Unemployment insurance fraud has skyrocketed across the U.S. and Canada since the onset of the COVID-19 pandemic.
Using phishing scams and database breaches, criminals have targeted billions of dollars in unemployment aid in the U.S., with victims numbering in the hundreds of thousands. Similarly, the Canadian Anti-Fraud Centre has received hundreds of identity theft reports linked to the Canadian Emergency Response Benefit (CERB).
At least 11 U.S. states have reported increases in unemployment insurance fraud activity, including Arizona, Colorado, Maryland, New York, Ohio, Texas and Washington, which have reported billions of dollars in fraud since the pandemic began.1
According to the Colorado’s Department of Labor and Employment, more than three out of every four claims in September 2020 were fraudulent. Not only does unemployment insurance fraud result in a loss for the unemployed, but also increases employer contribution rates.
Prior to the pandemic, benefits program fraud most often came from individual, dishonest applicants. The expansion of COVID-19 relief funding and eligibility, however, has made unemployment insurance funds an irresistible target for cybercrooks and other criminal enterprises across North America and even worldwide.
Unemployment insurance fraud does not require the victim to be unemployed. Instead, identity thieves procure personally identifiable information — such as a date of birth, Social Security number or driver’s license information — then sell or use the information to file an unemployment claim. Benefits are often issued in victims’ names on debit cards and sent to addresses associated with or accessible to the criminals.
Many victims are unaware of the fraud until they receive a letter or benefit card from a government unemployment agency. Others may find out when their current or former employer asks to confirm they have applied for unemployment benefits.
What can employers do to prevent or minimize unemployment insurance fraud?
Consider implementing these tips to safeguard against unemployment insurance fraud:
- Be accurate and timely in reporting new hires. Labor departments in the U.S. and Canada compare new hire data against unemployment claims to help determine fraud.
- Check your unemployment reports. Follow your unemployment claims, whether through an employee or a third-party claims administrator. Ensure vigilance when state labor agencies verify employee details and compensation information. Alert current or former employees immediately when your organization receives a suspicious call.
- Educate your workforce. Educate employees about the scams. Have them notify your HR department of any fraudulent benefits claims as soon as possible. Support and guide affected employees, with helping them with coping with identity theft, freezing and monitoring their credit, monitoring other accounts, and help them report the crimes to the report to appropriate state agency.
- Report potential fraud immediately. Scams in the U.S. should be reported to the U.S. Department of Labor. In Canada, report scenarios to the Government of Canada Employment Insurance Fraud Awareness and Reporting guide.
- Assess your organization’s cyber-hygiene. Sensitive personal information can be compromised in many ways. Vendor breaches, compromised computer networks and phishing scams are prevalent. Assess how well your organization guards against these threats.
Contact your HUB Risk Services expert for more information on unemployment insurance fraud and what your business can do to reduce your risk.
1 Bloomberg.com: “Covid-19 Scammers Driving Unemployment Fraud Across Nation,” October 19, 2020.