https://quarterly.blog.gov.uk/2020/02/13/fighting-fraud-at-home-and-abroad/

Fighting fraud at home and abroad

Mark Cheeseman
Mark Cheeseman, Deputy Directory, Counter Fraud Centre of Expertise, Cabinet Office

It is hard to escape the shadow of fraud, which media headlines frequently cite as the most prevalent of all crimes. In the UK, we estimate fraud and error loss at between £31 billion and £48 billion per year across the public sector – and we are not alone.

As well as one of the most common crimes, fraud, by its very nature, is complex and hidden. However, as civil servants, the public entrust us with their hard-earned money to deliver the services they rely on. It takes courage, persistence and a good deal of skill to embrace the task of detecting fraud, bribery and corruption and dealing with them effectively.

Types of fraud

Government has been collecting data since 2014 to further understand the different types of fraud in the public sector. The Cross-Government Fraud Landscape Report 2019 will publish the loss data by typology for the first time.

As a result of this work, we now know that 85% of detected fraud across government relates to external fraud, whereas 15% of detected fraud stems from internal fraud types. This information helps us to know which areas are likely to be targeted, and where we should focus resources to better protect ourselves and vital public services.

Welfare and Health fraud

To take types of fraud in just two areas, welfare and health. Failure to notify changes in circumstances is a major driver of fraud and error in the welfare system. These can often be relatively low-value changes, but over time can lead to significant overpayments and result in both civil and criminal sanctions. Working to reduce these is a key part of the Welfare Fraud, Error and Debt strategy.

In the health system, high‑volume / low-value fraud is a significant area of loss in many parts of government. This is probably best demonstrated by the issue of prescription fraud in the NHS in England and Wales. Current estimates suggest losses of around £162 million in 2017/18 resulting from individual charge evasion at £8.60 each, or around 19 million charges evaded in total.

Graphic of the Fraud Iceberg, showing the different costs of fraud loss in the public sector (the visible tip of the iceberg: £8.8 billion of fraud and error detected by government in 2017-18); £28.6 billion estimated fraud and error, just below the surface; and between £2 billion and £19.6 billion of 'unknown' fraud, deep below the surface).
The Fraud Iceberg

A new function

To improve our capability, the Government has invested in the Counter Fraud Function and Counter Fraud Profession.

The Function and Profession are coordinated by the Counter Fraud Centre of Expertise (CoEx) in the Cabinet Office. The profession recognises experts working in counter fraud, bringing them together as a community and introducing common standards and guidance.

CoEx priorities

Over the past six years, the CoEx has grown from just four people to a team of 40 counterfraud specialists. Its work to improve the response to fraud has included:

Changing the culture to one where finding fraud is a good thing

Historically, because of the criticism and scrutiny it could attract, it was not favourable to identify fraud within a department or across the public sector. Having people working to find fraud and devise ways to strengthen our controls and stop fraudsters should not be seen as a failing.

Building a credible evidence base

This was no mean feat. Before 2013 there was no single source of evidence for fraud loss in the public sector. Researching approaches domestically and internationally, the team has worked to develop a unique, world-leading methodology to measure fraud loss.

Bringing experts together to drive transformation

Because of its diverse and complex nature, tackling fraud demands a similarly diverse set of skills. These include capability in data and analytics (to prevent and detect fraud), measurement, investigation and fraud risk assessment. The CoEx team has brought together experts from across the public sector to share leading practices and make common cause in dealing with UK public sector fraud.

The result of these initiatives is that the UK is establishing itself as world-leading, trusted and innovative in its fight against fraud, particularly in the public sector, and is forging relationships internationally.

Is there a best approach for detecting fraud?

When fraud professionals consider how to increase the detection of fraud, they quickly acknowledge that there is no single way of doing so and, further, that we cannot rely on a single control measure to provide protection. A multi‑faceted approach to detection and prevention is required.

Because fraudsters exploit control vulnerabilities and continually test our defences, the best strategy is to invest in multiple control layers to bolster those defences. For example, while we may use data analytics to identify fraud based on a known pattern, the point of attack can quickly shift to new areas. So, it’s important to understand the limitations of the control, and to leverage new capabilities such as artificial intelligence to identify new trends as they emerge.

Tackling unknown fraud

Government is addressing the issue of unknown fraud through initiatives such as the fraud measurement and assurance (FMA) programme, developed by the CoEx. This programme helps organisations to find fraud in areas considered high risk – but where little is known of current fraud levels – through transaction testing and sampling. It also helps to identify gaps in the control framework, with an emphasis on managing known loss once it is found.

Results in UK counter fraud

Around 15,000 people work in central government alone tackling fraud against the public sector. The CoEx sets the strategy, standards and policy for the Counter Fraud Function.

Since its inception, the CoEx has supported UK Government departments to prevent £400 million each year in fraud loss through new initiatives. Other departments and agencies (not including tax and welfare) have also benefited from CoEx initiatives in fraud detection, with reported fraud in those agencies rising by 284% (from £31 million to £119 million) over three years.

Since 2014, 53 lossmeasurement exercises have been undertaken across government. These exercises also inform the estimated range of losses that could reasonably be expected to exist in areas of unmeasured government spend. This range stands at 0.5% to 5.0% of annual government expenditure.

How fraud measurement and assurance (FMA) can help shine a light on fraud

As part of their responsibility to protect public money, Government departments are required to shine a light on areas where fraud could exist, and measure the extent of fraud when it is discovered.

The CoEx in the Cabinet Office has developed the FMA programme to support departments in undertaking fraud measurement activity. The programme involves three key steps:

  1. A spend area fraud risk assessment to identify and assess three high-risk areas of spend.
  2. A detailed fraud risk assessment on a selected high-risk area.
  3. Testing and measuring the levels of fraud and error in a selected high-risk area.

These steps are cyclical, and should be repeated in order to see an overall improvement in fraud detection rates and measurement within a department.

The FMA process enables departments to understand their fraud risks and take preventative action where fraud and error is identified. Where little or no fraud is found, the process offers assurance on the tested area.

Reporting suspected fraud

Across government, organisations have whistleblowing and reporting routes to increase the reporting of fraud. These routes are available to all civil servants and it’s important that, if you suspect fraud or wrongdoing, you report your concerns so it can be dealt with appropriately.

No one should feel they can’t speak up, and the sooner we find the fraud, the quicker we can prevent it.

International Public Sector Fraud Forum

While the focus of the Counter Fraud CoEx is protecting public services in the UK from fraud, fraudsters don’t respect jurisdictional boundaries. So, in 2018, ministers challenged us to look outwards, establish global relationships on this theme, and share leading practices that would help us and other countries to fight fraud.

Since then, we have hosted the four other countries in the Five Eyes intelligence alliance (Australia, Canada, New Zealand, and the US) in a new group focused on tackling fraud in the public sector, the International Public Sector Fraud Forum (IPSFF).

In establishing the forum, the CoEx has brought together senior experts in counter fraud from the various agencies in the Five Eyes countries to share best practice. Last year, forum members published a guide on dealing with public sector fraud.

As a result of the UK’s leading role in this group, and the progress made by the CoEx, countries have requested UK support to develop their approach to public sector fraud. For example, after a challenging request from the Australian Attorney-General’s department, the UK conducted the CoEx’s first paid consultancy project.

The CoEx team at the White House in Washington, DC
The CoEx team at the White House in Washington, DC

Supporting an Australian counter fraud CoEx

The challenge was to help Australia build a convincing business case for investment in their own Counter Fraud Centre of Expertise. The Attorney General’s Department (AGD) wanted to quantify potential losses to the Australian public sector. At the same time as working with the UK CoEx, they employed a private sector consultancy to help develop a model.

The consultants concluded that:

“Due to its focus on public sector fraud and error loss, and its detailed methodology... the UK Cabinet Office (CO) CrossGovernment Fraud Landscape methodology provides the best approach to estimating the total cost of fraud against the Australian Commonwealth.”

We worked with the Australian AGD to show that the UK approach (investing in prevention through identifying and mitigating vulnerabilities in policies and programmes before they are implemented, and throughout their life cycle, using fraud risk assessments) is a much more economical and effective investment than investigating and recovering detected fraud.

We helped the case be clear that counterfraud activities have to be holistic – with fraud prevention and detection alongside disruption, investigation and enforcement activity.

We also identified that improved fraud control, especially prevention, would contribute directly to keeping the economy strong. It would also ensure that public funds reached the intended recipients, including the most vulnerable, and were not diverted to criminals and fraudsters.

These measures will allow the AGD to support the development of a comprehensive Australian approach to countering fraud. The CoEx continues to assist the department – including with the secondment of UK staff – as it builds its own Counter Fraud CoEx.

Continuing support for international partners

Work is ongoing to support our other IPSFF partners, with collaboration on a series of products, to share best practice and maximise counter fraud efforts. This activity will include thought papers on the use of Artificial Intelligence to counter fraud, and the development of fraud-awareness training for public servants.

As well as being recognised as a world leader in dealing with public sector fraud, the UK is emerging as a pace-setter in the professionalisation of counter fraud, being the first country to launch a Counter Fraud Profession.

As the profession develops, for example in the use of data and analytics and fraud risk assessment, we are confident the other Five Eyes will be looking on with interest and ready to reach out for support.

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