State agencies acted quickly to get public funds out the door and into the hands of constituents during the pandemic. Soon after, however, sophisticated fraud attacks began to be reported.
Like other states, Colorado was targeted by crime rings, nation-states and bad actors. According to a state audit, more than $100 million in overpayments were made. After the agency made the decision to move from one provider to another, more than 5,000 Coloradans had their unemployment claims wrongfully withheld this summer — that’s 5,000 people who weren’t getting the money they desperately needed.
This situation, however, is not unique. Fraudsters from around the globe bypassed identity checks by impersonating deceased people. They did so across agencies and state lines. The Government Accountability Office estimated national fraud losses at $135 billion in unemployment aid while the inspector general of the Small Business Administration estimated $200 billion was lost in small business loans.
In the wake of these attacks, a critical debate has emerged: either get money out fast or put up roadblocks and slow down the release of funds. Colorado recently encountered this dilemma when legitimate unemployment applicants could not access their accounts due to increased ineffective identity verification checks.
The reality is fast versus friction is a false choice. When utilizing the right technology, agencies are able to get benefits to the right people while keeping public funds safe from fraud. Doing so is imperative to restoring trust in government services.
So what should Colorado lawmakers, state agency officials and public sector technology leaders do?
First, establish a holistic approach to identity verification that moves beyond document verification. Single-point solutions and verification based on asking a series of personal questions are prone to fraud. New generative AI tools, like WormGPT, enable fraudsters to create fake identity documents at lightning speed and scale. Data breaches leak personal information online and are used to answer security questions.
Colorado should implement a multi-layered verification approach that is harder to get around. That approach takes into account what type of device is being used, the user’s IP address, behavior, velocity checks (or how often the same piece of data is used within a certain period), liveliness, and more. Evaluating these pieces all together can narrow suspicious activity, create checks where needed, and ensure legitimate applicants aren’t locked out. All of this can be done in milliseconds with the right technologies in place.
Second, emphasize the ability to verify identities with precision. Agencies and vendors should publish performance metrics that demonstrate effective fraud prevention without slowing down service to the very people government is trying to reach. Metrics arm agencies with better data to make better decisions. Ultimately, this will improve service delivery and help restore trust in government programs.
Third, increase collaboration and the exchange of information. The public and private sectors must work together to share best practices, information about known bad actors, and new threats in order to stay a step ahead. These open lines of communication can weaken the growing network of fraudsters who are sharing tips on how to siphon away money from states across the country.
Getting digital identity right is critical as more government services move online. Ensuring Coloradans have an easy to use, safe and reliable identity verification system when interacting with the government is essential to improving government operations and restoring trust in our institutions. The right technology exists today to stop fraud and create a friction-less experience. It’s up to government to adopt the solutions that create the best of both worlds for Coloradans.
Jennifer Kerber previously served in the U.S. General Services Administration Office of Citizen Services and Innovative Technologies and as executive director of the Government Transformation Initiative. She is currently a senior director at Socure, a provider of digital identity verification and fraud solutions.
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