May 11, 2023

Defrauding the government has become a big business for criminals. To give an idea of the scale: the Government Accountability Office (GAO) stated in its 2021 audit report that over $662 billion was lost due to fraud and improper payments alone. Plus, these audits generally do not even include fraud from COVID-related programs. Federal officials state that an additional $191 billion in COVID unemployment aid may have been misspent.

The losses are staggering, and Pandora’s box has been opened: criminals are now equipped with the technology, tools, and expertise to systematically plunder the public sector at scale.

In response to the growing threat, President Biden has promised a major crackdown. At the State of the Union address, he stated that criminal syndicates continue to steal “billions of dollars”, but that “the data shows that for every dollar we put into fighting fraud, the taxpayers get back at least 10 times as much”.

The Context: The Exponential Rise of Online Governmental Benefit Fraud

The pandemic caused a scramble to digitize in-person services and provide extensive financial aid to those in need. Government agencies rushed to provide remote access to benefits without having the appropriate time to ensure that these transactions would meet desired security standards.

The massive influx of public funding combined with immature security created an ideal scenario for fraudsters. The resulting levels and cost of fraud have been unprecedented. An estimated $80 billion — or ~10%— of the $800 billion handed out in the COVID Paycheck Protection Program was stolen by fraudsters. And that’s just losses from one specific plan.

Digitizing public sector services is essential, but without adequate security it makes benefits more

accessible to fraudsters too. Ultimately, public sector fraud has become a humanitarian issue wherein public funds are consistently lost to bad actors.

The Problem: Public Sector Programs are Not Built to Resist Online Fraud

How are vital public programs – such as food stamps (SNAP), unemployment insurance, and the tax system – being systematically siphoned by domestic and foreign criminals?

  • Technological asymmetry: Many government agencies have yet to adopt the most threat resistant identity verification technologies. Some states rely on methods such as video call verification (i.e in Kentucky, Nevada, New Jersey, and Pennsylvania) or other rudimentary methods to prevent fraud. This leaves agencies at a consequential disadvantage against modern-day fraudsters who are using sophisticated technologies.
  • The scale and evasive nature of fraud: As soon as an agency identifies a scheme and sets controls to mitigate it, fraudsters quickly find new ways to exploit them. Government anti-fraud programs and technology must be highly adaptable to keep pace, which means going beyond manual processes and static business rules. The scope is just too large.

Cybercriminals today have easy access to generative AI-based technology such as deepfakes, synthetic identities, and digitally injected attacks that are sabotaging traditional online security methods. Read more about the evolving threat landscape in our latest report here.

The Impact of Public Sector Fraud

  • Americans are left without support: Those who need aid the most find that their lifeline has been severed. More than 42 million Americans rely on Electronic Benefit Transfer (EBT) cards for everyday necessities and nutrition. But in many cases of EBT fraud, individuals find that their account has been emptied – criminals drain cards over short periods of time, generally through account takeover fraud.
  • Taxpayer money is wasted or spent inefficiently: Money is going to fraudsters rather than those who need it most, making a mockery of the entire benefits system. A hit to the governmental budget from fraud is a hit to the level of services and care states and agencies can offer, and money saved from stemming fraud could mean billions more available to help.
  • Overspending and misdirection of funds: The government has to spend more and more on the benefits system because it is not working as intended.
  • Fraud negatively impacts the United States’ image: When controls are not in place to curtail fraud and funds meant for public services fall into the hands of bad actors and criminal organizations, this undermines trust in the government and damages the optics of future attempts to help society’s most vulnerable.

The Solution: User-Centric Biometric Security

Most public sector fraud stems from poorly secured remote access to government-issued services and benefits. The solution relies on trusted identity verification – which enables the government to be sure that those receiving funds are the intended recipients. There’s only one way to be sure of this remotely: by verifying a genuine document against a genuine face using biometric verification technology.

How does it work? When a person applies for government benefits or signs up for services online, they would be prompted to complete a brief facial scan. Face verification technology is essential here, as only the face can be matched against a government-issued identity document, such as a driver’s license. This provides a trusted reference image from a government authority. You can read more about the many advantages of face biometrics here.

Investing in robust identity verification technology is essential for tackling fraud – not only to provide the security that’s so desperately needed, but because it will actually be a cost-saving initiative to the benefit of the taxpayer. Investments in fraud technology for detection and prevention can deliver huge payoffs – typically 10 to 100 times ROI.

Given the amount of money at stake, how stolen benefits funds undermine their intended humanitarian efforts, and how these stolen funds can fuel further criminal and nation state activity – a mission-critical solution is needed.

Ultimately, public sector agencies would be well-positioned to adopt best practices around biometric technology from other leading public sector organizations such as the UK Home Office, The US Department of Homeland Security, Singapore GovTech, and the Australian Tax Office, which all have mature facial biometric security strategies in use.

You can request a demo of iProov here or read more about this topic inside our recent report, Using Biometric Technology To Fight Public Sector Benefit Fraud below:

How Can Biometric Technology Safeguard Public Sector Funds?