Insolvency Practitioners Duties Regarding Bounce Back Loan Abuse!
- Thread starter UK Contractor Accountant
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- Original Poster
- #123
Treasury minister Lord Agnew resigns over government's 'lamentable' record on tackling COVID business loan fraud
Lord Agnew had served as Treasury and Cabinet Office minister since February 2020 and was responsible for efforts to counter fraud.
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Odd that the example he picked out (1000 non-trading cos getting loans) although very clearly fraudulent amounts to such a tiny amount of the total loans issued (it's around .1% of all loans, assuming they all took them for £50k, and ~1% of the estimated fraud total). It's a surprising thing to have let through, sure, but it's not the meat and potatoes of the fraud.Treasury minister Lord Agnew resigns over government's 'lamentable' record on tackling COVID business loan fraud
Lord Agnew had served as Treasury and Cabinet Office minister since February 2020 and was responsible for efforts to counter fraud.news.sky.com
You'd think he could pick a better example - something that addressing might make some significant dent in things.
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- Original Poster
- #125
This has just been published- looks like things are stepping up on fraud investigations around BBL's.
people arrested for fraudulent claims from business grant fraud
Two people have been arrested as part of a joint National Investigation Service (NATIS) and Metropolitan Police investigation into alleged case of fraud and money laundering of public sector funds totalling £260,000.
The arrests took place in Essex and London at various locations. One man aged 34 and a woman aged 34 were arrested on conspiracy to commit fraud and money laundering offences.
Officers executed a search warrant at an addresses in Dunmow and Ilford with evidence being seized, including electronic devices and paperwork.
The fraud involved the use of false information and documents to obtain Bounce Back Loans from a number of financial institutions, through a network of unrelated businesses.
The suspects have been released under investigation, following property searches and interviews, whilst enquiries continue.
people arrested for fraudulent claims from business grant fraud
Two people have been arrested as part of a joint National Investigation Service (NATIS) and Metropolitan Police investigation into alleged case of fraud and money laundering of public sector funds totalling £260,000.
The arrests took place in Essex and London at various locations. One man aged 34 and a woman aged 34 were arrested on conspiracy to commit fraud and money laundering offences.
Officers executed a search warrant at an addresses in Dunmow and Ilford with evidence being seized, including electronic devices and paperwork.
The fraud involved the use of false information and documents to obtain Bounce Back Loans from a number of financial institutions, through a network of unrelated businesses.
The suspects have been released under investigation, following property searches and interviews, whilst enquiries continue.
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- Original Poster
- #126
This one is interesting- Student applied for BBL for £50K. Picked up by the IS when petitioned for Bankruptcy
KJB, 28, from Scunthorpe, applied for and received a £50,000 Bounce Back Loan in June 2020. But KJB was not running a business at the time and was not eligible for any funding through the scheme, which was providing assistance to companies during the pandemic lockdown.
The Insolvency Service looked into the case when KJB petitioned for bankruptcy in April 2021, with debts in excess of £30,000 on top of the Bounce Back Loan.
When questioned, KJB said that he had intended to sell his home to clear his debts and start a car dealership business buying and selling second-hand cars using his car mechanic skills. He told investigators that he had been clear to the lender that his business was not yet trading at the point he applied for the loan.
KJB said he had not been able to proceed with his business plans due to the start of the pandemic, as lockdown meant car auctions were cancelled, and the sale of his house also fell through.
However he spent nearly £30,000 of the Bounce Back Loan to buy and insure a car, which he then sold for £10,000. KJB spent just over £8,000 on services for his would-be business, including premises, a van and tools, and made payments of more than £4,300 to creditors, but used the remainder of the funds on living expenses.
The Secretary of State for Business, Energy and Industrial Strategy accepted a 9-year bankruptcy restrictions undertaking from KJB which commences on 7 February 2022.
KJB, 28, from Scunthorpe, applied for and received a £50,000 Bounce Back Loan in June 2020. But KJB was not running a business at the time and was not eligible for any funding through the scheme, which was providing assistance to companies during the pandemic lockdown.
The Insolvency Service looked into the case when KJB petitioned for bankruptcy in April 2021, with debts in excess of £30,000 on top of the Bounce Back Loan.
When questioned, KJB said that he had intended to sell his home to clear his debts and start a car dealership business buying and selling second-hand cars using his car mechanic skills. He told investigators that he had been clear to the lender that his business was not yet trading at the point he applied for the loan.
KJB said he had not been able to proceed with his business plans due to the start of the pandemic, as lockdown meant car auctions were cancelled, and the sale of his house also fell through.
However he spent nearly £30,000 of the Bounce Back Loan to buy and insure a car, which he then sold for £10,000. KJB spent just over £8,000 on services for his would-be business, including premises, a van and tools, and made payments of more than £4,300 to creditors, but used the remainder of the funds on living expenses.
The Secretary of State for Business, Energy and Industrial Strategy accepted a 9-year bankruptcy restrictions undertaking from KJB which commences on 7 February 2022.
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Another interesting article / video regarding the banks ability to claim on the guarantee quickly at their discretion, and prior to any insolvency proceedings:
mrbounceback.com
Sarah from BEIS Forced to Admit She Lied to the Public Accounts Committee and Confirms Bounce Back Loan Lenders Can Call on the Guarantee Rapidly if a Borrower Cannot Repay – Writing Off a Bounce Back Loan Quickly and Easily
It is always good to see Government departments dragged in and grilled for telling big wobbly lies, and that is what Sarah Munby from BEIS was forced to experience yesterday in front of the Public Accounts Committee, and she revealed how easy it is for a Bounce Back Loan lender to claim on the...
mrbounceback.com
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- Original Poster
- #129
How is the Government getting money that was lost back?
We have set up the £100m Taxpayer Protection Taskforce of 1,200 HMRC staff to combat fraud, one of the largest and quickest responses to a fraud risk by HMRC.13,000 one-to-one fraud and error enquiries were opened in 20/21 and HMRC wrote to 75,000 people. We have so far stopped or recovered £743m of overclaimed grants in 20/21.
The taskforce is expected to recover up to £1.5bn from fraudulent or incorrect payments by end 22-23.
On Bounce Back Loans, the government continues to work actively with the British Business Bank, lenders, and enforcement authorities to recover loans obtained fraudulently. This work has been supported by the Cabinet Office Counter Fraud Function to better identify the level and types of fraud against the scheme, helping lenders tackle fraud effectively.
We are working with enforcement bodies including the National Investigation Service (NATIS) to investigate the most serious cases of fraud and we have always been clear that anyone who defrauds the scheme is at risk of prosecution. So far, NATIS have made 49 arrests in relation to Bounce Back Loan Scheme fraud, while work by the National Crime Agency has resulted in 17 arrests either in stand-alone investigations or as support to NATIS. Enforcement agencies continue to pursue cases of serious fraud. We have invested over £6 million in NATIS to tackle fraud in the Covid loan schemes.
In relation to Bounce Back Loans, the Insolvency Service have achieved 106 director disqualifications, 48 bankruptcy restrictions and 13 companies have been wound up in the public interest.
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I wondered if two months on from this, any of the IP's have seen a case of a lender pushing for personal bankruptcy as a means to claim on the BBL guarantee (I would suspect not given the recent press about how easy it is for them to claim, but would be good for an update to know any latest info)?
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Interesting. Probably ties into the above observations: that they've pursued this sole trader as they have a house for an asset.
Maybe they would not pursue if zero assets were present...
Although it still begs the question why they'd incur an extra £1500 of costs to go after bankruptcy when they can make a claim on the guarantee easier than originally expected (possibly they are forced to pursue if there's assets other than the main residence)
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- Original Poster
- #135
The process for recovering overdue loans in the Bounce Back Loan Scheme as agreed between
the government and lenders in December 2020
Enforcement action includes petitioning the borrower for insolvency or starting administration
proceedings.
Enforcement is not expected unless in the event of serious or organised fraud, or borrower
refusing to pay but has assets.
Interestingly Door Knockers not allowed!
the government and lenders in December 2020
Enforcement action includes petitioning the borrower for insolvency or starting administration
proceedings.
Enforcement is not expected unless in the event of serious or organised fraud, or borrower
refusing to pay but has assets.
Interestingly Door Knockers not allowed!
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For directors I speak to who choose to follow SpongeBob's method, this has come as a great relief.
I suspect both of these reasons are why the BBL lender is pursuing the sole trader I referred to for bankruptcy.
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One clear thing to note here though, unless I'm mistaken...
I believe no enforcement of any kind is being pushed for by the banks or government unless BBL payments are missed - i.e. once within an insolvency proceeding (everyone mentioned in the recent press regarding disqualifications has entered formal insolvency).
If a bank suspects any wrongdoing, then if the business is solvent & making loan repayments, the only course of action is for them to start lengthy court proceedings (for what charge though?). Surely this wouldn't happen if the loan is being paid back and there's so many other cases to investigate...
Would be interesting to hear any reports to the contrary.
I believe no enforcement of any kind is being pushed for by the banks or government unless BBL payments are missed - i.e. once within an insolvency proceeding (everyone mentioned in the recent press regarding disqualifications has entered formal insolvency).
If a bank suspects any wrongdoing, then if the business is solvent & making loan repayments, the only course of action is for them to start lengthy court proceedings (for what charge though?). Surely this wouldn't happen if the loan is being paid back and there's so many other cases to investigate...
Would be interesting to hear any reports to the contrary.
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If the banks suspect wrongdoing, then they are entitled to call in the whole loan. If the borrower cannot repay the whole loan, then the lender could start insolvency proceedings. Whether they would practically choose to take such action when the loan is being repaid on time.... I doubt it.
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- Original Poster
- #139
This one bagged 9 years Disqualification Order - only had BBL creditor and unpaid wages at date of liquidation yet liquidator took £25K of the BBL funds!!!
On 18 May 2020, Mr B caused E Ltd to wrongly apply for a Coronavirus Bounce Back Loan (“BBL”) of £50,000, when he knew or ought to have known that E was not eligible for that amount because it did not meet the turnover requirements for the BBL scheme,
in that: B professionally prepared accounts for Year-End 30 April 2019 recorded the annual turnover as £26,561. Bank analysis from E accounting records shows income into E was £33,396 for the whole calendar year of 2019.
B professionally prepared accounts for Year-End 30 April 2020 recorded the annual turnover as £35,066.
On 18 May 2020, B applied for a BBL of £50,000 on behalf of E. On the BBL application form, Mr. B declared that E's turnover was £200,000.
On 20 May 2020, E received BBL funds of £50,000. E traded as a courier service and was receiving income during the Covid-19 pandemic, there is no evidence that the company had been adversely impacted by Covid-19.
On 21 April 2021, E bank statements show that £25,000 was paid to the Liquidator.
On 17 May 2021, E went into Liquidation. The balance on the bank account at the date of Liquidation was £NIL.
On 18 May 2020, Mr B caused E Ltd to wrongly apply for a Coronavirus Bounce Back Loan (“BBL”) of £50,000, when he knew or ought to have known that E was not eligible for that amount because it did not meet the turnover requirements for the BBL scheme,
in that: B professionally prepared accounts for Year-End 30 April 2019 recorded the annual turnover as £26,561. Bank analysis from E accounting records shows income into E was £33,396 for the whole calendar year of 2019.
B professionally prepared accounts for Year-End 30 April 2020 recorded the annual turnover as £35,066.
On 18 May 2020, B applied for a BBL of £50,000 on behalf of E. On the BBL application form, Mr. B declared that E's turnover was £200,000.
On 20 May 2020, E received BBL funds of £50,000. E traded as a courier service and was receiving income during the Covid-19 pandemic, there is no evidence that the company had been adversely impacted by Covid-19.
On 21 April 2021, E bank statements show that £25,000 was paid to the Liquidator.
On 17 May 2021, E went into Liquidation. The balance on the bank account at the date of Liquidation was £NIL.
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Hello, has any of our insolvency practitioners applied for a bbl for their own business? What did you think about the turnover question being an estimate? we enquired about a bbl at the start and it asked us regarding the estimated turnover, we contacted HSBC and asked them about this estimate and at that time we had contracts coming in that would be approximately £280k. So we applied for a £50,000 bbl. We got put into another lock down and the clients had to go somewhere else after we bought all the machines, ingredients etc as our local council told us to close as we had a retail area in our building, Then 3 months later our local council told us we should have been open and that we didn’t qualify for the lock down grant, Now we have the bank wanting our old bank statements even when we have asked them to repay the loan at a reduced rate until we get ourselves fixed out, we have contacted hsbc about 10 times and our emails keep being returned from commercial. We are terrified as they are disqualifying directors who have did what we did by not fully understanding the turnover estimate. We see names of directors on forums and websites when they have did what we did but we didn’t do it for any other reason than to keep our business open and to pay our bills.
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This looks incredibly suspicious. It was evidently a tiny company, probably a one man band, so why on earth would they have paid the liquidator £25k? I'd have estimated the costs of liquidating it at not much more than a tenth of that figure, and I can't see any circumstances that would have justified such a massive fee payable in advance.
It occurred to my cynical mind that the liquidator might have agreed some form of `cashback' with the company director. I'm quite sure that some of the bent IP's I've come across wiould have been more than happy to do such a deal, but have any of the IP's on here ever heard of this happening?
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- Original Poster
- #146
The Insolvency Service (IS) new process
The IS has identified an opportunity to improve the targeting and investigation of cases where potential misuse of one or more Government- backed COVID-19 support schemes has been identified and is flagged by the office-holder/Director.In these cases, a standard enquiry letter will be issued to the office-holder as part of the IS’s initial review. The IS says:
“The information sought in this letter will enhance case targeting decisions by ensuring the Insolvency Service has the fullest possible summary of the circumstances surrounding the obtaining and disposal of funds through the support scheme(s). This is preferable to opening an investigation simply based on a company having obtained funds from a support scheme, to then establish there is no misconduct associated with that action. The information gathered through these initial enquiries ensures cases can be prioritised and resources can be used effectively.
The standard enquiry letter seeks to establish what support scheme(s) the company accessed, details of the amount received, dates of applications, eligibility for the scheme and evidence of overstatement of turnover.
The enquiries also seek to identify if any support scheme funds were paid to the director(s) or any connected party, what explanations the director has given for how the funds were used, and if the director has since paid money into the company.
Further questions seek to establish if any recovery action is being taken, what level of on-going trading activity there has been since the support scheme funds were received, and if repayments towards any support scheme funds have been made.
Office-holders will also be asked to provide company bank statements and any bank analysis undertaken.”
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Having looked at this again, it is misleading imo.
It says the £25k was paid to the liquidator, but it doesn't state that was to cover fees. It's standard practice for an insolvent company to send its funds to the IP's client account for protection whilst the liquidation is taking place.
It says the £25k was paid to the liquidator, but it doesn't state that was to cover fees. It's standard practice for an insolvent company to send its funds to the IP's client account for protection whilst the liquidation is taking place.
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I am seeing a number of cases as follows for Bounce Back Loans ("BBL"):
1. Exaggerated turnover at the point of application.
2. Directors receiving the BBL and offsetting it against a Director's Loan Account (a preference payment)
3. Directors transferring the BBL to their personal account and their loan account with the company, therefore, going overdrawn.
However, I have had a Director who took out a couple of BBLs and agreed to a Disqualification Undertaking of 9 nine years ie. almost two-thirds of the maximum period. Seem a little harsh?
1. Exaggerated turnover at the point of application.
2. Directors receiving the BBL and offsetting it against a Director's Loan Account (a preference payment)
3. Directors transferring the BBL to their personal account and their loan account with the company, therefore, going overdrawn.
However, I have had a Director who took out a couple of BBLs and agreed to a Disqualification Undertaking of 9 nine years ie. almost two-thirds of the maximum period. Seem a little harsh?
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I do not think dissolution in such an instance is going to work in view of the Insolvency Service now having powers to look into dissolved companies. I think such matters will lead to the reinstatement of those companies as the matter gets unscrambled. The suggested dissolution idea suggests mitigation is improbable. The Insolvency Service's recent Disqualifications have had a heavy focus on BBLs so you could see this sort of case could easily be on some flagging system to get on their radar.
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- Original Poster
- #158
All the disqualifications for BBL's abuse I am seeing logged at the moment are from reports made to the IS by Liquidators.
I assume the IS will at some stage get its own investigation team on the case for BBL abuse for Stuck Off companies. The Directors Disqualification (Dissolved Companies) Act 2021I believe does not require the company to be reinstated for investigation to take place.
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Agreed.
Most cases of Bounce Back Badness leading to a published ban to date appear to have sprouted from a CVL where the Liquidator will no doubt have completed the mandatory Director Conduct Reporting Service questionnaire. We do all the work; they get all the glory.
From what I have seen to date cases culminating in a ban seem to me to resemble low-hanging fruit.
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- Original Poster
- #160
Seems to be the case at the moment
With the falsifying turnover aspect you would have thought that there would be some sort of tie up with the IS investigating Dept and HMRC as they would hold details of turnover declared for 2019 & 2020 year ends via the Corporation Tax Return submissions.
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