As the COVID-19 pandemic unfolded, governments scrambled to provide small businesses with financial relief to weather the storm.
The U.S. federal government dispersed more than a trillion dollars in grants and loans to small businesses, most of whom had legitimate claims to qualify for aid. Some, however, were criminals committing fraud, taking advantage of a vulnerable time in the world.
There are some elements, however, that make governments vulnerable to these types of crime.
Why Emergency Programs Are So Susceptible to Fraud
Emergencies are unexpected with the pandemic upending the world at speed, putting lives in peril and economies on the brink. The world was taken by surprise, and governments were compelled to act to bolster the economy nearly overnight.
Fraudsters took advantage of the chaos, as well as the vulnerabilities that were already present across government systems—bulky, outdated infrastructure and technology that gives criminals ways into systems.
Government employees were overwhelmed with applications for Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL), attempting to balance time and speed with security. Understandably, the combination of a crisis and inadequate IT infrastructure that makes sharing data more difficult created a landscape for fraud to slip through the cracks.
Preventing and Handling Fraud in Times of Crisis
During this particular crisis, fraudsters had a unique opportunity to carry out their crimes in two main ways. First, legitimate business owners who qualified for relief used their businesses to gain access to funds only to misuse them. Rather than paying their employees or addressing business damages, these recipients used the funds to enrich themselves.
Others used the cover of chaos to submit fraudulent documentation, claiming they had hundreds or even thousands of employees to pay, when in reality the business owner was the only one on the payroll.
Hindsight is 20/20, so it’s easy for government agencies to say they should have been more careful during their due diligence checks for frauds. However, they’re up against challenges that will arise again and again during the next disaster as they continue to use outdated technology.
Entity resolution and network analytics are crucial in preventing fraud. To stop fraud in its tracks, government agencies must have the ability to identify previously failed applications, to harness all the information held within all of the relevant systems, to discover the hidden links within the data. Entity resolution is an essential component to root out fraud in a digital world where high-quality data is not always readily available in times of crisis in order.
While trying to learn from their mistakes, government employees are often stuck using systems that are unable to handle massive amounts of data, leading to gaps that fraudsters leap at. In order to prevent fraud, these institutions will need to do a comprehensive analysis of what went right and what went wrong during the onset of the pandemic.
It’s impossible to predict the next crisis perfectly, but one thing is clear—outdated technology is creating problems for government agencies and leaving them susceptible to fraud, and new technology is an important element to help stop it.