IG: ‘Tens of Billions’ in Fraudulent Unemployment Claims in 2020

Between the months of March and October 2020, the federal government doled out at least $5.4 billion in fraudulent unemployment claims, but the total value of fraudulent payments in 2020 “could easily range in the tens of billions of dollars,” according to an inspector general alert released this week.

However, the memo, released by the Labor Department Office of Inspector General as part of its ongoing audit of unemployment insurance expansion under the CARES Act, “only captures a subset of the potential fraudulent [unemployment insurance] activity.”

“The OIG expects that the actual amount of potential fraud is much larger,” reads the memo, which was released to warn the Labor Department’s Employment and Training Administration about the magnitude of fraudulent unemployment claims.  

“We identified more than $5.4 billion of potentially fraudulent [unemployment insurance] benefits paid to individuals with social security numbers filed in multiple states, to individuals with social security numbers of deceased persons and federal inmates, and to individuals with social security numbers used to file for [unemployment insurances] claims with suspicious email accounts,” the memo states.

While the IG’s audit is far from finished, initial datasets suggest a staggering amount of fraud as states distributed about $400 billion in CARES Act unemployment insurance funding.

California, the largest state, reported in January 2021 that it paid out at least 10%, or $11 billion, of its unemployment insurance benefits to fraudulent claims since the COVID-19 pandemic began. However, the IG notes California believes the amount “could be as high as 27%, or $29 billion” paid to fraudulent claims by a single state. Other states also reported high-levels of fraud, including New York ($1 billion), Washington ($600 million) and Maryland ($501 million).

“If other [states] have problems similar to California, the potential fraud occurring throughout the nation could easily range into the tens of billions of dollars,” the IG states. “It is incumbent on DOL’s ETA to ensure [states] employ more effective fraud controls.”

The IG recommends ETA partner with states to establish more effective fraud controls, especially with regard to unemployment insurance paid to multi-state claimants, claimants who used dead people’s Social Security numbers and ineligible federal inmates. The IG also suggests Congress establish legislation to require states to “cross match high-risk areas.”