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Half of the pandemic unemployment funds in the U.S have been stolen

Unemployment fraud during the pandemic could be up to $400 billion, and the majority of the funds are likely to have ended up in the hands of crime syndicates — making this not just a matter of colossal inefficiency but added impacts on national security.

The economic impact of COVID-19 is well documented. Businesses across all sectors felt the effects of national lockdowns and movement restrictions. Governments had to act quickly to protect these businesses and their employees from the financial effects. Altogether, authorities have spent about 2.2% of the global GPD (approx. 2 trillion USD) to combat the effects of COVID-19. Most of this stimulus funding was provided in cash assistance.

Authorities chose cash to refuel the economy as they saw it as the quickest solution to an urgent issue; however, did it have the biggest impact? Did the simplicity come with a sacrifice of efficiency?

Cash is very easy to distribute and requires no integration to spend, but on the flip side, it is impossible to direct where, when, and if it is finished.

As a result, stimulus funds can be misspent, creating an incentive for fraud. In the U.S., "widespread fraud at the state level in pandemic unemployment insurance is one of the most serious challenges," said White House economist Gene Sperling.

With the amount of state-distributed money rising, the rewards for fraud increase with it. It has got to the extent where the dark web now has people offering unemployment fraud on software as a service package.

With fraud, the likelihood that money intended to help individuals and to boost spending at struggling local businesses ends up in the wrong pockets grows significantly.

Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the U.S., ending up in criminal syndicates in China, Nigeria, Russia and elsewhere.

These insights are hard to validate due to cash being completely untraceable accurately, extra resources being used on surveys, and impact assessments being used to gauge the inefficiencies.

Government funding problems are now highlighted by the mass-scale distribution and fraud seen under COVID. Authorities are now looking to innovative, tech-based solutions as the answer to these problems.

"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."

The key to ending the issues with fraud takes two approaches:

1. Stop the fraudulent claims

Stopping the money from being given to the wrong people. However, this isn't easy and can absorb large amounts of resources in detailed applicant checks. Also, these checks slow down the time from application to receiving funds; increasing this time gap can be dangerous.

2. Ensure that the funding is only spent where and how it is meant to:

This works in multiple ways.

  • People are less incentivized to steal access to purchasing power if it can only be spent in restricted markets (e.g., funds are only redeemable at local food shops and restaurants), the risk of being caught, and the resources that go into committing state fraud are too serious if there is no big picture win (e.g., a house, a new car, a new watch), instead just $80,000 worth of food for example.

  • Set spending rules that ensure to spend government benefits, you must devote a portion of your own money (e.g., 50% grant, 50% personal earnings). This means that fraudsters would have to burn through considerable amounts of their cash to gain access to material goods through fraud.

  • The impact of fraud can be reduced even if unworthy people are still stealing funds. If funds are ensured to go to businesses that need government help to survive, then the negative of giving unjust funds is mitigated with the greater impact achieved.

Unbox is at the forefront of a new world of closed-loop purchasing power distribution networks, which we believe will solve the current issues with grants and remuneration systems. Our solutions improve the efficiency of funding flows by allowing full control and feedback on where given funds are distributed. As a result, organizations can either have the same impact with a smaller budget or keep the current budget but increase their impact significantly.

See Unbox your City to find out more about how our solution works.


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