A Maryland man and his co-conspirators scammed nearly 200 people across the country, obtaining nearly $1.3 million in pandemic relief money meant to help struggling families and the unemployed.
This is by no means an isolated incident. After federal funds were distributed to the states to provide pandemic relief, fraudsters went to work and cheated Americans out of billions of dollars in benefits at historic levels.
A report from the General Accounting Office (GAO) suggested that programs such as Unemployment Insurance had at least $60 billion in stolen funds in 2021, however the actual amount is not known. Last week, the Department of Labor’s Office of Inspector General estimated that as much as $191 billion in unemployment benefits may have been misspent, including a significant amount lost to fraudsters. The extent of the theft is so great that GAO has committed to build on existing evidence with its own independent modeling to calculate a more precise estimate. Much of this fraud occurred despite nearly $2 billion being allocated by Congress to modernize state employment systems, stop fraud, and improve equitable access to benefits.
Most recently, President Biden called for a tripling of anti-fraud strike forces to crack down on identity fraud during his State of the Union address. While this is a good start, state governments can and must shift to a focus on identity fraud prevention to stop fraud from happening in the first place.
Given the scope and scale of the fraud, it’s clear that past approaches to digital identity verification won’t work in the future. In the face of a potential economic downturn and evolving labor market, the question becomes how do state governments prevent funds from flowing to bad actors while ensuring that those who need help don’t face unnecessary barriers?
In order to be prepared for the digitization of government benefits and services spurred by the pandemic before the next crisis, states must reimagine digital identity verification. Not doing so risks leaving public benefit programs open for waste, fraud, and abuse.
There has been progress.
Dedicated public servants worked quickly to rectify issues introduced by new fraud techniques during the pandemic. Since then, state governments across the country have begun to re-evaluate their approaches to identity and access management. The National Association of State Information Officers named identity and access management as a 2023 Top Ten priority for state CIOs.
However, far more action is needed. As state sessions convene for the new year, policymakers and state agencies should look to pursue three additional steps to improve benefits service delivery in an equitable and efficient manner.
First, legislators, benefit agencies, and law enforcement should move away from a siloed approach to combating fraud. Fraudsters have become more networked in their approach to fraud via the dark web, making it easier to steal identities for the purpose of receiving pre-loaded debit cards or unemployment checks. Adopting policies that allow for safe and transparent data sharing makes it harder for known bad actors to attack multiple states using the same stolen personal identity information. And creating an information-sharing consortium made up of key state, federal, and private sector contributors can help identify rising fraud trends at every level.
Second, fraudsters are increasingly relying upon synthetic identities that combine fabricated and real personally identifiable information (PII) to fool legacy systems in the public sector. New technologies that use machine learning and artificial intelligence can determine with a high degree of accuracy whether the person providing the identity is who they say they are. During the pandemic, real people were prevented from accessing government benefits, sometimes waiting days or weeks, because systems in place erroneously flagged them as fraudulent.
Third, state governments must embrace a data-driven, performance-based mindset to evaluate the effectiveness of different solutions. This work starts with the ability to benchmark performance, testing how many positive identities are able to get through, easily and equitably. Two states – California and Florida – are evaluating outcomes by running pilots and data studies to test new solutions. Doing so will go further to help identify gaps and areas where tested solutions can adversely affect groups on the basis of race, color, sex, economic status, or national origin.
Equitable access to digital identity is key to restoring trust in government services and slashing fraud. States must undertake advanced efforts to stay ahead of fraudsters, especially in this moment when economic uncertainty is once again on the rise.
The author, Jordan Burris, is Vice President of Public Sector at Socure.
