Measures to Prevent Further Fraudulent Claims for SkillsFuture

Mr Desmond Choo asked the Minister for Education (Higher Education and Skills) what will be the measures taken to prevent future abuses of SkillsFuture claims without stifling the growth of the SkillsFuture movement.

Mr Zaqy Mohamad asked the Minister for Education (Higher Education and Skills) (a) what is the outcome of the Government's internal investigation into the weakness of its controls over the $40 million scam on SkillsFuture claims; (b) whether there have been additional safeguards put in place since $2.2 million have been identified as false claims earlier in March 2017; (c) why did the rectification measures put in place from the earlier incident failed to prevent the recent occurrence; and (d) whether any staff or personnel have been suspended pending investigations on the lapse.

The Members asked about two separate cases of fraudulent claims. They were unrelated and of different natures.

In the first case, more than 4,400 individuals were found to have made false SkillsFuture Credit claims within a very short period last year, amounting to over $2 million. The fraudulent claims were made by individuals who did not attend any training but falsely claimed to have done so. They acted largely on their own accord, prompted by a viral WhatsApp message. As of December, over 90% of these individuals have either made full payment or have made arrangements for instalment payments. Those who did not respond will be blacklisted for all future SkillsFuture grant claims until they have repaid. We will also not rule out further legal and enforcement actions.

Arising from that episode, SkillsFuture Singapore (SSG) has reviewed the claims processes for SkillsFuture Credit. Individuals can no longer be directly reimbursed by SSG for use of SkillsFuture Credit. It has already been implemented. Instead, payments will be made to training providers, who then reduce the course fees chargeable accordingly. This arrangement has significantly reduced the risk of false claims under SkillsFuture Credit. At the same time, the claim process is still convenient and easy and has not affected the number of individuals using their SkillsFuture Credit every month.

The second case involves $40 million of fraudulent claims. It did not involve SkillsFuture Credit or new SkillsFuture programmes. Instead, the fraudulent claims were for training grants drawn from the Skills Development Fund (SDF). SDF was established in 1979 to support the training and retraining of workers and workforce upgrading programmes and is built up through levies collected from employers. It is, therefore, a scheme that has been around for many years.

From its preliminary investigations, the Police believe that a criminal syndicate was behind this. The syndicate operated an organised network that utilised business entities, comprising employer companies and training providers to submit fraudulent claims. Central Provident Fund documents provided by the syndicate listed employees that the Police believe were fictitious. In short, this appears to be an elaborate and conscious effort.

These fraudulent claims were made in 2017, with the majority being made in October. When these irregular claims were detected, SSG immediately suspended all payments of grants to the relevant business entities and reported the case to the Police. Five persons have been charged with various offences, such as engaging in a conspiracy to submit forged documents and concealing the benefits from criminal conduct. The Police have also seized $6.7 million in cash and 11 kilogrammes of gold, and frozen slightly more than $10 million in bank accounts.

As investigations are ongoing, I am unable to disclose more details about the case. But what is clear is that this case involves fraudulent claims amounting to a large quantum. This should not have been allowed to happen. 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.

SSG's priorities are as follows: firstly, work with the enforcement agencies on the current prosecution to ensure that any perpetrators will face the full consequences of the law; secondly, systematically plough through other claims it has received over the past year. And thankfully, so far, there is no evidence of other cases of a similar nature.

Thirdly and very urgently, improve the system of fraud detection, checks and audits. SSG has formed an Interagency Process Review Task Force, overseen by its Board, and comprising members from SSG management, the Accountant-General’s Department, Commercial Affairs Department and the Ministry of Education (MOE). The task force is conducting a thorough review of how the fraudulent cases happened and will evaluate the current fraud detection system and make recommendations to improve the system.

Specifically, I have directed SSG to strengthen its fraud detection system through data analytics. Fraudsters, who are going all out to cheat, are getting more sophisticated and their plans more elaborate. They will also evolve their approach. SSG's detection system must improve and become more sophisticated, too. Through appropriate use of data analytics and drawing on data across Government agencies, we can better detect false claims without significantly affecting genuine employers applying for training grants to upgrade the skills of their workers. SSG is currently getting help from both private sector consultants and Government Technology Agency (GovTech) to get this done. It has restructured and strengthened the fraud detection and audit team. SSG has started implementing some of the measures manually and will progressively automate and systematise them. By the third quarter of this year, we will have a good and effective data analytics system in place.

In response to Mr Zaqy Mohamad's question, as of now, no staff member has been disciplined or suspended arising from the latest fraud case as there has been no evidence of wrongdoing by any staff member thus far. But SSG will take necessary management measures to remedy this weakness in fraud detection capability. We must also take the real culprits to task, send a strong deterrent signal, so that SkillsFuture continues to serve the working people of Singapore.

We cannot afford a repeat of fraudulent claims of such egregious nature and of such scale. SSG will do a thorough review and rectify any shortcomings in grant administration that it may have. But at the same time, we should not allow this case to detract from the important task of reskilling and upskilling the workforce in this period of technological disruptions and economic restructuring.

Mr Deputy Speaker, I thank the Minister for the answer and response. The Minister agrees that because of the large amount of public funds involved, we need measures to prevent such occurrences from happening in the future. Will the Ministry consider raising the bar or, in fact, having greater sanctions and harsher penalties in the review for the SDF Levy Act as well as related legislation involving public funds?

This will clearly come under the Penal Code. Administratively, we have a process. When we set up SSG, we enacted the SSG Act. We have provided for higher penalties. But for cases, such as this, of such an egregious nature will have to come under the Penal Code.

Sir, I have one supplementary question. I have received feedback from residents that, very often, they were falsely told that SkillsFuture Credit will expire, for example, while some are being told that they would need further courses in order for their certificate to be valid. I would like to ask the Minister whether there is any plan to make the reporting of such service providers easier. For example, is there a hotline set up for residents to report such service providers?

I thank the Member for the suggestion. We will definitely consider having such a hotline. I believe a hotline to SSG does exist, but we probably have to make it more widely known. The Member can assure her residents that SkillsFuture Credit does not expire.

I welcome the Minister's approach and strategies to combat such scams in the future. Bearing in mind that this may also mean tightening of the processes, firstly, how would SSG balance not having to make it more onerous for employers to claim and, secondly, given that $40 million was involved in the scams, how does it affect the performance and results that SkillsFuture had earlier reported? Will some old numbers be taken out and the adjusted numbers re-reported?

We cannot count those numbers as training; that would not be honest. In any case, training numbers are not really the full outcome of what SkillsFuture is trying to achieve. We work closely with the Ministry of Manpower. The Adapt and Grow numbers drawing on SkillsFuture funding and programmes are much more important. Thus, outcomes are one thing, key performance indicators are one thing, but understand the spirit of what we are trying to do and the real ground impact of what we want to do.

How to make it not onerous? That is an excellent clarification. The natural instinct is to think, "Because this thing happened, let us double-check everything and let us check a huge number" but this will impede the whole system. That is when genuine employers who want to train their workers will get affected. But we do not have to do that and, if we do that, we will end up putting out efforts in the wrong areas. What we want to do is, through data analytics, work out the pattern of cheating and then we can detect them much better. That pattern of detection of cheating has to keep on evolving because they are evolving, too.

If we can do that well – and we must do that well – we will not over burden employers. We can improve the audit and fraud detection system while not over-burdening employers. The bottom line is this: the system has a big capability gap today, this could have been prevented and it should have been prevented, and we will take the necessary actions to remedy this.

I have two questions for the Minister. First, will GovTech be involved in the move to use data analytics to prevent fraudulent claims and, secondly, what are the terms of reference for the Interagency Task Force and will they be making their findings public?

Mr Ong Ye Kung: The answer to the first question is yes, GovTech is involved. Beyond GovTech, we are also inviting private sector expertise to help us in this work. Second, on the Interagency Task Force, I do not have the terms of reference with me, but essentially, it has to, firstly, review the entire circumstances of the fraud case, how it happened; secondly, what are the gaps in our system today that led to us not being able to detect this and led to us detecting it so late; third, implement the measures; and fourth, to take a hard look at the whole structure and system, and what are the changes we need to do, including personnel, organisational reporting lines. So, it will be a comprehensive review.

If the Member files a question, I will be happy to report on the findings of the task force.