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Unemployment Fraud on the Rise as Jobless Claims Persist

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The Labor Department’s latest jobless claims report showed that employees are still losing their jobs due to the COVID-19 pandemic, as another 1.5 million U.S. workers filed for unemployment this week. This is the thirteenth consecutive week that jobless claims have stayed above one million, and the 1.5 million number is higher than the 1.3 million jobless claims that economists had been anticipating. The unemployment numbers were disappointing, as economists anticipated the numbers being lower as nearly all states are in varying stages of reopening after being locked down due to the pandemic. Continuing claims, which represent those individuals who have been receiving benefits for at least two weeks, decreased slightly to a staggering 20.5 million, per CNBC.

As part of the CARES Act passed by Congress, Americans who qualify for unemployment have also received an additional $600 per week in benefits, however, these payments are set to end after July 31st. The Chairman of the Federal Reserve, Jerome Powell, told the House Financial Services Committee that due to the continued jobless claims, Congress may need to consider extending the additional weekly benefits subsequent to the July 31st date, stating, “You wouldn’t want to go all the way to zero on that.”

As unemployment claims persist, states have struggled to meet the unemployment demand, as agencies have had limited staffing and the systems used to process unemployment claims have proven to be outdated. Because of this, unemployment benefits have unfortunately become a target for fraud.

Scott Dahl, the outgoing inspector general for the United States Labor Department, told the House Subcommittee on Government Operations that, “About 10% of (unemployment insurance) payments are improper under the best of times, and we are in the worst of times.” He estimated that approximately $26 billion in unemployment benefits could be wasted due to the actions of fraudsters.

In most instances, fraud is committed by criminals using stolen personal identifying information to make unemployment claims using that individual’s identity. Victims do not realize they have been impacted by fraud until they actually attempt to apply for unemployment benefits. For many, it is already hard enough to simply get through to the unemployment agency, and now dealing with the possibility of fraud complicates their situation even further.

Per the United States Secret Service, a group of international fraudsters have already launched an attack on United States unemployment systems, utilizing social security numbers that may have been obtained from prior cyber-attacks. In many cases, these fraudsters are filing unemployment claims on behalf of individuals that are still working. A Secret Service spokesperson confirmed to Business Insider that scammers are targeting state unemployment insurance programs using stolen personal information.

Brian Krebs, an investigative journalist, reported that the Secret Service issued a memo indicating that a Nigerian crime ring has organized a large-scale fraud against multiple state unemployment agencies, and that potential losses may be in the hundreds of millions of dollars. The memo allegedly indicated that “a substantial amount of the fraudulent benefits submitted have used PII (personally identifiable information) from first responders, government personnel and school employees.”

According to the Secret Service, Washington has been the primary state to be targeted initially, with additional evidence of attacks on North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming, and Florida. The Mississippi Department of Employment Security has also reported evidence of coordinated cyber-attacks against their unemployment system. In Pennsylvania, many individuals have reported receiving physical checks in the mail from the state unemployment agency for which they did not actually apply. The Maine Department of Labor has already received over 21,400 reports of unemployment fraud. Officials in Washington have indicated that the state has recovered $333 million out of an estimated $550 to $650 million that had already been fraudulently disbursed.

Eva Velasquez, president and CEO of the nonprofit Identity Theft Resource Center, indicated that prior to this year, unemployment fraud was relatively uncommon for fraudsters because it was not particularly lucrative, however, due to the immense amount of unemployment claims filed due to the pandemic, the circumstances have changed.

It is important now more than ever to protect your personal information. Change your passwords on accounts regularly, monitor your bank account activity for suspicious transactions, request a credit report and review for potential fraudulent activity, and be wary of clicking any links in e-mails, as you could become a victim of a phishing scam. If you believe you may be a victim of unemployment fraud, it is important to attempt to contact your state’s unemployment agency to report the fraud. Additionally, identify theft can be reported to the Federal Trade Commission at Potential for fraud will continue to persist until the unemployment issue begins to recede, and it is important to be proactive when it comes to protecting your personal information.

Megan Kelly, SobelCo