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Half of the pandemic’s unemployment money may have been stolen

June 10, 2021
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Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say.

Why it matters: Unemployment 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.

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Catch up quick: When the pandemic hit, states weren’t prepared for the unprecedented wave of unemployment claims they were about to face.

By the numbers: Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

  • Haywood Talcove, the CEO of LexisNexis Risk Solutions, 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 tells Axios.

  • Much of the rest of the money was stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months.

The Treasury Department declined to comment on these estimates.

How it works: Scammers often steal personal information and use it to impersonate claimants. Other groups trick individuals into voluntarily handing over their personal information.

The big picture: Before the pandemic, unemployment claims were relatively rare, and generally lasted for such short amounts of time that international criminal syndicates didn’t view them as a lucrative target.

  • After unemployment insurance became the primary vehicle by which the U.S. government tried to keep the economy afloat, however, all that changed.

  • Unemployment became where the big money was — and was also being run by bureaucrats who weren’t as quick to crack down on criminals as private companies normally are.

  • Unemployment fraud is now offered on the dark web on a software-as-a-service basis, much like ransomware. States without fraud-detection services are naturally targeted the most.

The bottom line: Many states are now getting more sophisticated about preventing this kind of fraud. But it’s far too late.

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