March 2, 2023 • 27 mins
Our largest and most vital US public government programs — food stamps (SNAP), Medicaid, Temporary Assistance for Needy Families (TANF), unemployment insurance and even the tax system — are being systematically plundered by domestic and transnational criminals who are intent on disrupting our way of life. Woody Talcove knows this because for 14 years, he has been on the frontlines of securing government agencies from fraudsters, cybercriminals and adversaries. The level of fraud is possibly the biggest heist in American history. To put things in perspective, US government published preliminary data showing that in 2021 alone, it was defrauded by $277bn. And that relates to the unemployment insurance programme alone.
Fraud is not only a problem for taxpayers and the federal budget. Fraud wreaks havoc on individuals’ lives and the people who suffer are those who need the most support. If fraud losses were stopped, they could pay for free childcare for every family in America. The time for complacency has come to an end. It is time to treat this as an national emergency. This podcast episode is a wake up call.
Haywood ‘Woody’ Talcove is CEO of LexisNexis Risk Solution’s government business.
This podcast is brought to you by RELX.
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Transcript
Episode Transcript
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YS Chi (00:00):
The unique contributions podcast is brought to you by
RELX. Find out more about us byvisiting RELX.com.
Woody Talcove (00:10):
How do you stop programmes where they're losing
25 to 30% of every dollar tocriminal groups, and I still
don't believe the policymakersin Washington DC understand the
scope of it.
YS Chi (00:41):
Hello, and welcome to series three of Unique
Contributions, a RELX podcastwhere we bring you closer to
some of the most interestingpeople from around our business.
I'm YS Chi and I'll be exploringsome of the biggest issues that
matter to society, how they'remaking a difference, and what
brought them to where they aretoday. In this episode, I want
(01:03):
to explore the astonishing storyof what is possibly the biggest
heist in American history. USgovernment has published
preliminary data showing $277billion lost to fraud in 2021
alone through the pandemicunemployment assistance scheme.
This is a fraud rate of 18.7%.
And to put this in context, 3%is considered best practice. The
(01:24):
number could be even larger asit is still collecting the data,
some schemes lost up to 50% ofthe money paid out. Now the
people who suffered the mostwere those whose identities were
stolen, for example, those whowere made unemployed during
Covid and couldn't claimbenefits. This fraud and waste
could have been prevented. Sowhat happened? Why, and can
(01:48):
something be done about it? Myguest today is Woody Talcove,
Chief Executive of LexisNexis,Risk Solutions, Government
Businesses. Woody is an experton how to tackle this kind of
fraud. Woody, welcome. And thankyou.
Woody Talcove (02:04):
YS, thanks so much for the opportunity to talk
about this really excitingtopic.
YS Chi (02:10):
Well, I know you're passionate about this, and
you've been evangelising forsome time. So I'm so glad that
we can ask you some questions.
Now the numbers we're talkingabout are huge, $277 billion
dollar loss to fraud in 2021alone! What is your view on
this? How bad is this Woody?
Woody Talcove (02:28):
Well, that's just the money that was lost in the
unemployment insuranceprogramme, that didn't include
PPP, and that didn't includeother programmes, including the
SNAP programme for food stamps.
It is just staggering, theamount of money that went to
(02:48):
criminal organisations locatedhere in the US, as well as
located overseas. The part thatreally needs to be explored
further, is this was a knownissue back in 2012/2013. And
almost nothing was done toresolve it.
YS Chi (03:10):
Was there just a lack of will? Was there a lack of
technology or what?
Woody Talcove (03:16):
It was a lack of understanding. So what was
happening, I've been here 14years. And what was happening
was government went from payingbenefits in line to paying
benefits online, right, muchlike the likes of Amazon and
other e-retailers. Governmentwas beginning to use these
tools, but they weren't buildingthe infrastructure. And as a
(03:39):
result, one of the things thatwe did is we started a web page
called fraudoftheday.com.
Fraudoftheday.com has over15,000 government subscribers,
and every single day, we educatethe market on different frauds
that are taking place. And thenin 2015, YS, the team wrote a
book called WTF (03:57):
Where's The Fraud?, focused exclusively on
government fraudulent activity,and in there, we predicted a
national crisis was going tocreate the largest fraud in the
history of our country, drivenby transnational criminal
(04:20):
groups. Now, we're notNostradamus, but we got that
one, right.
YS Chi (04:26):
Yeah, getting it right, though, doesn't mean that our
leaders would actually takeaction, right, because they need
to see evidence before they moveon anything. How long did it
take before people woke up andrealised that this was such a
problem, let alone actuallyaddressing them.
Woody Talcove (04:43):
I still to this day, before we did this podcast,
I went on the dark web, and Isaw transnational criminal
groups, organised criminalgroups, using different
techniques to steal money fromunemployment insurance, from
Medicaid from DisabilityInsurance from the Food Stamp
programme, it's still notsolved. And what happens is you
(05:06):
get into this debate about, wewant to make it really, really
easy for people to get theirbenefits. I mean, of course, if
you're hungry, if you lost yourjob, if you need your benefits
to pay your rent, you want toget it quickly. On the other
hand, there needs to be anotherdebate about how do you stop
programmes where they're losing25 to 30% of every dollar to
(05:30):
criminal groups. And I stilldon't believe the policymakers
in Washington DC, understand thescope of it. Here's a fact for
you. In the state UI programmes,they owe the federal government,
the federal government TrustFund for unemployment insurance,
they owe it $115 billion fromthe pandemic, and they have no
(05:52):
way of repaying it. Eitherthey're going to raise taxes on
employers, or they're going tohave to ask for forgiveness,
they can't afford to pay backthe money they borrowed during
the pandemic.
YS Chi (06:04):
And is there an amount of trade off that we have to
absorb? You're simply sayingthat it's just too high? Right?
Woody Talcove (06:12):
Exactly. I mean, it's not sustainable. 25 to 30%,
fraud rate, 25 to 30 cents onevery dollar, you're never gonna
get to zero. But you certainlycan get to 3%. And what we keep
on articulating to ourcustomers, to members of
Congress, to elected officialsin the states is that using the
(06:32):
tools that the private sectoruses, including device
assessment, email analytics, andother techniques that involve
information in data, we'll getthat fraud rate down to 3%,
which is completely manageable.
YS Chi (06:51):
And who would be the most against application of such
tools and technology? And whatwould be their fear, because we
need to make sure that that fearis addressed.
Woody Talcove (07:04):
The fear is that legitimate people won't get
access to benefits.
YS Chi (07:10):
And that's a, that's a major issue. We all care about
that.
Woody Talcove (07:13):
We want to make sure that legitimate people get
their benefits quickly andeasily. Now, it's interesting,
YS, the Identity Theft ResourceCentre, which is a leader in
identity theft in government,did a survey over the pandemic
for people that receivedunemployment insurance benefits.
42% of eligible recipientsweren't able to get their
(07:39):
benefits during the pandemic.
And why? Because the systemsthat some states put in place
didn't work, because the callcentres were overwhelmed. And
because people who weren't usedto technology, were asked to do
things on the internet that theyweren't capable of. Now, keep in
mind, the criminal groups gotthrough easily and at scale.
YS Chi (08:06):
Right? Because they are technologically savvy.
Woody Talcove (08:10):
The criminal groups that are doing this
likely have more processingpower than most states.
YS Chi (08:18):
So tell us how does the fraud actually work? Why are
fraudsters able to have such afield day? And who got impacted
the most?
Woody Talcove (08:28):
Well, you know, and that's a great point,
because very few people talkabout who got impacted the most.
And I want to start there, theindividuals that really needed
benefits. The individuals wholost their job that maybe worked
in the hospitality, or worked inretail establishments that
weren't able to be open duringtheir pandemic. They were the
(08:50):
ones that got hurt the most.
They couldn't get through, theycouldn't get their benefits. So
the fraud is really easy toperpetrate. There's been so much
stolen information because ofdata breaches over the past
decade. Of course, the mostnefarious was the OPM data
breach, but e-retailers, creditbureaus, banks, virtually every
(09:12):
industry has been hit. And Idon't think there's an identity
that hasn't been stolen. Theonly question is, has the
identity been used? So you goonto the dark web, you get the
stolen information, your name,your address, your social
security number, and you go onto the State portal and you
(09:33):
enter the information in andbang, the next thing you know,
you have a $26,000 debit cardsent to your address or
deposited into your bankaccount. It was that easy. Now
then some of the states shifted,they said, we need to start
using facial recognition. Sowe're going to compare your
(09:55):
picture through a video to apicture on a licence, that was a
horrible idea. There are somepeople that don't have driver's
licences, there's some peoplewhose licences have expired, and
there's some people whose facialexpressions have changed, right?
Maybe the licence is nine yearsold, maybe, you know, they lost
(10:16):
a lot of weight, maybe theygained a lot of weight, etc,
right. And then what happenedwas one of the transnational
criminal groups started sellingfake driver's licences on the
web. So that allowed me to stealYs's PII, take a picture of the
criminal on the licence, andbang, the next thing you knew YS
(10:38):
was getting benefits. That's why42% of people according to the
Identity Theft Resource Centresurvey, didn't get the benefits
they were entitled to, they wentto criminals.
YS Chi (10:55):
Does this require starting from scratch? Or are
there ways to fix this issue?
Because obviously, thefraudsters are ahead of the
game, right?
Woody Talcove (11:08):
Yeah, you know, keep in mind, the fraudsters are
always going to evolve. Butreally, when you break the
problem down into its naturalparts, there's three parts to
getting a benefit. The first isidentity verification, the
second is eligibilitydetermination. And the third is
population management. I wouldsay 95% of the fraud happened
(11:29):
with identity verification. Mostorganisations public and
private, outsource that. Andusing the tools that are
available today in the privatesector, stops that fraud
effectively. So there is noreason to start from scratch.
Every federal and stateprogramme needs to use leading
(11:52):
edge identity verification toolsthat allow legitimate people to
get their benefits, but stopthese transnational and other
organised criminal groups fromstealing them.
YS Chi (12:04):
And what is the pushback on this?
Woody Talcove (12:07):
I think you get back into this debate, right? We
don't want to put any barriersup to make it harder for people
to get benefits. I think that'spart of it. Second, and I'll
never forget this quote, I wasin a meeting with a large state
unemployment insurance director.
And what she told me was, "Idon't care that people have been
(12:28):
in a backlog for months, what Icare about, is making sure that
we follow our current process",or my other favourite quote from
somebody that currently works atthe US Department of Labour in a
Senate appointed position. "It'sonly fraud, if you count it".
Right, now, I do think we'reseeing a shift in the
(12:54):
environment right now. YS, so asthe economy goes through what
it's going through, and thereisn't additional money coming
out of the federal governmentfor pandemic relief, I suspect
that we're going to start payingmore attention to it.
YS Chi (13:11):
Hmm. Are there places that are actually doing this
better than their peers and arethere success stories that can
be shared?
Woody Talcove (13:21):
Yeah, I go to our home state of Ohio. Governor
DeWine, in April of 2020,realised he had a huge problem.
And it started when somebodyused his identity to get
unemployment insurance. Now, theconfusing part is he's the
governor of Ohio and the personused his identity in the state
(13:44):
of California. The second tipoff to him was they had more
people applying for benefits forunemployment insurance than they
had citizens over the age of 18.
YS Chi (13:57):
That should have given it away.
Woody Talcove (13:59):
That was it right? So, and the governor has
an accounting background, hebrought in some people from the
private sector who had deepexpertise in banking and
insurance. And they designed asystem that allowed the
criminals to get kicked out andlegitimate people to get their
(14:23):
benefits quickly. And as aresult, and even this number is
staggering. They only lost abillion dollars to the criminals
YS Chi (14:32):
Out of how much?
Woody Talcove (14:34):
They spent, if I remember correctly, 88 billion
YS Chi (14:41):
So well below the 3% threshold that you think is
doable.
Woody Talcove (14:45):
Absolutely.
Because they had the right toolin place and it also allowed
people that weren't accustomedto filing for unemployment
insurance, you know, somebodythat isn't tech savvy, to be
able to use the call centre. Allright, and get it picked up.
Whereas in other states, onestate in particular, it was so
bad that the governor put a noteon his mailbox, his voicemail
(15:07):
box saying if you're callingabout unemployment insurance,
please try to call theDepartment of Labour, please
don't leave a message for me, Ican't handle the volume. Another
good example is the state ofKansas. And I've got this great
chart that shows all thefraudulent, inappropriate
activity going on. And then,literally, the next day that we
(15:29):
turned on ThreatMetrix,Emailage, ID Analytics and other
tools. It dropped down to lessthan a half a percent. The one
thing about these criminals, YS,you gotta give them a lot of
credit. They're super smart,they're super efficient, and
they will not waste their timefocusing on places that have the
right identity verification,right, when there's other places
(15:51):
where they can go and rob andpilfer at will.
YS Chi (15:55):
Absolutely, there are so many places that don't have any
gates, why deal with it right?
Woody Talcove (16:00):
100%
YS Chi (16:02):
So there are solutions in working with private sector
to address some of these issuesup front. But what about when
you catch criminals? Is therethe stick side of the question
here about how you prosecutethose who are caught doing these
criminal activities.
Woody Talcove (16:20):
So first of all, you start with the notion that
pay and chase doesn't work,right of the approximately $250
billion that was stolen forunemployment insurance. Less
than $1.6 billion has beenrecovered so far. The second
issue is the capability at thestate and local level to do
(16:43):
these investigations. Whenyou're dealing with
sophisticated transnationalcriminal groups, when you're
dealing with sophisticatedorganised crime groups, they are
very difficult investigations,you need deep technical
expertise. And you also need thegovernment entity to cooperate.
So there have been a couple ofsuccess stories. The best one
(17:07):
was in Washington State. Theywere attacked by a Nigerian
criminal group that typicallyspecialised in romance scams,
but moved their operation tounemployment insurance.
Individuals stole $800 million.
I'm gonna say that again, theindividual scheme netted $800
(17:28):
million. And thanks to theeffort of the United States
Secret Service, and the FederalBureau of Investigations, they
were able to identify the group.
They understood that theringleader was going to be
leaving Nigeria and was going togo to Mykonos in the Greek
(17:51):
islands to enjoy a littlevacation. And he was greeted by
the FBI who gave him a privatejet ride back to the United
States, where he's beensentenced to 25 years in prison.
But that's the anomaly, right?
The fact of the matter is, ifyou put the right tools in place
up front, you don't need to goand do the prosecutions. The
(18:14):
other problem with prosecutionsright now is law enforcement is
not well staffed, on average, soonly at 71% capacity. So, this
type of thievery, which doesn'tinvolve violence, it doesn't get
a lot of attention. In fact,there's a great article in
Newsweek, about a year ago andthe article asked citizens to
(18:39):
stop calling the policedepartments about unemployment
insurance fraud, because it wastaking up too much of their
capacity.
YS Chi (18:49):
I'm not surprised. Is this unique to the US? Or are
you seeing this as a problemacross the world?
Woody Talcove (18:56):
That's a great question YS, in fact, I was just
over in the UK in November, andI met with the Home Office. The
exact same transnationalcriminal groups have also hit
the UK market, where they stolemoney for unemployment insurance
and other pandemic relief. Infact, there was a story on NBC
(19:22):
about three weeks ago, and whatit talked about was this group,
APT41, which is a well knownhacking group, and how they were
stealing money from both the USand the UK. These criminals, all
they want to do is get thismoney, then they want to use the
money for nefarious purposes.
And that's one of the thingsthat most people don't talk
(19:42):
about. What are they doing withthis money? Buying drugs, child
exploitation, terrorism, andother untoward activities that
harm our democracy.
YS Chi (19:56):
So let's talk about potentially some solutions,
you've already touched on someof them. But how do governments
and private organisationsaddress this balance between
speed and security morereassuringly? And more
consistently?
Woody Talcove (20:12):
I think part of the answer is bringing in that
next generation of leadershipthat understands technology.
Right? I think that's reallyimportant. I mean, when you work
in an agency, and it's verycomplicated, because you have
federal, state rules, you haveIGs, you got a process book
(20:36):
that's 1000s of pages long. It'sreal hard. On the other hand, I
think certain people withdifferent technical skills can
make a difference. The secondpart is from the top, from the
elected leadership. They need toarticulate that if you get
caught frauding there's going tobe a consequence. I don't know
(20:58):
if you realise right now, theDepartment of Justice, literally
every single week now is issuingpress releases about people that
have been caught doing fraud.
That is a highly effectivedeterrent, because if you think
you're going to get caught,you're most likely not to do it.
Right. Really, it's a change inleadership. It's a change in
(21:18):
getting people in there thatunderstand technology,
YS Chi (21:23):
Right? But there were three types of fraudsters,
right? Individuals, and theymight be dissuaded. Domestic
organised criminals, they toomight be somewhat discouraged.
But the transnational fraudstersprobably don't care. Right?
Woody Talcove (21:39):
Yeah, that's a great point, right? The average
citizen that got pulled intothis fraud, and some of them are
getting prosecuted right now.
You know, they read about it onFacebook, and YS, they just had
a bad day. And like to go aheadWoody, is there a way to kind of
rate local, state, federaland prosecute those individuals,
because the right processesweren't in place. I got a
(22:01):
problem with that. The organisedcriminals, particularly when
you're dealing with thetransnationals. It's not like
the groups aren't known. Theyknow the groups and resources
are needed, you know, within theFBI and the Secret Service to
mitigate their ability toattack. I mean, July 9th 2020,
(22:22):
Michael D'Ambrosio testified infront of the Homeland Security
Committee, Michael was thenumber two at the US Secret
Service, and warned them thattransnational criminal groups
were targeting COVID benefitpayments. Everyone knew what was
going to happen. Right, but theyjust didn't have the resources.
(22:45):
They didn't have the time, theyhad other priorities.
government according to howeffective they are in securing
these resources, and puttingthem into use to prevent these
(23:08):
frauds? Because once they becomevisible, maybe they'll do
something about it. And I'm notsure it's just about next gen of
leadership that understandstech, of course, that helps. But
I wonder if they areaccountable? Are the elected
officials in our governmentsaccountable?
So there's a lot to that. So thefirst piece, keep in mind, the
(23:32):
unemployment insurance programmehas had the highest improper
payment rate for the last 15years at over 10%. Right, the
pandemic just accelerated that.
YS Chi (23:43):
Right. It was so quick and so required, so necessary.
Yeah,
Woody Talcove (23:49):
There is a group called the National Association
of State Budget Officers that isworking on that. And what I like
about what they're doing is itgets into the governmental
auditing, no different than whenRELX gets audited. And that does
change how people view them.
Maybe Moody's won't be willingto loan them money, you know,
(24:12):
the different rating agencieswill pick that information up.
So I think that's going to help.
I think the other part is thereality of the situation where
all this money went out thedoor. Now budgets are
tightening. And States arebeginning to say, I don't have
enough resources to provide forthe things that I committed to.
(24:37):
Because I certainly, you know, Iunderstand fraud, right. And
when you're dealing with thetransnational criminal groups,
you're dealing with organisedcriminal groups, none of which
are likely located in yourstate. It's really easy to say
I'm not going to tolerate that.
Right. Where you get into achallenge is the individuals who
have a bad day, who make amistake. Right, but they don't
(25:00):
make up for their fraud is ifthe federal government in the
States just said, we are nolonger going to tolerate this.
And we're going to put thesetools in place. Can you imagine
YS what you could do with $250billion?
YS Chi (25:17):
Oh, my goodness. Yes, absolutely. You know, I think
that we all know that we tend tofocus on things that get
measured. And so I was wonderingwhether this fraud needs to be
measured more visibly for morepeople to make accountable those
who should be addressing this.
Woody Talcove (25:38):
That's why I like what NASBO is doing, because
that'll come back into thecredit rating agencies. It'll be
more prominently displayed.
YS Chi (25:47):
Absolutely. It really will do that. Well, Woody, you
are obviously an encyclopaediaon this subject, and just the
examples you've rattled off, I'msure there's 100 times more that
you can share with us. But thishas been really insightful.
Thank you so much. And I hopethat somehow we can muster more,
(26:12):
you know, initiatives at thegovernment levels, all levels of
government that is, and startto, you know, plug some of these
leaks in our system today. Wehope that we don't have another
COVID situation where governmentneeds to suddenly and quickly
spend this much money but evenfor ongoing programmes, it would
(26:34):
be so unfair that that moneygoes into the wrong hands. So
Woody, thank you so much. And Ihope that by building some more
trust into these systems, thatour regulators and lawmakers
will be able to more confidentlycome up with necessary
programmes for those who are inneed. Thank you again.
Woody Talcove (26:55):
Thanks. Have a great day YS.
YS Chi (26:57):
Thank you to our listeners for tuning in. Don't
forget to hit subscribe on yourpodcast app to get new episodes
as soon as they're released, andthank you again for listening.
The unique contributions podcast is brought to you by
RELX. Find out more about us byvisiting RELX.com.
Woody Talcove (00:10):
How do you stop programmes where they're losing
25 to 30% of every dollar tocriminal groups, and I still
don't believe the policymakersin Washington DC understand the
scope of it.
YS Chi (00:41):
Hello, and welcome to series three of Unique
Contributions, a RELX podcastwhere we bring you closer to
some of the most interestingpeople from around our business.
I'm YS Chi and I'll be exploringsome of the biggest issues that
matter to society, how they'remaking a difference, and what
brought them to where they aretoday. In this episode, I want
(01:03):
to explore the astonishing storyof what is possibly the biggest
heist in American history. USgovernment has published
preliminary data showing $277billion lost to fraud in 2021
alone through the pandemicunemployment assistance scheme.
This is a fraud rate of 18.7%.
And to put this in context, 3%is considered best practice. The
(01:24):
number could be even larger asit is still collecting the data,
some schemes lost up to 50% ofthe money paid out. Now the
people who suffered the mostwere those whose identities were
stolen, for example, those whowere made unemployed during
Covid and couldn't claimbenefits. This fraud and waste
could have been prevented. Sowhat happened? Why, and can
(01:48):
something be done about it? Myguest today is Woody Talcove,
Chief Executive of LexisNexis,Risk Solutions, Government
Businesses. Woody is an experton how to tackle this kind of
fraud. Woody, welcome. And thankyou.
Woody Talcove (02:04):
YS, thanks so much for the opportunity to talk
about this really excitingtopic.
YS Chi (02:10):
Well, I know you're passionate about this, and
you've been evangelising forsome time. So I'm so glad that
we can ask you some questions.
Now the numbers we're talkingabout are huge, $277 billion
dollar loss to fraud in 2021alone! What is your view on
this? How bad is this Woody?
Woody Talcove (02:28):
Well, that's just the money that was lost in the
unemployment insuranceprogramme, that didn't include
PPP, and that didn't includeother programmes, including the
SNAP programme for food stamps.
It is just staggering, theamount of money that went to
(02:48):
criminal organisations locatedhere in the US, as well as
located overseas. The part thatreally needs to be explored
further, is this was a knownissue back in 2012/2013. And
almost nothing was done toresolve it.
YS Chi (03:10):
Was there just a lack of will? Was there a lack of
technology or what?
Woody Talcove (03:16):
It was a lack of understanding. So what was
happening, I've been here 14years. And what was happening
was government went from payingbenefits in line to paying
benefits online, right, muchlike the likes of Amazon and
other e-retailers. Governmentwas beginning to use these
tools, but they weren't buildingthe infrastructure. And as a
(03:39):
result, one of the things thatwe did is we started a web page
called fraudoftheday.com.
Fraudoftheday.com has over15,000 government subscribers,
and every single day, we educatethe market on different frauds
that are taking place. And thenin 2015, YS, the team wrote a
book called WTF (03:57):
Where's The Fraud?, focused exclusively on
government fraudulent activity,and in there, we predicted a
national crisis was going tocreate the largest fraud in the
history of our country, drivenby transnational criminal
(04:20):
groups. Now, we're notNostradamus, but we got that
one, right.
YS Chi (04:26):
Yeah, getting it right, though, doesn't mean that our
leaders would actually takeaction, right, because they need
to see evidence before they moveon anything. How long did it
take before people woke up andrealised that this was such a
problem, let alone actuallyaddressing them.
Woody Talcove (04:43):
I still to this day, before we did this podcast,
I went on the dark web, and Isaw transnational criminal
groups, organised criminalgroups, using different
techniques to steal money fromunemployment insurance, from
Medicaid from DisabilityInsurance from the Food Stamp
programme, it's still notsolved. And what happens is you
(05:06):
get into this debate about, wewant to make it really, really
easy for people to get theirbenefits. I mean, of course, if
you're hungry, if you lost yourjob, if you need your benefits
to pay your rent, you want toget it quickly. On the other
hand, there needs to be anotherdebate about how do you stop
programmes where they're losing25 to 30% of every dollar to
(05:30):
criminal groups. And I stilldon't believe the policymakers
in Washington DC, understand thescope of it. Here's a fact for
you. In the state UI programmes,they owe the federal government,
the federal government TrustFund for unemployment insurance,
they owe it $115 billion fromthe pandemic, and they have no
(05:52):
way of repaying it. Eitherthey're going to raise taxes on
employers, or they're going tohave to ask for forgiveness,
they can't afford to pay backthe money they borrowed during
the pandemic.
YS Chi (06:04):
And is there an amount of trade off that we have to
absorb? You're simply sayingthat it's just too high? Right?
Woody Talcove (06:12):
Exactly. I mean, it's not sustainable. 25 to 30%,
fraud rate, 25 to 30 cents onevery dollar, you're never gonna
get to zero. But you certainlycan get to 3%. And what we keep
on articulating to ourcustomers, to members of
Congress, to elected officialsin the states is that using the
(06:32):
tools that the private sectoruses, including device
assessment, email analytics, andother techniques that involve
information in data, we'll getthat fraud rate down to 3%,
which is completely manageable.
YS Chi (06:51):
And who would be the most against application of such
tools and technology? And whatwould be their fear, because we
need to make sure that that fearis addressed.
Woody Talcove (07:04):
The fear is that legitimate people won't get
access to benefits.
YS Chi (07:10):
And that's a, that's a major issue. We all care about
that.
Woody Talcove (07:13):
We want to make sure that legitimate people get
their benefits quickly andeasily. Now, it's interesting,
YS, the Identity Theft ResourceCentre, which is a leader in
identity theft in government,did a survey over the pandemic
for people that receivedunemployment insurance benefits.
42% of eligible recipientsweren't able to get their
(07:39):
benefits during the pandemic.
And why? Because the systemsthat some states put in place
didn't work, because the callcentres were overwhelmed. And
because people who weren't usedto technology, were asked to do
things on the internet that theyweren't capable of. Now, keep in
mind, the criminal groups gotthrough easily and at scale.
YS Chi (08:06):
Right? Because they are technologically savvy.
Woody Talcove (08:10):
The criminal groups that are doing this
likely have more processingpower than most states.
YS Chi (08:18):
So tell us how does the fraud actually work? Why are
fraudsters able to have such afield day? And who got impacted
the most?
Woody Talcove (08:28):
Well, you know, and that's a great point,
because very few people talkabout who got impacted the most.
And I want to start there, theindividuals that really needed
benefits. The individuals wholost their job that maybe worked
in the hospitality, or worked inretail establishments that
weren't able to be open duringtheir pandemic. They were the
(08:50):
ones that got hurt the most.
They couldn't get through, theycouldn't get their benefits. So
the fraud is really easy toperpetrate. There's been so much
stolen information because ofdata breaches over the past
decade. Of course, the mostnefarious was the OPM data
breach, but e-retailers, creditbureaus, banks, virtually every
(09:12):
industry has been hit. And Idon't think there's an identity
that hasn't been stolen. Theonly question is, has the
identity been used? So you goonto the dark web, you get the
stolen information, your name,your address, your social
security number, and you go onto the State portal and you
(09:33):
enter the information in andbang, the next thing you know,
you have a $26,000 debit cardsent to your address or
deposited into your bankaccount. It was that easy. Now
then some of the states shifted,they said, we need to start
using facial recognition. Sowe're going to compare your
(09:55):
picture through a video to apicture on a licence, that was a
horrible idea. There are somepeople that don't have driver's
licences, there's some peoplewhose licences have expired, and
there's some people whose facialexpressions have changed, right?
Maybe the licence is nine yearsold, maybe, you know, they lost
(10:16):
a lot of weight, maybe theygained a lot of weight, etc,
right. And then what happenedwas one of the transnational
criminal groups started sellingfake driver's licences on the
web. So that allowed me to stealYs's PII, take a picture of the
criminal on the licence, andbang, the next thing you knew YS
(10:38):
was getting benefits. That's why42% of people according to the
Identity Theft Resource Centresurvey, didn't get the benefits
they were entitled to, they wentto criminals.
YS Chi (10:55):
Does this require starting from scratch? Or are
there ways to fix this issue?
Because obviously, thefraudsters are ahead of the
game, right?
Woody Talcove (11:08):
Yeah, you know, keep in mind, the fraudsters are
always going to evolve. Butreally, when you break the
problem down into its naturalparts, there's three parts to
getting a benefit. The first isidentity verification, the
second is eligibilitydetermination. And the third is
population management. I wouldsay 95% of the fraud happened
(11:29):
with identity verification. Mostorganisations public and
private, outsource that. Andusing the tools that are
available today in the privatesector, stops that fraud
effectively. So there is noreason to start from scratch.
Every federal and stateprogramme needs to use leading
(11:52):
edge identity verification toolsthat allow legitimate people to
get their benefits, but stopthese transnational and other
organised criminal groups fromstealing them.
YS Chi (12:04):
And what is the pushback on this?
Woody Talcove (12:07):
I think you get back into this debate, right? We
don't want to put any barriersup to make it harder for people
to get benefits. I think that'spart of it. Second, and I'll
never forget this quote, I wasin a meeting with a large state
unemployment insurance director.
And what she told me was, "Idon't care that people have been
(12:28):
in a backlog for months, what Icare about, is making sure that
we follow our current process",or my other favourite quote from
somebody that currently works atthe US Department of Labour in a
Senate appointed position. "It'sonly fraud, if you count it".
Right, now, I do think we'reseeing a shift in the
(12:54):
environment right now. YS, so asthe economy goes through what
it's going through, and thereisn't additional money coming
out of the federal governmentfor pandemic relief, I suspect
that we're going to start payingmore attention to it.
YS Chi (13:11):
Hmm. Are there places that are actually doing this
better than their peers and arethere success stories that can
be shared?
Woody Talcove (13:21):
Yeah, I go to our home state of Ohio. Governor
DeWine, in April of 2020,realised he had a huge problem.
And it started when somebodyused his identity to get
unemployment insurance. Now, theconfusing part is he's the
governor of Ohio and the personused his identity in the state
(13:44):
of California. The second tipoff to him was they had more
people applying for benefits forunemployment insurance than they
had citizens over the age of 18.
YS Chi (13:57):
That should have given it away.
Woody Talcove (13:59):
That was it right? So, and the governor has
an accounting background, hebrought in some people from the
private sector who had deepexpertise in banking and
insurance. And they designed asystem that allowed the
criminals to get kicked out andlegitimate people to get their
(14:23):
benefits quickly. And as aresult, and even this number is
staggering. They only lost abillion dollars to the criminals
YS Chi (14:32):
Out of how much?
Woody Talcove (14:34):
They spent, if I remember correctly, 88 billion
YS Chi (14:41):
So well below the 3% threshold that you think is
doable.
Woody Talcove (14:45):
Absolutely.
Because they had the right toolin place and it also allowed
people that weren't accustomedto filing for unemployment
insurance, you know, somebodythat isn't tech savvy, to be
able to use the call centre. Allright, and get it picked up.
Whereas in other states, onestate in particular, it was so
bad that the governor put a noteon his mailbox, his voicemail
(15:07):
box saying if you're callingabout unemployment insurance,
please try to call theDepartment of Labour, please
don't leave a message for me, Ican't handle the volume. Another
good example is the state ofKansas. And I've got this great
chart that shows all thefraudulent, inappropriate
activity going on. And then,literally, the next day that we
(15:29):
turned on ThreatMetrix,Emailage, ID Analytics and other
tools. It dropped down to lessthan a half a percent. The one
thing about these criminals, YS,you gotta give them a lot of
credit. They're super smart,they're super efficient, and
they will not waste their timefocusing on places that have the
right identity verification,right, when there's other places
(15:51):
where they can go and rob andpilfer at will.
YS Chi (15:55):
Absolutely, there are so many places that don't have any
gates, why deal with it right?
Woody Talcove (16:00):
100%
YS Chi (16:02):
So there are solutions in working with private sector
to address some of these issuesup front. But what about when
you catch criminals? Is therethe stick side of the question
here about how you prosecutethose who are caught doing these
criminal activities.
Woody Talcove (16:20):
So first of all, you start with the notion that
pay and chase doesn't work,right of the approximately $250
billion that was stolen forunemployment insurance. Less
than $1.6 billion has beenrecovered so far. The second
issue is the capability at thestate and local level to do
(16:43):
these investigations. Whenyou're dealing with
sophisticated transnationalcriminal groups, when you're
dealing with sophisticatedorganised crime groups, they are
very difficult investigations,you need deep technical
expertise. And you also need thegovernment entity to cooperate.
So there have been a couple ofsuccess stories. The best one
(17:07):
was in Washington State. Theywere attacked by a Nigerian
criminal group that typicallyspecialised in romance scams,
but moved their operation tounemployment insurance.
Individuals stole $800 million.
I'm gonna say that again, theindividual scheme netted $800
(17:28):
million. And thanks to theeffort of the United States
Secret Service, and the FederalBureau of Investigations, they
were able to identify the group.
They understood that theringleader was going to be
leaving Nigeria and was going togo to Mykonos in the Greek
(17:51):
islands to enjoy a littlevacation. And he was greeted by
the FBI who gave him a privatejet ride back to the United
States, where he's beensentenced to 25 years in prison.
But that's the anomaly, right?
The fact of the matter is, ifyou put the right tools in place
up front, you don't need to goand do the prosecutions. The
(18:14):
other problem with prosecutionsright now is law enforcement is
not well staffed, on average, soonly at 71% capacity. So, this
type of thievery, which doesn'tinvolve violence, it doesn't get
a lot of attention. In fact,there's a great article in
Newsweek, about a year ago andthe article asked citizens to
(18:39):
stop calling the policedepartments about unemployment
insurance fraud, because it wastaking up too much of their
capacity.
YS Chi (18:49):
I'm not surprised. Is this unique to the US? Or are
you seeing this as a problemacross the world?
Woody Talcove (18:56):
That's a great question YS, in fact, I was just
over in the UK in November, andI met with the Home Office. The
exact same transnationalcriminal groups have also hit
the UK market, where they stolemoney for unemployment insurance
and other pandemic relief. Infact, there was a story on NBC
(19:22):
about three weeks ago, and whatit talked about was this group,
APT41, which is a well knownhacking group, and how they were
stealing money from both the USand the UK. These criminals, all
they want to do is get thismoney, then they want to use the
money for nefarious purposes.
And that's one of the thingsthat most people don't talk
(19:42):
about. What are they doing withthis money? Buying drugs, child
exploitation, terrorism, andother untoward activities that
harm our democracy.
YS Chi (19:56):
So let's talk about potentially some solutions,
you've already touched on someof them. But how do governments
and private organisationsaddress this balance between
speed and security morereassuringly? And more
consistently?
Woody Talcove (20:12):
I think part of the answer is bringing in that
next generation of leadershipthat understands technology.
Right? I think that's reallyimportant. I mean, when you work
in an agency, and it's verycomplicated, because you have
federal, state rules, you haveIGs, you got a process book
(20:36):
that's 1000s of pages long. It'sreal hard. On the other hand, I
think certain people withdifferent technical skills can
make a difference. The secondpart is from the top, from the
elected leadership. They need toarticulate that if you get
caught frauding there's going tobe a consequence. I don't know
(20:58):
if you realise right now, theDepartment of Justice, literally
every single week now is issuingpress releases about people that
have been caught doing fraud.
That is a highly effectivedeterrent, because if you think
you're going to get caught,you're most likely not to do it.
Right. Really, it's a change inleadership. It's a change in
(21:18):
getting people in there thatunderstand technology,
YS Chi (21:23):
Right? But there were three types of fraudsters,
right? Individuals, and theymight be dissuaded. Domestic
organised criminals, they toomight be somewhat discouraged.
But the transnational fraudstersprobably don't care. Right?
Woody Talcove (21:39):
Yeah, that's a great point, right? The average
citizen that got pulled intothis fraud, and some of them are
getting prosecuted right now.
You know, they read about it onFacebook, and YS, they just had
a bad day. And like to go aheadWoody, is there a way to kind of
rate local, state, federaland prosecute those individuals,
because the right processesweren't in place. I got a
(22:01):
problem with that. The organisedcriminals, particularly when
you're dealing with thetransnationals. It's not like
the groups aren't known. Theyknow the groups and resources
are needed, you know, within theFBI and the Secret Service to
mitigate their ability toattack. I mean, July 9th 2020,
(22:22):
Michael D'Ambrosio testified infront of the Homeland Security
Committee, Michael was thenumber two at the US Secret
Service, and warned them thattransnational criminal groups
were targeting COVID benefitpayments. Everyone knew what was
going to happen. Right, but theyjust didn't have the resources.
(22:45):
They didn't have the time, theyhad other priorities.
government according to howeffective they are in securing
these resources, and puttingthem into use to prevent these
(23:08):
frauds? Because once they becomevisible, maybe they'll do
something about it. And I'm notsure it's just about next gen of
leadership that understandstech, of course, that helps. But
I wonder if they areaccountable? Are the elected
officials in our governmentsaccountable?
So there's a lot to that. So thefirst piece, keep in mind, the
(23:32):
unemployment insurance programmehas had the highest improper
payment rate for the last 15years at over 10%. Right, the
pandemic just accelerated that.
YS Chi (23:43):
Right. It was so quick and so required, so necessary.
Yeah,
Woody Talcove (23:49):
There is a group called the National Association
of State Budget Officers that isworking on that. And what I like
about what they're doing is itgets into the governmental
auditing, no different than whenRELX gets audited. And that does
change how people view them.
Maybe Moody's won't be willingto loan them money, you know,
(24:12):
the different rating agencieswill pick that information up.
So I think that's going to help.
I think the other part is thereality of the situation where
all this money went out thedoor. Now budgets are
tightening. And States arebeginning to say, I don't have
enough resources to provide forthe things that I committed to.
(24:37):
Because I certainly, you know, Iunderstand fraud, right. And
when you're dealing with thetransnational criminal groups,
you're dealing with organisedcriminal groups, none of which
are likely located in yourstate. It's really easy to say
I'm not going to tolerate that.
Right. Where you get into achallenge is the individuals who
have a bad day, who make amistake. Right, but they don't
(25:00):
make up for their fraud is ifthe federal government in the
States just said, we are nolonger going to tolerate this.
And we're going to put thesetools in place. Can you imagine
YS what you could do with $250billion?
YS Chi (25:17):
Oh, my goodness. Yes, absolutely. You know, I think
that we all know that we tend tofocus on things that get
measured. And so I was wonderingwhether this fraud needs to be
measured more visibly for morepeople to make accountable those
who should be addressing this.
Woody Talcove (25:38):
That's why I like what NASBO is doing, because
that'll come back into thecredit rating agencies. It'll be
more prominently displayed.
YS Chi (25:47):
Absolutely. It really will do that. Well, Woody, you
are obviously an encyclopaediaon this subject, and just the
examples you've rattled off, I'msure there's 100 times more that
you can share with us. But thishas been really insightful.
Thank you so much. And I hopethat somehow we can muster more,
(26:12):
you know, initiatives at thegovernment levels, all levels of
government that is, and startto, you know, plug some of these
leaks in our system today. Wehope that we don't have another
COVID situation where governmentneeds to suddenly and quickly
spend this much money but evenfor ongoing programmes, it would
(26:34):
be so unfair that that moneygoes into the wrong hands. So
Woody, thank you so much. And Ihope that by building some more
trust into these systems, thatour regulators and lawmakers
will be able to more confidentlycome up with necessary
programmes for those who are inneed. Thank you again.
Woody Talcove (26:55):
Thanks. Have a great day YS.
YS Chi (26:57):
Thank you to our listeners for tuning in. Don't
forget to hit subscribe on yourpodcast app to get new episodes
as soon as they're released, andthank you again for listening.
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