Coronavirus Business Interruption Loans – fraud investigations on the horizon?

The Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Bank Loan Scheme (BBLS) are the UK government-backed schemes introduced to help SME and large businesses through the Covid-19 pandemic.

Even at the time of roll-out, regulators and enforcement agencies recognised that the speed at which funds were needed by businesses to maintain the status of ‘going concern’ would result in less rigour in assessing the legitimacy of the entitlement. As the FCA acknowledged in a 4th May 2020 press release:

‘The unprecedented nature of the current coronavirus pandemic and the impact on the economy has created a climate of deep uncertainty and anxiety for the economy, business and consumers. The FCA recognises the Government’s Schemes need to be able to enable fast and efficient lending decisions. Ensuring that firms manage the risks of fraud and money laundering is essential to a well-functioning financial services system. We recognise that, currently, the need to manage these risks should be balanced against the need for the fast and efficient release of funds to businesses under the Government’s Schemes.’

Like any other emergency measure designed to ameliorate a black swan event, there is the inevitable risk of improper use, whether deliberate or otherwise. Institutions and individuals involved in the process, either as lenders or borrowers need to be fully aware of the enhanced scrutiny that will come in the next few months as the UK government tries to ensure that taxpayer largesse is all accounted for. That accounting will involve the instruction of enforcement agencies to look closely at the loan process and take action where appropriate. It will be no surprise if Her Majesty’s Revenue & Customs’ Criminal and Civil Investigations teams and the Financial Conduct Authority’s Enforcement Wholesale and Retail Investigations teams become very busy in the next few months.

Jeremy Gordon has considerable expertise in advising corporates and individuals accused of abusing the tax system.

Our team have successfully defended institutions and individuals being investigated by Her Majesty’s Revenue & Customs, the Financial Conduct Authority, The Pensions Regulator and the Serious Fraud Office in relation to matters such as Valued Added Tax, Income Tax, the Apprenticeship Scheme, Carbon Tax Credits and Research & Development Tax credits.

In addition, the team can call upon a combined twenty-five years’ worth of experience at Her Majesty’s Revenue & Customs and the Financial Conduct Authority (as an investigator and enforcement lawyer respectively) from two of its members.