More than $200 billion in unemployment aid may have gone to fraudsters in the pandemic
A significant portion of government support reserved for unemployed Americans instead went to scammers during the pandemic, according to new estimates.
According to ID.me, a computer security service that 19 states - 75% of the national population - use to verify the identity of workers, thieves may have lost more than $ 200 billion in unemployment benefits distributed in the wake of the pandemic Pocket. That's more than three times the official government estimate of $ 63 billion, based on a pre-pandemic fraud rate of 10%.
"The scale of the fraud is truly unprecedented," Blake Hall, CEO and co-founder of ID.me, told Yahoo Money. "The main driver is the PUA program ... For criminals, this program essentially targets every American and their identity."
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According to ID.me, up to 30% of the claims under the Pandemic Unemployment Assistance (PUA), the program that offers benefits to the self-employed and contractors, are fraudulent.
Maria Mora came for information about her claim but found that the California State Employment Development Department was closed in Canoga Park, CA on Thursday, May 14, 2020, due to coronavirus concerns. (Brian van der Brug / Los Angeles Times via Getty Images)
"The nature of the facility is very fragile."
In general, unemployment programs are vulnerable to fraud as admission rules can change quickly. This was especially true during the pandemic when new programs were introduced. Then there was the scope: Around 30 million Americans were dependent on unemployment benefits last spring.
Add that the per person benefits have increased in value - first the extra $ 600 per week under the CARES Act, and then an extra $ 300 per week under various other measures - and the programs have become a lightning rod for fraud, in particular of professional criminals.
"Unemployment is a program that is sure to have a high overpayment rate," Andrew Stettner, unemployment insurance expert and senior fellow at the Century Foundation, told Yahoo Money. "What is different at this time is the level of organized crime activity targeting unemployment insurance, definitely unprecedented."
Around 20% of fraud can be traced back to breached personal data, up to 10% to social engineering and 2.5% to face matching, in which a criminal tries to use a mask, video or picture of the victim Halle.
Verifying the identity of a self-employed or freelance worker is more complicated than verifying a worker's income with a traditional employer. There are no employer's wage records that can be used to verify the employee's income.
"They wanted to expand the authorization to people who are not in the system, such as gig workers, self-employed," said Stettner. "The nature of the facility is very fragile."
"Select the states in which you can achieve the most per person"
Criminal corporations targeted California, Oregon, Massachusetts and Washington - some of the states with the highest weekly unemployment benefits, according to Stettner.
"Organized crime in Russia, China, Nigeria and Ghana, as well as prisoners and petty thieves, have made it their business to take advantage of the pandemic and work creatively to steal funds from government agencies, including federal government PUA funds," Hall said .
California, which according to reports from the Los Angeles Times has paid at least $ 11.4 billion in fraudulent claims, has also been targeted as it relies on debit cards for benefits distribution, according to Stettner.
Before the Kentucky Career Center opens, people line up to find help with their jobless claims in Frankfort, Kentucky, United States, on June 18, 2020. REUTERS / Bryan Woolston TPX PICTURES OF THE DAY
According to a report by the Office of the Washington State Auditor, Washington fraud losses are projected to be $ 600 million as of June 2020, the equivalent of 122,000 known or suspected fraudulent claims. In Massachusetts, an estimated $ 687 million will be paid for fraudulent claims as of February, according to the state Department of Unemployment Assistance.
"They choose the states from which they can get the best out of each person," said Stettner.
Some states like Colorado have effectively rejected fraudulent jobless claims. The state estimates that 1.1 million fraudulent claims - possibly worth $ 7 billion - have been prevented from being paid out since the pandemic began.
After the $ 900 billion stimulus package was signed in December, greater protection against unemployment benefit fraud was put in place. For example, many states now require image-based or two-factor identity verification and additional documentation to verify your lost employment.
"We are currently working with 22 states (living in 19) to tackle unemployment fraud," Hall said. "We worked with only one state in July 2020. The states made quick efforts to improve their defenses."
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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