NY fends off $5.5B in fraudulent unemployment claims since March

More than $5.5 billion in unemployment aid payments have been kept out of the hands of fraudsters throughout the pandemic, according to the state Labor Department.

The agency, which handles the processing and evaluation of jobless claims across the state, said it has identified over 425,000 fraudulent jobless claims since March and that "hundreds of thousands of fraud cases" have been referred to federal prosecutors. The state is working with law enforcement at all levels to hold criminals to account, the department said.

In total, the state has paid out more than $65 billion to over 4 million state residents over the past 11 months. The sum of benefits so far is more than 30 typical years of benefits, the state said.

Unemployment expert Michele Evermore, senior policy analyst with the National Employment Law Project, said unemployment fraud has become a major issue for state agencies across the country.

Crime rings like the Nigeria-based group Scattered Canary have "wreaked havoc on every state UI system," she said. "Every state is battling this fraud ring in their own way."

Evermore said that because not every state is providing detailed data on their fight with fraud it’s hard to know how each state is faring, but that New York is doing a better job than many.

"Some of the agencies that have done a really good job are New York, New Jersey, Rhode Island and Washington state," Evermore said. "It’s a very real threat."

The New York Labor Department said that a "vast majority" of the criminal claims were identified before any aid was paid out.

"Unemployment fraud is — sadly — a scourge that we have to fight every day, but it is particularly despicable that criminals would use a global pandemic as cover to attempt to defraud our system," state Labor Commissioner Roberta Reardon said in a statement. "These benefits have been a lifeline for millions of New Yorkers over the last year, and every day our Office of Special Investigations is working to protect our system from fraud and abuse."

Using the identities of real New Yorkers likely stolen during past data breaches of banks, insurance companies and other large employers, fraudsters have filed unemployment claims and illegally collected benefits in the name of residents who are not unemployed, the state said in a news release Tuesday.

Fraudsters can use up the benefits workers would be entitled to if they became unemployed, and victims could be subject to an unexpected income tax bill on benefits they never received.

To help combat the problem, the Labor Department and the Department of Financial Services launched a public service announcement campaign last year meant to help the public protect against identify theft.

The state also warned that anyone who receives a determination letter from the Labor Department but hasn’t applied for benefits should report the issue to the agency immediately.

Fraudulent claims have continued to be an issue for state unemployment agencies across the country throughout the pandemic.

Kansas Gov. Laura Kelly announced last week that the state would shut down its unemployment system for several days to install new anti-fraud protections to deal with the issue, meaning a delay in some jobless payments.

The governor said the criminal unemployment claims may have been behind a recent surge in unemployment filings in the state.