Criminals and fraudsters are employing their fraud tactics again, this time by using innocent Americans’ information. Welcome to Unemployment Benefit Fraud – a new tactic where online criminals use your information to apply for unemployment benefits, usually in other states. Once received, the money is funneled through a network of mules, or victims recruited to transfer the money unknowingly, ultimately making its way back to the criminals.

Read on to learn about this new fraud scheme and to find out what you can do to prevent becoming a victim.

A new COVID19 scam

In a recent article on avoiding COVID19 scams, I detailed how fraudsters are leveraging the concern surrounding COVID19 to their benefit. Indeed, fraud involving COVID19 is expensive. According to a recent Federal Trade Commission (FTC) report, COVID19 fraud has cost Americans $69M from just a 105K reports of fraud.

Unemployment Benefit Fraud is costly too. Victims include not only the states whose coffers of unemployment funds are being stolen, but also the massive number of individuals whose information is being used. According to US Attorney William D Hyslop, from the Eastern district of Washington, “It is deeply troubling to see these reports of fraudulent unemployment claims being filed and allegedly paid by the State Employment Security Department. These are our public tax dollars. These funds are intended for those in need, and not for fraudsters.”

This is costly for the states. Maine’s Labor Department reported that it has stopped about $13M in fraud and is reviewing another $49M. Washington State has also been hit hard according to a recent NPR article. Federal law enforcement agencies are suspecting a vast, well-organized fraud network is behind the scheme, according to a recent New York Times article.

How Unemployment Benefit Fraud works

It works like this – international criminals are using personally identifiable information (PII), stolen from past data breaches and compromises from individuals, to register and apply for state unemployment benefits using that stolen PII. The criminals usually obtain the deposited funds through a mule or fictitious business shell account. Next, the funds are transferred from the first account to another mule account, usually by wire or similar automated transfer system, like an app. Criminals love money transfer apps. Their speed and anonymity are preferred mechanisms for moving money from person to person before reaching the criminals. Often the second mule transfers the money to yet another mule before the funds reach the criminals. Usually, there are a handful of mule accounts involved in the transfer of funds.

Compounding this problem is the speed at which the states are releasing unemployment benefits. Prior to COVID, states would verify and cross check information on the application, which took time. In response to COVID, to get more unemployed workers their benefits, states have been releasing funds much more quickly and perhaps not doing as much investigation on the unemployment benefit application, says Identity Theft Resource Center CEO James Lee in an interview with CNBC. The criminals noticed that states were releasing funds much more quickly, and the fraud accelerated from there.

What is a money mule?

A “money mule” is a term often used by the FBI and banks to identify an account that is used to transfer illegally acquired profits of financial crimes at the direction of the criminals. Notice the phrase, “at the direction of.” Money mules are recruited by the criminals to facilitate the transfer of funds. However, the criminals do not simply post an ad online asking for help in the transfer of stolen money. Instead, criminals often rely on simple tactics of social engineering – the manipulation of information to present it as factual – to convince someone to help them.

Criminals know that humans are relational by nature. That is why criminals use deceitful, simple tactics aimed at gaining their victim’s trust BEFORE they ever mention money. The criminals know that after their victim’s trust them, they will do what they ask. This is why criminals use easy tactics of creating fake online profiles on social media and then begin befriending their money mule victims online. Additionally, criminals may pose as potential employers with work from home jobs and side gigs luring in money mule victims.

Money mule red flags – what to look for

The FBI’s Money Mule Awareness Booklet does a great job at summarizing the indicators of a money mule. Specifically, you may be a money mule if:

  • You received an unsolicited email or contact over social media which promises easy money for little or no effort
  • The “employer” you communicate with uses web-based services such as Gmail, Yahoo, Hotmail, Outlook, Hangouts, etc.
  • You are asked to open a bank account in your own name, or in the name of a company you form, to receive and transfer money
  • As an employee, you are asked to receive funds in your bank account and then “process” or “transfer” funds via wire transfer, ACH, mail, or other money service such as an app
  • You are told to keep a portion of the money you transfer
  • Your duties have no specific job description
  • Your online companion, whom you have never met in person, asks you to receive money and then forward these funds to one or more individuals that you do not know
  • You accept the invitation to get to know this person even though you haven’t met them physically in person. You base your trust of their invitation on that your other friends seem to know them online

Wrapping it up

Remain vigilant and on guard against unsolicited offers. You should have an eye of uncertainty when dealing with a robocall, unexpected email, phone call, text message and letters. If you have suspicions, attempt to confirm with the sender and original source before handing over your sensitive information.

 Wilson Bank & Trust is here for you. Should you need help, please do not hesitate to reach out to us online at wilsonbank.com, through our mobile app, or at (844) WBT-BANK (844-928-2265).

 Have another thought, tip or suggestion? Leave it in the comments below. I would love to hear from you!

Posted by Elvis Huff

Elvis Huff worked as an officer and network administrator for 12 years with the Lebanon Police Department and has also served as an adjunct professor in information systems at Cumberland University. Read More »

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