September 23, 2023

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New Tech, Data Analytics to Curtail Fraud, Waste and Abuse in the Government Sector

Governments around the world are under great pressure to deliver services to citizens and businesses quickly, accurately, and efficiently.  At the same time, citizens and businesses are demanding that government leaders uncover and minimise possible vulnerabilities in existing programmes, as well as investigate and prosecute crime when it occurs, as countries begin to recover from the pandemic.

This tension is driving innovation – using data analytics – to allow quick delivery with strong integrity.  Programme Integrity can be implemented by altering current programmes or creating new ones that are sufficiently resilient against fraud, waste, and abuse.

When adopting new programmes, and allocating funding, governments can prevent harmful long-term impacts and be better prepared for future risks by focusing on monitoring, oversight, and design. This applies especially to those technology-inclined programmes or projects. As a result, the funds can achieve their goals and achieve the anticipated outcomes.

Governments have begun to invest considerably in analytics and data to explore and manage the dangers brought by digitisation, particularly as nations look to be more inclusive. There is a significant trend to invest in pandemic-related data analytics and innovative technologies to operate more economically, efficiently and effectively to prevent and detect fraud, waste and abuse in the government sector.

Data analytics boosts productivity, efficiency and revenue. Analysing data sets allows an organisation to know where it can optimise its processes to increase cost-effectiveness. Areas that are unnecessarily hoarding a company’s resources can be identified and decisions can be made about technologies that can reduce operational and production costs.

Shaun Barry: Preventing and detecting fraud, waste and abuse in the government with tech

Shaun Barry, Global Director, Fraud & Security Intelligence, SAS, revealed in an exclusive interview with Mohit Sagar, Group Managing Director and Editor-in-Chief, OpenGov Asia, that data and analytics are governments’ secret weapons to deal with fraud and scams in the digital era and is essential in any public sector fraud management strategy.

“There is no longer this trade-off between speed and accuracy; you can-do real-time fraud detection in sub-seconds. And you can also use analytics on the vector side, to be able to use artificial intelligence or machine learning to look for patterns that government leaders may have never thought existed or did not know were happening,” says Barry.

The heart of the response that government leaders should have is to adopt data and analytics in real-time to be able to enforce and promote integrity throughout society.

Agencies should roll out data and analytics initiatives to incorporate controls in their accounting and disbursement systems in real-time with great deliberation and must be able to keep up with the volume or number of transactions.

Countries that have performed well in terms of integrity are those who have planned for it – it does not occur by luck or by accident; they have built integrity into their systems. As governments roll out new programmes or evaluate how their present programmes are managed, they must ensure that honesty is at the forefront and the centre of everything.

“What does integrity do? It builds trust among people and it helps to make sure that these people and businesses trust the government and recognise that it is a force for good in society,” Barry emphatically states.

Governments around the world are under great pressure to uncover and minimise possible vulnerabilities in existing programmes, as well as investigate and prosecute crime when it occurs, as countries begin to recover from the pandemic. Programme integrity can be implemented by altering current programmes or creating new ones that are sufficiently resilient against fraud, waste and abuse.

When adopting new programmes and allocating funding, governments can prevent harmful long-term impacts and be better prepared for future risks by focusing on monitoring, oversight and design. This applies especially to those technology-inclined programmes or projects.

3 Vs that Increased Significantly because of Digitisation

According to Barry, 3 Vs were the main reasons for the drastic changes in the government sector – Volume, Velocity and Vector.

The Volume of transactions in and for governments has increased substantially as services move online; subsequently, the volume of fraudulent transactions is increasing as services are being digitised.  Fraudsters attempt to use volume to their advantage – hiding bogus claims among the millions of valid transactions that governments process.

Velocity is the speed at which those transactions come. They are coming literally at the speed of light because of the digitisation of services that governments rolled out, especially during the pandemic.

Simultaneously, the speed of fraud is increasing exponentially.  As governments undergo digital transformation – moving more services to electronic channels – fraud schemes can be perpetrated instantaneously.

Vector deals with where the threats are coming from. There are state actors who are targeting governments and programmes, there are non-state actors and there are organised crime syndicates. Primarily, these are not the result of mistakes made by individuals or corporations, even though these still exist wherever it is indicated that the vector has shifted.

Fraud schemes are now being perpetrated by criminal networks and organised crime syndicates.  Fraudsters are creating synthetic identities with data stolen from breaches.  They probe for control weaknesses and exploit vulnerabilities.  This level of sophistication adds magnitude to fraud schemes and patterns.

Understanding the Context of Fraud, Waste and Abuse

Fraud in the government sector is a false representation or any deliberate misrepresentation intended to deprive a government.

Threats are accompanied by some indicators like a sudden spike or an unexpected surge in expenditure or unexplained entries or manipulated records in a certain programme area. The absence of substantiating documentation, unauthorised dealings or transactions using non-serialised numbers are reliable indicators of wrongdoing as well. Cash payments in abnormally huge amounts are red flags as is a lack of internal controls.

High employee turnover could lead to or indicate fraud. People may also notice posts on social media, where people are communicating about a method to cheat the system, a means to acquire money when they should not be able to.

Of course, it is vital to understand if these signs of poor operation practices, systemic issues or staff challenges. The answer is often a mix of all. Fraud can take place due to poor operational practices, systemic issues or staff challenges. However, even a robust internal control environment cannot guarantee that no fraud will take place within an organisation.

Traditional fraud management is no longer sufficient, and intelligence technology is needed to mitigate fraud. It would be best to combine technologies such as AI, behaviour analytics and data mining, combined with the auditor’s experience and policy checking to help mitigate risks.

SAS uses industry-leading data analytics and machine learning to monitor payments and non-monetary transactions, as well as events, enabling you to identify and respond to unwanted and suspicious behaviour in real-time.

The Pandemic and Trends in Cybersecurity

Barry is quick to point out that the pandemic has not caused an increase in fraud, but the digital response to the pandemic has created opportunities that fraudsters have taken advantage of it. Bad actors certainly were aware of the significant digitisation in governments and have exploited vulnerabilities.

In their haste to serve people and control the pandemic, governments around the globe rolled out relief programmes quickly and without normal controls, opening up a wider attack surface for bad actors. It is pertinent to note that the pandemic also accelerated the pre-existing trend of digital transformation in government – yielding more opportunities for fraud.

COVID-19 caused huge disruptions which organisations across all sectors are still dealing with – all while fraud chances have multiplied and become more difficult to detect.

Bad actors are quickly growing in strength and effectiveness. Nearly 70% of organisations experiencing fraud reported that the most disruptive incidents came via an external attack or collusion between external and internal sources.

Many employees are now working in a less secure setting as a result of the unexpected move to remote and hybrid working environments. This has resulted in a dramatic increase in internet activity, making it harder to monitor and restrict fraudulent activities.

According to the Cybersource 2021 Global Fraud Report, there has been an increase in fraud attacks and the rate of fraud, especially for organisations based outside of North America. Companies based in the Asia Pacific region have been hit hardest, prompting an increased focus on fraud management and increased spending in this region.

Barry understands that citizens want good information – relevant and timely – not just raw data. They are looking to give leaders actional intelligence and deep insights at the right time. This allows for better decision-making that considers the risks and rewards comprehensively. The public sector must now implement and strengthen controls with robust cyber resilience initiatives.

Public Sector Fraud Management in the New Normal

PwC’s Global Economic Crime and Fraud Survey 2022 revealed that across organisations of all sizes, including the government and public sector, cybercrime poses the most significant threat, followed by asset misappropriation and customer fraud.

Even before the pandemic, the Asia Pacific region faced the highest incidence of medical claims fraud, according to a global claims fraud survey by reinsurance firm RGA.  “Survey results suggest that the global incidence of claims fraud is 3.58%, with high claims fraud incidence in the Asia Pacific region.”  That trend is widely expected to have increased during the pandemic.

The rise of digital fraud has forced organisations to work hard to enhance technical capabilities and implement more robust internal controls as well as reporting measures.

In the government and public sector, this fraud trend also makes the need to upgrade the government’s fraud management and technology even more crucial to prevent losses and misuse of funds and safeguard the government’s integrity as fraudsters are moving targets and becoming more specialised and professional. As soon as an agency identifies a scheme and puts in controls to mitigate it, the fraudsters quickly find new ways to exploit the system.

From a market growth perspective, the global market size of fraud detection and prevention solutions is predicted to grow from US$ 30.65 billion in 2022 to US$ 129.17 billion in 2029. Governments across countries, including countries in the Asia Pacific region, invest in implementing advanced fraud prevention solutions.

Investment in government fraud technology for detection and prevention can deliver big payoffs – typically 10 to 100 times ROI.

Border Protection During the Pandemic

“I believe that governments have increased their response to the pandemic to safeguard their borders. They must know the commodities and services entering or leaving their country,” Barry observes.

Of course, borders are only one of the many areas in which nations are beginning to invest in response to the pandemic. Governments across the world are beginning to extensively deploy analytics and big data solutions to assess the risks they may face at the border or within.

From the citizen’s viewpoint, people are concerned with financial fraud and want to be confident that the government collects the required customs duties, so those funds can be ploughed back into ongoing national development.

On the immigration side, people are aware of the potential risks associated with illegal immigration, overstays, as well as the risks of terrorism and contraband. Barry shared many nations are undergoing massive reformation that involves examining the entirety of their Immigration and Customs procedures. It employs and integrates real-time analytics to precisely identify these types of risks.

“There is certainly a very big trend that we’re seeing in the market, where government leaders, especially at borders, are investing in analytics coming from the pandemic,” Barry acknowledged.

Customs and border control are important operations not only because they have wide-ranging implications for a country, but also require close cooperation between many organisations to be truly effective.

Long before the pandemic, the ASEAN region has always been one of the world’s largest trading blocs, placing its member states at greater risk of various transnational crimes. The ASEAN Political-Security Community Blueprint 2025 prioritises and encourages ASEAN countries to strengthen cooperation on border management in accordance with respective domestic laws, rules, regulations and policies and to jointly address matters of common concern, including forgeries of identification and travel documents, as well as to explore the use of relevant technologies to manage borders to stem the flow of potential terrorists and criminals, and to coordinate border patrols and inspections.

When COVID-19 emerged in 2019, many countries imposed strict border control measures to mitigate as well as slow the spread of the virus. As global travel restrictions begin to ease and countries reopen their borders, governments expect border control measures to be different in the post-pandemic world.

The effects of the pandemic will remain as the World Health Organisation (WHO) and experts predict that the disease will presumably become endemic. Border control systems are facing more complex challenges, and border officials have the monumental task of managing dynamic health control measures to ensure safer travel to protect their citizens. Therefore, governments have to rethink and redesign how border controls operate.

Advanced data analytics and automation technologies can support government agencies by giving them relevant information to make better decisions on a real-time basis. Once data is collected from multiple sources, artificial intelligence or machine learning is applied to collected and historical data to develop real-time watchlist management, risk assessment and investigation management systems. The automated system can accommodate unstructured data in different forms and from multiple sources.

Adopting a risk assessment engine that allows automation as part of the modernisation, therefore, helps governments ascertain the risks and give them relevant information to make better decisions on a real-time basis while adjusting to the new reality and strengthening recovery.

Automation is not to replace customs inspectors and immigration officers, but to enhance border control management. Data analytics help turn the data into meaningful information quickly, so immigration officers can focus on the outcomes of the analysis.

SAS Support for the Public Sector

SAS has the tools, expertise capability and experience to determine the best strategy for effective fraud detection and prevention in agencies. They are one of the leaders in the space of advanced analytics and AI supporting the public sector. SAS helps governments in predictability and manage risk and identify opportunities by leveraging AI and Analytics. Everything SAS does is designed to empower better decisions.

As fraudsters get more sophisticated with their tactics, agencies are also required to get more sophisticated at fighting back. Digital fraud needs an approach with a faster, more accurate response to new threats.

The key strategy is to move from a reactive to a proactive approach. The SAS Detection & Investigation for Government Solution proactively prevents fraud, waste, abuse and improper payments. It provides a holistic view of fraud based on multisource data points and takes a multifaceted approach to detect hidden relationships and seemingly unrelated events.

Advances in fraud detection technologies can give agencies a more accurate and efficient arsenal than ever for attacking fraud and financial crimes. Sophisticated technology-based approaches can eradicate fraud and find it before the losses mount. Whether it’s contract fraud or Medicaid fraud, a criminal act or the sole attempt of a dedicated fraudster, fraud can be discovered and prevented.

Here are 3 essentials for winning the battle against fraud, waste and abuse:

  1. Find the patterns: Once agencies can bring together the relevant data, they can develop more complete views of the individuals, providers and businesses in the programs. The more information they have about these entities, the better they can determine what kind of behaviour is typical and what behaviour warrants closer scrutiny.
  1. Put advanced analytics to work: Traditional rules and outlier detection methods are proper to address known fraud patterns but are not very good at handling sophisticated and evolving fraud schemes today. Three forms of advanced analytics are taking centre stage in the war on fraud:
  • Predictive capabilities: predictive modelling allows agencies to see the patterns or interrelationships among various data elements that point to potential fraud, waste and abuse. It enables agencies to move more into fraud prevention mode versus pay-and-chase or detect-and-recover mode.
  • Robust social network analysis: this analysis reveals connections among entities to expose organised fraud rings or collusive activities.
  • Machine learning: machine learning: a form of artificial intelligence (AI), it is a powerful force for improving fraud detection accuracy and efficiency. It takes government fraud technology to an entirely new level.
  1. Empower staff for collaboration and efficiency: Responding to and tackling fraud requires the cooperation of multiple agencies and departments. While agencies need to ensure that the automation process runs and robust internal controls work effectively, employees need to be trained so that they can support agencies’ efforts by taking proper action based on insights extracted from the relevant data.

Barry is firmly convinced that utilising analytics in daily operations will spark innovative discoveries that propel the advancement of citizen outcomes and experiences –  ones that dismantle siloes, deliver on mandates and offer efficiencies.

There are a plethora of ways that data analytics can be valuable – to what extent relies largely relies on the organisation. But at its foundation, Barry says, it’s all about assisting the organisation in making the best business decisions to serve citizens.


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