How to Protect Your Organization from Unemployment Fraud

unemployment fraud

Unemployment claims are skyrocketing, with over 40 million Americans filing for unemployment benefits since the pandemic was declared, causing pressure on already overloaded unemployment systems. These systems weren’t built for the exponential increase in demand, nor were they built to handle temporary adjustments like the increase in benefits provided by the federal stimulus package or the exceptions to the eligibility criteria. All of this rapid change has caused systems to become unstable, and that instability is being taken advantage of by unscrupulous people intent on defrauding the system.

Hackers Exploit Weakened Unemployment Systems

On May 14, 2020, the U.S. Secret Service issued a memo to field offices warning of hackers exploiting the current crisis by committing large-scale fraud against multiple state unemployment insurance programs. The memo claims that an organized Nigerian crime ring is filing imposter unemployment claims in different states using Social Security numbers and other personal information amounting to losses in the hundreds of millions.

An imposter claim is a form of identity theft that is different from fraud as victims have no control over the claim being filed. While this may seem like a state unemployment issue, it can affect employers who are faced with increased unemployment liabilities due to fraud.

Protect Your Organization

Tribal organizations want to ensure their employees are treated fairly in the unemployment process. Over the last few months, Tribal employers have demonstrated care by trying to keep employees on the payroll, extending healthcare coverage, providing emergency relief, and diligently striving to ensure employees receive the unemployment benefits they’re entitled to. Human resource departments have been in crisis response mode, working around the clock, answering questions, providing resources, adjusting to IRS changes around healthcare, and solving many problems. HR is clearly swamped, but taking the time to protect your organization is imperative. Here are two things that you can do to combat unemployment fraud in your organization:

Audit Statement of Charges

One of the most prudent things an organization can do is have a process in place to audit the Statement of Benefit Charges provided at the end of each quarter. You typically have between 20-30 days to review the list of unemployment benefits paid out and protest any imposter, fraudulent, or erroneous charges.

As you review your Statement of Benefit Charges, you may find that employees who are still on your payroll are filing for unemployment insurance. You may also discover that previously discharged employees are filing claims. Because there is pressure for states to get unemployment benefits to those who need it, when the state’s system can’t support the judicial process, they error on the side of paying the claimant first and then figuring out the money later.

Organizations that typically see a one-page statement are now having to audit an exponential number of claims, but due dates have not changed. It’s important to take note of the date listed on the statement as you may have less time to audit the paperwork due to slower administration processes and mail delivery. Failing to timely protest a fraudulent claim will result in an approval of the claim and an increase to your tax rate.

Educate

Organizations can educate their employees on what to do if they are victims of an imposter claim. Employers can’t fix this problem for their employees as much of the information required to solve it is personal. Instead, provide the following resources to the employee:

  1. Your state’s hotline, website, or contact information for reporting fraudulent claims
  2. Federal Trade Commission’s identity theft website for a recovery plan: identitytheft.gov
  3. As of this writing, Equifax, Experian, and TransUnion are now offering free weekly online reports through April 2021. Provide information on free credit monitoring: //www.annualcreditreport.com/index.action

Make sure you document the incident and include all relevant information, such as the claimant name, dates, and details surrounding the incident.

Unemployment fraud is not isolated to Tribal organizations. It’s a nationwide problem. Every state and every employer is facing it. Billions of dollars are lost in unemployment fraud, but your organization doesn’t have to be a victim. Be on top of the fraud, or, better yet, get a reputable company to manage it for you.