A Pandemic Can Be A Scammer’s Delight

Even as millions of Americans were losing their paychecks because of the virus, others were hard at work on scams that would cheat ordinary people out of emergency relief funds as well as their savings. Unfortunately, they did this job all too well. 

These scamsters are incredibly sophisticated.  They know all the tricks and nothing is beneath them.  Sometimes they pretend to be calling from a health insurance firm, asking for personal information to update their records.  Other times they pretend they work for a government agency offering relief funds simply by filling out a few forms.  A related scheme is to offer the victim an amazing Bitcoin-related opportunity.

They have other tricks, too. In a small town in Orange County, California, a huge line of people was waiting to enter a social services store to plunk down as much as $700 to get false paperwork that would enable them to quality for unemployment benefits - benefits they were not entitled to and would never receive.

Breakdown!

“This isn’t just an Orange County problem and it isn’t just a California problem,” said Orange County District Attorney Todd Spitzer. “This is a breakdown of catastrophic proportions that has failed the American taxpayer.”

Ripping off government relief programs is old hat.  But what is new is the magnitude of these crimes.  According to NBC News, “The Labor Department Inspector General has yet to complete a full investigation, but estimates at least $63 billion of the $630 billion in government disbursements has been misspent. The full scope of the loss in taxpayer funds is likely many times higher, experts said, and probably will soar well beyond $100 billion.”

California is one of the few states that has reviewed its COVID-relief programs.  So far, investigators there have found that $11 billion were stolen in these scams, but they say that this number ultimately could reach $30 billion - 30% of the total amount allocated.

And it's not just California that has been affected.  In Nebraska, for example, an investigation found that through June 66% of all unemployment benefits were misspent.  The auditor in Kentucky found that the program’s internal controls were so weak that they violated federal law.  And Washington State reported that hundreds of millions of dollars were lost to fraud.

According to CNBC, the five states with the highest percentage level of fraud complaints are Maine, Massachusetts, Washington, Hawaii, and Rhode Island.  On a per capita basis, the District of Columbia would rank fourth.

Citing a senior federal law enforcement official, NBC News added that “the fraud is so complex and multilayered that it will take months to develop a full accounting... It just continues to spiral out of control and connect to other fraudulent schemes.”

In retrospect, perhaps states should have tightened their security as the billions allocated to emergency aid were an obvious target for fraud.  But it’s important to note that tens of millions of people were completely overwhelmed by the unprecedented free fall in the economy and were in desperate need of help.  When the government offered emergency relief, the top priority was to get the money to these people as quickly as possible.

Moreover, these criminals are incredibly capable.  To give an idea of just how skillful and brazen they are, even law enforcement officials have been targeted.  Personal information of the attorney general of Illinois was stolen and used to illegally obtain funds. And even high-ranking politicians were targeted, including Sen. Diane Feinstein and Ohio Governor Mike DeWine.

Surprise, Surprise

In the past few weeks, millions of people have been surprised to learn that they have become the victims of identity theft.  They are learning this from the 1099s that show they have received benefits - which in fact they never got.

One of these people is Michael W., a former business owner who received a 1099 that showed $13,000 in benefits had been filed in his name.  Michael never saw a cent of that money.

Back in March he had filed for unemployment benefits but was not approved, and follow-up attempts to get those benefits also were turned down.  He now suspects that someone had already filed for those benefits using his personal information.  Without a paycheck for many months and not eligible for unemployment benefits, he is in a very precarious situation. “We are this close to losing everything,” he laments.

Despite state crackdowns on these scams, the fraud is not only continuing but is becoming more sophisticated.  For example, among the latest schemes are very official-looking mass text messages pretending to be from government agencies, and using 3-D printing to create masks of identity theft victims’ faces to pass identity verification checks.

ID.me, an identity verification company, has been contracted by at least 21 states.  ID.me has said that it is battling against a “veritable tsunami” of fraudulent claims flooding into state systems.  And more may follow as investigators have been warning that the stimulus bill now working its way through Congress (and others that may follow) present tempting targets for crooks.

It’s said that guidelines on how to successfully target unemployment agencies are being exchanged by scammers over the dark web in places like Dubai, Hong Kong, and Moscow.  ID.me said that it had “caught 2.2 billion server requests for information out of Hong Kong, and four major attempts to overwhelm servers originating from Nigeria” in just one morning.

Incidentally, it’s not just Americans who are being subjected to such crimes.  In England, one in three people has been the victim of some type of COVID-relief crime.

That people so computer savvy would use their skills to rip off the weak and needy is a sad commentary on human nature.  That such fraud is going on to such a degree is a sad commentary on the times we live. 

Unfortunately, the simplest and seemingly most harmless questions could be part of a nefarious scheme to separate you from your money.  The best thing to do: Never let your guard down. 

 Sources: www.bbc.com; www.cnbc.com; www.nbcnews.com