Wednesday 11th December, 2013

With the UK public sector is losing £20.6 billion a year to fraud - global business analytics provider SAS has called on the sector to enforce its zero tolerance approach to the problem by harnessing the power of big data.

Big data analytics have been highly effective in preventing losses through fraud, including detection of organised crime. The company has worked with the Belgium government in combatting the theft of value added tax (VAT) by networks of conspirators (carousel fraud) saving nearly 1 billion euros each year.

HM Revenue & Customs has also reduced fraud losses by £7 billion, as well as the Department for Work and Pensions where savings of £100 million has been generated.

The new report 'Eliminating Public Sector Fraud and Error' finds the following key insights and recommendations:

• Of the estimated £20.6 billion a year lost to public sector fraud, just £702 million (3 per cent) had been identified, while £19.9 billion (97 per cent) remains hidden. In comparison, the private sector identifies 27 per cent of its £21.2 billion a year lost to fraud.
• The need for a cultural change in the public sector: from cautious, siloed, and largely manual systems to innovative, collaborative and automated approaches
• The need for the government to invest in technology that can automatically detect and deter the lower-level threats and ‘would-be’ fraudsters with letters, emails or SMS messages.

Michael Levi, PhD, DSc (Econ), AcSS, FLSW, Professor of Criminology, Cardiff University, said: "There is no point in hoping that fraud problems will go away with digitisation. This report correctly highlights the need for better data analytics and integration, and its case studies point some ways forward to managing these problems down.  Whether we like it or not, such fraud management is a permanent feature of the landscape, in the public sector as well as the private sector.  But enhancing the accuracy of risk assessments and optimising interventions by administrative control as well as by strategic use of criminal law, are a necessary prelude to maintaining both the affordability and legitimacy of government."

The research also found that awareness of skills and training in counter-fraud approaches is seriously lacking in the public sector, with almost 46 per cent of civil servants saying they were unsure whether their department had carried out any research into its losses through fraud over the last 12 months of 2012. Only around one in four (26 per cent) said they had received training in tackling fraud and error over that period.