Barclays bank is drafting in a crack squad of fraudbusters to claw back up to £1billion of Covid loans that have been siphoned off by criminals.
The high street lender issued 345,006 loans worth £10.8billion to small firms under the Government’s Bounce Back Loan Scheme at the height of the pandemic.
These were fully guaranteed by the Treasury so that banks were not exposed to excessive risks. However, this has left taxpayers on the hook for potentially huge losses from borrowers who are either fraudulent or genuinely cannot pay.
Concern: Barclays issued 345,006 loans worth £10.8billion to small firms under the Government’s Bounce Back Loan Scheme at the height of the pandemic
The Treasury encouraged banks to loosen normal checks to ensure financial help could be distributed quickly to prevent otherwise healthy firms going under during lockdown.
But there are mounting fears that large numbers of these loans will never be repaid. It is estimated that bogus borrowers may have got their hands on up to about £5billion of the total of £47billion issued by all of the banks that participated in the scheme.
Barclays, which has consulted the Government on its plans to hire an outside firm to hunt down the swindlers, needs official approval for the move.
The name of the firm it is planning to hire remains shrouded in secrecy to avoid alerting fraudsters that they have investigators on their tails.
Its elite team will include experts in insolvency, law and forensic accountancy. The hope is to reduce losses to taxpayers, who are already forking out extra National Insurance contributions and have been hit by a freeze in allowances and thresholds.
Based on industry figures, the amount of taxpayer-guaranteed loans that have been channelled through Barclays to scammers is estimated at up to £1billion.
City sources told The Mail on Sunday that other banks are likely to be mulling similar plans.
Many small companies that genuinely needed the money are now struggling to survive amid the cost-of-living crisis, which could lead to further defaults.
The Government’s own estimates suggest taxpayers could face a black hole of £17billion from fraud and company collapses linked to Bounce Back loans.
Barclays has held talks with the Cabinet Office over its move to outsource the Covid fraud investigation. It is likely to be given a green light by Ministers, who are keen to recoup as much of the losses as possible.
Lenders are having to rope in their own private armies of crime fighters due to the scarcity of police resources, only 2 per cent of which are focused on fraud.
Taxpayers will ultimately foot the bill because the investigators will be paid a slice of the money they recover as a fee.
Under the proposals, which are still being discussed, Barclays would trigger insolvency proceedings against suspected criminals who took out loans with no intention of repaying.
A liquidator, appointed by the Government’s Insolvency Service, would then sell the rights to chase down the debts to a third party, which would pursue the case through courts.
The Cabinet Office hopes specialist firms will be more successful at tracking down larger sums than the banks themselves. A pilot scheme is thought to be likely to precede a wider roll-out.
Bounce Back loans for sums between £2,000 and £50,000 were issued at speed with very few checks. The Treasury was desperate for banks to get money to struggling businesses to stave off a wave of insolvencies after Covid hit.
But the haste has proved controversial and the Government has come under fire for failing to do more to make the scheme fraud-proof.
Research by advisory firm Real Business Rescue found cases of company directors appearing to use Covid loans to buy Range Rovers, jet skis, buy-to-let property, flying lessons and even subscriptions to pornographic websites.
Treasury Minister Lord Agnew resigned at the start of the year, claiming the Government had ‘little interest in the consequences of fraud to our society’.
He said Ministers had made ‘schoolboy errors’ – including giving loans to more than 1,000 companies which were not trading when Covid struck.
The National Audit Office also criticised the Government for failing to stop criminals exploiting the loans.
Barclays declined to comment.
A Government spokesman said: ‘Taxpayers would expect the Government to take vigorous action against those who fraudulently obtained loans and are failing to repay them.’
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