Detect what’s meant to be invisible! Reframing the fraud challenge


Government fraud defrauds the public, but how can we fight it more efficiently? Are fraud numbers too small to matter? Is there the potential of doing more using less resources?

I get the impression that government agencies and organisations struggle to fight fraud, and even how to detect and recognise it on a daily basis. This may be a controversial statement, especially when governments around the world are trying to do more with less without diminishing the value of services being delivered, but it is still my impression. We need to look at examples like Nets in the Nordics and North Carolina in the US. Though from different domains, their efforts in detecting and preventing fraud are informative. The overall view, though, is that anti-fraud measures are limited, and the level of interest among the public is relatively low. We need to change that!

A question of cost?

No one believes that government fraud does not matter, or that the costs are too small to worry about. The US federal government’s three-year rate of “erroneous payments” (that is, payments that should not have been made to that person) was 7.1 percent in 2013. That doesn’t sound very much, but it was the equivalent of US$19 billion, and this is probably an underestimate of the actual amount lost to fraud. In the UK, 2016 estimates suggested that GBP 37.8 billion is lost each year in the public sector, including GBP 15.4 billion in tax fraud. At a time when the National Health Service is said to be facing a “black hole” of around GBP 20 billion, these figures do matter, and few would argue otherwise.

In the UK, 2016 estimates suggested that GBP 37.8 billion is lost each year in the public sector, including GBP 15.4 billion in tax fraud. At a time when the National Health Service is said to be facing a “black hole” of around GBP 20 billion, these figures do matter.

Is there, perhaps, an element of attitude? The public sector takes a very different approach to money from private sector organisations. Businesses exist to make money. Any kind of fraud is a direct attack on the bottom line, and therefore on their reason for existence. It can even, if big enough, call into question their ability to survive. It really matters.

Apart from the tax office, however, the public sector largely exists to spend money. Fraud is money spent on the wrong people. This is obviously unhelpful in terms of achieving objectives.

The invisible crime

New ways for insurance with smarter and more connected technology

What’s more, the onus to detect and prevent fraud in government is quite often shifted onto individuals. Your bank may well make huge efforts to detect and prevent credit card fraud, stopping your card or declining transactions flagged as risky or abnormal. The tax office? Not so much. Perhaps it is no wonder that one report found that 43 percent of those complaining about identity theft reported that their identities had been used for tax fraud, with someone either filing for a tax refund in their name, or working under their name and forcing them to pay the tax due. Far from the tax authorities instantly refunding the money or sorting the problem out, it often seems to be up to the individuals concerned to prove that they were the victims of fraud.

In a very real sense, public sector fraud – government fraud – is genuinely invisible. There is no victim, exactly. All of us, as taxpayers, lose out. Those who rely on government assistance are definitely more vulnerable if there is less money available to help them. It is, however, clear that the incentive for government agencies to detect and prevent fraud is, at best, limited. In fact, sometimes it may even be more trouble than it is worth noticing. Public entities even have difficulties with or are not allowed to share information. This means public systems and processes favour the fraudster.

This, of course, irresistible to fraudsters. They want invisible and difficult! That’s the real point of fraud – to sneak in under the radar by making their chain of value look as legit as possible. Fraud is designed to be invisible, but fraudster behaviour is possible to detect by looking at specific patterns of behaviour at both a small and large scale.

43 % of those complaining about identity theft report that their identities had been used for tax fraud. Government fraud is invisible! #fraud Click To Tweet

My conclusion: Fraud in government is publicly financed undermining of its own existence. It annoys me that government organisations struggle to fight fraud more efficiently. Especially when I know that technology incorporated in their processes, and in the hands of a skilled analyst, would make it easier to identify, detect and prevent it. We need to value more highly people and organisations that fight fraud. To me, fighting fraud has become personal!

Interested in fraud or curious about the good things SAS is doing with government data? Read more here.

Or get the e-book Doing Good With Government Data: Improving health, protecting the vulnerable, preventing fraud – and more.


About Author

Helge S. Rosebø

Senior Analytical Consultant

I strongly believe in technology as a facilitator for time to value performance. Great technology should unlock potential. The potential of moving and acting smarter in a world with increasingly detailed and rich data is huge, so why perform any less smart than you could have done?

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