Nearly three years after thieves stole $645 million in pandemic unemployment benefits from Washington state, investigators are still clawing back funds frozen in fraudsters’ bank accounts.
On Friday, the state Attorney General’s Office filed a motion demanding Bank of America forfeit $9.3 million left there by criminals who scammed Washington’s unemployment system in 2020.
It’s the largest fraud-related forfeiture sought by the office, which already has filed 17 similar actions against financial institutions that appear to have been repositories of looted jobless benefits.
“My office remains focused on recovering every dollar we can of this stolen money,” Washington Attorney General Bob Ferguson said in a statement Monday.
But the forfeiture motion also underscores how painfully incomplete fraud recovery has been — and points to a growing likelihood that much of the money that hasn’t already been returned might never be.
“The longer it takes to work this process, the more difficult it is to recover funds,” said James Lee, chief operating officer at the Identity Theft Resource Center, a California-based nonprofit that helps identity theft victims.
During the 2020 fraud attack, criminals used stolen Social Security numbers and other personal data to file hundreds of thousands of bogus claims for unemployment benefits from the state Employment Security Department. Other states were hit, too.
The fraudsters, including many believed to be operating offshore, often directed ESD to wire the ill-gotten money into bank accounts opened specifically for criminal activities.
Friday’s forfeiture filing refers to more than 1,100 accounts at Bank of America. “As a matter of policy, we cooperate with all inquiries from law enforcement,” said a bank spokesperson in an email Monday.
Washington was the first state to use forfeiture as part of efforts to recover stolen pandemic benefits, Ferguson has said. Often, banks must be compelled via court order to forfeit money held in accounts.
So far, Ferguson’s office has recovered a little over $22 million from seven banks and a financial technology company using forfeiture. That brings the state’s total recovery from the pandemic unemployment fraud to more than $400 million, with most of the money returned though separate efforts in 2020, according to state data.
The AGO also has filed or plans to file another $11.3 million in forfeiture demands, including the $9.3 million demanded from Bank of America motion.
Most of Washington’s fraud recovery came after banks themselves flagged incoming transfers as suspicious and quickly returned the money to ESD’s bank, KeyBank.
In other cases, banks flagged and froze accounts because they tripped so-called red flags for fraud — among them, accounts that had received benefits from more than one state and accounts in a name that didn’t match the names of the jobless claimants.
Those frozen funds often have been the target of the Attorney General’s Office’s forfeiture efforts.
After the fraud was discovered in spring 2020, ESD came under fire because its own fraud detection systems appeared to have missed some suspicious claims activity, including instances where multiple claims were filed using the same gmail address.
“We’ve made significant changes to improve security since 2020, and because fraud is ever-changing, we continue to monitor and refine our methods,” said ESD Commissioner Cami Feek in a statement Monday.
Although banks returned or froze many of the fraudulent transfers, law enforcement officials have speculated that a potentially large fraction of the transferred benefits was withdrawn by the criminals or their accomplices before those accounts were frozen.
For example, in the case of Washington’s first forfeiture case, against TD Bank last year, AGO officials acknowledged that funds that were not either returned voluntarily by the bank or identified for forfeiture were considered to have been removed by criminals before the accounts were locked.
In the case of Bank of America, which received a total $27 million in fraudulent payments from ESD, according to ESD data, it is not clear whether the roughly $13 million that wasn’t voluntarily returned or identified for forfeiture was withdrawn or is being held by the bank for other states also looking for recovery, said Ferguson spokesperson Brionna Aho.
Part of the problem is that some of the withdrawn funds might have been converted into other assets or moved offshore, said Lee. If funds are outside of the “traditional international banking community,” Lee said, then “that money’s gone. It’s not coming back.”
That outcome may be in the cards for Abidemi Rufai, a former Nigerian official sentenced Sept. 26 in Tacoma federal court for stealing $350,763 in pandemic unemployment benefits.
Although Rufai must make restitution, federal prosecutors expect they may see only a fraction of the stolen money, given that most of Rufai’s remaining assets are likely no longer in the U.S. “It’s really hard to get foreign assets … in Nigeria,” Assistant U.S Attorney Seth Wilkinson, co-counsel in the case, said at the time.
But another challenge is the sheer scale of the pandemic unemployment fraud, which was so much larger than anything federal or state law enforcement had confronted, and which strained law enforcement resources.
Each forfeiture case, for example, involves a laborious legal and accounting process in which investigators must demonstrate that funds in a given account were in fact stolen.
“It’s just a matter of scale,” said Lee with the Identity Theft Resource Center. “If this was just the traditional kind of government benefit fraud, it wouldn’t take you three years down the road. … But there’s only so many people who can only work so many hours to recover the funds.”