On January 23, 2023, the Federal Reserve Board announced that it had fined Popular Bank of New York, New York, $2.3 million for processing six Paycheck Protection Program (PPP) loans despite having detected that the loan applications contained significant indications of potential fraud. The bank also failed to report the potential fraud in a timely manner.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides emergency financial assistance to individuals, families, and businesses negatively impacted by the COVID-19 pandemic and the PPP was established to provide SBA-guaranteed, low-interest loans to small businesses and other eligible entities that under certain circumstances could be fully or partially forgiven. SBA-approved lenders like the Popular Bank are required to follow SBA guidance, rules and regulations implementing the BSA, and the Bank’s own BSA protocols in processing PPP loans.
In August 2020, Popular Bank processed and funded six PPP loans, totaling approximately $1.1 million, despite having detected that the loan applications contained significant indications of potential fraud. In addition, the Bank did not timely report the indications of potential fraud to the SBA and continued to process and fund these loans despite its awareness of a potential fraud. The six PPP loans were, in fact, fraudulent and the Bank has suffered a loss with respect to each loan. These unsafe or unsound practices warranted the assessment of a civil money penalty by the Board of Governors against the Bank under the Federal Deposit Insurance Act.
Read the FRB’s announcement here.
The consent order can be found here.