A fraudster in California used the $1-per-gallon subsidy earmarked for biofuel producers to steal more than $1 billion from taxpayers: https://www.justice.gov/opa/pr/jury-finds-los-angeles-businessman-guilty-1-billion-biodiesel-tax-fraud-scheme
It is astonishing this fraud was possible in the 21st century through a complex web of bank accounts, shell companies, fake shipments, false invoices, backdated documents, made-up identities, and transfers of millions of dollars to foreign countries.
Solution:
A digital and public subsidy system with controls around the granting of and the application for subsidies.
- IoT devices reporting information directly to a blockchain can be used to improve accuracy and reliability.
- Verifying parties can report information directly to a blockchain as materials move through the supply chain.
- Smart contracts can be used to release subsidies directly to the intended parties as certain conditions are met.
- Immutable records can be maintained for all requests and payments with clear supporting documentation.
- Public history of subsidies requested and paid will help identify patterns of fraudulent activity by participants and corruption by verifying parties.
There will always be new ways to commit fraud, regardless of how much technology we build around the problem. But wherever transparency can help reduce fraud, blockchains can shine.