Business Intelligence Beats Back Food Stamp Fraud
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
On any given day in Louisiana, there are hundreds of impoverished people desperately scheming to sell their food stamps for 50 cents on the dollar. All it takes is a dishonest retailer who is willing to pay cash for the food stamps and then pocket the difference. Known as "discounting," food stamp fraud in Louisiana costs federal taxpayers about $28 million annually. And that's just one state.
But the Louisiana Department of Social Services is putting discounters on notice, with a little help from sophisticated business intelligence and mapping software that pinpoints offenders.
In the old days, undercover agents from the U.S. Department of Agriculture and the Secret ServiceLouisiana's food stamp program is federally fundedwould walk into grocery stores throughout the state and attempt to sell food stamps for cash. This method of fraud detection and recovery amounted to a series of low-tech sting operations, none of which could build a prosecutable case against a retailer by itself. And with 3,400 retail participants in the program statewide, the sting approach gave the state "no sense of the scope and depth of the fraud," according to Raymond Pease, assistant director of fraud and recovery at the Louisiana Department of Social Services Office of Family Support.
But with the adoption in 1997 of electronic benefit transfer technology, in which magnetic-stripe debit cards replaced actual food stamp certificates, the state began to collect loads of data from JPMorgan Chase, which runs the program for the state. Using WebFocus, a business intelligence product from Information Builders, Pease and his team began to cull through data, looking for patterns that would direct federal agents to suspicious retailers. "We could mine some of the data, but we just couldn't drill down far enough to get what we wanted," says Pease. "In one investigation it took us three weeks or longer to get the reports we needed and we knew we needed a better way to see the data."
It wasn't until Pease put in place geographic information system (GIS) software from ESRI in the spring of 2004 that the data started to take shape. Plotting more than 100 million transactions annually on a map of the state, Pease saw clear patterns, such as people traveling long distances to redeem their food stamps at particular stores. And he is launching aggressive investigations against dishonest retailers and recipients, getting the USDA and the Secret Service more involved than they have been in the past. "It takes a while to build up and prosecute a case for the courtroom, but the software has already confirmed retailers we had suspicions about, and opened our eyes to a whole lot more," says Pease. "We now have the tools to put a significant dent in this."
Word of his department's new tool has spread quickly to other states, and it is likely to be extended throughout the Department of Social Services to help detect fraud in other benefit programs. But all the attention Pease is receiving does have its drawbacks. "I'm getting tired of showing these demos to people," he says.
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