During the chaotic days of the pandemic, it’s alleged that an international ring of nefarious fraudsters stole over $400 billion from the U.S government. This staggering amount is around 50% of unemployment monies paid out.
The story sounds like a script for an upcoming movie starring George Clooney. Bad actors from around the world including China, Russia, Nigeria, Romania and right here at home, wantonly looted unemployment funds earmarked for out-of-work Americans by perpetrating fraudulent claims. Unknowingly, naive Department of Labor workers sent out checks to bad guys.
Haywood Talcove is the CEO of LexisNexis Risk Solutions. His firm powers identity-verification for the nation’s top 50 banks. The company is on the front lines of focusing on regulatory, fraud and other related matters. Talcove’s LinkedIn bio headline reads “Stopping fraud, catching bad people.” In an about an hour long conversation, Talcove told me about the brazen massive theft from right under the noses of the U.S. government.
Talcove, given the nature of his job, was concerned about all the trillions of dollars the federal government was pushing out into the economy. In a conversation he previously held with Larry Kudlow, the former Director of the National Economic Council during the Trump administration, Talcove was told “you can’t have both speed and efficiency” in rolling out the financial aid related programs.
It seems, in hindsight, political leaders knew about the possibility of fraud and theft, especially as the Payroll Protection Plan, a program to bailout small business was co-opted by large corporations and other entities that were not entitled to participate.
The politicians turned a blind eye as they felt money needed to get into the hands of the jobless and took the gamble that everything would work out well. Gene Sperling, a point-person for President Biden’s stimulus plan, blamed the fraud on the Trump administration, calling it “one of the most serious challenges we inherited,” according to Fox.
Axios reported “Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security.”
Talcove points out what now seems obvious. The U.S. relies upon an antiquated technology infrastructure, COBOL, a programming language that’s decades old and hopelessly flawed compared to the modern softwares we have.
What happened in California highlights governmental ineptitude, leading to obvious criminal actions. Talcove points out the world moved on from the 1980’s COBOL, but the California Labor and Workforce Development Agency didn’t. When the outbreak happened, fraudsters at all levels of sophistication saw an easy target to exploit.
For example, claims were filed in the names of known prisoners who weren’t eligible for unemployment checks. About 35,000 unemployment claims were paid out to California prison inmates, roughly 133 of whom are on death row.
Talcove alleges that the siphoned off stolen funds were used, in part, for child trafficking, drugs, and causing disruptions in our country. Kits were sold on the darkweb to teach people how to steal someone’s identification and submit claims for unemployment benefits. The states didn’t have appropriate policies and procedures in place to catch the criminals. Innocent people had to wait for months to receive their unemployment benefits because the systems were overwhelmed with fictitious claims.
Blake Hall, CEO and founder of ID.ME, said “Fraud is being perpetrated by domestic and foreign actors.” Similar to Talcove, Hall is trying to highlight and put an end to this coordinated attack. Hall added “We are successfully disrupting attempted fraud from international organized crime rings, including Russia, China, Nigeria and Ghana, as well as U.S. street gangs.”
Talcove says that this could all have been avoided. The tools needed to verify someone’s identity in real-time when a transaction occurs are now commoditized with many companies offering SaaS and API-based products. The failure of our government to utilize these solutions when it comes to programs that dispense tens of billions of dollars is actually symptomatic of a more central, underlying issue: in general, the government has not “gone digital,”and we are now witnessing the consequences, he claims.
Talcove points to another serious consequence of the identity thefts. With so many criminals taking advantage of the system, he questions the validity of the actual unemployment numbers reported by the Department of Labor in their weekly and monthly jobs report. It’s reasonable to believe that with the widespread fraud, the unemployment figures may have been artificially inflated by criminal activity and identity theft.
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