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ODJFS details unemployment assistance program improvements, law enforcement action to combat fraud

Unemployment Benefits
Posted at 6:59 PM, Jul 08, 2021

COLUMBUS, Ohio — After a surge of hiring and the implementation of fraud detection efforts, the Ohio Department of Job and Family Services has eliminated the backlog of legitimate, non-fraudulent unemployment benefit claims as well as clamped down on fraudulent applications, ODJFS Director Matt Damschroder said Thursday.

In addition to efforts inside ODJFS, a working group of federal law enforcement agents and more than 50 financial institutions has been established to identify and investigate fraudulent claims and recoup stolen benefits.

From March 2020 and May 2021, there have been more than $2.1 billion in traditional unemployment benefits and pandemic unemployment assistance mistakenly paid out or disbursed because of fraud, Damschroder said.

Ohio is hardly alone in dealing with the unprecedented level of fraud. The inspector general for the US Department of Labor estimates more than $60 billion in unemployment benefits are the result of fraud. However, Ohio has been one of the only states to not only publicly acknowledge and detail the size and scope of the problem but also provide information to the public on the steps being taken to claw back that money.

“This is a historical, nationally historical loss to the taxpayers to this country and this state,” said former U.S. Attorney David DeVillers, who now leads the Cyber Fraud Law Enforcement Working Group. “The [working group realizes] that and they are doing everything they can to identify these criminal enterprises.”

Since being created in March, the working group has partnerships with seven federal agencies, including the IRS, Secret Service, FBI and the Department of Labor, as well as 50 different financial institutions. Using data and analytics, the working group is actively pouring over unemployment assistance claims and identifying those that appear to be fraudulent. Claims are determined to be fraudulent through a variety of ways, including identifying common IP addresses, bank account numbers, email addresses, telephone numbers and mailing addresses.

“We are going to identify the crime and the scheme. [Law enforcement] is going to find out who did it. We’re going to help each other in that endeavor,” DeVillers said.

The ongoing criminal investigations into the unemployment assistance fraud schemes are expected to take several years and are complicated by the fact that many of the criminal organizations behind the fraud emanate outside the United States. The organizations use a variety of traditional money laundering techniques and have been aided by the growing popularity of cryptocurrencies.

“It reminds me a little bit of the mortgage fraud crisis of 2008, 2009. It took years to prosecute those cases. That’s an event that went on for years before the crime was discovered. This [fraud] was discovered 10 months after it happened,” DeVillers said. “Eventually we’re going to catch up to [the criminal organizations] so they have to take that money and liquidate it somehow. They can try to cash it out but it’s not like they can go to Bank of America and say, ‘Here, withdraw my $3 million in cash.’ They launder it and buy cryptocurrency with it. That is undoubtedly where we are going to find a lot of this money.”

As for the litany of improvements and changes currently underway at ODJFS, Director Damschroder said the agency has nearly 900 employees tasked with processing claims and handling incoming calls—the highest figure since the pandemic began. The backlog of processing legitimate unemployment claims not currently under appeal has also been eliminated. Wait times into the call center have also been demonstrably reduced during non-peak hours, Damschroder said.

Overpayments and fraudulent claims in both the traditional unemployment benefits program and the pandemic unemployment assistance program exceed $2.1 billion. Damschroder said the state is currently unable to provide even an estimate on the number of claimants that have had their accounts taken over as a result of fraud.

These so-called ‘account takeovers’ occur when the claimants account credentials are stolen — typically through a phishing scheme. Once the fraudster has the account credentials, they are able to change the banking information and reroute any future unemployment benefit payments to a different account — which is sometimes offshore. Victims of these account takeovers are then left to deal with a bureaucratic process of proving that they were a victim of fraud. This process can become arduous but Damschroder said ODJFS has to abide by rules and processes set forth by the US Department of Labor.

“While we’re very cognizant of the impact that has on the claimant that has established essentially a right to those benefits, we also have to follow the framework that is established by the federal government,” Damschroder said.

Damschroder said he was unable to provide an estimate on the number of claimants that have had their accounts fraudulently taken over because many of the cases are still being adjudicated.

Later this summer, ODJFS will be launching a new web application that will allow people who received non-fraud overpayments due to no fault of their own to request a waiver. If the waiver is approved, they will not have to pay back funds previously labeled as an overpayment and could receive benefits that were previously withheld due to an overpayment status. Once the web application is up and running, those waivers will start being processed late this summer.