fraud detection techniques used at european tax agencies · the emerging practice model: upstream...
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Fraud Detection Techniques Used at European Tax Agencies
JJ Harkema Capgemini Government Solutions
2 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
• Introduction
• The European Experience
• Five Examples of Emerging Fraud Detection Practices from European Tax Agencies
• Conclusion and Discussion
Presentation Outline
3 Copyright © Capgemini 2012. All Rights Reserved
FTA Conference - July 29 2013
• Jan-Jaap (‘JJ’) Harkema
• Six years in the Global Tax Practice of Capgemini
• Focus on Fraud & Error Protection
Introduction
The European Experience
5 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
European governments are eager to bring more cash in
With an ongoing economic downturn, the challenge to bring in more revenue and protect tax systems from fraud and error becomes bigger
6 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
Physical mobility and open EU borders increase the challenge of combating fraud and error
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Anti-fraud sophistication in private sector financial institutions lead organized criminals to target the public sector
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FTA Conference - July 29 2013
Increased usage of public sector online channels are easy and cost-efficient, but also vulnerable
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We see three main types of tax related fraudulent behavior
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The old compliance model: pay first, check later
Received customer
submission
Register/ change of
details
Process application/
return
Establish liability/ benefit
Manage payment
in/out Reconcile
Investigation/ audit/
enforcement
Enforcement/ debt/
collection criminal
proceedings
Upstream process Downstream Processes
Risk & compliance
1. Cases selected locally using intuition
2. Risk assessment and audits carried out
by tax type
3. Paper case files
Cost of Intervention
PAYM
EN
T
11 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
The emerging practice model: upstream transaction risking
Received customer
submission
Register/ change of
details
Process application/
return
Establish liability/ benefit
Manage payment
in/out Reconcile
Investigation/ audit/
enforcement
Enforcement/ debt/
collection criminal
proceedings
Upstream process Downstream Processes
Risk & compliance
1. Segmented risk based approach
2. Data matching; use of sophisticated
analytical techniques and visualization
PAYM
EN
T
Taxpayer data & insight
Cost-effectiveness of intervention
Transaction Risking
1. Focus on prevention through new
emerging capabilities
Five examples of emerging practices from Europe
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FTA Conference - July 29 2013
Taxpayer Risk Profile
(1) Data is collected from multiple government agencies and from private sector sources, cleansed and analyzed
Taxpayer history
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(2) Deploying statistical models that ‘outsmart’ fraudsters
Statistical models; 1. Algorithms for known fraud
patterns
2. Anomaly detection
3. Social network analysis
4. Transaction monitoring and behavior analysis
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FTA Conference - July 29 2013
Transaction behavior analysis can indicate hidden income or assets
“Do I own a second home? Well…not sure, have to think
about that”
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(3) Visual representations of networks enable analysts and case officers to quickly see the connections among entities
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(4) Social networks are leveraged to better inform linkages between entities
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(5) Undeclared income and assets can be uncovered by analyzing online transactions
19 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
Emerging practice from Europe is about risk scoring to become smarter upstream and uncover more downstream
Received customer
submission
Register/ change of
details
Process application/
return
Establish liability/ benefit
Manage payment
in/out Reconcile
Investigation/ audit/
enforcement
Enforcement/ debt/
collection criminal
proceedings
Upstream process Downstream Processes
Taxpayer data & insight PAY
ME
NT
• Feedback Loop
Intervention Strategy • Driving down debt book
20 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
Summary
Becoming smarter upstream by:
1. Data matching, also from private sources
2. Smarter statistical models
3. Network visualization
4. Social network analysis
5. Online transaction analysis
21 Copyright © Capgemini 2013. All Rights Reserved
FTA Conference - July 29 2013
HMRC puts its Most Wanted on Flickr
22 Copyright © Capgemini 2013. All Rights Reserved
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Discussion and further contact
Email: Jan-Jaap.Harkema@Capgemini-gs.com Twitter: @Jharkema82 LinkedIn: Jan-Jaap Harkema
http://www.capgemini.com/public-sector
The information contained in this presentation is proprietary. © 2013 Capgemini. All rights reserved.
Rightshore® is a trademark belonging to Capgemini.
www.capgemini.com
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