Why Current UI Fraud Prevention Strategies Do Not Work in the Digital Age

We are?now returning to a normal pace of unemployment activity, except for some of the cleanup work states are still experiencing.?For months, unemployment was at an unimaginable level and states were facing hurdles providing unemployment insurance to those in great need. Legislation was changing and fraud was at levels never before experienced. Bad actors were and still are intent on abusing the system, taking valuable resources from those who need them most.?

Addressing fraud in a timely manner was highlighted during that time.?It is still an urgent need because governments now are beginning to feel the pain of the financial resources needed to recover from the economic damage left in the wake of COVID-19. Billions of dollars were stolen and now, states and the federal government are faced with how to replenish these funds.?On a state level some of the theft will be replaced through taxing employers through the social cost features of the trust fund financial models.?Others may be replaced by redirecting some of the money supplied by CARES Act to shore up trust funds instead of using this money for other purposes.?This pain in now being felt because criminals stole money from the unemployment trust fund.?

Tools currently used may be inefficient

A major tool identified during the height of the benefits theft outbreak is identity validation. This is a good tool, but alone this is inadequate to stop the problem.?That is not an acceptable margin of error when it comes to preventing fraud. Additionally, experience has shown it takes additional time to perform identity validation for customers who have not previously had this completed by the specific organization providing the identity validation service.?There have also been challenges to these tools from Congressional leadership, fear the data gathered and held by non-governmental organizations may not be controlled to the extent necessary to protect PII.?This is complicated by the fact that people are using the identity validation services as an avenue of receiving government benefits and may believe there is no other pathway. ?

Some tools offered, while being accurate, are very costly and in some instances do not provide fully automated methods of validating identity, creating an additional burden and delays for individuals filing claims.?

There are also criminals who use the identity of a deceased individual to file a claim. Unless the employers who are chargeable for the benefits respond that the person is deceased, this may go undetected too without a cross match with the state and federal death records.?

There are other ways to approach this problem and states have used many of them. None have shown to be fully effective. This is leading unemployment insurance, fraud, and IT experts to understand that no single solution can efficiently provide the impact states need to lock down their system and protect it from fraud.?The most effective fraud prevention is a multi-pronged approach, requiring the right tools positioned at strategic vulnerability points to be fully effective and cost efficient.?

By the time fraud is discovered, the horse has left the barn?

The bottom line is, once a criminal gets past the identity validation gate at the initial claim or successfully hijacks an actual customer’s account, they are usually free to perpetrate the fraud act.?In some cases, once in the system, the criminal may illegitimately receive benefits for the full term of benefits availability which could last 26, 39 weeks or more in some cases.?

The detection features employed by many agencies today may enable them to eventually catch up with the criminal and stop additional fraudulent payments, but this may be too little too late.?Even if they can stop additional payments, the money that has already been paid is exponentially harder to recapture.?

Please watch for blog 4 in this four-part series, Fraud Prevention Today, to learn more about new strategies for detecting and preventing UI fraud. ?

If you missed the first and second blog in this four-part series, please click below.

What Lurks in the Shadows of Unemployment Insurance Fraud?

The changing face of Unemployment Insurance fraud requires new protection strategies

About the Author:?

Dale Smith is Director of Unemployment Insurance for TCS. Formerly served citizens of Mississippi for over 39 years in numerous roles from UI benefits customer service representative to UI tax field representative and auditor, to UI chief financial officer, UI administrator, deputy executive director of Mississippi’s workforce agency and chief operating officer, retiring in June 2018. Working with TCS for past 4 years as Director of Unemployment Insurance and Workforce programs, and also working with American Institute for Research as a UI subject matter expert.