US pandemic fraud loss estimates keep rising as Congress dithers on digital identity

The wave of fraud suffered by the U.S. during the pandemic through unemployment insurance programs is even higher than previously thought, reaching between $100 billion and $135 billion, according to a new report from the Government Accountability Office (GAO). That total makes up 11 to 15 percent of all such benefits paid out during the public health crisis.

The large scale of the fraud was quickly discovered and analyzed, with estimates ranging from the “$60 billion and perhaps much higher” that the GAO testified to in a hearing held by the Congressional Ways and Means Committee in February to $400 billion. Other estimates had pegged the total fraud closer to $80 billion.

U.S. Senate Finance Ranking Member Senator Mike Crapo (R-Idaho) and U.S. House Ways and Means Chairman Jason Smith (R-Missouri) say Congress needs to respond by passing the “Protecting Taxpayers and Victims of Unemployment Fraud Act.” The law, they claim, will help with the recovery of fraudulent and excessive payments. Only $1.2 billion had been recovered as of May, according to the GAO.

The legislation would allow states to keep some of the federal funds they are able to recover, and put them towards fraud prevention, as well as extend the statute of limitations to bring criminal charges over the fraud from 5 to 10 years. It would also repeal fraud prevention funding contained in the American Rescue Plan. The Act passed the House by a 230-200 vote in May.

The Department of Labor says the GAO estimate is likely overstated, due to the methodology used.

The scramble to stem to the tide of fraud against state and federal government programs during the pandemic led to a spate of identity verification contracts for ID.me, and endless controversy.

Same challenge for financial institutions

The equivalent of $212 billion in transactions reported to the Financial Crimes Enforcement Network (FinCEN) in 2021 was related to identity, an official revealed at FedID last week in Chantilly, Virginia, as reported by NextGov/FCW.

FinCEN Chief Digital Identity Advisor Kay Turner said 1.6 million of 3.8 million events reported over suspicions of money laundering or fraud by financial institutions could be addressed with better use of digital identity technologies.

Attendees were also told that fraud prevention measures for the public sector could also help in the private sector.

“It is hand in hand — if we don’t get identity right on the public sector side, we will never get identity right on the banking side,” Prove Identity VP of Client Experience Mary Ann Miller told NextGov/FCW.

Better Identity Coalition Coordinator Jeremy Grant said at FedID that the U.S. government needs to take a broader approach to digital identity.

The Better Identity Coalition, the Identity Theft Resource Center and other organizations have urged Congress to pass digital identity legislation, but the Improving Digital Identity Act remains before the Senate, and has yet to be introduced in the House.

Article Topics

biometrics  |  digital identity  |  FinCEN  |  fraud prevention  |  GAO (Government Accountability Office)  |  identity verification  |  U.S. Government