Bounce Back Loan Scheme Fraud and Other Issues
Convictions for Bounce Back Loan Scheme Fraud Highlight Lax Oversights Regarding the Scheme
When the Minister responsible for Whitehall efficiency and counter-fraud resigned in January, he mentioned lax oversight regarding the Bounce Bank Loan Scheme BBLS. Much has also been said in the press about Bounce Back Loan Scheme fraud and losses from similar schemes being written off, but has anyone actually been prosecuted?
Stark Statistics Surround the Bounce Back Loan Scheme
Last year the Department of Business, Energy and Industrial Strategy estimated that 37% of the loans would not be repaid and that 11% of them came from fraudulent applications. A more recent estimate from PWC said the fraud rate was around 7.5%, although the National Audit Office has not checked that estimate yet.
Back British Business claimed that the loans were unenforceable and invalid. The claim is based on the circumstances in which the loans were offered. When the scheme was announced, the government said the pandemic was under control, and lockdowns were for a limited period.
Businesses believed that they would be able to carry on trading quite quickly and would be then able to trade and pay the loan back. Repeated lockdowns then took place, which Back British Business referred to as “moving the goalposts”.
Recent Convictions for Fraud
Harman Bangar
Harman Bangar was a councillor in Wolverhampton and used his knowledge from overseeing the council’s implementation of BBLS to his advantage. His wife submitted an application for a small business grant of £10,000 for a business the two shared.
They claimed it had been in business since October 2019, but an investigation revealed the business was not operating when they said it was and the grant was not paid. The two have not yet been sentenced as Mr Bangar is appealing his conviction.
Artem Terzyan and Deivis Grochiatskij
In December, two men were sentenced for fraud, having first been arrested in 2018. Whilst on bail, they fraudulently claimed bounce back loans for a number of shell companies they had set up. They claimed £10million in total in amounts of up to £50,000 at a time.
The Organised Crime Partnership said that hundreds of bogus companies were set up utilising a network of criminals under the pair’s control. After their conviction, Artem Terzyan was sentenced to 17 years imprisonment and Deivis Grochiatskij to 16 years.
Although neither director cooperated with the investigation, the Insolvency Service investigated Regal Luxury Lodges Ltd. One of the directors applied for a £50,000 bounce back loan when it had already ceased trading and was therefore ineligible.
The directors failed to maintain, preserve or deliver up accounting records.
It was found that the company bank account was being misused, and a bank account held by a third party was being used to take payments from would-be customers.
The High Court agreed that the company should be closed down in the public interest to prevent it from being used as a vehicle for fraud.
Distinction Between Fraud and Inability to Pay Back The Loans
The National Audit Office said the government failed to put in place adequate measures to prevent fraud. A total of £47billion was issued through the scheme via 1.5million loans, with a quarter of UK businesses making applications.
As of 30 September, the British Business Bank, which supervises the scheme, said that £2billion worth of loans had been repaid with £1.3billion defaulted on.
The National Audit Office continued to say that most of the counter-fraud measures were brought in too late to prevent fraud and focused instead on detection.
One campaigner said, “How can you pay back a Bounce Back Loan, when you haven’t bounced back?” A similar point to the one being made by Back British Business.
How can we help?
If you have any questions regarding Bounce Back Loan Scheme Fraud or any issues regarding any type of fraud, please don’t hesitate to get in touch immediately for expert advice on 0161 477 1121 or email us for more details.
