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Watch Out for Unemployment Benefits Fraud

employment fraud

More than 40 million Americans have filed claims for unemployment benefits since the coronavirus pandemic began a few months ago. Unfortunately, it appears that some of these claims have been fraudulent.

The FTC recently warned of what it called a “large-scale scam erupting in the midst of the coronavirus pandemic” in which identity thieves file claims for unemployment benefits using stolen personal information from people who haven’t filed claims. It’s estimated that between $550 million and $650 million in fraudulent unemployment benefits has been paid out so far.

It Starts with Identity Theft

It’s believed that this scam is being executed by a well-organized Nigerian crime ring against multiple state unemployment insurance programs. The criminals are stealing Social Security numbers and other personally identifiable information from identity theft victims including first responders, government personnel and school employees.

This fraud is working in much the same way that income tax refund fraud works. The thieves recruit “mules” to receive the fraudulent benefits and then send most of the money to the criminals. The mules are often unwitting victims of online scams or simply people who are out of work and easy prey for thieves offering what appears to be easy money.

In another version of the fraud, criminals use stolen personal information to file for unemployment benefits in someone else’s name. Then they contact the victims after they’ve received the money and tell them they’re from the government, instructing them to return the funds to a bank account they control because they were sent by mistake.

Unfortunately, it’s been difficult for many states to keep up with this unemployment benefits fraud due to the massive number of jobless claims that have been filed over the past few months. About $48 billion in unemployment benefits were paid out in April alone, according to the U.S. Treasury Department.

What If You’re Victimized?

The FTC says that if you receive a notice from your state unemployment benefits office or employer regarding an application for unemployment benefits but didn’t file such an application, there’s a good chance you’ve been victimized by this fraud. The same goes if funds suddenly appear in your bank account and you don’t know where they came from.

If you believe you’ve been victimized by this scam, the FTC encourages you to report the fraud to your employer and your state unemployment agency immediately for further instructions. Most importantly, do not respond to any phone calls, emails or texts instructing you to wire money, send cash or buy gift cards and send them to anyone. 

“Your state agency will never tell you to repay money that way,” the FTC said in a statement. “Anyone who tells you to do those things is a scammer. Every time.”

Meanwhile, government officials have been actively trying to recover unemployment benefits that were obtained fraudulently. So far, they’ve recovered approximately $333 million, or about half of the total amount of fraudulent funds.

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