U.S. sent $1.3 billion in small-business pandemic aid abroad, raising new fraud fears

As the U.S. government raced to shore up small businesses’ finances at the height of the pandemic, it may have erroneously awarded more than $1.3 billion to foreign applicants – raising new suspicions that the program might have helped fund overseas crime syndicates.

The top watchdog for the Small Business Administration, which reported its findings on Monday, said the spending posed a “significant risk of potential fraud.”

In doing so, the watchdog underscored the agency’s persistent, costly and well-documented struggles to ensure its vast array of coronavirus aid benefited the cash-strapped firms that needed it the most.

The trouble concerned the Economic Injury Disaster Loan Program, or EIDL, an initiative dating to the Trump administration that provided grants and other financial support to struggling small companies.

More than 27.8 million applicants ultimately sought funds from the SBA, overwhelming an agency that had been tasked to oversee a vast array of emergency spending that dwarfed its annual budget.

Congress required the SBA to disburse its EIDL aid only to those businesses affected by the pandemic and located in the United States or its territories.

But a crush of applications from foreign sources still flooded the agency over the life of its program – and the SBA repeatedly appeared to fund them anyway.

In total, the SBA made 41,638 awards totaling $1.3 billion to applicants that pursued that aid using computers believed to be located abroad, according to the agency’s inspector general.

The watchdog said that some of the applications came from what were deemed “high risk” countries that should have been blocked from filing applications outright.