Other LanguagesMore than $52M collected so far from banks that accepted stolen funds
SEATTLE — Attorney General Bob Ferguson announced today Metropolitan Commercial Bank will pay $10 million to Washington state as part of his innovative fraud recovery program to return unemployment funds stolen during the COVID pandemic. This initiative has so far brought in more than $52 million from banks across the U.S. that accepted stolen unemployment funds.
Metropolitan’s resolution reflects the second phase of the office’s investigation, which will seek out non-bank financial technology, “fintech,” companies that the criminals used to hold and help transfer stolen funds in violation of the Consumer Protection Act.
Ferguson asserts that in 2020, Metropolitan, as the sponsoring bank for the fintech company MovoCash Inc., accepted more than $15 million from criminals who stole from the state unemployment fund. They used stolen identities to get the funds then used Movo accounts to transfer funds through the bank. Ferguson asserts that Metropolitan received the transfers of stolen money without ensuring that proper anti-fraud, anti-money laundering and customer identification screens were in place.
Ferguson is the only state attorney general to pursue this first-of-its-kind consumer protection investigation against fintech companies, and their sponsoring financial institutions, in his continuing effort to recover stolen pandemic unemployment funds. Previously, during the first phase of the investigation, Ferguson was also the first and remains one of the only state attorneys general to exercise state asset forfeiture powers and recover stolen taxpayer dollars. During this first phase, Ferguson recovered $42 million from 26 financial institutions.
“More than four years ago, criminals targeted our state unemployment fund, and my office has not stopped working to recover what they stole,” Ferguson said. “Washington has been a national leader on this effort. We were the first state to use forfeiture laws to recover stolen dollars that were frozen in accounts. Now we’re the first to resolve an investigation into a fintech company that the criminals used to move the money. There is still more work ahead.”
Metropolitan served as the issuing bank for third-party prepaid or debit card programs, called digital banking programs, offered by fintech companies. To gain access to the U.S. financial network, some unregulated fintech companies essentially lease the bank identification numbers of regulated financial institutions to provide digital banking services to their customers.
In early 2020, criminals used a digital banking program marketed by Movo to steal more than $15 million in unemployment benefits paid by the state’s Employment Security Department. Between April and July 2020, Metropolitan accepted more than 3,700 fraudulent money transfers of Washington state unemployment benefit funds through Movo. After financial regulators informed Metropolitan about the illegal scheme, it froze and returned $5.5 million back to the state.
Ferguson subsequently recovered more than $732,000 from Metropolitan’s accounts using his forfeiture power. Ferguson then investigated Metropolitan for violations of the state Consumer Protection Act related to Movo’s program, and the bank cooperated with the investigation.
To avoid a lawsuit, Metropolitan will pay $9 million more to the Employment Security Department as restitution that will go back into the state unemployment trust and federal treasury. The bank will also pay $1 million to the Attorney General’s Office to cover investigation costs and fund future consumer protection activities.
The resolution requires Metropolitan to maintain policies that prevent money laundering of unemployment benefits paid in the name of Washingtonians through third-party digital banking fintechs.
The Attorney General’s Office will also continue to assist in federal investigations seeking to recover stolen funds.
Overall, Washington state agencies recovered a total of more than $432.6 million in stolen funds so far. The Employment Security Department estimates that during the pandemic, fraudulent claims accounted for $647 million, or 3%, of the overall $21.7 billion it paid in unemployment benefits paid to workers. State recoveries so far have returned more than two-thirds of the stolen funds.
This leaves approximately $214.4 million lost to fraud so far, which amounts to 1% of the total benefits paid to workers. Consequently, in Washington state, 99% of the unemployment benefits went, as intended, to support workers.
Other states experienced much larger losses to fraud, like California at $18.7 billion. Arizona lost $4.4 billion and Virginia lost $1.6 billion to fraud, and both have similar-sized populations to Washington state.
Washington among the first states targeted
Beginning in April 2020, Washington's unemployment insurance program was one of the first to suffer an unprecedented and massive nationwide attack of imposter fraud.
Sophisticated fraud rings used identity data harvested from data breaches to steal billions of dollars from 53 government programs that received federal pandemic unemployment benefits, according to a government accountability report. The same report estimated losses to fraud nationally to be as much as $135 billion.
Soon after the thefts, Ferguson initiated an investigation searching for bank accounts where scammers did not withdraw all their stolen funds and launched a legal effort to reclaim these funds for the state. To date, financial institutions across the country cooperated with this first forfeiture phase of the investigation. Essentially, the Attorney General recovered stolen money in accounts at banks and other financial institutions that criminals were unable to withdraw.
According to Employment Security Department data, it caught the fraud within the first two weeks and decided to pause benefit payments, which prevented payment on more than 100,000 fraudulent claims. Its finance team then collected and analyzed fraud data and determined that 95% of fraudulent payments went to 75 banks. From there, the department contacted each bank and attempted to recover funds. This effort included sharing fraud data with the banks and reaching resolutions on the amounts available to return.
Searching for accounts with red flags
During the first phase of its investigation, the Attorney General’s Office used the department’s data and subpoenaed more than 35 banks across the country to identify accounts with balances of $1,000 or more that bore red flags or indicators of fraud.
Red flags included:
- Accounts that received unemployment benefit payments from multiple states;
- Accounts that received deposits of unemployment benefits to multiple people; or
- A mismatch between the personal information of the account holder and the person who supposedly applied for the benefits deposited in the account.
Ferguson filed cases to recover stolen funds remaining in accounts at 26 different financial institutions. In part because of these forfeiture litigation efforts and the assistance provided to the department, Washington was more successful than other states in mitigating, and securing recoveries of, unemployment fraud losses — helping to preserve funds for the benefit of unemployed workers and taxpayers.
| Total Forfeitures Recovered During Phase One | |
| Institution | Forfeited Amount |
| TD Bank |
597,015.41 |
| PayPal |
1,579,249.64 |
| Wells Fargo |
8,033,573.24 |
| Citibank |
2,777,665.72 |
| JPMorgan Chase |
6,775,439.16 |
| Metropolitan Commercial |
732,761.82 |
| Capital One |
2,396,661.27 |
| BECU |
19,952.13 |
| Green Dot |
735,030.97 |
| Block |
105,138.19 |
| Choice Financial Group |
238,687.36 |
| Stride Bank |
87,013.81 |
| U.S. Bank |
578,727.85 |
| Bank of America |
9,714,631.52 |
| Citizens Financial Group |
247,229.99 |
| BBVA |
484,724.22 |
| PNC |
5,062,510.12 |
| Discover Bank |
80,145.91 |
| American Express |
45,368.77 |
| Santander Bank |
165,633.70 |
| Regions Bank |
269,936.35 |
| Incomm Financial |
244,835.74 |
| Netspend |
630,702.37 |
| Navy Federal |
199,533.90 |
| Huntington National Bank |
115,060.95 |
| Wise |
115,291.42 |
| Total |
42,032,521.53 |
Special Assistant Attorney General Jeff Sprung is leading this effort, along with Assistant Attorneys General Spencer Coates, Kendall Scott Cowles, Erica Franklin, John Nelson, Todd Sipe, Jonathan Tebbs and Martha Rodriguez-Lopez; paralegals Kellie Tappan, Victoria Johnson, Kristina Wooster, Jeanine Lantz and Michele Sanchez; and investigator Greg Coleman.
Former Assistant Attorney General Lia Pernell and paralegal Sara Cearley also worked on the case but have since left the Attorney General’s Office.
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