Business minister Nadhim Zahawi pledges to 'stamp out' bounce back loan fraud after being grilled over conmen exploiting £50,000 payouts meant for Covid-hit firms

The Business Minister yesterday pledged to 'stamp out' bounce back loan fraud after being grilled over the Mail's expose of conmen exploiting it.

Nadhim Zahawi was confronted on live radio after we revealed how scammers were cashing in on lax checks by helping arrange fraudulent loans worth tens of thousands of pounds.

LBC presenter Nick Ferrari told him our undercover expose showed the fast-track coronavirus credit scheme was clearly 'open to criminality' and so simple to defraud that 'even a child could do it.'

He told the minister: 'A Daily Mail investigation that shows how easy it is to con the bounce-back scheme.

'Their reporter was able to effectively engage two accountants who showed in five easy steps, you can get up to £50,000 from the government bounce-back scheme.

'It's not secure enough is it? What action will you be taking?'

Nadhim Zahawi was confronted on live radio after we revealed how scammers were cashing in on lax checks by helping arrange fraudulent loans worth tens of thousands of pounds

The rattled minister responded: 'We are continuing to work with the banks to do more to stamp out fraud and anyone who does fraudulently claim, there will of course be consequences and criminality attached to that.'

More than 1.2million firms have applied for loans of up to £50,000, which are offered via banks but are 100 per cent guaranteed by taxpayers.

But ministers have accepted the losses through fraud and non-repayments could hit £26billion – which is more than double the annual police budget for England and Wales.

Labour MP Meg Hillier, chairman of the Public Accounts Committee, said our investigation highlighted problems which the government needed to urgently iron out.

She said: 'This was a brilliant but shocking investigation.

'It shows how, while bounce-back loans have certainly stopped some businesses from going bust, its hasty launch has also allowed criminals to take billions of pounds at the taxpayer's expense.

'Meanwhile many of the smallest traders – who are the backbone of the economy – have often struggled to get the loans.'

Sir Geoffrey Clifton-Brown MP, a member of the Public Accounts Committee, said: 'I understand there are fewer checks on borrowers initially because of the need to get cash quickly to businesses.

'But there should have been a requirement for checks immediately after releasing the money to help uncover fraudulent applications and recoup the cash before it has been spent or left the country.'

Sir Geoffrey Clifton-Brown MP , a member of the Public Accounts Committee, said: 'I understand there are fewer checks on borrowers initially because of the need to get cash quickly to businesses

He said another concern was, despite the government underwriting the loans, it will be down to banks to fund and organise the attempted recovery of cash from borrowers who default.

Treasury officials say the government guarantee would become invalidated if they fail to do this.

But Sir Geoffrey said: 'This does seem a loophole as banks will have far more incentive to spend their resources recovering loans were they are footing the bill if there are no repayments.'

More than £38billion has been dished out so far on bounce back loans, with officials expecting this to rise as high as £48billion by the time the scheme ends. The scheme was originally due to close at the end of the month, but was this week extended until the end of January.

The National Audit Office predict between £15billion and £26billion could be lost to fraud and non-repayments, something Treasury officials say ministers knew when they gave the go-ahead to the scheme.

The scale of the fraud will inevitably raise questions about how many more fraudulent claims were able to access the cash under the scheme set up by Chancellor Rishi Sunak (pictured in September)

Michael Levi, professor of criminology at Cardiff University, said it was vital that it was vital more resources were put into tracking down scammers exploiting the scheme.

'The longer you leave it, the more money is going to be squirrelled away,' he said.

Lucy Powell MP, Shadow Minister for Business and Consumers, said: 'As the second wave hits and these loans are extended, it's vital Ministers ensure there are strong and robust safeguards in place to guard against fraud, so that the taxpayer money is protected.

'The government must ensure companies remain viable so that taxpayers can get the best return on these loans, to avoid loans being written off.'

A Treasury spokesman said loan schemes have provided a 'lifeline' to thousands of businesses across the UK and protected millions of jobs.

He added: 'We've looked to minimise fraud - with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls.

'Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.'