3 Ways State Unemployment Agencies Can Prevent Fraud

The DOL estimated at least $26 billion in unemployment insurance benefits payments related to COVID-19  could be wasted due to potential unemployment fraud.

States Report Widespread Unemployment Fraud During Pandemic

During a June 1 Congressional Subcommittee briefing, the Department of Labor estimated that at least $26 billion in unemployment insurance benefits payments related to the COVID-19 pandemic could be wasted due to potential unemployment fraud. Those overpayments are no longer available to help support out-of-work individuals in need. During the briefing, the DOL Inspector General stated that "Shortcomings in state IT systems prevented eligible individuals from receiving benefits in a timely manner." The IG's intent is to "ensure that IT systems are better prepared to accommodate changes to the unemployment insurance programs, including a surge in claims."

Many states have reported issues with unemployment fraud, with some even temporarily halting unemployment payments. This means that thousands of unemployed workers saw a delay in their claim processes and benefit payments. In response, Equifax pulled together its data and fraud experts to introduce an Unemployment Insurance (UI) Eligibility suite of solutions to help state workforce agencies reduce potential fraud and overpayments.

3 Best Practices for UI Fraud Detection and Verification

The COVID-19 pandemic created an overwhelming number of claims filed in a very short period of time. The resulting addition and expansion of federal unemployment benefits has only compounded this problem. The technology and processes at many state workforce agencies were ill-equipped to handle the changing regulations and the millions of applications for unemployment benefits. This opened up a window for fraud rings and impostors. As state unemployment agencies rush to process claims quickly for those in need, fraud detection and verification best practices need to be in place. These best practices include:

1. Flag fraudulent claimants at the point of application

Flagging potential impostors using tools and datasets can help stop fraudulent activities before they even start. Using insights from multi-dimensional data sources, these tools can execute several verifications of a claimant’s identity and validate that the information on the application for benefits is legitimate. For example, during account creation the multi-channel authentication takes place in milliseconds, including device, mobile and email verification and risk analysis. This can flag applications, for example, when individuals apply for unemployment in one state and have a direct deposit bank account in another.

2. Use verified data to help validate independent contractor claims

State workforce agencies are grappling with the extension of UI benefits to self-employed individuals under the CARES Act Pandemic Unemployment Assistance (PUA). These kinds of claims are particularly vulnerable to fraud, as they are nearly impossible to validate without tax return data. An extended 2019 IRS filing date means this tax return data can now be more than 12-18 months old. Further, State Wage Data or the National Directory of New Hires do not include independent contractors. As a result, this group of UI applicants poses a blind spot for state agencies. Access to verifications of income and employment, through automated platforms like The Work Number database, can help support the claims filed by these individuals. That can help protect the integrity of this new program, so the funds available can serve more individuals.

3. Conduct ongoing fraud monitoring during benefit re-verifications

In order to continue receiving unemployment payments, applicants must submit evidence that they are still eligible. Both the applicant and the state must re-certify eligibility for benefits. This represents an opportunity to reduce friction for the applicant while taking a second look for potential fraud and overpayments. State Wage Data and the National Directory of New Hires run months behind, making accurate re-certifications difficult. The UI Eligibility suite of solutions delivers verified income and employment data as recent as the last employer payroll cycle. This can help state workforce agencies to evaluate continued eligibility and quickly identify potential overpayments.

Addressing these three main gaps is at the heart of the Equifax UI Eligibility suite of solutions. Datasets and fraud tools that can be quickly integrated, without the need for significant investments in technology infrastructure, can give state agencies more confidence in the authenticity of the applicant. This can also foster a more streamlined process for validating eligibility for unemployment benefits. Doing so can help reduce potential improper payments, while getting benefits quickly to those in need. Find more information on Equifax Government Services.