Digital bank boss Starling has threatened to take legal action against the former anti-fraud minister because of his comments about its Covid loans fraud record.
In a letter to Lord Agnew of Oulton, chief executive Anne Boden called the former minister’s statements that the bank had allegedly failed to stop the fraudulent activity of state-backed Covid loans as “ wild accusations “.
She wrote: “Your statements are defamatory and I should ask you to retract them. You say you have no information to support your accusations, but you keep repeating them even though Starling clarified that you are wrong. “
Swansea-born Ms Boden, who set up a mobile-only bank in 2014, reiterated her request for Lord Agnew to withdraw her comments, threatening legal action if he did not, which writes: “Starling reserves all its rights in relation to your defamatory statements.”
He even accused the former minister of criticizing the bank for “avoiding the responsibilities you accepted when you took the job as a minister.”
“We only met once, in a video call during the pandemic when I explained to you how the scheme works. I understand you didn’t like the fact that I explained the scheme to you. I’m not sure if you were upset because you didn’t understand the technique or because I had the courage to speak up, ”he wrote.
The letter from Starling’s boss follows a former government counter-fraud minister openly criticizing the bank for its alleged poor performance in preventing pandemic fraud.
Lord Agnew resigned as anti-fraud minister in January over the government’s failure to prevent and monitor fraud in the £ 47bn bounce back loan scheme.
In a speech at Westminster Abbey last month, The Times announced that Lord Agnew referred to Starling as saying it was “acting against the interests of the government and taxpayers” and one of the worst banks in preventing fraud and flagging suspicious activity.
He said Starling does not take its responsibilities against fraud seriously, adding that Starling is “one of the worst when it comes to verifying the turnover of businesses or submitting suspicious activity reports.”
“Of course, as before the block most of their applicants were not yet customers and so any reasonable institution should be doubly careful before pouring money out the door. But the opposite happened,” Lord Agnew said.
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He further said the bank used the loan scheme to augment “its balance sheet by 50 times in less than a year, with no risk to themselves and 100 per cent risk to the taxpayer”.
Ms Boden said she was shocked by Lord Agnew’s comments and asked for her claims to be withdrawn.
He said: “I was surprised by Lord Agnew’s comments. We have always been open and clear about our BBLS lending strategy and in fact I have described the process – chapter and verse – in my book. We have been one of those most active and effective anti-fraud banks and in fact in the Treasury Select Committee on 14th December 2020, I was asked why we still have so many rejected applications compared to other banks.
“The comments raised by Lord Agnew about not checking the turnover of businesses or submitting suspicious activity reports are completely and utterly wrong and I should ask him to retract the statement.”
Ms Boden added: “Lord Agnew has never asked us for any information about any of the issues he has raised. We attended a meeting where he was present. Otherwise, his interaction with us was non-existent.”
The former minister refused to withdraw his claims unless the digital lender could prove it was not “one of the worst” performing in the distribution of state-backed emergency loans.
He said The Times: “I have no plans to retract my comments until I see some data that rests in my mind.”
He submitted a series of questions about the lender’s performance in the scheme.
The Bounce Bank Loan scheme was set in April 2020 by the UK Government to keep trading companies afloat during the coronavirus pandemic.
This allows businesses to borrow up to 25 per cent of their annual turnover up to £ 50,000, and means borrowers will have to prove their turnover in 2019 to secure the loans.
A total of 1.6 million loans, undertaken by the taxpayer, worth £ 47bn were issued through the initiative.
Lord Agnew had previously said the scheme was an “essential intervention at an extraordinary time” but it was “horribly implemented”.
The government estimates that more than a third of the loans will no longer be repaid due to fraudulent activity and legitimate borrowers will not be repaid.
State -guaranteed loans are issued with only light checks to borrowers.
During the coronavirus pandemic, Starling Bank provided £ 1.4bn in Covid bounce back loans to its business account customers, with 66% of recipients based outside London.
Earlier this year, Ms Boden said BusinessLive Wales that all banks are required to conduct very strict fraud checks.
“The bounce bank loan scheme is intended to get loans of up to £ 50,000 to small businesses as soon as possible. Starling has done all those checks,” he said.
“In a scheme of that magnitude there is always fraud. But there is no expectation at the moment that, throughout the scheme, that fraud is more than expected.
Ms Boden added: “If a bank has not carried out the processes as specified in them, then the bank will have to be held accountable. I can only speak for Starling but we have done all the necessary fraud checks. I think I think most banks have done that as well.
“The total percentage of fraud is likely to be within the expected levels set at the beginning of the procedure.”
On March 31 last year, £ 2.07 billion of Starling’s £ 2.23 billion loan book was underwritten by the state thanks to its use of emergency schemes. Since then, the bank has changed its loan book.
The fast -growing fintech venture has three million customers in the UK and is likely to float on the London Stock Exchange over the next two years. Last month, its Cardiff operation grew to nearly 900 staff, far exceeding initial job creation forecasts.
The company was originally focused on creating 400 jobs when it unveiled the investment in its Brunel House office in the Capital in 2020. However, that grew to 868 – an increase of 117% over the initial business plan.