Labor Dept offers government funding to fight unemployment insurance fraud – Thomson Reuters Institute

To help states deal with the high levels of fraud that have come with unemployment programs during the pandemic, the US Department of Labor is providing funds to help states improve systems or hire.

The U.S. Department of Labor issued a program letter earlier this summer, providing states with information on available funding to better help states “resolve favorable conditions” from the expired programs of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Department of Labor also announced up to $225 million in administrative costs related to reporting, identifying overpayments, and reimbursing resources under certain CARES Act compensation programs.

As part of the CARES Act, the federal government provided $260 billion in funding additions and extensions benefits under three new unemployment insurance programs. These programs increased the number of people eligible for unemployment benefits, extended the eligibility period, and increased benefits by $600 per week.

Unfortunately, few countries were prepared to deal with the growing number of unemployment claims except for fraud that has become widespread with criminal businesses using personal information obtained through data breaches and purchases on the dark web. Meanwhile, states were preparing “10- to 15-fold increase in claims.” In the first five months, the Department of Labor said 57.4 million first claims of profit.

In addition to the number of claims that have increased in the past, countries have taken the lead in getting help from the public by checking for potential fraud. As a result, millions of fraudulent applications were approved and billions of dollars in fraudulent claims were filed.

The US Employment and Training Administration said that improper payment 18.71% of 2021 in two out of three unemployment benefit programs that have “a large part due to fraud.” In this estimate, at least $163 billion would have been paid in error, according to the Labor Department.

The department noticed many weaknesses which has led to an increase in fraud in these programs, including:

      • government information technology systems that are “not up to date”;
      • operations that were “inadequate to handle the volume of new claims”; and
      • federal guidance that was “timely and vague.”

Fraud detection & refunds

Very low the latest program letter, the Department of Labor is providing an additional $225 million to states to “facilitate accurate reporting, and identification and reimbursement.” These approved financial management services include:

      • payment of expenses incurred in reporting audits and overpayment services;
      • Paying for expenses incurred to obtain business needs, computer systems or use of equipment, methods, or procedures for obtaining, implementing, and recovering overpayments and processing authorized refunds;
      • hiring employees or contracting services to process overpayments and recover those payments; and
      • to fix the problem of qualifying the program.

While the program’s letter focuses on fraud detection and refunds, it also acknowledges the need for states to ensure that “eligible individuals with legitimate claims receive the benefits they deserve.”

Attached to the program letter are details of the amount of funding available to each state for administrative costs. Funding applications must be received no later than the close of business on September 23, 2022.

Department of Labor grants provide opportunities

Trying to reverse unemployment fraud adds another burden to state programs, which must still process claims for benefits quickly while working with fewer people. These programs also still rely on the same IT systems that remain vulnerable to exploitation by criminal enterprises.

88% of all countries – 44 of the 50 states – have not implemented all measures to regulate wages, according to a 2021 survey by the Labor Department. Step-by-step verification can help countries identify fraud indicators, including those involved and) multinational claimants; ii) Social Security numbers of deceased persons; iii) statements made by state prisoners; and iv) reported using “suspicious and lost email accounts.”

Investing in technology solutions and tools that can help verify beneficiaries during the application process can significantly reduce the incidence of fraudulent returns. These solutions would allow countries to share information and aggregate personal information to identify fraudulent programs.

Indeed, a Labor Department survey found that 38% of states have not done what is needed to recover. Other technologies are available that can help countries identify bank accounts that have previously been linked to fraud schemes that have also received unemployment deposits. This would create a greater opportunity for the government to receive improper payments.

The funds of the Department of Labor provide a unique opportunity for countries to increase the number of workers to reduce some of these problems, or to use the latest technology and tools that will help them to recover the unfair wages that were paid in the past and to avoid the fraud of the future of unemployment.