The National Audit Office has revealed fraudulent loans worth £4.9bn may have been awarded to criminals taking advantage of the COVID-19 Bounce Back Loan scheme. Due to insufficient counter-fraud controls amid the urgency of economic trouble following nationwide lockdown, it is estimated that almost 11% of the total financial aid was given to fraudulent actors.
The scheme was launched in March 2020, whereby UK businesses were offered up to £50,000 in Bounce Back Loans to prevent the local economy from collapsing. Banks, building societies and peer-to-peer lenders were green-lit to provide these loans, which were 100% government-backed. It remains to be seen whether the damage to UK financial institutions due to this fraudulent activity is more significant than estimated. £4.9bn of criminally-gained funds in the local economy places significant pressure on FIs in terms of the robustness of their anti-money laundering controls.