Memorandum submitted by VocaLink (DM 09)

 

Summary

 

VocaLink processes all automated payments in the UK, including 98% of state benefits

It is therefore in a unique position to identify accounts which have a high potential to be fraudulent, by highlighting unusual patterns of activity

VocaLink has already demonstrated to HMRC that a system of this kind can help to reduce fraud and error in relation to the payment of tax credits

Readily-available data could be accessed by front-line DWP staff in order to reduce fraudulent and erroneous payments before they are made.

 

 

1. VocaLink welcomes the opportunity to contribute a submission to the Work and Pensions Committee's Inquiry into Decision-Making and Appeals in the Benefits System. This submission deals with how decisions are made and how effectively to address official error.

 

2. VocaLink is a specialist provider of transaction services. We process all automated payments in the UK including Bacs Direct Debits and Direct Credits, the method by which 90% of salaries and 98% of state benefits in the UK are paid. This means that VocaLink is in a unique position to identify accounts which have a high potential to be fraudulent, by highlighting unusual patterns of activity. Once identified, details of these high risk accounts can be sent to government fraud teams for full investigation. VocaLink has already demonstrated to HMRC that a system of this kind can help to reduce fraud and error in relation to the payment of tax credits. We are currently seeking to persuade DWP to run a similar Proof of Concept exercise in respect of benefit payments.

 

3. The specific purpose of this submission is to demonstrate that readily-available data, which can be accessed without the need to develop a radically different IT solution, could be accessed by front-line DWP staff in order to reduce fraudulent and erroneous payments before they are made.

 

4. There is widespread agreement that the amount of money handed over either in error or to fraudsters is far too large, that the true scale of the losses attributable to these causes is unknown but could be many times greater than official figures suggest, and that if anything this problem will become worse as the temptation to cheat the system and the sheer number of claimants increase during the economic downturn. For all these reasons, together with the acknowledged inefficiency of measures to combat fraud and error, which it has been argued cost more than the sums recovered (Public Accounts Committee, Thirty-First Report, 2007-8), it is vital that serious efforts should be made to prevent fraudulent and mistaken payments at source - rather than having to claw back payments, where possible, months or even years later - or not at all.

 

5. VocaLink believes therefore that the question that should be asked is, "Do DWP officials, when scoring claims, have the information they need at that time?" It is important to note that the information does not need to be available in real time, since the payments method used - Bacs, operated by VocaLink - is a three-day payment system. Effectively, therefore, there is a twenty-four hour window in which checks can be made which could identify a high proportion of suspicious claims which would merit further investigation, and which would accordingly justify putting payment to the claimant on hold pending further inquiries.

 

6. What are these checks? Examples include:

 

Has the account into which payment is being made been used previously for payment to another claimant? (ie are multiple claims being fed into one account?)

If, for example, the claim is for Jobseeker's Allowance, does the account into which benefit payment is being made also have a payroll payment associated with it? (ie is the claimant in fact employed?)

Is someone claiming as a partner but living alone or receiving other benefits (HMRC or DWP) that are inconsistent with the claim being considered?

 

It is important to note that it is not necessary to make detailed inquiries about specific payments made into or out of an account, thereby protecting the privacy of claimants, merely whether particular types of payment (eg payroll) are associated with it; whether other benefit payments are also paid into the same account; or whether the account is linked to other suspicious activity, such as regular overseas ATM withdrawals or third-party accounts into which other accounts also feed. VocaLink, through the systems it runs, has access to this kind of qualitative transactional data against which accounts can be tested without divulging private financial information to the DWP front-line officer.

 

7. Although generally regarded as quite distinct, in terms of avoiding unwarranted payments fraud and error are indistinguishable. The key differentiator is intent (an honest mistake as opposed to an intent to deceive), but from the point of view of running checks against claims the same types of queries will establish whether there are any indicators in the payee's account which would render a claim invalid.

 

8. Once suspicions are aroused about an account into which benefit is to be paid, there needs to be flexibility to allow payments to continue in order to track the fraud through the system. For example, VocaLink managed data would enable fraud to be tracked across different accounts in different banks, ultimately for example revealing where money is being withdrawn from ATMs and enabling law enforcement agencies to make arrests of others involved in the fraud in addition to the false claimants.

 

9. In summary, in order truly to tackle fraud and error, it is vital that DWP moves away from a mindset that makes the default position to "pay first and investigate later". Obviously it is important to alleviate suffering if a claimant is genuinely in need, but in fact genuine need can be met in a timely fashion and fraudulent or invalid claims identified (or at least those which have a high probability to prove so) by utilising the time delay in payment reaching the claimant's account. The alternative is to allow the continued leakage of scarce public resources to the undeserving, thereby increasing pressure on the public funding which can be used to help those genuinely in need.

 

September 2009