The PULSE Fraud Operations team is working to help financial institutions put the brakes on a scam involving fraudulent state unemployment claims. In the state of Washington alone, the attempted fraud totaled hundreds of millions of dollars. Washington state unemployment officials have announced they have recovered $300 million.
As of June 2020, Andrew Fong, Senior Manager with PULSE Fraud Operations, says a total of 20 states have confirmed sending funds as a result of phony unemployment claims. Fraudsters are applying for unemployment benefits using stolen personally identifiable information. These fraudsters file claims for unemployment benefits, using the names and personal information of people who have not filed claims. People learn about the fraud when they get a notice from their state unemployment benefits office or their employer about their supposed application for benefits. The unemployment payments usually are deposited to accounts the imposters control.
But sometimes payments get sent to the real person’s account, instead. To receive the funds, they strike up a friendship over the phone or online with targeted innocent people, often times preying on their isolation and loneliness. The social engineering strategy pays off when the fraudster convinces their “friend” to provide financial account information so the unemployment benefits can be deposited into their account. Once the credit hits, the fraudster asks the cardholder that they have befriended to send the money to them through P2P payments or money order.
“There are two distinct parts to the scam issuers should consider – first money comes in from the state and then money goes out via P2P,” Fong said. “Start by looking for transactions coming from state unemployment departments, each of which has a unique identifier. Then, if the credits are going to customers that do not reside in that state, consider reversing them immediately. For DebitProtect® Authorization Blocking customers, we recommend adding the PANs of the accounts that received these types of credits into a DebitProtect card group. Ultimately, the key to stopping this fraud is to block cash-outs from those accounts.”
Some states have responded to the scam by halting or delaying unemployment payments to sniff out phony claims. For instance, both the Michigan unemployment Insurance Agency and the Massachusetts Department of Unemployment Assistance implemented additional identification verification processes.
Washington was the first state targeted by scammers and was the first to announce a successful claw-back of its losses. Washington Employment Security Department Commissioner Suzi LeVine said the effort involved a "strong collaboration with federal law enforcement, our banks and financial institutions across the United States."
Fong says issuers in all 50 states should be on alert for this or similar scams, which seek to take advantage of the surge of government funds intended to help families that are suffering economically from business shutdowns during the pandemic.