How Treasury's Data Analytics Are Stopping Billions in Fraudulent Payments

The U.S. Department of the Treasury processes more than one billion payments annually, making it one of the world's largest payment operators. Behind this massive operation sits a sophisticated data analytics system designed to catch fraudulent transactions before they leave federal accounts, according to Justin Marsico, Assistant Commissioner for Fraud Prevention and Financial Integrity at the Treasury's Bureau of the Fiscal Service.

Executive Order 14249, signed earlier in the current administration, has dramatically expanded Treasury's authority to screen payments in real-time, adding a crucial layer of verification as funds move from agency accounts to recipients. The order represents a significant shift in how the federal government approaches payment integrity, moving fraud detection earlier in the disbursement process.

Background and Context

The Treasury's Bureau of the Fiscal Service sits at the center of federal financial operations, managing trillions in annual payments and revenue collection. This scale creates inherent vulnerabilities—improper payments have long plagued federal programs, costing taxpayers billions annually despite previous reform efforts.

The challenge stems from fragmented financial systems across government agencies. Many departments operate their own accounting and cash management platforms, creating blind spots that fraudsters exploit. Treasury already disburses over 90% of federal payments, but the remaining Non-Treasury Disbursing Offices have operated with varying levels of oversight.

Key Figures and Entities

Justin Marsico leads the Treasury's expanded fraud prevention mandate as Assistant Commissioner for Fraud Prevention and Financial Integrity. His team oversees the modernization of the Do Not Pay program—a centralized data repository that agencies use to screen recipients against multiple risk indicators before making payments.

The Bureau of the Fiscal Service operates the payment verification systems that process transactions for federal agencies. According to Marsico, the bureau maintains access to six separate death data sources, providing more comprehensive coverage than most individual agencies could obtain independently.

Legal and Financial Mechanisms

Executive Order 14249 establishes three key mechanisms for combating fraud. First, it requires payment verification at the point of disbursement, adding a final screening step before funds leave Treasury control. Second, it mandates consolidation of core financial management systems across government to improve visibility and traceability. Third, it authorizes Treasury to revoke payment authority from agencies, bringing more disbursements under centralized control.

The payment verification system screens for specific risk indicators including deceased payees, negative account balances, and invalid taxpayer identification numbers. When the system flags a transaction, it returns that payment to the originating agency for review while allowing other transactions to proceed—minimizing disruption to legitimate payments.

Treasury has implemented a "soft-launch" approach for new verification checks, working individually with agencies to document appropriate exceptions before deployment. This careful rollout is critical given that many processed payments are lifeline benefits for seniors, retirees, and veterans.

Policy Response and Systemic Implications

The executive order's emphasis on centralized payment verification reflects growing recognition that fragmented federal financial systems create systemic fraud vulnerabilities. By consolidating disbursement authority and implementing standardized screening protocols, Treasury aims to establish consistent fraud prevention across all federal payments.

State administrators of federally funded programs face similar challenges, and Treasury has made Do Not Pay data sources available to them at no cost. Marsico notes that many states and agencies already operate "integrity hubs" with existing fraud detection capabilities, and encourages collaboration rather than duplication of efforts.

Despite these advances, gaps remain in Treasury's data coverage. While death data sources are comprehensive, other risk indicators lack robust verification tools. Treasury continues to analyze government-wide improper payment data to identify missing data sources and develop new analytics capabilities.

Sources

This report is based on an interview with Justin Marsico, Assistant Commissioner for Fraud Prevention and Financial Integrity at the U.S. Department of the Treasury's Bureau of the Fiscal Service, conducted by Carly Mitchell, Partner at Guidehouse. Information regarding Executive Order 14249 and the Do Not Pay program was drawn from direct statements provided during this discussion.