SBA OIG Believes at Least 20% of EIDL and PPP Loans Disbursed Are Potentially Fraudulent
Client Alert | 1 min read | 06.28.23
On June 27, 2023, the Small Business Administration (SBA) Office of Inspector General (OIG) reported its estimate that SBA disbursed over $200 billion of potentially fraudulent COVID relief, including Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans. These possibly fraudulent loans represent at least 17% of all EIDL and PPP funds—or 21% of all loans and grants--disbursed. The SBA OIG estimates that the SBA disbursed $64 billion in potentially fraudulent PPP loans.
Nearly $30 billion in EIDL and PPP funds have already been seized or returned to SBA through the SBA OIG’s collaboration with SBA, the United States Secret Service, other federal agencies, and financial institutions. The SBA OIG reports a $9 billion return on investment in enforcement efforts in fiscal years 2021 and 2022.
The SBA OIG also details in Report 23-09 common indicators that have been useful in identifying fraud, including hold codes flagged by SBA and third parties, hotline complaints, loan defaults and PPP borrowers not applying for forgiveness. The SBA OIG used such rule-based analytical methods as link analysis of commonly shared data such as phone numbers, bank accounts, email addresses, physical addresses, and IP addresses to determine if they were used for more than one application. The SBA OIG plans to obtain, review, and analyze additional datasets from other government agencies as well as information subpoenaed from certain lenders and their third-party processors.
While the majority of PPP loans have been forgiven, borrowers should understand that forgiveness does not necessarily equate to a determination that the borrower was eligible for the PPP loan, nor does it preclude the SBA Office of Capital Access from opening a post-forgiveness review or the SBA OIG from opening an investigation. PPP borrowers should continue to maintain records establishing initial eligibility and demonstrating that they used the PPP funds for forgivable expenses.
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