US - Fraudsters took advantage of various loopholes and vulnerabilities in the U.S. government's COVID-19 relief aid programs, resulting in the largest theft in American history. They exploited the Social Security numbers of deceased individuals and federal prisoners, enabling them to receive unemployment benefits across multiple states. Additionally, there was a lack of cross-checking of federal loan applicants against a Treasury Department database, which could have flagged suspicious borrowers.
The stolen funds amounted to over $280 billion, with an additional $123 billion wasted or misused. This represents approximately 10% of the $4.2 trillion disbursed by the U.S. government for COVID-19 relief. Investigations are ongoing, and the total amount stolen is expected to increase as more schemes are uncovered.
The ease with which such large-scale theft occurred can be attributed to inadequate oversight and insufficient restrictions imposed on applicants during the early stages of the pandemic. The government's urgent need to distribute relief aid quickly contributed to this oversight. The perception that the funds were readily accessible led many individuals to rationalize their actions as socially acceptable, despite their illegality.
To date, more than 2,230 individuals have been charged with pandemic-related fraud crimes, and thousands of investigations are underway. While attention often focuses on high-profile cases involving millions of dollars, the overall pattern of theft demonstrates a pervasive problem of scams and swindles coinciding with the pandemic's impact on healthcare, education, and businesses. Over 1.13 million Americans have lost their lives to COVID-19 since the start of the pandemic.
According to Michael Horowitz, the U.S. Justice Department inspector general, the fraud committed amounts to tens of billions of dollars, and the final figure may eventually surpass $100 billion. However, a precise estimate will only be possible after more comprehensive data is available, a process that may take a couple of years.
The magnitude of the relief package injected into the U.S. economy, totaling $5.2 trillion, has overshadowed the significant financial mistakes made. For example, an IRS program intended to distribute economic stimulus checks had a 99% success rate but still resulted in nearly $8 billion going to ineligible recipients. The Small Business Administration (SBA) faced similar challenges, as it was tasked with managing the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, both exceeding a trillion dollars in funds. In the rush to distribute money quickly, safeguards were neglected, allowing fraudulent borrowers to slip through. The SBA's inspector general estimates fraud at $86 billion for the economic injury disaster loan program and $20 billion for the Paycheck Protection program, figures that are expected to increase in the coming weeks.
The government's failure to utilize existing databases, such as the "Do Not Pay" Treasury Department database, which identifies ineligible recipients, has been criticized by Horowitz. A brief review could have uncovered thousands of fraudulent applicants within days. Stricter measures, including the use of this database, have been implemented by the Biden administration to combat pandemic-related fraud. Furthermore, President Biden has proposed a $1.6 billion plan to enhance law enforcement efforts in prosecuting fraudsters.
While the SBA declined to comment on the figures provided by its inspector general, it acknowledged that there is currently no accepted system for assessing fraud in government programs. The majority of the likely fraud is believed to have occurred during the first nine months of the pandemic programs, primarily under the Trump administration.
Overall, the combination of economic distress, the urgency to provide aid, and systemic vulnerabilities allowed criminals to exploit the relief programs, resulting in substantial financial losses and an overwhelming workload for investigators and auditors.