Many states have failed to adequately safeguard their systems from a massive wave of unemployment fraud that is fleecing taxpayers, delaying legitimate payments and turning thousands of Americans into unwitting identity theft victims, reports the Huffington Post. The massive assault springs from prior identity theft from banks, credit rating agencies, health care systems and retailers.
Fraud perpetrators, sometimes in China, Nigeria or Russia, buy stolen personal identifying information on the dark web and use it to flood state unemployment systems with bogus claims. The Labor Department inspector general’s office estimates that more than $63 billion has been paid out improperly through fraud or errors — roughly 10% of the total amount paid under coronavirus pandemic-related unemployment programs since March. California has been the biggest target, with an estimated $11 billion in fraudulent payments and an additional $19 billion in suspect accounts. Colorado has paid out nearly as much to scammers — an estimated $6.5 billion — as it has to people who filed legitimate unemployment claims.
The nationwide fraud has fed on twin vulnerabilities: a flood of jobless benefit applications since the pandemic began that has overwhelmed state unemployment agencies and antiquated benefit systems that are easy prey for crafty and persistent criminals. Among states that have been hardest hit are those participating in the Pandemic Unemployment Assistance program adopted by Congress last year.
It has been a lifeline for out-of-work freelancers and gig workers who normally don’t qualify for unemployment insurance, but it’s also been a boon for criminals who use stolen identities to make claims. Nearly 800,000 of the 1.4 million claims Ohio has received through this program have been tagged for potential fraud.
But a government watchdog says states aren’t doing enough to prevent fraud, with the U.S. Department of Labor’s Office of Inspector General saying that by the end of last year, 22 of the 54 state and territorial workforce agencies were still not following its repeated recommendation to join a data exchange run by the National Association of State Workforce Agencies.
The biggest chunk of that, $3.5 billion, came through claims that used the same Social Security numbers in multiple states. One number was used on claims in 40 states. Twenty-nine of the states paid those claims, totaling more than $220,000.
Additional reading: Police Swamped with Unemployment Fraud Cases