COLUMBUS, Ohio (AP) — With the floodgates set to open on another round of unemployment aid, states are being hammered with a new wave of fraud as they scramble to update security systems and block scammers who already have siphoned billions of dollars from pandemic-related jobless programs.
The fraud is fleecing taxpayers, delaying legitimate payments and turning thousands of Americans into unwitting identity theft victims. Many states have failed to adequately safeguard their systems, and a review by The Associated Press finds that some will not even publicly acknowledge the extent of the problem.
The massive sham springs from prior identity theft from banks, credit rating agencies, health care systems and retailers. Fraud perpetrators, sometimes in China, Nigeria or Russia, buy stolen personal identifying information on the dark web and use it to flood state unemployment systems with bogus claims.
The U.S. Justice Department is investigating unemployment fraud by “transnational criminal organizations, sophisticated domestic actors, and individuals across the United States,” said Joshua Stueve, a spokesman for the department’s criminal division.
The Labor Department inspector general’s office estimates that more than $63 billion has been paid out improperly through fraud or errors — roughly 10% of the total amount paid under coronavirus pandemic-related unemployment programs since March.
“We’re all learning that there is an epidemic of fraud,” said U.S. Rep. Kevin Brady of Texas, the ranking Republican on the House’s powerful Ways and Means Committee. Brady said the $63 billion estimate “is larger than the entire budget of the Department of Homeland Security.”
“These are frightening levels of fraud,” he said.
California has been the biggest target, with an estimated $11 billion in fraudulent payments and an additional $19 billion in suspect accounts. Colorado has paid out nearly as much to scammers — an estimated $6.5 billion — as it has to people who filed legitimate unemployment claims.
Other estimates, according to AP reporting across the states, range from several hundred thousand dollars in smaller states such as Alaska and Wyoming to hundreds of millions in more populous states such as Massachusetts and Ohio.
The nationwide fraud has fed on twin vulnerabilities: a flood of jobless benefit applications since the pandemic began that has overwhelmed state unemployment agencies and antiquated benefit systems that are easy prey for crafty and persistent criminals.
In Ohio, weekly first-time unemployment claims have ranged from 17,000 to more than 40,000 during the pandemic. But since late last month, those claims have topped more than 140,000 some weeks, with many of them believed to be fraudulent. The state has paid at least $330 million in fraudulent pandemic unemployment benefit claims.
Trying to catch so many bogus claims delays payouts to Ohioans who are…
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