The United States Postal Service lost $9 billion in fiscal year 2025. Somewhere between $3.6 billion and $5 billion of the surrounding rot, spread across counterfeit shipping labels, counterfeit stamps, and a payment system nobody bothered to fraud-test before launch, was not a mystery to the agency while it happened.
It was, by the Postal Service’s own admission, something people inside the building had flagged, discussed, and in at least one case warned about in writing more than a year before anyone shut anything down. This is not a story about an agency that failed to notice a problem. It is a story about an agency that noticed, formed a working group, and kept mailing.
A Timeline That Reads Like a Confession
Start with the number that should embarrass everyone involved. From March 2024 through February 2026, the Postal Service’s own Office of Inspector General says counterfeit package labels drained $3.1 billion in unrecoverable revenue, with another $520 million projected through 2028. Ninety seven percent of counterfeit labels identified in that window made it all the way to delivery.
The detection system built to stop them, the Counterfeit Postage Intercept Process, caught the labels it was designed to catch in 2023 and then sat still while counterfeiters moved on, the institutional equivalent of reinforcing the door after the windows had been open for a year.
The Enterprise Payment Account fraud embedded in that mess has its own paper trail, and it is the most damning document in the pile. Corporate Treasury warned Postal Service stakeholders about the vulnerability in January 2025. The agency did not officially identify the fraud until May 2025.
The Inspector General discovered it independently that August, during unrelated site visits, which is its own small humiliation; the watchdog found the fire before the fire department did. The agency did not shut down the roughly 2,800 fraudulent accounts responsible until January 2026, a full year after Treasury’s first warning, by which point December alone had bled $125 million in a single month, 14 percent of that month’s entire label revenue.
The Inspector General’s own words on the agency’s response were blunt: “the measures have not been timely or robust enough to counter this fraud scheme.” OIG’s audit traced the root cause to something administratively poetic. Treasury, the office responsible for catching fraud, had no consultation rights and no decision authority over the very payment system fraud was flowing through. The system was never tested for fraud prevention before it went live.
A Machine That Cannot See What It Was Built to See
If the label fraud is a story about warnings ignored, the companion audit on counterfeit stamps is a story about equipment deliberately blinded. The Postal Service’s primary stamp authenticator, the Advanced Facer Canceller System 200, can run in a mode that catches nearly everything or a mode that catches almost nothing, and management chose the second one to save processing time.
When the Inspector General ran its own controlled test, feeding the machine counterfeit stamps in its low-revenue protection setting, the machine caught none of them. Zero. Management’s defense amounted to a cost argument, and a fair one on its own terms, except that nobody then bothered to implement any interim check, such as basic sample testing, to find out how much fake postage was sailing through in the meantime. That gap alone, OIG estimates, put $337 million at risk in a single fiscal year.
The stamp fraud also has an online dimension that makes the agency look almost quaint. A contractor hired to scan the internet found 8,895 instances of counterfeit stamps being marketed or sold in under two months. The Postal Service takes over 30 days to disable an online threat once found; the contractor’s industry benchmark is eight.
The Inspector General points out, not unkindly, that the agency already uses the Lanham Act aggressively to sue people selling unlicensed eagle-logo T-shirts and baseball caps, and applies it far less often to people selling fake postage using the same logo. Priorities, evidently, are a choice.
Ninety Seven Cases, Nine Convictions, One Percent Recovered
Here the story stops being about detection and becomes about consequence, or the near total absence of it. Between 2020 and 2025, the Postal Inspection Service presented 44 counterfeit label cases to the Department of Justice for prosecution.
Nine were accepted. All nine won convictions, a perfect record on the cases federal prosecutors bothered to take, which only sharpens the question of why 35 others were turned away and why the agency still cannot say. The Inspector General recommended a simple fix, a structured data field to track why DOJ accepts or declines a case, so patterns could inform future referrals.
The Postal Service disagreed, arguing the information “is not provided” by DOJ in the first place, an answer that concedes the problem while declining to solve it.
Of the $57 million in losses the Inspection Service actually identified through investigation over that same five year window, it recovered $572,250. About one percent. The delay between a search warrant and a seizure warrant runs four to five months, plenty of time for a suspect whose bank has already tipped him off to walk the money elsewhere.
The agency had two untapped options available to it. One was the Revenue Deficiency Process, an administrative billing mechanism. The other was simply referring cases to state prosecutors. It has used neither with any consistency. When OIG recommended exploring both, management disagreed with that too, and pointed to a prior report about stamps as though it had already answered a different question.
The Working Group That Was Not a Program
None of this happened for lack of meetings. The Postal Service assembled a “Fraud Analytics and Mitigation” team, held regular cross-functional sessions, and produced slide decks. What it did not produce, across two years and two separate audits, was a signed program charter, a clear line of decision authority, or meeting minutes documenting what was decided and why.
Management’s own response to the recommendation that it fix this was that formal governance amounted to unnecessary overhead given how fast fraud moves, an argument that would carry more weight from an agency that had, in fact, moved fast.
The Postal Service agreed with eight of the eleven recommendations in the label audit and rejected three, all in the section on prosecution. It agreed to all four recommendations in the stamps audit and all five in the payment account alert, mostly after the money was already gone.
Every implementation date attached to a real fix lands sometime between April 2026 and August 2027. The Inspector General will keep filing reports. The agency will keep filing agendas.
The $3.62 billion did not wait for either.
Sources: Efforts to Mitigate Counterfeit Postage (USPS OIG, Report 25-072-R26, September 10, 2026); Counterfeit Stamps (USPS OIG, Report 25-121-R26, June 16, 2026); Management Alert: Enterprise Payment Account Fraud (USPS OIG, Report 25-072-2-R26, February 10, 2026)
