The Covid-19 pandemic had a devastating impact on markets all over the world, disrupting virtually every aspect of industry and triggering an estimated 8.5 million job losses in America between February 2020 and February 2021, according to the US Bureau of Labor Statistics.
Some analysts estimate that it could take up to three years for employment to recover to pre-pandemic levels. What’s more, while millions of Americans experienced significant hardship, the pandemic created lucrative opportunities for fraudsters and criminals. According to figures published by Axios in June 2021, up to 50% of pandemic unemployment benefits may have been fraudulently claimed.
Unemployment fraud throughout the Covid-19 pandemic could have cost the American economy somewhere in the region of $400 billion, according to some estimates. Experts warn that much of this sum is likely to have fallen into the hands of foreign crime syndicates, making it more than just theft, but a matter of national security.
Covid-19 blindsided governments the world over. When the pandemic hit, no one was ready for the unprecedented wave of unemployment it created. US state governments knew that some fraud was inevitable, but prioritized getting benefits out to people who desperately needed it rather than laboriously checking every single claim.
What is unemployment fraud?
There are several different types of unemployment fraud, but common tactics emerging throughout the Covid-19 pandemic included:
Purchasing stolen identities via the dark web.
Using this false information to file unemployment claims.
Receiving unemployment benefits via drop accounts.
$400 billion is an astronomical sum that’s left many reeling, wondering how this can possibly have occurred on such a massive scale. Unfortunately, situations leading up to the Covid-19 crisis created a perfect storm.
Unemployment fraud on this scale seems unlikely, since for every claim, attackers need access to legitimate Social Security numbers. Unfortunately, these days, this is less of a problem for criminals than you might think. Massive data breaches involving credit card companies, retailers, credit bureaus, and healthcare providers have compromised almost every US citizen’s Social Security number. On the underground, stolen identities are readily available and waiting to be snapped up by criminals.
Once the criminal has acquired one or more stolen identities, they start completing their fraudulent unemployment claim. With online tutorials available to guide them through this process for as little as $5, fraudsters can complete an application in no time. According to experts on fraud, these criminals have gotten away with citing virtually any physical address when filing unemployment claims—uninhabited homes have proven particularly popular, according to CBS Los Angeles, who tracked down hundreds and even thousands of fraudulent claims to properties that were standing empty, pending sale. For example, a single property in the Winnetka neighborhood of LA had more than 5,000 claims attached to it.
At the start of the pandemic, many states were drastically under-resourced and desperately struggling to keep up with the vast surge in unemployment claims. Add to this mix stay-at-home orders and the closure of schools and daycare, and state staffing dwindled still further. Most states struggled to keep on top of genuine claims, let alone implement systems and checks to prevent fraudulent claims. They faced intense pressure to pay now and ask questions later.
How can we stop unemployment fraud?
According to security experts, there are a handful of signs of fraudulent access to online unemployment claim systems. These include:
Multiple users logging in via the same device.
Users logging in at unusual times.
Logging in from other countries.
Using anonymizing proxies, VPNs, or other technologies designed to shroud an IP address.
Possible solutions include incorporating biometric-based identity verification systems, requiring a real-time selfie or a government-issued ID, implementing “liveness” checks to see whether someone is using a picture of a picture versus a valid selfie for ID, and more. States have also created hotlines and websites for reporting instances of fraud. However, with many states still relying on outdated IT to power online claim systems, the problem will likely continue.
Other Covid-19 related scams
Scammers took advantage of the fear and disruption created by the Covid-19 pandemic in a variety of different ways, including:
Charity scams that solicited donations for fake charities.
Social media scams that distributed false information and capitalized on panic.
Phishing scams with emails impersonating a variety of public bodies, including the CDC and World Health Organization.
Romance scams targeting the many people forced to stay at home during the pandemic, feeling socially isolated while spending increasing amounts of time on the internet.
Robocalls from cybercriminals pretending to be family members in distress, banks or credit card companies, or government organizations.
Of course, these scams have been around before pandemic. However, Covid-19 disrupted so many different aspects of daily life—and this created an environment of uncertainty, upheaval, and panic in which organized criminals thrive.
In the wake of recent revelations, President Biden pledged $2 billion to support urgent UI modernizations in the American Rescue Plan and instituted an Identity Theft and Benefits Initiative and Department of Justice Anti-Fraud Task Force. Regarding smaller-scale scams, authorities are closing in on individuals who have tried to deposit fraudulent Covid-19 stimulus checks. Perpetrators can be fined for bank fraud, wire fraud, and mail fraud, all of which are serious crimes with large fines or long jail sentences.