2024 Public Sector Perspectives

AI can leverage data frommultiple sources – both within government and from the private sector – to deliver actionable insights for risk management and controls. For instance, AI can help governments to detect and prevent fraud in areas such as tax collection and social welfare programs, flagging cases where reported income differs from financial transactions or where multiple individuals claim the same dependents for social security or tax benefits. Italy used AI to identify one million high-risk cases in 2022 and prevent more than €6.8 billion in fraud. 8 In September, the Internal Revenue Service announced that it was using AI to investigate tax evasion at hedge funds, private equity groups, real estate investors and large law firms. 9 Regulators and supervisors are also turning to AI to deliver a more effective, flexible and responsive supervisory system. For example, Mexico’s National Banking and Securities Commission has developed a prototype for an NLP application to uncover potential money laundering/terrorism financing networks and facilitate the detection of unusual transactions and relationships. 10 In Germany, the Federal Financial Supervisory Authority (BaFin) has established an integrated automated alarm and market monitoring system for analyzing potential market abuse cases, including insider trading andmarket manipulation. The solution leverages the regulator’s analytical data warehouse, visualization software and AI techniques. 11 The advent of generative AI means that there is an opportunity to further strengthen risk and control processes. By gaining a deeper understanding of unstructured data compared to today’s solutions, it can boost efforts to detect cyber threats and identify fraud in myriad situations. 8 https://news.bloombergtax.com/daily-tax-report-international/italy-turns-to-ai-to-find-taxes-in-cash-first-evasive-culture 9 https://www.nytimes.com/2023/09/08/us/politics/irs-deploys-artificial-intelligence-to-target-rich-partnerships.html 10 https://www.oecd-ilibrary.org/sites/d478df4c-en/index.html?itemId=/content/component/d478df4c-en 11 https://goingdigital.oecd.org/data/notes/No10_ToolkitNote_SupTechCorpGov.pdf AI can leverage data from multiple sources – both within government and from the private sector – to deliver actionable insights for risk management and controls. For instance, AI can help governments to detect and prevent fraud in areas such as tax collection and social welfare programs, flagging cases where reported income differs from financial transactions or where multiple individuals claim the same dependents for social security or tax benefits. Conclusion: There is no such thing as a free lunch – data is critical The opportunities for governments and public sector entities to use AI are potentially limitless. These technologies can be used to lower costs, improve efficiency, reduce risk, deliver services more effectively and engage with, and respond to, citizens. They can also improve openness, accountability and social inclusion and help governments to meet their Sustainable Development Goals: many solutions to monitor and mitigate climate change, for instance, depend on AI. While there are several benefits in deploying AI, especially generative AI, governments also need to be cautious when using this technology. AI can be biased, inaccurate and outright wrong. It is only valuable if the data that underpins them is accurate, timely, consistent and complete. Moreover, data has to be used in the right way. An OECD’ report on AI notes: “Public servants who are interested in engaging with AI need to know… what types of data can be used, what sort of data AI needs, and how to check if their data are ready for AI.” 12 Just like the private sector, governments and the public sector need to strengthen how they collect, collate, analyze and store data. In particular, governments should establish best-in-class data privacy and other safeguards, not just to protect citizens but also to act as a role model for the private sector. Provided such protections are put in place, government data should also be made available to the private sector in order to spur innovation. Citi is deeply engaged in finding ways to use AI to benefit clients, and already deploys the technology extensively in its solutions. The bank is committed to working with public sector clients to help them leverage the enormous power of AI to improve how they engage with citizens, enhance the efficiency of their processes, and strengthen their risk management and controls. 12 https://oecd-opsi.org/wp-content/uploads/2019/11/AI-Report-Online.pdf Citi Perspectives for the Public Sector 35 34 AI in the Public Sector: Facilitating Engagement, Improving Enablement and Enhancing Risk Management