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COVID-19

Fraud prevention during record unemployment

In a matter of weeks, the United States has seen a dramatic shift from all-time low unemployment levels to a record high number of claims. In the face of this momentous influx, state unemployment agencies across the nation are pushing themselves to process applications faster than ever before. But even with small teams and limited resources to handle the avalanche of work, local unemployment departments have to stay vigilant to prevent fraud.

What are unemployment agencies dealing with?

Before the outbreak of the COVID-19 pandemic and mandated stay-at-home orders, unemployment agencies would typically manage only a few hundred thousand claims per-week nationally and could process them in roughly two or three weeks. They were able to work effectively with minimal staff and had little need for additional processing tools. Now, these agencies have been overwhelmed with over 26 million new applications to process, while also implementing additional regulations and procedures that will help protect the public.

This sudden spike has caused many telephone and online application systems to crash, leading to long lines of claimants looking to file their applications in-person. Combined, these factors have left unemployment centers severely understaffed and ill-equipped to disperse unemployment insurance benefits in a timely manner. The longer it takes to process applications, the more people will struggle to pay for essentials like food, housing, and utilities. Falling behind will inevitably damage taxpayers’ trust in their local government leaders and institutions.

What can unemployment agencies do to keep up?

When work is overflowing, it is natural to focus on just keeping your head above water. It’s no surprise then, that most state agencies are doing everything they can to process the incoming flood of financial assistance applications quickly. While many states have automated systems in place that can organize applications, this is only the first step of the approval process. Agency staff still have to review and approve these applications before any money can be shared, which creates a bottleneck that slows everything down.

While state unemployment agencies have been given extra financial support to hire more staff by recent legislation, this will not instantly solve their problems. Hiring and onboarding new team members takes time, and they usually can’t operate at full capacity right away. And while additional personnel may help process applications faster, they won’t necessarily help prevent fraud.

Why unemployment fraud matters now more than ever

Historically, criminal fraudsters take advantage of economic crises by blending in with the crowd. With so many new applications coming in, it is much easier for their fraudulent claims to slip by undetected. They often use synthetic IDs, or the personal information of others, to obtain additional unemployment assistance illegally. During regular seasons, experts estimate that about 9% of unemployment claims are fraudulent. But with so many people looking for help, even that amount could be devastating.

The national average amount of financial assistance granted to an applicant is $378 per week. The Coronavirus Aid, Relief and Economic Security Act ads another $600 to all unemployment payments until the end of July, increasing the national average to $978 per week. If 9% of the 26 million new assistance claims were fraudulent, the government would lose more than 2.3 billion dollars per week. Chances are that the majority of the money lost to fraud will not be recovered, wasting money that is sorely needed elsewhere.

What more can state unemployment agencies do to prevent fraud?

Instead of chasing after fraudulent payments after they are found, state unemployment agencies must continue working to prevent fraud before it occurs. To do this, they have to invest in solutions that can quickly assess each applicant’s form for accuracy and corroborate multiple data points to verify the legitimacy of their identity and employment history. These types of tools can highlight any issues and save significant time for reviewers, allowing them to be both thorough and fast. If installing a new system isn’t feasible, agencies can also choose one-time checking tools that will vet large batches of applications simultaneously.

During trying times, the last thing people want to hear is that their state governments are making big mistakes with their taxes. Learn more about how state unemployment agencies can protect against fraud by visiting our unemployment insurance programs page and signing up for a free demo.

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