Home Fraud, Error and Debt Acceleration under pressure: governments tackle fraud with fintech

Acceleration under pressure: governments tackle fraud with fintech

Global Government Fintech Lab 2022 panel session three: Euan Slack, Jerome Bryssinck, Aleksejs Čekalovs, Valentina Ion and Siobhan Benita (moderator)


The Global Government Fintech Lab 2022’s third panel examined how governments are using fintech solutions to address fraud, error and debt, Daniel Tost reports

The public sector’s vulnerability to fraud has been thrust into the mainstream media glare during the Covid-19 pandemic with cases of financial fraud skyrocketing and costing governments worldwide billions through false claims.

The Global Government Fintech Lab’s third panel session – ‘How can fintech help governments tackle fraud, error and debt?’ – focused on how new technologies and collaboration between public and private sector are being harnessed to fight fraud.

The session featured government representatives from the UK and Latvia, plus private-sector representatives from Microsoft and Quantexa.
Euan Slack, head of Spotlight, which is an automated due-diligence tool managed by the UK’s Cabinet Office, was the opening speaker. He was followed by Jerome Bryssinck, director of government solutions at Quantexa, which is a fintech company specialised in using data analytics and artificial intelligence (AI) to help its clients combat fraud (the company was actually enlisted by the Cabinet Office last year to help the UK government detect fraud in Covid-19 loan schemes and help tackle financial crime more broadly); Aleksejs Čekalovs, senior expert in the European Union (EU) funds audit department of Latvia’s Ministry of Finance; and Valentina Ion, Microsoft’s business strategy director.

The discussion, moderated by former UK civil servant Siobhan Benita, saw the panellists address the principal question before concluding with thoughts about the lasting impact the pandemic will have on the topic area, as well as the deployment of preventative measures.

UK puts Spotlight onto fraud

Euan Slack

Spotlight is among the tech-based solutions used by the UK government to tackle fraud, having the ability to highlight areas of risk to inform grant-making decisions.

“Historically, grants management has been fragmented across government – it has not used digital tools to manage applications or payments,” Slack said during his opening remarks, explaining that tools such as Spotlight – which is powered by data from the UK’s Companies House, the Charity Commission and external providers – are in the vanguard of digital change.

“Spotlight automates a lot of manual and time-consuming due diligence checks that you would hope and expect to be conducted when giving out taxpayers’ money,” said Slack, adding that a key feature of the tool is that it is built on a centralised platform that is being ‘licensed out’ across different parts of government.

“Spotlight is very good at gathering a lot of data and providing risk indicators against those data points to hopefully make the award decision more informed and quicker in real-time,” he said, adding that the tool was helping to “break down departmental silos when it comes to grant contract applications and the data associated with them.”

Since the beginning of the pandemic, Spotlight has analysed almost one million applications with more than £20bn-worth of grant value, Slack said. It has been used recently to support the government’s energy rebate scheme, which grants domestic electricity customers £400 from October 2022 onwards that will not need to be repaid. “We’ve seen one million applications processed within a month,” said Slack.

Looking forward, Slack explained the need to better understand the ‘corporate networks’ attached to applications. “This that can be a simple entity such as a small UK company or a really large international network with ties to a [different] country. The technology is quite easy to harness,” he said. The big challenge lies in upskilling and educating government users on “what risk look like and how to manage that”, he said.

Future opportunities, he added, include, capitalising on bank account verification (“are we paying the person we expect to pay?”), as well as harnessing open banking and blockchain.

RELATED ARTICLE ‘Governments turn to fintech in fight against financial fraud’  a report on our ‘How can fintech solutions help governments tackle fraud, error and debt?’ webinar held on 16 November 2021 (this webinar featured Ivana Gordon, a colleague of Euan Slack’s in the Cabinet Office)

Connecting data to catch criminals

Jerome Bryssinck

“What we do is actually very simple,” Bryssinck said in his opening remarks, describing the work of Quantexa. “We connect all of the different data to create a unified view, then create scores and networks, and make them available to investigators and support them in their work,” he explained.

Bryssinck highlighted the company’s work during the pandemic’s early stages for the tax agency of an (unnamed) country. “We had four weeks to process 100,000 claims from companies that were asking for money back from the government,” he said.

He mentioned one case that involved the creation of “40 to 50” companies that were connected and trying to claim Covid-19 payments. “It’s really interesting how prepared these companies were,” said Bryssinck, adding that the companies had all been created two to three years prior to the pandemic: “The fraudsters already had those companies and were waiting for an opportunity to use them for any type of fraud.”

While payments in these cases were quickly suspended (and became subject to criminal investigation), they illustrate not only the opportunities but also the threats in fraud and compliance linked to digitalisation, according to Bryssinck. “You can see from the example that we have much less contact with people. Through digitalisation all of the physical contacts with the [government] agencies are disappearing and that also means less control by people over the process,” he said. At the same time, fraud was becoming more international: “It’s possible to defraud an agency without even going into the country.”

However, Bryssinck sees the volume of data now available as a major opportunity. With it, “we can form a very good picture and it becomes much more difficult for people to misrepresent their situation and to fraudulently claim benefits or claim that they don’t have to pay some sort of tax,” he said.

RELATED ARTICLE ‘UK Cabinet Office enlists fintech company in Covid-19 fraud battle’  our news story (2 November 2021) on the UK government appointing Quantexa

Evolution not revolution preferred

Aleksejs Čekalovs

Čekalovs described the Latvian Finance Ministry’s Audit Authority’s main function as providing “assurance” to the European Commission, and society, that the expenditure of EU funds in the country – a relatively small Baltic state of roughly similar size to the Lab’s host nation, Estonia – is “legal and without irregularities”.

Yet, in his opening remarks, he described both a lack of knowledge and lack of competence among public authorities when looking for fintech solutions.

“We really don’t know what kind of fintech solutions we can use to reach our goals, for example to identify conflicts of interest, corruption, fraud risks or other risks in public procurement,” he said.

Čekalovs warned of the risk of overlapping functions of national and EU level databases and solutions. “There is really a thin line between best practice and failure in implementing fintech or other IT solutions in control of expenditure,” he said, adding that he preferred implementing solutions using already existing systems. “We shouldn’t try to make a revolution and cancel our databases, but instead make improvements and evolve existing systems,” he said.

The involvement of civil society is a “really significant” point that, he asserted, merited greater prominence given OECD reports have shown relatively low levels of trust in governments worldwide. Civil society could act as a “controller” for EU funds’ expenditure if data was publicised and “visualised”, he said.

Čekalovs also highlighted Latvia’s progress in particular areas such as e-procurement. It can help with audit controls, but also help improve the work of contracting authorities, he said.

AI can spot anomalies – but beware bias

Valentina Ion

Microsoft’s Ion began her opening observations by setting out where fraud risks lie in the public sector, naming VAT and other tax fraud, benefit fraud and corruption as among the major challenges to governments worldwide.

In the first year of the pandemic, for instance, more than €9 trillion (about £7.74 trillion) were allocated globally to benefits packages. “You can imagine the level of fraudster interest,” she said.

Ion explained that technology could help tackle these issues by providing a ‘360-degree view’ of the entities interacting with government. She mentioned, for example, ‘entity resolution’, which encompasses understanding the transaction request and from whom it exactly comes from; and ‘secure data collaboration’ from government to government but also from government to private sector. “Once you have the 360-degree view of these entities, you can leverage the analytics capabilities powered by artificial intelligence in order to understand where the anomalies – good or bad – in their behaviours lie,” she said.

Referring again to economic stimulus packages, Ion explained how technology could enable a personalisation of services. “It’s extremely important [for governments] to be able to assess and readjust the budget allocation and move from a programme that’s not reaching the interest of the economy to programmes where there’s a lot of demand,” she said.

She gave the example of Australia, saying that taxpayers are segmented into ‘low touch’, ‘high touch’ and intermediary levels. Low touch means the individual is paying taxes on time and with few or no errors. Individuals flagged as high touch might be struggling to pay in full or on time, which would require a deeper level of engagement or offering additional services. But those using AI tools should be “mindful of biases”, she said, going on to highlight the growing importance of cyber-security as the volume of digital data grows.

‘Delivery at a rapid pace’

During the session’s Q&A the panellists were asked if governments’ greater openness to the use of fintech solutions (whether or not yet realised) would be a legacy of the pandemic.

Slack answered that Covid-19 had shown how government systems can react quickly and capably when under pressure, leading to “a period of delivery at a rapid pace that we hadn’t really seen before” – albeit “some basics to fix when it comes to systems and technologies” do remain.

Spotlight was originally designed because of Britain exiting the EU, he said, adding: “It was there to help with the capability and capacity of administering EU grants, but then Covid came along and its application could be expanded. Government certainly did scale and apply the use of technology in that instance.”

Bryssinck said he had noticed a “drastic acceleration” in engagement since the pandemic. “A lot of things that were going to take years in terms of deployment, in terms of agreeing on what data we wanted to use, how to get the data, a lot of that happened in a couple of weeks. Normally it would have taken a couple of years,” he said.

During the closing part of the session, it was asked about the balance between preventative and retrospective measures.

Čekalovs brought up a report published last month by the European Court of Auditors, which had shown that blacklisting is not used effectively to prevent EU funds from being paid out to individuals, businesses or public organisations involved in illegal acts such as fraud and corruption. “In my opinion it’s a signal that there might really be room for improvement if we are talking about preventive mechanisms,” he said.

“Preventative is definitely the way to go,” said Bryssinck. “We see very often that once the money has been paid out, it’s very difficult to get back. You spend a lot of money prosecuting, still not getting the money back and therefore spending money on money that you’ve already lost.”

Fintech’s positive trajectory

Overall, the urgencies and pressures of the pandemic have helped government authorities deepen their understanding of what potential fintech solutions can do in terms of fighting fraud.

Yet the panellists also demonstrated how governments have varying awareness, competence and capacity to both fully understand and engage with fintech solutions.

While government agencies in some countries are already able to evaluate several years’ use of sophisticated fintech tools while tackling fraud, others are yet to decide what kind of solutions could benefit them.

These barriers to more significant fintech adoption would not appear insurmountable, and fintech’s rising prominence, helped by the growing number of use cases within government, appear set to drive increasing interest.


Watch the session, which was held on 1 June 2022, in full (52min 32sec) =>

Source: Global Government Forum YouTube page


=>>> Global Government Fintech’s dedicated ‘Fraud, Error & Debt’ section <<<=

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