The Paycheck Protection Program was created to support businesses during a financial crisis, but it also led to a rise in federal investigations. In recent years, many people have been surprised to learn just how closely banks work with government agencies when it comes to reviewing and reporting PPP loan activity.
If you received funds through this program and are now facing questions or an investigation, you may be wondering how that happened. In many cases, the process begins when a bank shares information directly with investigators. This can happen even if the borrower never did anything intentionally wrong.
How Banks Collect And Review PPP Loan Data
When a business applied for a PPP loan, the bank collected information about the business’s size, payroll records, tax filings, and ownership. These details were used to determine eligibility and calculate the loan amount. After the funds were disbursed, the bank often remained involved, especially during the forgiveness stage.
Banks were responsible for reviewing forgiveness applications, which required updated documents, certifications, and explanations of how the funds were used. If something appeared inconsistent, the bank may have flagged the file for closer review.
In some cases, red flags include inflated payroll numbers, businesses with no clear activity, or loan applications that contain identical information submitted across multiple businesses. Even a simple error on an application can draw attention when the loan amount is large or if the supporting records appear incomplete.
Why Banks Cooperate With Federal Investigations
Banks are regulated by federal agencies and have an obligation to report suspected fraud. Most banks have internal departments that review loan applications and forgiveness submissions. If anything looks suspicious, they may file a report known as a Suspicious Activity Report. This report is not shared with the borrower and does not require proof of a crime. It is a way for the bank to alert the government to possible misuse of funds.
Once a report is filed, it can be reviewed by the Small Business Administration, the Department of Justice, or other agencies responsible for handling PPP fraud cases. From there, investigators may request additional information or begin building a case.
What Happens After A Report Is Filed
If investigators decide to move forward, they may request records directly from the bank. These can include the loan application, payroll documentation, communications between the bank and borrower, and forgiveness materials. Investigators may also look into related accounts or business activity to see whether the loan funds were used as required.
You may not know you are being investigated until you receive a letter, subpoena, or visit from federal agents. If that happens, it is important not to respond on your own. Even casual explanations can be misunderstood and used later.
Attorneys like those at Stechschulte Nell can attest that early legal guidance makes a difference. A PPP loan fraud defense lawyer can review the materials submitted to the bank, help you respond to inquiries, and work to resolve the situation before charges are filed.
Responding To Bank Cooperation The Right Way
If your loan file was flagged or if investigators have reached out, do not assume the bank acted unfairly. In many cases, they are following required reporting rules. But that does not mean your case is without defense. Accurate records, honest communication, and timely legal support can help protect your interests and address misunderstandings before they lead to formal charges.