‘HMRC denied banks access to data that could have prevented Covid loans fraud’

Hannah Bernard, of Barclays, told MPs that, instead, her bank had to rely on self-attestation by businesses applying for bounceback loans.

Businesses borrowed more than £47bn in Covid bounceback loans (Dominic Lipinski/PA)
Businesses borrowed more than £47bn in Covid bounceback loans (Dominic Lipinski/PA)

The Government did not provide vital data that banks indicated might have let them prevent billions of pounds of fraudulent Covid loans, MPs have been told.

Hannah Bernard, the head of business banking at Barclays, said her bank had asked HM Revenue and Customs (HMRC) for up-to-date figures on the turnover of borrowers before handing out bounceback loans in 2020, but had been told it was not available.

It meant that, instead, the bank had to ask the business what its turnover was, and hope it told the truth. The amount a business could borrow was based on turnover.

The scheme necessitated a lot of self-attestation, particularly the businesses’ turnover

Hannah Bernard, Barclays

“The scheme necessitated a lot of self-attestation, particularly the businesses’ turnover. Ideally we would have wanted an HMRC data feed so we could have checked the turnover they were stating,” Ms Bernard told the Business, Energy and Industrial Strategy Committee.

“We made the suggestion, it wasn’t available, so we had to go with the self-attestation.”

She later added that of the 7.5% of loans that the Government estimates might have been taken out fraudulently, a vast majority would have been due to self-attestation of turnover.

Barclays’ data currently shows around 1.5% of fraud in the scheme, but Ms Bernard said this could rise.

“I can see my way through to the 7.5%, but most of that, 90% of that, will be due to self-attestation,” she said.

Ms Bernard said it is possible that many of the businesses which inflated their turnover will still pay back their loans and the taxpayer will not lose out.

HMRC set up the Bounce Bank Loan Verification Service in January 2021 to allow banks to check applicant information against HMRC data. All banks offering bounce back loans were encouraged to use the HMRC service

HMRC

In response to a question from the PA news agency, HMRC said that it had set up a system that would allow banks to verify a company’s turnover. This system was not active until months after the loan scheme was launched in May 2020.

“HMRC set up the Bounce Bank Loan Verification Service in January 2021 to allow banks to check applicant information against HMRC data,” a spokesperson said.

“All banks offering BBLs (bounce back loans) were encouraged to use the HMRC service.”

The department said that it was unable to simply hand over turnover data due to taxpayer confidentiality laws.

According to a National Audit Office report, the British Business Bank, which ran the scheme on behalf of the Government, identified turnover misstatement as the top fraud risk in October 2020.

Ms Bernard’s comments came at a meeting where HSBC revealed it had taken it months longer than other banks to make sure that it was not giving bounceback loans to companies which had borrowed from one of its rivals.

The bank said it had not put in place a full duplicate check on all applicants until December 8.

The British Business Bank had put what the National Audit Office called a “straightforward” way of checking for duplicates in June, already too late to prevent many duplicate applications.

Other banks said it had taken them a matter of weeks to implement the duplicate checks.

MPs asked the representatives of five major banks – HSBC, Barclays, Santander, Lloyds and NatWest – if they had any particular concerns if the Government decided that the names of all businesses which took a bounceback loan should be published.

No-one raised any objections.

Jas Singh, consumer and business banking director for Lloyds and Bank of Scotland, said: “I’m not sure what purpose it would serve, but if that was the decision made with the British Business Bank and the Treasury that it was helpful to disclose everyone who received a bounceback loan publicly, we would happily support that.”

He added that he would have to check whether the bank has the right to disclose the information because of data protection.

Barclays said it currently estimates 1.5% of fraud in its loans, Lloyds said 2%-2.5%, HSBC said 1.81%, Santander said less than 1%, and NatWest said it thinks fraud was about 2%.

According to British Business Bank figures, £79.3 billion was paid out in three emergency Covid loan schemes.

More than £47 billion of this was from the bounceback scheme. The loans were vital to keeping hundreds of thousands of businesses alive during the pandemic.

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