Past underinvestment in basic government technology and the crush of demand during the pandemic, combined with ill-considered decisions to take down basic fraud controls at the onset of the pandemic led to a historic degree of outright fraud and identity theft of emergency benefits. This systemic fraud particularly impacted the pandemic small business programs and the new and expanded unemployment benefits that were originated in the first half of 2020—often with too little regard for basic program integrity.
While the initial pandemic legislation in 2020—as well as the American Rescue Plan passed in 2021—were essential to mitigating the health and economic impact of this unprecedented pandemic, there must be a bipartisan response to punish those who engaged in major and systemic fraud against the American people during a time of national emergency, to put in place stronger fraud and identity theft prevention going forward, and to hold harmless those Americans who were innocent victims of identity theft.
President Biden is introducing a three-part historic Pandemic Anti-Fraud proposal:
Ensuring resources & time for investigations and prosecution of those engaged in major or systemic pandemic fraud ($600 Million): It is imperative that those criminal syndicates who preyed on Americans during a time of unprecedented health and economic emergency know that they may run, but they cannot hide. We must prosecute serious offenders and go after those who have the largest amount of stolen funds to recapture.
Investing in fraud prevention and identity theft ($600 Million): It is critical that we learn lessons from what went wrong with certain emergency programs that were subject to significant fraud in 2020 and invest in better prevention of identity theft and all forms of major fraud involving public benefit programs. We are committed to simpler access for intended beneficiaries and protecting our commitment to equity, civil liberties and privacy.
Helping victims of identity theft ($400 Million): While we must take broad steps to prevent identity theft of public benefits, we must recognize the nature of the harms to innocent victims who find themselves facing hardship, credit score deterioration, tax liability and extreme stress and helplessness through no fault of their own.
Ensuring That Oversight and Enforcement Bodies Have the Resources and Time to Prosecute Major Pandemic Fraud & Recoup Taxpayer Dollars
We must empower law enforcement to pursue, investigate, prosecute, and recover money from those who were engaged in major or sophisticated fraud—from well-off individuals who took hundreds of thousands, if not millions, of dollars from taxpayers to sophisticated criminal syndicates engaging in systemic identity theft. The oversight and law enforcement communities need both the time to prosecute the most serious and sophisticated cases and the resources to hire law enforcement and investigators for multi-year assignments. This is extremely important with regard to major acts of fraud in the Pandemic Unemployment Insurance and pandemic small business programs, where the Inspectors Generals (IGs) have led the investigative work behind major prosecutions that have recovered or prevented billions of dollars of fraud. Absent additional resources, the oversight community would be unable to investigate and prosecute the known caseload before the statute of limitations expires and to pursue sophisticated cases that will require more time and resources. This backlog, and the significant funds these IGs are able to recoup and save, also means that increasing their funding will result in a more than 10-to-1 return for taxpayers.
Critical enforcement steps will include $600 million to provide watchdogs with the resources and the time needed to go after most serious pandemic fraud.
Triple the COVID-19 Fraud Strike Force Teams that were created by the Department of Justice (DOJ) “Chief Pandemic Fraud Prosecutor” that President Biden announced in his State of the Union: Following the President’s policy announcements in his 2022 State of the Union address, Department of Justice (DOJ) created three “strike forces” for Pandemic Fraud. These “strike forces” have been highly effective and must be expanded to recover more stolen taxpayer dollars. One case alone, brought with the support of the COVID-19 Fraud Enforcement Task Force, recently seized and recovered $286 million in stolen pandemic relief funds, and investigators have already identified several equally important cases. President Biden’s proposal requests $300 million for DOJ to add at least ten “strike forces” to target criminal syndicates and major fraudulent actors. These funds would ensure that the Department has the necessary resources to prosecute the full range of pandemic fraud, bring to justice the most egregious and sophisticated offenders, and recover stolen funds for the American people.
The strike forces will combine investigative, prosecutorial, and analytical capacities in tackling COVID fraud throughout the country. Each strike force will include a Supervisory Assistant U.S. Attorney, a team of Assistant U.S. Attorneys, along with investigative support analysts and law enforcement agents—including those drawn from the IG community and other federal law enforcement partners such as the Federal Bureau of Investigation, Homeland Security Investigations, the U.S. Secret Service, the U.S. Postal Inspection Service, and Internal Revenue Service (IRS) Criminal Investigation. Mechanisms exist for non-DOJ agency reimbursements, such as through DOJ’s Organized Crime Drug Enforcement Task Forces. This effort will include funds to hire 30-45 additional prosecutors, as we create a Forfeiture Task Force
Increase statute of limitations to 10 years for serious, systemic pandemic fraud including Pandemic Unemployment Insurance programs: Building on our doubling of the extension of the statute of limitations for the Paycheck Protection Program and COVID-19 Economic Injury Disaster Loans, which President Biden signed this summer, this proposal calls for ensuring that the Justice Department and Department of Labor’s Inspector General have the time and multi-year resources to go after criminal syndicates committing systemic or multi-state fraud. It will also ensure that systemic fraud in any pandemic program will face the same statute of limitations.
Pass bipartisan legislation supported by the Oversight Community to increase the cap in the Fraud Civil Remedies Act: Supported by heads of both the Government Accountability Office (GAO) and the Pandemic Response Accountability Committee (PRAC), this legislation would raise the administrative claims cap from $150,000 to $1 million to ensure that all remedies are available to recapture large, six figure fraud that might otherwise fall below the prioritization threshold for prosecution.
Ensure that the Department of Labor (DOL) Office of Inspector General (OIG) can easily access multi-state data to detect instances of multi-state fraud where the same identity is inappropriately used to apply for benefits in multiple states: Early in 2021, the Biden Administration reversed a Trump Administration policy that required the DOL OIG and PRAC to subpoena each state and territory individually to get the data needed to detect and investigate massive multi-state fraud in the unemployment insurance (UI) program. In addition, the Biden Administration made a portion of American Rescue Plan grants offered to all 53 state and territories for UI modernization conditional on giving the DOL OIG data from the beginning of the pandemic to December 2023 to save billions in multi-state identity fraud. Future grants will extend this agreement through 2025, and the Department of Labor is committed to ensuring that the OIG will not experience a gap in accessing multi-state data.
Provide at least $300 million for the Pandemic Inspectors General and PRAC investigative staff: At current Small Business Administration (SBA) and DOL IG staff funding levels, it would take decades to prosecute the known caseload. This funding would ensure they can bring on the resources needed to recover billions of dollars in fraudulent payments. The SBA and DOL IGs would each get at least $100 million for the express purpose of long-term hiring of investigators to pursue special cases of organized pandemic fraud and to support the interagency strike forces led by the DOJ Chief Pandemic Fraud Prosecutor. Additionally, this proposal provides funding for PRAC to hire or provide reimbursements for investigators to support major prosecutions and ensure that other pandemic IGs have the resources they need.
Investing in Fraud Prevention and Stopping Identity Theft
The pandemic exposed significant vulnerabilities in our government benefits systems, especially in regard to preventing systemic identity theft as a means to steal benefits designed for Americans coping with the health and economic impacts of the pandemic. It is clear that reliance on historic knowledge-based verification (e.g., Social Security number, date of birth), is more and more susceptible to attacks given the widespread ease of access by criminal syndicates to individuals’ personal information, which can be bought on the dark web for pennies. Through an upcoming executive order, the President will direct actions designed to provide guidance to federal agencies on the best ways to prevent identity theft in public benefits. In addition, the Administration is proposing significant resources to support stronger preventative steps to prevent identity theft in public benefits.
This proposal builds upon the lessons learned during the pandemic and will ensure robust fraud prevention and identity theft prevention investments totaling at least $600 million:
Prevent Future Fraud by expanding the PRAC’s Pandemic Analytics Center of Excellence: The Pandemic Analytics Center of Excellence (PACE) is a cutting-edge analytic platform that provides analytic, audit, and investigative support to the Inspector General community. As evidenced by a recent PRAC Fraud Alert, this is a high-return investment. This proposal would establish a permanent anti-fraud data and analytics capability analogous to the PACE for the Inspector General community to be positioned to oversee future disaster relief and emergencies. The PRAC, the American Rescue Plan (ARP) Implementation Team and the Office of Management and Budget (OMB) pioneered a new model of early action fraud prevention—as opposed to chase and pay. This proposal would support further cooperative efforts to prevent fraud from taking place in the first place.
Expand Treasury’s Do Not Pay Service and increase checking tax transcripts: During the pandemic, the previous Administration allowed 57,000 loans worth $3.6 billion to go out by August 2020, when all of them would have been flagged had the Trump Administration SBA simply checked them against Do Not Pay (DNP) databases. SBA loan applicants have also long allowed the SBA to check their IRS tax records to identify potential fraud before approving loans, but Congress at one point put in legislation language to discourage the checking of tax transcripts for potential fraud before giving out large SBA loans. Fortunately, the Biden Administration re-started checking DNP databases and authorized tax transcripts in 2021. This proposal will both add significant new funds to Treasury to increase capacity to identify, prevent, and recover improper payments and related fraudulent activity, and call on Congress to pass a law making clear that skipping payment integrity verifications for loans and grants above $25,000 should not happen again—even in an emergency situation.
Provide at least $300 million to prevent identity theft in public benefits: To further prevent systemic identity theft and organized criminal syndicates from exploiting government benefits programs, this proposal would include funding to support the modernization of agency identity verification systems and support enhancements to lessen the impact on victims of identity theft. As recommended by the PRAC and outlined in their recent report, this funding would facilitate improved data sharing and enhancement of “yes” / “no” attribute validation services.
Invest $150 million to ensure lessons learned are applied going forward: This funding would ensure that effective oversight and the best practices and lessons learned from the pandemic are institutionalized. This would include funding for under-resourced IGs, such as the Department of Energy, Department of Agriculture, and the Environmental Protection Agency.
Formalize “Gold Standard” meetings: “Gold Standard” meetings were started by the Biden ARP Implementation Team and OMB, in partnership with the PRAC, to institute a more cooperative and early prevention model for fraud prevention and program integrity, while still respecting the independence of the oversight community. The Chair of the PRAC testified that it is a “model for how to manage large-scale emergency spending initiatives and balance the need for robust independent oversight with timely program implementation.” These Gold Standard meetings brought together the White House ARP Implementation Team, OMB, agency program staff, the agency IG, and the PRAC in one meeting—so everyone could hear all concerns and issues at the same time, before major implementation started. These meetings were later institutionalized by OMB Guidance and are being used for the Bipartisan Infrastructure Law and Inflation Reduction Act implementation. This process has led to major new anti-fraud controls at the front end and should be required for new major programs.
Strengthen the unemployment systems’ program integrity and fraud prevention through new legislation and deployment of American Rescue Plan funding:
New UI program integrity resources for states in FY2024 Budget: In the upcoming release of the President’s Budget on March 9, 2023, the Administration will propose a package of legislative reforms to more effectively prevent, detect, and recover improper payments. These proposals would require states to use the tools already at their disposal to identify fraud and gives states access to more funding to reduce and recoup fraudulent and other improper payments, including an ability to reinvest 5 percent of recovered fraud into fraud prevention, detection and recovery. This proposal would also require states to check claims against the National Directory of New Hires and prisoner datasets.
$1.6 billion in American Rescue Plan funds to be available to states to modernize, improve access and prevent fraud and identity theft by June 2023: The American Rescue Plan committed $2 billion to strengthen UI oversight and help states modernize their UI systems to prevent fraud, identity theft and payment error, while at the same time promote equitable access and ensure the timely payment of benefits to legitimate claimants. By June 2023, $1.6 billion of these funds will be available to states to help them achieve these goals through measures including:
$246 million for tiger teams to help states identify risks and implement fraud prevention solutions, such as improved identity verification, claims risk scoring, and increasing state usage of the multi-state UI Integrity Data Hub.
$380 million in anti-fraud grants and identity theft prevention, including $140 million in anti-fraud grants already available to states, $200 million in new grants to strengthen identity theft prevention, and over $40 million in investments to make equitable innovations in identity verification available to states through Login.gov and the U.S. Postal Service.
$600 million to modernize vulnerable state IT systems and improve program integrity, countering decades of underinvestment that led to significant fraud and payment errors. These new grants will help states modernize IT systems, enabling faster responses to fraud, decreases in erroneous payments, and more efficient claims processing.
$100 million for solutions to help states reduce common mistakes and improper payments, such as simplifying difficult-to-complete forms to reduce the number of incorrect submissions that lead to payment errors and automating repetitive tasks that result in unnecessary staff burden and processing mistakes.
$249 million in equity enhancements that improve payment accuracy, such as translating web pages, using plain language, and building more accessible websites for people with disabilities. These enhancements show that equity and program integrity can go hand-in-hand by enabling applicants to better understand program requirements and providing more accurate information, ultimately decreasing improper payments.
Major Investment in Helping Victims of Identity Theft
Identity theft exacts a devastating toll on its victims. Ever-evolving and increasingly sophisticated identity theft schemes cause significant tax and credit harms to the victims of identity fraud as well as equally serious challenges in resolving those harms. Victims are saddled with ruined credit scores and private sector debt, are liable for government-provided loans and overpayment claims, and are unable to qualify for home mortgages, auto loans, and other lines of credit—and are often denied access to public benefits.
President Biden is proposing $400 million in new funding for enhanced help for victims of identity theft to:
Pilot an identity theft Early Warning System: Funds should be provided to GSA to evaluate, create government-wide recommendations, and pilot with specific agencies an Early Warning System to notify individuals and entities when their identity information is being verified in order to access a federally- or state-administered public benefits program and give individuals and entities the option to stop potentially fraudulent transactions before they occur and report such transactions to law enforcement entities.
Provide one-stop remediation experience for victims: Funds would support FTC’s enhancement of IdentityTheft.gov, which will provide individuals a one-stop shop experience to both report identity crimes and receive personalized identity theft recovery assistance, coordinating, as appropriate, with state and local non-profit legal services and community-based organizations.
Offer grants for additional services to victims: Additional funding would be available to state and local non-profits and legal services organizations that provide direct services to victims. These grants will be administered by DOJ’s Office for Victims of Crime and will help scale on-the-ground support for victims and existing partnerships.
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