A Monday report by the government watchdog stated that the Small Business Administration may accidentally have sent more than $1 billion in COVID-19 relief overseas to individuals.
SBA provided loans up to $2,000,000 each to nonprofits and small businesses in need. the COVID-19 Economic Injury Disaster Loans program as well as grants and advances. But the agency did not properly detect certain foreign IP address applicants, including those in “high risk” countries and may have given them up to $1.3 billion in funding, according to a SBA inspector general report.
Some Americans and aliens who live in foreign countries may have qualified for Economic Injury Disaster Loans relief if they “meet certain eligibility requirements,” the report said, not explaining what those requirements were. The risk of fraud in the program was elevated “because of the history of fraud originating from transnational crime organizations that have stolen funds from U.S programs in the past,” said the report.
“The federal government’s response to COVID was panicked and not thought out,” E.J. Antoni, an economics fellow at The Heritage Foundation’s Center for Data Analysis, told the Daily Caller News Foundation. “The careless, shotgun approach to disbursing unneeded aid was an invitation for fraud, both at home and abroad.”
The Economic Injury Disaster Loans program was launched during the Trump administration and was first authorized by the passage of the Coronavirus Preparedness and Response Supplemental Appropriations Act in March 2020, the report says. It was reauthorized by two other coronavirus relief package, including the American Rescue Plan signed by President Joe Biden, the report says.
According to the report, SBA employed a contractor to process relief applications and make recommendations to SBA loan officers on whether or not they should approve them. The agency stopped accepting COVID-19 Economic Injury Disaster Loans applications on Jan. 1, 2022, and the program’s portal closed in May, the report says.
The system did not flag over 41,600 applications from six “high risk” foreign IP addresses despite “four layers of controls” to do so, according to the report. The report states that between March 20, 2020 (and Nov. 12, 2021), $1.3 billion was disbursed by the agency to these applicants.
“Under the previous administration, a decision not to require a static IP address for EIDL applicants was made,” a spokesman for SBA told the Daily Caller News Foundation. “Under the leadership of Administrator Guzman, this administration immediately set to work to implement risk control measures designed to help prevent fraud, including monitoring of the IP static address for EIDL applicants.”
“With this new framework, SBA successfully stopped most of the applications from foreign IP addresses and is committed to ensuring that effective fraud controls are in place for future programs,” said the spokesman.
Linda McMahon, an ex-SBA Administrator, did not respond when we asked for comment.
According to the report the possible payments to foreign recipients account for 0.04% the $342 billion SBA has disbursed through its program. SBA processed more than 233,000 applications between March 20, 2020 and November 12, 2021.
SBA determined people had high-risk IP addresses based on them having fraud risk, connections to the “deep web,” or engaging in “suspicious online behavior,” says the report. The IP addresses of applicants who received funds were registered in multiple nations, including Nigeria, Pakistan and Ghana.
According to the report, over 33,000 applications were submitted by people with Nigerian IP addresses. According to the report, applicants could have received more than $19 million in loans and grants as well as advances.
COVID-19 relief programs are ripe for fraud. The Justice Department said in March 2021 it had charged 474 defendants with allegedly trying to illegally obtain over $569 million in funds from Economic Injury Disaster Loans and other programs.
Biden signed two bills in August giving DOJ more time to prosecute fraud related to both Economic Injury Disaster Loans and the SBA’s Paycheck Protection Program—another program for businesses to obtain COVID-19 relief loans.
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