Alert Memorandum — $714 Million in Potentially Fraudulent UI Funds on Prepaid Cards

Record facts

Summary

An alert memorandum dated January 30, 2026 from Inspector General Anthony P. D'Esposito of the U.S. Department of Labor, Office of Inspector General to Henry Mack, Assistant Secretary for Employment and Training. It concerns unemployment insurance funds from pandemic-era claims still held on prepaid cards by Financial Institution 1 or already escheated to state unclaimed property administrators. The OIG reports analyzing more than 5 million prepaid card accounts, finding $738,475,819 remaining on 4,369,061 accounts and $266,853,492 already escheated. It states that $714,626,297 in potentially fraudulently obtained funds was held or is being held on 3,139,091 accounts. The memorandum says ETA has an opportunity to issue guidance to state workforce agencies within 30 days, and an attachment gives three tables of the figures.

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U.S. Department of Labor 
Office of Inspector General 
 
 
Washington, DC 20210 
Working for America’s Workforce 
 
January 30, 2026 
 
 
MEMORANDUM FOR: 
HENRY MACK 
 
 
 
 
Assistant Secretary 
 
 
 
 
  for Employment and Training 
 
FROM:  
 
 
ANTHONY P. D’ESPOSITO 
 
 
 
 
Inspector General 
 
 
 
 
 
SUBJECT:  
Alert Memorandum: The Employment and Training 
Administration Needs to Ensure State Workforce 
Agencies Take Action to Recover Significant 
Unemployment Insurance Holdings Still Held by 
Financial Institution 1’s Prepaid Card Program 
 
The purpose of this memorandum is to alert you to an urgent concern regarding 
the potential upcoming loss of more than half a billion dollars the Office of 
Inspector General (OIG) has identified through its ongoing work with financial 
institutions. During the COVID-19 pandemic, certain financial institutions 
contracted with state workforce agencies (SWA) to disburse unemployment 
insurance (UI) benefits on prepaid debit cards. Currently, a substantial amount of 
these funds remains unspent, including upwards of $76,000 on a single prepaid 
card account. These funds are being held by the respective financial institutions 
with significant amounts linked to potential fraud. The OIG assesses that—if swift 
action is not taken—taxpayers risk losing these funds.0F1 
 
Many SWAs provided financial institutions with information on improper UI 
payments, including fraud, in accordance with Employment and Training 
Administration (ETA) guidance. However, SWAs do not appear to have 
adequately managed millions of prepaid card accounts with remaining balances 
from COVID-19-era UI claims. Continued inaction will likely result in SWAs not 
fulfilling their programmatic responsibilities to prevent and detect improper 
payments and recover potential overpayments, including fraud. Further, this 
situation is worsened as the funds on these prepaid cards may still be targeted 
by capable adversaries or the funds may have to be escheated (surrendered) to 
 
1 The OIG assessed the share of state versus federal UI funding by examining UI Program Letter 
(UIPL) 13-25, Attachment 1: State Reimbursements - Program Allocation Chart. This examination 
of the 53 SWAs’ UI funding mix showed approximately 22 percent of pandemic-related UI funding 
sourced from state UI funds and 78 percent of pandemic-related UI funding sourced from three 
key pandemic UI programs: Pandemic Unemployment Assistance, Pandemic Emergency 
Unemployment Compensation, and Federal Pandemic Unemployment Compensation. 

 
Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1 
Page 2 of 5 
 
state unclaimed property administrators,1F2 as some funds have already been, 
further complicating potential overpayment recovery. 
 
Background: OIG Work to Combat the UI Fraud Crisis 
 
In March 2020, among other relief, the Coronavirus Aid, Relief, and Economic 
Security (CARES) Act created three key temporary UI programs: Pandemic 
Unemployment Assistance (PUA), Pandemic Emergency Unemployment 
Compensation (PEUC), and Federal Pandemic Unemployment Compensation 
(FPUC).2F3 Later, the Continued Assistance for Unemployed Workers Act of 2020 
and the American Rescue Plan Act of 2021 reauthorized and extended these 
programs. The OIG has previously reported more than $888 billion in total federal 
and state UI benefits were paid for benefit weeks during the pandemic period.3F4 
 
While providing relief to eligible workers affected by the COVID-19 pandemic, 
these benefits were distributed amidst a perfect storm—millions of claims, a 
vulnerable system, and motivated offenders. CARES Act UI programs became a 
high-value, low-risk target for criminal actors. For example, the U.S. Department 
of Labor reported an improper payment rate of 35.9 percent for the life of the 
PUA program. Further, criminal enterprises took advantage of the situation, 
increasing their fraud schemes with readily available stolen identities. According 
to Inspector General Congressional Testimony, of the $888 billion in UI benefits, 
at least $191 billion could have been improper payments, including more than 
$76 billion paid to fraudsters.4F5 
 
Starting in April 2020, to combat this crisis, the OIG initiated over 200,000 
investigative matters to bring perpetrators to justice. Further, the OIG conducted 
targeted audits, issuing reports with recommendations to mitigate program 
vulnerabilities. As of September 30, 2025, the OIG’s pandemic UI-related 
criminal investigations have resulted in more than: 2,300 individuals charged, 
1,700 convictions, 42,000 months of incarceration, and $1.6 billion in monetary 
results. Further, the OIG’s pandemic UI-related audit activities have resulted in 
 
2 In this alert memorandum, the term escheatment refers to the mandatory obligation for financial 
institutions to surrender unclaimed funds. These requirements and their deadlines vary by state, 
and funds from a single account may not be transferred all at once but rather determined by the 
date of deposit against the state’s required time period. These funds are not surrendered directly 
to SWAs, but instead go to state unclaimed property administrators. 
3 While this alert memorandum refers to PUA, PEUC, and FPUC, the OIG’s concern extends to 
outstanding UI funds in all UI programs, including pandemic UI-related state programs. 
4 “The Greatest Theft of American Tax Dollars: Unchecked Unemployment Fraud,” Hearing, 
Statement for the Record of Larry D. Turner, Inspector General, U.S. Department of Labor, 
House Committee on Ways and Means (February 8, 2023), available at: 
https://www.oig.dol.gov/public/testimony/02082023.pdf  
5 “Waste, Fraud, and Abuse Go Viral: Inspectors General on Curing the Disease,” Hearing, 
Statement for the Record of Larry D. Turner, Inspector General, U.S. Department of Labor, 
House Committee on Oversight and Accountability, Subcommittee on Government Operations 
and the Federal Workforce (March 9, 2023), available at: 
https://www.oig.dol.gov/public/testimony/03092023.pdf  

 
Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1 
Page 3 of 5 
 
over 100 UI program recommendations and more than $75 billion in monetary 
results. Access to CARES Act UI program data and associated financial data 
from financial institutions has been vital to the OIG’s pandemic UI-related 
oversight. 
 
OIG’s Findings regarding UI Funds Still Held by Financial Institution 1 
 
Based on the OIG’s continued work with various financial institutions responsible 
for administering prepaid cards during the pandemic, the OIG learned Financial 
Institution 1 and three other financial institutions were the largest prepaid card 
providers and significant UI funds: (1) are still being held and soon may be 
escheated or (2) have already been escheated. 
 
In August 2025, to further examine the nature of these UI holdings, the OIG 
issued Inspector General subpoenas to these four financial institutions pursuant 
to its authority under the Inspector General Act of 1978, as amended. The OIG 
sought financial institution records pertaining to: (1) all prepaid cards with 
remaining UI balances and (2) prepaid card balances already escheated to state 
unclaimed property administrators. In late September 2025, Financial Institution 1 
provided records to the OIG that detailed remaining and escheated balances 
specific to client SWAs. 
 
With these records, the OIG assessed both available and escheated UI balances 
for potential fraud via comparative analysis with the OIG’s UI claimant data. 
Specifically, the OIG’s analysis included crossmatching against high-risk 
indicators, including those the OIG has used in previous work.5F6 
 
As of October 2025, OIG data analytics had 
identified the following information in relation 
to Financial Institution 1’s holdings based on 
the provided records. Overall, the OIG 
analyzed more than 5 million prepaid card 
accounts and identified $1,005,329,311 in 
affected funds. Specifically, the OIG 
examined two categories of affected funds: 
(1) funds remaining on the prepaid card 
accounts and (2) funds that have been 
escheated to state unclaimed property 
administrators. The OIG found:  
 
• $738,475,819 remained on 
4,369,061 prepaid card accounts (see 
Attachment, Table 1) and  
 
6 COVID-19: ETA Needs to Improve Its Oversight of States’ Efforts to Identify Multistate UI Fraud, 
Report No. 19-25-004-03-315 (August 4, 2025),  
https://www.oig.dol.gov/public/reports/oa/2025/19-25-004-03-315.pdf   
The OIG found $522,499,034  
(about 71 percent of $738,475,819) 
in potentially fraudulently obtained 
funds was being held on 2,679,741 
Financial Institution 1 prepaid cards, 
and 
The OIG found $192,127,263 
(about 71 percent of $266,853,492) 
in potentially fraudulently obtained 
funds have been escheated to state 
unclaimed property administrators.  
Overall, the OIG Identified 
about $715 Million in 
Potential Fraud  

 
Alert: ETA/SWA Action Needed on UI Funds Held or Escheated by Financial Institution 1 
Page 4 of 5 
 
• $266,853,492 in already escheated UI funds from 914,527 prepaid card 
accounts (see Attachment, Table 2). 
 
Further, these findings include $351,992,389 in taxpayer dollars (48 percent of 
the $738,475,819 not yet escheated) about which the OIG had previously notified 
ETA in September 2022 after flagging the underlying claim as suspicious (see 
Attachment, Table 3).6F7  
 
In summary, a total of $714,626,297 in potentially fraudulently obtained funds 
was held or is currently being held on 3,139,091 UI prepaid card accounts and 
require swift action to recover those taxpayer dollars. 
 
 
 
 
 
Conclusion 
 
As a result of this analysis, the OIG assesses a substantial risk of potential loss 
of taxpayer funds. An opportunity exists for ETA to issue guidance within 30 days 
to SWAs to commence engagement with ETA, the OIG, and relevant financial 
institutions to assess these findings. This will allow SWAs to detect improper 
payments and recover potentially fraudulently obtained UI funds held by financial 
institutions or various state unclaimed property administrators. In doing so, 
taxpayers may be able to recover these taxpayer funds.  
 
The OIG provided a draft of a non-public version of this alert memorandum to 
ETA for technical review. ETA responded timely with no corrections or other 
comments on the draft. We also issued further details to ETA. We look forward to 
continuing to work with ETA personnel on this urgent concern and appreciate the 
cooperation and courtesies ETA has extended to us.  
 
 
 
Attachment
 
7 Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in High-Risk 
Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315 (September 21, 2022), 
https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf 
$714,626,297 of These UI Funds Being Held Were  
Potentially Fraudulently Obtained and  
Require Swift Action to Recover Taxpayer Funds 

Attachment 
 
Page 5 of 5 
The following three tables are sourced from OIG Data Analysis, Crossmatching 
of 2025 Financial Institution 1 Data and OIG UI Data Warehouse.  
 
 
Table 1: Financial Institution 1 UI Funds Held on Prepaid Cards  
(Not Yet Escheated), March 1, 2020–September 30, 2021* 
 
Total 
Number of Prepaid 
Cards with Balance 
Total Current 
Balance on Prepaid 
Cards 
Number of Prepaid 
Cards Related to  
OIG-Identified 
Potential Fraud 
Total Balance 
Related to  
OIG-Identified 
Potential Fraud 
Total 
4,369,061 
$738,475,819 
2,679,741 
$522,499,034 
*The sums may not total due to rounding. 
 
 
Table 2: Financial Institution 1 UI Funds Escheated to State Unclaimed 
Property Administrators, as of September 25, 2025* 
 
Total 
Number of Prepaid 
Cards with 
Escheated Funds 
Total Escheated 
Funds from Prepaid 
Cards 
Number of These 
Prepaid Cards with 
OIG-Identified 
Potential Fraud 
Total Balance 
Related of Escheated 
Funds with  
OIG-Identified 
Potential Fraud 
Total 
914,527 
$266,853,492 
459,350 
$192,127,263 
*The sums may not total due to rounding. 
 
 
Table 3: Not Yet Escheated UI Funds on Financial Institution 1 Cards OIG 
Identified in 2022 
 
Total 
Number of Prepaid Cards  
Related to Claims  
OIG Identified as Potential Fraud in 2022  
Total Balance on these Cards  
Related to Claims  
OIG Identified as Potential Fraud in 2022 
Total 
950,227 
$351,992,389

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