The UK Government has directed a laser-like focus on Bounce Back Loan Scheme (BBLS) fraud. Led by the National Investigation Service (NATIS), Operation Aurora has led to more fraudulent bounce back loan application prosecutions. NATIS’s website is replete with examples of this increased level of prosecutions, including;
- Arrests following allegations of Bounce Back Loan Fraud, 27th July 2023.
- Four arrested for fraudulent bounce back loan applications, 29th July 2020.
- And similar again, for bounce back loan applications, 21st Jan 2022.
If you are being investigated or have been charged in connection with fraudulently obtaining money through the scheme, you need to get sharp legal advice from an experienced Fraud Solicitor immediately.
The primary method of BBLS fraud involves people or businesses applying for loans under false pretences. This can include providing inaccurate financial information, inflating the size of the business, or even fabricating the existence of a business altogether. These fraudulent loan applications were approved quickly due to the scheme’s streamlined and simplified application process, which was intended to disburse funds rapidly to businesses who genuinely required them.
Additionally, some businesses may have diverted loan funds for personal use or non-business-related expenses, which is also considered fraudulent.
The UK government and financial institutions have been actively combating BBLS fraud. The Insolvency Service have been given the power to investigate directors where it appears BBLS fraud has occurred. Legislation in the form of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 strengthened the powers of investigation available to the Secretary of State (and in turn the Insolvency Service) where it appears fraud has been committed. Furthermore, the British Government is working with law enforcement agencies, such as the National Investigation Service (NATIS), to examine the most severe instances of BBLS fraud. According to the Government website, NATIS has arrested 49 people connected to BBLS fraud, and the National Crime Agency’s efforts have led to 17 arrests in both independent investigations and while assisting NATIS. Over £6 million has been allocated to support NATIS in combatting fraud within the Covid loan programs. In addition, the government has announced various measures to recover fraudulent loans, such as clawing back funds and freezing assets.
Employees have also been encouraged to report any suspicions of fraudulent activities to the authorities. The fight against BBLS fraud is ongoing, and it highlights the delicate balance between providing swift financial support to businesses in times of crisis and safeguarding against misuse and fraudulent activity.
Reeds Solicitors is an award winning and leading top-tier criminal defence firm. Obtaining legal advice at an early stage is crucial. If you would like to discuss any aspect of your case, please contact us through our contact page here. Alternatively you can phone 0333 240 7373, or email us at info@reeds.co.uk.
Nicola Hutchinson has been recognised as a Next Generation Partner by the Legal 500 for four years running, and provides unparalleled expertise in criminal and regulatory matters. Her experience covers fraud (including bounce back loan fraud), murder, terrorism, drug conspiracies and firearms. Nicola is an Equity Partner and Higher Court Advocate based in the South West region. She covers Bristol, Bath, Cheltenham, Gloucester, Swindon, Salisbury and the surrounding areas.
Contents
- The extent of bounce back loan fraud
- Types of bounce back loan fraud
- Sentences for bounce back loan fraud convictions
- How Fraud Solicitors defend a BBLS prosecution cases
- Wrapping up
The extent of bounce back loan fraud
The statistics regarding BBLS fraud are truly staggering. Launched in March 2020, this program was initiated to provide businesses with the necessary capital to navigate the challenges posed by the COVID-19 lockdown. The uptake of the scheme was remarkably swift, with 860,000 loans approved within just the first six weeks.
Similar to other financial assistance, Bounce Back Loans came with specific terms and conditions, which included:
- Only one loan could be applied for by a ‘group.’ If a director or directors had control over multiple companies, seeking separate Bounce Back Loans could be deemed fraudulent.
- Applicants must not have already received a loan under schemes like the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), or the COVID-19 Corporate Financing Facility (CCFF), unless they are refinancing entirely with a Bounce Back Loan.
- The funds obtained through a Bounce Back Loan must be used exclusively to support trade and commercial activities. Diverting the funds for personal use could be considered fraudulent.
- In the event of a business defaulting on another loan, whether from the same lender or not, it would also be regarded as a default on the Bounce Back Loan.
- Certain alternative forms of financing, such as mortgages, liens, or encumbrances on assets, might be restricted under the terms and conditions of the Bounce Back Loan.
The Department for Business, Energy, and Industrial Strategy (BEIS) estimates that BBLS fraud or credit losses could cost the taxpayer £27 billion. This is exacerbated by the fact that the 100% taxpayer guarantee puts the Department in a position where it relies on banks to recover funds. The banks have acknowledged there is little incentive to claw back monies given that it is not their own funds at stake.
Types of Bounce Back Loan Fraud
The Cabinet Office has identified two main types of Bounce Back Loan Fraud:
- Hard fraud, characterised by large-scale fraudulent activities, often perpetrated by organised criminal groups. This includes actions such as impersonating legitimate businesses or people, submitting multiple fraudulent applications with various lenders, and employing money mules to accept loans and subsequently declaring bankruptcy.
- Soft fraud, where an organisation exaggerates certain aspects of their business to secure a Bounce Back Loan, typically by inflating their annual turnover figures.
Providing false information to secure a loan may lead to potential charges related to:
- Fraud by false representation.
- Fraud by abuse of position.
- Conspiracy to defraud.
- False accounting.
- Money laundering.
Before formal charges are filed, investigative bodies like the National Crime Agency (NCA), NATIS, and/or HMRC will conduct thorough investigations into your business. This may involve searches of premises and related documents, including bank accounts, to track how the loan funds were utilised. You may also be required to attend an interview under caution.
Sentences for bounce back loan convictions
Upon conviction of BBLS fraud, the Court must use the Sentencing Guidelines to determine what sentence to hand down. First, the Court will assess the culpability of the defendant and the harm their actions of caused. For example, a defendant will be highly culpable if they involved others in the offending by exerting undue influence or they deliberately targeted vulnerable victims. If evidence shows that the defendant was not motivated by personal gain or they had limited awareness of the fraudulent activity, their culpability will be low.
The harm is measured by the actual, intended, or risked loss that may result from the fraud as well as the level of harm caused to the victims.
Once the culpability and harm have been established, the Judge must reach a sentence starting point. This starting point will not consider a guilty plea or any previous convictions. The Judge will then apply a series of aggravating and mitigating factors which may increase or decrease the final sentence handed down.
Aggravating factors include:
- Previous criminal convictions
- Committing the offence whilst on bail
- Steps taken to prevent the victim reporting or obtaining assistance and/or from assisting or supporting the prosecution
- Attempts to conceal/dispose of evidence
- Established evidence of community/wider impact
- Failure to comply with current court orders
- Offence committed on licence or post sentence supervision
- Offences taken into consideration
- Failure to respond to warnings about behaviour
- Offences committed across borders
- Blame wrongly placed on others
Mitigating factors include:
- No previous convictions or no relevant/recent convictions
- Remorse
- Good character and/or exemplary conduct
- Little or no prospect of success
- Serious medical conditions requiring urgent, intensive, or long-term treatment
- Age and/or lack of maturity
- Lapse of time since apprehension where this does not arise from the conduct of the offender
- Mental disorder or learning disability
- Sole or primary carer for dependent relatives
- Offender co-operated with investigation, made early admissions and/or voluntarily reported offending
- Determination and/or demonstration of steps taken to address addiction or offending behaviour
- Activity originally legitimate
Source: Fraud – Sentencing (sentencingcouncil.org.uk)
You may also have your sentence reduced if you plead guilty.
Fraud is a serious offence, and the sentences reflect this. For example, the maximum sentence for false accounting, often a feature in BBLS fraud is seven years’ imprisonment. If you are convicted of conspiracy to defraud in connection with the BBLS, you could face up to ten years in prison.
How Fraud Solicitors defend a BBLS investigation and prosecution cases
It is absolutely crucial to get an experienced Fraud Solicitor involved as soon as the authorities begin investigating you on suspicion of BBLS fraud. You may be asked to attend an interview under caution or your business may be subject to a dawn raid. At the pre-charge stage, you need the advice and representation of a Solicitor who specialises in fraud to ensure your best interests are protected, you do not say anything that inadvertently incriminates you, and to have the best chance of having your involvement in the investigation ended with no criminal charges being laid. They will obtain all the details concerning the background to the allegations. They will also examine your accounts, the original BBLS application and if they can provide exculpatory evidence to clear you of any suspicions, they will instigate pre-charge engagement.
If you are charged with fraud in connection with the BBLS, your Solicitor will contact the Crown Prosecution Service (CPS) and ask for the evidence bundles they have regarding your case. Once this is in their possession, they will hold a conference with you to go through the evidence. Your Solicitor will then take instructions as to your version of events as well as any further details relating to the background of the charges.
The key purpose of the first conference held with your Solicitor is to ensure you understand the prosecution’s evidence against you. It is impossible to emphasise how important it is to instruct an expert Fraud Solicitor well before your court date as on the day there will be no time for any negotiation with the prosecution.
Your Solicitor will also advise you on your plea. If the evidence against you is strong, you may be advised to plead guilty as this may result in your sentence being reduced. If you do have a credible defence, backed up by robust evidence, your Solicitor will work with a Barrister who specialises in fraud and will represent you in Court.
If you choose to plead guilty or you are convicted, your Fraud Solicitor will meticulously prepare for the sentencing hearing. In the case of a guilty plea being accepted, this may involve requesting a pre-sentence report from the Probation Service. A Probation Officer will arrange a time to meet you and ask questions concerning your childhood, any substance abuse, your employment history, and details about your relationships. It is up to you how much information you choose to share; however, a favourable report could make the difference between you receiving a community sentence instead of being sent to prison.
You will receive extensive advice before you attend your pre-sentence meeting. Factors that can make a difference include expressing remorse and taking proactive steps to pay back the BBLS money you received.
If you have pled guilty but disagree with the facts set out by the prosecution, your Solicitor may issue a basis of plea which states the actualities of events from your point of view. If the prosecution rejects the basis of plea and the Judge believes that the facts set out by the prosecution could result in a more severe sentence, the Judge may choose to conduct a Newton hearing.
During the sentencing hearing and preparation, your Solicitor will be focused on achieving a sentence of less than two years’ imprisonment as they can then request that the Judge suspend the sentence.
Wrapping up
BBLS fraud investigations and prosecutions are affecting a wide range of people, from company directors who believed they were entitled to the money but indulged in some ‘creative’ accounting to secure the loan, through to international organised crime groups. If you are being investigated or prosecuted in relation to BBLS fraud, engaging a specialist Fraud Solicitor is essential. They can advise you throughout the entirety of your matter, from the initial interview under caution through to sentencing. Having an experienced Solicitor by your side provides the best chance of achieving a positive outcome, both in terms of maintaining your liberty and your personal and commercial reputation.
For criminal law advice and representation, please contact us immediately. Alternatively, you can phone 0333 240 7373, or email us at info@reeds.co.uk.