As we’ve been reporting, the Insolvency Service’s recent press releases have been awash with director disqualifications and bankruptcy restrictions related to misuse of the Bounce Back Loan Scheme (BBLS).

While there was only one such update in September from the Insolvency Service last month, there was an important statistical update from the Department for Business & Trade with one statistic, in particular, widely reported by the press…

Marked increase in Bounce Back Loans flagged as suspected fraud

In the ‘Covid-19 loan guarantee schemes performance data‘ quarterly update to the end of June 2023, published by the Department for Business & Trade, the value of BBLS loans “flagged by lenders as suspected fraud” rose to £1.65 billion – a near 40% increase since the March 2023 update.

The official commentary on the statistics states: “Since fraudulent loans are likely to be among the first to default, it is assumed that the proportion of guarantee claims linked to loans with a suspected fraud flag should decline as the scheme matures, although this will only become apparent over time.”

As we have seen from the number of Bounce Back Loan Scheme fraud cases discussed on this website over the past couple of years, the scheme was open to fraudulent activity, as lenders were encouraged to provide businesses with financing as quickly as possible.

The loans handed out under the scheme were, of course, 100% guaranteed by the UK government and the public purse has so far paid out on £1.27bn of loans with a suspected fraud flag (around 18% of the total paid out so far under the BBLS guarantee scheme).

The data release from the Department of Business & Trade (formerly the Department for Business, Energy & Industrial Strategy) includes a set of notes specifically relating to suspected fraud reporting, which admits that the “figures for suspected fraud will vary from quarter to quarter” as lenders evolve their “processes for identifying and combatting fraud”. The release also notes that a flag of suspected fraud will not always mean actual fraud, and that reporting will differ by lender depending on their “fraud tolerance thresholds”. The general message is that the figures for this metric are “indicative” as at a moment in time.

First Bounce Back Loan compensation order secured in court

The Insolvency Service has secured its first compensation order in court, which orders Marian Ghimpu to repay £52,163 for his abuse of the Bounce Back Loan Scheme.

Ghimpu, from Croydon, obtained the maximum £50,000 Bounce Back Loan in October 2020 after he claimed his company’s turnover was £200,000 in his application. In fact, his company, Deea Construct Ltd, was only eligible for the minimum loan amount of £2,000. There was no activity at all for the year to October 2020 in the company’s bank accounts, and only around £4,000 in revenue in summer 2019 (which fell in the qualifying period for the loan application).

On receiving the loan funds, Ghimpu transferred more than £40,000 to his personal bank accounts and withdrew the remaining money in cash.

Just six months after acquiring the loan, the director placed Deea Construct Ltd into liquidation, which in turn led to an Insolvency Service investigation. The company’s liquidator, from Capital Books, was unable to recover the loan money. As a result, the Insolvency Service sought a compensation order, which was imposed on Ghimpu by Chief ICC Judge Briggs at High Court of Justice, Rolls Building on 25^th July 2023 (but only reported by the Insolvency Service on 1^st September 2023).

Ghimpu also received a thirteen-year director disqualification order.

Nina Cassar, Deputy Head of Investigations at the Insolvency Service, said: “Marian Ghimpu’s actions, providing false information to the bank, allowed Deea Construct Ltd, and himself, to have an unfair advantage over other businesses impacted by Covid-19. Abuse of taxpayers’ money will not be tolerated and I am delighted we have secured this compensation order. Where there have been similar cases of abuse by company director, we will be seeking further compensation orders and disqualifications.”

Insolvency and debt investigations

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