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AI-enhanced fraud detector helped Treasury recover $375 million

February 28, 2024

The tax robot overlords look to be making a good argument for their existence.

A fraud detection system utilizing artificial intelligence (AI) helped Treasury recover $375 million in fiscal year 2023.

Treasury's Office of Payment Integrity (OPI) began using the AI process at the Oct. 1, 2022, start of that fiscal year to deal with check fraud that increased dramatically during the COVID-19 pandemic.

Catching increased check fraud: As the pandemic's effects started to be widely felt in 2021, FinCEN received more than 350,000 Suspicious Activity Reports (SARs) from financial institutions in connection with potential check fraud.

That was a 23 percent increase over the number of check fraud-related SARs filed in 2020.

The upward trend continued into 2022. Check fraud SARs nearly doubled from the previous year, hitting more than 680,000.

Overall, fraud in connection with the traditional paper payment option increased nationwide by 385 percent since the coronavirus hit the United States.

AI algorithm advances: Generally, AI fraud detection is a technology-based approach that employs machine learning to identify fraudulent activities within large datasets, says technology company and cloud service provider DigitalOcean.

The process involves training algorithms to recognize patterns and anomalies that signal possible fraud. By continuously learning from new data, the machine learning models become increasingly adept, improve their predictive accuracy, and adapt to evolving fraudulent tactics.

OPI process success: Treasury says OPI's AI-enhanced fraud detector strengthened and expedited processes to recover potentially fraudulent payments from financial institutions. Part of that success, noted Treasury, was the process' ability to mitigate check fraud in near real-time.

"We are using the latest technological advances to enhance our fraud detection process, and AI has allowed us to expedite the detection of fraud and recovery of tax dollars," said Deputy Secretary of the Treasury Wally Adeyemo.

The end result helps guarantee the U.S. government is "paying the right person, in the right amount, at the right time, and ensuring that Social Security payments, tax refunds, and other types of checks, and people who are receiving them, are safe from fraud," added Adeyemo.

Criminal actions, too: In addition to bringing in more revenue, Treasury noted that the enhanced AI fraud detection and OPI's partnership with federal law enforcement agencies have led to multiple active financial criminal cases and arrests.

OPI's check fraud detection is just one of Treasury's increased usage of AI. You can read about AI efforts at the Internal Revenue Service in these posts:

 

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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