Unemployment Benefit Fraud: Understanding the Crisis and Solutions

Published: April 11, 2024 by Wayne Rottger

In today’s world, the term “fraud” is often associated with identity theft. However, a lesser-known but pervasive form of fraud is equally damaging: unemployment benefit fraud, responsible for siphoning billions through deceitful schemes, leaving both individuals and businesses grappling with repercussions.

A recent study published by the Government Accountability Office (GAO) in September of 2023 painted a grim picture, estimating that between $100 billion and $135 billion in unemployment benefits were funneled into the hands of fraudsters during the COVID-19 pandemic. This staggering figure represents a significant chunk, roughly 11% to 15%, of the total benefits disbursed during the crisis.

Rise in Unemployment Benefit Fraud

The surge in unemployment benefit fraud can be largely attributed to the nefarious involvement of organized crime. No longer are we dealing solely with inadvertent errors or individuals gaming the system. These fraudsters craft fictitious claims, hijack legitimate ones, and even conjure up phantom employers to bolster their deceit. What was once a simple case of receiving payments during periods of disqualification has now evolved into a sophisticated and costly endeavor.

For the unsuspecting individual, the signs of identity theft related to unemployment benefits can be subtle yet devastating. Employees may receive a notification about a claim they never filed, or worse, a federal tax form detailing benefits they never received. Employers, too, find themselves caught in the web of fraud, receiving claims from employees who are still firmly on the payroll.

Tackling Fraud

However, there is a possible solution on the horizon. In the battle against unemployment benefit fraud, both state and federal agencies are working towards a fix. The U.S. Department of Labor (USDOL) leads the charge with its Benefit Accuracy Measurement (BAM) program, offering insights into the scope of improper payments, including those stemming from fraud.

Enter the National Unemployment Insurance Fraud Task Force (NUIFTF), spearheaded by the U.S. Department of Justice (DOJ). This multi-agency task force, boasting representatives from over 10 federal agencies, is on a mission to dismantle fraud networks, one criminal at a time. From the FBI to the IRS-CI, these enforcement partners leave no stone unturned in their pursuit of justice.

State Efforts to Reduce Unemployment Benefit Fraud

State workforce agencies are also taking action by harnessing the power of the Integrity Data Hub (IDH), a cutting-edge platform armed with advanced analytics to sniff out fraudulent activity. Through fiscal year 2023, states prevented $3.89 billion in overpayments using the Integrity Data Hub. The overall return rate for IDH is just under 50 percent, meaning at least half of the inquiries get a hit, indicating some sort of potential fraud. IDH also allows states to collaborate by crossmatching against claims they’ve received with data entered by another state to see if there are similarities or duplicate names and social security numbers.

How Employers Can Defend Against Fraud

Employers looking to do more can also partner with Experian Employer Services. With our expertise and unwavering commitment to combatting fraud, we stand shoulder to shoulder with businesses of all sizes, offering guidance and solutions to mitigate risk. Employers are urged to remain vigilant, scrutinizing unemployment claim documents with precision and conducting thorough audits of tax rate notices.

In this ever-evolving landscape of fraud, one thing remains clear: the fight against unemployment benefit fraud is far from over. But with perseverance, collaboration, and the expertise of industry leaders like Experian Employer Services, we can turn the tide.

Follow Us!

About Us

We brought together the best of the best to deliver a suite of specialized solutions with unmatched service, trusted expertise and client-inspired innovation. We’re focused on the employee experience while improving your bottom line. Reduce complexity and minimize disruption with Experian Employer Services.

We’re keeping the focus and flexibility you value in boutique providers and adding the resources and security of Experian.