$400 billion, or roughly half of US unemployment benefits paid out during Covid-19 pandemic, may have been squandered by criminals

Up to half of the enhanced jobless benefits paid out to help Americans weather the Covid-19 pandemic was reportedly stolen by fraudsters and other criminals, squandering as much as $400 billion in tax dollars.

Thieves have tapped into the money by stealing personal information and using it to make false unemployment claims to states, according to reports on Thursday by Fox Business and Axios, citing security experts. States, which are administering the payments, have been ill-prepared to detect overseas crime rings using false identities to fleece the system.

Haywood Talcove, chief executive at LexisNexis Risk Solutions, told Fox Business that about $250 billion was stolen by international crime groups, many of which are allegedly state-backed. Blake Hall, founder of identity-proofing firm ID.ME, said the organized crime rings involved in the fraud are based in such countries as Nigeria and Ghana – and of course the usual suspects China and Russia.

“What they need to understand is post-Covid, the world has changed,” Talcove said. “They are the target, and right now, they haven't put the defenses up that will secure those resources and make sure that they get into the hands of the right people, not criminal groups.”

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The apparent opportunity was created by massive US unemployment benefits that were provided after Covid-19 lockdowns put millions of people out of work. The federal government last March supplemented the state jobless benefits that are paid out during normal times by kicking in an extra $600 weekly for each claimant through the end of July.

The weekly supplement dropped to $300 in later Covid-19 relief packages, but it was paid on top of state benefits. With the state portion of those weekly payouts ranging from $235 a week in Mississippi to $823 in Massachusetts – and Congress also providing tax relief on the benefits – many unemployed Americans netted more money sitting at home than they had made while working.

Gene Sperling, economic adviser to President Joe Biden, blamed the rampant unemployment fraud on the Trump administration, calling it “one of the most serious challenges we inherited.” He told Fox Business that the latest Covid-19 relief package included $2 billion for modernizing the unemployment insurance system.

Republican lawmakers have argued that with businesses reopened, inflated unemployment benefits have led to labor shortages, with many workers choosing to stay sidelined rather than fill open jobs. At least 25 states have decided to opt out of taking the extra federal money, ending supplemental benefits before the program's scheduled expiration in September. Enhanced payments will be halted in some states as soon as June 13.

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