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Fraud overwhelms pandemic-related unemployment programmes

PTI Columbus | Updated on March 02, 2021

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Labour Dept inspector general’s office estimates that over $63 billion has been paid out improperly via fraud or errors; sham springs from prior identity theft from banks, credit rating agencies, health care systems, retailers

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 US Justice Department is investigating unemployment fraud by “transnational criminal organisations, sophisticated domestic actors, and individuals across the United States,” said Joshua Stueve, a spokesman for the department's criminal division.

Also read: US House tees up vote on Biden's $1.9 trillion Covid-19 relief plan

The Labour Department inspector general's office estimates that more than $63 billion has been paid out improperly through fraud or errors — roughly 10 per cent of the total amount paid under coronavirus pandemic-related unemployment programs since March.

“We're all learning that there is an epidemic of fraud,” said US Rep. Kevin Brady of Texas, the ranking Republican on the House's powerful Ways and Means Committee.

Brady said the $63 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 $11 billion in fraudulent payments and an additional $19 billion in suspect accounts.

Other estimates, according to AP reporting across the states, range from several hundred thousand dollars in smaller states such as Alaska and Wyoming to $6.5 million in Colorado and to hundreds of millions in more populous states such as Massachusetts and Ohio.

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.

In Ohio, weekly first-time unemployment claims have ranged from 17,000 to more than 40,000 during the pandemic. But since late last month, those claims have topped more than 140,000 some weeks, with many of them believed to be fraudulent. The state has paid at least $330 million in fraudulent pandemic unemployment benefit claims.

Trying to catch so many bogus claims delays payouts to Ohioans who are legitimately in need of help. In the Columbus suburb of Upper Arlington, Cynthia Sbertoli was receiving $228 a week after she was laid off in March from her job with a non-profit that runs high school student exchange programs.

Her benefits were put on hold in January after she informed the state that someone had tried to use her identity in a scam to claim benefits. She thought the problem was resolved but has yet to see a renewal of her benefit cheques, which she and her husband use to help pay for a son's vision and auditory therapy.

“It's just not a good way to take care of people,” said Sbertoli, 49.

In Indiana, Kentucky and Maryland, officials have said that for certain weeks in the new year at least two-thirds of the claims they received were classified as suspicious due to problems verifying identities. It's not the first brush with serious fraud for Maryland. In July, officials said they'd discovered a massive criminal enterprise that had stolen more than $500 million in unemployment benefits.

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.

Scams have been so widespread that the US Department of Justice is setting aside money to hire more prosecutors. In New York alone, the Department of Labour says it has referred “hundreds of thousands of fraud cases” to federal prosecutors.

Published on March 02, 2021

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