Feds: Fraud network targets U.S. unemployment systems

SEATTLE — A group of international fraudsters appears to have mounted an immense, sophisticated attack on U.S. unemployment systems, creating a network that has already siphoned millions of dollars in payments that were intended to avert an economic collapse, according to federal authorities.

The attackers have used detailed information about U.S. citizens, such as social security numbers that may have been obtained from cyber hacks of years past, to file claims on behalf of people who have not been laid off, officials said. The attack has exploited state unemployment systems at a time when they are straining to process a crush of claims from an employment crisis unmatched since the Great Depression.

With many states rushing to pay claims, payments have gone straight to direct-deposit accounts. In Washington state, the agency tasked with managing unemployment claims began realizing the extent of the problem in recent days when still-employed people called to question why they had received confirmation paperwork in the mail.

“This is a gut punch,” said Suzi LeVine, commissioner of Washington state’s Employment Security Department.

Investigators from the U.S. Secret Service said they had information suggesting that the scheme was coming from a well-organized Nigerian fraud ring and could result in “potential losses in the hundreds of millions of dollars,” according to a memo obtained by The New York Times.

The Secret Service memo said Washington state had emerged as the primary target thus far, but there was also evidence of attacks in Florida, Massachusetts, North Carolina, Oklahoma, Rhode Island and Wyoming. The agency warned that every state was vulnerable and could be targeted, noting that the attackers appeared to have extensive records of personally identifiable information, or PII.

“It is assumed the fraud ring behind this possess a substantial PII database to submit the volume of applications observed thus far,” the memo said.

Rhode Island State Police reported Monday that it had received “numerous reports of suspected fraud” related to unemployment benefits.

Scott Jensen, director of Rhode Island’s Department of Labor and Training, said Saturday that it can be hard to distinguish between a legitimate claim and a fraudulent one when impostors provide the proper information. He said the fraudulent cases that are emerging seem to have their paperwork in order without hallmarks of other times when claims may have mistakes or other indicators that they are not genuine.

“Whoever it is seems to be fairly sophisticated and good at what they are doing,” Jensen said. He did not know whether it was a group of international actors but was hopeful investigators would get to the bottom of the fraud. In the meantime, he said the state is clamping down and taking a closer look at claims surrounding specific banks or other trends.

LeVine said she did not want to put a number on the losses so far in Washington state but believed it was in the millions of dollars. The state is working with law enforcement agencies to try to reclaim some of the funds.

Some workplaces have been hit particularly hard. At Western Washington University in Bellingham, Washington, more than 400 employees have been targeted with fraudulent claims, out of a total workforce of fewer than 2,500, said the university’s spokesman, Paul Cocke.

The state has been inundated with calls from people and businesses asking about unemployment notifications that have been sent to them. They have flooded a hotline and have forced the state to hire more people to answer the phones.

More than 1 million people in Washington state have filed unemployment claims amid the economic turmoil brought by the coronavirus pandemic. Around the country, the numbers have reached more than 36 million in the past two months.

Unemployment programs have delivered billions of dollars in payments.

States may be particularly vulnerable as they work to rush payments to people who have lost their jobs. Many states have long built in lengthy reviews to help weed out fraudulent claims, but as more people have suddenly become eligible and the need for speedy payments becomes urgent, some states have tried to eliminate those delays.

“There’s a dire need to get money out quickly,” LeVine said. “This makes us an attractive target for fraudsters.”