For a variety of reasons, unemployment insurance fraud has grown into a major concern not just for Illinois, but the entire country. A USA Today article last year estimated $36 billion had been stolen from the U.S. by overseas scam artists alone. In California, unemployment claims by 35,000 prison inmates were erroneously approved by a state agency. Washington State went from identifying a few dozen fraudulent claims a year to 122,000. Unemployment fraud is growing so quickly, it's essential employers and employees learn how to recognize they have been victimized by fraud, and understand what they can do to battle the scourge.
How does the scam work? People are taking Social Security numbers from other people, filing for unemployment benefits and taking those benefits for themselves.
Victims find out about it in letters they receive from the Illinois Department of Employment Security (IDES). IDES will send a letter to the person under whose identity the claims have been submitted. A letter will also go to the employer notifying the employer of the claim.
Those who have been scammed may also discover the fraud when they receive a Form 1099-G early in tax season. Those forms are mailed to people the IRS believes have received unemployment insurance during the course of the previous tax year.
A perfect storm
Why has the unemployment insurance fraud threat emerged front and center at this time?
The surge in the fraud results from “a perfect storm” of concurrent events, according to Allison Bartels, compliance officer with Oak Brook, Ill.-based Leaders Bank. First, hackers have pulled off a number of significant corporate data breaches in recent years, among them the giant Equifax breach of May through July, 2017. That breach alone exposed hundreds of millions of individuals' data to the dark web. Unscrupulous operators have exploited the breaches to gain Social Security numbers and commit identity theft.
In the midst of that ongoing surge in identity theft fraud, the sudden emergence of COVID-19 led to mass layoffs, leaving IDES inundated with claims. An agency already overburdened with backlogged claims stood ill-prepared to verify if all the new claims were legitimate. “It just happened at the same time,” Bartels says. “People felt they could overwhelm the system with claims. It was already overburdened, and that made it easier to commit fraud.”
Among the most outrageous scams is one that is delivered by text message and purports to be from IDES, but exists as nothing more than a phishing attempt to gain vital information.
Once notified fraudulent claims have been initiated, employees and employers must communicate with one another. Both need to be aware the claim has been filed and take steps immediately to dispute the claim. The State Information Data Exchange System (SIDES), a new IDES-established portal to provide an electronic way to obtain unemployment notices, can provide assistance. Employers should register with SIDES, which can speed up the process of receiving and disputing claims.
Individuals can take action in other ways. Because their Social Security numbers are being used fraudulently, they should visit the Federal Trade Commission (FTC) website, IdentityTheft.gov. That site will help them create their own Identity Theft Reports, as well as personal recovery plans based on their own individual situations. The website also displays a map showing the extent of the problem in Illinois. Its neighboring states in Q4 2020 registered from 33 to 123 identity theft reports apiece. By contrast, Illinois tallied 810 reports.
“There, they can gain access to their free credit report every year. And if they've been victimized, they should put a freeze on their credit reports. That way, they can make sure that other versions of identity theft aren't taking place in their names.”
Although the pandemic unexpectedly sparked a steep increase in the number of fraudulent cases, IDES has been improving its processes, so the problem should diminish as these claims are denied.
Located at 2001 York Road in Oak Brook, The Leaders Bank is a premier community commercial bank catering to private business owners, their families and other entrepreneurs. The Leaders Bank offers a full spectrum of traditional and customized banking services, Internet-based banking, and online bill payment. To contact The Leaders Bank, call (630) 572-5323 or visit www.leadersbank.com.