AI Helps Treasury Department Trace Fraudulent Checks

There is plenty of buzz about the potential benefits of artificial intelligence (AI) in government on a broad scale. Now, we are learning of a law enforcement use case, where AI is already paying major dividends. At the U.S. Department of the Treasury, AI is helping crack down on fraudulent checks.

Treasury says it recovered over $375 million traced to fraudulent checks, since it implemented an enhanced detection process that uses AI.

That process was first implemented in fiscal year (FY) 2023 by the Treasury’s Office of Payment Integrity (OPI), within the Bureau of the Fiscal Service. It uses AI to “mitigate check fraud in near real-time by strengthening and expediting processes to recover potentially fraudulent payments from financial institutions.”

The process of using AI to root out suspicious transactions at lightning speed was already being implemented in the private sector and allows for almost real time detection of the check fraud.

Treasury implemented the process as check fraud, like other types of fraud, soared during the COVID-19 pandemic. Check fraud rose about 385 percent from pre-pandemic levels.

Check fraud is being reported more as well. The number of Suspicious Activity Reports (SARs) about check fraud to the Financial Crimes Enforcement Network (FinCEN) by financial institutions rose to 680,000 in 2022, from 350,000 in 2021.

“The Treasury Department is committed to safeguarding taxpayer dollars through payment integrity – paying the right person, in the right amount, at the right time, and ensuring that Social Security payments, tax refunds, and other types of checks, and people who are receiving them, are safe from fraud,” said Deputy Treasury Secretary Wally Adeyemo. “We are using the latest technological advances to enhance our fraud detection process, and AI has allowed us to expedite the detection of fraud and recovery of tax dollars.”

The use of AI and the partnership between OPI and law enforcement also led to multiple active cases and arrests for fraud.

“AI can help humans operate more efficiently, allowing them to see more in shorter timeframes,” Amiram Shachar, co-founder and CEO of cloud security startup Upwind told CNN. “This is especially important in the government, where there are headcount constraints.”

Tackling Fraud Governmentwide

Regarding fraud and lessons learned from the pandemic, Linda Miller, former deputy executive director the Pandemic Response Accountability Committee (PRAC) and founder and CEO of Audient Group, writes in Federal News Network that the federal agencies are still struggling to appreciate the scale of the fraud problem, and struggle with data, poor incentives, and keeping pace with advancing technology.  

Miller urged Congress to create a centralized antifraud office to work on data, accountability, and technology challenges that she says are “stymying preventative fraud efforts at every level of government.”

“We must act now to put more fraud prevention tools into the hands of government leaders and hold them accountable to prevent history from repeating itself in the future,” wrote Miller.


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