(The Center Square) – A new report from the Arizona Department of Economic Security says the state has prevented more than $75 billion in unemployment benefits fraud during the COVID pandemic.
DES Director Michael Wisehart said the department began looking at the effectiveness of its fraud prevention efforts shortly after the federal Pandemic Unemployment Assistance program came to an end in early September.
The federal PUA was created in late March 2020 when Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. The program expanded the existing unemployment framework to include self-employed, contract and gig workers. Because those nontraditional workers would have difficulty proving employment history and lost wages, the law waived the usual employer verification process.
PUA was available to anyone providing a name, date of birth, address and Social Security number. That opened the door for fraud through corporate data breaches and widespread identity theft.
Arizona had paid out $4.6 billion in PUA benefits by mid-July and was receiving nearly 3 million weekly certification requests, an amount far beyond the number of nontraditional workers in the state.
“Our team quickly partnered with Google Analytics to develop a fraud scoring model,” Wisehart said. “This enabled the department to parse through a queue of more than 1 million suspected fraud claims, prioritize valid claims and identify patterns and trends.”
The analysis revealed that fraudsters were submitting backdated claims, many with dates from before the first case of COVID-19 was detected in the state.
That same month, Arizona suspended retroactive claims, seeing the number of weekly certifications fall by 87%.
In the late summer 2020, however, after President Joe Biden authorized the Lost Wages Assistance program to supplement the PUA, Arizona saw weekly PUA applications increase more than 10 times the weekly average.
Wisehart said the DES was able to leverage an existing statewide contract to partner with ID.me, an identity verification vendor. By October 2020, a real-time identity verification process for all new PUA applications saw claims fall by 99%.
By January this year, criminals began targeting Arizona’s regular unemployment insurance program, with more than 220,000 new claims filed in the first six weeks of 2021. By the second week of February, using real-time identity verification, new claims fell by 96%
More than $14 billion in fraudulent claims have been recovered by Arizona and some 200 cases have been referred to the state attorney general’s office, with more than 100 resulting in criminal indictments.