Do You Need a Fraud Prevention Strategy?

Following a flood of pandemic-related fraud, the U.S. government sent a strong message to Covid benefit program criminals last month – handing down a 25-year sentence to a habitual fraudster who exploited loan schemes to steal millions.

Repeat offender Adedayo Ilori was out on bail for fraud offenses when he teamed up with co-defendant Chris Recamier to falsely obtain loans from the U.S. Small Business Administration’s Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”) Program. These programs, introduced during the pandemic to help small businesses weather lockdowns and other restrictions, disbursed low-interest and forgivable loans to qualifying companies.

Ilori and Recamier applied for 14 PPP and EIDL loans, trying to squeeze $10 million from the relief programs. Over the course of a year, they managed to steal over $1 million of government funds – all while Ilori was facing charges for a separate case of money laundering, fraud, and identity theft.

Fraudsters posed as legitimate businesses

To qualify for an EIDL loan, businesses had to show they’d suffered ‘substantial economic injury’ as a result of the pandemic. To obtain funds under the PPP, companies had to share details of their workforce and payroll costs, confirming the amount they’d compensated employees.

Posing as legitimate companies, Ilori and Recamier used false identities, fabricated IRS documents, and faked corporate documentation to claim that they employed more than 200 people and paid more than $3.2 million in wages.

Slipping through the programs’ vetting processes, Ilori and Recamier successfully applied for several loans and used the funds to open investment accounts under stolen identities. These accounts were then used to buy cryptocurrencies and stocks. Their newfound wealth also went to fund their lavish lifestyles, leasing luxury apartments and splurging on high-end cars.

Prioritizing fraud protection

The sheer volume of pandemic fraud underscores the need for more robust fraud protection in federal programs. It’s now clear that the PPP and EIDL were insufficiently safeguarded against identity theft and other forms of criminal activity. With businesses struggling, the federal government rushed funds out the door, dispersing billions in a matter of months. Inevitably, those billions did not always reach those who needed them.

Emerging from the Covid era, the lesson for everyone involved in government entitlement programs is to strengthen their defenses and prioritize compliance. The pandemic may be over, but fraud is an ever-present threat, and, as seen with Ilori, even an ongoing investigation doesn’t deter committed criminals. Rather than being dissuaded, they’re emboldened by finding the gaps in the system.

Creating a fraud prevention strategy

Ilori used multiple forms of theft to deceive those involved in the loan schemes, from identity fraud to forging IRS documents.

Public and private organizations need to be aware of these multifaceted attacks and put stringent controls in place to authenticate and verify documentation produced at every level – from making sure someone is who they say they are, to confirming the validity of any official documentation.

This kind of nuanced and holistic approach helps organizations develop a structured and comprehensive fraud prevention strategy that’s also nimble enough to meet evolving threats.

Anchin advisors can help you get ahead of fraud, identifying potential issues and resolving them before they arise. To discuss your organization’s needs or learn more about the work of Anchin’s RCI team, contact Brian Sanvidge, Principal & Leader, Regulatory Compliance & Investigations Group, or your Anchin Relationship Partner.