Government plans to catch tax fraudsters with help of AI

The government’s Public Sector Fraud Authority (PSFA) wants to use cutting-edge technology and data to tackle tax fraud.

The PSFA, which is part of the Cabinet Office and HM Treasury, has signed a £4m deal with data analytics company Quantexa to use technologies such as artificial intelligence (AI) and high-speed data processing to find potential fraudsters.

The authority was set up in August 2022 with the sole aim of tackling “fraud against the public purse” as the government’s “centre of expertise on the management of public sector fraud”, with a target of preventing and detecting £180m worth of fraud in its first year. This includes building a national counter-fraud data analytics service and enhancing the use of fraud intelligence across the public sector.

Working with Quantexa, the government hopes to not only find those committing fraud, but to use modern technology to stop it from happening in the first place, particularly with public sector net debt having reached £2.5tn in December 2022.

PSFA CEO Mark Cheeseman, who previously led the creation of the government’s Counter Fraud Profession (CFP), said fraudsters are “a capable and committed adversary and the way they commit fraud is diverse and evolving”.

“As criminals develop more sophisticated tools, we too must innovate and modernise our approach to prevent fraud. By bringing together expertise and tools from the public sector and private sector, we will raise our ambition and challenge ourselves to increase our impact on this often unseen and underestimated crime,” he said.   

Backed by £23m funding, the PSFA reports to both HM Treasury and the Cabinet Office and aims to share best practices on counter-fraud across all public bodies, including devolved administrations and local governments.

It is also planning to run a unit to coordinate, facilitate and share data and intelligence across central government. The PSFA is part of a wider government initiative to combat public sector fraud, which is estimated to be worth around £33bn each year.

Cabinet Office minister Baroness Neville-Rolfe said fraud against “the public purse is unacceptable and we’re stepping up the fight against those who wish to profit off the backs of taxpayers”.

“Through the use of cutting-edge technology, the PSFA will use data and AI to help us in the fight against fraudsters,” she added.

The government previously signed another deal with Quantexa, in October 2021, to help combat Covid-19 loan scheme fraud. During the pandemic, fraudsters abused the government’s loan scheme, with a number of businesses making fraudulent claims. The contract with Quantexa was part of the government’s response to those criminal activities.

As part of the contract, the government used Quantexa’s Contextual Decision Intelligence (CDI) platform, which enables customers to “create a connected view of [their] data to reveal relationships between people, places and organisations”. It analysed an initial set of 250 networks of people, organisations and places, processing more than 100 million data items.

The software is also used by HSBC and Standard Chartered’s anti-fraud departments.