Financial Fraud Creates Complex Challenges for Government Agencies

Financial criminals are increasingly taking advantage of timely trouble to trick government agencies into believing they are someone they are not, writes Carol Chris.

A recent incident led the ATO to launch an investigation into a fraudulent TPS scheme involving 40,000 people who listed fake companies to claim bogus refunds, costing the organization $850 million.

Caroline Chris

As financial crime continues to present threats to public sector reputations, finances and operations, recognizing how fraudsters operate and changing consumer expectations is critical in order to plan ahead and to mitigate the risks.

A successful attack can lead to an avalanche of financial crimes

Financial fraudsters are persistent and relentless. One of the main reasons government agencies need to take a proactive and preventative approach to financial crime is the sheer volume of criminal resources and the 24/7 nature of their operations and technical capabilities. .

It is unreasonable for an organization to believe that it can keep up with, let alone stay ahead of, the strategies of financial criminals without the aid of permanent technological solutions. These solutions must integrate tools such as artificial intelligence (AI) and machine learning (ML) to ensure that they continuously iterate their approaches at the same pace as fraudsters. These tools use predictive analytics and deep learning to tackle emerging fraud threats in an automated way.

Moreover, this consistent and proactive approach is necessary to prevent fraudsters from replicating their successes. A common strategy for financial criminals once they have managed to find a way to break into an organization, obtain personal data or customer information, or gain illegal access to funds, is to continue use this same method in other similar organizations. For the government sector, this means moving from one government agency to another with the same tactics and methods until they no longer lead to a positive outcome for the fraudster.

Consumer confidence is being tested

Consumer confidence in government in general, as well as federal and state officials and MPs, has declined significantly in recent years. Since brand trust is closely tied to consumer loyalty and overall brand reputation, this is an issue that government agencies cannot afford to take lightly. Every instance of financial crime, including financial fraud, that negatively impacts a customer, worsens the perception of the organization involved.

Consumer expectations of government agencies are changing

According to an IDC study, commissioned by GBG last year, almost half (47%) of Australian consumers were aware of and acknowledged that there had been an attempt or an actual compromise of their personal data. While 85% agree that they are primarily responsible for protecting against fraud, more than 46% also attribute responsibility to the most trusted institutions, including governments and banks.

In addition to consumers who believe the government is responsible for cases of fraud that impact their finances, in the event of a fraud incident, 73% expect a 100% refund and 57% expect account reset and restoration with minimum delay.

These statistics highlight the complex and growing expectations that consumers have of the public and private sectors to quickly and proactively reverse any impact of financial fraud on consumers, even if consumer behavior was the reason for the incident.

As government agencies continue to be heavily involved in the management of consumers’ personal information and the provision of essential services such as healthcare, the sector will continue to be significant targets for financial criminals and fraudsters.

In addition to addressing the aggressive and ongoing nature of fraud attempts, government agencies need to take a close look at the damaging consequences of each fraud incident and the domino impact it has on consumer trust. It is not enough for government organizations to be proactive to stop fraud before it happens, but in cases where consumers are being exploited, the industry must be ready to intervene immediately and effectively.

There has never been a more important time for government agencies to combat financial fraud.

Carol Chris is the Regional Managing Director for Australia and New Zealand at GBG.

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Ashley C. Reynolds