16
May 20

U.S. Secret Service: “Massive Fraud” Against State Unemployment Insurance Programs

A well-organized Nigerian crime ring is exploiting the COVID-19 crisis by committing large-scale fraud against multiple state unemployment insurance programs, with potential losses in the hundreds of millions of dollars, according to a new alert issued by the U.S. Secret Service.

A memo seen by KrebsOnSecurity that the Secret Service circulated to field offices around the United States on Thursday says the ring has been filing unemployment claims in different states using Social Security numbers and other personally identifiable information (PII) belonging to identity theft victims, and that “a substantial amount of the fraudulent benefits submitted have used PII from first responders, government personnel and school employees.”

“It is assumed the fraud ring behind this possesses a substantial PII database to submit the volume of applications observed thus far,” the Secret Service warned. “The primary state targeted so far is Washington, although there is also evidence of attacks in North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida.”

The Secret Service said the fraud network is believed to consist of hundred of “mules,” a term used to describe willing or unwitting individuals who are recruited to help launder the proceeds of fraudulent financial transactions.

“In the state of Washington, individuals residing out-of-state are receiving multiple ACH deposits from the State of Washington Unemployment Benefits Program, all in different individuals’ names with no connection to the account holder,” the notice continues.

The Service’s memo suggests the crime ring is operating in much the same way as crooks who specialize in filing fraudulent income tax refund requests with the states and the U.S. Internal Revenue Service (IRS), a perennial problem that costs the states and the U.S. Treasury hundreds of millions of dollars in revenue each year.

In those schemes, the scammers typically recruit people — often victims of online romance scams or those who also are out of work and looking for any source of income — to receive direct deposits from the fraudulent transactions, and then forward the bulk of the illicit funds to the perpetrators.

A federal fraud investigator who spoke with KrebsOnSecurity on condition of anonymity said many states simply don’t have enough controls in place to detect patterns that might help better screen out fraudulent unemployment applications, such as looking for multiple applications involving the same Internet addresses and/or bank accounts. The investigator said in some states fraudsters need only to submit someone’s name, Social Security number and other basic information for their claims to be processed.

Elaine Dodd, executive vice president of the fraud division at the Oklahoma Bankers Association, said financial institutions in her state earlier this week started seeing a flood of high-dollar transfers tied to employment claims filed for people in Washington, with many transfers in the $9,000 to $20,000 range.

“It’s been unbelievable to see the huge number of bogus filings here, and in such large amounts,” Dodd said, noting that one fraudulent claim sent to a mule in Oklahoma was for more than $29,000. “I’m proud of our bankers because they’ve managed to stop a lot of these transfers, but some are already gone. Most mules seem to have [been involved in] romance scams.”

While it might seem strange that people in Washington would be asking to receive their benefits via ACH deposits at a bank in Oklahoma, Dodd said the people involved seem to have a ready answer if anyone asks: One common refrain is that the claimants live in Washington but were riding out the Coronavirus pandemic while staying with family in Oklahoma.

The Secret Service alert follows news reports by media outlets in Washington and Rhode Island about millions of dollars in fraudulent unemployment claims in those states. On Thursday, The Seattle Times reported that the activity had halted unemployment payments for two days after officials found more than $1.6 million in phony claims.

“Between March and April, the number of fraudulent claims for unemployment benefits jumped 27-fold to 700,” the state Employment Security Department (ESD) told The Seattle Times. The story noted that the ESD’s fraud hotline has been inundated with calls, and received so many emails last weekend that it temporarily shut down.

WPRI in Rhode Island reported on May 4 that the state’s Department of Labor and Training has received hundreds of complaints of unemployment insurance fraud, and that “the number of purportedly fraudulent accounts is keeping pace with the unprecedented number of legitimate claims for unemployment insurance.”

The surge in fraud comes as many states are struggling to process an avalanche of jobless claims filed as a result of the Coronavirus pandemic. The U.S. government reported Thursday that nearly three million people filed unemployment claims last week, bringing the total over the last two months to more than 36 million. The Treasury Department says unemployment programs delivered $48 billion in payments in April alone.

A few of the states listed as key targets of this fraud ring are experiencing some of the highest levels of unemployment claims in the country. Washington has seen nearly a million unemployment claims, with almost 30 percent of its workforce currently jobless, according to figures released by the U.S. Chamber of Commerce. Rhode Island is even worse off, with 31.4 percent of its workforce filing for unemployment, the Chamber found.

Dodd said she recently heard from an FBI agent who was aware of a company in Oklahoma that has seven employees and has received notices of claims on several hundred persons obviously not employed there.

“Oklahoma will likely be seeing the same thing,” she said. “There must be other states that are getting filings on behalf of Oklahomans.”

Indeed, the Secret Service says this scam is likely to affect all states that don’t take additional steps to weed out fraudulent filings.

“The banks targeted have been at all levels including local banks, credit unions, and large national banks,” the Secret Service alert concluded. “It is extremely likely every state is vulnerable to this scheme and will be targeted if they have not been already.”

Update, May 16, 1:20 p.m. ET: Added comments from the Oklahoma Bankers Association.

Tags: , , , , , , ,

147 comments

  1. A fraudulent claim was filed in my name in WA state. I reported it as fraud and got a response. I’ll get let go from my job next Monday and want to file an unemployment claim. Any idea how long the fraud inspections are taking to clear these cases? Thanks so much for any thoughts.

    • Sorry to hear you soon to be unemployed.

      I had a fraudulent claim filed on my behalf in Washington State a month ago, and have yet to have it cleared up.

      The biggest issue you will run into is that you will not be able to open an account with the Employment Security Department using your social security number to file an unemployment claim as an account with your social security number has already been set up.

      Oddly enough, those who filed unemployment claims in the past are immune to this fraud as they already have accounts.

  2. Over the weekend I got a strange letter from the WA Dept. of Employment Security about special job training I would be eligible for. Being the person at Cascade Security Corporation who responds to all employment claims filed by our employees, I have already discovered rampant impostor fraud disrupting legitimate claims processing, so I suspected something was array. Then when I got today’s mail, the first thing I saw was a claim with my name and SSN and work address on it. I reported this fraud to the WA ESD website and also on my own claim which I responded to. Now I worry when the next shoe will drop with the IRS or my credit card/bank transactions. I hope the FBI works hard to nail these pitiful bad actors taking advantage of the current Pandemic crisis. Absolutely despicable and they should not get any mercy.

  3. My unemployment online says paid but yet I have still for three days now have not had the money deposited onto my debit card what’s the deal with that?

  4. I have been legitimately collecting unemployment benefits in the state of New Jersey since early April. In late May I received a letter from the Massachusetts Dept of unemployment stating my MA claim was accepted. I never submitted this claim in MA. I have been writing to various government agencies to documents this false claim. I have not heard back yet as to the status of my situation. Any other advice as to who to contact?

    • I got a letter as well from Mass DUA stating I was approved for benefits.(I am in Mass)
      I talked to a person and we confirmed it was fraud. She didn’t seem to bothered by it.
      I reported it on the link someone else mentioned as well as emailed.

      Still 24 hours and not even a automated reply that they received my info.

      Massachusetts DUA seem a bit incompetent to me. (wrong URLs given on the phone, given phone number that do not work etc.).

      I am in Mass and if I do not hear something within 48 hours I’ll contact my state Senator and he AG.

  5. Twenty years in a state penitentiary sounds like a reasonable
    punishment with NO time off for good behavior

    • They caught the ring leader .. a notable Nigerian “nick named” hush puppi! Wow he’s not gonna see the light of day for min 20 years smh .. he used all that money to live the big life SMH

  6. CherylCollins

    I filed a claim three weeks ago. I was told someone was collecting under my social security number. I received an emai today advising me that this fraud will not prevent me from collecting unemployment in the “future Should I need it.” What about my current claim? I am shocked.

  7. I filed last Monday for pua benefits, the next day I was told to verify my identity. I did that and they received it the same day but did not review it. I’m almost due to go in labor and I’m trying to get things. Any info?? Filed in Massachusetts btw

  8. Hawaii here. Got an unemployment letter requesting additional information for an unemployment claim I did not make. Immediately reported the fraudulent activity.

  9. DAVID C STAMATELATOS

    Ive been collecting since april never filed before i am 54 years old now they stop paying me three weeks now i have twin girls to support and cant get any answers i dont know what to do and they dont care cause they still have a job …..im from mass.

    • JoAnne Sebastino

      Me too. I file ever week and the last check I received was for the 16th of May. They keep saying,Give it a few days. Well I called a few day’s ago and said, You keep telling me give it a few days, I have waited 3 weeks and it still says Processing. She claims it’s because they had a large amount of people applying in May. Massachusetts is not run well at all.

    • you need to call for them to send an identity verification I’m in MA and the same happened to me. You MUST call and get the identification verification sent to you. Once you submit it will take 2-6 weeks to process and now I’m 5days of that being approved and no funds yet. If you don’t call you case will not be paid out on and it’ll take longer to receive your money. They are having issues and won’t tell you that’s the problem you must call! good luck

    • Same. Called every week and they keep saying

      “There are no benefit issues with your PUA account.

      it is just delayed due to high claim volume.
      All accounts are not just yours, we are working through the backlog as fast as possible.
      ​Please continue to monitor your online account for changes in status.”

      Except now my 3 ‘Pending’ weeks say “This week is not being paid while an issue is resolved.” Only problem is every person i’ve talked to has told that there aren’t any issues. Also, I’ve not received any letters or notices stating there is an issue that needs to be resolved. lol SH**-SHOW

  10. Hawaii.
    I have been receiving PUA unemployment benefits from March through May 23rd. When I filed my claim for weekending May 30th I was asked to supply copies of front and back of both SS Card and State ID AGAIN and now my claim says. PENDING. WHY? And why did they request this information again?

  11. My son filed an unemployment claim and requested direct deposit. Someone hacked into his account and stole all of his payments since April. He has contacted EDD in various ways and they have not responded. What should he do? Is his bank responsible?

  12. Pennsylvania

    Last week received 2 checks that totaled 9K….I did not file and the letter sent, by PA stated if you didn’t file, then you are a victim of identity theft….I had to file a police report and send the checks and the police report to the Dept of Labpr and Industry. I sent it certified with return receipt.

    Now here is the kicker, I have to file a claim in Oct, due to PA’s rules regarding severance pay and UC. How much UGH

  13. This is really bad one, I can’t believe people are using this global pandemic to hurt others. Stay safe everyone, those scams will be arrested surely.

  14. George E Brooks

    I would like to know who is going to get jail time out of this

  15. Thanks for the work Krebs! Sorry to say it but Florence is not the smartest of cities. I’m sure you know that after they paid the city of Muscle Shoals was attacked. They are not paying.

  16. I also had the 3-week delay after initially get approved. I had gotten paid from March 9th to May 16th with no problem. I then got the same run around that is given by the others in this thread. Then on Friday, I got a proof of Identity form where I had to produce a picture of my birth certificate, driver license, social security( front and back), and then a picture of me holding my license next to my face. When I called and asked why I was told it was because of a huge fraud scandal across the country. I sent in the documents and I am now in a holding pattern with a pending payment hold until issues are resolved.