08 November 2023

Tackling fraud in the public sector: how can central government support local authorities?

Tackling fraud in the public sector: how can central government support local authorities? image
Image: Pungu x / Shutterstock.com

Colin Gray, principal fraud consultant at SAS UK, explains the current perceived risks from citizens around fraud, and how public sector bodies can deploy technology to counteract it and protect public finances.

From council tax evasion to funding for health and social care, staying ahead of fraudsters is an ongoing challenge for local authorities particularly in the digital age.

The prevalence of fraud today means that vital funds can be diverted from essential services, both in lost revenue and the time it takes to identify and act on fraud. According to the National Audit Office, identified fraud in government expenditure rose from £5.5bn in the two years before the pandemic (2018-19 and 2019-20), to £21bn in total over the following two years.

A Fraud Advisory Panel report, published at the end of last year, found that the Covid-19 pandemic had left local authorities – tasked with distributing billions-of-pounds of central government funding – unprepared for the level of fraud risk because of ever-tighter budgets.

That same report also cited a BBC investigation which uncovered a £3bn black hole in the budgets of upper and single tier councils, some of which are at risk of bankruptcy.

The pandemic might have provided an opportune moment for scammers but they are operating continuously – some at an individual level, while others are linked to serious organised crime.

As well as fraud committed against councils, there are regular warnings about scammers impersonating councils too.

Reports of council tax scams, where perpetrators ask for sensitive information including bank details, are common and, thanks to technology, increasingly convincing.

Artificial intelligence (AI), for instance, allows them to target people on a mass scale via email or text; create false identities; and, more recently, to mimic the voices of people the victim is likely to trust.

Growing risk

According to our own research, Faces of Fraud: Consumer experiences with fraud and what it means for businesses, a third of UK consumers have already been a victim of fraud twice or more, with three-quarters fearful they will fall victim in the future.

Sadly, as is often the case, it’s vulnerable people who suffer most. According to official figures, adults with a disability are more likely to be a victim of fraud compared to those who don’t (9.1% versus 7.4%). Social renters are also more likely to fall victim than owner-occupiers (10.1% versus 7.5%).

Now it’s feared that the switch over of landlines from analogue to digital will create further opportunities for scammers to target the often older and vulnerable people who rely on them for communication and healthcare telephony devices. It is reassuring to see some councils working proactively to identify fraud risk and warn residents of potential scams – for example, by installing call blockers in people’s homes and public awareness campaigns. Understanding fraud risk at a national and local level means that more measures like this can be put in place.

Changing face of fraud

Our research also suggests that as many as 90% of people believe that organisations, including public bodies, could do more to protect them from fraud. This being the public sector, they don’t have the option to switch providers – but councils will struggle to engage citizens, deliver value for money, and generate revenue if they don’t provide assurances.

Digitisation is vital for efficient service delivery but it is up to organisations to ensure they have the right safeguards in place to prevent fraud.

Fortunately, for public bodies increasingly rolling out digital self-service tools, people don’t see fraud risk as a barrier to these tools. In fact, our survey suggests around two-thirds will continue to use them at their current level, while a fifth plan to use them more.

In today’s world, that means using data analytics to proactively identify fraudulent activity and share it with relevant authorities. Along with call blockers for vulnerable people, there are wider initiatives that can prevent fraud such as biometric verification rather than a reliance on fixed passwords. As many as 80% of those we surveyed said they’d use security features like fingerprint checks although steps must be taken to avoid digital exclusion.

Supporting local authorities

Through initiatives like the Public Sector Fraud Authority, we all hope to see a coordinated approach to combating fraud across the UK.

Technology allows fraudsters to be highly efficient, and work across local authority and national borders. But it’s thanks to developments in data analytics and AI that central and local governments can finally work closely together to identify suspicious activity in vast and previously siloed data sets – something that would have been a huge drain on resources. It allows local authorities to tap into the expertise and technical capabilities of central government, safeguarding both their citizens and funds as well as their reputations.

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