One week ago Jazz wrote about a massive amount of unemployment fraud that had been uncovered in Washington state. At the time there didn’t seem to be an exact dollar figure for the fraud, only the belief that it involved hundreds of millions of dollars. Today, we’re learning that the actual total might be as high as $650 million. Washington state is trying to reclaim that money but so far has gotten only about half of it back.
Washington officials said Thursday they believe they have recovered about half of the hundreds of millions in unemployment benefits paid to criminals who used stolen identities to file claims during the coronavirus pandemic.
Employment Security Department Commissioner Suzi LeVine said officials are still working to determine the final amount paid out fraudulently, but they believe it was between $550 million and $650 million. To date, the state has recovered $333 million, she said.
Washington has paid out a total of $4.9 billion in benefits so the $650 million figure represents about 13 percent of the total, half of which they have gotten back. The nature of the fraud was the filing of false claims using identities of real people which had previous been stolen online. The fraudulent claims are coming from West Africa, specifically, from a group of Nigerian scammers dubbed “Scattered Canary.”
Over the last several weeks, [cybersecurity firm] Agari has been working alongside law enforcement to share information on the threat group and its methods, said Crane Hassold, Agari’s senior director of threat research.
“This is essentially a perfect storm for these groups [to take advantage of],” said Hassold. “You have billions and billions of dollars that is being handed out by the federal government [for emergency purposes], and you have states that need to pay out legitimate claims very quickly. Usually, there is a validation period and a waiting period for most unemployment claims, but because of the current circumstances of COVID-19, these claims need to be paid out immediately.”
The Wall Street Journal reports that the Secret Service put out a memo last month warning about this specific group:
“It is extremely likely every state is vulnerable to this scheme and will be targeted if they have not been already,” the Secret Service memo said. The tactics described resembled attempts to file fraudulent income-tax returns, a problem the Internal Revenue Service and states have faced for years.
The Secret Service said hundreds, if not thousands, of “mules,” or intermediaries that help launder stolen money out of the country, appeared to be supporting the fraud scheme, in some cases unknowingly. Local and national banks, as well as credit unions, have been targets.
The Inspector General for the Department of Labor has warned that this type of fraud, beyond this one Nigerian group, could total as much as $26 billion.
Meanwhile, because the fraud involves real people’s identities, officials are having to sort out duplicate claims in some cases, i.e. people whose names were used in the fraud but who also filed real claims because they lost their jobs. Some of those unfortunate people are currently having to wait until the state can sort out which claims are real before they can collect their unemployment.