The biggest heist in American history happened in plain sight. In the chaos of the COVID-19 pandemic, state unemployment insurance (UI) systems became an open vault, hemorrhaging over $191 billion in fraudulent or improper payments. From domestic scammers to international fraud rings in Russia, China, and Nigeria, bad actors cashed in on an antiquated system overwhelmed by applications. And unless Congress acts soon to give fraud investigators more time to do their work, many of these criminals will get away with it.
As we mark the five-year anniversary of COVID-related shutdowns and economic disruption, we also approach the rolling expiration of the five-year statute of limitations for prosecuting pandemic-era UI fraud. That means thousands of fraudsters who stole taxpayer dollars will evade justice simply because they were able to run the clock out. Fortunately, the House approved an extended statute of limitations earlier this month, as they previously did for pandemic-related Paycheck Protection Program fraud. If the Senate doesn’t pass companion legislation and deliver a bill for the President’s signature, Congress will send a clear message: Crime pays, if you can stall the government long enough.
The scale of pandemic UI fraud was staggering. State unemployment offices, relying on decades-old technology, buckled under the sudden influx of claims. Identity verification was lax, use of basic fraud flags was practically nonexistent, and many states made little effort to screen applicants against databases of prisoners or the deceased to avoid paying ineligible claims. California alone managed to pay out over $1 billion to claims made on behalf of state inmates.
The Justice Department has been working to hold fraudsters accountable, but these investigations take time. Unlike violent crime, financial fraud cases require meticulous tracing of digital paper trails, forensic accounting, and cross-agency coordination. Some fraudsters laundered stolen UI funds through cryptocurrency and overseas accounts, adding even more layers of complexity. With investigators stretched thin, every extra month counts. If Congress doesn’t extend the statute of limitations, many of these cases will be dead on arrival, and stolen billions will never be recovered.
If Congress doesn’t extend the statute of limitations, many of these cases will be dead on arrival, and stolen billions will never be recovered.
Of course, pandemic fraud is just the tip of the iceberg. UI systems have improved but remain dangerously vulnerable. Without structural reform, we’re setting ourselves up for a repeat performance in the next crisis. Fraud recovery should be a high priority, but states have little reason to aggressively chase down fraud because any recovered funds go back to Washington, not into their own budgets. A simple fix to let states keep a portion of what they recover would give them a real reason to invest in fraud detection. Better data-matching is another obvious reform. Some states have since implemented basic verification measures, and creating new federal standards can help enshrine best practices into law.
Bipartisan legislation to improve UI fraud prevention is already on the table. Senators Mike Crapo (R‑ID) and Ron Wyden (D‑OR) introduced a bill in the previous Congress to strengthen fraud detection, improve administration, and incentivize states to recover stolen funds. Under the leadership of House Ways and Means Committee Chairman Jason Smith (R‑MO), the House passed a similar bill last session. In this Congress, the House has already passed the aforementioned statute of limitations extension, teeing it up for Senate action.
Washington has a bad habit of lurching from crisis to crisis, addressing problems only after they explode into full-blown disasters. The best time to fix UI fraud was before the pandemic. The next best time is now. The Senate must act to extend the statute of limitations and ensure that pandemic fraudsters face justice. Then, Congress must take the long-overdue steps to make sure it never happens again.
