December 7, 2020

The Honorable Philip Ting

California State Capitol
Sacramento, CA 95814

Dear Assembly Members and Senators:

I am responding to your letter to CEO Brian Moynihan dated November 24, 2020
regarding prepaid cards issued and managed by Bank of America under its contract
I appreciate the
opportunity to update you on measures Bank of America is taking, in partnership with
the EDD, to ensure valid claimants have timely access to their benefits against a
backdrop of the unprecedented levels of unemployment benefits fraud occurring in
California.

First, if you or any other member of the Legislature have a direct constituent query

other issues involving service and support, please provide me with the details and I will
ensure it gets reviewed and that we provide a response to the requesting member for
the constituent.

While there has been ample press coverage and public testimony regarding fraud in the
California unemployment insurance program, it is important you have information that
we also have shared with EDD and other state officials with
whom we are working about the type and scope of fraud
to ensure legitimate claimants receive their benefits. We welcome the interest of
elected officials in helping resolve these challenging issues. We have done our best to
respond to the issues you raised, and to place it in the context of the work we are doing
with EDD to manage through the fraud challenges, which unfortunately are impacting
the best efforts of EDD to ensure legitimate claimants get the benefits they deserve.
For some of the issues you raised in your letter, it is difficult to provide a general
response when individual circumstances differ for each claimant. If there are specific
claimant/constituent issues about which you need further information, please provide

Criminal fraud in pandemic unemployment insurance programs is not unique to

California, although the scale of program fraud in California is unique. We know that
other states are experiencing similar challenges. Third party cyber-security specialists
rganized crime rings are using unemployment funds to support
other criminal enterprises, such as illegal arms purchases, human trafficking and
terrorist activities
Through these challenges, between March 1 and November 21 Bank of America has
issued more than 8.2 million cards at the direction of the EDD in the cumulative amount
of $105.1 billion. While benefit payments have been received and used by the vast
majority of intended recipients without incident, some benefits recipients have
experienced issues. Most of the complications appear to result from stolen cards,
identity theft, or other types of fraud described in this letter. Given the unprecedented
volume of fraud in the program, identifying legitimate claimants from among the high
number of fraudulent claimants is time consuming and challenging.

We have provided significant detail to EDD, California law enforcement, and other state
offices and agencies as to how criminals are using stolen identities to apply for
unemployment benefits, intercepting cards in the mail, requesting replacement cards
posing as legitimate benefit recipients, and engaging
claims of unauthorized use. We also have detailed instances in which criminals not only
withdrew initial funds provided by the State, but sought and received additional
credit from Bank of America consistent with federal consumer protection
regulations -- in the hundreds of millions of dollars after filing false claims of loss
themselves, essentially attempting to double-dip the fraudulent removal of funds.

Much of the fraud that is being committed in California occurs during the enrollment
process, by criminals using stolen or fictitious identities. This occurs before Bank of
America becomes involved. We are engaged at the end of the enrollment process,
once EDD has validated and approved someone to receive unemployment benefits
through its own processes and systems and has directed us to issue a prepaid card for
benefits to a specified recipient.

Over the past several months, consistent with our obligations under federal law, we
have collaborated with EDD to help establish additional fraud prevention measures,
including implementing a series of filters and flags that indicate suspected fraudulent
activity. As a result of these efforts, we have identified more than 640,000 accounts for
EDD to evaluate as to whether they are fraudulent and the associated card should be
frozen or account closed. These efforts enabled us to identify for EDD:
76,000 benefits cards sent to recipients in states that do not border California;
numerous cases of multiple cards (hundreds in some instances) sent to a single
mailing address;
multiple cards using a common contact phone number;
benefit claims using common email addresses; and
benefits issued to infants or children as well as centenarians or other elderly,
and to persons unlikely to be recently unemployed.

Although in our experience red flags such as these and others are highly correlated with
the risk of fraudulent activity, the application of these filters will inevitably impact some
legitimate claimants. EDD and Bank of America therefore must work to investigate and
resolve matters for recipients who are inadvertently impacted by the measures
necessary to weed out fraudulent activity. We have committed significant additional
personnel to address the challenges. Since this program began in March, we have
increased call center and claim staffing to more than 6,150 dedicated personnel.

To further improve the program, we have proposed to EDD additional measures outside
the scope of our existing contract for service, including:

establishing a dedicated call center to help CA EDD authenticate blocked and

frozen accounts, and
facilitating information flow with law enforcement agencies.

EDD is reviewing our proposal for these additional program elements. We anticipate
that impacts on legitimate recipients would be significantly reduced through the
implementation of these and other front-end, anti-fraud measures.

We have taken other actions with EDD that have helped stop billions of additional
dollars ending up in the hands of criminals. In September, EDD directed us to freeze
approximately 345,000 accounts due to fraud concerns. You asked about this in your
letter. Based in part on the relatively low volume of complaints to our call centers, as
shared with EDD, we assess that a very small percentage of those total accounts may
be legitimate. Our assessment is that there is activity consistent with fraud in those
accounts on the order of approximately $2 billion. Pursuant to federal Anti-Money
Laundering and Bank Secrecy Act obligations as a national bank and its contracts with
individual cardholders, Bank of America also froze approximately 62,000 accounts
because those accounts triggered various fraud alert indicators.

We work with EDD to ensure cardholders know that an account has been frozen. We
now provide written notice to the cardholder of a freeze, explaining that the account has
been frozen because there may be fraudulent, unauthorized or unlawful activity on the
card. The notice invites the cardholder to contact the Bank. We understand that EDD
also contacts claimants whose accounts have been frozen and provides instructions on
how to validate their identities so that their accounts can be reactivated. As noted
above, EDD as the agency ultimately responsible for eligibility determinations also is
responsible for validating the identities of those whose accounts have been frozen in
order to initiate the reactivation process.

Bank of America also is working with EDD to streamline the process for EDD to validate
legitimate cardholders through verification of identity so that Bank of America can
reactivate their accounts when directed by EDD to do so. We developed a template for
EDD to send us the list of accounts that it has validated as legitimate. Once Bank of
America receives the requisite information from EDD, we initiate the process to
unfreeze the accounts, subject only to a brief review to determine whether Bank of
America has any additional information regarding potentially fraudulent activity that
should be considered before unfreezing the card. If there is none which is almost
always the case we reactivate the cards in our systems. It typically takes two to three
business days to reactivate accounts after Bank of America receives the EDD file.
Since September 1,
direction based on its assessment and verification of legitimate claims. Given the scale
and brazenness of the fraud with which we are dealing, this is a process that we are
working with EDD to expedite but which we all recognize can take more time than
anyone likes.

You asked about the steps your constituents can take to reactivate a frozen account.
Your constituents can obtain further information by reviewing their UI Online account or
SDI Online account or send EDD a message through Ask EDD:
https://askedd.edd.ca.gov/. EDD s website, www.edd.ca.gov, also gives information
about the agency's anti-fraud initiatives and other methods to contact EDD with any
questions or concerns they may have.

Finally, you inquired about fraudulent transactions on EDD prepaid cards. This is not
something that happens for most cards and is a separate issue from the account
freezes about which you also inquired. When a legitimate cardholder reports that he or
she has had fraud on his or her account (such as an unauthorized use) and Bank of

losses to the cardholde

policy for unauthorized transactions. Where the claim is not substantiated or we have
concerns about the claim or the account, then this policy does not apply. In this latter
situation, Bank of America closes the claim and, if it has granted any temporary credits
pending its investigation of the claim, reverses those credits and debits the account.

We appreciate the opportunity to keep you updated as we work with EDD to ensure
legitimate claimants are served while mitigating the impact of the unprecedented levels
of criminal activity in the program. I want to reiterate that any constituent inquiries you
ica may be directed
to me and I will ensure they receive the appropriate review.

In the meantime, please let us know if you have any further questions. We share with
you and with EDD the objective of ensuring that legitimate claimants get the benefits
they deserve while mitigating the impact of the unprecedented fraud being experienced.

Sincerely,

Brian Putler
Director California Government Relations

cc:
Anthony Rendon
Brian Dahle
Mike McGuire
Bill Dodd
Jim Nielsen
Andreas Borgeas
Bob Wieckowski
Scott D. Wiener
Anna M. Caballero
Scott Wilk
Maria Elena Durazo
Henry I. Stern
Thomas J. Umberg
Patricia C. Bates
Megan Dahle
Jim Wood
James Gallagher
Cecilia M. Aguiar-Curry
Marc Levine
Susan Talamantes Eggman
Timothy S. Grayson
Buffy Wicks
Rebecca Bauer-Kahan
David Chiu
Bill Quirk
Kevin Mullin
Marc Berman
Devon J. Mathis
Ash Kalra
Mark Stone
Robert Rivas
Joaquin Arambula
Rudy Salas, Jr.
Vince Fong
Tom Lackey
Monique Limon
Luz M. Rivas
Chris R. Holden
Laura Friedman
Jesse Gabriel
Ed Chau
Wendy Carrillo
Eduardo Garcia
Christina Garcia
Jose Medina
Mike A. Gipson
Sharon Quirk-Silva
Steven S. Choi
Randy Voepel
Cottie Petrie-Norris
Brian Maienschein
Shirley N. Weber