The Virginia Employment Commission Reduced Fraud by+$500K Within Months

The Virginia Employment Commission (VEC), a crucial arm of the State of Virginia, provides employment optimization services to statewide employers and handles all of the state’s unemployment insurance claims processes. Concern at the VEC was growing about the high level of fraud activity in its call centers. The team was looking for a solution to help detect fraud and craft a strategy to mitigate future fraud risks.

Our Pindrop® Protect solution helped VEC detect over 800 potentially fraudulent calls in their call centers in one year, provide better service to their customers, and improve agent productivity by reducing the use of knowledge-based authentication (KBA) questions.

About the VEC

The VEC, formed in 1933, is a public employment service established to assist employers in finding qualified workers and to help employees find jobs. VEC administers the state’s unemployment insurance benefits program, providing financial assistance to unemployed individuals and supporting workers, families, and communities while stabilizing the state’s economy.

VEC is the largest single source of job candidates in Virginia, with nearly half a million job seekers registered annually.² In 2024 alone, VEC paid $259M in unemployment benefits for +126k initial claims and +928k continued claims.¹

VEC was concerned about the rise in fraud, particularly the growing number of fraudsters targeting the agency’s contact center with unemployment claims. The VEC team reached out to Pindrop to help modernize their contact center fraud detection framework and help protect the funds that serve the people of Virginia.

Challenges

Since the COVID-19 pandemic, VEC faced an increase in fraudulent activity because of the rise in unemployment levels, combined with large government payouts such as the Pandemic Emergency Unemployment Compensation (PEUC). Post-pandemic, VEC lost an estimated $350M to fraud in three years. This rise in fraud is consistent with Pindrop internal data, which shows a +39% increase in fraud activity across U.S. contact centers during the same period.³ VEC was concerned that their existing authentication system was not equipped to handle this elevated fraud risk. VEC needed a solution to help modernize their call center security framework, alert them to the fraud, and help reduce the authentication burden on their genuine customers.

Goals

VEC had three goals as they sought a new solution:

With these goals in mind, VEC wanted to proactively detect and mitigate fraud instead of reacting to events on a passive, case-by-case basis. Additionally, VEC leadership wanted a more comprehensive view of risk across the call center.

Before Pindrop® Solutions

Before Pindrop, VEC’s fraud detection policies and actions relied on feedback from its fraud research department in Richmond, VA, which investigated cases and determined if fraud actually took place. Contact center leadership also leveraged tools like LexisNexis, which required the caller to verify their personal information through a “fraud quiz” that leveraged personal information pulled from public identity databases (street addresses, vehicles owned).

However, there were two major problems with the quiz:
1. Genuine customers were not able to verify the information and answer the quiz correctly, resulting in those customers being turned away and denied service.
2. Fraudsters were often successful at passing the quiz, which weakened its effectiveness as a security mechanism.

Pindrop internal data corroborates that Knowledge Based Authentication (KBAs) using personal information from public records is not effective as a security mechanism. After analyzing 2.5k fraud calls across 10 financial institutions, Pindrop found that fraudsters successfully passed KBA 53% of the time on average, with success rates ranging from 9% to as high as 90%.³

VEC’s existing methods were not catching fraud, nor were they conducive to improving customer experience.

VEC was ready for a change.

Why Pindrop

VEC required a fraud detection system that could detect fraud early, not after the fact. They also required a solution that could seamlessly add to their existing call center infrastructure, help the call center and leadership teams differentiate between high-risk calls and genuine claimants, and make the fraud detection process smoother and more effective.

Pindrop® Protect was the real-time, multifactor solution with an industry-leading fraud detection capability that VEC was looking for. In addition to assisting in fraud investigations, the ability of Pindrop® Protect to safeguard their contact center at all stages of a phone call, from IVR to the agent leg, was a key factor in the team’s decision to choose Pindrop.

The VEC team also valued the ability to customize and seamlessly integrate the Pindrop® Protect solution into their existing infrastructure. Protect enabled the team to build their fraud detection policies and processes around real-time alert capabilities.

For example, the Protect solution made the fraud detection process easier for call center agents by adding color codes to their screens and providing screen pops when fraud was detected, with no disruption to the customer experience. Pindrop® Protect also helped VEC move away from fraud quizzes, lowering frustration for the claimants and improving satisfaction for the agents.

Why did VEC choose Pindrop®?

What ROI did Pindrop® Solutions deliver?

VEC deployed the Pindrop® Protect solution in their IVR as well as the agent leg of the contact center.

Better fraud tracking

With Pindrop® Protect, VEC is now in a better position to track fraudulent claims, spot fake employer accounts, and identify and prevent monetary loss. With better fraud tracking, the commission has prevented account takeovers and identity thefts and detected fraudulent account openings.

Fraud insights from Protect also helped VEC identify a fake employer case, which was leading to fraudulent claims. In this case, the fraudster set up fictitious employers and provided fake documentation about layoffs using stolen identities to steal money. Pindrop® Protect alerted the Commission to this high-risk activity, which led to an investigation and discovery of the fraudulent scheme.

Fraud detection in the IVR

VEC’s call center has a wait time of +8 minutes,⁴ so they offer customers a callback rather than making them wait. This approach helps reduce the number of callers reaching an agent on their first call, but it creates the challenge of monitoring high-risk calls in the IVR, where customers spend their time.

VEC started using the ‘Risk API’ feature of the Pindrop® Protect solution to determine caller risk in the IVR. Risk API allows VEC to pull call risk scores in real time in the IVR, even when the caller is not speaking. This capability helped VEC classify IVR calls as ‘high-risk’ or ‘low-risk’. Instead of VEC calling back every caller, they can now call back only low-risk callers, redirecting high-risk calls to a fraud agent.

Pindrop® Protect account risk analysis capabilities helped VEC make an important change to their IVR security policies: it facilitated their ability to connect the dots between different fraudulent claimants with insight into signals which can indicate malicious activity, like whether an address on a claim matches the address on other claims, or if multiple claims are listed under the same address or phone number. With Pindrop® Protect, calls with these signals can be immediately stopped or redirected to fraud investigators before resulting in further account takeovers.

VEC used these insights to update its IVR call handling policies to flag additional suspicious claims that share these commonalities.

Richer fraud insights with ‘Custom Attributes’

‘Custom Attributes’ is a PindropⓇ Protect feature that provides the flexibility to define custom fields and gather specific metadata in the case investigation UI, and to get relevant and consistent context for enhanced call analysis.

Using Custom Attributes, VEC investigated fraud cases associated with accounts having a certain balance threshold, which helped VEC conduct more targeted and high-impact investigations. Prior to using Protect, the team did not have visibility into the resolution of the fraud cases because the cases took months to resolve. With Custom Attributes, VEC has better visibility into case investigations and can track them all the way to the end.

Fraud detection and loss avoidance

Pindrop® Protect was deployed by VEC in April 2024. Since then, Protect has detected potential fraud at the rate of 1 in every 2,529 calls to the call center, with potential savings of over half a million dollars ($560k) in fraud loss avoidance. On an annualized basis, Protect is on track to potentially save VEC almost $1M ($840k) in fraud losses.

Protect customers do not need to wait to enroll callers’ voice profiles, or rely only on ANI (Automatic Number Identification) and voice blocklists to detect fraud. Instead, they can start detecting fraud on day one by leveraging a variety of factors with Pindrop® Protect.