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Illustration: Aïda Amer/Axios

Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say.

Why it matters: Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates — making this not just theft, but a matter of national security.

Catch up quick: When the pandemic hit, states weren't prepared for the unprecedented wave of unemployment claims they were about to face.

  • They all knew fraud was inevitable, but decided getting the money out to people who desperately needed it was more important than laboriously making sure all of them were genuine.

By the numbers: Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

  • Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere.
  • "These groups are definitely backed by the state," Talcove tells Axios.
  • Much of the rest of the money was stolen by street gangs domestically, who have made up a greater share of the fraudsters in recent months.

What they're saying: “Widespread fraud at the state level in pandemic unemployment insurance during the previous Administration is one of the most serious challenges we inherited," said White House economist Gene Sperling.

  • "President Biden has been clear that this type of activity from criminal syndicates is despicable and unacceptable. It is why we passed $2 billion for UI modernizations in the American Rescue Plan, instituted a Department of Justice Anti-Fraud Task Force and an all-of-government Identity Theft and Public Benefits Initiative.”

How it works: Scammers often steal personal information and use it to impersonate claimants. Other groups trick individuals into voluntarily handing over their personal information.

  • "Mules" — low-level criminals — are given debit cards and asked to withdraw money from ATMs. That money then gets transferred abroad, often via bitcoin.

The big picture: Before the pandemic, unemployment claims were relatively rare, and generally lasted for such short amounts of time that international criminal syndicates didn't view them as a lucrative target.

  • After unemployment insurance became the primary vehicle by which the U.S. government tried to keep the economy afloat, however, all that changed.
  • Unemployment became where the big money was — and was also being run by bureaucrats who weren't as quick to crack down on criminals as private companies normally are.
  • Unemployment fraud is now offered on the dark web on a software-as-a-service basis, much like ransomware. States without fraud-detection services are naturally targeted the most.

The bottom line: Many states are now getting more sophisticated about preventing this kind of fraud. But it's far too late.

This story has been updated with the quote from the White House.

Go deeper

Pandemic-era stimulus lifted millions out of poverty, new government data shows

A woman carries a box of food as others wait in line at a food bank in Van Nuys, Calif., in April 2020. Photo: Mario Tama/Getty Images

In one of the worst years ever for the economy and labor market, America's poverty rate dropped, per one measure that takes into account pandemic-era aid, the government said Tuesday.

Why it matters: It underscores the colossal impact stimulus checks, expanded unemployment payments and other benefits had on households in 2020 — even as millions lost jobs. Without them (and other safety nets, like Social Security), the poverty rate jumped for the first time in five years by one percentage point to 11.4%.

911's digital makeover

Illustration: Annelise Capossela/Axios

A next-generation 911 would allow the nation's 6,000 911 centers to accept texts, videos and photos.

The big picture: U.S. emergency communications have remained stubbornly analog, but Congress is about to take another run at dragging 911 into the digital age.

Biden enlists business leaders in campaign for vax mandates

President Joe Biden at a meeting with business leaders Sept. 15, 2021. Photo: Oliver Contretas/Getty Images

President Biden convened a meeting of top business leaders Wednesday to build support for a sweeping vaccine mandate that will affect most of America's workers. The message: Vaccines work, and the stalled uptake is holding back the economy.

Why it matters: As vaccine rates have flattened across the country, business leaders have the power to impact their employees’ decisions. Many corporate leaders had been looking for stronger federal guidance to lean on.