We have found that in some cases a tax preparer (or someone in similar professional role) may have helped someone apply for their SBA PPP funds. I think this is normal/acceptable - for instance, if our borrower is a pool cleaner, I might not expect her to have the financial and computer skills needed to adequately complete the PPP application process. To me it makes sense to expect the involvement of financial professionals.

Anyway in some cases one CPA helped one, two, or even five of our PPP applicants apply. Today I found out that one person (a tax attorney) helped thirty-seven of our applicants apply.

Would you consider that alone enough to file a SAR? Or, do we continue with what we've been doing so far, and wait until they apply for forgiveness to determine whether they used the funds as intended and qualify for forgiveness, etc.?

Would your answer change if this particular professional was already identified in two separate cases of possible PPP fraud involving backdating, sham documentation, and altered documents?

I'm finding it really hard to properly investigate these for suspicious activity considering the SBA's program rules were, to my mind, very lax. If the SBA decided they qualified, and later decides the same borrower merits forgiveness of the debt, who am I to argue about how the SBA chooses to waste taxpayer dollars on questionable "assistance" to needy businesses? Why would the bank interject to say, No, that doesn't look right to us?

In case you're wondering, no, there aren't any Lamborghinis or other extravagant/luxury purchases involved. Most of these are very small-dollar loans that wouldn't be enough for a down-payment on a sensible used car. But a lot of these applicants chose to get the funds in cash. But again, if they come back with documentation of the type required by SBA for forgiveness, at what point is the bank supposed to start filing SARs based on its own invented/imaginary requirements about the program?

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I am not sure why someone seeking help in filing for a PPP loan equates to fraud if the applicants received the funds.

This is the part that would concern me.

From OP: Concern you enough to file a SAR that has hundreds of pages? Based on nothing more than the "helper was a subject of other SARs, and helper helped these others apply to, so now all of them are suspicious" line of thought?

OP here. Some speculation:

Some number of these businesses - perhaps a lot of them - could conceivably be sham businesses created to defraud SBA for funds. The SBA does not require that any particular borrower proves that it has ever operated or existed, other than through provision of tax documents and proof of income etc.

The fact that the helper is someone who is expert at creating documentation of the sort that SBA requires for approval, could be a cause for concern, now that this helper has been identified in previous reports regarding sham documentation.

You have wasted more time here than it would take to file a SAR. Why all the hand wringing? If they have been suspected of previous fraud, file and move on.

OP here: I disagree as to the time involved, as my total time on BOL has been measured in minutes whereas writing a SAR of this size will take me another 20 hours of work effort, if not more. Some additional reasons for the hand-wringing (aka careful, methodical decision-making process):

1. I don't file any SARs lightly. I need to have a persuasive basis for forming a belief that the customer is involved in reportable activity (or at the very least, that a hypothetical "reasonable person" would have such a suspicion, as determined by our regulators).

2. Have never considered any "guilt by association" type SAR before. Any time I have a brand-new idea for a way to get a SAR filed that I've never used or even considered before, that gives me considerable pause.

3. I am part of a team that has to collectively decide on whether each SAR filing should be made, so I need to believe in this one firmly enough to potentially persuade others.

4. This would be a SAR not just on the professional services provider, but on every one of the borrowers with which that firm is associated. If we determine we suspect that firm is committing fraud, that means we suspect all of the borrowers the firm touched as being actively and wittingly engaged in the fraud. (So, dozens of suspects). So it's a very complex, time-consuming, and sweeping SAR to consider.

5. This SAR will involve more borrowers and parties than will fit on a SAR form, either in our system or directly on FinCEN's e-filing system. I'm not sure how to proceed with filing a SAR that has this many pages; it far exceeds the maximum capacity of the forms used by FinCEN. I'm not sure what the exact limit is on the number of subject pages per SAR but I am sure I have a lot more than the max. I will also likely hit a character maximum on the narrative. I don't think it is necessarily valid to file a SAR with 20 subject pages (or whatever the limit is) and then in the narrative say "See attachment for the other suspects." My original investigation revealed 37 involved parties, but as of this morning, continuing to look for more data, I'm at 52 involved parties.

6. This SAR dollar amount would total well over a million dollars, by far the largest amount I've seen on a SAR. It will "stand out" to anyone monitoring SAR traffic. A SAR with a dollar amount that high will have FDIC ringing my phone within a few days after it is filed. It could even accelerate the timing of our next BSA exam.

7. Although there is no basis for denying SBA applications based on suspicions of this type, I am concerned that regulators will feel that we could have or should have done so. As near as I have been able to determine we are not legally allowed to deny an SBA applicant based on this kind of issue. The SBA's program itself is perhaps flawed then, but the bank cannot create its own additional approval requirements or make applicants pass a "sniff test." Still, I don't lightly take steps in a SAR filing decision that will turn this subject of inquiry into a round of committee meetings with regulators and the bank's management.


Would also be interested to hear from any bankers out there who have ever filed a SAR with dozens of suspects, a SAR over a million dollars, or a SAR that was larger/longer than the SAR form allows.

Most CPAs have lots of clients or they are not in business very long. Lots of CPAs advertised themselves as experts who could help borrowers navigate the rules and provide the documentation for both loans and forgiveness. (Last summer, a number of CPAs filed lawsuits against banks to try to collect agent fees on PPP loans for their assistance to borrowers. You can bet they weren't just helping one client.) The fact that one CPA worked with a lot of PPP borrowers by itself should not be suspicious at all. Yet that seems to be the basis for your inquiry. No problems or unusual discrepancies have arisen in processing those loans and forgiveness applications?

The fact that this same CPA has been suspected (but not shown) to have been involved in some previous fraudulent activity might increase the likelihood of fraudulent activity here, but the facts you have recited really don't provide any basis for concluding that fraudulent activity is likely.

I've been involved in some large investigations and SAR filings and I've never approached 20 hours for a SAR. That's about 2 and half full days of work. I'd be interested in reading your epic novel but alas it will never come to be.

Ok, but I just want to clarify about the time estimate here: I would doubt that your largest case ever seen would have involved dozens of borrowers. I doubt most banks have SARs like that except maybe global banks, conceivably. The size and volume of data with this net of possible suspicion was one of the main issues that gave me pause. Let's say there are only 52 parties to be reported, plus the professional helper, so 53 parties total identified so far. A usual SAR might be 5 to 7 pages for a short one. But each suspect has their own page, so that's about 60 pages for one SAR. In my system, the number of actual system screens involved would be some multiple of 60. Each would need to be written, proofread, and checked before filing.

But before I could even begin, I'd need to pull loan documentation for all 52 loans and determine to what extent this professional may have handled or provided the documentation. Each loan has probably 8 to 10 .pdfs, each saved separately, that I'd need to locate and open and read, and save as supporting documentation. If you spent only a meager half an hour per loan looking for discrepancies or other reportable details, etc., you'd hit 26 hours of effort before you even opened a blank SAR and tried to figure out how to fit 53 suspects into it.

Deleted.

You don't need to write War and Peace in the SAR Narrative. Cover the key elements and law enforcement will come calling if they want the details.

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it sounds like 1) your bank has a strange process - sar by committee where you must convince others to agree with you prior to filing, and 2) you are looking for people to agree with you to provide validation or confirmation.

for what my opinion is worth - if you are spending this much time just trying to determine whether you should try and convince others on your sar team or not, them YOU don't believe YOU have sufficient SUSPICION to act on it, so move on.

and yeah, 20+ hours to prepare a SAR is beyond understanding.

Have you checked the business listings in the state's secretary of state office? What does your CDD/KYC say about the borrowing businesses?

OP here: It says they applied for an SBA PPP loan. For us, an SBA PPP loan is not a high-risk product that would trigger CDD. Are any banks out there are doing CDD on customers whose only relationship is based on the SBA PPP? This would, again, feel like inventing SBA requirements that are above and beyond what the SBA requires for these funds.

The SBA Interim Final Rule states "Federally insured depository institutions and federally insured credit unions should continue to follow their existing BSA protocols when making PPP loans to either new or existing customers who are eligible borrowers under the PPP. PPP loans for existing customers will not require re-verification under applicable BSA requirements, unless otherwise indicated by the institution's risk-based approach to BSA compliance."

Under your BSA program, would potential fraud on the part of a borrower's accountant or a suspicion the business is a sham applicant trigger KYC/CDD requirements?

Good point. I thought you were mistaken at first (I thought that section, since it means "re-verification," was purely concerning whether Beneficial Ownership rules had to be followed) but then I saw the rest of that section. For the interest of others reading this, let me walk them to it: Your citation comes from "3. What do lenders have to do in terms of loan underwriting?" part d which is: "d. Follow applicable BSA requirements:" Your quote above is section "i." Section "ii" explains that if the lender doesn't already have such BSA or AML requirements, it should implement a procedure for CIP including beneficial ownership, understand the nature and purpose of their relationship with the borrower, assess the risk of the relationship with the borrower, and file SARs when appropriate.



Possibly, but it would trigger a SAR. We don't often reach out for CDD on SAR cases unless we think it would eliminate the SAR.

The key issue is, have we really identified any "potential fraud" or "suspicion that the business is a sham" based on nothing more than a common professional helper, and the speculation that if the helper is suspected of knowingly helping in fraud once or twice, then it's conceivable that the helper may have done similar frauds dozens of times?

I think what I'm seeing in this thread is that most comments don't see any reason to pursue or investigate further. The fact that one professional helped numerous individuals apply is not unusual, apparently.

Let's say tomorrow I file a SAR on fictional customer Bill S. Preston, Esquire, personal injury attorney, suspecting that he committed fraud by pursuing a settlement in a case where he knew that the injury was staged (let's imagine he told our teller this, while structuring out the proceeds in cash). Then, by chance, I somehow happen upon a list of 193 additional consumer checking accounts at this financial institution, which were all funded by various legal settlements from Bill's office in recent years. Would I then have the basis to file a SAR on those 193 people, who have no connection to the identified suspected fraud at all, other than the unfortunate circumstance that they use the same attorney? This thread says no, to that line of inquiry.

Basically, we'd be deciding that if his business includes one spoiled apple, then he only deals in rotten apples. If regulators viewed banks that way, they'd think all our customers were criminals just because 1 out of 100,000 is suspected to be.

Anyway, the conclusion of this epic odyssey is: I'm against pursuing this further. I'll keep my list of "helper" loans and when and if any actual fraud is detected in what those other dozens of applicants have submitted, I'll file on those cases as they are found.