Fraud overwhelms pandemic-related unemployment programmes

COLUMBUS, OHIO (AP) — With the floodgates set to open on another round of unemployment aid, states are being hammered with a new wave of fraud as they scramble to update security systems and block scammers who already have siphoned billions of dollars from pandemic-related jobless programmes.

The fraud is fleecing taxpayers, delaying legitimate payments and turning thousands of Americans into unwitting identity theft victims. Many states have failed to adequately safeguard their systems, and a review by The Associated Press finds that some will not even publicly acknowledge the extent of the problem.

The massive sham 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 United States (US) Justice Department is investigating unemployment fraud by “transnational criminal organisations, sophisticated domestic actors, and individuals across the United States,” said a spokesman for the department’s criminal division.

The Labour Department inspector general’s office estimates that more than USD63 billion has been paid out improperly through fraud or errors — roughly 10 per cent of the total amount paid under coronavirus pandemic-related unemployment programmes since March. “We’re all learning that there is an epidemic of fraud,” said US Representative Kevin Brady, the ranking Republican on the House’s powerful Ways and Means Committee. Brady said the USD63 billion estimate “is larger than the entire budget of the Department of Homeland Security”.

“These are frightening levels of fraud,” he said.

California has been the biggest target, with an estimated USD11 billion in fraudulent payments and an additional USD19 billion in suspect accounts. Colorado has paid out nearly as much to scammers — an estimated USD6.5 billion — as it has to people who filed legitimate unemployment claims.

Other estimates, according to AP reporting across the states, range from several hundred thousand dollars in smaller states.

Webpages show information for collecting unemployment insurance reporting fraud and identity theft. PHOTO: AP