The technology helped recover $1.3 billion in tax fraud during the 2024 fiscal year, according to the Treasury.
The US Treasury Department is increasingly turning to artificial intelligence (AI) to combat fraud, using the technology to prevent $4 billion in improper payments over the last year. This estimate was included in a press release issued on Thursday, highlighting the success of its “data and technology-driven strategy.”
In the 2024 fiscal year, which ran from October 2023 to September 2024, the Treasury utilized machine-learning AI to prevent $1 billion in cheque fraud. Additionally, AI systems helped to identify $3 billion in other improper payments by spotting at-risk transactions and enhancing screening processes. This brings the total amount of fraud prevented in the past year to $4 billion, six times higher than the previous year, the agency reported.
Uncovering Hidden Patterns
Renata Miskell, a Treasury official, told CNN that AI has been “transformative” for the agency, though human involvement is still essential for the final decision in fraud cases. “Fraudsters are adept at concealing their activities and attempting to exploit the system,” Miskell explained. “AI and data analysis help uncover hidden patterns and anomalies, enabling us to address these issues proactively.”
Each year, the US Treasury distributes around 1.4 billion payments, totaling more than $6.9 trillion, according to the agency. In its fraud prevention statement, the Treasury emphasized its commitment to effectively managing taxpayer funds. “Ensuring that payments are made to the right individuals, in the correct amount, and on time is central to our mission,” the agency stated.
IRS Also Employing AI for Financial Crime Detection
The Treasury is not alone in using AI for financial crime detection. The Internal Revenue Service (IRS) is also adopting the technology to fight tax fraud, with plans to increase audits in the future. The IRS reported that it had recovered $1.3 billion from wealthy taxpayers since late 2023, part of a broader effort to target high-income individuals’ tax returns.
The IRS’s latest estimate of unpaid taxes stands at around $496 billion per year for the years 2014 to 2016, with the tax gap expected to grow to $688 billion in 2021, according to the US Government Accountability Office (GAO).
Ensuring Safe AI Use
As AI becomes more prevalent in the industry, regulators have raised concerns about potential risks to safety and financial stability. Janet Yellen, the US Treasury Secretary and chair of the Financial Stability Oversight Council, stated that supporting responsible AI innovation could enhance efficiency in the financial system. However, she emphasized the need for existing risk management principles and regulations to be applied to mitigate these risks.
