We’ve all heard stories about the grandparents scam, the foreign prince that can give you a huge fee to help them move their money, and someone’s brother’s cousin who got catfished online and lost thousands to a fake romance. If you haven’t or you want to hear about more schemes, read Three of the Top Identity Theft and Fraud Scams to Look Out for in 2023. If you have, you might think these are only things that happen to other gullible people.
While it’s true that you might not ever encounter or fall for these specific types of scams, you should be aware that they are not the only tactics criminals use to try to get your information or perpetrate fraud. According to Javelin Strategy & Research, 42 million Americans were victims of identity fraud in 2021.* Outside of romance and royalty scams, another avenue for fraud that has been particularly profitable for criminals recently is the filing of fraudulent unemployment claims and theft of unemployment insurance funds.
Unemployment Claims Fraud
During the heart of the COVID-19 pandemic, the rise in the volume of unemployment claims, the easing of checks and balances by states to expedite payments, and the increases in benefit amounts made these funds a prime target for fraudsters.
A report from the US Government Accountability Office suggests that criminals potentially stole more than $60 billion of a projected $191B improperly paid benefits from the nation’s unemployment insurance program during the COVID-19 pandemic. Attempts using fraudulent tactics continued in Q3 of 2022, whennearly 10% of all the reports received by the FTC (85,124) were identified as employment or tax-related fraud reports. So even after pandemic-related restrictions were eased and the additional funds available in the program stopped being paid out, unemployment claims fraud remains something to keep an eye on.
How the Unemployment Benefits Scam Works
Criminals file fraudulent claims for unemployment benefits using the names and personal identifying information of individuals who are still employed. They may get these stolen identities by purchasing information on the dark web, contacting victims impersonating government officials or trusted organizations, sending phishing emails, stealing electronic or physical data, or searching websites and social media.
If you were to become a victim, the stolen unemployment payments would likely be deposited into bank accounts controlled by the scammers. However, some scams involve sending them to your legitimate bank account instead. In this case, the scammers may contact you impersonating an unemployment official, telling you that the payment was made in error in an attempt to get you to transfer the funds elsewhere.
Employers Can Help Better Protect Against Unemployment Fraud
Employers often are the first to notice a fraudulent claim, often making HR the first line of defense against unemployment fraud. You may discover that a current employee or employees have been receiving unemployment benefits for weeks or that a claim has been filed in the name of an employee who retired or left the organization years ago, which obviously isn’t the best news for anyone involved.
Fortunately, there are steps that you can take to help better protect your company, employees, and you from unemployment benefits fraud.
- Carefully review unemployment claims - Be vigilant in reviewing unemployment reports or advising your third-party unemployment claims administrators to do the same. Promptly review whether the named applicant for unemployment benefits is a current or former employee. If it is a current employee, the claim is likely fraudulent. You should contact the individual to confirm whether they filed a claim.
- Alert the workforce about the scam – Educate your employees about the spike in fraudulent unemployment claims and identity theft, and ask them to report any suspicious benefits claims to HR as soon as possible in order to begin resolving the issue.
- Check the company’s cybersecurity - The FTC recommends that employers review their cybersecurity policies. For tips on staying ahead, check out 6 proactive steps to better cybersecurity.
- Review procedures for storing employee information - To help avoid a possible data breach in the future, identify where employee information is collected, stored, and used in order to find potential areas of weakness that could be exploited.
What Employers Can Do If a Fraudulent Unemployment Claim Is Suspected
- Contact the appropriate state unemployment fraud hotline or website - The Department of Labor (DOL) provides a list of unemployment fraud hotlines or websites by state. You can also report the fraud online if available, as it may save time and be easier for the agency to process. Depending on the state, the agency may request a fraud report from the employer, the employee, or both.
- Provide the employee a copy of the report – Give the employee copies of any documentation of the report to the state, including any confirmation or case number. Inform them if the state requires that they also report the fraud.
- Provide support and resources to the employee for identity theft - Unemployment fraud can be the precursor to greater and additional issues related to identity theft. A fraudulent unemployment claim is a sign that an employee’s sensitive personal information is possibly in the hands of criminals. You should consider directing affected employees to file a report with the FTC at IdentityTheft.gov, notify the major credit bureaus, review their credit report, request fraud alerts or a credit freeze, and take steps to help ensure that their personal information is not used to commit additional fraud. To provide greater identity theft monitoring, resolution, and support for unemployment claims fraud and more, consider adding an end-to-end identity theft protection service like ID Watchdog as an employee benefit.
- Consult with the IT Department – Especially if you are seeing multiple fraudulent cases come through, you should consult with your IT department to confirm that databases containing employee information have not been compromised and that appropriate security procedures are in place to help avoid future compromises.
For more information on how individuals can better protect themselves from unemployment fraud and how to report it, refer to Have You Been a Victim of Unemployment Fraud? What to Know and What to Do.
For more information on how we can help you proactively monitor for unemployment claims using your employees’ identities and, if we do find a fraudulent claim, help them report and resolve the fraud with, please contact us at workforce.equifax.com and ask about Unemployment Claims Fraud Watch.
*Javelin Strategy & Research, 2022 Identity Fraud Study: The Virtual Battleground, Mar. 2022.
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