Hundreds of financial institutions have reported more than 5,000 instances of suspected fraud involving hundreds of millions of dollars stemming from a Small Business Administration COVID-19 loan program, according to a new report released Tuesday by the SBA’s Office of Inspector General.
“Nearly 440 financial institutions ranging from small, local credit unions to major national institutions have contacted us to express serious concerns,” according to the OIG. “Our law enforcement partners report similar calls from financial institutions.”
In its 13-page report, the OIG highlighted that a federal credit union reported to the criminal division of the Department of Justice that the cooperative received $15 million in SBA deposits. The credit union audited 60 of the transactions and determined that 59 appeared to be fraudulent, according to the OIG report, which did not identify the credit union.
After the Coronavirus Preparedness and Response Supplemental Appropriations Act was signed into law last March, it authorized the SBA’s disaster assistance program to use available funds to distribute “economic injury loans,” and begin a new program called Economic Injury Disaster Loans and Advances to respond to COVID-19 economic injuries.
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Approximately $374 billion had been allocated for loans and grants through the SBA’s economic injury loan program. As of July 22, the SBA said it has approved 2.8 billion loans totaling $160 billion and 5.7 million advance grants amounting to $20 billion.
According to the report, SBA approved 6,123 loans totaling $208.1 million to ineligible businesses, and an additional 20,692 advance grants totaling $47.8 million to potentially ineligible businesses.
What’s more, the OIG investigation also found the SBA approved and paid at least 275 loans more than one time. Approximately $25 million of the $45.6 million in approved duplicate loans has been disbursed.
“We verified the duplicate approved loans were made to the same businesses at the same address,” the report said.