Popular Bank has agreed to pay a $2.3 million penalty to the Federal Reserve in connection with six fraudulent Paycheck Protection Program loans originated by the bank.
The New York division of Popular, a Puerto Rican bank, accepted the sanction after self-reporting that it had financed the $1.1 million in falsely obtained loans in August 2020, according to a Fed order.
The bank with assets of $71 billion cooperated with the Fed’s investigation, accepted the fine without admitting or denying the Fed’s allegations, and has undertaken “substantial remediation related to its ineffective controls and procedures,” the order says.
“We have consented to the imposition of the order and the civil monetary penalty. The order does not impose any other obligation on the bank,” a Popular spokesperson wrote in an emailed statement.
The Fed’s investigation found Popular failed to follow required anti-money laundering policies and “timely” failed to report detecting “significant indications of potential fraud,” according to a Fed news release. The order did not provide further details.
The fine is one of the first penalties imposed against a PPP lender. The $800 billion program was created in March 2020 to support small businesses forced to close during COVID-19.
Since last year, banks and fintech companies have come under increasing scrutiny for allowing PPP fraud to run rampant by lowering due diligence standards to disburse funds quickly at the start of the pandemic. The Department of Justice has estimated that at least 10% of PPP loans, as well as emergency damage loans and similar disasters, were made fraudulently. obtained.
In September, Houston-based Prosperity Bancshares established with the Department of Justice for allegedly violating the False Claims Act by approving a $213,400 loan to a doctor who bank employees knew was facing criminal charges that made him ineligible for a PPP loan.
Prosperity’s fine totaled $18,670, which prosecutors say reflects the bank’s cooperation as well as its implementation of compliance measures.
Kabbage, a fintech that filed for bankruptcy but continues to work with borrowers under the KServicing brand, is another PPP lender that has come under scrutiny after it revealed it is also facing a Justice Department investigation for possible violations of the False Claims.
