COVID-19 Relief Programs: Suspected Fraud

Since the pandemic hit the country, there have been a sharp decline in economic output with thousands of businesses shutting down and people going jobless. In order to help some of these businesses and people stay afloat, the government has announced many relief programs that can provide aid and small loans that can help in this time of crisis.

However, according to the Small Business Administration inspector general’s report has shown that these programs might be riddled with fraud. The report shows that the government’s emergency loan and grant program might be being misused.

Inspector General accumulated the data for the report after receiving complaints of more than 5000 instances of fraud. These reports were being made by the financial institutions receiving SBA economic injury loan deposits.

After this investigation, IG Ware found that there are strong indicators that there is widespread fraud happening in these programs. He called for an immediate response by the SBA to “reduce fraud risk and prevent further losses”, before it dispatches the remaining more than $200 billion left in its coffers.

The funding provided by the SBA right now is approved and distributed under the authority provided by the emergency Coronavirus Aid, Relief and Economic Security Act (Cares Act), passed by Congress and signed into law by President Trump in March. The money is meant for small businesses and their workers who are suffering most from the coronavirus pandemic.

The initial findings by the IG SBA, showed that nearly $250 million in SBA economic injury loans and advance grants were given to potentially ineligible recipients and $45.6 million in economic injury loans that were given to 300 businesses were actually duplicates.

Being a duplicate means that one institution got financial assistance by the government multiple times. The report showed that one business was even approved four times and received four loans. Overall, six businesses were approved for loans three times each and 268 business got approval twice. This means millions of US tax dollars went where they shouldn’t have.

The report also found that there were all kind of suspicious activities afoot. There were stolen identities being used and people even tried to move funding from business accounts to private investment accounts. Some economic injury loans made to agricultural businesses were even deposited to different states altogether, when business locations were registered in other states.

The IG report also found that “a London-based international money-transfer business claims to have identified $1.9 million in pending SBA deposits being made to accounts to be transferred internationally.” Also, a federal credit union reported receiving $15 million in SBA deposits in recent weeks. Among 60 transactions that were suspected of fraud, 59 were in fact just that.

Just this week, nine people were even charged with suspected fraud. All nine of them were seeking loans of more than $24 million in small business administration paycheck protection program.

Among nearly 3,800 instances of suspected fraud, only six financial institutions raised alarm, which perhaps show that there need to be more stringent measures put in place to ensure that this does not happen again.

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