The US Secret Service has returned $286 million in fraudulently received pandemic relief loans to the Small Business Administration, the agency said Friday.
The funds returned to the SBA were obtained through the Economic Injury Disaster Loan (EIDL) program, using both fake information and stolen identities.
The suspects used Green Dot Bank, a fintech institution, to store and move the fraudulent funds. More than 15,000 accounts were used in the conspiracy by individuals in the US and by domestic and transnational organized crime rings, the agency said.
The investigation is ongoing and further information about suspects was not immediately released. The The investigation was initiated by the Secret Service field office in Orlando, Fla., and Green Dot Bank worked with the agency to identify the fraudulent accounts.
“Scammers in general are always looking for ways and techniques to better commit their crimes, and modern conveniences are just one of the things they use. So currently, cryptocurrency is a big deal, fintechs, third-party payment systems. But there is no institution, even our traditional financial institutions, that has not been targeted during the pandemic,” Roy Dotson, the Secret Service’s lead investigator, said in an interview with CNBC.
Initial investigations showed that the majority of Green Dot’s fraudulent accounts were set up with synthetic and stolen identities and involved the use of “willing and unwilling money mules,” Dotson said.
The Secret Service and the SBA Office of Inspector General gave advice to 30,000 financial institutions in early 2020 to set fraud indicators and direct banks to work with federal agencies to recover fraudulent funds, Dotson said. He added that given their size and scope, these investigations will likely take years.
Green Dot said it has partnered with federal agencies, including the Secret Service, to identify fraud in the industry.
“Account protection and fraud prevention are our top priorities, and we work around the clock and invest heavily to identify, block, and combat fraudulent activity [a] proactive ally of government agencies and industry peers as we work together to prevent fraud,” Green Dot spokeswoman Alison Lubert said in a statement.
OIG Inspector General Hannibal Ware said the partnership with the agency has resulted in more than 400 indictments and nearly 300 convictions related to pandemic fraud so far.
The US government provided more than $1 trillion to Main Street under both the Paycheck Protection Program and the EIDL program. The PPP allowed small businesses to take out loans that can be made when the borrower uses the bulk of the capital on the payroll, while the Covid-19 EIDL program allowed borrowers to access loans based on temporary revenue losses due to the pandemic . An upfront grant was also available under the EIDL.
Reviews of the two programs by the SBA’s Office of Inspector General warned that criminals could potentially exploit the system due to the rapid pace of implementation and the demand for help. In some cases, CNBC investigations showed how easy it was for criminals to obtain fraudulent help through stolen identities.
The SBA OIG said it identified $87 billion in potentially fraudulent EIDL loans.
Over the past two years, the Secret Service said it has seized more than $1.4 billion in fraudulently obtained funds and helped pay back about $2.3 billion to state unemployment insurance programs. Almost 4,000 fraud investigations and inquiries related to the pandemic have been launched by the Secret Service. More than 150 branch offices and 40 cyber task forces are involved.
“This will not be a quick fix. As we discussed today, 15,325 accounts at a financial institution – this is a case, so you can only think of the potential number of suspects and how many investigations this could result in. And with all of our federal, state and local partners who are working on this and have the same mission. It’s going to be a long process,” Dotson said at a news conference announcing the returned funds.