Fujitsu and UK Tax Fraud Detection System

IT giant Fujitsu has earned itself the best possible shop window for its advanced fraud detection system: in just six months it has saved the UK taxation system more than £400 million pounds by using automated software to detect false tax credit claims.

Fujitsu has been processing tax credit applications since the beginning of the year and has detected thousands of fraudulent claims. What’s more, it’s done it using off-the-shelf software instead of the massively expensive bespoke systems that successive UK governments have been so fond of splurging on.

So confident is Fujitsu in its software that it has offered the government a deal with no payments up front in return for a cut of the savings it promises to make if the government adopts its tax fraud detection system across all departments. The company estimates that permanent adoption of its system could save as much as £10 billion pounds by the time the Coalition goes to the polls in 2015.

Fujitsu is understandably tight-lipped about the way in which the software works, but a spokesman for HM Revenue and Customs described it as applying dynamic risk criteria to every tax credit claim then alerting human operators to claims which meet those criteria. The system is also understood to use a massive database to identify, for instance, multiple occurrences of telephone numbers across different claims.

Fujitsu is chirpy about its success, boasting on the company’s UK website that it will have saved the government £50,000 in the time it takes to read the home page. The company is clearly serious in its commitment to fraud detection, describing programs to monitor grant disbursements, procurement fraud, housing tenancy fraud and council tax discounts.

The CEO of Fujitsu UK, Duncan Tait, said this week that the government was keen to move towards outcome-based payment for its services and revealed that the company is negotiating with the Department for Work and Pensions.

“These savings are so visible that it makes an inordinate amount of sense,” said Tait, adding that the success of the pilot had demonstrated how well the system works.

Tait’s second in command, Andy Fuller, was quick to point out that the system doesn’t make any final decisions, but simply flags suspicious claims. He also described the system as similar to those used by banks to screen loan applicants. Fuller welcomed the government’s willingness to exploit the money-saving power of new technologies. Megadeals for IT contract had become a thing of the past, said Fuller, in the wake of a government decision that ministerial approval would be needed for contracts with a value of more than £100 million.

Fujitsu employs 14,000 people in Britain and is a long-standing supplier of IT services to HMRC. The success of its anti-fraud system comes as a vindication for the company, after a scandal barely three years ago when it withdrew from a deal to upgrade parts of the NHS system, resulting in an ugly £700 million dispute.