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BIRTH OF UK'S BIGGEST FRAUD: The UK pandemic loan scheme


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Highlights from FT's report: https://www.ft.com/content/41d5fe0a-7b46-4dd7-96e3-710977dff81c

‘A giant bonfire of taxpayers’ money’: fraud and the UK pandemic loan scheme

  • The Financial Times has spoken to more than a dozen senior bankers, fraud experts and people involved in the creation and running of the programme. In the words of one, “the scheme was being abused and defrauded on an industrial scale”.

  • “In 10 years' time, people will still be looking for the money,” says David Clarke, chairman of the Fraud Advisory Panel and a former head of the City of London Police fraud squad. He adds that the political reckoning could be just as long-lasting, “when the inquiries start into what happened with this scheme”.

  • “The period from April to June was essentially a giant bonfire of taxpayers' money,” says one senior banker, “with banks just handing out matches”.

  • Loans of up to £50,000 with no capital or interest repayments for one year — and then just 2.5 per cent for up to a decade. “People saw it and thought, ‘wow’! Why on earth wouldn't they take it? It’s basically free money,” says a senior banker.

  • The Office for Budget Responsibility said in November that it expected a total of up to £87 BILLION of business borrowing to be backed by government guarantees — the majority in bounce back loans.

  • Within weeks of the scheme launching, senior executives at high-street banks were raising concerns that up to half of the money could be lost. The government itself had estimated losses from the scheme could be between a third and 75 per cent due to the parlous nature of many businesses going into the crisis.

  • At the end of November, the OBR increased its estimates of overall losses to as much as £29bn, the vast majority related to bounce back loans. In the best-case scenario, total losses from all the loan schemes could add up to £22bn; in the worst, taxpayers would foot a £40bn bill — almost half of all government lending to business during the crisis.

  • “This is basically [a criminal’s] dream scenario,” says a person familiar with the banks’ internal reviews. “An incredibly lucrative fraud that requires very little work and has almost no chance of law enforcement action.”

  • A review of the scheme in May, by PwC, the consultancy, calculated the fraud risk as “very high”. During the first two months, high street banks rejected hundreds of fraudulent applications on a daily basis, according to senior executives. Much of this initial surge was caused by a loophole that allowed the filing of multiple applications across banks — it was at least two months before cross-industry checks were put in place. “We were flying blind,” says the chairman of one high street bank.

  • Criminals adapted the tools of established financial fraud to target the scheme. Acuris Risk Intelligence, which tracks online fraud, found one gang that claimed to have taken £6m using stolen UK identities. Acuris’ head of market planning Nick Parfitt says compromised credit card details were also used. “At first, criminals were not going for the full £50,000 as they expected banks to check. But when that didn’t happen,” he adds, “they went hell for leather.” His findings are supported by another bank fraud expert, who says that criminals would apply for loans of £48,000, assuming that applying for the full £50,000 would raise a red flag. But, he says, since the government allowed a further “top up” to the full amount for businesses, fraudsters have tried to come back for the remainder.

  • Bankers have also highlighted the use of “mules” — people in financial difficulties recruited by organised gangs to borrow money then declare bankruptcy. One banker describes bounce back customers who already had sizeable overdrafts and other debts; customers who rarely used personal accounts suddenly turning them into business ones; customers sending the balance overseas; and multiple occupancy houses where several people all successfully applied for the maximum £50,000 loans. 

  • The money provided by the scheme made some business owners see a chance to pay down a credit card or a deposit for a property, invest in equities or even cryptocurrency, says one bank fraud expert. “Completely against the spirit and terms of the scheme but we honestly don’t know how we should treat these customers,” he adds.

  • Banks can only lend up to £50,000, or a maximum of a quarter of a company’s turnover. This meant, according to a different banker, “we found a strangely large number of business customers had precisely £200,000 turnover last year”.

  • Bankers say criminals are still trying to game the system, even if many are detected ahead of approval. “The truth is we will not know how much money will come back until May,” when loans start to charge interest, says the bank fraud expert. “Don't forget these are 10-year loans,” says one bank chairman. “So we could be dealing with this for decades”. 

  • Although banks have to pursue lost money, they remain confident that the Treasury and Mr Sunak will ultimately foot the bill. “We were expecting to just flip them to the government if they didn't pay,” says another senior banker, “but now, I think we are going to have to try for a year to get our money back before we can go for the guarantee. “Which I feel is unfair,” she adds, “it wasn't our decision to lend”.

A story were bankers are the good guys.....lol. Rest assured the banks will not be the victims here, that unfortunate mantle is reserved for the tax-payers like us, and generations to come!

 


 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

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I don't think the term "bonfire of money" is appropriate and fundamentally misunderstands what money is.

On the face of it, if the government took a bunch of cash out of circulation and burned it, the value of the remaining currency would increase, because there is less of it. 

Spaffing a bunch of digital (i.e. imaginary) pounds at useless eaters is not the same.

 

In reality, the government and its pet the BoE actually create only a small fraction of the money in the economy; the vast majority is created by banks in the form of loans.

However, previous bailouts were not given to the plebs, but went to the elite, who proceeded to drive up asset prices, hence "no inflation". Instead you get the slow death of a zombified economy

Giving this money to people who will spend it on real things such as food may very well result in the same kind of inflationary spiral which finished off the Weimar Mark with self-sustaining increasing velocity of money.Therefore, despite its relative smallness compared to other forms of money creation, this together with furlough payments could be the final straw which breaks the camel's back.

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I don't think the term "bonfire of money" is appropriate and fundamentally misunderstands what money is.

On the face of it, if the government took a bunch of cash out of circulation and burned it, the value of the remaining currency would increase, because there is less of it. 

Does this work with real estate? Is it time for a Help to Burn scheme to keep HPI going?

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So a kebab shop owner who is renting his shop, up to his neck in debt,  but not making money right now could borrow £50K and fly back to somewheristan and live very well thankyou

Nah. That's not a bad example. The kebab shop exists and prob employees people. But yeah 50k for them. 

Someone who has an entity for any purpose, trade stall for that Sunday Market, selling stuff on ebay could get a full 50k loan. Then pay divi then fold then happy days. Nothing was checked. 

First few weeks they weren't even checking when the company was formed so cash went to newly formed shells.

They also weren't checking if you already had a loan first few weeks so it's multiple loans to one entity 

And there was a mass conversion of personal bank accounts to buisness to allow all that. 

At the start the estimate was £10billion would be lent to actual kebab shops etc. Current total is £40billion and counting. Big spread. 

Nonsense like that is why the NAO are estimating £4.5billion to organised crime. Its also got a default estimate of 40 to 50%. Times are crap for the high Street and some areas but not every area. 40 to 50% of companies are not collapsing, not close, but the ones that got these loans will as its an easy way out. Nobody lends to micro entities without directors guarantees aside from madman taxpayer. 

 

Not saying actual buisnesses didn't need lending but this scheme was so ridiculous, putting get cash out within 24 hours above all else its criminal waste of someone else's resources. That 30billion cost could have gone to targeted grants to employers.

So ridiculous, even the dull FT is now leading with bonfire of cash headlines which sound more like the sun. 

Edited by captainb
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Or put the money as a deposit on a BTL 

Never thought of that one. But just perhaps that was one of Sunaks intentions a) with this 'loan' and b)no stamp duty.              It was noted here that BTL has gone through the roof again, particularly in the cheaper towns and cities.  £50K could well be 2/3rds the price of something or even a whole flat  in the northern half of the country after a quick map view on rightmove.

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Nah. That's not a bad example. The kebab shop exists and prob employees people. But yeah 50k for them. 

Someone who has an entity for any purpose, trade stall for that Sunday Market, selling stuff on ebay could get a full 50k loan. Then pay divi then fold then happy days. Nothing was checked. 

First few weeks they weren't even checking when the company was formed so cash went to newly formed shells.

They also weren't checking if you already had a loan first few weeks so it's multiple loans to one entity 

And there was a mass conversion of personal bank accounts to buisness to allow all that. 

At the start the estimate was £10billion would be lent to actual kebab shops etc. Current total is £40billion and counting. Big spread. 

Nonsense like that is why the NAO are estimating £4.5billion to organised crime. Its also got a default estimate of 40 to 50%. Times are crap for the high Street and some areas but not every area. 40 to 50% of companies are not collapsing, not close, but the ones that got these loans will as its an easy way out. Nobody lends to micro entities without directors guarantees aside from madman taxpayer. 

 

Not saying actual buisnesses didn't need lending but this scheme was so ridiculous, putting get cash out within 24 hours above all else its criminal waste of someone else's resources. That 30billion cost could have gone to targeted grants to employers.

So ridiculous, even the dull FT is now leading with bonfire of cash headlines which sound more like the sun. 

I know they are never interested in how the £Trillions of dodgy financial dealings flow through the city of London because that's close to the current Parliaments personal pocket, however, with normal people and small business they tend to be very exacting down to the 20p coin you found on the pavement when it come to taxation and not paying your loans to banks etc.  I think when things calm down they will have an army of newly hatched tax and fraud detectives hunting these people down, which of course will be a distraction from the blatant fraud that handouts to covid suppliers and hedge fund bets on the Brexit outcome

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Never thought of that one. But just perhaps that was one of Sunaks intentions a) with this 'loan' and b)no stamp duty.              It was noted here that BTL has gone through the roof again, particularly in the cheaper towns and cities.  £50K could well be 2/3rds the price of something or even a whole flat  in the northern half of the country after a quick map view on rightmove.

https://www.rightmove.co.uk/properties/63159258#/

153233_CLE170003_IMG_09_0000.jpg

 

 

1 Bed Flat Halifax Road, Dewsbury, West Yorkshire, WF13

 
See map
 
£45,000
If you rented it out you would get £380PM
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https://www.rightmove.co.uk/properties/63159258#/

153233_CLE170003_IMG_09_0000.jpg

 

 

1 Bed Flat Halifax Road, Dewsbury, West Yorkshire, WF13

 
See map
 
£45,000
If you rented it out you would get £380PM

That would give you a gross 10% however places like that attract massive service fees so I can imagine a net 5% which most landlords would take on.  So with the free loan it a no brainer.

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That would give you a gross 10% however places like that attract massive service fees so I can imagine a net 5% which most landlords would take on.  So with the free loan it a no brainer.

That was the first sexy property on Rightmove I am sure you can find one without a massive service charge, or even a freehold.

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Bounce back loan fraud impacts car finance industry

Surplus of cheap credit in the market means plenty of car buyers but tough sell for auto loans!

People buying Range Rovers full payment, some bounce-back that!

 

Car finance brokers and providers are seeing decreased business due to consumers fraudulently using bounce back loans to purchase cars outright, according to a broker in the space.

Zac Choudhri founded car finance brokerage Prime Personal Finance in January and he has seen customers eschew his in-house finance brokerage in favour of bounce back loans.

“When you sell a Range Rover it’s not normally someone treating themselves to a car but to someone who is slightly better off than the average household and is able to qualify for it and buy it,” Choudhri said.

“But now we’ve sold so many on direct payment. We promote and recommend our in-house car finance brokerage and show the benefits of it, but some people said ‘no, we already have a 2.5 per cent loan’.

“We’ve sold cars to these people and absolutely loads of people with business loans have just bought cars and this has generally affected car finance brokers and providers.

“Car prices have gone up as a result of these loans. No one was getting finance, so they raised prices on cars. It has had a massive knock-on effect.”

https://www.p2pfinancenews.co.uk/2020/12/04/bounce-back-loan-fraud-impacts-car-finance-industry/

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As a bit of a petrol head I'm forever perusing ebay, Autotrader etc just casually looking at what interesting performance/exotic cars are available... even the most stupidly overpriced examples, some of which had been up for sale for a year or more have all been snapped up since the inception of the BBL's and what was already a bubble for performance/exotic/modern classic cars prior to covid has just gone insane, some examples have now trebled or more in ''value'' in just the last 5 years

Just a couple of examples from my particular area of interest, both these cars could have been easily bought for around £7k only 5 years ago and perhaps £15k at just the start of this year, now look at what's being asked for them!!...

https://www.ebay.co.uk/itm/SUBARU-IMPREZA-WRX-STI-TYPE-R-VERSION-6-LTD/224293753925?hash=item3438f31445:g:jwQAAOSw0jJf5t2E

 

https://www.ebay.co.uk/itm/Subaru-impreza-P1/164599342756?hash=item2652e2a6a4:g:PHUAAOSw1rpf42G~

Edited by nome
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As a bit of a petrol head I'm forever perusing ebay, Autotrader etc just casually looking at what interesting performance/exotic cars are available... even the most stupidly overpriced examples, some of which had been up for sale for a year or more have all been snapped up since the inception of the BBL's and what was already a bubble for performance/exotic/modern classic cars prior to covid has just gone insane, some examples have now trebled or more in ''value'' in just the last 5 years

Just a couple of examples from my particular area of interest, both these cars could have been easily bought for around £7k only 5 years ago and perhaps £15k at just the start of this year, now look at what's being asked for them!!...

https://www.ebay.co.uk/itm/SUBARU-IMPREZA-WRX-STI-TYPE-R-VERSION-6-LTD/224293753925?hash=item3438f31445:g:jwQAAOSw0jJf5t2E

 

https://www.ebay.co.uk/itm/Subaru-impreza-P1/164599342756?hash=item2652e2a6a4:g:PHUAAOSw1rpf42G~

2020:
Gold +20%
Bonds +20%
Shares +20%
Bitcoin +250%
Classic cars +20%
Houses +20%
 

it’s just the real rate of inflation. 

I myself own classic cars, not a lot of modern stuff is any good, plastic rubbish or other smaller engines and turbos great for finance deals but terrible for longevity 

Look at the lotus Elise, brilliant cars, what’s the price for a new one now? 
 

you can see why anything special and older is worth a lot, you can’t buy anything that decent new anymore at a reasonable price, so it pushes up the second hand cars value

the bottom of the depreciation curve on things like lotus Elise was pretty obvious a few years ago, anything special always has a value 

 

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2020:
Gold +20%
Bonds +20%
Shares +20%
Bitcoin +250%
Classic cars +20%
Houses +20%
 

it’s just the real rate of inflation. 

I myself own classic cars, not a lot of modern stuff is any good, plastic rubbish or other smaller engines and turbos great for finance deals but terrible for longevity 

Look at the lotus Elise, brilliant cars, what’s the price for a new one now? 
 

you can see why anything special and older is worth a lot, you can’t buy anything that decent new anymore at a reasonable price, so it pushes up the second hand cars value

the bottom of the depreciation curve on things like lotus Elise was pretty obvious a few years ago, anything special always has a value 

 

I get the sentiment but you are cherry picking a wee bit. Shares up 20% in 2020? FTSE is 1000 points down since Jan, it might be up 20% from its lows for sure. All house prices up 20%? Nope, just the desirable ones, Halifax is saying on average 7.6%.

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I get the sentiment but you are cherry picking a wee bit. Shares up 20% in 2020? FTSE is 1000 points down since Jan, it might be up 20% from its lows for sure. All house prices up 20%? Nope, just the desirable ones, Halifax is saying on average 7.6%.

Hes also counting assets in his inflationary basket. Madness. 

Also more of a minor point the "bonds" 20% up is also divorced from any form of reality 

Edited by captainb
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Not surprising anymore.......this will be written off!

 

Meg Hillier MP, chair of the Public Accounts Committee, said: “We all hope the Bounce Back Loan Scheme saves a significant number of Britain’s small businesses, who will play a key part in the economic recovery from this pandemic.  

 

 “But despite knowing that it was a case of ‘when’ rather than ‘if’ a serious pandemic hit the country, Government didn’t develop plans for how to support the economy. Rushing to get money out of the door after the fact didn’t allow for analysis of how many businesses needed this help, could benefit from it, or could repay it.” 

AAT is now calling for loans to the small business community be written off, which it claims would save the taxpayer around £1bn in interest payments and avoid the need for banks to utilise “costly” debt recovery agencies. 

Phil Hall, AAT head of Public Affairs & Public Policy, said: “The Public Accounts Committee report again highlights that most of these loans are likely to be written off. 

“As a result, AAT repeats its recommendation that all Bounce Back Loans for small businesses be written off to provide a much-needed boost for the SME sector, enable a speedier recovery, more growth, more investment and to benefit the taxpayer in the long run.” 

https://www.accountancytoday.co.uk/2020/12/16/parliamentary-committee-criticises-bounce-back-loan-scheme/

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