Unemployment Benefits Fraud on the Rise with $200 Billion Stolen During Pandemic: Security Firm

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ByJulija A.
March 26,2021

Fraudsters are exploiting the COVID-19 pandemic and have stolen billions in unemployment benefits, according to a computer security firm.

ID.me is a company that verifies the identities of approximately 75% of the workforce in 19 states. It reports that $200 billion worth of federal assistance for unemployment benefits during the pandemic may have been fraudulent. Based on data relating to fraud rates before the pandemic, the official government estimate of $63 billion is three times smaller than ID.me’s estimate.

Criminals commit fraud by stealing people’s personal data in 20% of cases. The other most common types of fraud are committed through social engineering (10%) and face matching (2.5%), where criminals attempt to use an image, video, or “mask” of their victim. ID.me says at least 30% of claims to the Pandemic Unemployment Assistance program, which the Federal Government unrolled to assist self-employed Americans, have been fraudulent.

After the Paycheck Protection Program, unemployment benefits, and stimulus checks, fraud relating to unemployment benefits is the fourth “largest spending program,” according to the American Enterprise Institute. The federal government has spent $557 billion in total on unemployment benefits, and as much as 36% of that could be the result of fraudulent claims. Even the original government estimate of $63 billion and the 10% error rate surpasses the funds allocated to food stamps or vaccine and treatment development.

The states with the highest unemployment benefits - California, Washington, and Massachusetts - are the primary targets for fraud. According to government officials, out of $11.4 billion in unemployment benefits paid in California during the pandemic, 10% has involved fraud, while another 17% is under investigation.

Washington state has identified 122,000 suspected and fraudulent claims for unemployment benefits, amounting to $600 million, according to a report filed by the Office of the Washington State Auditor. The Massachusetts Department of Unemployment Assistance has reported that $687 million in claims have been fraudulent.

The American Rescue Plan was recently passed by congress, allocating $209 billion to unemployment out of the total $1.8 trillion. A further $94.3 billion was allocated to expanding eligibility for COVID-19 support payments.

Currently, 18.2 million Americans are collecting unemployment aid, while 770,000 applied for assistance the first time in March this year.

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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