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UK watchdog criticises lack of fraud checks on COVID loans -Breaking

© Reuters. FILE PHOTO – A general view of New Bond Street after the coronavirus epidemic (COVID-19) in London, Britain on May 7, 2020. REUTERS/Simon Dawson//File Photo

David Milliken

LONDON (Reuters – Britain’s government did not properly guard against fraud in its COVID emergency lending program for small business, which cost 47 billion pounds ($63 billion). This allowed it to suffer billions of dollars of losses.

According to the National Audit Office which examines public sector spending, The Bounce Back Loan Program was launched in May 2020. It did not perform credit checks nor fully verify small business applicants for loans.

Gareth Davies (the NAO’s auditor general and comptroller) stated that while the government prioritized getting small business Bounce Back Loans quickly, it failed to implement adequate fraud prevention steps.

The high level of fraud estimated by the government is one effect of these decisions.

This scheme was created by the government to prevent the demise of small businesses that had been forced to close their doors due to strict lockdowns at the beginning of the COVID-19 pandemic.

Banks can lend up to 50,000 pounds per firm at a fixed rate of 2.5% and repayable over ten years. Initially, lenders were required to approve loans within 24 hours to 48 hours.

British’s Business Ministry, which managed the program via the British Business Bank (a state lender), estimated in March that 37% of loans wouldn’t be repaid. 11% was fraudulent.

PwC, an accounting firm, subsequently investigated the matter and reduced the fraud rate to 7.5%. However the NAO stated that it hadn’t had the time to verify this figure.

Another country is also looking into the misappropriation of emergency loans during the pandemic.

According to the U.S. special inspector general for pandemic recovery, Washington’s loan programme was plagued by fraud at unprecedented levels.

Meg Hillier is the Chair of the cross-party Public Accounts Committee of Britain’s Parliament. She said that the government has done too little in reducing “colossal risk of fraud and errors”.

“It now focuses on recovering money from organised criminality, while many small-scale fraudsters will be slipping through its fingers,” she said.

According to a spokesperson for the ministry of business, loans and support have helped many firms prevent layoffs.

According to the spokesperson, “We work closely with lenders as well as enforcement authorities in order to minimize fraud and ensure that those who commit fraud face penalties.”

($1 = 0.7519 pounds)

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.