Unemployment Fraud Spikes Amid Surge In Claims Due to Pandemic

A man wearing a face mask walks past a sign "Now Hiring" in front of a store amid the COVID-19 pandemic, in Arlington, Va., on May 14, 2020. Olivier Douliery/AFP/Getty Images

Federal and state authorities are warning that unemployment benefit fraud is on the rise amid record-high jobless claims filed during the COVID-19 pandemic.

“In a large-scale scam erupting in the midst of the Coronavirus pandemic, imposters are filing claims for unemployment benefits, using the names and personal information of people who have not filed claims,” said Seena Gressin, an attorney at the Federal Trade Commission (FTC), in a statement on Wednesday.

Spurred by the economic fallout from pandemic-driven lockdowns, a record 40.767 million Americans have filed jobless claims since March 21. The unprecedented volume of claims gives criminals more opportunities to act and deceive.

State unemployment offices, including ones in Maine, North Dakota, and Pennsylvania, have all sounded the alarm in recent days or weeks, warning of a surge in jobless claim fraud.

“Unprecedented claim volumes are driving a dramatic increase in fraudulent unemployment claims across the country—North Dakota included,” said the state’s job service, in a statement.

People who lost their jobs wait in line to file for unemployment at an Arkansas Workforce Center in Fayetteville, Ark., on April 6, 2020. Nick Oxford/Reuters

North Dakota authorities said criminals committing the fraud look to many different sources to obtain victims’ personal information, including from buying social security numbers on the dark web.

“These sophisticated schemes are often hard to detect and ultimately can result in very large losses,” they warned.

The Maine Department of Labor said in a May 27 release it had teamed up with local law enforcement to investigate such fraud after receiving around 1,000 reports of potential unemployment imposter fraud. The agency said that, as of the date of publication of the release, it had identified and cancelled around 2,200 unemployment claims that it found to be fraudulent.

“While fraud is not new or unique, organized criminals across the nation are now targeting unemployment programs expanded during the pandemic in unprecedented ways,” Commissioner of the Maine Department of Labor, Laura Fortman, said in the release.

The FTC said people often find out about the fraudulent claims made in their name when the receive a notification from their state unemployment office or their workplace that they allegedly applied for benefits.

When this happens, it means someone is almost certainly exploiting the victim’s confidential personal information, including Social Security number, Gressin said.

Further, some people fall prey to what’s known as a “money mule scam,” which may expose them to legal liability. This is a scenario in which the fraudulently obtained unemployment benefits aren’t sent to the perpetrator’s account, but to the victim’s. Criminals will then contact the victim to try and get them to transfer some or all of the money.

“Scammers may try to use you to move stolen money. If you help them, you could be what law enforcement calls a money mule,” said Lisa Weintraub Schifferle, an FTC  attorney, in an earlier statement.

She warned that giving a scammer bank account information raises the risk that they may misuse it.

“You could even get into legal trouble for helping a scammer move stolen money,” she warned.

People who suddenly receive benefit money that they never applied for should report the incident to the state unemployment agency, the FCT said.