What Does EIDL Fraud Look Like?
Recently, we highlighted parts of the Government Accountability Office (GAO) 100-page report on the EIDL program. In this post, we unpack the occurrences of fraud with the EIDL program. Here is a summary of the fraud findings along with a video recap.
In our recent YouTube poll, the number of approvals remains steady at 27%. Another 27% have not heard back from their initial application and 46% have been denied or are in reconsideration.
What Was Reported About EIDL Fraud?
The GAO report from October 2020 “found strong indicators of fraud” such as loans going to multiple applicants with the same bank account, mailing address, or IP address. There are also reports from law enforcement regarding patterns of fraud investigations involving the EIDL program.
The SBA has approved nearly $200 million in EIDL loans and advances to over 10,000 businesses that did not qualify. The DOJ filed numerous charges. Of these, 19 were for identity theft, 39 involved fake or inflated employee counts, 39 were due to false attestation, and 29 involved misuse of proceeds. Bank fraud, wire fraud, and money laundering were also part of the findings with $860,000 from the EIDL funds diverted to accounts overseas.
What Is An Example of EIDL Fraud?
In one example, the defendant falsely claimed that his apparel store was in operation since 2015 and certified that he had no criminal record. He actually opened his business in 2020, used a P.O. Box for his address (which is against EIDL protocols), and is on parole. Still, he was awarded just under $200,000.
How Does EIDL Fraud Impact You?
EIDL fraud affects businesses because it undermines the system, diverts money away from eligible businesses, and gives fraudsters an unfair advantage. Also, the fraud that occurred over the last year slowed the process down, forcing millions of businesses to wait an exorbitantly long time to get approved.
What Has The SBA Done to Prevent EIDL Fraud?
The SBA enacted new policies to prevent EIDL fraud from occurring. After August 2020, EIDL applications were no longer approved in batches but individually reviewed by SBA loan officers. Also, the SBA created review teams to look into suspected cases of fraud and established an internal email for SBA loan officers to send suspected fraud applications to.
Lastly, in April 2021, the SBA started requiring businesses to submit their tax information as part of the application process. While all of these changes resulted in higher scrutiny, they also resulted in decreased application processing.
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