Bank faces fine of nearly $2.3 million for indifference toward signs of fraud in PPP loan applications

A fine of nearly $2.3 million has been levied against a New York bank for processing loans under a coronavirus pandemic recovery program despite signs that the applications contained “significant indications” of potential fraud, the Federal Reserve said Tuesday.

The Fed said Popular Bank of New York, N.Y., processed six loans totaling $1.1 million made under the Paycheck Protection Program (PPP) despite having found that the applications contained indications of possible deception. The bank was also cited for failing to report the potential fraud in a timely manner.

“Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Small Business Administration (SBA)-approved lenders like Popular Bank were allowed to provide PPP loans to qualified small businesses negatively impacted by the COVID-19 pandemic, but were required to follow their anti-money laundering policies,” the Fed said in a statement. “Popular Bank’s processing of potentially fraudulent PPP loans and failure to report the potential fraud in a timely manner violated these policies and constituted unsafe or unsound banking practices.”

As of Sept. 30, the bank reported $11.1 billion in assets and 708 employees.

Federal Reserve Board announces it has fined Popular Bank $2.3 million for processing six Paycheck Protection Program (PPP) loans despite having detected that the loan applications contained significant indications of potential fraud