U.S. Treasury Uses AI to Combat Fraud, Recovering $4 Billion

The U.S. Treasury Department is intensifying its fight against rising financial crimes, including money laundering and tax evasion, which often involve complex schemes that require sifting through extensive transaction data.

However, the recent incorporation of Artificial Intelligence (AI) has made this process more efficient, enabling the recovery of $4 billion in fraudulent activities.

A report from the Federal Government Accountability Office highlights that federal agencies lose between $233 billion and $521 billion annually due to fraud, emphasizing the necessity for advanced data analytics to combat these issues.

In the fiscal year ending September 2024, AI has been instrumental in the Treasury’s fraud detection efforts. The department announced it successfully prevented $1 billion in check fraud and uncovered $3 billion linked to improper payments. Furthermore, proactive measures focused on high-risk transactions led to an additional $500 million in fraud prevention, saving another $2.5 billion.

While the Treasury’s AI efforts are relatively new, they have been ongoing since 2022, with extensive training to enhance the system’s analytical capabilities. This year, the recovery rate surged to six times more than last year’s figure of $652.7 million. Renata Miskell, a Treasury official, described the impact of AI as transformative, highlighting its effectiveness in identifying hidden fraud patterns.

In tandem, the Internal Revenue Service (IRS) is leveraging AI to address tax fraud, recovering $1.3 billion from wealthy taxpayers. A report reveals that high-income individuals owe approximately $496 billion annually. With such significant amounts at stake, the IRS plans to continue employing AI for audits and enforcement.

The Treasury aims to reduce the risks associated with financial fraud while managing around 1.4 billion payments worth $5.9 trillion. Officials caution that online payment fraud could escalate to $362 billion by 2028, making it essential to adopt advanced technologies like AI to tackle these challenges.