The U.S. Treasury’s use of AI and machine learning has dramatically enhanced its ability to detect and prevent financial fraud, recovering over $4 billion in fiscal 2024, a six-fold increase from the previous year. (Source: Image by RR)

U.S. Treasury’s AI Initiative Targets Hidden Fraud Patterns Amid Surge in Financial Crime

The U.S. Treasury Department’s use of AI to combat financial crime has yielded significant results, recovering $1 billion in check fraud during fiscal 2024—nearly three times the amount recovered the previous year. This success comes from employing machine learning to sift through massive data sets and detect fraud more effectively. Treasury officials credit AI for helping them prevent and recover over $4 billion in total fraud in 2024, a six-fold increase compared to the prior year. The AI-driven system, focusing on machine learning rather than generative AI, has proven transformative in fraud detection and prevention.

Treasury’s adoption of AI began in late 2022, following the lead of banks and credit card companies. The goal, as reported in cnn.com, is to protect taxpayer funds, especially following a surge in fraud during the COVID-19 pandemic when emergency aid was rapidly distributed. Machine learning allows Treasury officials to detect complex fraud patterns at a speed and accuracy that would be impossible for humans alone. By analyzing vast streams of data, AI models can quickly identify suspicious transactions, helping the government prevent and recover funds lost to fraudsters.

Given its role as one of the largest payers in the world—distributing nearly $7 trillion in payments annually—the Treasury is a prime target for financial criminals. AI has become essential in safeguarding this critical function. Fraudsters, who are adept at hiding their tracks, are increasingly using AI themselves to commit financial crimes. U.S. officials, including Treasury Secretary Janet Yellen, have raised concerns about the risks AI poses to the financial system, classifying it as an emerging vulnerability.

Despite the AI’s capabilities, human oversight remains crucial in determining if flagged transactions are indeed fraudulent. Treasury’s efforts to fight financial crime with AI are still expanding, as the department tests new fraud detection methods, explores additional data sources, and collaborates with state agencies to combat issues like unemployment insurance fraud. These advancements are part of a broader push to enhance the tools available to government programs and keep pace with evolving financial threats.

read more at cnn.com