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The COVID-19 pandemic forced governments around the world to take swift and extraordinary actions to help support businesses and citizens impacted by a crisis that brought the world to a standstill for months. One key measure introduced in May 2020 by the U.K. Government, via the British Business Bank (BBB), was the Bounce Back Loan Scheme (BBLS), designed to help small and midsize businesses borrow between £2,000 and £50,000 at a low interest rate – loans guaranteed by the U.K. Government.
Banks and other commercial lenders administered more than £47 billion in loans through the BBLS to over 1.5 million companies. However, according to the latest estimates from the Department for Business, Energy and Industrial Strategy, 7.5% of the loans guaranteed have been identified as potentially fraudulent. Given how rapidly the U.K. Government had to move to provide COVID-19 relief, and how quickly fraudsters inevitably act to take advantage of any situation ripe for exploitation, economic crime at some level was unavoidable. Now the U.K. Government is moving swiftly to track down those who defrauded the system and return as much of the ill-gotten taxpayers’ money as possible.
“The BBLS was an unprecedented economic intervention – and a lifeline to microbusinesses throughout the pandemic,” says Craig Martin, Fraud Analytics Lead & Head of Programme for the Cabinet Office, based in London. “Unfortunately, opportunistic criminals and more serious and organized criminal actors also saw the BBLS as a way to maximize their gains at taxpayers’ expense.”
The U.K. Government moved quickly to start investigating incidents of fraud related to the BBLS and is now accelerating and expanding that work. “While there has been a higher risk of fraud, the BBLS has done a lot of good supporting businesses that genuinely needed help to survive the pandemic,” says Martin. “So, from an overall government perspective, its objectives have been achieved.”
Quantexa has helped us narrow in on the right type of fraud — and the right type of fraud typologies—to surface networks of interest that we deem to be very high risk.
Fraud Analytics Lead & Head of Programme,U.K. Cabinet Office
“The main aim of the Cabinet Office’s initial deployment with Quantexa has been to target organized fraud within BBLS and take maximum action against serious and organized crime groups that have exploited the scheme,” says Martin. “Quantexa has helped us narrow in on the right type of fraud — and the right type of fraud typologies—to surface networks of interest that we deem to be very high risk.”
Quantexa’s Decision Intelligence (DI) Platform can quickly ingest data at scale to unify billions of data points across internal and external data sources to provide a single, contextualized view. This capability has provided a means for U.K. Government investigators to see not only the individual perpetrators of fraudulent acts but their complete network of connections to other enterprises and individuals, enabling the organization to make confident data-driven decisions and build digital resilience.
When the Cabinet Office first began working with Quantexa in early 2021 on a proof-of-concept (POC) basis, it marked the start of a first-of-its-kind analytics project for the U.K. Government, according to Martin. “The government had never run network analytics before, or subjected Companies House data to network analytics,” he explains.
Martin says he first learned about Quantexa while taking part in a virtual counter-fraud conference in 2021. He quickly recognized that Quantexa’s DI platform could be the solution his team was looking for to take the Cabinet Office’s BBLS fraud investigation efforts to the next level. “We had the data. We’d just done our initial data sharing with organizations, and we were aggregating more and more data. But ultimately, we knew we needed a different type of technology if we were going to look at the potential of organized criminality in the BBLS and other schemes,” he says.
Working in close collaboration with Quantexa, the Cabinet Office deployed the DI platform in just three months, during which more than 100 million data items were fed into it. One of the most important datasets was from Companies House, which Martin says was “essential for generating networks with Quantexa and understanding how individuals and entities are connected.”
Another critical dataset was information about all the government-guaranteed loans issued through the BBLS and other schemes, including the Coronavirus Business Interruption Loan Scheme (CBILS) and the Recovery Loan Scheme.
Additionally, Martin says the Cabinet Office has been sharing data with the U.K.’s National Crime Agency and HM Revenue and Customs, which is the U.K.’s tax, payments, and customs authority. Data sharing has helped the Cabinet Office to enrich its datasets “with other high-risk flags or insights that we’re subsequently using to home in on specific networks of interest within the loan book,” says Martin.
As for deploying the Quantexa platform, Martin says the whole process was “quite seamless” – and he credits both internal and external collaborators for that. “We knew this was an ambitious deployment and its success hinged on finding the right people with the right skills to form an incredibly agile delivery team. We had to bring three teams together at once – our team at the Cabinet Office, the Quantexa team, and our cloud provider team that helped us set up an on-premises cloud platform to deploy Quantexa’s software.” (The Cabinet Office has since migrated Quantexa’s platform to a Microsoft Azure cross-government cloud, according to Martin.)
By February 2022, the Cabinet Office was ready to share information with lenders about the first 250 networks it had generated and analyzed with help from Quantexa. Looking back on that initial effort, Martin says “starting from scratch” was a challenge — but in many ways, it was also a tremendous opportunity for the Cabinet Office to transform its digital capabilities, in line with the U.K. Government’s IT modernization agenda and intent to create a modern civil service.
“When I joined our fraud analytics team in 2020, the maturity just wasn’t there in terms of data science, data platforms, and analytics,” says Martin. “I’ve been at the leading edge of securing the necessary resources to build our analytics program. Tackling BBLS fraud was one of our first efforts, and we’ve been able to find significant instances of fraud within the scheme – hundreds of millions of pounds of potential fraud. And with the network analytics and entity resolution capabilities that Quantexa provides, we’re not only seeing evidence of opportunity fraud, but also organized fraud.”
Martin says the Cabinet Office is now in an optimum position “to really start building an understanding of risk in a whole new and different context.” And, he says the whole exercise has provided insight into how government should continue to work with the banking sector to deal with fraud and economic crime in the future. “The government has never been able to share this level of output with the banking sector before,” he says.
According to Martin, the Cabinet Office has been sharing vital findings from its proof-of-concept with Quantexa with at least 19 lenders, including all Tier 1 banks in the United Kingdom, that provided government-backed loans to businesses through the BBLS. The goal of sharing that information is not only to help banks investigate incidents of BBLS-related fraud, but also to lay the groundwork for preventive fraud monitoring that can help reduce economic crime in the United Kingdom, and even elsewhere, in the future.
The Cabinet Office’s initial project with Quantexa has helped to “show how much more government can do with its data to address organized fraud and criminality across the public sector,” says Martin, adding, “From my perspective, the proof of concept has provided a lot of insight to help shape our strategic approach to fighting fraud in the future. Also, as of September 2022, we’ve already found through our lender collaboration sessions on the 250 networks, £14 million in loans that subsequently have been confirmed as fraud. So, from our perspective, the return on investment is healthy. We’re looking at about a 10-to-1 ROI for every pound we spend on the technology.”
With its investigation into COVID-19 relief fraud well underway, and expanding, Martin says he is shifting his focus more toward helping the Cabinet Office in its efforts to help “transform how the government uses data and technology over the next three years.” The Cabinet Office also recently established the Public Sector Fraud Authority to investigate fraud committed against the U.K.’s public sector. Martin says the work his team has done will provide value to that executive agency’s vital work.
With the network analytics and entity resolution capabilities that Quantexa provides, we’re not only seeing evidence of opportunistic fraud, but also organized fraud.
Fraud Analytics Lead & Head of Programme,U.K. Cabinet Office
“Our future is about fraud prevention,” says Martin. “We have a very clear plan, and part of what the Cabinet Office will be doing over the next three years is building up our data-science capability. We will be investing in a single network analytics platform to help us tackle a whole range of use cases that will enable us to better protect government spending and forge ‘economic crime data partnerships’ with the banking sector.”
Martin says he anticipates Quantexa’s DI platform will play a critical role in these and other future efforts, including investigations of shell companies, suspicious formations, phoenixing, and more that the U.K. government may need to pursue. The Cabinet Office also has plans to introduce a tool that uses contextualized network analytics that banks can use to conduct real-time checks for serious and organized crime activity.
Most importantly, the U.K. Government is sharing its learnings from the BBLS fraud response with other governments, including Australia, Canada, New Zealand, and the United States. “[These] governments have seen their COVID-19 relief efforts exploited by fraudsters, as well, and the crisis has exposed them to new types of risk that they need to monitor.”
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