America's pandemic of unemployment fraud

·2 min read

COVID-19, and the government’s response to it, created a perfect storm for unemployment fraud — which Axios reported could have accounted for half of all the payments made throughout the pandemic.

Why it matters: The government has not officially audited the issue. But there are good reasons to believe that the number is enormous.

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  • At an estimated $400 billion, which is where it's pegged by security company, the fraud would account for almost 2% of annual GDP.

The big picture: When the pandemic hit, all unemployment applications had to be made online. While going to an office and pretending to be someone is difficult and dangerous, the same kind of impersonation is much easier — and largely risk-free — if you're filing your application from Russia or China.

  • By the numbers: A successful unemployment application can easily net $20,000, over time. In Washington state, for instance, the regular maximum unemployment benefit is $844 per week. Add on $300 per week in extra federal unemployment benefits during the pandemic, and you get to $20,000 in less than 18 weeks.

How it works: In March 2020, international criminal syndicates already owned — or could easily purchase — massive databases of Americans' personal information, gleaned from thousands of data breaches over the years. New breaches during the pandemic, including one at the Texas DMV, helped to keep up the flow of personal data.

  • Because the states didn't effectively share information, a single identity could be used for unemployment benefits in dozens of states. In the pandemic, people moving from one state to another after they were laid off was common, so an out-of-state applicant wouldn't necessarily raise red flags.

The easiest program to defraud was Pandemic Unemployment Assistance, or PUA, say experts. The program was designed for gig-economy workers and other independent contractors, and therefore didn't require employer confirmation of a layoff.

  • All unemployment programs have seen large-scale fraud, however, and criminals simply moved to other programs when anti-fraud controls were put in place.

  • Unemployment Insurance fraud, for instance, is a bit harder to pull off because of the involvement of employers. But it's still rampant. One rapper who was dumb enough to rap on YouTube about the money he was making from UI fraud was charged with stealing $1.2 million in jobless benefits.

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