Unemployment insurance fraud on the rise as pandemic creates 'perfect storm' for identity theft
North Dakota has seen more cases in first half of 2020 than any full year on record.
BISMARCK — Identity theft has become a minor epidemic of its own in North Dakota, the side effect of an overwhelming surge in unemployment filings during the coronavirus pandemic.
Parrell Grossman said the Consumer Protection Division of the North Dakota Attorney General's Office has processed more claims of identity theft in the first half of 2020 than in any full year on record. The vast majority of those claims, 146 out of 168, are the result of unemployment insurance fraud.
"And there are more coming," said Grossman, an attorney in the division. "We have perhaps 20-plus police reports that have been sent to the Consumer Protection Division awaiting the actual contact or submission of an ID theft affidavit."
The number of claims that has come before Jobs Service North Dakota is even greater. Darren Brostrom, the department's director of unemployment insurance, said his office has identified a total of 647 confirmed fraud cases so far, with "new fraudulent claims being filed on a daily basis."
This sharp spike in insurance fraud is the result of “a perfect storm” of opportunities for identity thieves in the pandemic, Grossman said. Fear around virus transmission has opened up a range of avenues for scammers to draw out sensitive personal information. This comes on top of several major data breaches in recent years and an unemployment safety net suddenly trying to account for tens of thousands of new names.
“It’s a brand new system, so there’s always going to be little patches for fraudsters to exploit,” explained Sarah Arntson, a communications officer for Jobs Service North Dakota.
In particular, identity thieves have seized on information gaps in the new Pandemic Unemployment Assistance program, part of an expanded effort by Congress to support out-of-work freelancers and gig workers who have not typically qualified for unemployment.
“We don’t have a background relationship with this type of worker, so we don’t have as much information on file for them,” Arnston said, explaining that in many cases, fraudsters have made illegitimate unemployment claims under previously unregistered identities.
Historically, widespread fraud has followed on the heels of major disasters, as federal intervention programs have opened up a broadside of security vulnerabilities.
"When we had the flood in Minot and in Bismarck in 2011, we saw the same thing happen then, because federal disaster programs tend to draw out criminal elements," Brostrom said.
In total, some $318,000 in state and federal funding has been stolen in North Dakota during the pandemic, according to Job Service.
"We're able to claw back some of those funds," Brostrom said, adding, "If we hadn't caught those cases when we did, those cases could have paid out about $6.3 million."
North Dakota is not alone in the recent affliction. Emergency CARES Act funding has been siphoned from the coffers of state governments across the country in a massive unemployment insurance fraud.
The U.S. Labor Department recently estimated that the national toll during the pandemic could amount to billions of dollars in stolen unemployment insurance funds. Washington state alone has reportedly lost hundreds of millions of dollars to such schemes.
“I believe that what is occurring with the theft of unemployment insurance benefits is part of a wholesale, nationwide effort by a very organized criminal group in most cases,” Grossman said.
And while fraud cases in many states have resulted from government reliance on out-of-date software, both Grossman and Brostrom said the fraud cases in North Dakota resulted from data breaches in other industries, some of them years old.
Massive breaches in the last five years at Equifax and Experian, two of the country's largest consumer credit reporting agencies, compromised the data of hundreds of millions of Americans. Grossman noted the Equifax breach alone exposed almost 250,000 North Dakotans. Meanwhile, a tally of 42 distinct data breaches between 2017 and 2019 comprised at least 250 North Dakotans each, a run of recent incidents that have left more people vulnerable in the pandemic.
Unemployment insurance fraud is widespread enough that the state’s Job Service and Attorney General offices launched a task force in collaboration with federal officials to root out an issue that has put an untold number of North Dakotans at risk.
"For us it's run the spectrum," Brostrom said, explaining that fraud schemes have already targeted both employed and unemployed residents. "There hasn't been any discrimination on the part of the criminals."
Readers can reach reporter Adam Willis, a Report For America corps member, at email@example.com.