Nov 03, 2020 06:35 PM EST
The Small Business Administration may have granted billions of dollars to fraudsters who made fake COVID-19 relief loans.
In a report published on October 28, the agency's internal watchdog said that the Small Business Administration has relaxed in response to an unprecedented amount of applications, causing it to grant billions of fraudulent coronavirus relief loans.
To keep up with the demand and fasten the loan approval process, the SBA "lowered its guardrails" during the economic disaster due to the COVID-19 pandemic, as per the agency's office of the inspector general (OIG). The act made a significant increase in fraud, according to HuffPost.
In early March, the SBA was authorized to provide loans of up to $2 million to small businesses, farms, nonprofits, and other eligible entities, after the U.S.government declared COVID-19 as a disaster.
The SBA received more than 14 million COVID-19 relief loan applications as of July 31, based on the report. The SBA has an average of about 65,000 applications per year prior to the pandemic. It approved 3.2 million applications or a total of $169.3 billion and disbursed 5.8 million COVID-19 relief grants costing $20 billion.
Among those loans, the SBA approved $14.3 billion to deferred accounts from the original bank accounts listed on the loan applications, wherein more than $13 billion of those loans were disbursed, the OIG stated.
The SBA also approved $63 billion in loans to applicants who used the same information - IP addresses, email addresses, mailing addresses, or bank accounts - for multiple loan applications. About $58 billion of those loans were disbursed, according to the OIG.
Besides, the SBA reportedly granted more than $1 billion on grants and loans to potentially ineligible businesses. The OIG said in its report that they recognize some of the loans in subgroups could be legitimate and for eligible companies. An example would be a law firm accounting filling out several applications for their clients.
However, the SBA must have had a more robust vetting process to research instances of suspicious activity or redundant data, the OIG reiterated. Several recommendations were made by the OIG to reduce the risk of fraud and recover funds disbursed to ineligible businesses, including having robust vetting processes to ensure loan deposits are made only to eligible bank accounts.
Fox7Austin reported that Jovita Carranza, SBA Administrator, took issue with the report's failure to indicate the enhanced and effective system validation and controls that SBA uses to process COVID-19 EIDLs" and claims many fraudulent applicants were decreased.
Carranza says, "The Draft Report does not fully and accurately portray SBA's highly successful delivery of an unprecedented volume of disaster assistance. Instead, the Draft Report grossly overstates the risk of waste, abuse, and fraud in the COVID-19 EIDL program."
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