The Small Business Administration may have inadvertently sent more than $1 billion in COVID-19 relief to individuals in foreign countries, a government watchdog said in a Monday report.
The SBA has provided struggling small businesses and nonprofits with up to $2 million in loans each under the COVID-19 Economic Disaster Loan Program, as well as grants and advances. But the agency failed to properly screen some foreign IP applicants, including those from “high-risk” countries, and may have awarded them up to $1.3 billion in funding, according to a report by the SBA Inspector General.
Some Americans and foreigners who live in foreign countries may qualify for economic disaster loan relief if they “meet certain eligibility requirements,” the report said, without explaining what those requirements were. The risk of fraud in the program was elevated “due to a history of fraud from transnational criminal organizations that have stolen funds from U.S. programs in the past,” the report said.
“The federal government‘s response to COVID has been panic-stricken and unthoughtful,” EJ Antoni, an economics researcher at the Heritage Foundation’s Data Analysis Center, told the Daily Caller News Foundation. “The reckless and drastic approach to disbursing unnecessary aid was an invitation to fraud, both at home and abroad.”
The Economic Disaster Loan program was launched under the Trump administration and was first authorized by passage of the Coronavirus Preparedness and Response Supplementary Appropriations Act in March 2020, the report said. . It has been reauthorized into two other coronavirus relief programs, including the U.S. bailout signed by President Joe Biden, the report said.
The SBA hired a contractor who processed relief requests and made recommendations to loan officers or SBA teams on whether to approve them, the report said. The agency stopped accepting applications for COVID-19 economic disaster loans on January 1, 2022, and the program portal closed in May, the report said.
The system failed to flag more than 41,600 applications from six “high-risk” foreign IP addresses despite “four levels of screening” to do so, according to the report. In turn, the agency between March 20, 2020 and November 12, 2021 paid those applicants $1.3 billion, the report said.
“Under the previous administration, the decision not to require a static IP address for EIDL candidates was made,” an SBA spokesperson told the Daily Caller News Foundation. “Under the leadership of Administrator Guzman, this administration immediately went to work implementing risk controls designed to help prevent fraud, including monitoring the static IP address of EIDL applicants. .”
“With this new framework, SBA has successfully stopped most applications from foreign IP addresses and is committed to ensuring that effective fraud controls are in place for future programs,” the spokesperson said.
Former SBA administrator Linda McMahon did not respond to a request for comment.
Possible payments to foreign recipients represent 0.04% of the SBA’s $342 billion disbursed under its program, according to the report. During the period of March 20, 2020 and November 12, 2021, the SBA processed more than 233,000 requests.
The SBA determined that the people had high-risk IP addresses because of their risk of fraud, “deep web” connections, or “suspicious online behavior,” the report said. The applicants who received the funds had IP addresses registered in several countries, including Nigeria, Pakistan, Ghana and Mexico.
For example, more than 33,000 applications were submitted by people with an IP address in Nigeria, the report said. Applicants may have received more than $19 million in loans, grants and advances, the report said.
COVID-19 relief programs were ripe for fraud and abuse. The Justice Department said in March 2021 that it had charged 474 defendants with allegedly attempting to illegally obtain more than $569 million in funds from economic disaster loans and other programs.
Biden signed two bills in August, giving the DOJ more time to prosecute fraud related to economic disaster loans and the SBA’s Paycheck Protection Program, another program allowing businesses to obtain COVID-19 relief loans.
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