The U.S. Secret Service has returned $286 million to the Small Business Administration in fraudulently obtained pandemic relief loans, the agency said on Friday.
The funds sent back to the SBA were obtained through the Economic Injury Loan (EIDL) program using each fabricated information and stolen identities.
The suspects used Green Dot Bank, a fintech institution, to store and transfer fake funds. The agency said greater than 15,000 accounts were used in the conspiracy, each by individuals in the US and domestic and international organized crime circles.
Investigations are ongoing and further information on the suspects has not been released immediately. The the investigation was launched by the Secret Service field office in Orlando, Florida, and Green Dot bank worked with the agency to discover the fake accounts.
“Scammers are generally at all times in search of ways and techniques to do their crimes higher, and modern conveniences are only certainly one of the things they use. So now cryptocurrencies are an enormous deal, fintechs, third party payment systems. But there aren’t any institutions, not even our traditional financial institutions, which have not been targeted during the pandemic,” Roy Dotson, the Secret Service’s chief investigator, told CNBC.
The initial investigation found that the majority of the fake accounts at Green Dot were arrange using synthetic or stolen identities and exploited “willing and unwilling money mules,” Dotson said.
Dotson said the Secret Service and SBA’s Office of Inspector General issued advice to 30,000 financial institutions in early 2020 to determine fraud rates and guide banks to work with federal agencies to get well fraudulent funds. He added that these investigations would likely take years due to their size and scope.
Green Dot said it’s working with federal agencies, including the Secret Service, to discover scams in the industry.
“Account protection and fraud prevention are our top priorities, so we work around the clock and invest heavily to discover, block and resolve fraudulent activity. We are committed to protecting customers in addition to serving as [a] an energetic ally of presidency agencies and industry partners as we work together to prevent fraud,” Green Dot spokeswoman Alison Lubert said in a press release.
OIG Inspector General Hannibal Ware said that working with the Secret Service has thus far resulted in greater than 400 indictments and nearly 300 convictions related to pandemic fraud.
The U.S. government has committed over $1 trillion to Main Street through each the Paycheck Protection Program and the EIDL program. PPP allowed small businesses to take out loans that might be forgiven if the borrower used most of their payroll capital, while the Covid-19 EIDL program allowed borrowers to access loans based on temporary income losses attributable to the pandemic. An advance grant was also available under the EIDL.
Reviews of two programs by the SBA’s Office of Inspector General warned that criminals would potentially exploit the system due to the rapid nature of deployment and the need for assistance. CNBC’s investigations revealed in some cases how easy it was for criminals to obtain fraudulent assistance using stolen identities.
The SBA OIG said it had identified $87 billion in potentially fraudulent EIDL loans.
Over the past two years, the Secret Service said it seized greater than $1.4 billion in ill-gotten funds and helped return roughly $2.3 billion to state unemployment insurance programs. The secret service has launched nearly 4,000 investigations and investigations into pandemic fraud. More than 150 field offices and 40 cyber task forces are involved.
“It’s not going to be a fast fix. As we talked today, 15,325 accounts at one financial institution – that is one case, so just take into consideration the potential variety of suspects and the variety of investigations that might come out of those… And all of our federal, state and native partners are working on it and have the same mission . It’s going to be an extended process,” Dotson said at a press conference announcing the returned funds.
