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Illustration by Security Management

The Unemployment Gold Mine: Fraudsters Steal Billions

If you’re a criminal, here’s a recipe for you to try: the two main ingredients are 20 years' worth of personal identification information (PII) breaches and a patchwork of neglected systems, most without rigorous fraud control. Now add a global pandemic that results in the highest levels of unemployment in U.S. history and hundreds of billions of dollars of emergency money flooding in.

What you get is the whopper of a press call that the California Department of Labor made yesterday. California Labor Secretary Julie Su reported that 10 percent of the claims the state has paid have been confirmed as fraudulent, and another 17 percent is considered suspicious. California has paid out $114 billion of unemployment, meaning $11.4 billion is confirmed fraud and another $19.4 billion could be fraud.

“There is no sugarcoating the reality,” the Associated Press quotes Su as saying. “California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”

It turns out, California’s incarcerated population represents one of those security weaknesses. A Los Angeles Times report in December said state investigators had identified $400 million in unemployment payments had been made to 21,000 inmates. Even convicted murderers have gotten in on the scam.

The elderly represent another security weakness. A KTLA5 report details the work of two fraudsters of Vietnamese descent who advertised a scheme in Vietnamese to lure participants into making false claims. Among the claims filed was one for a 99-year-old woman who had not worked in decades.

In addition, the chaos has led to a class-action suit against the Bank of America, which contracts with the state of California to provide debit cards to unemployment recipients. “Among the issues raised in the 67-page complaint,” reports CalMatters, a news organization focusing on the state, “are the lack of secure microchips in unemployment debit cards, a ‘failure to secure’ private account information and a sluggish response to consumer fraud reports.”

California is not alone. In a pair of posts—one last week and one in OctoberGovernment Technology blogger Dan Lohrmann documents and discusses the fraud that states have faced. His not-so-cheery outlook: “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.”

In addition, late last year USA Today obtained an interview with a Nigerian engineering student who reported that he made approximately $50,000 through unemployment scams. He detailed the ease of the process: “After compiling a list of real people, he turns to databases of hacked information that charge $2 in cryptocurrency to link that name to a date of birth and Social Security number. In most states that information is all it takes to file for unemployment.”