Three Ways Public Agencies Can Build Trust and Reduce Fraud Risk

To prioritize CX and stop bad actors, agencies must implement effective fraud prevention strategies that increase friction when suspicious activity is detected — while minimizing friction when good constituents engage.

By delivering convenience and security, agencies can establish trust, reduce barriers to access and streamline processes for constituents while identifying more fraudsters and preventing them from stealing funds or data. There are three key fraud risk-reduction strategies that can protect your agency while simplifying CX for the people who depend on your services.

Which government agencies may be the biggest fraud targets?

While many public sector agencies can benefit from using fraud detection solutions, some of the most common targets include:

• Unemployment Insurance (UI) offices: These offices experienced tremendous volume — and fraud — during the pandemic. Grants for fraud solutions helped during peak criminal activity but are now expiring. With the landscape of UI demand and fraud changing, offices may need to replace solutions they implemented in response to the pandemic.
• Tax authorities: Stolen refunds are an ongoing problem for tax authorities which not only lose money from fraud but must also assist victims whose identities and refunds have been stolen.
• Government assistance programs: Benefits like the Supplemental Nutrition Assistance Program (SNAP) and Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) can be abused by people who aren’t eligible. Fraud detection solutions can verify identities — the first step in reducing misuse.
• Secretaries of State: These agencies can be targeted by fraudsters twice: once when licensing a fake company and again when they don’t receive payment for licenses.
• Public Employees’ Retirement System (PERS) Offices: While these agencies have existing personnel data, governments may lack the ability to authenticate the person activating a retirement account online for the first time is who they say they are. Fraudsters using synthetic identities can slip through the cracks and quickly steal hundreds of thousands of dollars.

Key fraud detection strategies for enhanced trust and security

While each of these agencies may be targeted by different schemes, they can all benefit from overarching fraud detection strategies to increase constituent trust in two ways: by making it easier for honest people to interact and engage, and becoming better stewards of taxpayer funds.

Here are three central fraud prevention strategies your agency should put in place:

Strategy #1: Align online account authentication with constituent preferences

Most constituents appreciate account authentication efforts that instill their trust and confidence, but they don’t want measures to be burdensome. By adopting a data-driven strategy that incorporates both identity and device insights, agencies can uncover potential fraud risks while enabling seamless verification and authentication for good constituents. This approach empowers agencies to transact with legitimate people without hesitation, minimizing friction in the user journey.

The widespread use of internet-enabled devices (computers, smartphones and tablets) has introduced a new layer of risk for government agencies that must be able to verify identities and authenticate anonymous users in faceless channels. Solving for device risk is one of the first responses TransUnion offers agencies with ineffective or costly identity verification because it can be more cost effective for agencies and invisible to good constituents. Device proofing is a critical ingredient in the fight against public sector fraud, and only TransUnion assesses risk across a wide consortium of data that includes more than 10 billion device records. With such a large database, we can help reveal connections between unknown and blocked devices, accounts that others can’t and also identify any “guilty-by-association” devices.

One-time password (OTP) services are another solution easily integrated with and offering enhancement to an agency’s existing identity verification tactics. And while most OTP services don’t verify phone number authenticity, TransUnion can take this to the next level by analyzing identity information tied to any phone number given to receive a code. If a number isn’t legitimately tied to the constituent, we can instantly raise a red flag.

Strategy #2: Reduce false positives across channels

Government agencies, like any other organization, need to effectively detect and prevent real incidences of fraud while minimizing false positives that can frustrate — and even marginalize — legitimate constituents.

One key to good constituent service is helping people make hassle-free transactions. No one likes to be slowed down when they’re trying to do business with you, but sometimes false positives happen — especially when people are new to a jurisdiction, are experiencing homelessness or don’t have a lot of identity data due to being underbanked or otherwise outside traditional systems.

Because false positives can have equity ramifications, agencies must draw from the most robust data sources to confirm identities without denying access to constituents who are most in need. TransUnion’s ability to identify constituents who’ve been outside or underserved by traditional systems is better than most because we can access a tremendous breadth and depth of data.

Strategy #3: Leverage advanced analytics to detect synthetic identities

Synthetic identities pose a significant threat to government agencies as fraudsters use compromised personally identifiable information (PII) to fabricate fraudulent identities. While financial services have traditionally been the target of synthetic identity fraud, government agencies, such as tax authorities, secretaries of state, and unemployment offices, may be increasingly vulnerable to these attacks.

By applying advanced analytics techniques, agencies can uncover synthetic identities and effectively combat fraudulent benefit claims or business registration applications. Detecting and mitigating these risks will not only enhance CX but also ensure compliance with reporting requirements and protect program integrity.

Sophisticated fraudsters can open multiple claims at the same time using bits and pieces of real identities to create fictitious identities. Without authoritative identity verification and the right models to detect synthetic identities, agencies risk unwittingly paying out benefits to criminals who know how to game the system. This is why knowing who you’re dealing with and detecting suspicious behaviors are critical. For example, since fraudsters often try to log in to multiple accounts at the same time, agencies need solutions that can recognize when that’s happening in real time.

Fraud detection models can be built to detect synthetic identities throughout the constituent lifecycle — including at the point of enrollment, during benefit decisioning and when monitoring existing accounts. Using dedicated synthetic models also helps deliver prioritized accounts to case managers in order of risk, helping agencies improve proper payment distribution.

Reducing fraud increases trust

While fraud will remain a persistent problem for government agencies, the key to staying a step ahead of bad actors is applying solutions with the broadest range of device, identity and behavioral metrics.

These solutions can reduce friction and improve satisfaction among honest constituents while leading to dramatic loss reductions at the same time. One government agency that embraced TransUnion solutions reduced monthly losses of unpaid fees from tens of thousands to only hundreds of dollars — the solution literally paid for itself after the first month.

Learn more about TransUnion’s friction-right approach to government agency fraud detection and prevention: