The Export-Import Bank of the United States (“Ex-Im Bank” or “Bank”) is a federal agency that provides financial credit to those who claim they are unable to obtain it privately. In reality, Ex-Im Bank offers taxpayer-guaranteed loans to politically-connected companies while leaving smaller companies at a competitive disadvantage. Last August, citing Ex-Im Bank as a form of corporate welfare, Cause of Action Institute advocated for its abolishment.
Now, a new Government Accountability Office (GAO) report finds that Ex-Im Bank lacks a comprehensive framework to deter fraud, needs comprehensive fraud risk management reform, and currently poses a significant risk of loss to taxpayers by failing to provide these adequate protections against fraud and abuse.
Between October 2016 to July 2018, the GAO conducted a performance audit of the Bank, surveying more than 400 employees about the organization’s fraud risk management capabilities. The GAO report concluded that:
“[T]he Bank has approached fraud risk management on a fragmented, reactive basis, and its anti-fraud activities have not been marshalled into the kind of comprehensive, strategic fraud risk management regime envisioned by GAO’s Fraud Risk Framework and its leading practices.”
The report found that employees were concerned about the lack of proactive measures being taken to combat and prevent fraud. The protocols in place focus on reacting after the fraud was committed, rather than preventing fraud from occurring. The GAO noted that the Bank was making efforts to reform its anti-fraud capabilities, but it was not clear whether improvements were keeping pace with expectations.
The GAO report surveyed employees and included the following comments and summaries about the Bank’s attitude towards addressing fraud:
- “The Bank is more concerned with increasing sales than preventing fraud.”
- “[The current division of responsibilities] is not the most effective way for the Bank to oversee fraud and fraud risk, as responsibility needs to be given to the teams on the front end—such as the individual relationship managers and loan officers—not on the back end.”
- “[The current arrangement]seems to be more of an after-the-fact approach to potentially (if reluctantly) detecting fraud than any proactive encouragement to actively prevent fraud.”
These comments from Ex-Im Bank employees illustrate both a cultural challenge within the Bank and the Bank’s failure in constructing comprehensive reforms to prevent fraud. The GAO presented Ex-Im Bank with a list of recommendations to address its vulnerabilities and create a culture of prevention rather than reaction.
Given the Bank operates with taxpayer funds, these improvements are critical. In the words of a concerned Bank employee, “More due diligence should be required in order to qualify for the U.S. government’s support.”
It is Cause of Action’s mission to advocate for a transparent and accountable government free from fraud and cronyism. The Ex-Im Bank is a key example where oversight and accountability are critical to ensuring its service to the public interest. For too long, the Ex-Im Bank has been linked to providing political favors for well-connected corporations and undermining fair market competition, and Cause of Action Institute will continue to advocate for ending the Bank and this form of corporate welfare.
Ethan Yang is a Research Fellow at Cause of Action Institute.