The United Kingdom’s version of the Paycheck Protection Program is also getting hit up by fraudsters, though British bankers appear to be a step ahead in short-circuiting the scams.
Catherine Lewis La Torre, chief executive of the British Business Bank, contends that U.K. banks have rejected nearly 27,000 “bounce-back” loans since the program was launched in May, the Financial Times reports.
Had the loans gone through, fraudsters would have made off with more than $1.3 billion, the bank chief warned the House of Commons’ public accounts committee through a letter.
Still, concerns remain about the fraud vulnerability of the bounce-back loans.
The loans, designed to help U.K. businesses get back on their feet in the wake of the coronavirus and the ensuing economic downturn, are only lightly vetted, critics note.
Under the program, small businesses can borrow just under $65,000 interest-free for a year, with the loans guaranteed by the government.
So far, banks and other lenders across the U.K. have issued more than $78 billion in bounce-back and other small business assistance loans, with the money deposited in the accounts of 1.4 million businesses, according to the FT.
However, the $1.3 billion in fraudulent loans that British bankers say they have rejected may be just a drop in the bucket compared to the overall problem, according to the National Audit Office.
The parliamentary watchdog, which tracks spending, has warned that British taxpayers could wind up on the hook for $34 billion of the $78 billion loaned out so far – not just through fraud, but also defaults.
Fraud has also been a major issue with the Paycheck Protection Program in the U.S. as well. In just one investigation announced in early September, the U.S. Department of Justice charged 57 people with allegedly stealing $175 million in PPP funds.