Financial fraud creating complex challenges for government agencies

Financial criminals are increasingly leveraging timely issues to trick government agencies into believing they are someone they are not, writes Carol Chris.

A recent incident led to the ATO launching an investigation into a fraudulent GST scheme involving 40,000 people who have listed fake businesses to claim false refunds, costing the organisation $850 million.

Carol Chris

As financial crime continues to present reputational, financial, and operational threats to the public sector, it is critical to recognise how fraudsters operate and the evolving expectations of consumers in order to plan ahead and mitigate risk.

One successful attack can lead to an avalanche of financial crime

Financial fraudsters are persistent and relentless. A key reason why government agencies need to take a proactive and preventative approach to financial crime is because of criminals’ sheer volume of resources and 24/7 nature of their operations and technical capabilities.

It is unreasonable for any organisation to believe they can keep up, let alone stay ahead, of financial criminals’ strategies without the assistance of always-on technology solutions. These solutions need to incorporate tools such as artificial intelligence (AI) and machine learning (ML) to ensure they are continually iterating their approaches at the same rate as fraudsters. These tools use predictive analytics and deep learning to combat emerging fraud threats in an automated manner.

Furthermore, this consistent and proactive approach is needed to stop fraudsters from replicating their successes. A common strategy for financial criminals once they have successfully found a way to penetrate an organisation, gain personal data or customer information, or illegally access funds, is to continue using this same method in other similar organisations. For the government sector, this means shifting from one government agency to another with the same tactics and methods until they no longer lead to a successful outcome for the fraudster.

Consumer trust is being tested

Consumer trust in the government broadly, as well as in public servants and federal and state MPs, has significantly declined in recent years. As brand trust has strong ties 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 organisation involved.

Consumer expectations of government agencies are evolving

According to IDC research, commissioned by GBG last year, almost half (47%) of Australian consumers were aware of and acknowledged there was an attempt or actual compromise of their personal data. While 85% acknowledge they are mostly responsible for protecting themselves from fraud, over 46% also assign responsibility to the most trusted institutions, including governments and banks.

In addition to consumers believing the government is accountable for instances of fraud that impact their finances, in the case of a fraud incident, 73% expect a 100% refund, and 57% expect resetting and restoring of the account with minimal delay.

These statistics highlight the complex and growing expectations that consumers have of both the public and private sector to rapidly and proactively reverse any impacts of financial fraud on consumers, even if the consumer’s behaviour was the reason for the incident.

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

As well as addressing the aggressive and ongoing nature of fraud attempts, government agencies need to take a hard look at the damaging consequences of every fraud incident and the domino impact this has on consumer trust. It is not enough for government organisations to be proactive in stopping fraud before it happens, but in cases where consumers are taken advantage of, the sector needs to be ready to immediately and effectively step in.

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

Carol Chris is Regional General Manager for Australia and New Zealand at GBG.

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