How Automated Anti-Fraud Technology Can Substantially Reduce Fraud Losses in UK Public Sector
Written by Michael Hobson
Published: 2nd Feb 2021
In recent months, U.K. officials have steadily raised their estimates of the potential fraud and losses in many of the coronavirus pandemic relief programs, especially the Bounce Back Loan scheme designed to aid small businesses with government-guaranteed loans of up to £50,000.
Even as the program was being launched in May, banking industry leaders warned that the speed of loan approvals and fund distribution sought by the government and the laxity of anti-fraud controls would result in high default losses. The estimates of loss levels have climbed steadily since then. The National Audit Office recently said up to 80% of loans could be unrecovered and combined losses from defaults and fraud could reach £26 billion.
Government officials have defended their efforts and pointed to some successes. British Business Bank (BBB) Chief Executive Catherine Lewis said in November that nearly 27,000 loan applications for a total of £1.1 billion had been rejected as fraudulent since the program launched in May. The BBB also said, however, that up to 60% of borrowers could default on loans. The full extent of losses, both credit, and fraud, will not emerge until the loans start being repaid in May 2021.
Fraudsters have used a range of strategies to make improper loan applications, including:
- Identity theft: Using the names and credentials of actual small businesses and owners to make applications in their names without their knowledge while directing the loan money to bank accounts the fraudster’s control
- Making duplicate loan applications
- Buying inactive/non-operating limited liability companies and using their credentials to apply for the loans with the intent to default and/or declare bankruptcy
How to prevent losses with anti-fraud technology
The level of these potential losses underscores the need for increasing the use of automated anti-fraud technology. With a holistic view of data, many of these improper payments could have been prevented. Agencies should look to implement more sophisticated real-time transaction monitoring and analytical systems to help detect fraudulent behaviors.
In the near term, technology can help to prevent additional improper payments, improve the internal controls of relief programs, and hold those accountable who have committed fraud.
Two factors created special challenges for preventing fraud and waste in the pandemic-related relief programs:
- The huge scale of the funds allocated to the relief effort, and
- The extreme pressure on officials to distribute funds quickly
Yet both those factors underscore the critical role of technology, with its capacity to process data and inform decisions at scale and with speed.
Data is at the center of fraud prevention
Using available data, analytic software tools can use techniques like entity resolution to determine if different entities are in fact the same person or company. Relationships between all types of entities, including financial accounts, IP addresses, people, and companies can be quickly revealed, and scoring models can rank the highest risks and threats. Government agencies using data-driven, analytical approaches to fraud prevention can discover risks and threats faster compared to traditional methods.
UK government agencies are not the only ones feeling the pressure of pandemic-related fraud. In the U.S., federal and state governments have also experienced high levels of fraud in their pandemic relief programs. A common challenge to automating fraud prevention systems is siloed data – which could be highly valuable if it were available in a single place. This was allegedly a key factor in the $1.4 billion in COVID-19 stimulus payments made to deceased persons by the U.S. Treasury Department. The Internal Revenue Service, which is part of the Treasury Department, maintains accurate death records, but those records were not available to the Treasury’s Bureau of Fiscal Service, which distributed the stimulus payments.
“The coronavirus pandemic highlights the need for rapid, real-time information to support decision making in government. Traditional government data systems and reporting processes were designed for semi-annual or annual reports and analytics, yet in a global health crisis, decision-makers need information much faster – on a daily or even hourly basis,” according to Effective Data Governance, a survey of U.S. federal government Chief Data Officers released in September 2020. “…The global pandemic highlights an ongoing need for government to have data collection, management, and analytic capabilities at the ready to support decision-making needs.”
You may be interested in…
Upgrade Your CDP Software for B2B with a Customer Intelligence Platform
To remain competitive, large corporates need to upgrade their CDP software to harness the full potential of B2B data and exceed changing customer expectations in an increasingly digital world. Enter the Customer Intelligence Platform.
Creating Value For The Enterprise Using Data
In this episode, Vishal Marria, CEO at Quantexa, speaks with the Chief Data Scientist at Dun & Bradstreet, on overcoming common data challenges, digital resilience, and creating enterprise value using in AI and data & analytics.
How Danske Bank Is Adopting Data and Analytics Technology
To maximize the value of data, enterprises need the right IT infrastructure in place. In this episode, Bo Svejstrup, CIO at Danske Bank discusses resolving legacy data challenges, improving collaboration between business and IT, and the future of cloud adoption.
How Allianz Is Transforming Using Tech
Quantexa speaks with Allianz CEO to discuss the challenges of adopting technology across the enterprise, the role of data in customer-centricity, and leading transformation in the insurance industry.
New Risk Factor Guidelines to Strengthen Financial Crime Detection
The updated European money laundering and terrorist financing risk factor guidelines highlight taking into account “wider, contextual factors.” Find out how contextual decision intelligence can ensure enhanced risk detection and due diligence measures.
QuanCon 2021: Meaningful Data for Trusted Decisions
QuanCon 2021 Virtual explored compelling thought leadership from the Altimeter Group and Accenture, knockout presentations from State Street and ABN AMRO, and an in-depth show and tell on Quantexa’s new capabilities.
Reduce the tax gap, identify fraud and non-compliance, and operate as efficiently as possible with limited resources.
Reveal hidden risks and detect criminal activity faster. Reduce false positives to manage the cost of compliance. And improve investigations to make faster and more consistent decisions at scale.
Customs Agencies & Border Control
Contextual Decision Intelligence enables faster decisions, increased revenue collection and enhanced compliance. The Quantexa platform enables Customs and Border agency teams to analyze data successfully, automate and accelerate decision-making, and achieve improved results.
Identify potentially fraudulent activity by looking at people or transactions in isolation. Understand the context surrounding the organizations you do business with to make fast, accurate decisions.
Fraud, Waste & Abuse
Empower your team with the best tools available for today’s challenges to identify and prevent fraud, waste and abuse with contextual decision intelligence software.
Understand your customers, their business structures and supply chains. Make better lending decisions, faster. And support digital risk transformation.
Know Your Customer
Reduce significant manual effort across onboarding, refreshes and remediation. Automate checks, implement continuous monitoring, and focus on contextual decision making.
Generate a complete view of the context around your customers and prospects to build better relationships, reduce attrition and find hidden opportunities.
Master Data Management
Connect all data—internal and third party—to create a joined-up, contextual view of all the relationships between your customers and every other domain.
See how we help to reduce costs and improve coverage for financial crime compliance.
See how our platform uses contextual analysis to turn data into a high value asset.
See how our platform uses financial crime technology to enhance your existing IT ecosystem.