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EDD reports nearly 10% of 19.5 million claims paid were fraudulent

California Employment Development Department has paid $114 billion in unemployment claims in the coronavirus pandemic.

SACRAMENTO, Calif. — California Department of Employment and Development (EDD) reported the agency has confirmed 9.7% of the 19.5 million unemployment claims since March 2020 have been fraudulent.

EDD said the department noted that an additional 17% of unemployment claims from March 2020 to Jan. 16 could also be fraudulent. The department is now investigating these claims.

EDD estimated the screening and security protections have prevented up to $60 billion in payments to fraudulent claims.

“We know that many Californians are waiting on payments, and EDD is working quickly to validate their claims and get their benefits to them," said Julie Su, California Labor and Workforce Development Agency Secretary.

California processed a record amount of unemployment benefits claims in 2020, primarily driven by the COVID-19 pandemic. According to the department, the high volume of new claims in the state allowed for thieves to hide in plain sight. 

ID.me CEO Blake Hall, whose company is handling identification of EDD claims, said some of the fraudulent claims are coming from crime rings out of Nigeria, Moscow and Hong Kong. EDD reported that many of the crime syndicates targeted the federal Pandemic Unemployment Assistance (PUA) program.

“EDD was clearly under-prepared for the type and magnitude of criminal attacks and the sheer quantity of claims,” said EDD Director Rita Saenz. 

Su said the lack of security infrastructure for the PUA program led to criminal activity. According to the U.S. Department of Labor, the PUA program was particularly susceptible to fraud as it did not require income or employment verification upfront and allowed claimants to back-date their claim to February.

The EDD estimated that roughly 95% of California's known fraudulent payments were made to PUA claims. 

The remaining 5% is associated with California’s existing Unemployment Insurance (UI) program. In 2019, the UI program had 6% of its claim deemed fraudulent.

ID.me and EDD continue to investigate unemployment claims to prevent further fraudulent claims.

EDD experienced more than five times as many unemployment claims in 2020 than in 2010, the worst full year of the Great Recession. In fact, EDD processed as many claims within the first eight weeks of the pandemic shut down as it did during all of 2010. 

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