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Treliant Takeaway:

On December 1, 2022, the House Select Subcommittee on the Coronavirus Crisis (Select Subcommittee) issued “We Are Not the Fraud Police”: How Fintech Facilitated Fraud in the Paycheck Protection Program (Report), which presents findings from the Subcommittee’s 18-month investigation into the role of fintechs in facilitating origination of fraudulent and ineligible loans through the Paycheck Protection Program (PPP). Treliant knows third-party risk management and customer due diligence. If the Select Subcommittee’s Report prompts you to reassess your institution’s risk, we can help.


Forgivable, low-cost PPP loans provided $800 billion in critical relief to millions of small businesses during the pandemic. The Select Subcommittee Report finds, however, that at least tens of billions of dollars of PPP funds were disbursed improperly due to fraud or ineligible borrowers. Further, the Select Subcommittee found that fintechs “failed to stop obvious and preventable fraud, leading to the needless loss of taxpayer dollars” and that fintech bank partners “often did little to oversee the activities of the companies to which they delegated their responsibilities.” Key findings from the Select Subcommittee’s Report included:

  • High rates of fraudulent PPP applications strained the financial crime resources of lenders and lender service providers (LSPs), including established fintechs and their bank partners.
  • LSPs and lenders blamed the Small Business Administration’s(SBA’s) rules for the high volume of fraud.
  • Lenders sought to ensure the SBA was responsible for fraud losses, rather than the lenders.
  • Whistleblowing fintech employees informed the Select Subcommittee of poor training and pressure to approve PPP loan applications even when fraud was suspected.
  • Fraud prevention practices at some fintechs with significant roles in PPP lending were subpar, resulting in targeting of those companies by criminal gangs.
  • Lenders partnering with fintechs to issue PPP loans lacked “close and proactive oversight of their fintech partners.”
  • Congress and the SBA “should consider carefully whether unregulated businesses such as fintechs, many of which are not subject to the same regulations as financial institutions, should be permitted to play a leading role in future federal lending programs.”

For fintechs, the Select Subcommittee’s Report is a signal of additional scrutiny of fintech lending and fraud prevention practices, which may result in additional regulation.  For banks engaged in fintech partnerships, the Report may lead to additional scrutiny of third-party risk management and know-your-customer practices.