SkillsFuture to tighten ‘big capability gap’ in fraud detection system by Q3: Ong Ye Kung

SINGAPORE — The S$40 million fraudulent claims from the Skills Development Fund by a criminal syndicate last year appeared to be an “elaborate and conscious effort”, but SkillsFuture Singapore (SSG) should have detected the case earlier and such frauds should not have happened.

Acknowledging that there is a “big capability gap” in SSG’s fraud detection system, Education Minister (Higher Education and Skills) Ong Ye Kung said it must be tightened to prevent similar occurrences in future.

As such, a “good and effective” data analytics system will be in place from the third quarter this year, he pledged, adding that SSG is getting help from Government Technology Agency of Singapore and private sector consultants to improve the system to better detect fraudsters.

Addressing questions posed in Parliament on Monday (Jan 8) on the recent spate of bogus claims made in the name of skills development, Mr Ong said: “The bottom line is this: The system has a big capability gap today. This could have been prevented, should have been prevented, and we will take the necessary actions to remedy this.”

Under the SkillsFuture national movement announced in 2015, Singaporeans aged 25 and above receive a S$500 credit from the Government to attend courses by approved training providers, which include polytechnics and private providers.

In January and February last year, some S$2.2 million of bogus claims were submitted by 4,400 individuals who encashed their SkillsFuture Credits without attending any courses.

At the end of last year, SSG saw its largest defraudment to date, where S$40 million worth of fraudulent claims were drawn from the long-standing Skills Development Fund. Established in 1979, the fund, built through levies from employers, supports training of workers and workforce upgrading programmes.

Investigations, which are still ongoing, suggest that a criminal syndicate was behind this, said Mr Ong on Monday. In what appears to be an “elaborate and conscious effort”, the syndicate operated an “organised network” that used business entities and phantom employees, he added.

“This should not have been allowed to happen,” Mr Ong said. “While we cannot always prevent all forms of fraudulent activities, SSG should have detected this case much earlier, especially when it was so egregious and the amounts involved were so large.”

The institution will work with enforcement agencies to ensure that perpetrators will “face the full consequences of the law”, he said.

Already, processes have been tightened. In May last year, claims processes were revised such that individuals could no longer be directly reimbursed for use of their credit. Payments must be made to the course providers, who should reduce the chargeable course fees accordingly.

SSG will also be mindful not to “over-burden” employers in strengthening its fraud detection system, Mr Ong said.

“The natural instinct is to, because this thing happened, let’s double check everything… But we don’t have to do that. If you do that, you end up actually putting your effort in the wrong areas,” he said. “What we want to do is that, through data analytics, we can work out the pattern of cheating.

“If we can do that well, and we must do that well, we do not over-burden employers.”

14 CASES OF BOGUS CLAIMS TO DATE

SINGAPORE — The authorities have prosecuted 13 cases of bogus claims made under the Productivity and Innovation Credit (PIC) scheme and one under the Wage Credit Scheme (WCS) to date, revealed Second Minister of Finance Lawrence Wong, in response to questions from Members of Parliament on the recent spate of fraud cases involving government assistance schemes.

The Inland Revenue Authority of Singapore (Iras) reported last month that over 1,000 employers had tried to fleece the WCS — which subsidises wage increases to help businesses during the restructuring period — of S$5.57 million from 2014 to 2017, with ruses like reporting phantom workers or inflating their wage payouts.

As of last November, the taxman had also audited 98,000 of 313,000 PIC claims made from 2011 to 2016, of which 64 per cent (63,000 claims) were rejected upfront.

Of the remaining cases selected for audits, 3,300 claims required clawback and 29,400 were bona fide claims. The remaining 2,300 cases were still being audited.

Mr Wong said on Monday (Jan 8) that Iras will continue to take “strict enforcement and legal actions” against fraudsters who abuse the scheme, such as by disqualifying them from these schemes or taking legal action.

The authorities take a “risk-based approach” to safeguard against abuses, he said, where cases assessed to be of a higher risk profile are subject to more detailed investigations.

For the WCS, this could involve examining supporting documents and phone interviews to verify the accuracy of submissions. For the PIC scheme, this may involve examining transaction details and verifying documents like invoices. Iras may also conduct field visits to understand how equipment subsidised by the PIC is used by business.