Banks filed a record number of suspected business loan fraud, at the same time they dispersed PPP funds that Republicans called a ‘resounding success’

Banks report record amount of suspected business fraud during PPP – Business Insider

Associated Press

  • Banks filed a record-high monthly average of suspected business loan fraud reports in July, according to a new report.
  • The filings come at the same time banks were distributing loans through the Paycheck Protection Program to small businesses.
  • The federal program has been under scrutiny for potential risk of misuse of funds for fraud.
  • The Project on Government Oversight study released Thursday analyzes previously unreported government data to the Treasury Department’s Financial Crimes Enforcement Network, otherwise known as FinCEN.
  • House Democrats have warned the loans could be subject to waste and abuse. Republicans, on the other hand, have praised the program as a “resounding success.”
  • Visit Business Insider’s homepage for more stories.

Banks experienced an unusually high spike in suspected business loan fraud reports for the month of July — at the same time they had been lending out Payment Protection Program loans to small businesses, according to a new report released Thursday.

The study, conducted by independent watchdog Project on Government Oversight, analyzed previously unreported government data and revealed that banks filed 1,044 suspicious activity reports to the Treasury Department’s Financial Crimes Enforcement Network, otherwise known as FinCEN.

That figure is nearly seven times more than the monthly average, and the highest-ever month recorded in FinCEN’s database, which has been operating since 2014. For comparison, 1,263 reports were filed throughout the whole year of 2015, the research states.

The July number also builds on 489 reports filed in June, the second-highest monthly record of suspected business loan fraud reports.

Though the suspicious activity claims are not “definitive evidence of fraud, the FinCEN data casts doubt on the assertion that there has been minimal fraud in the Paycheck Protection Program,” the report said.

Congress approved a sweeping $660 billion in federal payouts earlier this year to help keep small businesses afloat after the economic fallout of the coronavirus pandemic. Yet since then, handling of the program run by the Small Business Administration has drawn intense backlash for potential instances of impropriety, including large companies benefiting from the loans, as well as other risks of misuse.

Thursday’s report adds to early analyses that have signaled fraud may have occured while banks distributed the relief funds. The Small Business Administration Office of Inspector General has said the agency has launched investigations into suspected fraud reports submitted by banks.

House Democrats have previously sounded the alarm for additional oversight of the federal payouts and last week released a memo that the loans could be subject to waste and abuse. Republicans, on the other hand, also released a report on the program, praising its “resounding success.”

Additional money for small businesses is being considered in a new economic package, which has been deadlocked by Congress for months, as the country suffers a recession. The PPP funding expired on Aug. 8.

SBA provided roughly $190 billion more to businesses late last month through the Economic Injury Disaster Loan program, which has also been under scrutiny for possible fraud.

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