Five Ways to Combat Unemployment Fraud
The Equifax data breach in 2017 reminded us that personal data is ripe for the picking for any motivated cybercriminal. More recently, the Secret Service revealed a suspected widespread fraud ring specifically targeting state unemployment funds.
We’re experiencing a perfect storm: With easy access to personal data, backlogged claims as a result of the COVID-19 pandemic, and intense pressure to pay out benefits quickly, unemployment programs are prime targets for fraud.
Unemployment fraud detection
While the Federal government establishes guidelines for unemployment insurance, each state administers a separate program. Who qualifies, the amount of benefit available, and the duration of payout varies making fraud difficult to detect. The general practice, however, is to notify the most recent employer when an employee files an unemployment claim.
The employer provides additional information or corrects inaccuracies in the claim prior to payout. If the employee who reportedly filed the claim remains fully employed, this can be an important red flag.
What happens next varies state-to-state. In the state of Wisconsin, for example, the employer is provided contact information to report inaccuracies. If the employer acts promptly, payout of the claim is typically suspended.
The employee may also receive notification confirming the claim because his or her current address is on file. This notification will include a request for direct deposit information to initiate payout. The fraudster will likely be a step ahead, creating a direct deposit account for the payout. The employee must act quickly following the protocols outlined to report the fraudulent claim and suspend payment.
The impact of unemployment fraud
Because states finance unemployment benefits through taxes on employers, it is in the best interest of employers to fight fraudulent unemployment claims. Allowing them to continue unchecked results in higher taxation.
A fraudulent unemployment claim poses little financial risk to individual employees. The act, however, is a form of identity left, raising the concern that personal information is compromised.
Employers and employees alike might not be able to stop unemployment fraud, but they should be aware and ready to take action when it takes place.
What to do next
Organizations represent an important line of defense in fighting unemployment fraud. As an employer, you can take the following five action steps:
1) Proactively communicate the risk of unemployment fraud to your employees. At a time when personal information is accessible and claim rates are high, raise awareness so that your employees are on-guard. Encourage them to closely monitor notifications received by mail and to turn on available fraud alerts via their banks, credit cards, or other credit monitoring agencies. Consider sharing this video detailing the risks of fraud and how to avoid it.
2) Closely monitor unemployment notifications for your organization. The COVID-19 pandemic resulted in shutdowns and interruptions of many business processes. Make sure your benefits team is routinely monitoring unemployment notifications so they are promptly evaluated.
3) Keep a pulse on workforce changes. Depending upon the size and geographic scope of your organization, it may be difficult to closely track workforce changes in the forms of layoffs or furloughs. Consider dedicating a small team to cross-reference unemployment notifications in order to promptly evaluate the legitimacy of claims. Any gap or delay only helps those committing the fraud succeed.
4) Keep a trail. In case a fraudulent claim results in payout, it is helpful to reference a paper trail demonstrating your due diligence in evaluating and resolving the claim.
5) Check in on your affected employees. When fraudulent claims are detected, encourage employees to follow the outreach protocols identified, keeping a documented trail of their own. If they are not making progress due to long call center wait times, direct them to contact their local state representative to speed the process.
Francis Investment Counsel’s employer-sponsored MoneyAdvice@Work® Financial Wellness Services connect employees to credentialed financial professionals who educate, advise, and coach. When financial risks arise, we stand ready to help employers and employees alike navigate difficult situations and pave the best path forward. Reach out to one of our team members to learn more or fill out the form below for assistance.
Tags: unemployment, fraud, cybersecurity, cybercrime