A well-organised Nigerian criminal group is taking advantage of the KOVID 19 crisis and committing massive fraud against many state unemployment insurance schemes, with potential losses of hundreds of millions of dollars, according to a new warning from the US intelligence service.
The KrebsOnSecurity brief, which Secret Service distributed Thursday to U.S. field offices, says the network has requested jobs in several states that use social security numbers and other personal information (PII) belonging to victims of identity theft, and that a significant portion of the PII benefits fraudulently presented have been used by first-time residents, government officials and school employees.
The underlying fraud chain would have an extensive PII database reflecting the volume of requests observed so far, warns the intelligence service. The main target so far is Washington, although there is also evidence of attacks in North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida.
According to the secret service, a fraud ring would consist of hundreds of mules, a term used to describe people hired to launder the proceeds of fraudulent financial transactions, whether or not they are willing to commit fraud.
In the state of Washington, non-state residents receive several ACH deposits under the Washington state’s unemployment benefit program, all under a different name, with no connection to the account holder, the notification continues.
The department’s memo says a criminal gang acts in the same way as fraudsters specializing in fraudulent claims for state and U.S. Internal Revenue Service (IRS) income tax rebates, an ongoing problem that costs states and the U.S. Treasury hundreds of millions of dollars in revenue each year.
Under these types of schemes, fraudsters usually hire individuals – often victims of online fraud or unemployed people looking for a source of income – to contribute directly to the fraudulent transactions and then channel most of the illicit money to the criminals.
A state fraud investigator who spoke to KrebsOnSecurity on an anonymous basis stated that many states simply do not have the control to identify patterns that could help eliminate fraudulent applications more effectively, such as searching for multiple applications with the same Internet address and/or the same bank accounts. The investigator stated that in some states fraudsters only have to provide the name, social security number and other basic data of the person in order to process their claims.
The alert follows media reports from Washington and Rhode Island that millions of dollars have been embezzled in those states for fraudulent claims for unemployment benefits. The Seattle Times reported Thursday that activity suspended unemployment benefits for two days after officials discovered false claims worth more than $1.6 million.
Between March and April, the number of fraudulent claims for unemployment benefits rose 27-fold to 700, the State Department of Employment Security (ESD) told the Seattle Times. The report notes that the ERM fraud hotline was flooded with phone calls last weekend and received so many emails that it was temporarily closed.
WPRI Rhode Island reported on 4. May the State Department of Labor and Training receive hundreds of complaints about unemployment insurance fraud and the number of allegedly fraudulent accounts keeps pace with an unprecedented number of applications for statutory unemployment insurance.
Cases of fraud are increasing as many states attempt to deal with an avalanche of unemployment claims resulting from the coronavirus pandemic. The U.S. government announced on Thursday that nearly three million people claimed unemployment benefits last week, bringing the total number of claims in the past two months to over 36 million. According to the Ministry of Finance, $48 billion was spent on unemployment programs in April alone.
Some of the states mentioned as the main target of this fraud ring have one of the highest unemployment rates in the country. According to data released by the U.S. Chamber of Commerce, nearly 1 million unemployment claims have been filed in Washington, D.C., and nearly 30 percent of the labor force is currently unemployed. The situation in Rhode Island is even worse: 31.4% of the employees are unemployed, according to the room.
Banks at all levels, including local banks, credit unions and large national banks, were targeted, according to the secret service. It is very likely that every state is vulnerable to this system and that it will be the target if it has not already been.
*** It’s the Krebs on Security network of union bloggers, written by BrianKrebs. The original message can be found at the following address: https://krebsonsecurity.com/2020/05/u-s-secret-service-massive-fraud-against-state-unemployment-insurance-programs/.