The British Business Bank has promised to “call out” the banks that have taken taxpayer cash to cover the losses of fraudulent Covid loans, but have failed to apply the minimum check.
Patrick Maggie, chief commercial officer of the state-owned business bank, told Treasury committee MPs on Wednesday that about £ 63m had been disbursed so far for potential fraudulent coronavirus business loans in UK banks.
He said refunds could be made if banks were found to have not applied the minimum check, even where they relied heavily on self-certification by borrowers.
“It’s because we believe they did not apply the check, and we continue to challenge them,” said Maji.
Banks that lose that challenge will have their government guarantee removed, meaning lenders will have to bear the loss, including bounce back loans that were 100% backed by taxpayer cash.
“We have a lot of incentives to make sure banks do the right thing, and if they don’t, we’ll call them,” Maji explained.
He added that some lenders have already acknowledged their own shortcomings, meaning they have dropped government cash claims worth £ 240m to offset fraudulent covid loans.
It is believed that about £ 4.9bn was lost for fraud through the bounce back loan scheme, which was managed through BBB and distributed through commercial banks including NatWest, HSBC, Lloyds and Barclays.
Another 7 5.7 billion is estimated to have been lost due to fraud and errors between Farlow and the self-employment program.
The comments came after lawmakers announced plans for a £ 25m “fraud squad” after lawmakers criticized the government’s failure to crack down on criminals who stole billions of taxpayers’ cash through the Covid aid project.
Announcing the creation of the Public Sector Fraud Authority on Wednesday, the Treasury said it would double the government’s counter-fraud efforts, adding to the work of the £ 100m Taxpayer Protection Task Force launched more than a year ago.
The PSFA, which is due to begin operations in July, will be run through a cabinet office and will be given a m 25m budget to “crack down on the criminal cycle of snatching taxpayers”.
The Treasury could not immediately confirm how many people would be recruited to the PSFA, but said it would be hired by an “elite team” of data experts and economic crime investigators tasked with recovering public funds.
They will be responsible for identifying “suspicious companies and individuals” who are trying to gain access to government contracts, and will review existing Whitehall programs to try to identify any vulnerabilities in the fraud.
The announcement comes hours after Parliament’s Public Accounts Committee criticized the government for its “unacceptable” failure to recover taxpayers’ cash and called for more action against fraud.
The Chancellor, Sage Sunak, said on Wednesday: “People are outraged that fraudsters have taken advantage of our much-needed Covid aid project and we are working to pay for it.”
The shadow chancellor, Rachel Reeves, said the need for a new authority resulted in the chancellor “repeatedly ignoring warnings about the lack of anti-fraud measures in his support projects”.
He said: “It is unforgivable that .8 11.8 billion of taxpayer money has been transferred to fraudsters and criminals, and especially painful when the government is imposing new taxes on working people and businesses.”