Financial Crime World

Puerto Rico: A Hotbed for CARES Act-Related Financial Frauds - Unemployment Benefits Scandal Unravels

As Puerto Rico navigates the economic aftermath of the COVID-19 pandemic, the US Department of Labor and Human Resources (DTRH) has become a focal point of controversy due to several high-profile financial fraud cases related to the pandemic unemployment assistance (PUA) program under the CARES Act.

Background

  • The CARES Act’s PUA program, which offered unemployment benefits to individuals impacted by the pandemic, was implemented in Puerto Rico by the DTRH.
  • Evertec Group LLC, a joint-subsidiary of Popular, Inc. and Apollo Management, was hired by the DTRH to manage the requests and financial transactions from the CARES Act.
  • The automated platform for processing applications became glitchy, leading to widespread frustration and suspicion.

Early Fraud Discoveries

  • In early June, it was discovered that the platform was inadvertently mailing checks to a single address, “La Misma,” due to applicants penning it in when providing their home address.
  • Thousands of invalid checks were sent out as a result of manual inputting of applications by DTRH employees.
  • Former Secretary of Labor, Briseida Torres Reyes, resigned after this discovery.

Financial Fraud Schemes

Identity Theft

  • Between March 15 and July 24, ten individuals were arrested for stealing the identities of others and using false IDs to cash checks meant for the victims.
  • The criminal organization allegedly targeted abandoned houses, collecting mail containing the checks, and later cashed them at banks with appropriate documentation.

False Statements and Misinformation

  • Late July, the US Postal Service alerted the DTRH to abandoned houses receiving multiple checks.
  • Drug addicts, both Puerto Ricans and foreigners, had been providing false information, claiming they did not need to provide evidence of unemployment.
  • Perpetrators kept an eye out for mail delivery and collected checks to later cash them with corroborating documents from various sources.
  • Three men were arrested on July 23 in Bayamón and Carolina for using false identities.

Total Financial Losses

  • As of July 24, the Puerto Rico Police had recovered $133,252 from fraudulent activities.
  • Between July 14 and August 3, the SAIC recovered an additional $183,280.
  • By August 4, this amount had grown to $187,230 with more arrests made.

Ongoing Fight Against Financial Fraud

  • The DTRH is only involved in the recovery of funds, and both local and federal authorities are handling criminal charges.
  • A merchant registration certification was required as businesses and government entities reopened.
  • The DTRH plans for a more efficient system, allowing applicants to input their routing and account numbers for direct deposit payments.
  • Puerto Rico and its law enforcement agencies continue to seek closure and recovery from these widespread, CARES Act-related schemes.