Every bank in the US utilizes technology that can stop it
by Haywood Talcove Weeks ago,Vermont’s Labor Commissioner Michael Harrington made the tough call to entirely shut down the state’s online portal for filing for unemployment benefits. Facing an ongoing barrage of fraudulent claims coming from transnational criminal groups, domestic organized criminal groups and everyone in between, agency leaders had no choice but to move from a digital filing system to an analog one: phone calls.
They were right to do so.
Our nation’s entitlement programs are facing a coordinated attack right now - and the great unemployment heist of COVID-19 may go down as the largest fraud in history – current national estimates are between $150-250 billion. Vermont, like every other state in the union, is dealing with something unprecedented - and nobody should accept or normalize this situation.
Citizens should not have their tax dollars squandered and sent to overseas criminals; legitimate claimants shouldn’t reach out for help only to find that somebody else has already “taken” their rightful benefits; those whose identities are stolen shouldn’t have to pay income taxes on unemployment checks they never received; and states should not fall victim to opportunistic startups that promise a miracle cure to the fraud.
Now, the influx of fraudulent claims has dropped, but friction for legitimate claimants has increased. Those in need - who have paid their taxes and earned their rights to these benefits - shouldn’t have to face exorbitant hold times and delays as they struggle to put food on the table.
The important question we must now ask is: how does Vermont move forward? How does the state architect a frictionless digital identity system that doesn’t allow fraudsters to get through - while guaranteeing that citizens with legitimate claims have access to the benefits they desperately need?
Moving forward, Vermont should look to US financial institutions for guidance - and Governor Phil Scott and Commissioner Michael Harrington should assemble a task force to rapidly implement the same kinds of tools the financial system uses to stop fraudsters. This approach has worked in other States. Banks, unlike unemployment insurance programs, are not crumbling right now. They’re not shutting down their apps and forcing customers to make phone-based withdrawals that last hours on average. Nor are they losing 30% to 50% of all deposits to fraudsters. They’ve had years to construct systems that enable near-frictionless fraud prevention, and it’s time for Vermont’s UI program to adopt the same technologies relied upon by the private sector. It’s fast to implement and it costs very little.
Fundamentally, this is an issue of digital identity-verification. How can Vermont ensure that the person applying for benefits is exactly who they claim to be? There are two approaches that can be taken. One is to force people to display their government documents - driver's licenses, passports, ID cards, etc., and to visually confirm that they are the person in the photos. This is what would have worked several decades ago, and some states have opted for this approach over the past 18 months. Instead of waiting in line you wait on-line and it requires a smartphone, a contract with a carrier and the same address for at least a year! Some things that those in vulnerable populations may not have.
The other way is to do what every major bank in the US does: analyze somebody’s digital and physical footprint and identify unique characteristics that a fraudster wouldn’t know about and use basic device assessment data to make sure that they are associated with the phone and email accounts of the person they claim to be.
The latter approach is how nearly every major bank in the US manages to stop fraud without creating friction, and it’s the correct approach. The tools needed to implement such a system are well-developed, and have been proven across billions of transactions - every single day.
The state of Vermont doesn’t need to reinvent the wheel. They’re not the only entity dealing with rampant fraud right now. And they surely don’t need to continue to force citizens into an analog process. Vermont needs to look to the private sector, identify how the biggest companies in the world are dealing with similar issues, and implement the exact same identity-verification systems that have already been proven effective, efficient and equitable.
Haywood Talcove is CEO of the government group at LexisNexis Risk Solutions.