Lauren C. Moye, FISM News
A recent Office of Inspector General report for the Small Business Administration warned of potential fraud and the unintentional funding of international crime organizations through the distribution of COVID-19 Economic Injury Disaster Loans (EIDLs) and grants meant for American small businesses.
In all, the Sept. 12 report found that 41,638 COVID-19 EIDLs and grants, rather than going to businesses struggling under pandemic measures, were instead approved for applicants with foreign IP addresses. This totaled $1.3 billion of pandemic relief sent outside the U.S. from March 20, 2020, to Nov. 12, 2021.
Inspector General Hannibal “Mike” Ware noted in his report that some foreign applicants might legitimately qualify for assistance. However, “the numerous applications submitted from foreign IP addresses are an indication of potential fraud that may involve international criminal organizations.”
The alarming findings discovered that nearly $12.5 million in aid had been sent to six unnamed “high-risk” countries. In a separate table, Ware noted that loans were also dispersed to three out of four designated State Sponsors of Terrorism: Cuba ($276K), Iran ($165K), and Syria ($23K).
While the SBA had historic numbers of loan and grant applicants for the record-setting aid package, they also created a four-step system to help prevent the aid from being sent out of the country. This included two different firewall stages and an automatic flagging system for applications that snuck past the earlier security measures. These flagged applications were meant to be reviewed by a human loan officer.
In a sample group of 50 foreign applications, Ware discovered that the system failed to flag 16 of them, which left 34 of the applications being sent to loan officers. He wrote, “However, we found loan officers did not properly review 15 of the flagged applications in accordance with written procedures to address and mitigate potential fraud indicators.”
This meant that 44% of the foreign applications directly reviewed by loan officers were erroneously approved, while 62% of overall foreign aid applicants in the sample group were approved.
Ware recommended that the system controls be reviewed, for the SBA to stop any future disbursements to ineligible or fraudulent applicants, and to recover erroneously disbursed loans and advances.
“The $1.3 billion identified by the OIG that originated from applications submitted from a foreign IP address represents less than .04 percent of the more than $342 billion approved by SBA for COVID EIDL advances and loans,” Patrick Kelley, SBA associate administrator of the Office of Capital Access, responded to Ware.
Kelley added that less than .005% of funds were approved for a high-risk country.
The news comes alongside GOP concerns that COVID-relief funds earmarked for schools was squandered on progressive items like training on teaching CRT and “LGBTQ cultural competency” rather than on filling gaps that were left by online learning due to COVID lockdowns.