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Washington State Hit by Wave of Unemployment Fraud, Again

The state lost millions of dollars to fraud last year, as criminals took advantage of the sharp increase in pandemic-related unemployment. Now, officials are seeing another spike in fraudulent claims, but this time they’re better prepared.

(TNS) — One year after Washington state disclosed hundreds of millions of dollars in unemployment fraud, criminals appear to be making a second run at the state's jobless system.

But so far, the thieves aren't getting away with much money, the Employment Security Department said.

ESD officials acknowledged this week that spikes in weekly jobless claims in May were similar to surges last year that paralyzed unemployment systems in Washington and other states as criminals used stolen Social Security numbers and other personal data to file fake claims for billions of dollars in pandemic benefits.

But this second wave of fraud is smaller than what struck last year, ESD officials said. And so far, the ESD's updated security flagged most of the suspicious claims before any funds went out and without further delaying legitimate benefit payments, agency officials said.

"Our fraud controls are working," Cami Feek, ESD's acting commissioner, said in an interview this week. "We're catching [the bogus claims] and not paying them out."

The agency said it first saw suspicious activity during the first week of May, as new, or "initial," unemployment claims jumped nearly 60 percent, to 16,605, over the prior week. That was well above the 11,000 to 13,000 weekly claims the agency has averaged in recent months.

The surge intensified during the week ending last Saturday as the state received 19,619 new claims, up 18.2 percent from the prior week, the ESD reported Thursday morning. Feek said the numbers of fraudulent claims already appear to be tapering off. "It's hard to know for sure, but we believe [the decline in fraudulent claims] is likely because the criminals weren't paid and are moving on."

But Feek and outside security experts warned that impostors are likely to keep probing the claims systems in Washington and other states for gaps in security.

Unemployment fraud "was such a lucrative cash cow for the thieves, they're not going to stop trying," said Eva Casey Velasquez, president and CEO of the Identity Theft Resource Center, which has reported a massive increase in consumer fraud complaints this year over last year's already elevated numbers.

The latest fraud surge in Washington comes as new jobless claims nationwide fell 7.1 percent to 444,000 last week, the U.S. Labor Department reported Thursday.

It also follows Friday's arrest of a Nigerian government aide on charges of stealing $350,000 during last year's fraud in Washington state.

ESD officials said they initially attributed the latest fraud spike to internal system issues related to changes in federal pandemic benefit programs for some Washingtonians, which appeared in the agency's claims system as new claims. "It took us a little bit to work through what we were seeing," Feek said.

But ESD's fraud detection systems, which have been upgraded since last year, began flagging a large number of claims with characteristics associated with fraudulent activity, said John Snodgrass, the ESD's new anti-fraud chief.

Those characteristics included claims filed using similar email address domains and filed from computers that appeared to be in similar geographic locations, Snodgrass said.

"Of the claims that came in that went through our filters [in early May], 76 percent of them were flagged as unusual and something we needed to look into," Snodgrass said. Claims that were not flagged as suspicious were reviewed manually and were determined to be legitimate claims, Snodgrass said. "Those were valid people getting money — they were not impostors," Snodgrass said.

Impostors also appeared to be using so-called dot variants of Gmail addresses where multiple Gmail addresses can be created from a single Gmail account. Many of the claims were also filed for the same high-salaried job occupation; ESD officials declined to specify that occupation in order to avoid revealing security protocols.

The agency was also seeing an uptick in reports of suspicious claims from employers, who are notified whenever an employee files for benefits. (Last year, those employer reports tipped off law enforcement about the fraud, even before ESD itself recognized the issue.)

Putting all the data together, "we were able to see a very clear pattern of claims that were not good," Snodgrass said.

But criminals appeared to have adopted some new tactics. While much of the early fraud activity appeared to originate from foreign computers, including in Nigeria, the suspicious activity seen this round appeared to come from U.S. locations, Snodgrass said.

The three regions that generated most of the fraudulent claims were Los Angeles, Chicago and New York, Snodgrass said, although some claims originated from other places, including Washington state.

Snodgrass acknowledged that criminals could be masking their true locations in an effort to throw off security measures focused on foreign internet addresses. "So they could still be in Nigeria for all I know," he said.

ESD officials emphasized that the recent wave of fraud was far smaller than what struck the state last spring, when, during a single week in May, approximately 61,000 of the 109,000 new weekly claims received were later identified as fraudulent.

One reason for the smaller wave this time could be the smaller financial reward for criminals. Claimants — and criminals — could file last spring for an extra $600 a week in federal pandemic benefits, on top of state benefits, but the extra federal payment is just $300 now.

Furthermore, criminals could file last spring retroactively for benefits from earlier weeks, and receive those back payments in a single lump sum — now, retroactive requests are automatically flagged for manual review, said ESD spokesperson Nick Demerice.

As a result, whereas criminals last year often received $10,000 or more using a single stolen identity, this year the maximum payout likely would be a single week's worth of benefits of perhaps $1,100, Demerice said.

ESD officials said they've informed the U.S. Justice Department about the fraud. A spokesperson for the U.S. Attorney in Seattle confirmed that the ESD has contacted the Justice Department but declined to comment on the reports of fraud activity.

Marcus Fowler, a cybersecurity expert with Darktrace, said the changing tactics of the criminals hitting Washington state underscore the challenge governments face in balancing security against the ability to quickly pay legitimate claims.

"It's a miscalculation to assume that ... they can't and won't adapt to what you've put in place," Fowler said. But adding extra verification steps for claimants can be "very taxing" for legitimate claimants anxious for benefits, he said.

ESD officials said the latest surge in fraudulent claims hadn't resulted in slower payment times for benefits. Since last year, the agency has often struggled to process the high volume of legitimate claims, even as claimants have frequently struggled to contact the agency to address issues with their claims.

The ESD reported last week that approximately 10,000 claimants were not receiving benefits and were waiting for the ESD to resolve a question with their claim during the prior week — a marked decrease from late December, when nearly 24,900 claimants were waiting for resolution. However, the average time needed to resolve a delayed claim was 9.7 weeks, which was almost unchanged from December, the ESD reported.

The ESD reported Thursday that its customer service call centers received 392,472 calls in April, a 20 percent increase over March. Average wait times rose 9 percent, to more than 41 minutes in April, while the number of times callers hung up fell 24 percent, to 18,125. The number of times callers were unable to get through due to "high call volume" increased 41 percent to 312,303 in April.

Last week, the ESD paid benefits on 318,367 individual claims, a nearly 4 percent increase from the prior week. Because individuals can have multiple claims, the number of those claims is often slightly higher than the number of individual claimants.

Since March 2020, more than 1 million Washingtonians have received more than $18.1 billion in jobless benefits, with about two-thirds of the money coming from the federal government.

By comparison, in each of the previous 10 years, the ESD's annual payout averaged just over $1 billion, the ESD said.

(c)2021 The Seattle Times. Distributed by Tribune Content Agency, LLC.
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