Barclays to hunt down £1billion Covid scammers
Barclays to hunt down £1billion Covid crooks: Bank to send crack team of fraudsters to recover loans – as taxpayers face huge losses
- Fake borrowers may have obtained £5bn out of a total of £47bn issued by all banks
- The Treasury has guaranteed Bounce Back loans so that banks are not exposed to excessive risk
- There are growing concerns that many of these loans will never be repaid
- Barclays needs official permission to hire outside firm to hunt down scammers
Barclays Bank is recruiting a crack team of fraudsters to recover up to £1billion in Covid loans that have been misappropriated by criminals.
The high street lender provided 345,006 loans worth £10.8billion to small businesses under the government’s rebound loan scheme at the height of the pandemic.
These were fully guaranteed by the Treasury so that the banks were not exposed to excessive risk. However, this has left taxpayers liable for potentially huge losses from borrowers who are fraudulent or truly cannot pay.
Concern: Barclays provided 345,006 loans worth £10.8billion to small businesses under the government’s rebound loan scheme at the height of the pandemic
The Treasury has encouraged banks to relax normal controls to ensure that financial aid can be distributed quickly to prevent otherwise healthy businesses from going bankrupt during the lockdown.
But there are growing fears that many of these loans will never be repaid. It is estimated that fake borrowers may have got their hands on up to around £5billion of the total £47billion issued by all the banks that took part in the scheme.
Barclays, which has consulted the government over plans to hire an outside firm to hunt down crooks, needs official approval for the move.
The name of the company he plans to hire remains secret to avoid alerting fraudsters that they have investigators hot on their heels.
Its elite team will include experts in insolvency, law and forensic accounting. The hope is to reduce losses for taxpayers, who are already paying extra National Insurance contributions and have been hit by a freeze on benefits and thresholds.
Based on industry figures, the amount of taxpayer-backed loans that have been funneled by Barclays to the crooks is estimated at £1billion.
City sources told the Mail on Sunday that other banks were likely considering similar plans.
Many small businesses that really needed the cash 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 £17billion black hole from fraud and business meltdowns linked to Bounce Back Loans.
Barclays has held talks with the Cabinet Office over its decision to outsource the Covid fraud investigation. It should be given the green light by ministers, keen to recover as much of the losses as possible.
Lenders must enlist in their own private armies of crime fighters due to the scarcity of law enforcement resources, only 2% of which focus on fraud.
Taxpayers will ultimately foot the bill as investigators will receive some of the money they recover in the form of fees.
Under the proposals, which are still being discussed, Barclays would initiate 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 pursue the debts to a third party, who would take the case to court.
The Cabinet Office hopes that specialist companies will be more successful in recovering larger sums than the banks themselves. It is believed that a pilot program will likely precede a wider rollout.
Bounce Back Loans for sums between £2,000 and £50,000 were issued quickly with very few cheques. The Treasury was desperate for banks to get money for struggling businesses to avoid a wave of insolvency after the Covid hit.
But the haste has proved controversial and the government has been criticized for not doing more to make the system fraud-proof.
Research by consultancy firm Real Business Rescue found cases of business leaders appearing to use Covid loans to buy Range Rovers, jet skis, rental property, flying lessons and even subscriptions to pornographic websites.
Treasury Secretary Lord Agnew resigned earlier this year, saying the government had “little interest in the consequences of fraud on our society”.
He said ministers had made “schoolboy mistakes” – including giving loans to more than 1,000 businesses that weren’t negotiating when Covid hit.
The National Audit Office also criticized the government for failing to prevent criminals from exploiting the loans.
Barclays declined to comment.
A government spokesman said: ‘Taxpayers would expect the government to take strong action against those who have obtained loans fraudulently and fail to repay them.’