Fraud poses a significant challenge across various sectors of government, draining resources and undermining public trust. It also means there is less much needed money to spend on vital resources like schools and hospitals.
Common types of fraud include benefits fraud, tax evasion and procurement fraud, with fraudsters constantly seeking new ways to exploit systems. As more activities move online, identity fraud has become more common, accounting for a staggering 66% of cases recorded to the National Fraud Database in the first half of 2024.
Government agencies must stay one step ahead of fraudsters, by employing robust solutions to detect and prevent fraud, leveraging advanced analytics and artificial intelligence (AI).
Benefits fraud
From individuals failing to report a change in their circumstances, to organised crime gangs who exploit vulnerabilities in the system, benefits fraud is prevalent and can take on many shapes and sizes.
Someone who is receiving state benefits may fail to report that someone has moved in with them permanently. This may lead to them continuing to claim benefits to which they are no longer entitled, for example.
Larger groups may use false identities or set up fake households to fraudulently claim benefits on a much greater scale. However, analytics can significantly enhance the detection and prevention of this type of fraud, by combing through vast amounts of data to uncover unusual patterns and suspicious activities.
Tax evasion and VAT carousel fraud
His Majesty’s Revenue and Customs (HMRC) faces an ongoing battle against tax evasion, including the sophisticated schemes of VAT carousel fraud. This is where fraudsters repeatedly reclaim VAT on the same goods as they are passed between legitimate and fake companies across Europe, only paying the tax at the end of the chain.
These schemes are complex — even more so now that the UK has left the European Union. Here, once again, is where advanced analytics can help. With the technology, organisations are able to scrutinise vast amounts of financial data to identify anomalies.
Whether it’s through self-assessment discrepancies, money laundering via shell companies, or individuals underreporting their earnings, AI-powered analytics can help catch these fraudsters before they cause significant harm.
Procurement fraud
Procurement fraud is another area where government agencies are particularly vulnerable. Several companies might collude to artificially inflate the price of a tender, and by coordinating their bids, they create the illusion of fair competition while driving up costs. In other cases, fraudsters may set up fake companies to win contracts, only to disappear once payment is made.
Large-scale infrastructure projects, such as High Speed 2, may be susceptible given the large-scale volumes of spend. The NHS has also been affected, notably during the Covid-19 pandemic, when the scramble to secure personal protective equipment (PPE) saw numerous cases of inflated prices and questionable contracts, with some suppliers delivering substandard goods at premium prices.
Cloud-based analytics platforms can help detect such irregularities by identifying unusual patterns of spending or discrepancies in bidding processes. For example, if multiple bids come in at strikingly similar prices, or if a supplier’s bank account is linked to another vendor, these could be signs of fraud.
Human oversight will always remain crucial, but AI can further refine this process by recognising patterns that humans might miss — expediting the efficiency of the process.
The need for a robust platform
While it’s impossible to predict the next big trend in fraud, having the right platform in place is crucial to detect modern fraud schemes. As fraud becomes increasingly sophisticated, it’s more important than ever for governments to embrace advanced analytics.
By using an intelligence platform that can enhance your current capabilities to join the dots in an investigation, government departments can identify and explore complex organised crimes across multiple data sources and over different time periods. This will help to accelerate investigations, reduce workload, protect society and reduce criminal activity.
By sharing data across departments and utilising AI, agencies can better detect anomalies, prevent fraud, and protect public funds. Fraudsters will continue to innovate, exploiting any weaknesses they can find, but with the right tools and a proactive approach, government agencies can stay one step ahead.
For more information, please visit
www.sas.com/uk/gov/fraud