The funds have “attracted the attention of individuals and organized criminal networks” world-wide, the agency said in a news release, though its estimate of stolen benefits represents just a fraction of the trillions of dollars in government relief provided since last year.

The Secret Service said it would work closely with a variety of federal agencies—including the Labor Department and Small Business Administration, which have key roles tracking and administering relief funds—to investigate and recover fraudulently disbursed funds.

The Justice Department separately said earlier this month that its fraud section has prosecuted over 150 defendants in more than 95 criminal cases stemming from fraud schemes involving the Paycheck Protection Program, which has been the centerpiece of the federal government’s pandemic aid to small businesses.

In a separate estimate recently released, the Labor Department said about $87 billion in unemployment benefits might have been paid improperly, “with a significant portion attributable to fraud.”

Lawmakers have consistently raised concerns about fraud in the SBA’s aid offerings, particularly the COVID-19 Economic Injury Disaster program, which provides small businesses with loans and emergency grants. The SBA distributed more than $3.1 billion in loans and $550 million in grants to potentially ineligible recipients through those programs between March and November 2020, the agency’s inspector general said in a November report.

“SBA’s lack of adequate front-end controls to determine eligibility contributed to the distribution” of the funds to the potentially ineligible recipients, the report said.

The SBA’s inspector general previously also warned of potential fraud and abuse in the Paycheck Protection Program. The $961 billion program, which closed to new applications in May, offered small businesses forgivable loans issued through financial institutions and guaranteed by the SBA. It received bipartisan support for getting money out to businesses quickly. Citing the use of antifraud measures at the financial institutions that issued the loans, lawmakers have broadly raised fewer concerns about fraud in the PPP compared with the economic-injury programs.

The SBA under the Biden administration has said it implemented additional safeguards across its pandemic programs to better protect against fraud.

The Secret Service said its estimate is based on public reports issued by internal government watchdogs, with the bulk of the potentially misused funds stemming from fraud tied to unemployment insurance. Those analyses are based on 2020 activity and could overstate the amount of actual fraud or theft, in part because they also include mistaken payments to ineligible recipients who are not necessarily bad actors.

Source: Wall Street Journal

The closure marked the end of a $961 billion emergency effort that helped millions of small businesses survive the pandemic but was dogged by fraud claims and criticism that it didn’t reach the neediest businesses.

The program had been scheduled to end Memorial Day, but the Small Business Administration on Friday said in a notice to lenders that “due to the high volume of originations today, the portal will be closing for new originations” that day.

The SBA as of May 23 had approved 11.6 million PPP loans totaling roughly $796 billion across the program’s first round, from April to August last year, and its second round, which began in January. Banks and other lenders issued the loans, which the SBA guaranteed.

After the program’s general funding was exhausted in May, funds remained only for certain community lenders. The SBA said Friday that these lenders submitted 125,000 loan requests in the preceding 24 hours.

The agency will have another month to process loan applications that were already submitted. The SBA also has thousands of pending requests for loan forgiveness. Millions more will likely follow.

Created by the $2 trillion CARES Act that became law in March 2020, the PPP offered coronavirus aid in the form of loans that could be forgiven provided recipients used the funds to retain workers and on other allowable expenses.

Researchers at the Massachusetts Institute of Technology last July estimated the program had increased employment in the U.S. by about 2.3 million jobs through the first week of June 2020. At that time, the SBA reported that it had approved about 4.5 million loans totaling $511 billion.

Source: Wall Street Journal