JPMorgan Chase is investigating whether its staff helped customers to illegally tap the US government’s small business bailout fund.

The largest US bank, which arranged $29bn of forgivable loans under the Paycheck Protection Programme (PPP) by the end of June, on Tuesday said it had discovered “conduct that does not live up to our business and ethical principles — and may even be illegal”.

“This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programmes. Some employees have fallen short, too,” the bank’s operating committee wrote in a memo to all employees.

“We are doing all we can to identify those instances, and co-operate with law enforcement where appropriate.”

A spokesman for the bank confirmed the contents of the memo, which was first reported by Bloomberg, but declined to comment further.

It is the latest controversy to hit the $670bn programme designed to blunt the Main Street toll of the coronavirus pandemic. President Donald Trump and his administration have defended the scheme on the basis that it saved 51m jobs.

Some experts dispute that figure. The PPP has been dogged by problems since its April inception, including early technical glitches that left struggling businesses fearing the funds would run dry before their applications were processed and outrage over publicly listed companies such as Shake Shack successfully securing funds.

The scheme was ultimately given more funds, the technical hitches were resolved and several high-profile companies returned their funds when it emerged that their names would be published and that larger loans would face special scrutiny.

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Still, even before its August 8 closure, several states filed criminal investigations into allegedly fraudulent PPP applications, including claims for businesses that did not exist or did not operate when applications were made.

Bankers have privately said the sheer volume of PPP loans processed — which totalled 4.9m by the end of June — meant there would inevitably be some issues with fraud.

More issues may come to light over the coming months, as borrowers apply for their loans to be forgiven on the basis that they were used for allowable expenses, largely rent and wage bills.

Via Financial Times