WASHINGTON, D.C. — The United States Department of Labor and its Office of Inspector General are directing financial institutions to preserve prepaid debit card accounts tied to suspected pandemic-era unemployment fraud as federal officials intensify efforts to recover billions of dollars lost during COVID-19 relief programs.
In letters issued last week, Acting Labor Secretary Keith Sonderling and Inspector General Anthony P. D’Esposito instructed banks and payment providers to freeze identified accounts through December 31, 2026, to prevent dormant funds from being transferred to state unclaimed-property systems, where recovery efforts could become significantly more difficult.
The action is part of a broader federal anti-fraud initiative coordinated with President Donald Trump’s White House Task Force to Eliminate Fraud, led by Vice President J.D. Vance.
“During the pandemic, criminals and bad actors exploited weaknesses to steal billions of dollars from the American people,” Sonderling said. “We are working with Vice President Vance to ensure we use every tool at our disposal to track down stolen funds, hold fraudsters accountable, and return money to the taxpayers.”
Federal investigators said many fraudulent unemployment insurance claims issued during the pandemic were routed through prepaid debit card accounts administered by financial institutions on behalf of state workforce agencies. Some of those accounts remain inactive but still contain recoverable funds.
Under normal state procedures, dormant balances can eventually be transferred to state unclaimed-property agencies through a legal process known as escheatment, potentially complicating federal recovery efforts.
The Labor Department and the inspector general’s office requested that institutions freeze accounts identified in confidential attachments, maintain the funds in recoverable form, and coordinate directly with federal investigators during the preservation process.
“Our office has already issued alert memoranda sounding the alarm, and the time for excuses is over,” D’Esposito said. “Every dollar lost through delay or inaction is taxpayer money handed directly to fraudsters.”
The move marks one of the most direct federal recovery actions tied to pandemic unemployment fraud since emergency benefit programs expired. Federal watchdogs and congressional investigators have repeatedly estimated that tens of billions of dollars in unemployment payments were improperly distributed during the pandemic amid relaxed eligibility verification standards and unprecedented claim volumes.
The Labor Department did not disclose how many accounts were identified or the estimated value of funds targeted under the preservation effort.
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