With the UK public sector losing £20.6 billion a year to fraud – equivalent to more than a third of total spending by the Department for Education – business analytics firm 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, SAS said.
The company has worked with the Belgium government in combatting the theft of value added tax (VAT) by networks of conspirators – something commonly known as carousel fraud.
An advanced analytics technique called hybrid detection is used which comprises multiple analytical techniques to expose even the hardest-to-find fraudsters. With this approach, the Belgian government saves nearly 1 billion euros each year – a reduction in fraud losses of nearly 98 percent.
SAS has already worked with HM Revenue & Customs to reduce fraud losses by £7 billion, as well as the Department for Work and Pensions where savings of £100 million have been made.
In a new report entitled Eliminating Public Sector Fraud and Error: The secrets of a zero tolerance approach, the company offers key insights and recommendations.
Of the estimated £20.6 billion a year lost to public sector fraud, just £702 million (3 percent) had been identified (that is fraud actually measured in some way), while £19.9 billion (97 percent) remains hidden. In comparison, the private sector identifies 27 percent of its £21.2 billion a year lost to fraud.
Amanda Gardiner, public sector fraud specialist, SAS UK said: “The current cost of fraud to the public sector is equivalent to more than a third of the UK’s education budget.
“SAS is committed to helping the UK public sector tackle this considerable cost to taxpayers, by using big data analytics to give it the power to know all it needs to about fraud, so as to enforce a zero tolerance approach.
“These threats can appear in many forms, from opportunistic citizens, organised gangs or internal perpetrators. These fraudsters can be swiftly identified when the public sector treats its information as an asset, collecting it, valuing it, and analysing it in smarter, more efficient and effective ways to tackle this problem.”
The report findings were underlined by additional SAS research which showed that awareness of skills and training in counter-fraud approaches is seriously lacking in the public sector, with almost 46 percent 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 percent) said they had received training in tackling fraud and error over that period.