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A failure to name which companies received state-backed loans totaling £80bn during the Covid pandemic has put the UK’s reputation as a reliable place to do business at risk, a tribunal has heard.
Anti-corruption campaigners and leading fraud experts warned on the first day of a three-day tribunal challenging state-owned British Business Bank (BBB) and the Information Commissioner over their decision to withhold the names of loan recipients.
The hearings were prompted by concerns about misuse of public funds by fraudsters and organized criminals. Campaigners, including Spotlight on Corruption, which brought the case to the tribunal, claim the fraud could have been partly prevented by greater transparency.
However, the BBB has argued that disclosing those names would breach commercial confidentiality between borrowers and the private lenders disbursing the funds and put borrowers themselves at risk of becoming targets of fraud.
A leading fraud expert and former chairman of the charity’s Fraud Advisory Panel, David Clarke, told the tribunal on Monday that money would have been saved if the fraudsters had made it clear to the BBB (which oversees the scheme) that they wanted the names published. Number of recipients when private lenders first started disbursing loans.
“The level of due diligence controls put in place … was woefully inadequate and could have been partially prevented and protected by the sharing of company names,” Clark said.
“Saying you’re going to publish is a great way to stop first [fraudsters] … That’s what I was saying back and forth at the beginning of the pandemic and it just seems to be ignored,”
He suggested that publishing the information now would give credit agencies and journalists access to a wealth of data that would help undersourced public bodies identify potential fraud and ensure public confidence in the UK as a place to do business.
“Is it right to tell the world? If we want to continue trading and be able to trust the system then yes, we should publish data from businesses. [who received loans]Clark said.
Recent estimates from the Business Department suggest that the taxpayer could be forced to cover £3.3bn or 4.2% of the £80bn worth of loans disbursed due to fraud and error. Others fear the amount could be much higher.
Much of that loss is likely to stem from the popular bounce back loan scheme, which had fewer checks to ensure disbursements were made to businesses at speed. The scheme provided £47bn, with affected business applicants able to borrow up to £50,000 each. The government is responsible for 100% of the losses if the borrowers fail to repay.
Representatives of Spotlight on Corruption argued that borrowers should expect that their information would be made public, as a result of their association with the BBB, as a result of the confidentiality clauses attached to the loans.
But Richard Berman, the bank’s director in charge of the bounce back loan scheme, said disclosing the information would actually raise privacy concerns and erode trust between businesses, their commercial banks and government bodies.
“There are small businesses in this moment of absolute crisis who are worried about their future … did they foresee possible consequences like this at the time? I highly doubt it,” Berman said.
“At its heart, it’s a question of faith. and … trust between us and or the government and with lenders and their customers.”
The tribunal continues.
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