Cybercriminals Steal Funds from US Covid-19 Aid Programs
According to the US Department of Labor’s Inspector General (IG), cybercriminals from around the world have defrauded the US of approximately $8 billion since the pandemic began. These stolen unemployment funds were supposed to be used to help people forced out of work due to the coronavirus pandemic. Cybercriminals have been using huge databases of stolen personal information available on the dark web to make fake unemployment claims. They were made by cybercriminals based everywhere, from Nigeria to London. This fraud has been possible because the system for distributing the unemployment funds is easily breached. The reason for this is that the US Congress allowed applicants to receive payments before providing documents to verify their identities. Furthermore, the state workforce agencies distributing the federal funds have been struggling with the flood of applications. Especially as some state workforce agencies are running decades-old IT systems that are slow, unpatched and thus exposed to cybercrime. Consequently, these agencies have found themselves ill-equipment for detecting and preventing fraud.
Californian Inmates Claim Pandemic Unemployment Benefits
The IG warned the federal government (PDF removed by source) back in August about the risks its pandemic unemployment program was likely to face. The IG predicted that $26 billion in aid program funds could be lost if something wasn’t done to help states detect and prevent fraud. This prediction could very well come true, especially as US inmates are now also getting in on the act.
How Inmates Were Involved
Inmates in several Californian prisons have apparently been making fraudulent Covid-19 related unemployment claims for several months. This scheme came to light when inmates were overheard talking about how easy it was to cheat the system and collect unemployment benefits. Furthermore, police in Sacramento became aware of the scheme whilst investigating reports of out-of-state suspects attempting to buy luxury goods. They were buying goods from Rodeo Drive’s exclusive luxury shops using cash or multiple Employment Development Department (EDD) debit cards. California’s EDD distributes pandemic related unemployment benefits to self-employed and contract workers via pre-loaded debit cards. These debit cards come pre-loaded with upwards of $20,000 each. A multi-agency investigation later discovered that 35,000 unemployment claims had been filed by California state inmates or in the inmates’ names. Of these claims, at least 20,000 had been paid out, costing the state around 140 million. Some of these benefits were even paid out to inmates on death row. Sacramento County District Attorney, Anne Marie Schubert, called the scale of the scheme “honestly staggering”. She added that the scheme could be “the biggest fraud of taxpayer dollars in California history.”
Methods Inmates Used to Claim Unemployment Benefits
Inmates in San Mateo’s jail, for example, contacted friends and relatives on the outside and had them file fraudulent unemployment claims. The inmates provided their outside accomplices with the required Social Security numbers and other required information. The outside accomplices then filed for pandemic relief on behalf of 30 different inmates. Next, the outside accomplices received the unemployment payments, in the form of pre-loaded debit cards, via the mail. They withdraw the pre-arranged commission for filing the fraudulent claims, which amounted from $3,000 to $4,000 for each claim. They then arranged to have the debit cards, containing the remaining funds, delivered to the inmates in jail. In other prisons, the inmates filed the claims themselves, sometimes even in their own name. In other instances, they used fake names and even fake Social Security numbers. One prisoner even used the name “poopy britches” on the claim and still received the benefit. The prisoners then had the debit cards sent to friends and families on the outside or to themselves in prison. The outside accomplices who received the debit cards, either cashed the money and kept it or sent money orders to the value of the debit cards to the inmates. In Kern County, one address was used to receive the benefits of 16 inmates.
How did the Inmates Get Away with It?
Californian prisoners were able to carry out this fraud because, unlike many other US states, California does not have a system that cross checks prison data with unemployment claims. It must also be pointed out that it is possible that the stolen pandemic unemployment funds may not be able to be recovered.
