fraud detection techniques used at european tax agencies · the emerging practice model: upstream...

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



• Jan-Jaap (‘JJ’) Harkema

• Six years in the Global Tax Practice of Capgemini

• Focus on Fraud & Error Protection

Introduction

The European Experience



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



Physical mobility and open EU borders increase the challenge of combating fraud and error

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=NQld3VYuvOWDHM&tbnid=UkVdAvBQv35BaM:&ved=0CAUQjRw&url=http://euobserver.com/justice/32250&ei=Vv7mUZXaCvK34APHpYCICw&psig=AFQjCNGU5Jorqis5hOV-Uli_fAw1yGqxhw&ust=1374179264824192



Anti-fraud sophistication in private sector financial institutions lead organized criminals to target the public sector

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hvaSUDb4uJGbzM&tbnid=VCqL-TwQv3ddtM:&ved=0CAUQjRw&url=http://blog.unibulmerchantservices.com/tag/chip-and-pin/&ei=mgXnUcyzMani4AOS-YDYCw&bvm=bv.49405654,d.dmg&psig=AFQjCNFfXGh2gq4rgrYwreLWcDHaao_Hkw&ust=1374181141921464

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=ooQBVlrgRSG9EM&tbnid=B-gbgIzV-bZoCM:&ved=0CAUQjRw&url=http://www.gtplimited.com/&ei=2QXnUZTyCpbe4AO1joHQAg&bvm=bv.49405654,d.dmg&psig=AFQjCNFrsIkc3eVX8l8lAYJPd1ZXK_4-Pg&ust=1374181182848903



Increased usage of public sector online channels are easy and cost-efficient, but also vulnerable

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=8AmeDEM7iI-ksM&tbnid=udooqpd9SV9OUM:&ved=0CAUQjRw&url=http://pvs-chel.ru/crediting/hmrc-gov-tax-credits/&ei=AwDnUf2tJ7O54AOa6oCgAw&bvm=bv.49405654,d.dmg&psig=AFQjCNF0DllPg5G1CtthTy8mDoqL7UJPew&ust=1374179634096505



We see three main types of tax related fraudulent behavior



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



The emerging practice model: upstream transaction risking

Received customer

submission

Register/ change of

details


return


Manage payment

in/out Reconcile


enforcement

Enforcement/ debt/

collection criminal

proceedings


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



Taxpayer Risk Profile

(1) Data is collected from multiple government agencies and from private sector sources, cleansed and analyzed

Taxpayer history

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=qtdYB5v6vSLVCM&tbnid=B_sTTBJn_Dr76M:&ved=0CAUQjRw&url=https://commons.wikimedia.org/wiki/File:Office_building_icon.png&ei=TU7oUdr6N630igKZzICwDQ&bvm=bv.49478099,d.cGE&psig=AFQjCNFa56tb063t_AiisyZjMX8x2WmkDg&ust=1374265281187292

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=ORStHTWNl4g3DM&tbnid=zm8uTVTd3YZoeM:&ved=0CAUQjRw&url=http://www.flickr.com/photos/sercasey/299031183/&ei=qU7oUfP0FsmpiAKS8ICYCQ&bvm=bv.49478099,d.cGE&psig=AFQjCNEEeUNOmpocgBT3sB4Ea2bCkyGJ6g&ust=1374265362322220



(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

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=K6WKqYFEzp_v1M&tbnid=NqVQBEG-5UvDVM:&ved=0CAUQjRw&url=http://pixabay.com/en/black-sheep-sheep-wool-animal-142727/&ei=TVXoUbHBEqvMigL_v4GgDQ&bvm=bv.49478099,d.cGE&psig=AFQjCNEjQrQ5Vss-wYaalJUevwCMdJiZVA&ust=1374266925934216



Transaction behavior analysis can indicate hidden income or assets

“Do I own a second home? Well…not sure, have to think

about that”

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=3dzPZPi8YJWLkM&tbnid=fdzy3OHdlV36gM:&ved=0CAUQjRw&url=http://www.refdag.nl/nieuws/politiek/weekers_belastingaangifte_in_kwartiertje_gepiept_1_718515&ei=FUXxUbjfNpPC9gSalIHQDA&bvm=bv.49784469,d.eWU&psig=AFQjCNGQ2edC3fqx6xFDc4VwhYBOVVOyEg&ust=1374852728348217

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=BNuyyq137Ff2MM&tbnid=pW-kQJnUI666VM:&ved=0CAUQjRw&url=http://coolshots9.weebly.com/mouse-cursors.html&ei=kUXxUYb8IYn29gSonYCoDw&bvm=bv.49784469,d.eWU&psig=AFQjCNFU1GsZ3nzW7GhodAYwWhRs1PtaQw&ust=1374852869616100



(3) Visual representations of networks enable analysts and case officers to quickly see the connections among entities



(4) Social networks are leveraged to better inform linkages between entities



(5) Undeclared income and assets can be uncovered by analyzing online transactions

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=fzD3Ic8IwnyEZM&tbnid=KW2mknLQ4jQeGM:&ved=0CAUQjRw&url=http://fontsinuse.com/uses/4046/airbnb-logo&ei=-0vxUdu_I5SA9gSjq4GIAw&bvm=bv.49784469,d.aWc&psig=AFQjCNEug6xbCnoEi8Xutt2dh6ZhA4eUkQ&ust=1374854517641078



Emerging practice from Europe is about risk scoring to become smarter upstream and uncover more downstream

Received customer

submission

Register/ change of

details


return


Manage payment

in/out Reconcile


enforcement

Enforcement/ debt/

collection criminal

proceedings


Taxpayer data & insight PAY

ME

NT

• Feedback Loop

Intervention Strategy • Driving down debt book



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



HMRC puts its Most Wanted on Flickr



Discussion and further contact

Email: [email protected] Twitter: @Jharkema82 LinkedIn: Jan-Jaap Harkema

http://www.capgemini.com/public-sector

mailto:[email protected]







http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=H7c2UM-y0eI2tM&tbnid=xjoySq4hoHH7IM:&ved=0CAUQjRw&url=http://wellalogo.blogspot.com/2011/06/all-cap-gemini-logos.html&ei=3ZvtUevjDaHk4APJ3YDwDQ&bvm=bv.49478099,d.dmg&psig=AFQjCNFz6gyUXZxBWPumwpZ5ucOVSEuoeQ&ust=1374612820683484

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=3LTVBTaCB-E50M&tbnid=TW40P_3a4vVnfM:&ved=0CAUQjRw&url=http://theinspirationroom.com/daily/2012/twitter-logo-redesigned/&ei=_5vtUdWTNM7-4AP23oHgAQ&bvm=bv.49478099,d.dmg&psig=AFQjCNFIFpsGoMGOCCJyhNLl-sEqC1RyeQ&ust=1374612859522258

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=U1UegxI11nOIkM&tbnid=qAq4JUQDW6IOjM:&ved=0CAUQjRw&url=http://blogs.nvcc.edu/intercom/2012/11/19/novas-linkedin-group-offers-exposure-for-job-seekers/&ei=JZztUcvTGNOy4AO0vIHQAw&bvm=bv.49478099,d.dmg&psig=AFQjCNF6ml6ehWJ3WAoDi2ihpS-dOfPYUA&ust=1374612892716944




http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=H7c2UM-y0eI2tM&tbnid=xjoySq4hoHH7IM:&ved=0CAUQjRw&url=http://wellalogo.blogspot.com/2011/06/all-cap-gemini-logos.html&ei=3ZvtUevjDaHk4APJ3YDwDQ&bvm=bv.49478099,d.dmg&psig=AFQjCNFz6gyUXZxBWPumwpZ5ucOVSEuoeQ&ust=1374612820683484

The information contained in this presentation is proprietary. © 2013 Capgemini. All rights reserved.

Rightshore® is a trademark belonging to Capgemini.

www.capgemini.com

http://www.facebook.com/Capgemini

http://www.linkedin.com/company/capgemini

http://www.twitter.com/capgemini

http://www.youtube.com/capgemini

http://www.slideshare.net/capgemini

fraud detection techniques used at european tax agencies · the emerging practice model: upstream...

Documents