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Arizona plagued by unemployment fraud, legitimate claims stalled

Bad actors posing as real Arizonans are stealing unemployment insurance money. Meanwhile, Arizonans with legitimate claims are having trouble getting their money.

PHOENIX — Arizona is under attack. Bad actors are posing as real Arizonans on paper and receiving unemployment insurance money. 

One expert calls the flurry of scams a national crisis.

“The problem is some of these organized crime rings and individual hackers will come up with the recipe -- if you will -- and then they will literally publish the recipe on the dark web,” said Blake Hall of ID.Me., an identification verification company contracted with Arizona and more than two dozen other states.

'We’re afraid to go to the mailbox'

Legitimate businesses in Arizona are seeing the ripple effects of the scams.

Clouse Engineering is a small Scottsdale firm with six employees. 

Like many Arizona companies, it’s been inundated with letters from the state attempting to confirm they laid people off. 

The company has received about a dozen such letters, said JoAnne Cohan, the office manager for Clouse Engineering.

The problem? The company has not laid off anyone during the pandemic and the letters contain names they’ve never heard of.

“We’re afraid to go to the mailbox because we don’t know if there will be more of these letters. It’s disturbing,” Cohan said.

These companies must report the fraud to the state within 10 days to ensure the attempted fraudsters don’t collect unemployment.

'It’s a national crisis'

Hall said the suspects defrauding the system are both international and local and they are perpetrating “the largest organized cyber attack of fraud in American history.”

“Often times, these are domestic criminals that live within the state or adjacent to the state itself,” Hall said. 

“The funds get mailed typically to an address within the state where it is dispersed. These money mules are recruited to get the debit card and pull the money off the card and transfer it to a cash app.”

“We’re seeing nation-state attacks, organized crime rings, domestic criminals who are just following the criminals on the dark web, orderlies at nursing homes who are manipulating elderly people to obtain their identity,” Hall added.

“And then some people are using their legitimate identity to take unemployment insurance payments in five, six or seven states at once.”

Hall is briefing the U.S. Department of Labor about the scams and estimates that $200 billion in federal money has been lost. 

“It’s a national crisis, really,” Hall said. “At this point, it’s almost like a cancer that’s metastasized to stage four.”

Arizona was more prepared than most states

According to Hall, the Arizona Department of Economic Security began preparing for these kinds of attacks since early October and acted earlier than many other states.

But Hall calls it a federal issue because it involves federal funds being dispersed.

“There’s desperate people who need legitimate funds to take care of their families and themselves,” Hall said.

The department tells 12 News they are working to prevent $15 million in fraud benefit payments each week.

How can you protect yourself?

If you are applying for unemployment, never give confirmation codes to anyone over the phone, Hall said. 

If someone calls claiming to be a state agency or an I.D. verification service, ask them for a secondary confirmation.