UPDATE: Sept. 10, 2020:  JPMorgan Chase fired several employees who improperly applied for and received coronavirus relief funds through the Economic Injury Disaster Loan (EIDL) program, Bloomberg and the Financial Times reported Wednesday, citing an anonymous source.

JPMorgan Chase noticed suspicious amounts of money had been deposited into checking accounts owned by bank employees, a person familiar with the matter told Bloomberg.

The discovery came more than a month after the Small Business Administration (SBA) warned banks to investigate suspicious activity tied to the EIDL program. The agency's inspector general in late July called for closer oversight of the program over fraud concerns.

Unlike Paycheck Protection Program (PPP) loans, which were facilitated by banks, EIDL grants of up to $10,000 were given out directly by the SBA.

Last month, Bloomberg identified $1.3 billion in suspicious payments tied to the EIDL program because the number of grants in 52 congressional districts exceeded the number of eligible small businesses.

The SBA's inspector general has identified more than $250 million in aid given to potentially ineligible recipients, in addition to $45.6 million in possibly duplicate payments, Bloomberg reported.

JPMorgan employees who fraudulently obtained EIDL loans had not been acting in their work capacity, according to the Financial Times. But breaking the law was a violation of the bank's code of conduct. The bank declined to comment.

Only a small percentage of EIDL misuse JPMorgan found has been tied to bank employees, Bloomberg's source said, adding that the bank hasn’t found evidence of wrongdoing by employees connected to PPP.

Dive Brief:

• JPMorgan Chase is investigating the role of employees and clients in the potential misuse of coronavirus relief funds, the bank's operating committee said Tuesday in a memo to more than 250,000 staff members first reported by Bloomberg.
• Although the pandemic has brought out the best in many workers, the bank has "seen conduct that does not live up to our business and ethical principles — and may even be illegal," the memo said. "This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programs. Some employees have fallen short, too."
• The nation's largest bank facilitated the greatest amount of PPP money of any lender — $29.4 billion among more than 280,000 loans, according to Small Business Administration (SBA) data.

Dive Insight:

Government agencies and lawmakers both have warned of the risk of fraud associated with the program. The Government Accountability Office (GAO) in June said the number of PPP loans approved, the speed with which they were processed, and limited safeguards left the program open to "significant risk that some fraudulent or inflated applications were approved."

An analysis of SBA data by Democratic staff of the Select Subcommittee on the Coronavirus Crisis last week revealed more than $1 billion in PPP funds went to borrowers who received multiple loans through the program. Borrowers who have been debarred or suspended from doing business with the federal government received about $96.3 million in PPP funding, the analysis found. And more than 11,000 borrowers — accounting for nearly $3 billion in loans — used information on their PPP applications that mismatches data contained in the federal government's System for Award Management (SAM) database.

The panel's analysis indicated the agencies approved hundreds of loan applications that did not contain the borrower's identifying information, such as names and addresses.

Past analyses of SBA data had also found application information to be lacking. When the SBA in July disclosed its list of recipients of loans greater than $150,000, a Bloomberg analysis found more than 554,000 applications listed zero in the application's "jobs retained" field. The field was blank for another 324,122. Another data field — congressional district — was listed incorrectly for roughly 226,000 borrowers, The Washington Post found.

Tuesday's JPMorgan Chase memo did not elaborate on employees' shortcomings with regard to the PPP process.

"We are doing all we can to identify those instances, and cooperate with law enforcement where appropriate," the bank said, according to CNBC. "We want you to know because we need everyone to be vigilant."

In the wake of the program, which delivered $525 billion in aid to coronavirus-stricken small businesses between April and August, the Justice Department has generated occasional headlines for prosecuting a handful of fraud cases.

Disgruntled PPP applicants have also sued large banks, including JPMorgan Chase, alleging that the lenders prioritized existing customers and larger loans — and their beefier processing fees — during a flurry of early demand for the funds.

PPP loans are forgivable if borrowers meet certain conditions, including maintaining employee headcount and spending at least 60% of the loan on payroll expenses.

"While we know that we are working through a period of unprecedented turmoil," it's "important to continue to hold ourselves to the highest standards of conduct," JPMorgan Chase said Tuesday, according to Bloomberg.