At the 2019 ISSA World Social Security Forum in Brussels, Belgium, the International Social Security Association (ISSA) launched the ISSA Guidelines on Error, Evasion and Fraud in Social Security Systems. The ISSA guidelines consist of recommendations and suggestions supported by good practices to address error, evasion and fraud (EEF), with a view to enabling institutions to identify the most appropriate techniques that fit their specific circumstances. The development of the EEF guidelines benefited from significant research, including a 2016 report (Goveia and Sosa, 2016) and international seminars in 2013 and 2018 in Madrid organized by ISSA members in Spain to enable high-level exchanges of experiences.

In this context, this article presents a brief overview of the issues on EEF in social security and the approaches to deal with these challenges based on the good practices shared in the 2020 competition for the ISSA Good Practice Award for the Americas. Recent innovations by ISSA members in the region consist mainly of four approaches:

1. The application of advanced Information and Communication Technologies (ICT), to facilitate the processes of validating an activity and obtaining a benefit;
2. Coordination and systematic data cross-checking with third-parties, to enable the automatic confirmation of insured person/contributor's declarations or to obtain the requisite data to complete a file, without need for presence-based action;
3. Strengthening the relevant teams' inspection capacities and professional skills; and
4. Strengthening the enforcement of sanctions and communicating these to the public.

Application of advanced Information and Communication Technology

This strategy is based primarily on the strategic use of Information and Communication Technology (ICT). Such technologies are indispensable to automatically detect potential fraud, atypical profiles and risk scenarios. The application of ICT to prevent and/or detect possible irregularities is covered in the ISSA Guidelines on Information and Communication Technology, notably section B4 on Data Analytics. Recent ISSA webinars elaborated on the use of data analytics to address fraud.

Good practices in this area highlight the importance of specialized software, such as that developed by Argentina's Federal Administration of Public Resources (Administración Federal de Ingresos Públicos – AFIP) and Uruguay's Social Insurance Bank (Banco de Previsión Social – BPS). In Argentina, an IT tool known as the "System of Social Security Obligations Calculation – Inspection Certificate Module" (Sistema de Cálculo de Obligaciones de la Seguridad Social – Módulo de Actas de Inspección, SiCOSS) facilitates the collection and distribution of funds arising from a tax inspection recovery service (Federal Administration of Public Resources, 2016). For several years now, this application has helped to speed up and streamline the process of calculating and recovering outstanding social security contributions. BPS Uruguay has developed the "Integrated Solution for the Selection of Cases to Monitor" (Solución Integral de Selección de Casos a Fiscalizar – SISCA), which identifies contributors who should be subject to inspections based on the use of modelling and predictive analytics techniques (Social Insurance Bank, 2016).

Advanced Information Systems and Big Data initiatives also enable the implementation of effective measures against EEF. As shared in a webinar on analytics application against EEF, the Social Security Information and Technology Enterprise – DATAPREV (Empresa de Tecnologia e Informações da Previdência Social – DATAPREV) of Brazil developed a Big Data system connected with decision-support tools, which can detect potential fraudulent attempts to obtain unemployment benefits. Similarly, the Mexican Social Security Institute (Instituto Mexicano del Seguro Social – IMSS) is developing an institutional Big Data system that uses analytics technologies to monitor a range of possible fraudulent cases including non-compliance. In addition, the IMSS established information systems to facilitate the coverage of domestic workers and minimize the risk of employer evasion.

In Argentina, the Employee Pension Fund of the Entre Rios Province implemented a contributions control system covering personal and employer contributions (SICA) (Federal Social Insurance Council, 2020a). Increasing intra-institutional exchanges make common databases ever-more efficient. Moreover, the development of a single online channel for social security declaration and contributions to replace the multiplicity of channels through which companies traditionally shared data with the authorities, helps prevent inconsistencies, overpayments and duplication. Many of the practices of ISSA members from the Americas are presented in the ISSA Guidelines on Contribution Collection and Compliance. Furthermore, AFIP and the National Social Security Administration (Administración Nacional de la Seguridad Social – ANSES) in Argentina are using ICT to develop an integrated national register of EEF cases and individuals who have committed social security fraud. This raises public awareness of their existence and enables the automatic application of sanctions to companies committing fraud, e.g., banning them from bidding for public contracts.

Coordination and systematic data cross-checking with third‑parties

Section G of the ISSA guidelines on EEF covers the coordination of efforts with other institutional actors. It recommends that social security bodies share information with public finance departments in cases of fraud related to means or residency; with labour inspection departments and services responsible for addressing illegal work in the case of fraud relating to undeclared employment; and with interior ministries in the case of identity fraud, etc.

In Argentina, the AFIP and ANSES implement risk mitigation measures through permanent social security data sharing. Such information sharing can be extended to financial institutions, as is done in Ecuador where the Ecuadorian Social Security Institute (Instituto Ecuatoriano de Seguridad Social – IESS) established agreements with financial institutions including public and private banks, to enhance the collection of social security contributions (Ecuadorian Social Security Institute, 2020a). Brazil's National Social Security Institute (Instituto Nacional do Seguro Social – INSS) makes its data available to all those involved in funding the social security system (employers, employees, institutions), thereby enabling cross-checks to highlight potential anomalies. INSS has also put in place artificial intelligence solutions to combat fraud. The initiative draws on inter-institutional information systems to communicate and digitally register every death digitally and counter without delay any abuse of funds or unjustified payment.

This latter good practice illustrates the recommendations of the ISSA guidelines on EEF, notably guidelines 35, 36 and 37 on partnerships with other actors. Using Big Data, predictive analytical models are able to identify risk groups that are likely to evade contributions because of irregular payment patterns or recurrent payment arrearages. Unique identification numbers facilitate data cross-checks, as suggested by guideline 9. Subject to data protection regulations, social security institutions could request for access to bank account records of contributors and beneficiaries in order to cross-check declarations.

Strengthened inspection capacities

In most legal systems, when two or more parties are involved in the commission of a fraudulent activity, said parties may be found to be jointly and/or severally liable for the wrongdoing. The courts may hold legally liable the entire chain of parties involved in fraudulent activities, from the main instigator through to partners and subcontractors. To facilitate the identification of those who are part of these intricate networks of arrangements, social security administrators are coordinating with national authorities including in the use of national databases, with a view identifying and bringing the culprits to the justice system.  

For example, the Ecuadorian IESS has developed an integrated management model to control evasion and under-declaration (Ecuadorian Social Security Institute, 2020b). This involves a statistical model that identifies companies with the highest rates of evasion, based on data from the IESS itself as well as other public bodies such as tax authorities, the Ministry of Labour, superintendence of companies, and the Ministry of the Interior. The aim is to target inspections at those companies most likely to evade or under-declare.

Strengthening institutional capacities in this area involves wide-ranging internal transformations, and the examples below illustrate some of the strategies adopted in the Americas.

1. Improving institutional risk management as the Social Insurance Fund of Costa Rica (Caja Costarricense de Seguro Social – CCSS) did by carrying out operational and strategic plans. To reinforce the management of its strategic and operational risks, the CCSS evolved its approach by moving from mere observance of regulatory requirements towards a standardized framework that generates valuable data for decision-making (Social Insurance Fund of Costa Rica, 2020). The objectives of the initiative revolve around consolidating the process on the basis of best practice and the recommendations of the ISSA Guidelines on Good Governance; regular risk-data quality reviews; an innovative detailed risk inventory through a new database of institutional risks (Catálogo Institucional de Riesgos); and closer links between strategic risks and strategic and tactical planning.
2. Updating the tools used by the agents responsible for tackling fraud. A good practice is to revise on a regular basis the basic inspection manual along with the subject-specific inspection handbooks (e.g. on bogus subcontracting) to ensure that they are fit for purpose. This includes the establishment and periodic updating of a database of judicial rulings on illegal labour and social dumping. In addition, staff should be provided with ongoing training and development through targeted modules, along the lines of the "Trails of Learning" (Trilhas de Aprendizagem) developed by the INSS in Brazil (National Institute of Social Security, 2020). This online training resource enables INSS officials to follow a series of regularly updated technical training modules autonomously and independently, according to the time they have available. The Uruguayan BPS uses emerging technologies to support agents with mobile tools to perform on-site field inspections and on the spot verification of compliance with social security obligations (Social Insurance Bank, 2020).
3. Developing a national inter-ministerial stimulus and coordination policy. The goal is not only to reinforce the national mission to coordinate the fight against fraud, but to ensure as well the coordination with all other inter-ministerial liaison missions or delegations that are responsible for addressing illegal or undeclared employment or the trafficking of labour.
4. Launching large-scale investigations to formulate a more detailed profile of fraudsters. Employment and Social Development Canada (ESDC) created for example a fraud reporting tool for the use of Canadians, to encourage the filing of reports of potential cases of fraud that they know about in order to protect the social security system for the common good. A recent initiative is the push to take action on fraud related to the payment of the Canada Emergency Response Benefit (CERB), a benefit that covers gaps in employment during the pandemic (Buzzetti and Vastel, 2020)

More effective sanctions and the importance of communication

The means and powers enjoyed by social security institutions to address fraud can be harmonized by law. Sanctions can be strengthened by defining and establishing a number of enabling factors. For example, the various legal appeals procedures gain credibility the faster they are implemented. In Brazil, the INSS established an emergency structure to help proceedings flow more smoothly and before cases are brought to the Conselho de Recursos de Previdência Social (CRPS), the social security benefits appeals board. This new administrative "crisis cabinet" (Gabinete de Crise de Diligências – GCD) made up of members of the CRPS and INSS carries out advance checks on appeal files to avoid the need for adjustments owing to missing documents once the appeals process is underway. This helps to ensure a smooth and effective process (Ministry of Finance – Secretariat for Social Insurance, 2020).

In terms of contributions, infringements often give rise to administrative sanctions (e.g. the cancellation of exemptions and reductions, the imposition of surcharges or fines, etc), and occasionally lead to criminal proceedings. New, dynamic fraud detection strategies have been put in place using profiling and the flagging of potential risky cases, as is done in Uruguay where the BPS uses a dedicated predictive analysis system (Social Insurance Bank, 2017).

Communication is of paramount importance in this field, as the EEF guidelines suggest, notably in its section F. Neglecting this aspect runs the risk of losing ground to those fraudsters who are highly organized and are capable of mobilizing significant resources. An appropriate communications policy is essential to promote the benefits of safeguarding social security and to broadcast the success of sanctions and use these to set an example, as recommended by the ISSA Guidelines on Communication by Social Security Administrations. For example, in a webinar on EEF in the context of COVID-19, the Colombian Pension Administrator's (Administradora Colombiana de Pensiones – ColPensiones) outlined its strategy to fight EEF, which includes actively developing a culture against fraud.

Another good practice is the Canadian communications campaign that characterized fraud as theft of the common good and publicized those who have been caught and sanctioned. Such a policy can be effective in generating a "social multiplier" effect that has, for example, one sanctioned case of fraud resulting to an average of five undetected fraudsters returning to formal employment. The weight of this "social multiplier" increases if the enforced sanctions are the subject of a well-conducted communications campaign. This is in line with the "name and shame" principle, which can extend to banning the fraudulent company from bidding for certain public contracts. This policy draws on a range of methods and extends from the institution's relationship with users (external communication) to its relationships with the Government and the press (e.g., lobbying and providing periodic technical advice). It also involves strengthening the cohesion and professionalism of the institution's internal communication and training teams.

These aspects, which are key to the success of institutional policies, are discussed in the report "Pensions Communication" prepared by the ISSA Technical Commission on Old-age, Invalidity and Survivors' Insurance in 2016 (ISSA, 2016b). The report validates an effective policy implemented in several Latin American countries including Uruguay, where a systematic partnership was established with the national education system on the subject of social security and how to safeguard it.

A more recent example is the initiative of the Dominican Republic's Superintendence of Pensions' (Superintendencia de Pensiones) policy to promote social insurance education (Superintendence of Pensions, 2020). Promoting social security as a common good that is managed in a spirit of trust is bolstered by a policy that increases its transparency, e.g., the creation of an internet portal providing access to key documents related to an institution's governance and financing. Argentina's COFEPRES initiative in this area (Federal Social Insurance Council, 2020b) is in accordance with the ISSA Guidelines on Good Governance, in particular section A2 on transparency.

Conclusion: Fighting EEF and the role of the ISSA guidelines

Social security institutions in the Americas are implementing a rich set of measures against EEF, which are aligned with the recommendations in the ISSA guidelines, including the application of advanced technologies, systematic communication, and improved inter-institutional coordination.

The ISSA guidelines are the result of a global collaboration of social security institutions and serve as a practical and informative reference document. They were valuable references in the context of social security responses to the COVID-19 crisis, which has seen the roll-out of emergency support policies and the liberalization of certain measures that could likely create vulnerabilities to fraud and embezzlement. This subject was specifically discussed in a webinar addressing EEF and adapting to the COVID-19 context.

Nonetheless, the continued success of institutional policies to address error, evasion and fraud will depend on institutions’ capacity to continuously anticipate new fraud risks and to be several steps ahead of fraud strategies. In addition to addressing evasion and fraud in the traditional forms of employment, for instance, social security institutions are gearing up and preparing for addressing the challenge of evasion and fraud in the emerging new forms of employment.

The ISSA guidelines and various reference documents are being updated to provide continued value for social security institutions in this adaptation process. The innovations and good practices of ISSA members in the Americas are currently being studied by the ISSA Technical Commission on Contribution Collection and Compliance. The ISSA guidelines on EEF have already been updated with these good practices to provide more examples on recent initiatives to address error, evasion and fraud.

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