More than $200 billion in Covid relief loans and grants were distributed to potentially fraudulent actors, nearly a fifth of all Small Business Administration funds disbursed in the US, according to a new estimate from the SBA Inspector General.
The estimate is the highest yet for the $1.2 trillion released under the SBA Paycheck Protection Program and the Economic Injury Disaster Loan from March 2020 to January 2022, at which time funding for both programs had ended. The figure is based on watchdog casework, previous reports and advanced data analysis. Last year, NBC News reported that fraud at the two programs, which together approved 22 million loans, could reach as much as $160 billion.
The new number shows that up to 17% of the revenue from the shows may have been stolen. That’s well above the 5% that the Association of Certified Fraud Examiners estimates is the standard amount of fraud expected for any organization’s finances.
The watchdog report notes that prior to the pandemic, SBA programs were not a magnet for organized crime syndicates or transnational gangs. However, once the tap for Covid relief was turned on in early 2020, bad actors immediately came looking for money, according to the report.
SBA officials responded to the report’s findings Tuesday, noting that the vast majority of the estimated fraud, 86%, occurred in the first nine months of the pandemic under President Donald Trump in 2020 and not in subsequent distributions during the Biden administration.
According to the report, inspector general investigators reviewed more than 250,000 fraud leads from the agency’s hotline, narrowing them down to 90,000 “actionable leads.”
The IG’s office said its team identified obvious red flags of fraud, including loan applications submitted from foreign countries, multiple loans coming from the same IP addresses, and borrowers who did not apply for loan forgiveness and are currently in arrears.
The report highlighted a scammer who defrauded SBA loan programs more than 150 times to get more than $3 million.
To date, at least $30 billion has been recovered, seized, or returned to the United States Treasury. Financial institutions repaid $8 billion and borrowers repaid an additional $20 billion. The IG report said the watchdog’s work has resulted in 529 fraud convictions so far and 570 investigations are ongoing.
