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Fraud has played a big role in diverting $ 163 billion into the unemployment system


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According to a U.S. Department of Labor report, more than $ 163 billion in aid probably flowed from the unemployment system during the pandemic, with “a significant portion” related to fraud.

In March 2020, Congress created many new programs to support the millions of people who lost their jobs due to the effects of Covid-19. Together, the programs have increased weekly payments, increased their duration, and expanded the range of eligible workers. They ended last September, although many states abandoned them earlier.

During that time, the federal government paid nearly $ 873 billion in total unemployment benefits, the Labor Department said in six months. report Congress released on Thursday.

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“Unprecedented infusion of federal funds into [unemployment insurance] The program has provided individuals and organized crime groups with a valuable target for exploitation, ”the report said.

The criminals were able to deceive the system because of the shortcomings of the program and easily stolen information that allows to identify the person, the agency said.

Many states were reluctant to consider new claims for benefits and had difficulty implementing newly established programs – and as a result many traditional domestic fraud controls were not used.

Criminals can make fraudulent claims about payments with a relatively low risk of being caught, potentially getting tens of thousands of dollars, the Department of Labor said.

Much of the criminal activity was aimed at a temporary unemployment assistance program during the pandemic for concert, self-employed and other workers. Initially, lawmakers allowed program applicants to self-certify their qualifications for benefits; they later abolished this feature and added safeguards against fraud, as did the state.

The Department of Labor has also taken additional measures to prevent fraud, including allocating money to help states modernize their administrative systems.

Volume of [unemployment] the investigative cases now under consideration are unprecedented in the history of the OIG.

Office of the Inspector General of the U.S. Department of Labor

Some argue that less red tape was crucial for the rapid provision of financial assistance to households in a deep crisis.

Even with rules that were initially weaker, it took states (sometimes months) to start issuing unemployment benefits. For example, early PUA inspections matched delays of six or seven weeks, according to the latest data. report from the Hamilton Project, part of the Brookings Institution.

“These delays have been consequential in terms of consumer welfare,” the report said, citing inability to pay bills, rising credit card debt, high interest rates on loans, depleted savings, food shortages and homelessness.

The so-called “wrong payments” occurred before the pandemic. This is not all because of fraud; some may be due to errors in the handling of government employment agencies or errors in applications from applicants.

In December, the Department of Labor reported that 18.7% of benefit payments in 2021 were improperly executed. By applying a 2021 rate to $ 873 billion in total unemployment benefits during the pandemic era, the Department of Labor has deduced its new estimate that at least $ 163 billion may have been issued incorrectly.

Prior to the pandemic, the Office of the Inspector General of the Department of Labor annually opened about 120 investigations related to unemployment insurance. During the pandemic era, the Office received more than 144,000 complaints of unemployment fraud from the U.S. Department of Justice and self-initiated more than 39,000 fraud investigations – an increase of more than 1,000 times, the report said.

“The scope of the investigations currently under consideration is unprecedented in the history of the OIG,” the report said.

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