SACRAMENTO — Bank of America estimated Monday that fraud in California’s unemployment benefits system could total $2 billion, and said it has identified 640,000 accounts with suspicious activity that should be investigated to determine whether they are bogus and should be shut down.

The bank, which has contracted with the state Employment Development Department to issue debit cards containing unemployment benefits, issued the warning in a letter to state legislators. It represents the highest estimate of fraud yet in a system that has paid $110 billion since the COVID-19 pandemic triggered a wave of joblessness in California beginning in March.

A bank official said red flags have been issued on claims filed in the names of infants, children and centenarians, as well as people living in states not contiguous to California.

“It is outrageous,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn. “We understand that there was an effort to push as much money into the economy as possible, but there has got to be some controls. Here it is like they have opened up a bag of cash in the middle of a tornado and hoped that it ends up someplace where it is supposed to be.”

The bank has worked with EDD to establish fraud prevention measures, including a series of filters and flags that indicate suspected fraudulent activity, wrote Brian Putler, the bank’s director of California government relations.

“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,” Putler said.

The accounts identified as suspicious include 76,000 benefits cards sent to people in states that do not border California, which are deemed more likely to involve fraud than adjacent states that might temporarily host out-of-work Californians.

The bank said there were also “numerous cases” in which multiple cards, including hundreds in some instances, have been sent to a single mailing address.

Other issues include multiple cards using a common contact phone number or address, and benefits issued to infants or children as well as centenarians or other elderly people not likely to be working, Putler wrote.

He said the scope of potential fraud is coming into better focus from an examination of 345,000 debit cards already frozen because of suspicious activity.

“Our assessment is that there is activity consistent with fraud in those accounts on the order of approximately $2 billion,” the bank official wrote to legislators.

A representative of the Newsom administration confirmed in a statement that EDD is coordinating with Bank of America to review debit card accounts that the bank has frozen based on fraud flags.

“At this time, we are unable to confirm the estimate that [Bank of America] provides because EDD is verifying identities on claims the department has separately identified as non-fraudulent,” said Crystal Page, a deputy secretary for the state Labor and Workforce Development Agency. “The Governor has made it clear we must weed out all abuse of our unemployment system.”

Page said that if the bank does not unfreeze an account, the EDD continues to send checks on subsequent payments, adding: “We know how critically important these unemployment benefits are during this challenging time.”

The bank’s estimate was in response to a recent letter from 59 state legislators to Bank of America Chief Executive Brian Moynihan demanding answers to festering problems in the benefits system run by the EDD.

After the EDD announced that nearly 350,000 of its debit cards had been frozen to investigate suspicious activity, the lawmakers wrote to Moynihan and said that their offices have been flooded with calls from panicked constituents unable to access benefits on legitimate claims.

“Constituents report they are unable to get through to your call centers, or when they do, the issue is not resolved,” the lawmakers wrote to the bank executive on Nov. 24.

In response, Putler wrote to legislators Monday, saying that although other states also experience unemployment fraud, “The scale of program fraud in California is unique.”

The bank’s estimate was issued just days after state officials confirmed that $400 million in unemployment benefits was paid on claims improperly filed in the names of inmates in state prisons.

A group of nine district attorneys warned Gov. Gavin Newsom last week that they have received unverified information that some $1 billion in benefits has been paid on claims filed by people outside the state, including claimants outside the country.

Putler warned lawmakers on Monday that the fraud problem has implications far beyond the loss of taxpayer funds.

He cited conclusions by third-party security experts in the U.S. that organized crime rings may be using unemployment funds to support other criminal enterprises, including illicit arms purchases and terrorist activities.

However, to make sure Californians with legitimate claims are paid quickly, the bank has increased its staffing to handle problem claims and has proposed to the EDD that the contract be changed to provide a dedicated call center to help authenticate blocked and frozen accounts, Putler said.

“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,” he wrote.

Assemblyman Jim Patterson (R-Fresno) responded to the bank’s letter Monday by saying too many Californians with desperate need for unemployment benefits are caught in limbo by the freezing of debit cards.

“Identifying fraud must be a priority, but Californians with no income cannot be sacrificed on the altar of incompetence,” he said.