What is Considered Bounce Back Loan Fraud or Misuse?
Bounce Back Loan fraud or misuse refers to the act of knowingly providing false information or using the loan for unauthorised purposes in order to gain financial benefits from the UK government’s Bounce Back Loan Scheme (BBLS).
This article aims to provide a comprehensive understanding of what constitutes fraud or misuse in the context of the Bounce Back Loan Scheme.
We will delve into the legal definitions, the penalties for committing such offences, and best practices for ensuring compliance with the scheme’s regulations.
- What is Deemed as Misuse of a Bounce Back Loan?
- Dealing with Accusations of Bounce Back Fraud
- What happens if you misused a bounce back loan?
- If I Close a Company with a Bounce Back Loan, Will the Use of the Loan Be Investigated?
- Recent Conviction Highlights Risk of Bounce Back Loan Fraud
- Bounce Back Fraud FAQs
What is Deemed as Misuse of a Bounce Back Loan?
Bounce back loan fraud or misuse occurs when someone:
- Set up a fake business or impersonated someone else to obtain a loan.
- Used a third party to get a loan on your behalf, who then filed for bankruptcy.
- Obtained multiple loans from different lenders.
- Used the loan to purchase personal assets or transferred it to your personal bank account.
- Paid yourself or other directors increased salaries or dividends directly from the loan.
You may have also unwittingly committed Bounce Back Loan fraud by not reading the rules correctly or if another person in your business made these mistakes.
If you are a director who needs experienced bounce back loan support, please get in touch with us via live chat, telephone, or email. We offer clear, practical advice to lay out your options with complete transparency. Our advisors specialize in helping stressed directors find positive solutions to business challenges.
Dealing with Accusations of Bounce Back Fraud
If you are accused of bounce back fraud, it is vital to seek qualified legal advice from a firm specializing in this area as soon as possible. A lawyer can help you understand the allegations against you, develop a defence strategy, and represent you in court if necessary.
Here are some of the things a lawyer can do for you if you are accused of bounce back fraud:
- Review the evidence against you and explain the charges in plain language.
- Advise you on your legal rights and options.
- Help you gather evidence to support your defence.
- Negotiate with the prosecution on your behalf.
- Represent you in court, if necessary.
It is important to note that the consequences of being convicted of bounce back fraud can be severe, including fines, imprisonment, and disqualification from being a company director. Therefore, it is essential to have a lawyer who understands the law and can represent you vigorously.
Our expertise is in helping directors tackle the business of closing down limited companies with bounce back debt.
What happens if you misused a bounce back loan?
Bounce back loan fraud is a serious crime with severe penalties. The specific penalties you face will depend on the severity of the fraud and the amount of money involved, but they may include:
- Fines: You could be fined.
- Disqualification as a director: You could be disqualified from being a company director for up to 15 years.
- Imprisonment: You could be imprisoned for up to 10 years.
- Personal liability: You could be held personally liable for the debt, including compensation.
- Serious Crime Prevention Orders (SCPOs): An SCPO can restrict your activities and place you under supervision for up to 15 years.
- Civil recovery orders: The government can seize your assets to recover the money you defrauded.
- Civil settlements or penalties: You may be ordered to pay a civil settlement or penalty.
In addition to these penalties, you may also face damage to your reputation and difficulty obtaining credit in the future.
If you are accused of bounce back loan fraud, it is important to seek legal advice immediately. A lawyer can help you understand the charges against you and develop a defence strategy.
If I Close a Company with a Bounce Back Loan, Will the Use of the Loan Be Investigated?
If you’re a director considering closing a company with an outstanding Bounce Back Loan, it’s essential to be aware of the potential scrutiny you could face concerning the loan’s use. The Insolvency Service and insolvency practitioners are obligated to thoroughly investigate the usage of such loans in companies that are closing or have entered into administration or insolvent liquidation.
Insolvency practitioners have specific duties outlined by bodies such as the Insolvency Practitioners Association (IPA) to ensure the proper investigation and reporting of Bounce Back Loans. They are required to ascertain whether the loan was a Bounce Back Loan and then obtain all relevant documentation, including the loan application.
Verification and Investigation
The insolvency practitioner must verify the information provided during the loan application process, ensuring it meets the qualifying criteria for the loan. This may include confirming your company’s trading status, turnover, and insolvency status as of 31 December 2019.
Any concerns the insolvency practitioner may have about the use of the Bounce Back Loan must be reported to the Insolvency Service. Additional reporting may be required, depending on the nature of the issues discovered, and could include reports to HMRC or even a Suspicious Activity Report (SAR).
The insolvency practitioner is also required to examine bank statements and company accounts to confirm that the Bounce Back Loan funds were used in the ordinary course of business.
Recent Conviction Highlights Risk of Bounce Back Loan Fraud
Kulwinder Singh Sidhu, a 58-year-old director of Wavylane Ltd, a haulage company based in Stanwell, has been sentenced to 12 months in prison for fraudulently obtaining a £50,000 Bounce Back Loan. Sidhu pleaded guilty to offences under the Companies Act and the Fraud Act, acknowledging that he manipulated the financial support scheme introduced to aid businesses impacted by the pandemic.
Sidhu received the loan on June 9, 2020, and within two days transferred the funds to his personal account. Subsequently, he filed paperwork to dissolve the company on June 26, 2020, without notifying interested parties such as the bank from which he had taken the loan. This was a clear violation of rules that mandate notifying creditors within seven days of filing for company dissolution.
An investigation by The Insolvency Service uncovered that Sidhu had not only transferred the funds to his personal account but had also fraudulently overstated his company’s turnover in the loan application. The funds were then distributed to his son and another company. Alongside the imprisonment, Sidhu has been disqualified as a director for six years and was ordered to pay a £50,000 confiscation order, which he has settled in full.
Julie Barnes, Chief Investigator at the Insolvency Service, stated that the action taken ensures that taxpayers have not incurred losses and served as a warning to other company directors contemplating fraudulent dissolution of their businesses.
Bounce Back Fraud FAQs
What Are the Legal Repercussions of Bounce Back Loan Fraud?
Legal ramifications for Bounce Back Loan fraud can be severe, including criminal charges, fines, and potential imprisonment. Civil actions to recover misappropriated funds may also be taken.
What Actions Should I Take if I Think I’ve Committed Bounce Back Loan Fraud?
If you suspect that you may have committed fraud inadvertently, the first step is to consult legal advice to understand the ramifications and possible corrective measures. It is generally advised to approach your lender and regulatory bodies to correct the situation, although this should be discussed with your legal counsel first.
Can I Negotiate a Settlement if I’ve Committed Bounce Back Loan Fraud?
A negotiated settlement is a possibility, but the likelihood of this option depends on multiple factors including the severity of the fraud, the lender’s policies, and prevailing laws. Legal advice is crucial when considering this course of action.
Can Ignorance Be a Defense Against Bounce Back Loan Fraud Charges?
Ignorance is generally not considered a valid defence in legal proceedings for fraud. It is your responsibility to understand the terms and conditions of the Bounce Back Loan before accepting the funds.