Source · Select Committees · Public Accounts Committee
Recommendation 16
16
The Scheme has also made trade-offs in its response to countering fraud and the associated...
Conclusion
The Scheme has also made trade-offs in its response to countering fraud and the associated deterrent effects. The Department based its counter-fraud response on the 31 Qq 15, 16 32 Qq 74–75 33 Qq 74–75, 83 34 Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, Re Bounce Back Loans, 27 January 2022, published 31 January 2022 35 Equifax Written Evidence, BLS0001. 36 Q71 37 Qq 56–58, 61 38 Qq 61, 66, 79–80; C&AG’s Report, Figure 10 39 Qq 59, 60 40 Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, Re Bounce Back Loans, 27 January 2022, published 31 January 2022 14 Bounce Back Loans Scheme: Follow-up return on investment from recovering fraudulent loans within three groups: top-tier, mid- tier and bottom-tier fraud cases. The Department defined top-tier fraud cases as those involving organised crime groups with sums of more than £100,000; mid-tier fraud cases as having some evidence that individuals acted dishonestly but not on a large scale; and bottom-tier cases as those where individuals might have received loans dishonestly, for example, by misstating their turnover on the application. It is focusing its efforts on the top-tier cases of organised crime; and decided not to focus its investigative resource on borrowers who have overstated turnover by less than 25%, if there were no other fraud risk indicators.41
Government Response
Not Addressed
HM Government
Not Addressed
3: PAC conclusion: The Department has been complacent in preventing Scheme fraud and its prioritisation of ‘top tier’ fraudsters puts other government Schemes at risk. 3a: PAC recommendation: Next time the Department launches an emergency business support scheme, it should be explicit on the trade-offs and level of fraud it is prepared to tolerate from the outset. 3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 The economic crisis brought about by the COVID-19 pandemic required an extraordinary response from government. The BBLS was devised to address the urgent cashflow needs of the UK’s smallest businesses. The department was clear at the outset that the scheme’s design would create a heightened vulnerability to fraud and there would be a significant risk of credit losses. The scheme was implemented under Ministerial Direction, and the exchange of letters that were published in June 2020 shows that these risks were acknowledged at the outset. 3.3 In the event of another crisis similar in scale to the COVID-19 pandemic, the government would again need to consider the trade-offs between the generosity and speed of a loan guarantee scheme, and the consequent risks for value for money. There is now increased Fraud and Financial Crime resource in the Bank. Additionally, the launch of the Public Sector Fraud Authority this year (announced in the Spring Statement) will further strengthen the ability of the government to manage and mitigate fraud risks, deal with vulnerabilities, and overall increase its counter fraud capacity and capability.