On November 23, the United States House Select Subcommittee on the Coronavirus Crisis announced that it has expanded its investigation into the role of FinTech companies in pandemic relief fraud. This expansion signals that the Department of Justice (DOJ) is not alone in setting its sights on investigating lenders and their FinTech partners. Businesses and individuals in the financial industry now must be prepared for congressional investigations.
In October, we reported that the DOJ was "surging" resources to combat corporate crime. As part of that report, we noted that leadership within DOJ's Major Frauds Unit had announced the unit was turning its attention to "the conduits of funding" for pandemic relief programs, marking an intentional shift in focus from borrowers to lenders. The recent announcement by the Select Subcommittee on the Coronavirus Crisis indicates lenders and FinTech companies may also now find themselves in congressional crosshairs.
This is not the first time the subcommittee has requested documents from FinTech companies involved in facilitating pandemic relief programs. In May, the subcommittee sent letters to four FinTech companies that, according to the subcommittee, had "been linked to a disproportionate number of fraudulent PPP loans." The subcommittee has said the same data-driven concerns underlie the two new letters announced yesterday and the letters thus far indicate the subcommittee is especially focused on Anti-Money Laundering compliance under the Bank Secrecy Act.
The government's approach to prioritizing investigative leads is now largely driven by data analytics and multi-agency task forces, meaning any report a company submits to a governmental entity could be shared with auditors and investigators across agencies. And because offices of inspectors generally report their findings to Congress, relevant data usually finds its way to congressional committees, too. So, it comes as no surprise that lenders and companies who facilitated PPP loans now find themselves in receipt of congressional inquiries.
The subcommittee's letters requested an extraordinarily broad range of documents, including "[a]ll communications concerning potential fraud or other financial crime related to PPP loans." Accordingly, some of the subcommittee's requests may implicate concerns about attorney-client privilege, among other things. The letters also included a questionnaire and gave recipients only four business days to respond, including the Thanksgiving holiday.
In light of the subcommittee's aggressive timeline and the recent narrative from DOJ leadership, it is clear that investigations into pandemic relief fraud are accelerating. The momentum now seems to be shifting toward the very financial institutions the government leaned on to operationalize its array of relief programs.
Given the subcommittee's sense of urgency, as well as the DOJ's recent shift in resources toward investigating corporate crime, we recommend that no company or individual engage with government authorities without experienced and skilled counsel. The complexities of the laws and the aggressiveness of these law-enforcement efforts can pose significant risks for companies navigating a host of economic challenges. And critically, congressional investigations pose unique risks, given the potential for widespread negative publicity and, ultimately, referrals for prosecution.
Norton Rose Fulbright represents businesses and executives in government investigations and has an experienced team of former high-level government officials uniquely positioned to navigate congressional and other investigations into participation in pandemic relief programs and other financial activities. If you or your business are involved in a government investigation or receive a government subpoena or civil investigative demand (CID), our team will defend your interests aggressively and effectively.
Senior associate Chris Cooke (San Antonio) also contributed to the preparation of this content. He works under the supervision of Jay Dewald and is licensed in New York and the District of Columbia; his admission to the Texas bar is pending.