AI helping US government save billions from fraudsters; but how
The United States Treasury Department has stepped up its game in the battle against fraud with the increased use of artificial intelligence (AI). In a recent press release, the agency revealed that this "technology and data-driven approach" prevented $4 billion in improper payments during the fiscal year 2024 (October 2023-September 2024). This is a sixfold increase over last year's fraud prevention efforts.
AI's role in detecting cheque fraud and improper payments
Not just that, AI processes played a key role in detecting and stopping $3 billion worth of other improper payments, CNN reported. All of this was made possible by the technology's ability to detect at-risk transactions and improve screening methods. Describing the use of AI as "transformative" for the agency, Renata Miskell, a Treasury official, explained that while AI helps identify hidden patterns and anomalies, a human still makes the final decision on labeling fraud.
IRS also utilizes AI to combat tax fraud
The Internal Revenue Service (IRS) is another US agency using AI to fight financial crime, particularly tax fraud. The IRS intends to ramp up audits using AI and has already recovered $1.3 billion from wealthy taxpayers since late 2023. The agency estimated the tax gap—taxes owed but not paid—was about $496 billion annually for 2014-2016 and expected it to grow to $688 billion by 2021.
Treasury official labels AI as 'transformative' for the agency
In late 2022, US officials began employing AI to detect financial fraud, mirroring the practices of banks and credit card firms. To be sure, Treasury does not use generative AI, the kind that has enthralled users of OpenAI's ChatGPT and Google's Gemini. Instead, fraud detection measures rely on machine learning, a subset of artificial intelligence that specializes at processing large amounts of data and making decisions and predictions based on what it has learned.
AI innovation brings benefits and risks, says Yellen
The purpose is to protect taxpayer dollars from fraud, which increased during the COVID-19 outbreak as the federal government hurried to provide emergency relief to consumers and companies, CNN wrote. "Fraudsters are really good at hiding. They're trying to secretly game the system...AI and leveraging data helps us find those hidden patterns and anomalies and work to prevent them," Miskell told the channel.
Online payment fraud expected to surpass $362 billion
This technology is particularly important for the Treasury, one of the world's largest payers. The Treasury distributes around 1.4 billion payments totaling nearly $7 trillion to 100 million people every year. It is in charge of paying out everything from Social Security and Medicaid payments to federal employee paychecks, tax refunds, and stimulus payouts. Juniper Research projects that online payment theft could surpass $362 billion by 2028.
