Stopping fraud, especially fraud against the government, which rightly belongs to the people, is an all-hand-on-deck process. Public fraud during the COVID-19 pandemic was off the charts, and it was felt most harshly in the fraudulent redirection of unemployment insurance (“UI”) payments.
In June 2021, Axios reported that “[u]nemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security.” The CEO of LexisNexis Risk Solutions – Government, Haywood (“Woody”) Talcove, “estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere… ‘These groups are definitely backed by the state,’” Talcove added. Talcove said that while “the identity fraud loss rate in the private sector is about 0.32%. The fraud rate for unemployment insurance is…estimated at 18.7%, the highest of any government benefits program.”
How can government agencies reduce fraud against the government? “This is another example of the need for public-private partnerships,” said Matt Albence is former acting director of U.S. Immigration and Customs Enforcement (ICE). Albence “sees [public benefits fraud] as part of the ongoing evolution of international criminals seizing opportunities created inside the U.S.” He added that during the pandemic, “criminals found they could take advantage of government relief…” Albence is now the spokesperson for the anti-fraud organization United to Safeguard America from Illegal Trade (USA-IT). He said that “[i]f industry and government are siloed in their efforts, criminals will continue adapting and evolving—and we will continue to pay the price.”
When Congress passed the CARES Act to expand unemployment eligibility, it unintentionally created new avenues for fraud. Brett Johnson, “a cyber-crook turned cybersecurity expert,” said that “the skills needed for credit card fraud translated well for unemployment insurance fraud. Simple-to-implement safeguards such as looking at an applicant’s history within the state, checking a device’s location when the application was made, and seeing whether or not the site was accessed from TOR— a dark web browser — were not used.” Yet, tools are widely available from members of the Consumer Data Industry Association, and others, that have been used to keep loses to a minimum.
The biggest states, like California, had the largest losses. California may have lost between $20b – $40b in fraudulent UI payments. “The crooks hit smaller states, too. ‘“An early review in Nebraska, which looked at all statewide payments through June, found roughly 66% of unemployment money was misspent,’ NBC News reports.”
“In December 2021, Oluwaseyi Akinyemi, a Nigerian national operating out of Maryland, pleaded guilty to multiple charges of stealing COVID-19 unemployment fraud. Akinyemi was ripping off senior citizens, then used their personal information to also file fraudulent unemployment claims during the pandemic emergency.” According to the U.S. Attorney’s office in Maryland, “’Akinyemi and his co-conspirators used the identities of 19 real individuals to file fraudulent unemployment insurance and [other] claims [with an] ‘intended loss of $250,000 in state and federal benefits.’”
There is an important lesson to help reduce public benefits fraud, like against the UI system. First, data access and use are critical. But data alone will not suffice. There are many companies that turn data into intelligence so that they can help their government, nonprofit, and business customers reduce fraud. Second, governments and businesses must collaborate. Collaboration means not just passing laws that allow for data exchanges regulated by existing laws, like the FCRA and GLBA, but also for fraud prevention purposes. Third, government agencies should take full advantage of the services offered by businesses to prevent fraud and deploy those resources to put government money to work for the people, not the bad guys.
 Felix Salmon, Half of the pandemic’s unemployment money may have been stolen, Axios, June 10, 2021.
 Elaine Mallon, U.S. Taxpayers Lost $163B to Unemployment Fraud During Pandemic. It Could Have Been Worse, insidesources.com, April 30, 2022.
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More