government fraud detection - sas · 1/1/2013 · 03-jerome-bryssinck-government-fraud-detection...
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GOVERNMENT FRAUD DETECTION
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TAX OFFICES USE SAS AT DIFFERENT LEVELS OF MATURITY
2
Our Revenue Clients
USA - IRS
Ireland – Irish Tax
Spain - AEAT Tax
UK - HM Revenue & Customs
Netherlands
DTA
Singapore - IRAS
Denmark - Danish Ministry of Taxation
Belgium – SPF
European C- Taxud
Hungary -National Tax
Greece - Tax
Australia - ATO
Estonia - Estonian Tax
India – Andhra
Pradesh,
Rajasthan
South Africa – SARS
France – DGFIP
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THE FACE OF VAT CAROUSELS
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SERIOUS & ORGANISED VAT
FRAUDCOMMISSIONER SEMETA
• 1 trillion euro lost to tax evasion and avoidance
• VAT gap of 168 billion euros in 2013
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Offshore
SERIOUS & ORGANISED VAT
FRAUDVAT CAROUSEL
Conduit
Company Missing
Trader
VATNO VAT
French
Treasury
Profit
Taker
Buffer
Company
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Offshore
SERIOUS & ORGANISED VAT
FRAUDVAT CAROUSEL
Conduit
Company Missing
Trader
VATNO VAT
French
Treasury
Profit
Taker
Buffer
Company
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SERIOUS & ORGANISED VAT
FRAUDVAT CAROUSEL
VAT CAROUSEL
Conduit
Company
Profit
Taker
Buffer
CompanyMissing
Trader
VAT
Offshore
NO VAT
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SERIOUS & ORGANISED VAT
FRAUDEXP
Fake
Company Company
VATNO VAT
French
Treasury
Goods stay on the French
territory and are sold on the black
market
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SERIOUS & ORGANISED VAT
FRAUDXFACT
Conduit
CompanyBuffer
CompanyXFACT
VATNO VAT
French
Treasury
Company
Buffer
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Company Owners
Given Details (Phone)
VAT Registered Company
Given Details (Registered Address)
(
(
B
SERIOUS & ORGANISED
VAT FRAUDMULTI CELL VAT REPAYMENT FRAUD
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(
Different Apparent Owners
(
B Shared Address
Shared Phone
MULTI CELL VAT REPAYMENT FRAUDSERIOUS & ORGANISED
VAT FRAUD
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• Companies of similar type
• All Companies have a negative net balance
claimed more $ refunds than payments
• Started around same date
• Claims submitted around same days
• Average claim amount is relatively small
• Average claim amounts are similar for each
company
• Companies located in different regions
Company Type: Restaurant
Net Balance: -$10,000
# Refunds: 20
# Payments: 1
Reg Date: 01/01/2013
Company Type: Restaurant
Net Balance: -$11,000
# Refunds: 20
# Payments: 2
Reg Date: 02/01/2013
Company Type: Restaurant
Net Balance: -$10,500
# Refunds: 20
# Payments: 0
Reg Date: 03/01/2013
Company Type: Restaurant
Net Balance: -$10,200
# Refunds: 20
# Payments: 1
Reg Date: 01/01/2013
MULTI CELL VAT REPAYMENT FRAUDSERIOUS & ORGANISED
VAT FRAUD
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ANALYSING RETURN PATTERNS
400
420
440
460
480
500
520
540
560
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Refu
nd
Am
ou
nt
Period
Refunds Per Company Per Period
A B C D
• Refund amounts
within a narrow
range
• Refund amounts
between VAT reg.
companies are
similar
• Refund amounts
well under Tax
Authority defined
non-automatic
thresholds (i.e.
small amounts)
SERIOUS & ORGANISED
VAT FRAUD
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CHALLENGE
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SERIOUS & ORGANISED VAT
FRAUDA NETWORK AFTER INVESTIGATION
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19
Super Cluster
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SERIOUS & ORGANISED VAT
FRAUDCHALLENGES WITH VAT CAROUSEL DETECTION
• Complex environment
• High velocity fraud
• Constantly evolving:
• Legislative changes
• Changes in the behaviour of fraudsters
• Geographical shift
• “Commodities” shift
20
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SOLUTION
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FPS FINANCE (BELGIUM), VAT CAROUSELS
Business Problem
Organized VAT Fraud was a billion euro problem for the Belgian Government. This
fraud typology is a high velocity fraud: “Carousel frauds are like floods. It is futile to
believe that after the storm we can put back water in the riverbed with buckets. What is
needed is to build dykes to prevent overflows” .
The Tax Department is overloaded with data relevant for Organized VAT Fraud
(600.000 tax-payers, 5.000.000 VAT return, 24.000.000 Intra-community transactions).
SAS Approach
The solution is used to detect companies with a high probability of being involved
in Organized VAT Fraud. The SAS Hybrid approach provides ultra-early detection
from the first suspect VAT return or other suspicious behaviour. This Hybrid approach
combines network analysis, business rules, predictive modeling and anomaly detection.
The combination of these methods enables new networks to be discovered and to
monitor known networks. The models are highly accurate (80% true positive rate). This
makes the SAS Hybrid approach the ideal tax auditor.
Results
The result is a reduction by 98% (from 1.1 billion € to 0.029 billion €) of the VAT
carousel fraud. Analytics was key in achieving this result. The models are not only very
accurate (80% true positive rates), they also provide ultra-early detection as from the
first VAT declaration. Organized VAT fraud is now a controlled phenomenon. The
system also enables international collaboration by identifying suspicious companies
abroad.
Highlights
• VAT carousel fraud reduced by
98% (from 1.1 billion € to 0.029
billion €)
• Ultra-early detection
• SAS hybrid approach
provides a high accuracy
model (80% true positive rate)
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Criminal Investigation
Fraud
Dete
ctio
n
Tax Investigation
Sto
p th
e
Fra
ud
Criminal Investigation
Fraud
Dete
ctio
n
Tax Investigation
Na
tura
l D
eath
SERIOUS & ORGANISED VAT
FRAUDNEW APPROACH FOR SERIOUS CASES
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SERIOUS & ORGANISED VAT
FRAUDBENEFITS
INCREASE DETECTION RATES
Detect Fraud before it is committed
List of Suspected Fraud (80% True Positives)
INCREASE EFFICIENCY
3 weeks pre-investigation
=>
5 minutes pre-investigation
Increased efficiency during investigation: Risky transaction and the role of the different companies are
provided to the investigator.
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DEMO
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