Over $200 billion in pandemic business loans appear to be fraudulent, a watchdog says

Over $200 billion, or 17% of the $1.2 trillion in federal aid given to small businesses during the pandemic, may have been fraudulently claimed.

The Big Picture: The Office of Inspector General (OIG) of the Small Business Administration (SBA) estimates about $200 billion of the pandemic business aid could be fraudulent.
* The emergency need to distribute funds quickly may have made it easier for fraudsters to apply for and have loans forgiven for non-existent businesses.
* Advanced data analytics of SBA data have allowed for this assessment.

The Fraud Environment: An initial rush to disburse funds created opportunity for fraudsters to access these programs easily.
* The report says the attractiveness of “easy money” pulled numerous fraudsters towards the programs.
* The SBA’s leadership attributes 86% of the potential fraud to the first nine months of the program and refers to the anti-fraud measures implemented in early 2021.

The Clampdown: Efforts are underway to recover some the stolen money.
* There have already been “1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023.”
* So far, “nearly $30 billion” in aid has been seized or returned to the government.

A Balancing Challenge: The need for speedy financial support during an economic emergency had to be balanced against the risk of fraud.
* Government officials admit that the urgency of the pandemic shutdowns in 2020 required quick loans, despite the potential for fraud.
* Sam Kruger, an assistant professor of finance at the University of Texas, points out that the data analysis used in this report indicates the government had an opportunity to tighten up the system.

View original article on NPR

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