The Federal Trade Commission (FTC) has issued a warning that criminals may be using individuals’ personal information, including Social Security numbers and dates of birth, to file fraudulent unemployment claims and collect phony benefits. According to reports, this large-scale and sophisticated scam is being conducted by a group of international fraudsters. Learn how the scam works and what to do if you become a victim.
Employed or Not: Anyone Can Be a Victim
Most victims learn about an incident of unemployment benefits fraud from their employer or when they receive a notice from the state unemployment agency about an application for benefits filed using their identity. In many cases, however, by that time the funds have already been paid to an account under the criminal’s control. Other victims may not realize that they have been targeted until they try to file a claim for legitimate unemployment insurance benefits or receive a notice from the IRS.
The FBI advises individuals to be aware of:
- Communications regarding unemployment insurance when the individual has not applied for unemployment benefits
- Unauthorized transactions on bank or credit card statements related to unemployment benefits
- Any fees involved in filing or qualifying for unemployment insurance
- Unsolicited inquiries related to unemployment benefits
- Fictitious websites and social media pages mimicking those of government agencies
How the Unemployment Scam Works
Experts say that US unemployment programs have become a prime target for scammers because more funds are available during the pandemic and some of the typical checks and balances have been lifted.
The FBI states that these criminals use stolen identities to impersonate the victim and submit fake unemployment benefits claims on their behalf. According to reports, scammers are attracted to the potential of a possible $10,000 or $20,000 payout per fraudulent claim.
Scammers may get the 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.
The Impact of Unemployment Fraud on Victims
Though victims are not responsible for the stolen unemployment benefits, the fraud can lead to bigger concerns.
- Unsuspecting victims could be lured as “money mules” - Fraudulent unemployment payments are often deposited into accounts the imposters control. However, in some cases payments are made to the victim’s legitimate account, and the scammers may call, email or text the victim and impersonate an official from the state unemployment agency in an attempt to recover the money. This is a money mule scam and could cause even more problems for the victim.
Money mules are individuals asked to receive funds in their bank account and then “process” funds via wire transfer, mail, or money service. The FBI advises individuals to better protect themselves by refusing to send or receive money on behalf of individuals and businesses for which they are not responsible and to be wary of online job postings and messages promising easy money for little to no effort.
- It’s a slow process to get unemployment funds replenished. – Once an investigation shows that an individual is a victim of unemployment fraud, their funds will be refilled. However, this is a slow process which can take weeks or even months. If someone becomes a victim while employed, the unemployment benefits will be available to them in the future. The victim may, however, have to clear their name before they can access their benefits.
- Victims will receive a 1099-G tax form for unemployment benefits they didn’t receive. – Unemployment benefits are taxable, and states will mail recipients Form 1099-G so the payments can be included as income on tax returns. Though unemployment fraud victims will not be held responsible for these taxes, they do have to take action to ensure they don’t have to pay. The IRS advises victims to contact their state for a corrected form showing that the amount they received was $0. Victims filing taxes before receiving a corrected form should report only their actual income. For more details, review the IRS guidance.
- Unemployment fraud puts victims at risk of more identity fraud. – Filing false unemployment claims indicate that criminals have victims’ personal identifying information (PII), including Social Security numbers and dates of birth. PII in the wrong hands puts victims at risk for more identity theft and fraud, like new account fraud and tax identity theft.
What Individuals Can Do If They Are a Victim of Unemployment Fraud
The FTC recommends the following steps if an individual suspects they are the victim of unemployment benefits fraud.
- Report the fraud to the employer
- Report the fraud to the state unemployment benefits agency - The Department of Labor provides a list of hotlines and websites by state. The FTC recommends reporting the fraud online if possible, as it could save time and be easier for the agency to process. It’s advised to keep any confirmation or case number and a copy of all communication.
- Report the fraud to the FTC at IdentityTheft.gov.
- Review credit reports regularly - The FTC advises checking credit reports every week for free through April 2021 at AnnualCreditReport.com.