EXCLUSIVE-90 Financial Firms Reported to FCA for Alleged COVID Loan Fraud | Thomson Reuters Regulatory watch and compliance learning

The UK’s Financial Conduct Authority (FCA) has received 90 reports of financial services companies that may be committing fraud in relation to the government’s pandemic emergency loan scheme.

The FCA said it expected “lenders to report to us all instances where an FCA company, as [Bounce Back Loan Scheme] BBLS Borrower, has committed or been involved in fraudulent activity” in a July 2021 “Dear CEO” letter. The number of alleged frauds committed or attempted by financial services companies was published in response to a request made under of the Freedom of Information Act 2000. (FoI) by Regulatory Intelligence.

“We can confirm that as of February 21, 2022, the FCA has received 90 reports from Bounce Back Loan Scheme (BBLS) lenders of suspected fraud involving FCA-licensed firms. These include referrals where a fraudulent application has was suspected at source and the request was subsequently denied,” the FCA said in a response sent last week.

An FCA spokeswoman confirmed that each of the 90 reports related to a separate company.

On March 8, Lord Theodore Agnew (Con), the former minister responsible for combating fraud, suggested that the FCA and the Prudential Regulation Authority should be called upon to help identify fraud in all COVID-19 support loans . The FoI response makes it clear that lenders are already reporting suspected fraud to the regulator.

The National Audit Office said up to £5bn of BBLS loans could have been lost to the fraud.

pressure to lend

Across all sectors, some £47bn of emergency funding has been provided to businesses through the BBLS. The scheme opened in May 2020 when the UK was in its first lockdown and allowed businesses to borrow up to £50,000.

The government designed the BBLS specifically to send money to small and medium-sized enterprises (SMEs) as quickly as possible, and regulators waived some know-your-customer checks to facilitate this. SMEs that had an existing relationship with their lender requiring a loan of up to £50,000 should have been automatically approved for a loan, as long as they did not ask to borrow more than 25% of their annual turnover .

Provided that the required basic fraud checks have been carried out and banks attempt to recover defaulted loans, funds lent through the BBLS are 100% guaranteed by the government.

In May 2020, shortly after the opening of the BBLS, lawmakers on the Treasury Select Committee publicly chastised the UK’s biggest banks for being slow to process loans. At the time, Matt Hammerstein, chief executive of Barclays UK, told the committee that delays were occurring because information provided on some loan applications did not match data the bank already held for that business and required checks. additional.

The committee asked all the banks for the cumulative total of the loans they had issued. Barclays approved 50,000 bounce back loans, collectively worth £1.5bn, in the first three days of the scheme being in place, Hammerstein said.