StateScoop: Automated public-benefit fraud detection used by states subject of new FTC complaint 

January 4, 2024

An automated system used by several state agencies to detect public benefits fraud is the subject of a complaint that the Electronic Privacy Information Center, or EPIC, filed Tuesday with the Federal Trade Commission. The research group claimed the system incorrectly identifies fraud and is in violation of several federal rules. 

The software named in the complaint, Thomson Reuters’s “Fraud Detect,” advertises itself as a tool that detects fraud against public benefits, like unemployment insurance and the Supplemental Nutrition Assistance Program. The complaint alleges the software uses sensitive personal data to power an algorithm that alert benefits administrators of potentially fraudulent activity and contains an “opaque, proprietary algorithm.” EPIC also claimed the adoption of the Thomson Reuters tool by government agencies has led to millions of legitimate claimants going without access to public benefits. 

… The FTC complaint, which follows a three-year investigation conducted by the Electronic Privacy Information Center into Thomson Reuters’ fraud detection system, also states that the media company has failed to show that its algorithm meets federal standards for responsible automated decision-making systems. Those standards include those set out in President Joe Biden’s October Executive Order on the “Safe, Secure, and Trustworthy Development and Use of AI,” 2022’s White House Blueprint for an AI Bill of Rights and the National Institute of Standards and Technology’s AI Risk Management Framework. 

EPIC also claimed that Thomson Reuters is in violation of Section 5 of the FTC Act because it has engaged in unfair and deceptive trade practices, both directly and indirectly. In its complaint, EPIC urged the FTC to open an investigation, secure an injunction and seek model deletion or destruction of the system. 

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