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A joined-up approach to tackling fraud in the public sector

Source: PSE - April/ May 15

Rachel Tiffen, head of CIPFA’s Counter Fraud Centre, discusses how a new partnership could help public services in the fight against fraud and cyber-attacks. David Stevenson reports.

Last year the Audit Commission’s final ‘Protecting the Public Purse’ report revealed that local government bodies detected 3% fewer cases of fraud in 2013-14 compared with the previous year. But the value increased by 6% to over £188m. 

It added that the recent improvements in addressing fraud in local government were at risk, with councils under continued financial pressure – as any reduction in fraud investigators is matched by a similar fall in the detection of housing benefit fraud, for instance. 

To strengthen the public sector’s fight against fraud, the Chartered Institute of Public Finance and Accountancy’s (CIPFA’s) Counter Fraud Centre (CCFC) announced a new strategic partnership with BAE Systems Applied Intelligence to develop counter-fraud and cyber-security services and solutions for public services. 

Smarter working 

In particular, the programme will make innovative technology and best practice more accessible to the public sector, helping to combat criminal activity in an increasingly “complex and sophisticated threat landscape”. 

Speaking to PSE about the development, Rachel Tiffen, head of the CCFC, told us: “The landscape itself is quite rapidly changing. There’s been a splitting of the public sector down into different parts within councils, which have seen quite dramatic changes over the past year. This will continue over the next 18 months, especially whilst universal credit kicks in. 

“Councils have been quite badly affected [in terms of their] capacity and capability to do their work, and over the next year or so there is likely to be a skills gap. 

“If there are full fraud teams left in councils, they will then have to start dealing with different types of fraud. Really, the only way forward for them is to work in partnership and work smarter. I think we can bring something to the table in terms of that.” 

Four target areas 

There are four key areas for the partnership: Managing Risk; Fraud Detection; Cyber Security; and Compliance and Anti-Money Laundering (AML). 

With regards to managing risk, the partners have put forward plans to create a global fraud risk register. Tiffen told us that there had been a series of roundtables and workshops last year, which helped shape the partnership’s objectives. 

“In particular, the idea of a common risk register across the different agencies that join the partnership,” she said. “We thought what a fantastic thing it would be if people could share their common fraud risks and see how others are tackling them. 

“This would then generate alerts for other people within the partnership. So we would almost be preventing fraud as well as sharing information. But we could only really do that with BAE because they are SAFO, a specified anti-fraud organisation. You need to have a special accreditation in order to share that sort of information.” 

PSE was told that the register could help tackle a number of fraudulent activities, but especially mandate fraud – when someone gets an organisation to change a direct debit, standing order or bank transfer mandate, by purporting to be someone you make regular payments to, for example a subscription or membership organisation or a business supplier. 

“That type of fraud has ‘done the rounds’ across public services. On the City of London website or the Met Police website, they have guidance about making sure you know your supplier,” said Tiffen. “The Institute is particularly excited about the fraud detection capability being developed by CIPFA and BAE Systems. Public services are experiencing huge shortfalls as a result of fraud and we hope to be able to decrease this by collecting and sharing data.” 

In addition to understanding fraud risks, the partnership will enable public services to utilise advanced data analysis tools to better support the fight against fraud and connect with other authorities facing similar issues. 

Tiffen told us that CCFC, which is a subscription-based centre, is distributing toolkits to make sure people know the people they are talking to on the phone in tackling mandate fraud. 

“When something like that happens within one organisation, the natural thing to do is let other people know,” she said. “And, as you put controls in place, the fraudsters are quickly changing their modus operandi so you need to adapt to deal with that.

“The idea is that we would make all of our detection activities real-time, so as frauds are happening we would be telling people: this is what has happened, this is what you can do about it. We are trying to get organisations one step ahead of what is happening.” 

She added that the plan on the technology and analytics services is that CIPFA and BAE will develop a Fraud Hub service, which can be used by individual organisations or across both similar and non-similar organisations. 

“We are also looking at developing something on cyber with BAE, but we haven’t – as yet – finalised what the shape of that will be,” Tiffen, a former deputy director the National Fraud Authority, told us. 

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Knowledge gap 

“From the workshops we have had, there was quite clearly a gap in knowledge, so we would like to support people as services become more digital and there is more evidence of e-enabled fraud,” she said. 

“Some of the threats they talked about were there before, but are actually ‘quicker’ and harder to detect because of services being delivered in a different way [online]. Some people talked about things like ‘ghost employees’, others talked about things being stolen and put on eBay. In fact, a lot of people said they had eBay fraud issues.” 

Just before Christmas, the Home Office issued a new anti-corruption plan. CIPFA was named on it for delivering tools and services to support public services.

 “We are offering health checks and e-learning on anti-corruption areas. We are also building up a set of resilience tools,” Tiffen said.

As part of the latest work, CIPFA and BAE said public services will be supported with anti-money laundering (AML) solutions to check the legitimacy of payments and help identify fraudulent activity.

 “We already have AML advice and guidance in the form of a DVD. The idea is that we would develop a toolkit which would have some things like support, maybe a helpline and something to support identification going forward.” 

Piloting the service 

In March, CIPFA held two events to showcase and share leading-edge counter fraud and cyber security solutions to those working in public services.  

“We did a demo recently to around 40 different organisations: some councils, some charities and some central government departments,” said Tiffen. “There is quite an interesting theme developing where they are all quite interested in using the partnership in their own organisation but also want to come together to do something to tackle fraud. This would be incredibly innovative, especially as we all know fraudsters don’t work to boundaries.” 

PSE was told that once the Fraud Hub service is up and running it would be a paid for service, but Tiffen believes this would be able to deliver a return on investment due to the amount of fraud organisations could potentially detect and the enhanced ability to recover losses. 

No cost for the service has been set yet, but CCFC is in the process of trialling its innovative service for 15-16 weeks with approximately 30 organisations. 

“Only a couple of organisations have said they’re not interested,” Tiffen told us. “The idea is to go ‘straight live’ after the pilots. So we would build the software following some workshops with people that they think are high risks. We would then keep refining that continuously as we go forward. 

“The Fraud Hub itself will be real-time, so we need to keep it fresh. We are hoping to have a live service by around July. “ 

Tiffen told us that there are a growing number of councils looking to create shared Fraud Hub services, where they merge their counter fraud efforts with neighbours and with other enforcement bodies within their geographical areas. It is only when organisations start looking at fraud in a more holistic way, which is where CCFC can help, that it makes detecting fraud even easier, she explained.

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