The spike in fraud began last year after Congress approved a historic increase in unemployment benefits, stepped up payments, and opened the program to new categories of unemployed Americans. At the same time, the unprecedented economic downturn resulted in a flood of jobless claims that overwhelmed government agencies struggling to send money quickly to the unemployed and desperate. Criminals took advantage of the chaos.
Congress created a new Pandemic Unemployment Assistance (PUA) program that provides benefits to those who typically do not qualify, including freelancers, the self-employed, and independent contractors. This program was a particular target for criminals because the US Department of Labor and states allowed applicants to self-certify their employment and income. Eligibility for traditional state benefits must be verified by an employer.
The need for additional unemployment was recognized by all, passed by Republicans and Democrats, and enacted by former President Donald Trump. President Joe Biden and the Democrats extended the benefits until early September. Criminals are doing what they can all the time.
But the problem can be much bigger than originally thought.
Blake Hall is the CEO of ID.me, a company that markets itself in the States to help contain this type of fraud. He made the provocative claim to Axios that up to 50% of all unemployment claims – more than $ 400 billion – could be fraudulent.
If that’s true, that would be a terrifying number.
I asked ID.me for more specific information and they sent me a case for their product – this helps verify claims. They also tried to distinguish between identity theft fraud, which involves stealing someone’s identity, and claims fraud, which involves claiming unemployment benefits for someone who is not eligible for unemployment benefits.
ID.me confirmed that the new pandemic unemployment relief program for freelancers and contractors appears to be the biggest target for scammers. ID.me said that more than 30% of pandemic unemployment benefits claims in the states they operate in are fraudulent.
They also documented inquiries about government unemployment schemes from Nigeria and China.
Luhby tracks unemployment for CNN and provides detailed information on what we know for sure. Here’s what she wrote:
Countries that distribute the funds have also submitted their own estimates. Some experts say the extent of fraud at the national level can be more difficult to track as claims are paid out by states.
- California. In January, California reported that about $ 11 billion in fraudulent claims had been paid during the pandemic, about 10% of the total. Up to 17% of the $ 114 billion in claims paid were investigated for fraud. The Employment Development Department estimates 95% of fraudulent claims under the Pandemic Unemployment Assistance Program. (In 2019, fraud accounted for approximately 6% of total California unemployment benefits.) In April, Ann Marie Schubert, Sacramento District Attorney who leads a regional task force, said estimates show that more than $ 20 billion paid to criminals.
- Colorado: In April, the Colorado Department of Labor and Employment announced that $ 19.4 million had been paid in fraudulent services. Almost 43,000 applications were found illegitimate, but the agency is investigating more than 1 million suspected fraudulent claims. (Fewer than 90 fraudulent claims were detected in 2019.)
- Ohio: The State Department of Job and Family Services said it identified $ 330 million in fraudulent payments in December, the agency’s former head said in February press conference.
- Washington: In April, the Washington State Auditor’s Office found that nearly $ 647 million in unlawful claims had been paid in 2020. About $ 370 million was confiscated. The State Department of Occupational Safety and Health announced that inappropriate payments were below 10%. (In 2019, the fraud loss was 3.4%.) The auditor also had other questionable payments of $ 461 million. although the employment agency has objected to this designation.
What Congress and States are Doing to Fight Fraud. Many states have tightened their identity verification controls, including the discontinuation of ID.me and other companies. As part of the December congressional aid package, states had to increase their identity checks on pandemic unemployment benefit applicants and require applicants to submit additional documentation. The U.S. Department of Labor has given states more funding to improve their verification processes.
The Department of Justice has set up an Unemployment Insurance Fraud Task Force to investigate numerous fraudulent attempts.
CNN’s Kristen Holmes, who also looked at it, adds: A group of Democratic Senators has introduced legislation Establish a unified system of distributing funds – that is, a set of cybersecurity standards as opposed to more than 50 individual websites.
According to Senate Finance Chairman Ron Wyden, an Oregon Democrat, “the bill requires a complete overhaul of unemployment insurance technology and paves the way for a website to apply for unemployment benefits, not 53. The bill also requires minimum standards of accessibility and equity”. . Black and Hispanic workers are much less likely to have access to benefits, although they are much more likely to lose their jobs during this crisis because they work in the hardest-hit industries. Congress must not allow another recession to come and go reform our unemployment insurance system, and that starts with a technology overhaul. “
Bottom line: The consequence of this increased vigilance is that eligible applicants have gotten stuck in the system and experienced delays in receiving their benefits.
The other important story of unemployment. Half of the US states have decided to stop accepting the $ 300 unemployment benefit allowance – they would have expired at the end of summer anyway. The surge, along with two other pandemic unemployment programs, will end in some states starting this weekend.
The reason given by the governors was a widespread labor shortage, particularly in industries such as catering.