House Subcommittee Launches Investigation into Role of FinTech Companies in Allegedly Fraudulent P3 Lending

United States: House Subcommittee Launches Investigation into Role of FinTech Companies in Allegedly Fraudulent P3 Lending

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The special House subcommittee on the coronavirus crisis recently
ad an investigation into the role of four Fintech companies and partner banks in issuing allegedly fraudulent Paycheck Protection Program (PPP) loans. The Sub-Committee press release refers to some reports that the FinTech industry and its banking partners “have been linked to a disproportionate number of fraudulent PPP loans … This announcement builds on the March 25 of the Sub- committee results that the Treasury Department and SBA failed to put in place adequate safeguards to prevent waste, fraud and abuse in pandemic relief programs, resulting in nearly $ 84 billion in potentially fraudulent loans.

In conjunction with this announcement, Representative Jim Clyburn, Chairman of the Sub-Committee, sent letters to these companies requesting documents and information regarding, among other things, the establishment or governance of the process used to review and approve requests for PPP loan, and all communications regarding potential fraud. or other financial crimes related to

PPP loans. The letters note that criminal actors have sought out FinTechs for fraudulent PPP loans because of their speed in processing such loans – in some cases as little as an hour – while implementing minimal due diligence. Letters from the subcommittee can be viewed here, here, here, and here.

Put into practice : Like yet another Example The scrutiny that participants in the pandemic relief program face by regulators, FinTechs and their partner banks must be prepared for future government investigations. As the subcommittee seeks to understand the fraud controls and compliance systems that companies have applied to their PPP loan programs, this investigation highlights the value of strict and consistent due diligence policies and procedures to detect fraudulent claims for those who process and finance commercial loans in general. To help mitigate potential risks, FinTechs should ensure that their commercial lending programs include:

  • Lending policies and procedures that verify the accuracy of loan documentation and information, and include processes for borrowers and high-risk transactions, such as the implementation of management oversight;
  • Improved internal controls and post-closing due diligence, including audits of closed loans and warning procedures to take immediate corrective action;
  • Avoid or limit fees and other internal incentives that cause employees to focus on loan volume at the expense of loan quality; and
  • A highly skilled and efficient team of quality control professionals.

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