WASHINGTON—Generous unemployment benefits put in place by the CARES Act and subsequent relief packages to respond to pandemic-related joblessness have become an easy target for identity thieves and other criminals. Most states have been hit by fraud committed on a vast scale, mainly by international organized crime rings.
Rep. Jackie Walorski (R-Ind.) called it “a frightening number” that exceeds “the entire budget of the Department of Homeland Security.”
During a virtual roundtable that she hosted on May 10 with state leaders, employers, and fraud victims, Walorski said that “criminal organizations, including international cybercrime rings, prison inmates, and opportunistic foreign actors are using stolen identities to falsely claim unemployment benefits.”
In the state of Indiana, for example, nearly 1.3 million claims have been processed for unemployment, and roughly 15 percent of these claims “have been flagged for fraud indicators,” according to Walorski.
Claims for unemployment benefits have surged since the pandemic lockdowns began. Most states have been struggling to keep up with a record volume of claims due to their outdated systems. In addition, they’re not equipped to deal with large fraud attacks, particularly the ones coming from overseas.
States have to put new technologies in place, according to experts, so they can stop the fraud before it happens, rather than try to chase it down and claw it back.
“After the CARES Act was passed, the unemployment insurance system became a rich target in a way that it had never been previously,” Amy Simon, deputy assistant secretary at the Department of Labor under the Trump administration, said at the roundtable.
“Many states were unprepared to defend themselves against organized crime, against credential stuffing.”
At the Labor Department, Simon was working on the frontlines of the department’s “daily inundation of both claims and fraud.” Last month, Simon herself became one of the fraud victims when she got a text message showing that she had filed an application for unemployment insurance in a state that she hadn’t lived in for years.
“It was an unsettling reality to accept that not only had I watched fraud unfold on the macro stage, it was now impacting my life directly,” she said. The same day, the state’s initial claim application portal was shut down due to the volume of fraudulent attacks.
Experts note that the total amount of fraud nationwide could be significantly higher than estimated by the Labor Department, with the amount being anywhere between $200 and $300 billion.
Many Americans have been affected by this fraud. Those who have had their ID stolen can’t apply for benefits, they instead have to wait until the matter is resolved.
Speaking at the roundtable, Doug Swetnam, section chief for the data privacy and ID theft unit for the Indiana Attorney General’s Office, said that his unit saw a 1,500 percent increase in identity theft in 2020 and is on track to set a new record for 2021.
Fraud Surges 4,800 Percent
People typically find out about the fraud when they attempt to apply for unemployment insurance benefits or when their employers notify them. Some also receive prepaid credit cards by mail often from states where they don’t live. And others learn when they receive a 1099-G form in the mail that shows an amount of benefits that they never applied for.Traditional ID verification isn’t enough to prevent these scams, according to Pete Eskew, senior vice president at ID.me, an identity verification company that currently serves 23 states, including California, Colorado, and New York.
The company helps individuals securely verify their identity online.
“Due to our controls, we’ve stopped about 1.6 million fraudulent claims protecting over $30 billion of taxpayer money,” Eskew said during the roundtable.
International organized crime groups from countries such as Russia, Uzbekistan, China, and Nigeria are involved in the ID theft, Eskew said, adding that a lot of domestic organized crime is also “beginning to get into this game.”
While some states have started to take preventive measures and deploy new systems to address the problem, identity theft continues to surge, according to Eva Velasquez, president and CEO of the Identity Theft Resource Center, a nonprofit that helps victims of identity theft.
Speaking at the roundtable, Velasquez said unemployment identity theft increased 4,800 percent last year.
“We’re on pace to surpass our 2020 numbers before the end of the second quarter this year,” she said.
According to a survey by the Identity Theft Resource Center, 33 percent of the victims of unemployment- and stimulus-related identity fraud reported that they didn’t have enough money to buy food or pay for utilities. And 13 percent have stated that they’ve been unable to get temporary or permanent jobs as a result of the misuse of their identity.
The Department of Labor and the FBI have been unable to keep up with the volume of fraud cases, according to experts.
Republican lawmakers plan to introduce the Combatting COVID Unemployment Fraud Act this week to prevent “criminals and international cybercrime rings” from robbing the American people, Walorski said in a statement.
In a letter to U.S. Department of Labor Secretary Martin Walsh on May 10, Sen. Mike Crapo (R-Idaho) and Rep. Kevin Brady (R-Texas) urged the department to make “targeted investments” to stop unemployment fraud.
“The Department should act to implement commonsense policies to stop the ‘pay and chase’ model of unemployment administration, like requiring states to verify identity and prior employment of applicants before authorizing benefits,” the lawmakers stated.
The Labor Department didn’t immediately respond to a request by The Epoch Times for comment.
