New Loan Scheme Must Have Tighter Fraud Prevention

It is anticipated that tomorrow’s Budget will see the announcement of a new business loan scheme. Matthew Cox, Managing Director EMEA, Fraud, Security & Financial Crime, at global analytics firm FICO welcomes the news but urges that the checks on the new scheme are considerably stronger than they were for the scheme introduced at the height of the first lockdown last year.

“When the bounce back loan scheme was set up, the government rushed to roll it out because they needed to, and they didn’t put all the normal controls on loans at the bank level. As a result at the end of last year the fraud was estimated at 15-26 billion pounds. It may only be when banks start to attempt to recover the debt later this spring that the true size of the problem becomes clear.

“We would urge government to require banks operating the scheme to apply much stronger fraud checks than was the case last year.

“Ahead of the closure of the first loan scheme it would also make sense to get on top of the potential fraud problem. Network analytics could be used to identify potential fraud across all the applications already made. It would be too late to wait until the payments are due to start.

“Using advanced link analysis, all the connections between loans, like common phone numbers or company names or addresses, could be found. Banks should get all the data together, use the analytics to find everyone who made more than one application, put all those into a bucket, then start contacting them. The money may be gone, but no one can abscond with it, they can’t even leave their house! Then run some first-party fraud definitions on the rest, and tell the suspicious accounts, “I need to talk to you.” Automated notifications like SMS and App Push could be used for account holders that have made an application. Plus the government should consider having a consolidated collections process across the banks that made the loans.

“As the new loan scheme is launched, it is critical that this doesn’t add another cost to the ever-increasing taxpayer bill.”