We stopped more than $12.3B in jobless claim fraud, state says

The state has stopped a record 1.1 million fraudulent unemployment claims since the pandemic began, keeping more than $12.3 billion out of the hands of scammers, Newsday has learned.

"We stop most fraud before it’s paid, which is really critical," Labor Commissioner Roberta Reardon told Newsday in a phone interview Wednesday. Fraudsters "are capable of filing a claim, but that doesn’t mean they’ve actually collected benefits."

The state did not provide a figure for how much has been paid out on bogus claims, but Reardon said the amount "is significantly less than" the billions the state has protected.

Since the pandemic shutdown began last March, the state has paid more than $81.3 billion in unemployment benefits to more than 4.6 million New Yorkers, the equivalent of nearly 30 years of normal unemployment payments.

In previous years, the number of fraudulent claims intercepted by the state has been low. Reardon said the number of cases might have been "in the double digits."

But in the wake of massive job losses and record levels of unemployment claims, the profile of a benefits fraudster has changed drastically, leading to big increases in the number of bogus claims, she said.

"These are very sophisticated criminals," Reardon said. "These are international cyber criminals that have access to the dark web. They have very efficient techniques."

Using the identities of real New Yorkers stolen during data breaches at banks, insurance companies and other large corporations, scammers file claims and attempt to collect benefits in the name of residents who are not unemployed.

And while most of the criminal activity is conducted online, Reardon said fraudsters have become more brazen to circumvent newer security measures, such as the state’s use of ID.me, an online verification platform partnered with hundreds of federal and state agencies, health care organizations, financial institutions and retailers.

Now, criminals are going so far as to call the labor department directly in hopes of gaming the system.

"They are calling in," Reardon said. "They are trying to get around our system. They don’t want to go through ID.me. They want somebody to open the door for them. We don’t."

Alexa Tapia, unemployment insurance campaign coordinator for the National Employment Law Project, said New York has been handling fraud "better than some states" while working to make its system more accessible to residents filing legitimate claims. But she said the national issue of unemployment fraud presents a real problem for states.

"This is going to be a new terrain that we have to tackle," Tapia said. "Especially now, as the cyber security clearly has been lacking and the perpetrators have become very sophisticated."

Individual state unemployment systems – including New York’s – have remained largely antiquated over the years, making them enticing to criminals and necessitating improvements and reforms, she said.

At the same time, states need to be careful not to risk shutting out legitimate claimants from accessing benefits, an issue that disproportionately impacts minorities, she said.

Reardon warned New Yorkers to remain vigilant and only respond to official communications sent by the State Department of Labor. The alert comes in the wake of widespread reports of fraudsters using fake communications such as phishing texts and emails seeking personal information.

Residents should report "anything that looks suspicious .. to help us in our efforts to catch these fraudsters," Reardon said.