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20 Apr 2023

Article by: Claire Anderson

Last year, a group of Bankers were hauled in front of a special government committee to explain why, what was meant to be an emergency lending scheme to support small/medium sized businesses caught in the grip of the Covid pandemic, turned into what was, certainly to a hugely significant extent, the handing over of billions of pounds, to organised criminal gangs.  The title of my piece is a quote from an MP sitting on this government committee, who were clearly very concerned at the ease of which these loans could be obtained.

It is hard to recall the desperation of those frightening times at the beginning of lockdown, in March 2020.  It seems like some kind of weird dystopian interlude now.  The message was that if any of us caught Covid, there was a risk that we would die a very unpleasant death in isolation from our loved ones.

Financially, those of us that were employed could hope to be ‘furloughed’ which presented some challenges given our salaries were reduced, but there was at least a good degree of stability afforded by the Furlough Scheme.

What of those, however, running small or medium sized businesses?  Some of course, thrived in the pandemic, but millions of others were headed for disaster, or were perhaps heading for disaster  – who knew?  Times were so horribly uncertain, that no small business owner facing the prospect of losing a business in which they had possibly invested their entire life savings/ re mortgaged their house etc, could risk seeing it go under.

A lifeline was provided by the government in the shape of the so called ‘bounce back loan’ which allowed businesses’ to borrow up to a maximum of £50k per business, which was calculated on the specific businesses turnover.  The loan was for business purposes only and each business was strictly entitled to one loan.

Of course, at the beginning of lock down, the government were under enormous pressure to act quickly to save millions of businesses, or at least give them the chance to survive.  What has now become apparent however, is the banking institutions did not have in place the kind of rigid checks and balances one might expect, especially as, or perhaps even because of, the Treasury ( AKA the taxpayer) were underwriting these loans.

Fast forward 3 years and having done the sums, the government are left with a situation where of over £45 billion lent by banks, at least half of those loans were reportedly made, based on fraudulent information submitted by the borrower.  Cue a fair bit of finger pointing between the banks and the Treasury, culminating in the briefing of the National Investigations Service (NATIS), an organisation created to investigate organised fraud and economic crime – to recover as much of the ‘proceeds of crime’ paid out in the guise of a bounce back loan, as possible, and thus lighten the load on the public purse.

At ABV, we are acting on behalf of a large number of small business owners under investigation by NATIS.  There are many thousands of individuals currently under investigation, who are initially being invited to attend ‘voluntary interviews under caution’.  The investigator will also ask the interviewee to consent to the disclosure of what can be fairly substantial financial information, including business  accounts and bank statements. These can be obtained by virtue of a Court order if consent is withheld.

In the cases where NATIS are looking at legitimate businesses, they will be seeking to establish the following via interview and document analysis;

1. Was the business turnover cited on the loan application accurate or was it significantly over inflated.
2. How many loans were sought, per business, given only one was permitted.
3. Where were the funds lent, actually spent.
4. Have the loan repayments been made on a regular basis.
5. Does the borrower have the capacity to repay the loan.

In cases where multiple loans were taken out for one company, and turnover has been grossly exaggerated, in order to achieve the maximum loan pay out, a prosecution is very likely.  In cases however, where turnover can be shown to have been over inflated to some extent, but the person under investigation has regularly made repayments and shows the financial ability to continue to meet these payments, or perhaps even raise sufficient funds to settle the whole loan, NATIS are open to legal representations with a view to avoiding criminal sanctions, after all, they cannot possibly afford to prosecute everybody.

The cases involving organised crime however, will of course be treated completely differently.  Many thousands of loans were made to bogus or insolvent companies where the borrower never had any intentions of making repayment. Those cases will be prosecuted with follow on Proceeds of Crime Act proceedings in the event of conviction.

NATIS has one remit, and one only – claw as much criminal property back from those who obtained fraudulent loans as possible.  Prosecuting business owners who acted outside the strict loan criteria, having been motivated, not by greed, but the real fear of losing everything they had ever worked for, and who are making repayment, would arguably be yet another dreadful waste of tax payers money.

Please get in touch with our specialist Fraud Team if you would like to seek further advice in this area on 0344 587 9996.