Gov. Whitmer solidifies anti fraud measures to protect unemployed workers

Gov. Gretchen Whitmer signed Executive Order 2021-16 today permanently establishing the Unemployment Insurance Fraud Response Team which solidifies the coordination among state departments and law enforcement partners to identify, investigate and prosecute individuals who steal jobless benefits intended for Michigan workers.

The governor also issued Executive Directive 2021-14 directing the Unemployment Insurance Agency to continue to use new technologies, integrate stakeholder expertise, partner with community organizations to educate potential UI claimants, and prioritize enforcement of UI fraud cases through the Response Team. 

"It's extremely important that we continue to push back on bad actors who look to take advantage of a vital safety net resource for out-of-work Michiganders," said Gov. Whitmer. "While we are seeing increased success in identifying and stopping fraudulent claims, we cannot let up. We owe it to workers to make sure this jobs resource is available when they need it the most. Today's action ensures the Unemployment Insurance Fraud Response Team continues to have the expertise and tools necessary to ramp up our efforts to prevent bad actors from defrauding the system."

A new report prepared by Deloitte released today found UIA, now under new leadership, prevented nearly $43.7 billion in benefits in imposter fraud or intentional misrepresentation by the applicant. The report also determined between Oct. 3, 2020, and Sept. 30, 2021, UIA's anti-fraud efforts cut the rate of cases involving imposter fraud and intentional misrepresentation to only 0.57%. For comparison, the US Dept. of Labor (DOL) shows Michigan's average pre-pandemic fraud rate was 2.01% from July 2017 through July 2020 and the federal agency has estimated that the fraud rate during the pandemic could be much higher than the 3% national average.  

"Our diligence in identifying fraudulent claims proves that we now have effective processes to identify criminals who steal benefits from unemployed workers and Michigan taxpayers," said Julia Dale, UIA director. "We will use all the sophisticated tools available to us - and pursue new opportunities and partnerships - to continue aggressively fighting unemployment insurance fraud." 

Today's report looked at federal and state UI benefits programs launched to help workers affected by COVID-19. It defined likely imposter fraud as claims filed by an apparent bad actor to fraudulently extract funds. The report defined likely intentional misrepresentation as claims filed by a legitimate claimant who appeared to be misrepresenting their eligibility for benefits. 

A November 2020 Deloitte report documented steps UIA had taken to enhance its fraud risk management capabilities to address identified vulnerabilities in the unemployment system. The report did not include cases of intentional misrepresentation. Many of those and subsequent measures to prevent fraud are solidified in today's executive directive: 

• Detect anomalies to identify questionable claims for additional review using UIA's Fraud Manager software. Fraud Manager analyzes claims at filing and certification, flagging irregularities or other suspicious patterns.
• Continue using tools provided by the Integrity Data Hub to identify foreign IP addresses, suspicious email domains, multi-state claims and other tip-offs to fraud. Michigan was one of the first states to join the initiative.
• Implement daily reviews of all claim activities and establishing procedures to resolve matters for victims of identity theft who need to file a new claim.
• Continue implementing protocols that streamline workflows by detecting fraudulent claims activity in bulk.
• Continue following procedures to resolve matters for victims of identity theft in real time. Identify theft victims must be empowered to file legitimate claims and access resources available to them to protect their identity.
• Retain experts, as needed, to counter criminal attacks on the UI system, analyze fraudulent unemployment activity, and clear legitimate accounts.
• Create partnerships with community organizations to educate potential UI claimants on eligibility requirements and improve accessibility for disadvantaged communities.
• Prioritize enforcement of UI fraud cases through the Unemployment Insurance Fraud Response Team created by Executive Order 2021-16, which continues the work of the Michigan Unemployment Insurance Fraud Task Force created by Attorney General Dana Nessel.
• Develop operational metrics to track objectives and key results.

In addition, the UIA will:

• Modernize its current IT system. A new claims processing system that is agile, robust and secure will allow for quicker response to economic changes and provide more internal control over touchpoints with our customers.
• Launch an aggressive staff training regimen to address knowledge and skills gaps to better allow the agency to pivot in times of crisis and move resources fluidly to address growing issues.
• Identify opportunities for procedural changes or creating new procedures that will increase agency efficiency not only in current processes, but in recognizing emerging trends that need to be addressed.
• Focus on a human-centered, plain language approach with customers by making sure correspondence isn't confusing, requests by the agency are clear, and missteps can be avoided when dealing with customers.
• Marshall resources, processes and stakeholder partnerships to identify potential fraud cases and deploy new technologies to supplement existing identity proofing tools.
• Plan for UIA's participation in the DOL's Tiger Teams anti-fraud initiative, tapping multi-discipline experts including fraud specialists. 
• Integrate the National Association of State Workforce Agencies' (NASWA) Integrity Data Hub, which identifies high risk claim indicators, into UI fraud detection and prevention processes.
• Create partnerships with community organizations to educate potential UI claimants on eligibility requirements and improve accessibility for disadvantaged communities.  
• Collaborate with DOL and NASWA to track trends and emerging fraud schemes perpetrated by multi-state criminal enterprises.

UIA's What is Fraud webpage details its anti-fraud actions and how you can prevent fraud. 

The creation of the Fraud Response Team builds on the efforts of Attorney General Nessel's previously established Michigan Unemployment Insurance Fraud Task Force. The work of the Task Force, which was first announced in June 2020, has resulted in 54 Michiganders being charged with UI fraud by either state or federal authorities - in some cases netting millions of dollars - with 37 cases pending. Nine people have pleaded guilty or been convicted and three have been sentenced. Those accused of facilitating fraud include five UIA employees or contract workers.

"I applaud Gov. Whitmer's action to ensure bad actors continue to be identified through the Unemployment Insurance Fraud Response Team," said Nessel. "Michiganders currently out of work should not have to worry that the benefits available are being exploited by criminals, which is why our task force has remained focused on rooting out fraud. I look forward to working with our agency partners to support this new endeavor."

The COVID-19 pandemic has been an extremely difficult period for the UIA as the agency faced enormous challenges beginning in March 2020. Despite these challenges, the UIA has paid over $39 billion in benefits to more than 3.3 million workers, with over 99% of eligible claimants receiving benefits. Besides organized fraud schemes, the agency also faced:

• Unprecedented Number of Claims: The agency received 77 times more claims that it did in an average week before the pandemic. In the spring of 2020, the volume peaked with a high of over 388,000 claims in a single week, compared with just 5,000 claims before the pandemic and a previous all-time weekly high of 77,000 during the Great Recession.
• Implementing New and Complex Federal Programs: In addition to traditional state unemployment benefits, the agency has had to quickly build and administer several new federal UI programs created by Congress that required the state to allow individual to self-certify their own qualification.
• Transitioning Staff to Remote Work: Under extremely difficult circumstances, nearly the entire 650+ UIA staff was quickly transitioned to remote work to ensure service to UIA customers continued during the worst global pandemic in over a century.

Incomparable levels of sophisticated, international criminal actors exploited the pandemic with new technology tools and previously stolen information to file fraudulent claims. In May 2020, the U.S. Secret Service warned of an international criminal ring committing large-scale fraud against state unemployment programs across the country. In June 2020, DOL warned that the pandemic created a perfect storm for criminal activity across the country and nearly every state has been a victim of fraud schemes. Emerging reports from states across the country reveal billions of dollars in fraudulent claims were lost to criminal activity.

Today's Deloitte report estimates that out of a potential $52.2 billion in attempted fraudulent claims between March 1, 2020, to Sept. 30, 2021, an estimated $2.7 -$2.8 billion was paid to claims involving likely imposter fraud and an estimated $5.6 - $5.7 billion was paid to claims involving likely intentional misrepresentation fraud. The bulk of payments were federally funded through the various Pandemic Unemployment Assistance programs.

The report also estimated that state-funded UI claims totaled only 2.9% of the total amount identified. With over 97% of imposter fraud and intentional misrepresentation claims coming from federal jobless programs, there was minimal impact to the state's unemployment trust fund.  

"It's extremely disheartening that bad actors have defrauded the much-needed benefits intended for hard-working Michiganders and the scale of their actions is stunning," said UIA Director Dale. "We have been successful over the past year in limiting the percentage of cases that are fraudulent to less than 1 percent, but we will never stop fighting for our workers."

If you suspect you are a victim of fraud of identity theft, report it through Michigan Web Account Manager (MiWAM). Go to Michigan.gov/UIA for information on preventing fraud or identity theft. 

Claimants with questions about their accounts can call UIA Customer Service at 1-866-500-0017, 8 a.m. to 5 p.m., Monday through Friday; employers can call 1-855-484-2636. Or go to Michigan.gov/UIA.