Artificial Intelligence in Public Sector Fraud Detection

Accountability and transparency are critical components of audits within the public sector. There is a constant scrutiny to ensure that finances are administered ethically while also providing timely alerts about potential financial strains or failures. The distribution of funds, particularly stemming from COVID measures, has surged, increasing the scrutiny on audits to ensure that these funds are utilized for their designated purposes.

Artificial Intelligence (AI) can play a significant role in helping public sector organizations identify and resolve potential issues before they escalate, ultimately saving valuable resources and ensuring that public funds are managed effectively.

Challenges and Opportunities

Recent alerts from the National Crime Agency indicated that fraud related to COVID-19 could cost taxpayers up to £4 billion, as opportunistic criminals exploit the crisis. The rise in fraudulent activities, from bogus company registrations to misuse of the job retention scheme, necessitates that government departments not only identify errors and fraud but also find ways to recover lost funds.

The rapid deployment of support schemes was a necessity during the crisis, but this speed also opened doors to significant opportunities for both systematic errors and fraud. While the immediate financial crisis may have passed, businesses and individuals still require ongoing support, highlighting the need for the public sector to learn from these experiences to efficiently target fraud and mitigate future losses.

Leveraging Technology for Better Control

Now is the ideal time for the government to bolster internal controls to ensure appropriate utilization of public funds, with technology playing a vital role in detecting and preventing fraud and errors in the future.

To combat current levels of fraudulent activities and to pinpoint areas needing attention, the public sector should adopt a data-driven, intelligent approach. By integrating AI into public sector IT systems, organizations can identify errors, detect fraud, and streamline processes to avert further issues.

Successful Implementations

HMRC (Her Majesty’s Revenue and Customs) has already made significant strides by leveraging its extensive expertise in tackling tax fraud to address furlough scheme abuses. For the future protection of public funds, a cohesive initiative from central government is essential, especially since smaller local authorities may lack the necessary resources and analytical capabilities to undertake thorough evaluations.

Data and Machine Learning

The government possesses a wealth of data, but the expedited nature of COVID-19 financial responses may have led to data collection gaps that need urgent attention. The priority should be to identify these data gaps while simultaneously utilizing Machine Learning (ML) to uncover anomalies indicative of systematic errors or fraud.

Additionally, ML-driven insights can enable public sector entities to transition towards predictive analytics, enhancing controls and shifting focus from retrospective assessments. By understanding key fraud indicators, automated alerts can be triggered during the application process for any unusual claims, significantly reducing the fraud risk during claim processing.

Moving Forward

While the prospect of implementing these strategies may appear overwhelming to many public sector bodies, rapid action is crucial. Even amid crises, strong processes are essential. Neglecting the lessons learned from the past few months could exacerbate issues and lead to further misuse of public funds. It is vital for the public sector, businesses, and individuals to adapt to the current environment, which requires dedicated efforts to analyze data, identify issues, and establish new controls.