Unemployment Benefits Claims Fraud: New Threats for 2021

After an unprecedented level of unemployment insurance fraud hit states in 2020, new details are emerging on the severity of the ongoing threat in 2021.

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The numbers are simply staggering. According to CNBC, the U.S. lost more than $36 billion in unemployment benefits due to improper payments since the CARES Act was passed in the spring.  

Yes, the federal government and states are taking steps to adjust, but will it be enough to stop the fraud as benefits are extended and expanded?

One example of action, the $900 billion COVID relief package signed last month adds steps for workers to prove their eligibility for benefits. However, these extra checks will likely slow payments to those who truly need the money.

One expert said that fraudulent claims for benefits can account for roughly 35 to 40 percent of new applications in some states, with international organized crime rings from countries like China, Ghana, Nigeria and Russia accounting for most of the attacks.

Back in October, I wrote a blog post describing how widespread unemployment fraud was overwhelming state systems. Sadly, the situation continues to be very challenging, even worsening in some states.

This article from News 4 in Jacksonville, Fla., states that as unemployment numbers are back up in Georgia and Florida, and so are the unemployment fraud numbers: “New unemployment claims in Florida rose to 75,444 for the week ended Jan. 9. The surge is to the highest level since August. Georgia’s unemployment claims are up almost 5,000 from the week before.”

And this article from CBS News, and the following video from ABC 7, describes how people with legitimate claims are being severely impacted in California.



New Details on Criminal Underground Accelerating Fraud

A new report released on Jan. 14 from Recorded Future describes in detail how the criminal underground has grown to increase unemployment fraud, which is now a crime of choice.

Here are some of the key judgements and findings in the executive summary:

  • “The promotion of fraudulent unemployment services within closed-source reporting over the past six months can be divided into two broad categories:
    • The sale of tutorials or methods to file fraudulent claims
    • The sale of direct access to unemployment relief accounts that often contain a pre-existing balance of funds
  • Over the past six months, cybercriminals have demonstrated a preference to advertise unemployment fraud tutorials or services via messaging platforms over criminal forums, shops or marketplaces, specifically Telegram.
  • Underground sources promoting unemployment fraud services typically specialize in a variety of other forms of fraud simultaneously, including credit card fraud and tax fraud.
  • The scale of fraudulent unemployment claims within the U.S. has become widespread enough in recent months to unlikely be attributed to a single threat entity.
  • Open source reporting on the reported losses stemming from unemployment fraud activity assessed to be in the millions of dollars has very likely contributed to the growing level of interest among underground threat actors.
  • Money mules likely remain a critical component of the unemployment fraud supply chain as evidenced by images uploaded by underground sellers of fraudulent unemployment methods and open source reports surrounding the arrests of suspected mules throughout 2020.”
Action in Michigan

Back in late November 2020, the Michigan Unemployment Insurance Agency released this report describing the potential fraud exposure:

“Since the beginning of the pandemic, the UIA has received as many claims as it did in the nearly seven previous years combined. This historical demand was coupled with criminal attacks on unemployment systems nationwide. The U.S. Secret Service (USSS) in May issued a national alert regarding an international criminal ring exploiting the COVID-19 crisis to commit large-scale fraud against state unemployment programs. This week alone, saw large-scale fraud schemes were announced in California, Illinois and Massachusetts . The Inspector General of the U.S. Dept. of Labor has warned that the pandemic created a perfect storm for criminal activity across the country.”  

The report went on describe findings and corrective actions being taken by Michigan UIA.

Moving Forward in 2021

The number of UI claims around the country continue to overwhelm many state government systems, and residents trying to contact unemployment offices continue to face extremely long wait times and delays.

With new stimulus plans announced by the incoming Biden administration, criminal organizations are sure to continue their fraudulent unemployment claims.

According to CNN, “Biden would increase the federal boost the jobless receive to $400 a week, from the $300 weekly enhancement contained in Congress' relief package from December.

He would also extend the payments, along with two key pandemic unemployment programs, through September. This applies to those in the Pandemic Emergency Unemployment Compensation program who have exhausted their regular state jobless payments and in the Pandemic Unemployment Assistance program, which provides benefits to the self-employed, independent contractors, gig workers and certain people affected by the pandemic.

Lawmakers only provided an additional 11 weeks of support in the December package, which will last until March.”

Final Thoughts

What is clear at this point regarding fraudulent unemployment claims is that the states and federal government are not out of the woods yet. More fraud is certainly coming in 2021, and states continue to scramble to both meet the essential needs of those truly unemployed and hurting as well as stop the global criminal underground that is working harder than ever to defeat their anti-fraud measures.

Expect another report from me by the end of the summer on our ongoing unemployment fraud battle, which has risen to near the top of criminal justice security concerns.

Daniel J. Lohrmann is an internationally recognized cybersecurity leader, technologist, keynote speaker and author.
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