Fighting customs fraud

Using advanced technology to think faster than the fraudsters

By Jérôme Bryssinck, Director of Government Fraud Solutions, EMEA & AP at SAS

Customs officers have an increasingly difficult job in detecting fraud. Manpower is tight, the complexity of customs tariffs high and fraud volumes are rising.

Few people know exactly how much customs fraud takes place. Most agree that it is a small yet persistent percentage of the global export market. However, a small percentage of this year’s estimated $19.7 trillion global export trade is still going to be a big number. Of that global export total, about $6.9 trillion in goods will be imported into the EU. That volume of freight traffic creates a hugely complex task for customs authorities charged with identifying which truck to stop or container to open, with the emphasis on keeping the trade flowing without creating bottlenecks.

The latest systems can quickly assess the transactional data history of all risk patterns, identify new rules to mitigate these risks and complete the process in just a few minutes.

There are large profits to be made by avoiding duty or importing illegal goods and the chances of detection are small, so it’s no surprise this is a target area for organized crime. To spot criminals, customs authorities have moved from manual searching, and reliance on officers’ detective skills, to rule-based systems and database searching. However, these systems are now also under pressure as smugglers become more sophisticated and better at out-maneuvering existing systems.

Scoping the challenge

Officials today require detailed information about each shipment so as to scrutinize its veracity. A skilled customs expert will look beyond the immediate shipment and search for identifying links, such as directors and known fraud cases, as well as being aware of what’s been declared and whether it poses a specific risk.

Doing this manually is time-consuming. To conduct risk management thoroughly, agencies must gather data from multiple sources, including the business itself, other customs and tax agencies and the police. To compound their difficulties, they face manpower issues and yet need to act fast to respond to information that is often received late.

All this means that customs officials can often only check a small percentage of goods and must therefore carefully target their approach.
Today, most agencies, at best, are only armed with systems that automate the separate customs management processes they run. First generation rule-based solutions often lack the advanced analytics necessary to optimize their rules. They typically generate large volumes of false positives resulting in wasted time, reduced operational efficiency, increased costs, mistrust and ultimately system atrophy. Coupled with this, there is a lack of information sharing between government agencies, due to political and cultural issues; concerns about privacy and security; poor policies and inadequate technologies.

Changing the game

Fortunately, a new breed of risk management solutions is emerging, offering a range of operational advantages over its predecessors. Advanced risk management systems enable agencies to rank import transactions and manage associated information to create risk scores. Field offices can plan the deployment of staff to best match threat priorities.

The new systems also need to provide graphic user interfaces that help the customs officer understand why they should stop a specific consignment. The systems should also pinpoint the most relevant data, so officers can target this or ask the right questions. This ability to view summarized data enables investigators to make faster decisions.

Another key benefit is that they deploy self-learning advanced hybrid analytics to reduce false positives. With false positive rates minimized, customs officers can focus their time on fraudulent shipments rather than on unwarranted alerts, thereby becoming more efficient.

Critically too, the latest solutions can score imports and exports in real-time. This allows 24 hour, 7 days a week monitoring and accelerates the decisioning and detection process.

The versatility of these next generation solutions also extends to the creation, testing and deployment of new detection rules. Unlike first generation customs solutions, the latest systems can quickly assess the transactional data history of all risk patterns, identify new rules to mitigate these risks and complete the process in just a few minutes.

By embracing new “scale free” technologies, benefits can be further extended, by allowing interaction with other border control systems, or by enabling use of the same solutions across associated departments such as customs and tax, facilitating data sharing and reducing total cost of ownership.

Looking ahead

The days of expensive in-house fraud management projects built from scratch are ending. The cost of managing and maintaining these systems on-site is frequently prohibitive. Increasingly, governments are looking to pre-packaged solutions which offer low risk and costs, scalability and a high level of future-proofing. Advanced risk management technologies are the right solution to real problems and, far from costing a country money, should easily earn their keep.

The automated approach these technologies offer to risk management is here to stay. They are already operational and profitable within a few customs departments globally. They cut costs, increase customs revenue and perhaps most critical of all, bring more fraudsters to justice.

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Read More

  • Fraud takes a heavy toll on government programs today. Read more about how you can achieve a consolidated view of fraud risk and take proactive action to prevent it. 
  • The benefits of advanced risk management technologies can be extended to other government agencies as well. Take a look at the way Estonia and Belgium are detecting fraud and saving tax payers' money.

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