Joachim Murat, public sector industry director, EMEA civil government
While governments of every country have to deal with their own unique set of challenges, there is one issue that is consistent across them all – social and fiscal fraud. Or, to put it another way, people abusing the system. At an EU level, huge sums are being lost due to tax evasion and avoidance, for example, with estimates up to €1 trillion.
As populations grow, and services become under increasing pressure as a result, it is an issue that has gotten steadily worse in the last decade.
More complex than ‘cause and effect’
It is, however, more complex than ‘cause and effect’ of population changes. Social welfare, healthcare, tax and benefits and many other departments have all grown rapidly and often with a patchwork of technologies, restructures and reforms. It means that each country not only has a system full of holes, but one that is incredibly lucrative and easy to crack for would-be criminals. No European country is unaffected.
Health insurance fraud in France reached €287m in 2019. What’s more shocking is that it costs less than that (around €250m) to build a new hospital. It was recently reported that social security fraud in France hit a record high of €315m in 2022, a 44% increase compared to 2021. and The UK, too, has a similar problem where healthcare fraud is estimated at £1.27 billion a year, which is more than 30% of the European Union healthcare budgets. Indeed, according to this article, healthcare fraud costs the EU €56 billion annually.
Fraud perpetrated at every level
While criminal gangs and professional operations are behind a lot of it, fraud at this scale is being perpetrated at every level and from multiple sources; from migrant gangs sending money back to Africa or Asia, right through to consultants overbilling for work or adults falsely claiming benefits. This variety means it is hard for governments to identify, catch and prosecute the perpetrators. However, when they do, examples are made of those convicted in an attempt to dissuade others.
For example, in Denmark, a social worker was jailed for embezzling around €20m from the government’s welfare system. She used the money to fund her luxurious lifestyle after years of financial hardship. In the UK, a man was jailed for cheating the social care system out of £1.6 million by creating fake care homes and submitting fraudulent invoices. A quick internet search will reveal many more examples.
Fuelling the greater good
The upshot of it all is that, beyond the capital loss, fraud is fuelling societal discontent. People want equality and, in most instances, are happy to pay tax as long as they deem it fair and that the revenues are fuelling the greater good of society. On the contrary, what is totally unacceptable is when people see their hard-earned money being wasted, leaking out of the system and being used to address problems that could have been avoided.
And we’re approaching a tipping point. The social model of Europe is not only under attack, but it is not sustainable in its current state. Countries are losing too much money while, at the same time, needing more revenue to fund projects and developments fit for an evolved demographic and populus base.
Services are at breaking point and throwing money at the problem isn’t working. Governments need a different approach and this means turning to technology.
Technology has evolved considerably
There are technologies that have evolved considerably in recent years that have had the dual effect of increasing performance, reliability and accessibility, while also bringing down price. Biometrics is an excellent example. Historically, it wasn’t considered by many governments because it would take too long (and therefore cost). Today, enrolling the entire population of France – 67 million people – could be done in months, if not weeks. The cost of which would be negligible to the amount lost in fraud and relatively easy to do in a country where ID/social cards are already commonplace.
Data Analytics and AI have also come on leaps and bounds and are being used to analyse behaviour of the system and can identify fraud due to professionals. For example, in 2019 it was revealed that the Dutch tax authorities had used a self-learning algorithm to create risk profiles in an effort to spot child care benefits fraud. Last year, the UK set out plans to use AI to help everything from ‘tracking tumours in Glasgow and improving animal welfare on dairy farms in Belfast to speeding up property purchases in England’.
Paralysis by analysis
While the benefits of increasingly integrating new technologies is clear, there are challenges too. Most notably with regards to privacy, GDPR and data security. However, these issues come with a set of clear parameters and rules that being overwhelmed fighting fraud on all sides does not. What is perhaps the biggest obstacle to adopting technology is the governments themselves.
Put simply, unless they green-light projects, nothing will happen. Decisions have to be taken at a political level but instead, what happens is a paralysis by analysis scenario where plans and research move much slower than technology. By which time recommendations, pricing and benefits are all out of date and the information ministers are reviewing is not reflective of reality. Anyone with an iPhone will tell you biometrics works but we need to get to a stage where we engage the best tool for the situation and then iron out the nuances, rather than the opposite, which is where we are now.
The European dream is based on helping everyone with a social welfare system where everybody pays a fair price and receives a fair service. In 2020, the French Parliament Investigation commission dedicated to the social fraud problem evaluated it to be between 14 to 40 billion euros per year. So this idea where everyone contributes is simply not happening at the moment and, without greater prevalence of technology in the system, it never will.
