PPP Fraud Reveals New Need For Banks To Use Geolocation Data

Government-benefits fraud runs at about 10 percent even during normal times, but now that the pandemic has exponentially increased U.S. federal stimulus spending, the level of theft is on the rise, too.

“I think bad actors and fraudsters always follow the money,” Elizabeth Cronan, vice president of government relations at geolocation-based fraud prevention firm GeoGuard recently told PYMNTS.

She said U.S. government pandemic stimulus programs with huge funds have been a major draw for the bad guys. For example, Cronan said the U.S. Labor Department projects fraud is having a potential $26 billion impact on state unemployment insurance funds.

Meanwhile, the U.S. Justice Department has already taken action to recoup some $180 million of funds allegedly stolen from the $669 billion Paycheck Protection Program. Cronan said problems around the PPP stem in part from the pressure the government put on lenders to get funds out quickly to struggling U.S. small businesses.

“Unfortunately, that sense of urgency created a scenario where reviews were perhaps rushed a little bit more quickly than they would ordinarily [be],” she said. “The diligence wasn’t as extensive as you’d see ordinarily, [and] I think with some of the underwriting processes, there were shortcuts.”

Theft Hurts Not Just Governments, But Intended Recipients

Cronan points out that such thefts are not only illegal, but also deprive the individuals and small businesses these programs are designed for the money they desperately need.

She added that while federal agencies like the Governmental Accountability Office aim to uncover waste, fraud and abuse within the trillions of dollars of federal stimulus money already spent, a lot of fraud could have been stopped before it even happened.

“If you strengthen the reliability and the trustworthiness of digital identity frameworks, you will see a drop in fraud [and] you will see a drop in the rate of financial crime,” Cronan said. She added that multi-source location data plays a critical role in creating more modernized digital ID frameworks.

FATF Guidance Shines Spotlight On Value Of Location Data

She said recent guidance concerning digital identity from the international Financial Action Task Force (FATF), an influential standard-setting body, has had an impact on the way government agencies set new policies and regulations.

Cronan said the guidance “put a spotlight” on the value and importance of collecting multisource geolocation data that goes far beyond what’s historically been just the gathering of simple IP addresses.

“Within the span of guidance, there’s recognition that you have to do more than [just monitor IP addresses],” she said. “You have to collect multiple location data points. There has to be WiFi, [GPS and] there should be cellular data coupled with IP to triangulate that data.”

Preventing Fraud With Geolocation Data: Three Key Steps

When it comes to leveraging geolocation data for purposes of fraud prevention, Cronan said there are “really three things that we need to home in on.”

The first is the fact that fraudsters will almost always try to conceal where they’re truly located. So, simply asking an individual to share their location data with a lender or government agency can be a significant fraud deterrent.

Secondly, she said it’s “critically important that you have the proper tools and methods in place to ensure that the data you collect is accurate, authentic and reliable.” Cronan said a quick web search can reveal the widespread availability of cheap anonymizing tools that enable criminals to mask their identity.

Lastly, Cronan said it’s vital to collect location data more than just during the initial ID authentication process. Asking for data not just at the onboarding stage but throughout a relationship’s duration is “one of the greatest ways to bolster confidence that an individual is indeed who they claim to be,” she said.

Doing so enables lenders or agencies to detect anomalies or other unusual activity that would be indicative of some type of fraudulent activity taking place. However, failing to take the three steps above is asking for trouble.

“Unfortunately, it seems like there’s not a day that goes by where you’re not seeing a new headline that’s really shining a spotlight and really illuminating the severity and the magnitude [of fraud] that we’ve seen,” Cronan said.