Overcoming Resource Constraints to Prosecute Government Fraud

The cost of fraud to taxpayers is staggering. In a first-of-its-kind report, the Government Accountability Office (GAO) estimated that the U.S. government loses between $233 billion and $521 billion annually to fraud.

Government benefits fraud has increased 60% since 2018. This statistic reflects only the cases that have been caught. The National Health Care Anti-Fraud Association estimates Medicare/Medicaid fraud costs taxpayers at least $100 billion annually, and countless fraudsters have taken advantage of the COVID-19 Paycheck Protection Program. According to Thomson Reuters, more than half of surveyed government officials expect fraud instances to rise over the next two years, with no foreseeable reduction in resource-intensive investigations. 

Federal agencies often lack the resources to effectively identify and prosecute fraud. AI-powered verified financial intelligence (VFI) can be the force multiplier agencies need to reduce fraud losses. 

Obstacles to investigating fraud

The government's expansive financial systems create opportunities for fraud. The huge volume of data, transactions, institutions and processes creates opacity, allowing criminals to conceal their misdeeds among a sea of legitimate transactions. While many fraud schemes are straightforward, government investigators report a rise in sophistication.

Investigating and proving fraud in this flood of data presents difficulties for many government agencies working with limited budgets, staff and tools. Thomson Reuters' government fraud report found the percentage of front-line government employees and investigators who are confident their agency has the tools to fight fraud decreased by 13% last year.

Data preparation and reconciliation consume about 90% of investigators' time. This arduous process extends investigation timelines, limits investigators' ability to pursue anything beyond the most obvious and least burdensome schemes and forces tradeoffs between comprehensive analysis and resource constraints. As a result, most fraudsters are never held accountable for their actions. Agencies need more tools to expand their investigation and prosecution capacity. 

Verified financial intelligence as a fraud investigation tool

Traditionally, investigators have reviewed, sorted and separated thousands of financial records by hand, which takes weeks or even months to accomplish. Between preparing data and making deadlines, teams only have time for a brief skim of transactions, creating the potential for missed fraud. 

AI-powered VFI technology reduces data preparation and analysis workloads and accelerates timelines, empowering government agencies to investigate a larger case volume and more involved schemes. VFI platforms use AI to extract data from bank statements, brokerage statements, printed and handwritten checks, deposit slips and other financial documents and run QA algorithms to verify data integrity. 

VFI software then aggregates, reconciles and categorizes data from all sources. Algorithms detect and bring visibility to inconsistencies, such as data format variations and different currencies, and notify investigators of missing or erroneous data, like missing statements or conflicting balances. The automated data preparation process delivers a complete and verified dataset in hours rather than weeks. 

Valid8's VFI platform contains powerful visualization tools to simplify discovery and enhance narrative development. Tools like process maps and Sankey diagrams visually trace the flow of funds so investigators can pick out patterns and identify anomalies for further review.  

The benefits of AI-powered tech

VFI provides significant advantages to government agencies fighting fraud.

• Expedited data capture and reconciliation
  • Historical extraction technologies require defined templates and manual separation, creating administrative headaches and delays. AI-powered VFI recognizes text without templates, enabling the platform to capture data even from unconventional formats. QA algorithms ensure data quality.
  • Automated reconciliation and cleaning mean teams don't have to spend time manually matching entries, finding duplicates, identifying missing statements, discerning inconsistencies and categorizing transactions. Investigators reclaim weeks of their time and obtain an accurate, holistic perspective of financial transactions for a more thorough investigation. 
• Stronger evidence
  • VFI platforms establish a clear evidentiary chain of custody, generating data that meets the high standards required for court proceedings. Analyzing only a portion of transactions limits investigators' ability to prove intent and calculate exact totals. The complete financial history demonstrates the investigation's thoroughness and credibility, empowering prosecutors to build stronger cases.
• Better narrative building
  • Data quality is just one aspect of a fraud case. Investigators must be able to build a compelling narrative demonstrating criminal intent. Visualization tools enable teams to easily track money movement between accounts, giving them the perspective they need to prove fraud.‍
  • These visualization tools support evidence in court by showcasing intricate financial histories in an easy-to-understand way. These visuals present a powerful case to judges and juries. 

VFI's impact on government investigations

VFI increases productivity and confidence for government agencies. Their teams can investigate more cases with the same resources while also executing more thorough reviews into more elaborate schemes. Higher-quality evidence will result in more prosecuted cases and more convictions, reducing fraud losses and deterring future crimes. With timely, complete, reliable data on fraud, agencies can better understand fraud trends, impact and scope to create mitigation strategies. 

AI technology also contributes to higher employee morale and retention. Investigators and their teams can spend less time on tedious manual work and more on expert-level analysis, which creates better engagement and job satisfaction. 

Valid8’s VFI platform was effectively employed by a Medicaid Fraud Control Unit (MFCU) to accelerate financial reviews by 60% and generate consistent, standardized transaction-level datasets for state prosecutors. The platform’s automation also improved employee morale. The benefits of AI analysis are so apparent that the GAO recommended the DOD invest in data analytics to accelerate fraud investigations. 

AI-powered VFI technology is a game-changer for government agencies in their fight against fraud, empowering them to maximize their resources, save taxpayer money and deter future criminal activity.