WASHINGTON, DC – In an effort to protect taxpayers, crack down on criminals, and prevent bogus bank transfers from wiring hundreds of millions of dollars to fraudulent accounts, U.S. Senators Jack Reed (D-RI) and Sheldon Whitehouse (D-RI) are urging the Trump Administration to step up efforts to identify, halt, and prosecute unemployment insurance (UI) fraud and claw back stolen funds.

Since March, 42.7 million people -- including over 200,000 Rhode Islanders -- have filed applications for unemployment insurance benefits.  Scott Dahl, the Inspector General for the U.S. Labor Department (DOL) recently told Congress that up to $26 billion in federal jobless benefits could be wasted, with the vast majority of that going to fraudsters.

“These taxpayer dollars are meant for struggling Americans, not cyber-criminals and fraudsters.  The Trump Administration controls these funds and needs to start taking a proactive, coordinated approach to preventing fraud, waste, and abuse.  We urge the Administration to work with financial institutions and law enforcement and use the considerable tools at their disposal to crack down on identity thieves at home and abroad and claw back stolen funds,” said Reed and Whitehouse in a joint statement.

Reed and Whitehouse penned a joint letter with six of their colleagues urging the U.S. Department of Labor (DOL) to enhance efforts to prevent scammers, crime rings, and cyber criminals from stealing UI benefits.

Following several news reports about organized crime rings using stolen Social Security numbers and other personal information -- much of it from first responders, government personnel, and school employees -- to file for weekly jobless benefits, the Senators are seeking answers from the Trump Administration about what steps DOL is taking to address organized fraud activity against unemployment insurance programs that have been left vulnerable to online crime rings amidst the novel coronavirus (COVID-19) pandemic.

“We write to express concern over recent reports of organized fraud against state unemployment insurance programs, leading to delay of payment of benefits to legitimate claimants and potential losses of hundreds of millions of dollars.  We all share a common goal of ensuring the integrity of the unemployment insurance (UI) program, and supporting a strong UI program is a critical component of the economic safety net during times of economic downturn, including during the COVID-19 pandemic. Safeguarding state UI systems against unscrupulous actors who seek to exploit the current public health crisis for economic gain requires a holistic response by the federal government in partnership with states,” the eight Senators wrote.

The Senators noted that in addition to robbing taxpayers, the fraudulent activity is harming innocent Americans whose identities have been stolen, and delaying aid to legitimate claimants who have had their benefits frozen by state agencies seeking to ensure the claims are real.

The letter notes public reports about a U.S. Secret Service memo describing a “fraudulent crime network” that used identity theft victims’ personal identification information to file unemployment claims in several states, including Rhode Island and Massachusetts.  A large portion of the fraud was reportedly orchestrated by a well-organized Nigerian criminal group known as “Scattered Canary,” using stolen personal information to file bogus claims for UI benefits.

The Rhode Island Department of Labor and Training (DLT) has processed tens of thousands of unemployment insurance claims since the beginning of the COVID-19 pandemic.  UI fraud victims should report a suspected fraud to DLT and their employer, file a police report, and contact their appropriate financial institution to monitor or freeze their credit.

“For their part, when states became aware of the fraudulent activity, they took steps to mitigate the problem and weed out fraudulent claims, including by temporarily halting payments,” the Senators wrote.  “However, any long-term solution will require additional guidance, resources, and support from the department to prevent fraud in the UI system.”

The Senators asked DOL about when it became aware that a crime ring was filing false claims, what amount of fraudulent claims each state has paid out, and how DOL can help states get real claimants their benefits in a timely manner while preventing future fraud.

In addition to Reed and Whitehouse, the letter is signed by U.S. Senators Patty Murray (D-WA), Ron Wyden (D-OR), Mazie Hirono (D-HI), Edward J. Markey (D-MA), Maria Cantwell (D-WA), and Elizabeth Warren (D-MA).

Full text of the letter follows:

The Honorable Eugene Scalia
Secretary
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210

Dear Secretary Scalia,

We write to express concern over recent reports of organized fraud against state unemployment insurance programs, leading to delay of payment of benefits to legitimate claimants and potential losses of hundreds of millions of dollars.  We all share a common goal of ensuring the integrity of the unemployment insurance (UI) program, and supporting a strong UI program is a critical component of the economic safety net during times of economic downturn, including during the COVID-19 pandemic. Safeguarding state UI systems against unscrupulous actors who seek to exploit the current public health crisis for economic gain requires a holistic response by the federal government in partnership with states.

In response to the unprecedented levels of job loss as a result of the COVID-19 pandemic, Congress enacted provisions to, among other things, expand eligibility for UI benefits and increase the weekly benefit amount. The Department of Labor (the Department) and state UI agencies took important steps to ensure these benefits were made available to workers as expeditiously as possible, given that unemployment compensation is a critical lifeline for unemployed workers. Unfortunately, these new provisions, combined with the urgency with which UI benefits needed to be disbursed, left state UI systems vulnerable to online crime rings.

According to reports, the U.S. Secret Service circulated a memo to field offices indicating that a fraudulent crime network has been filing unemployment claims in different states using Social Security numbers and other personally identifiable information (PII) belonging to identity theft victims. There is evidence that this group targeted several states, including Washington, North Carolina, Massachusetts, Rhode Island, Hawaii, Oklahoma, Wyoming, and Florida.  For their part, when states became aware of the fraudulent activity, they took steps to mitigate the problem and weed out fraudulent claims, including by temporarily halting payments. 

However, any long-term solution will require additional guidance, resources, and support from the Department to prevent fraud in the UI system.

We seek information on the Department’s plan to address the current organized fraudulent activity. Please provide responses to the questions below by June 19, 2020:

1. When did the Department become aware that a fraudulent crime ring was filing false UI claims? How and when did the Department communicate this information to states?

2. Has the Department identified specific aspects of the UI program that made it especially vulnerable to this type of fraudulent activity? If so, please outline those findings and your proposed and planned actions to help mitigate them in the future.

3. What is the total amount of fraudulent claims paid by each state? How is the Department working with states and other law enforcement organizations to recoup this money?

4. What steps will the Department take to help states process UI benefits for legitimate claimants in a timely manner while taking necessary steps to combat this type of fraudulent activity?

Thank you in advance for your attention to this matter.

Sincerely,