Bounce loan officials tried to denounce ahead of launch

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The Canarythe latest survey of the rebound loan program, as part of our #Follow the money series, found that its own administrators had attempted to shut down its launch, the threat of system fraud was rated “very high” and fraudsters could make multiple requests.

The regime, which was announcement on April 27 by Chancellor of the Exchequer Rishi Sunak, aimed to provide financial support to small businesses throughout the coronavirus pandemic.

A hotbed for organized crime

Since the launch of the rebound loan, he has granted £ 40.2 billion to support businesses throughout the coronavirus pandemic.

However, this National Audit Office (NAO) report reveals that it will cost the government half of that amount to reimburse lenders for money lost by fraudsters and those who cannot repay the loan:

Assuming the program lends £ 43bn this would imply a potential cost to the government of £ 15-26bn.

A major factor contributing to these numbers is that the fraudsters were able to cash the loan more than once.

The same NAO report revealed that during the first month of the program, duplicate requests submitted were not stopped, but processed more than once.

Read on …

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The British Business Bank (Bank) stressed in its booking notice that there was not enough time to agree with lenders on a methodology to avoid duplicate claims before launch. The Bank worked with lenders and anti-fraud groups to develop this methodology and it was implemented on June 2.

The result: it was a hotbed for organized crime.

Launched without methodology

The same report confirmed that prior to the launch of the rebound program, the auditing and accounting firm PricewaterhouseCoopers (PWC) conducted a risk review which found the program’s threat of fraud to be “very high.” .

Despite PWC’s risk review, the program was launched without an agreed methodology, leaving the system unable to prevent duplicate claims.

The British Business Bank (Bank) stressed in its booking notice that there was not enough time to agree with lenders on a methodology to avoid duplicate claims before launch. The Bank worked with lenders and anti-fraud groups to develop this methodology and it was implemented on June 2.

No credit check

Although the Bank said there was not enough time to agree on a methodology to avoid duplication, this was not the first such program to be launched.

The rebound loan was introduced after two previous schemes were criticized. The Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) have been criticized for their speed with the small and medium enterprises (SMEs) hardest hit.

The Chancellor launched the program after companies criticized CBILS for the strict eligibility criteria, which created a backlog of applications for the smaller end of the SME market.

In an attempt to speed up the process for businesses, the decision was made to remove the program from any credit or affordability checks.

The design of the program was aimed at reducing the time between loan application and payment, which was a concern for businesses. The Regime achieved this by removing the administrative complexities inherent in a loan application process. It reduced the complexity, in part, by removing the credit and affordability checks required under the Consumer Credit Act.

Administrators tried to stop the launch 4 times

The report confirms that the department’s accounting officer (AO) called on ministers to intervene in the face of concerns that the regime’s spending proposal violates several of the Bank’s requirements.

After a letter, email and commissioned review, Managing Director and Accountant Keith Morgan CBE issued a reservation notice to the Secretary of State to denounce the flaws in the scheme.

Morgan said:

Acting under your leadership, Sam Beckett tasked the Bank with implementing the BBLS yesterday. In light of the concerns we have raised and the findings of PWC’s fraud risk review, the Bank’s Board of Directors met this morning to discuss the launch of BBLS. As a result of these discussions, he asked me to send you an official reservation notice in response to this instruction on BBLS.

A reservation notice is a mechanism in the constitution of the bank by which we can raise concerns for specific reasons. In this case, the relevant grounds are: ownership; value for money; and feasibility.

The NAO agreed that government intervention was necessary

A ministerial direction is requested when an AO, usually a permanent secretary, believes that an expenditure proposal violates one of the following criteria: regularity; convenience; value for money; or feasibility.

Based on the AO assessment, there was a strong case for government intervention; however, the level of risk and uncertainty associated with the program meant that guidance was needed on all four criteria.

Despite the concerns, Secretary of State for Business Alok Sharma called on the AO and the Bank to move forward with the project. The Bank’s instructions came 48 hours after the AOs were ordered to continue. The rebound loan launched the next day on May 4.

Extended program before locking two

The device, which was due to end in November 2020, was expanded as of January 31, 2021 following the announcement of a second lockdown in the United Kingdom.

The Bank has worked and will continue to work with Anti-Money Laundering Control (AML) and Fraud Prevention services to prevent this from happening again.

In a official statement the Bank said:

Since its inception, the Bank has worked alongside the government and the financial sector to alleviate the issues raised in the reservation notice. The Bank’s concerns about the risks of fraud within the Program were mitigated by approved lenders performing standard fraud, anti-money laundering (AML) and Know Your Customer (KYC) checks as part of the program. of the Program’s application process.

In addition, the Bank, the government, the fraud prevention services, the anti-fraud offices and the alternative banking and financial sectors acted quickly after the launch of the program to put in place additional measures, beyond standard controls to further mitigate the risk of fraud.

While the rebound program has been vital to the survival of microenterprises and SMEs, concerns remain about the targeting of public services by organized crime.

As the UK braces for a second national foreclosure, money set aside for businesses in real need of help is threatened by those looking to write a quick paycheck.

You can stay up to date with this series by bookmarking our #Follow the money page or our surveys page.

Featured Image Via Suzy Hazelnut

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