Half of the pandemic’s unemployment money may have been stolen

Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say.

Why it matters: Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security.

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Catch up quick: When the pandemic hit, states weren’t prepared for the unprecedented wave of unemployment claims they were about to face.

By the numbers: Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

• Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere.

• “These groups are definitely backed by the state,” Talcove tells Axios.

• Much of the rest of the money was stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months.

The Treasury Department declined to comment on these estimates.

How it works: Scammers often steal personal information and use it to impersonate claimants. Other groups trick individuals into voluntarily handing over their personal information.

The big picture: Before the pandemic, unemployment claims were relatively rare, and generally lasted for such short amounts of time that international criminal syndicates didn’t view them as a lucrative target.

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• After unemployment insurance became the primary vehicle by which the U.S. government tried to keep the economy afloat, however, all that changed.

• Unemployment became where the big money was — and was also being run by bureaucrats who weren’t as quick to crack down on criminals as private companies normally are.

• Unemployment fraud is now offered on the dark web on a software-as-a-service basis, much like ransomware. States without fraud-detection services are naturally targeted the most.

The bottom line: Many states are now getting more sophisticated about preventing this kind of fraud. But it’s far too late.

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