Unemployment Fraud: Millions Lost to Pandemic-Era Schemes?

Since the start of the pandemic, millions of people have filed for unemployment. Many of them may have been criminals.

Millions of Americans have lost their jobs since the start of the coronavirus outbreak, and since many were living paycheck to paycheck before the pandemic, they had no money in savings to fall back on once they were out of work. It's for this reason that unemployment benefits have been such a lifeline.

Unemployment benefits have been extended throughout the pandemic -- normally, they run out in most states after 26 weeks. But they've also been boosted: first, by $600 a week under the CARES Act, and then by $300 a week once that extra $600 ran out. In fact, the $300 weekly boost is set to remain in place through early September, though some states are pulling it early due to local labor shortages.

The purpose of unemployment benefits is to get money into the hands of jobless people who need it. But new data reveals that a large percentage of unemployment funds may have instead landed in the hands of criminals.

A costly problem

It's estimated that the U.S. government has lost more than $400 billion in unemployment funds to illegitimate claims, according to ID.me, a fraud prevention service that many states use as part of the claims process. All told, that means up to half of the unemployment money that's been given out may have been unintentionally handed over to criminals -- namely, criminal syndicates in foreign countries.

Criminals have long managed to defraud the government by getting their hands on people's personal information and using it to file jobless claims on their behalf. And since unemployment claims spiked during the pandemic, that activity also escalated.

In some cases, legitimate claimants may have seen their benefits land in a bank account that didn't belong to them due to fraud. And since there were a lot of delays in getting benefits out during the pandemic, that's something those legitimate claimants may not have noticed right away -- and may not have reported until it was too late.

Of course, the risk of fraudulent activity is something the government is fully aware of. That's why many states have partnered with services like ID.me to help verify people's identity before approving their jobless claims. But that's caused its share of problems, too.

Like all technology, services like ID.me have the potential to glitch. And glitch it did.

It's estimated that tech issues caused delays in processing unemployment claims in 22 states during the pandemic. So while these fraud prevention programs are unquestionably important given the high level of criminal activity that's emerged recently, they've also, at least temporarily, prevented people from getting the help they need.

Still, keeping fraud prevention measures in place is important. The government can't afford to continue handing money over to criminals, so it may have no choice but to put up barriers that could hinder some individual jobless claims but ultimately ensure that its money goes to the right people.