PHOENIX (3 On Your Side) - Nathaniel Phillips is out of work. Recently, he moved in with a friend to try to make ends meet.

"Having this the feeling that this wasn't going to get better anytime soon, I had the option of moving up to Nevada with a friend -- basically splitting the bills -- and I decided that was my best move," he told 3 On Your Side.

Phillips says his Pandemic Unemployment Assistance claim was immediately flagged for fraud by the Arizona Department of Economic Security because of that out-of-state move.

"They asked me to upload selfies of me with my ID. I uploaded my passport," Phillips said. "I keep being told that all the documents are there. I have to wait my turn in line."

While he waits, the bills are piling up. "Every week, I'm calling the finance company for my car, just basically begging for extra time," Phillips said.

DES suspects up to 3.5 million PUA claims are fraudulent, according to Brett Bezio, a spokesman for the agency. Some of the claims that have been flagged for investigation are legitimate, but Bezio says a vast majority are from scammers targeting the system.

Jon Coss, the vice president of risk, compliance, and fraud for Thomson Reuters, says organized crime rings are the biggest offenders.

"What's really amazing is, if you go out to the dark web, which I don't suggest as an average citizen, you'll not only find identities that are for sale, but also state-by-state instructions on how to defraud unemployment insurance programs. You can buy those for as little as $200," Coss said.

DES is using a new tool,, to verify claims. According to Bezio, the agency has seen a "significant decrease" in initial claims filed in recent weeks, indicating that the verification process is working.

"DES will expand the utilization for identity verification to further ferret out fraud among existing claims, prevent additional fraudulent weekly certifications, and ensure individuals eligible for benefits receive their payments," Bezio said in a statement.

Although Arizona says it is making progress sifting through claims, the damage has been done.

"Make no mistake. This is a problem that's going to be here for a while in the unemployment insurance system. And I think it's going to take months or even a year or two to clean this up," Coss predicted.

Phillips believes it's already taking too long.

"If they would have kept up over the years and kept the system updated so they were ready for a disaster like we're experiencing now, there might not be this issue with the fraud," Phillips said. "So, in my mind, it's all on them, but I'm the one suffering."

The DES Office of Inspector General is involved in thousands of investigations into unemployment insurance fraud, according to Bezio. So far, 20 of those investigations have led to arrests, including two cases in Arizona, led by the U.S. Postal Inspection Service.

"Many of these investigations involve numerous fraudulent claims and multiple victims of identity theft," Bezio said. "With the majority of perpetrators residing out of state, investigations into these cases involve multiple sources of information, research, and collaboration before an arrest can be made by federal or local law enforcement."


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