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Tuesday, June 18, 2024

PPP Investigations and Enforcement Actions are Heating Up - JD Supra

The government has made fraud investigations and enforcement a priority for funds issued under the pandemic-related CARES Act, most notably regarding funds related to the Paycheck Protection Program. In December 2022, Congress issued a report detailing what it considered to be widespread fraud in the PPP.

Following public reports that many companies did not adequately screen PPP applications, Congress launched its investigation, finding that certain companies that originated only a third of PPP loans were responsible for over 60% of all suspicious loans originated. While this disproportionate number of suspicious loans does not indicate that these specific companies were inherently problematic, Congress found that the lack of enforcement systems invited bad actors to take advantage of the program. Congress found that lax oversight procedures enticed many companies to prioritize profits over procedure.

Congress made a variety of recommendations in its report, including:

  • The SBA OIG should continue to assess PPP-related fraud;
  • Particular emphasis in investigations should be given to the involvement of unregulated fintech entities in SBA programs and the current framework that allows for SBA lenders to delegate compliance-related responsibilities to third parties;
  • The SBA should establish and enforce clear guidelines for the lenders and service providers to perform due diligence regarding underwriting, fraud screening and suspicious activity reporting;
  • The SBA should...


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