NAO Good Practice Guide - Tackling external fraud - HM Treasury

Good practice in tackling external fraud | Understanding and managing the risks of fraud
1.2 In taking a strategic approach, some
departments and agencies have taken an across
the board approach to looking at external fraud,
and some have looked at individual fraud risks
and produced a strategy for each. Others tackle
fraud within the context of an overall strategy to
combat losses from all types of non-compliance.
The overall compliance approach recognises that
there is a ‘loss continuum’ ranging from inadvertent
customer error at one end of the spectrum to fraud
at the other with shades of grey in between
Figure 5
Examples of counter fraud strategies
The Department for Work and Pensions
has developed a counter fraud strategy for
all welfare benefits. First set out in 1999,
the strategy proposed action on four fronts:
l Getting it right – aiming to get benefit
payments correct from day one;
l Keeping it right – ensuring payments
are adjusted as circumstances change;
l Putting it right – detecting when
payments go wrong and taking prompt
action to correct them with appropriate
penalties to prevent a recurrence;
l Making sure the strategy works
– by monitoring progress, evaluating
the strength of preventive measures
and adjusting them in the light of
experience.
The Department seeks to ensure that their
goals of supporting people in their efforts
to find work, whilst providing appropriate
financial support where necessary, are not
compromised by their efforts to prevent
fraudulent abuse of the benefits system.
The NHS Counter Fraud Service’s
strategy consists of seven objectives:
l the creation of an anti-fraud culture;
l maximum deterrence of fraud;
l successful prevention of fraud which
cannot be deterred;
l prompt detection of fraud which
cannot be prevented;
l professional investigation of
detected fraud;
l effective sanctions where fraud
is proven;
l redress for money defrauded.
HM Revenue and Customs’
approach to tackling fraud has a
number of key components:
l the development of reliable
estimates of the size of tax losses
as far as possible;
All of these approaches can be equally valid
depending on a department’s circumstances and
the stage they are at in developing their approach
(Figure 5). However, a common feature is that
the departments and agencies develop fraud risk
assessment tools to identify the fraud risks, their
likelihood and impacts, and how to manage them.
These tools need to be reviewed regularly to assess
whether they remain appropriate or require updating
to respond to the threat from new fraud risks.
l establishing the nature and economics
of the activity and behaviour that cause
the losses, through the analysis of
intelligence and other data;
l a comprehensives set of responses
based on:
1 Support: building services that
are tailored to the needs and
circumstances of taxpayers;
2 Prevention: ensuring that basic
processes and design make the
system as secure as possible from
fraud and avoidance;
3 Identifying and tackling those
who set out to obtain an unfair
tax advantage: using improved
risk assessment and checks, with
sanctions as appropriate tailored
to behaviour.
l Monitoring effectiveness against key
outcomes to measure the success of
the strategies.