COVID-19 Bounce Back Loan – Am I at risk of prosecution?

The Government’s COVID-19 Bounce Back Loan Scheme (BBLS), launched in April 2020, was set up by the Department for Business, Energy & Industrial Strategy with the aim of helping small-to-medium sized businesses borrow between £25,000 and £50,000 depending on turnover, to help support these businesses from the impact of the Coronavirus global pandemic.

Loans provided under the BBLS were 100% government guaranteed, and with the added bonus of there being no interest payable for the first 12 months, and only 2.5% p.a. interest thereafter. Given these terms, it is not surprising that HM Treasury has released figures showing that over 1.5 Million BBLS loans were approved, with over £45.5 Billion lent in total.

However, the fast turnaround of applications and the 100% government guarantee has led to widespread reports of misuse of the BBLS, with UK Banks estimating fraud rates on BBLS loans being five times higher than normal, equating to an estimated £420 Million.

Further, according to the Government’s recent report, the Department for Business estimates that the loss rate on BBLS loans will be between 35% and 60%, meaning potential losses of £22.8 Billion to the UK taxpayer.

BBLS Fraud

Issues with the BBLS system have been widespread due to an initial lack of scrutiny relating to these applications which, given the circumstances of getting cash out quickly to small businesses in need, was understandable. Furthermore, the less stringent checks on eligibility made the process more accessible to a greater number of people, and left many companies and directors at risk of fraudulent applications or perhaps making applications in circumstances they should not have.

From a criminal perspective the National Crime Agency (NCA) and Central Government have in recent months ramped up the investigations into individuals who have obtained funds under the BBLS inappropriately or under false pretenses, including a recent investigation by the Metropolitan Police which resulted in the imprisonment of two individuals who had illegitimately obtained some £489,000.

Whilst it is the decision of a company’s directors how the company’s funds are used, including the BBLS funds, directors will need to be careful to avoid any aspersions that the BBLS loan has been obtained fraudulently, which could lead directors to facing both civil and criminal liability

Recent reports include extreme examples of companies obtaining BBLS loans and then subsequently using the money to purchase supercars for directors. Other examples include companies obtaining funds for the express purpose of funding a certain activity, but on receipt of the funds, the company utilises the funding for a complete separate purpose.

Additionally, many UK Banks who have given out BBLS loans are taking the opportunity to review these applications and take steps to pursue companies and directors for the loans where they were obtained fraudulently, or the funds have since been used not in accordance with the original application purpose.

How can Ellis Jones help?

If you’ve taken out a BBLS loan and are concerned that you may have made an application subject to challenge or you are the victim of fraud, or you have been contacted by your bank and/or the NCA or Police with regards to your BBLS loan, it is important that you obtain legal advice at the earliest opportunity to understand your options both in respect of any criminal investigation, but also in respect of any civil liability you may have to repay any BBLS monies.

Our specialist team of Banking and Finance litigation solicitors has substantial experience of dealing with claims in this area. To speak to a member of the team and discuss your options and potential liabilities, call 01202 525333 or send an email.

Alternately, to speak to a solicitor in our specialist Criminal Department, with a combined total of over 60 years’ experience in dealing with all types of criminal defence including financial crime, call 01202 525333 or send an email.

Written by Conor Maher, Solicitor (Dispute Resolution and Crime).