Serious Concerns of Potential Fraud in EIDL Program Pertaining to the Response to COVID-19

Inspector General Hannibal “Mike” Ware issued a management alert on July 28, 2020, to inform the agency of strong indicators of widespread potential fraud in the Economic Injury Disaster Loan and Advance grant programs that require immediate attention and action.

OIG had been inundated with contacts to investigative field offices and the complaint Hotline. OIG received complaints of more than 5,000 instances of suspected fraud from financial institutions receiving economic injury loan deposits. Nearly 3,800 of those reported instances of suspected fraud came from only six financial institutions. An additional 1,220 reports of suspected fraudulent transactions have come in from other financial institutions. Nine financial institutions have reported a combined total of $187.3 million in suspected fraudulent transactions.

In addition, from the inception of the Economic Injury Disaster Loan and Advance Program in March until May 19, OIG received 465 hotline complaints by May 19, 2020. By June 26, 2020, the number of OIG hotline complaints had increased to 1,038. Of these, 692 complaints were about potential fraud or scams.

Additionally, we have found indications of deficiencies with internal controls related to disaster assistance for the COVID-19 pandemic. Our review of SBA’s initial disaster assistance response has identified $250 million in economic injury loans and advance grants given to potentially ineligible recipients. We have also found approximately $45.6 million in potentially duplicate payments.

OIG suggested swift management action to engage financial institutions immediately to identify disbursements that may have been obtained fraudulently, recover disbursed funds, and prevent additional taxpayer losses.