Two men have been arrested over an alleged scam to claim “bounce back loans” from the Government’s scheme to help small businesses affected by the Covid-19 pandemic.

The main suspect, who is in his late 40s, is believed to have recruited people to set up fake companies and bank accounts.

Detectives have got orders to freeze 10 bank accounts containing a total of £553,305 after finding application forms for bounce back loans.

The alleged fraud was uncovered following a routine drug search on a vehicle in Holland Park, west London, on Wednesday.

Scotland Yard said the owner, a man in his early 20s, had travelled to meet a man to set up a bank account, for which he would be paid £300.

He and the second suspect were later arrested on suspicion of money laundering and fraud, and have since been released under investigation.

Detective Sergeant Neil Stanley said: “I would like to assure the public that we take a zero tolerance approach to fraud-related criminality of any kind within our community, and we are committed to bringing those involved to justice.

“During these unprecedented times, we have intensified our effort to dismantle organised criminal networks and will continue to crackdown on individuals who are found to be exploiting government schemes for their own monetary gain.”

Officers found application forms from suspected fake companies to their banks requesting bounce back loans – set up to help small businesses – in a search of a residential address in Hounslow, police said.

The Metropolitan Police said: “While still in the early stages of investigation, police believe the main suspect to have been recruiting individuals with the sole purpose of using their details to set up limited companies and bank accounts, which have then been used to launder money and facilitate fraud.”