Designing and Evaluating AI-Powered Predictive Models for Detecting Unemployment Insurance Fraud: A Data-Driven Approach to Enhancing the Integrity of U.S. Public Benefit Systems

The unprecedented surge in Unemployment Insurance (UI) claims, particularly following the COVID-19 pandemic, has exposed critical vulnerabilities in public benefit systems, leading to staggering financial losses attributable to fraudulent activities. Traditional fraud detection methods, predominantly reliant on static, rule-based systems and post-payment audits, are ill-equipped to counter the sophisticated, large-scale, and adaptive nature of modern fraud schemes. This paper introduces the Predictive Anomaly and Network Detection for Operational Risk Abatement framework, a novel, multi-modal machine learning architecture designed for real-time fraud mitigation in UI systems. PANDORA integrates three specialized analytical modules: (1) a supervised learning component utilizing an XGBoost classifier trained on historical fraud data to generate claim-level propensity scores; (2) an unsupervised anomaly detection component employing an Isolation Forest algorithm to identify novel and emergent fraud typologies not present in historical data; and (3) a graph neural network (GNN) module for uncovering complex, collusive fraud rings through network analysis of claimant, employer, and infrastructural data. These modules operate in concert, feeding into an ensemble meta-learner that calculates a unified Composite Risk Score (CRS) for each claim. This score facilitates a dynamic, risk-based triage system, enabling real-time decision-making: auto-approval, manual review, or immediate denial. We present a simulated implementation using a large-scale synthetic dataset modeled on real-world claim characteristics, demonstrating that PANDORA achieves a 28% improvement in F1-score and a 42% reduction in false positive rates compared to traditional benchmarks. The framework's design addresses critical considerations including model interpretability through SHAP (SHapley Additive exPlanations), scalability, and a continuous learning feedback loop, presenting a robust and adaptive solution to a pressing public administration challenge.

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Publication Details

Journal
International Journal of Science and Research Archive
Published
2025-07-30
DOI
https://doi.org/10.30574/ijsra.2025.16.1.2134
Primary Topic
Insurance and Financial Risk Management
Type
article
Field-Weighted Citation Impact
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article

Designing and Evaluating AI-Powered Predictive Models for Detecting Unemployment Insurance Fraud: A Data-Driven Approach to Enhancing the Integrity of U.S. Public Benefit Systems

Ivan Zimbe, Omoniyi David Olufemi, Vincent Onaji, Justin Njimgou Zeyeum et al.
International Journal of Science and Research Archive
Insurance and Financial Risk Management
article

Designing and Evaluating AI-Powered Predictive Models for Detecting Unemployment Insurance Fraud: A Data-Driven Approach to Enhancing the Integrity of U.S. Public Benefit Systems

Ivan Zimbe, Omoniyi David Olufemi, Vincent Onaji, Justin Njimgou Zeyeum, Kehinde Ayano
article en

Abstract

The unprecedented surge in Unemployment Insurance (UI) claims, particularly following the COVID-19 pandemic, has exposed critical vulnerabilities in public benefit systems, leading to staggering financial losses attributable to fraudulent activities. Traditional fraud detection methods, predominantly reliant on static, rule-based systems and post-payment audits, are ill-equipped to counter the sophisticated, large-scale, and adaptive nature of modern fraud schemes. This paper introduces the Predictive Anomaly and Network Detection for Operational Risk Abatement framework, a novel, multi-modal machine learning architecture designed for real-time fraud mitigation in UI systems. PANDORA integrates three specialized analytical modules: (1) a supervised learning component utilizing an XGBoost classifier trained on historical fraud data to generate claim-level propensity scores; (2) an unsupervised anomaly detection component employing an Isolation Forest algorithm to identify novel and emergent fraud typologies not present in historical data; and (3) a graph neural network (GNN) module for uncovering complex, collusive fraud rings through network analysis of claimant, employer, and infrastructural data. These modules operate in concert, feeding into an ensemble meta-learner that calculates a unified Composite Risk Score (CRS) for each claim. This score facilitates a dynamic, risk-based triage system, enabling real-time decision-making: auto-approval, manual review, or immediate denial. We present a simulated implementation using a large-scale synthetic dataset modeled on real-world claim characteristics, demonstrating that PANDORA achieves a 28% improvement in F1-score and a 42% reduction in false positive rates compared to traditional benchmarks. The framework's design addresses critical considerations including model interpretability through SHAP (SHapley Additive exPlanations), scalability, and a continuous learning feedback loop, presenting a robust and adaptive solution to a pressing public administration challenge.

International Journal of Science and Research ArchiveVol. 16(1)
Openalex Percentile: Top 69%
Insurance and Financial Risk Management
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Designing and Evaluating AI-Powered Predictive Models for Detecting Unemployment Insurance Fraud: A Data-Driven Approach to Enhancing the Integrity of U.S. Public Benefit Systems — Ivan Zimbe, Omoniyi David Olufemi, et al. · International Journal of Science and Research Archive (2025) | TGRS Research Map | TGRS