Banks filed a record number of reports flagging suspected business-loan fraud at the same time they disbursed PPP funds that Republicans called a ‘resounding success’

FILE - In this April 28, 2020 file photo President Donald Trump, along with Jovita Carranza, administrator of the Small Business Administration, and Treasury Secretary Steven Mnuchin listen during an event about the Paycheck Protection Program used to support small businesses during the coronavirus outbreak, in the East Room of the White House in Washington. The Small Business Administration is shouldering a massive relief effort for the nation’s small businesses and their workers left reeling by the pandemic. The agency has committed to auditing every sizable emergency loan it approves. But six weeks after the $600 billion-plus program was launched, the agency has yet to make public the recipients of taxpayer aid.  (AP Photo/Evan Vucci)
President Donald Trump with Jovita Carranza, the administrator of the Small Business Administration, and Treasury Secretary Steven Mnuchin at an event about the Paycheck Protection Program.
  • Banks in July filed a record-high number of claims of suspected business-loan fraud, according to a new report.
  • At the time, banks were distributing billions of dollars in loans to small businesses through the Paycheck Protection Program.
  • The federal program has been under scrutiny over the possibility of fraud.
  • The Project on Government Oversight study released Thursday analyzes previously unreported government data to the Treasury Department.
  • Visit Business Insider's homepage for more stories.

Banks experienced an unusually high spike in reports of suspected business-loan fraud for the month of July, a period when they had been lending out Payment Protection Program loans to small businesses, according to a new report released Thursday.

The study, conducted by the Project on Government Oversight, an independent watchdog, analyzed previously unreported government data and found that banks filed 1,044 suspicious-activity reports to the Treasury Department's Financial Crimes Enforcement Network, also known as FinCEN.

That figure is nearly seven times the monthly average and is the highest of any month recorded in FinCEN's database, which has been operating since 2014. For comparison, 1,263 reports were filed in all of 2015, the researchers said.

The number was also far higher than that of June, when a then-record 489 reports of suspected fraud were reported.

Though the suspicious-activity claims are not "definitive evidence of fraud, the FinCEN data casts doubt on the assertion that there has been minimal fraud in the Paycheck Protection Program," the report said.

Congress approved a sweeping $660 billion in federal payouts earlier this year to help keep small businesses afloat amid the disruption caused by the coronavirus pandemic. The program's rollout was met with a public outcry, however, when several large companies were found to have applied for the loans.

Thursday's report adds to early analyses that have indicated fraud may have occurred as well while banks distributed the relief funds. The Small Business Administration Office of Inspector General has said the agency has launched investigations into suspected fraud reports submitted by banks.

House Democrats have previously sounded the alarm for additional oversight of the federal payouts and last week released a memo that the loans could be subject to waste and abuse. Republicans, on the other hand, also released a report on the program, praising its "resounding success."

Additional money for small businesses is being considered in a new economic package, which has been deadlocked by Congress for months, as the country suffers a recession. The PPP funding expired August 8.

The Small Business Administration provided roughly $190 billion more to businesses late last month through the Economic Injury Disaster Loan program, which has also been under scrutiny over the possibility of fraud.

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