Washington officials pushed back Saturday after the U.S. Attorney in Seattle cited “vulnerabilities” in the state’s unemployment system that reportedly have left it a prime target for an international fraud ring amid the coronavirus joblessness explosion.
Still, the state’s top unemployment administrator acknowledged the agency is likely to slow direct deposits of unemployment payments to block the widespread fraud, which a Secret Service alert linked to a “well-organized Nigerian fraud ring.”
Suzi LeVine, commissioner of the state’s Employment Security Department (ESD), said in an interview Saturday she was “surprised, and really frankly disappointed” with U.S. Attorney Brian Moran’s statement a day earlier referring to Washington’s vulnerabilities to unemployment fraud schemes.
“You know, as somebody who comes from the technology industry, I have a deep appreciation that you don’t talk about your issues and errors, if you know of them, until after you’ve got them fixed,” LeVine said.
David Postman, chief of staff for Gov. Jay Inslee, also expressed frustration. “I’m really beside myself trying to understand why a law enforcement official who believes there’s a vulnerability, so far unnamed, wouldn’t tell us what they thought that was and offer to help,” he said.
The back and forth comes as the ESD temporarily halted benefits payments this past week to try to deal with a surge of bogus claims for unemployment insurance filed using the identities of unsuspecting workers.
While blasting the criminals behind the fraud schemes, Moran, the U.S. Attorney for Western Washington, on Friday said state leaders should “address and fix vulnerabilities in their system.”
Emily Langlie, a spokeswoman for the U.S. Attorney’s Office, said Moran has personally engaged in efforts to halt the criminal activity, including conference calls with federal investigators, members of the state Attorney General’s Office and ESD personnel. “He is happy to speak with anyone at any time,” Langlie said.
A U.S. Secret Service alert issued Thursday described Washington as the top target so far of a Nigerian fraud ring “exploiting the COVID-19 crisis to commit large-scale fraud against state unemployment insurance programs.”
The alert said the “primary state targeted so far is Washington” but said there also was evidence of attacks in North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida, warning it was “extremely likely” that every state is vulnerable to the scheme. It further described Washington unemployment payments going to persons residing outside the state “all in different individuals’ names with no connection to the account holder.”
On Saturday, a security news website reported that banks in Oklahoma this week began seeing a “flood of high-dollar transfers” connected with unemployment claims filed in Washington, “with many transfers in the $9,000 to $20,000 range.”
“It’s been unbelievable to see the huge number of bogus filings here, and in such large amounts,” Elaine Dodd, executive vice president of the Oklahoma Bankers Association’s fraud division, told KrebsonSecurity.com.
Washington and other states are scrambling to process unemployment benefits for an unprecedented number of workers. Congress has bolstered state unemployment programs with billions of additional dollars — money that also appears to have attracted fraudsters, who reportedly have broken into unemployment insurance systems using personal data stolen during earlier data breaches.
LeVine and other state officials say the fact that Washington was among the first states to start paying federal benefits likely made the state an early fraud target. ESD officials have also said that federal and state efforts to get claimants paid quickly — efforts that gave states less time to verify claims — may have made it easier to game the system.
By last week, Washington already had taken dramatic steps to try to stem fraudulent claims — including a two-day halt in payments of benefits. That followed the state’s discovery of at least $1.6 million in claims paid to impostors in April — with fraud spiking even further in May.
ESD has resumed payments, but some will likely arrive more slowly as officials attempt to to weed out illegitimate applications.
The department had been turning around direct deposits for approved initial claims within 24 to 48 hours, LeVine said, but that may not be possible going forward. Although she did not specify the length of delay, she said the agency would notify claimants in the coming days of any changes, and would strive to pay benefits as quickly as possible.
From the start of the crisis, during which the state has paid out $2.5 billion in benefits over eight weeks, LeVine said ESD’s goal has been trying to strike a balance between the “risk of fraud” and “risk of hunger.”