Pandemic unemployment benefit fraud could reach $45 billion, federal watchdog says



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About $45.6 billion in pandemic unemployment benefits may have been fraudulently paid to criminals between March 2020 and April 2022, the office of the U.S. Department of Labor Inspector General said in a memorandum on Thursday. It is the latest report identifying widespread plans to steal money from various federal aid programs.

The updated figure is a big jump from the $16 billion in potentially fraudulent unemployment benefits the office cited in a June 2021 warning that looked at claims from March to October 2020. Since then, increases in payments linked to social security numbers of people who signed up in multiple states, who died, and who used suspicious email accounts in their claims — all considered high-risk areas.

The 2021 warning also found that payments linked to social security numbers of federal inmates were a high-risk area. The agency said in Thursday’s memorandum it was unable to update that figure due to a lack of new data from the Federal Bureau of Prisons, which declined to provide it due to the burden the request would create on the agency’s resources and technological platform. desk, the inspector said the general’s office.

Fraud within the country’s unemployment system skyrocketed after Congress enacted a historic expansion of the program to help Americans cope with the economic upheaval sparked by the Covid-19 pandemic in March 2020. an effort to quickly get the money out of those who had lost their jobs. Within five months, more than 57 million people filed for unemployment benefits, the inspector general’s office said.

“Hundreds of billions in pandemic funds attracted fraudsters seeking to exploit the UI program — resulting in historic levels of fraud and other improper payments,” Inspector General Larry Turner said in a statement.

States and Congress subsequently tightened their verification requirements in an effort to fight the fraud, most notably in a new temporary program that allowed freelancers, gig workers and others to collect benefits for the first time.

An important part of the relief effort was a federal weekly allowance for unemployed Americans. The unemployed received a boost of $600 per week from April to July 2020. Congress then revived the improvement in late December 2020, but reduced it to $300 per week. That supplement expired in September 2021, although many states led by Republicans and one with a Democratic governor dropped out earlier.

Lawmakers have also taken two other measures to help the unemployed. The Pandemic Unemployment Assistance program provided payments for freelancers, the self-employed, independent contractors and certain people affected by the outbreak, while the Pandemic Emergency Unemployment Compensation program expanded payments for those who had used up their regular benefits. Those programs also ended in September 2021.

As of March 2020, a total of $872.5 billion in pandemic-related unemployment benefits has been paid, the inspector general’s office estimates.

Nearly a million Social Security numbers were used by people who applied for benefits in two or more states, resulting in benefits from more than one state, the inspector general’s office said. They received nearly $29 billion in potentially fraudulent payments.

Nearly 206,000 social security numbers from deceased people were used to receive more than $139 million in potentially fraudulent benefits. And 1.7 million Social Security numbers linked to suspicious email addresses were used to file a $16.2 billion benefit.

In its earlier report, the Inspector General’s office found that Social Security numbers of potentially ineligible federal inmates were used to file more than $267 million in benefits.

The Inspector General’s office said it struggled to get unemployment insurance data from government personnel services until subpoenas were issued. In some cases, the data sent was incomplete or unusable.

The Inspector General’s office also disagreed with the Department of Labor’s Employment and Education Administration, which oversees the unemployment insurance program, saying the agency has not implemented the office’s previous recommendations, including working with government agencies to establish effective controls to reduce fraud and work with Congress to require government agencies to match high-risk areas.

“The lack of sufficient action by ETA significantly increases the risk of further UI payments to ineligible claimants,” the Inspector General’s office wrote in the memorandum.

Commenting on the memorandum, the agency said it will continue to “actively and aggressively tackle fraud” in unemployment benefit programs. It said it is committed to helping states fight the “constantly changing and new types of sophisticated fraud.”

The Inspector General’s office also announced on Thursday that more than 1,000 people have been charged with unemployment benefit fraud since March 2020 and there have been more than 400 convictions to date. It has opened more than 190,000 investigations into unemployment benefit fraud, an increase of more than 1,000 times in the volume of the unemployment insurance office’s work.

The unemployment insurance system isn’t the only pandemic program to fall victim to fraud in the chaos caused by the pandemic.

The Small Business Administration’s Paycheck Protection Program, or PPP, has been plagued by questionable loans and rampant fraud, though it managed to help many businesses continue to pay their employees during the pandemic.

In total, the program provided $813.7 billion in loans to small businesses, which were forgiven if the company spent the money on qualifying expenses.

The Small Business Administration’s Office of Inspector General has said that more than 70,000 PPP loans totaling more than $4.6 billion could potentially be fraudulent, according to a May 2022 report.

“These loans can only be considered potentially fraudulent because OIG has not completed a document-by-document review of loan files to confirm or resolve the suspicious activity; however, our investigations have revealed an unprecedented level of fraud activity. We are working to identify the full extent of PPP fraud,” the report said.

Separately, since May 2022, the Justice Department has prosecuted more than 150 defendants in more than 95 criminal cases and seized more than $75 million in cash proceeds, as well as real estate and luxury goods.

And just this week, the Department announced charges against 47 people accused of stealing $250 million from a federal program designed to provide meals to needy children during the pandemic. The scheme is the largest Covid-19-related fraud discovered by researchers to date, the department said. The suspects face a range of charges, including conspiracy, wire transfer fraud, money laundering and paying and receiving illegal bribes.

The defendants set up a network of shell companies affiliated with the Minnesota-based nonprofit Feeding our Future to operate the federal infant nutrition program, which is designed to provide meals to children from low-income families, prosecutors said.

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