Fraud and Economic Crime

The scale of fraud is now a national security issue, according to a report published recently by the Royal United Services Institute. The report recommends the National Security Council should encourage a ‘whole of system’ approach with a clear role for the private sector in tackling fraud -  calling out in particular financial, e-commerce, and telecoms sectors.  Having worked in all three sectors, as well as government, I can see the potential for some really transformational data-sharing and identity validation/verification technology to help fight the growing hordes of fraudsters.

We are often asked what we could do to improve data exploitation and increase the use of standardised APIs for exchanging information. Some of the changes needed are relatively simple and straightforward, others may take years.

This is not a problem that can be solved by increasing the number of individual investigators, although that will help of course. What is needed is better cooperation across organisations and countries to tackle organised criminal gangs not constrained by international boundaries. Harnessing the power of AI by using machine learning tools to trawl through large transactional datasets to find patterns and flag the most suspicious cases for human review is the only way to deal with the overwhelming volume of low value but fraudulent transactions.

There have been many suggestions for how we can ‘build back better’ to create jobs and new industries, green new deals etc. But if we don’t tackle this the £190bn cost will only grow. Wouldn’t it be great to build new jobs in anti-fraud or cybersecurity and train a new generation of software engineers to design solutions to these problems.

Link to the full paper here (https://rusi.org/sites/default/files/the_silent_threat_web_version.pdf).

It’s worth saying, in the same way as Al Capone was technically brought down for tax evasion, abuse of government support schemes is often only the tip of the iceberg. One arrest in the UK last July was connected with multi-million pound tax fraud and alleged money laundering offences (https://www.accountancydaily.co/first-arrest-over-ps495k-furlough-fraud).

Meanwhile, in Canada 190,000 citizens have repaid CERB support they weren’t entitled to receive. One arrest (https://www.cbc.ca/news/canada/toronto/fraud-cerb-1.5609877) resulted in a string of additional charges for identity theft and setting up bank accounts to divert funds from hacked CRA accounts. In Australia $120m in Jobkeeper payments have been clawed back from ineligible claimants, with employees tipping off (https://www.news.com.au/finance/money/costs/jobkeeper-payments-expert-slams-boss-fraud-and-issues-ato-warning/news-story/72505b385b8eab5c35c98054c955d45a) the ATO about their employer claiming government funds but not actually issuing the stand down order.

So it seems patterns of fraudulent behaviour travel around the world as fast as the virus itself.