As the state continues to deal with an overwhelming amount of fraud with unemployment insurance claims, state officials briefed lawmakers on how Kentucky is working to combat these issues and help individuals with legitimate claims receive their benefits.
Kentucky Office of Unemployment Executive Director Buddy Hoskinson began his testimony noting government programs have always been a target for fraud and that the pandemic unemployment insurance (UI) system was a prime target because it was set up so fast. There was a lack of guidance from the Department of Labor, which caused the perfect storm, according to Hoskinson.
MORE ON FRAUDULENT CLAIMS: Fraudulent claim letters being sent to Kentuckians about unemployment insurance benefits
The country has seen more than $63 billion in fraudulent claims paid out so far and Hoskinson said he expects that number to grow to more than $100 billion in fraudulent claim payments before the end of the pandemic, as there are currently more fraudulent claims than there are legitimate claims.
The dark web is the biggest source of the information leading to these issues, he said, and other countries like Nigeria and others have been prevalent in fraud, using a playbook on how to beat the system seeking social security numbers and addresses of individuals and employers. Hoskinson said those efforts are successful about one in six attempts, and the victim normally has no idea it has happened. These individuals are learning their identity has been compromised when they are receiving letter about a UI claim or getting a 1099 because a claim has been filed, Hoskinson said.
To date, just under $6 billion in benefits have been paid out in Kentucky, touching almost two million claimants. Many legitimate claims still remain unpaid in Kentucky, and Hoskinson said the UI office knows the vast majority of those left have to do with fraud and that other, legitimate claims, are being held up by the massive amounts of fraud.
This is happening across the country, and the federal government has issued around $200 million to help states combat this fraud. Kentucky has received the maximum amount of $1.7 million from the federal government twice to help with upgrading systems and bring on more staff to help with the issues. Hoskinson said the United States Justice Department has issued 50 state task forces and many agencies are working on the issue including the FBI, state attorney general’s office, and others.
The state is no longer using a debit card system to distribute UI funds. Instead, paper checks are being sent, which Hoskinson said has halted some of the fraud because the hacker is not getting the desired end result, and now the victim is recognizing that something has been done in their name and funds can be sent back. If an individual receives a check accidentally, that person should report through online portal and send the check back to the address provided on the site.
As people are attempting to file their taxes, many are struggling, as they have bad 1099 forms due to this issue and are unsure how to move forward. The Kentucky Department of Revenue specified that if you cannot get a corrected 1099 in a timely manner to file your tax return, you should only claim the amount of income that you actually received. Read more about how to use the state’s website dealing with fraudulent claims here.
As for next steps, Hoskinson said the state plans to have the ability for Kentuckians to talk to someone about claims in person as the state launches career centers across the state in April. The UI office is also implementing additional security measures on their sites and audit programs for processing.