In Conversation with Dr Lucian Tipi: How can the Public Sector be Better Equipped to Tackle Fraud

Covid-19 brought a sharp increase in fraud, targeting the private, public, and voluntary sectors. It has seen a rise in fraudsters exploiting faults in financial support schemes. The crisis provided fertile ground for fraud, the combination of financial and health threats made people more vulnerable, creating opportunities for fraudsters.

We spoke to Dr Lucian Tipi, Head of Teaching and Learning Enhancement of the College of Business, Technology and Engineering at Sheffield Hallam University, about the impact of fraud on the public sector.

Lucian’s research interests are focused on the areas of Information Systems in Business, Project Management and Education. Cybercrime is his ‘flagship’ teaching area, in which he takes an applied approach by using current news and practical examples.

MGC: Hello Lucian. Thanks for speaking with us today! Firstly, can you introduce yourself and tell us a bit about your research on Cybercrime, and what led to your interest in the subject?

LT: I used to work for an IT consultancy in a previous life before joining academia (…) Cybersecurity was one of the issues I was concerned with on a day-to-day basis. Having moved to academia some time ago, I noticed the gap in this area of work. We were teaching our students business; we were teaching our students IT, technical aspects of IT, but we weren’t really teaching how they interfaced very well, and what the opportunities for fraud were because of poor integration between business processes and technology.

This is where I tried to form an interest in a teaching expertise (…) I talk to business leaders on a regular basis, and what I’m finding is that attitudes such as “It won’t happen to me” or “It won’t happen to me for a while” remain in this area. There is a lack of understanding of how technology and business processes need integrating to make sure that proper controls exist to combat fraud.

(…) On a technical level, I doubt many of us understand what’s going on when we use technology. Some people do understand it though, and some of these people choose to become fraudsters. They understand where the weaknesses in technology lie, they exploit people and businesses through this knowledge.

Unless we understand how the technology we use, integrates with what we are trying to achieve as a business, we are going to be vulnerable. (…) For me, it’s been an interest always, it’s an interest that I keep active with (…) As an educator, I have a big role in trying to prepare the business professionals of tomorrow.

MGC: How has Covid-19 affected rates of fraud in the UK?

LT: The answer sadly is very simple; the impact has been both significant and negative. This is because, virtually overnight we had to change the way we did things (…) this has meant that, a huge amount of easy money became available overnight to fraudsters.

The Government had to respond quickly to support businesses and individuals, through business loans and furlough. These things came in at incredibly short notice, people did not have time to work out robust processes for preventing fraud. There was no time to test these processes, and there was no time to apply stringent controls for businesses to obtain loans.

(…) When the Government introduced the £50,000 business loans, immediately there was a huge increase in the registration of new companies. Many of these were phantom companies, taking the loan and then two or three weeks later, they would shut down. Some organised groups of fraudsters didn’t only register one company, but in some cases, dozens of companies.

MGC: What are the most common types of fraud to affect the public sector?

LT: The public sector is affected by several types of fraud. We’re seeing the same types of fraud that we would probably have seen before the pandemic.

LT: Bribery and corruption are an issue that the public sector comes across regularly, particularly given the scarcity of goods and services during the pandemic. People started to get desperate and use suppliers from abroad, some of the business practices that are unacceptable in the UK are accepted elsewhere. Issues of bribery and corruption can crop up as a result.

MGC: Why is it so important for the public sector to strengthen its responses to tackling fraud?

LT: As a country, we must tackle a huge NHS backlog. We must continue to support certain businesses through the recovery phase after Covid-19. The Government has stated that they have big plans to level up the country, around building huge infrastructure, housing, roads, and an expansion of public services. So, it would be foolish to lose money to fraud -it’s as simple as that.

There is never enough money in the public purse. There are many challenges including huge rates of inflation, so we must do all we can to preserve the cash that there is. (…). The public tends to see traditional crime as much more important than white-collar crime. We often see violent crime as a much higher priority than tackling financial crime, so this could well be why the Government do not prioritise tackling fraud in the public sector as much as it should.

MGC: Can you tell us of any mechanisms that can be adopted by the public sector to detect fraud before it happens?

LT: If we had a crystal ball, it would be great because we could see incoming threats. I will pinpoint a few issues that make it challenging for public sector organisations to prevent fraud. (…) In the UK there is no universally accepted form of ID, as opposed to most of Europe where people are required to have a unique ID. This makes tackling the issue of identity checks, difficult. The fact that we’ve had to move online, makes checking identification even harder.

Online, it is difficult to check that the details of an ID document may be correct, but we also don’t know that the person supplying those details is the rightful owner of them.

MGC: What would you recommend public sector bodies do when fraud does occur?

LT: One should always attempt to recover money lost to fraud, it’s not an easy task and in most cases, that activity will not result in success. However, it is possible to recover large amounts of fraudulent money. It can be recovered in a single blow. Sometimes fraudsters make mistakes, they are human. It is always worth exploring whether they have made mistakes and whether there are avenues in which money can be recovered.

Speed is key here. As soon as fraud has been discovered, although easier said than done – if fraudulent activity is discovered quickly, the chances of recovery are much more improved. There should be cooperation with agencies such as HMRC, the police and the National Crime Agency. The National Crime Agency have very good advice on their website on how to prevent fraud, as well as recovering money after fraud has taken place.

It is important to draw on resources. Of course, you must look at yourself and your processes as a public sector organisation, which goes back to lessons learned. It is always worth looking at whether processes can be simplified, but do not simplify at the cost of overlooking due diligence.

Key Takeways

Overall, Dr Tipi highlighted that Covid-19 has had a significant impact on rates of fraud in the UK. Covid-19 saw phantom, fraudulent businesses operating, exploiting the financial support that was provided at a time of crisis. The public sector is often a target of bribery and corruption and should act with due diligence to ensure they are being mindful of who they are making large financial transactions with.

His key recommendations for the public sector were:

• Conduct thorough identity checks before transferring large sums of money

• Always act with due dilligence when conducting financial and business transactions

• The larger the amounts of money involved in a transaction, the more due dilligence should be exercised

• Learning from past encounters with fraudsters is a powerful tool for detecting fraud in the future

• Act with speed after fraud has occured, this improves the chances of financial recovery

• If fraud occurs, thorough auditing and documenting of the details and the process of the crime can be used to educate people so that it doesn’t occur again

[1] Dr Lucian Tipi, 2022, Sheffield Hallam University