How They Do It: Unemployment Benefit Theft Tactics Unmasked

april 30, 2021 | identity theft
How They Do It: Unemployment Benefit Theft Tactics Unmasked

Welcome to this monthly feature on the IDShield blog. "How They Do It" is geared to give you glimpses into the hidden world of hackers. You'll learn the many ways they operate so you can guard your identity and your assets.

Benefit fraud has exploded, and part of that surge is the abuse of unemployment benefits. Familiarize yourself with how hackers work the system. A scammer could seek to collect unemployment benefits in your name.


Estimates vary on this scam's mounting cost, but the tally for the 50 states could top $200 billion by year's end.


Scam rings have grown like weeds, as one recent traffic stop by Florida police revealed. In March 2021, two Florida residents pled guilty to unemployment benefits theft after a car chase ended with a crash over the Georgia line and had a trove of documents in the trunk.


"Inside the vehicle, law enforcement recovered more than $20,000 in cash, dozens of prepaid debit cards issued by states', unemployment insurance funds in the names of others, as well as several false identifications that the two had used," the U.S. Attorney's Office for the Southern District of Georgia said in a statement.


Top Targets


Government benefits fraud occurs every year, but since the pandemic's initial lockdowns, bogus claims have skyrocketed in all 50 states. The initial stimulus bill bumped benefits by $600 a week, making unemployment cash an irresistible objective. Congress stiffened the penalties for unemployment fraud as part of the second stimulus bill, but that hasn't deterred eager identity thieves.


Gig workers – individuals who companies hire and pay by the job who aren't on a corporate payroll – have proven to be a particularly lucrative target. In the past, gig workers and the self-employed were ineligible for unemployment funds, but the 2020 CAREs Act extended coverage to them. Documents for past gig work or self-employment are also challenging to verify.


In addition to the money paid erroneously, fake claims have created a backlog in payments to honest applicants who are desperate for funds.


Tools Con Artists Employ


The purchase of blank W-2 forms and 1099 tax forms can create phony documents in your name. Duplicates of past pay stubs are reworked. Letters about layoffs are forged. These tactics can build a complete profile with added employer data.


Your name appears on the application. Even if you are happily employed, the scam can work if the scammer has obtained your personally identifiable information (PII).


Most state agencies will contact your employer to confirm past work and determine that you're no longer employed. Savvy employers spot this fraud and kill bogus claims. If the employer isn't meticulous or the office is overworked, claims pass inspection, and someone begins collecting benefits earmarked for you.


Data on the Loose


If your name pops up in connection with bogus unemployment benefits, it could indicate that your Social Security number (SSN) is floating around on the dark web or is firmly in the hands of a crook. How did that happen? Sometimes the perpetrator is someone you'd never expect.


Here are a few ways PII gets into the wrong hands:


  • Info is obtained from past data breaches

  • Rogue employees steal your PII from a hospital or company

  • A vendor employed by that hospital or business experiences a data breach

  • Hackers access a computer network with out-of-date software and unpatched security risks

  • Friends or relatives access your data in your own home

  • Discarded digital equipment files are not properly erased 

  • A worker erroneously shares PII via an email addressed to the wrong individuals

  • A large auto insurance firm's online quote system contains a flaw that allows scammers to apply for policies in your name to obtain driver's license data for unemployment fraud

Don't be a Money Mule


Often these crooks conduct operations that recruit hundreds of mules – individuals who agree to be intermediaries in the transfer of funds. Hundreds of applications are cranked out with funds that are deposited into accounts the mule controls. Then the bulk of the cash gets transferred out of the country. The mules are often the ones that face arrest.


Savvy Moves 


You may never learn you’re a victim unless you are rejected when claiming benefits yourself. Other indicators include a 1099-G income tax form in the spring for benefits never received or a pre-loaded debit card from the state that lands in your mailbox. Unemployment payments are taxable income, and you may owe back taxes, which compounds your headaches.


Contact your state's Labor Department if you suspect fraud; they need to know what you've witnessed. Depending on your status, you can usually file fraud statements online. If payments are already flowing, document your efforts to alert the government. Your employer should also file a notice.


If benefits pop up in your bank account in error, don't go on a spending spree. Be wary of any calls you receive after that fund transfer.


"Don't respond to any calls, emails, or text messages telling you to wire money, send cash, or put money on gift cards. Your state agency will never tell you to repay money that way. Anyone who tells you to do those things is a scammer. Every time," the FTC stated in a 2020 fraud advisory.


Add a fraud alert on all your credit files. IDShield members can rapidly trigger alerts, so potential lenders or employers know identity theft has occurred. Extra identification steps will be required to prove you are you before credit accounts or job offers are made in your name.

IDShield is a product of Pre-Paid Legal Services, Inc. d/b/a LegalShield (“LegalShield”). LegalShield provides access to identity theft protection and restoration services. For complete terms, coverage, and conditions, please see an identity theft plan. All Licensed Private Investigators are licensed in the state of Oklahoma. This is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide any specific recommendations. 

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