Secret Service agent.
Julia Nikhinson | AP
The U.S. Secret Service returned $286 million in loans to the Small Business Administration that were fraudulently obtained in connection with the pandemic, the agency said on Friday.
The funds sent back to the SBA were obtained through the Economic Injury Injury Loan (EIDL) program using both fabricated information and stolen identities.
The suspects used the fintech institution Green Dot Bank to store and move fraudulent funds. The agency said more than 15,000 accounts were used in the plot, both by individuals in the US and by domestic and transnational organized crime groups.
The investigation is ongoing and no further information about the suspects was released immediately. the investigation was initiated by the local branch of the Secret Service in Orlando, Florida, and Green Dot worked with the agency to identify fraudulent accounts.
“Cheaters in general are always looking for ways and means to better commit their crimes, and modern conveniences are just one of the things they use. So nowadays cryptocurrency is a big deal, fintechs, third party payment systems. even our traditional financial institutions that were unaffected during the pandemic,” Assistant Special Agent Roy Dotson, lead Secret Service investigator, told CNBC.
Initial investigations revealed that most of the fraudulent Green Dot accounts were created using synthetic and stolen identities, as well as using “willed and unwitting money mules,” Dotson said.
The Secret Service and the SBA’s Office of Inspector General sent advisories to 30,000 financial institutions in early 2020 to indicate indicators of fraud and direct banks to partner with federal agencies to recover fraudulent funds, Dotson said. He added that the investigations would likely take years due to the size and scope.
OIG Inspector General Hannibal Ware said the Secret Service partnership has resulted in more than 400 charges and nearly 300 convictions to date related to fraud during the pandemic.
The U.S. government has given Main Street more than $1 trillion in both the Paycheck Protection Program and the EIDL program. The PPP program allowed small businesses to take out loans that could be forgiven if the borrower used most of the capital for payroll, while the EIDL Covid-19 program allowed borrowers to take out loans based on temporary income 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 rapid deployment and demand for assistance. CNBC investigations have shown, in some cases, how easy it was for criminals to get fraudulent help with stolen identities.
The SBA OIG said it had identified $87 billion in potentially fraudulent EIDL loans.
The Secret Service said it has confiscated more than $1.4 billion in fraudulent funds over the past two years and helped return about $2.3 billion to state unemployment insurance programs. The Secret Service initiated about 4,000 investigations and fraud investigations related to the pandemic. More than 150 field offices and 40 cybersecurity task forces are involved.
“It won’t be a quick fix. As we said today, 15,325 accounts at a single financial institution is one thing, so you can just think about the potential number of suspects and how many investigations there could be on those… And with all of our federal, state, and local partners working over this and having the same mission. It will be a long process,” Dotson said at a press conference announcing the funds returned.