Mar 12, 2021 | NEWS | By April Kwan | Illustration by Xixi Qin

With unemployment rates surging during the pandemic, international fraud rings have been taking advantage of Colorado’s unemployment system.

The phenomenon isn’t recent; it’s been occurring for years on end. However, the Office of Inspector General for the U.S. Department of Labor revealed that pre-pandemic unemployment fraud consisted of 12% of its caseload. Now, it accounts for 70% of their cases. 

Unemployment fraud occurs through data breaches where scammers use people’s personal information to file for unemployment. Federally, under The Coronavirus Aid, Relief, and Economic Security (CARES) Act, people who do not receive unemployment insurance from their jobs can get financial assistance.

This is where hackers come in, stealing identities for financial benefits, which has been made easier because some states have eased their verification process to be more equitable, sometimes enabling identity theft.

In addition, more federal aid has been provided as a result of the pandemic. Colorado Gov. Jared Polis signed an executive order to speed up the process to provide financial aid within 10 days, making hacking easier.

The issue came to light this past June when Colorado’s Department of Labor noticed an increasing amount of suspicious unemployment claims filed. The massive increase didn’t match up with the amount of people who had lost jobs or had jobs in the first place, sparking initial suspicion.

Upon further investigation they stopped half of the claims, preventing $34 million from being distributed. Colorado enforced anti-fraud measures that are predicted to have stopped 30 to 50% of the false unemployment claims in the following month. International criminals, who’ve organized to attack the U.S. unemployment system, are suspected to be behind the fraud.

As a result of these data breaches that have led to identity theft and fraud, Colorado has shifted from using Social Security numbers on unemployment applications to confirm identities. Instead, they’ve begun to use resources like ID.me. 

According to Jessica Hudgins Smith, press secretary for the Division of Unemployment Insurance, “Through ID.me, a claimant with an integrity hold will receive an email and has an opportunity to verify their identity in three different ways — by phone, through a third party provided by ID.me or through their local workforce center.” 

This process recently began in January and the state has placed a system that includes 50 causes that set off suspicion about an application, which can pause an unemployment claim for further investigation — a massive increase from the five causes that were in place pre-pandemic. So far, it’s prevented the release of $7.5 billion that were flagged as fraudulent. 

The executive director of the Department of Labor, Joe Barela, announced that “of the $6.5 million [that was distributed to suspicious claims], Colorado has been successful in recapturing nearly $1 million with the cooperation of our financial institutions, the Department of Treasury and the Secret Service division.” 

Colorado Attorney General Phil Weiser stated that “It’s not enough to help people after the fact. We need to go after these scammers. This activity is criminal. It’s reprehensible.” 

Employers also have the option to report suspicious claims from their employees as part of newly added measures to combat fraud. 

The actions of hackers have left the victims of identity theft unable to receive financial aid from the government. They have also made the application process much more difficult and impeded the process of receiving aid. As a result, there have been major delays in the system, which has caused havoc for many people who are struggling to afford groceries, pay rent, and receive basic necessities amid the pandemic.

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