ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / NEWS

Complaint Raises Concerns About Fraud Detection System Depriving People of Benefits

Electronic Privacy Information Center has filed a complaint with the FTC against the state-deployed automated fraud detection system
PUBLISHED FEB 3, 2024
Cover Image Source: Pexels | Photo by Element5 Digital
Cover Image Source: Pexels | Photo by Element5 Digital

Scammers are increasingly targeting vulnerable consumers as well as netizens with their fraudulent schemes and the system is struggling to act in time to block their attempts. In yet another blow to the fight against fraud, the Electronic Privacy Information Center (EPIC) has filed a complaint with the Federal Trade Commission (FTC) against the state-deployed automated fraud detection system, Thomson Reuters's "Fraud Detect." The software, used by government agencies in 42 states, including notable ones like Illinois, Indiana, Iowa, Nevada, and the District of Columbia, is alleged to incorrectly identify fraud and violate federal rules, according to EPIC.

Pexels | Photo by Arturo  Añez
Pexels | Photo by Arturo Añez

EPIC's complaint argues that Fraud Detect employs an "opaque, proprietary algorithm" fueled by sensitive personal data. The software aims to alert benefits administrators about potentially fraudulent activities related to public benefits, such as unemployment insurance and the Supplemental Nutrition Assistance Program (SNAP). It combines historical public benefits data with the personal information of an applicant to predict fraud and determine the appropriate level of assistance for recipients.

The data points used for fraud predictions include recipients' home addresses, shopping patterns, affiliated persons, social media profiles, and even credit scores, raising concerns about privacy and the potential misuse of personal information.

Image Source: ucdd.org
Image Source: ucdd.org

EPIC further contends that the adoption of Thomson Reuters's tool has resulted in millions of legitimate claimants being denied access to public benefits. The system categorizes applicants into five risk levels based on various metrics, such as high-dollar transactions, long-distance travel for shopping, and frequent balance inquiries.

The complaint highlights a specific incident in December 2020, where the California Employment Development Department engaged Pondera, the company behind Fraud Detect, to review 10 million unemployment insurance claims. Using the same algorithm, the system flagged 1.1 million claims as "suspicious," leading to the suspension of benefits for all these claimants. A probe conducted later revealed that little more than half of the flagged claims, approximately 54%, were legitimate.

Image Source: epic.org
Image Source: epic.org

EPIC's complaint extends beyond allegations of inaccurate fraud predictions. It raises questions about compliance with federal standards for responsible automated decision-making systems.

Furthermore, EPIC asserts that Thomson Reuters is in violation of Section 5 of the FTC Act due to engaging in unfair and deceptive trade practices, both directly and indirectly.

This complaint comes on the heels of the FTC's recent decision to prohibit drugstore chain Rite Aid from utilizing AI facial recognition systems, citing a lack of reasonable safeguards. The incident underscores a growing trend where regulatory bodies are scrutinizing the deployment of AI and automated systems, emphasizing the need for responsible and transparent practices in the development and use of such technologies.

As the debate over the ethical and legal implications of automated systems continues, the outcome of the FTC's investigation into Thomson Reuters's Fraud Detect may set important precedents for the use of similar technologies in public benefit programs across the United States. The EPIC complaint raises serious concerns about the accuracy, privacy implications, and compliance of the automated fraud detection system employed by numerous states. The repercussions of this investigation could potentially reshape the landscape of automated systems used in public services, emphasizing the importance of ethical considerations and adherence to regulatory standards.

MORE ON MARKET REALIST
According to the expert, personal letters and a signature from Tolkien himself added to the value of the book.
7 hours ago
Chistina and Katie Currie won over $88,000 in cash and two exotic vacations with their stunning performance.
8 hours ago
After everyone backed out, the billionaire Shark stepped up to help the founder of Diaper Dust.
1 day ago
Sun kept repeating the incorrect phrase but couldn't identify the error in time.
1 day ago
After almost closing a deal with Mr Wonderful, the founder of 'Simply Good Jars' pivoted hard.
1 day ago
The host thought it was the "worst possible answer" to give even as the team felt it was good enough.
2 days ago
Adding to the controversy, the owner of Dr. Mudd's lapdesk asked Harrison for $100,000.
2 days ago
With just milliseconds to spare, Sarah LaPilusa pulled off an incredible Bonus Round win.
2 days ago
Ozark Trail 64 oz Water Bottles were recalled after the lids of faulty bottles forcefully ejected.
3 days ago
The player laughed and giggled her way through the puzzles to win prizes worth over $57,000.
3 days ago
Scott Riccardi placed an unbelievable wager during Final Jeopardy! to win a massive amount in a day!
3 days ago
The guest got a 200% return on investment on her sculpture that she bought from Macy's.
3 days ago
Jennings had a record-setting winning streak as a contestant before he became the host.
4 days ago
The player, Ron Wheeler, tragically got no clues after his letter picks for the final puzzle.
4 days ago
The former kids champion, Skyler Hornback knew what was coming.
4 days ago
The fans took issue with the clue being too tough and unnecessary for the contestants.
5 days ago
Cuban wanted to strike a deal with the founder of Coconut Girl and gave her an ultimatum.
5 days ago
Although the word did make a lot of difference, some fans felt that the decision was ridiculous.
5 days ago
The guest, who found the item online, didn't think it was the real deal until he heard its value.
6 days ago
The player Samantha secured the first big win of Ryan Seacrest's run on the show.
6 days ago