Widespread Unemployment Fraud Strikes During the Pandemic: Steps for Individuals and Businesses

According to reports, a widespread unemployment benefits scam is affecting tens of thousands of individuals, slowing the delivery of legitimate claims and costing states hundreds of millions of dollars. Learn how both individuals and businesses can help better detect and protect against unemployment fraud.

How the Unemployment Benefits Scam Works

According to a US Secret Service memo, this wave of unemployment fraud is likely being executed by a well-organized crime ring that appears to have extensive records of personally identifiable information taken during previous cyber hacks. The scammers are reportedly filing fraudulent unemployment claims on behalf of unsuspecting victims using stolen Social Security numbers and other information.

In many cases, fraudulent unemployment payments are deposited into bank accounts controlled by the scammers. However, if payments are sent to the victim’s legitimate bank account instead, the criminals may continue the scam. Fraudsters may contact the victim by phone, email or text message and impersonate an unemployment official, telling the victim that the payment was made in error in an attempt to get them to transfer the funds.

Employed or Not: Anyone Can Be a Victim

According to the Internet Theft Resource Center (ITRC), anyone can be a victim, and individuals with and without a current position have been impacted. Both public and private employers have identified suspicious claims filed on behalf of employees who still held their jobs. In one case, Western Washington University stated that 410 of its 2,463-person staff had been targeted by the scam.

Employed victims may learn of the fraud when their employer asks why they have applied for jobless benefits. A victim who is currently unemployed may find out about the crime when they apply for unemployment themselves and state labor officials notify them that someone is already collecting unemployment using their identity.

Some states have begun adopting measures in the hopes of reducing unemployment fraud, such as reviewing past applications and delaying payments. According to reports, applicants of unemployment benefits have reported delays and challenges in getting applications approved.

Unsuspecting Victims Could Be Lured as “Money Mules”

Experts say that a substantial number of money mules may be helping facilitate these crimes. Money mules are individuals asked to receive funds in their personal bank account and then “process” funds via wire transfer, mail, or money service. They may be lured in by quick-money job offers or online romance scams.

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.

If You Think You Have Been a Victim of Unemployment Benefits Fraud

The FTC advises individuals to act quickly if they suspect unemployment fraud.

  • Report the fraud - Report suspected unemployment fraud to your employer, the state unemployment benefits agency, and the FTC at IdentityTheft.gov. It’s a good idea to keep a record of the communication.
  • Better protect your credit - Consider locking your credit report or placing a one-year fraud alert, an extended fraud alert, or credit freeze, which can make it more difficult for an identity thief to open new accounts in the victim’s name.
  • Regularly review credit reports – Check your credit report for unrecognized activity which could be a sign of potential fraud.

How Employers Can Help Better Protect Their Employees

The FTC advises businesses to respond quickly to any suspicious unemployment claims and help support employees.

  • Notify the workforce - Ask employees to report fraudulent benefits claims to HR, and ask HR to notify employees about any suspicious claims that the company receives.
  • Report fraudulent activity - Depending on the state, the state unemployment benefits agency may require a fraud report from the employer, the employee, or both. Provide the employee with a copy of any documentation of the company’s report.
  • Refer employees to the FTC at IdentityTheft.gov - A fraudulent unemployment claim means that the employees’ information is likely exposed, which could put them at risk for further harm. Employees can report the identity theft to the FTC at IdentityTheft.gov.
  • Conduct a cybersecurity checkup - Consider doing a check-up on the company’s cyber defenses. The FTC provides a guide for Cybersecurity for Small Business.