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Slight Uptick in Government Benefits Fraud Attempts in Q2 2022

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For the second consecutive quarter, almost one-third of respondents (29%) indicated they were affected by a fraud scheme targeting a public benefit program, according to TransUnion’s Consumer Pulse Q2 2022. Among these respondents, all specific categories of benefits fraud saw an increase this quarter:

  • 46% reported health insurance fraud (up from 45%)
  • 35% reported tax return fraud (up from 34%)
  • 34% reported retirement-related fraud (up from 33%)
  • 30% reported unemployment fraud (up from 28%)

Among consumers reporting falling victim to a digital fraud scheme in the past quarter, nearly half (49%) were targeted as part of a public benefits scheme. While pandemic-related assistance programs may have fallen out of the news cycle, the persistent level of reported fraud attempts and victimization rates suggest fraudsters continue to pursue opportunities to attack government benefits programs.

Trends in unemployment benefits fraud

Focusing on this quarter’s unemployment fraud, respondents reported the largest relative increase compared to last quarter. While the labor market is strong and national unemployment rate is sitting at a pandemic-era low, workforce dislocations precipitated by the pandemic continue to impact Americans across the country. Many unemployment insurance systems are still reeling from the massive spike in activity last quarter and (combined with an unaddressed backlog of fraud claims and overworked administrators) remain an attractive target for fraudsters. In fact, the IRS recently named unemployment fraud as one of their “Dirty Dozen” schemes taxpayers should remain vigilant against,[1] and the GAO named unemployment insurance a “high risk” program due to fraud.[2]

Nearly one in three respondents reported being targeted by an unemployment fraud scheme. Within this group, 18% reported falling victim to fraud in the past quarter. This is up one percentage point compared to the prior quarter, perhaps reflecting increasing fraud scheme sophistication and/or falling consumer awareness of unemployment schemes.

Changes in age distribution of reported unemployment benefit fraud

The composition of respondents who reported experience with unemployment fraud schemes this quarter shifted significantly; Gen Z consumers falling from one-third of the population to one-fourth. Simultaneously, the level of Gen X consumers who experienced unemployment fraud attempts rose from one-fifth to one-fourth.

Age group

Last quarter

This quarter

Baby Boomers

7.5%

7.1%

Gen X

18.8%

25.1%

Millennials

39.7%

41.4%

Gen Z

33.9%

26.4%

Numbers may not add to 100.0% due to rounding

Interestingly, Gen X consumers reported higher rates of falling victim to digital fraud schemes compared to Gen Z consumers — particularly identity theft. Of Gen X consumers who reported being victimized by digital fraud last quarter, 46% fell for an identity theft scheme compared to just 18% of Gen Z. Perhaps we’re seeing this reflected in fraudsters’ targeting decisions as they shift focus to less “tech-savvy” (or, at the very least, more fraud-prone) consumers.

Data breaches increase Americans’ risk to unemployment fraud

Among respondents who reported being targeted by an unemployment fraud scheme, 45% were notified  details about their identity and/or an online account had been exposed in a data breach in the past three months. For those who reported falling victim to a recent digital fraud scheme, 64% were notified they’d been affected by a recent data breach. The increased volume and efficacy of schemes targeting those with exposed identities further underscores the need for robust verification procedures, even as pandemic-era unemployment concerns and assistance programs subside.

It’s not always “just” unemployment fraud

About a quarter of respondents targeted by an unemployment fraud scheme also reported being targeted by a different benefits fraud scheme, suggesting many fraudsters may be taking a “shotgun-style” approach to scams. A compromised identity can be leveraged to apply for benefits across multiple programs in a short time span, providing bad actors with a variety of opportunities to exploit fragmented information systems for maximum gain.

Benefits fraud scheme

% of respondents affected by unemployment fraud also affected by this scheme

Health insurance fraud

29%

Retirement fraud

25%

Tax return fraud

25%

 

Protecting constituents requires a multifaceted approach to identity

To ensure benefits are going to their intended recipients, government agencies that administer such programs need to continually adapt their fraud management processes to combat emerging fraud schemes. This requires sharing information about known fraud actors and compromised identities/devices as it becomes available; developing education resources to warn citizens of new schemes; and strengthening identity verification processes at the point of enrollment. For unemployment fraud specifically, TransUnion is proud to support the Department of Labor in its $260 million program to help states protect against fraud schemes targeting unemployment programs.

Learn more about TransUnion Public Sector Fraud Solutions.

 

[1] IRS Newswire IR-2022-117 (June 6, 2022)

[2] GAO-22-105162, UNEMPLOYMENT INSURANCE: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks (June 9, 2022)

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