Over $1 billion in unemployment aid is being threatened by fraud, in schemes ranging from lying about personal income to sophisticated cybercrime, state and federal officials told NBC News. The main target: Pandemic Unemployment Assistance. The widespread fraud is plaguing unemployment systems nationwide, hampering states’ efforts to get money into the right hands. The U.S. Secret Service has launched over 500 investigations in 40 states as part of a multiagency effort to protect taxpayer dollars. “It’s very rampant,” David Smith, the agent in charge of the investigation, said in an interview. “Criminals knew the priority was to get that money into the hands of Americans sooner than later. So they just jumped on an opportunity.”
And the situation has only gotten worse over the past several weeks. Here’s a roundup from around the country:
California: “EDD fraud involves stolen identities, dark web, international crime”
Quote: “Thousands of envelopes containing fraudulent California Employment Development Department claims that were sent to residents across the state are part of several fraud schemes, a KCRA 3 investigation found. … The schemes involve identity theft, the dark web and possibly an international crime ring.”
Arizona: “Arizona investigating up to 2 million fraudulent unemployment claims”
Quote: “Arizona may have been hit with as many as 2 million fraudulent unemployment claims, 3 On Your Side has learned. The new number dwarfs previous estimates, as scammers continue to target taxpayer dollars in unemployment systems across the country.”
Rhode Island: “RI State Police: Nearly 18K unemployment insurance fraud claims filed since April”
Quote: “Thousands of Rhode Islanders have fallen victim to unemployment insurance fraud, and R.I. State Police Detective Captain Robert Creamer said they’re still receiving approximately 100 fraud claims per day.”
Michigan: "Fraudulent documents sent out by Michigan UIA contained letters and debit cards."
Quote: “Dozens of fraudulent unemployment documents are being sent out to people in Michigan and now those getting them are wondering why.
Shane Farlin Sr. is the general manager for Quality Asphalt and Maintenance in Charlotte.
'I’m getting cards. I got two today, I got three yesterday those are still coming in,' he told FOX 17 during a Zoom call.”
Kansas: “KS Dept. of Labor combats unemployment fraud claims”
Quote: “'What we’re seeing is a pretty dramatic increase in fraudulent claims that are being filed as part of the Pandemic Unemployment Assistance program,' said Kansas Department of Labor Acting Secretary Ryan Wright. 'Folks are getting a letter from us saying they’ve applied for benefits, and that’s their first indication that they’ve been a victim of identity theft.'”
"KDOL has also launched a website, www.ReportFraud.ks.gov, that gives Kansans the tools to protect themselves.”
Massachusetts: “Attorney General Maura Healey charges two with unemployment fraud”
Quote: “Two people charged with larceny and fraud in connection with collecting more than $64,000 in combined unemployment benefits will pay full restitution, Attorney General Maura Healey said Tuesday.”
Huge Challenge of Cyberthreats Multiplied by Unemployment Fraud
As this blog reported on several occasions over the past six months, the pandemic, due to the increase in working from home and other process changes, has brought a huge surge in cyberattacks, including ransomware at hospitals, data breaches and more. Attention has been on the election and on getting unemployment payments to those who need them.
Nevertheless, the rush to get payments out the door has created a surge in unemployment fraud that is unprecedented in our nation. In fact, the fraud has also delayed unemployment payments to those who truly need the money.
Forbes just offered these recommendations to better combat unemployment fraud, and they include biometrics and common sense. Here’s an excerpt:
Implementing a biometric-based identity verification process is key to thwarting unemployment fraud amid the pandemic and beyond. Government agencies responsible for each state’s unemployment benefits program need to consider high-assurance solutions with the following four requirements:
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Government-issued ID: Asking for a photo of a driver’s license or passport when someone files a new claim establishes the individual’s real-world identity, and AI-powered software can quickly determine if the ID document is real.
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Real-time selfie: Determine if the person possessing the ID is who they claim to be. Requiring a selfie also acts as a strong deterrent to fraudsters who generally do not want to show their face while committing a crime.
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Liveness detection: Ensure the individual is physically present and not a spoof by incorporating liveness checks, which can sniff out if someone is using a video or a picture of a picture instead of a valid selfie.
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Ongoing biometric authentication: Require the user to capture a new selfie, which creates a fresh biometric that is instantly compared to the original selfie to confirm the account owner is the actual person logging into the account.”
According to CBS news in Sacramento, Calif., victims of identity theft in California should report the fraud, but don’t expect a quick response:
“The EDD instructs victims like Vanessa to report unemployment fraud using their social security number through this online tool or by calling the hotline at 1-800-229-6297.
But Vanessa says after calling the hotline and filling out an online report, she has not received a response after three weeks.
In Jorjets’ case, she has been sending the fraudulent claims letters and debit cards back to the EDD as instructed by the EDD. But she says the EDD mail it just keeps coming, including another debit card.”
Other state websites encourage victims to report the fraud to their state unemployment agency's hotline phone number or Web portal; or, if they do not respond, to report the fraud to the Internal Revenue Service (IRS) or Federal Trade Commission (FTC) websites or local police.
Closing Story on Impact
I personally know several people in Michigan who have been directly impacted by these unemployment fraud schemes. They received letters requesting proof of identification be sent to verify applications that they never sent. Worse than that, several have received unsolicited debit cards in the mail related to fraudulent applications.
The response to customers impacted by fraud from the Michigan Unemployment Insurance Agency has been very slow or non-existent, with little ability for victims to reach anyone via the Web or phone — even after fraud reports are filed.
No doubt, unemployment systems, call centers and processes are overwhelmed in most states right now, and the situation does not appear to be getting better at this time.
In Michigan, according to this report, the cases that were flagged for identity verification to prevent payment have increased the number of claimants needing ID verification from around 28,000 to 80,000 over the last two weeks.
This fraud trend is being seen nationwide, and these stories (and the pandemic) are far from over.
