Is Fraud Contagious? Social Connections and the Looting of COVID Relief Programs

Abstract

Fraud indicators in the Paycheck Protection Program (PPP) COVID relief program are highly geographically concentrated. Zip codes and counties with high rates of suspicious PPP loans exhibit strong social connections to one another with evidence of fraud spreading spatially over time through social connections. Individuals in suspicious social media groups have higher rates of PPP fraud, and socially connected zip codes frequently use the same specific FinTech lenders, consistent with social connections influencing particular loan decisions. Our findings suggest that more proactive data analysis in fraud prevention, detection, and prosecution is needed to prevent the social spread of fraudulent schemes.

Keywords

Tags of Social Finance