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Needles in Stack of Needles: Detecting Tax Fraud & Evasion Through Big Data

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Keynote at the 48th General Assembly of the Inter-American Center of Tax Administrations (CIAT), Rio de Janeiro, 5 May 2014. Video recording of this presentation: https://youtu.be/R8DUFyOxClc?list=FLPg0WRYkRbmTYZvsrmnJRhQ

Published in: Data & Analytics
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Needles in Stack of Needles: Detecting Tax Fraud & Evasion Through Big Data

  1. 1. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.1 Needles in Stack of Needles: Detecting Tax Fraud & Evasion Through Big Data Hong-Eng Koh Global Lead, Justice & Public Safety (JPS) Oracle Corporation Vice President (Corporate) The Society for the Policing of Cyberspace (POLCYB)
  2. 2. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.2 The Safe Harbor The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.
  3. 3. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.3 Customer & Partner
  4. 4. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.4 Customer & Partner Industry Business Unit
  5. 5. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.5 Global Public Sector Industry Business Unit Marcel Swart Global Vice President Public Sector & Utilities §  Tax & Revenue §  Justice & Public Safety (JPS) §  Enterprise Modernization §  Social Services §  City Platform §  Defense §  Public Transportation §  Utilities §  Licensing, Permitting & Inspections
  6. 6. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.6 Oracle Global Justice & Public Safety Team Jorge Medina Cindy Schwimer Tim Wallace Jeff Penrose David Shepherd Udi Nessimyan Koh Hong Eng Global LeadDirector Industry Strategy & Marketing Bert Oltmans
  7. 7. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.7 Issues & Challenges Tax Avoidance Tax Evasion
  8. 8. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.8 Issues & Challenges Tax Avoidance Tax Evasion Tax Fraud Cyber Security Threats Identity Theft Crowd-Sourcing Virtual Currency Social Engineering Unwilling Customer Cloud Computing Social Networking
  9. 9. Cyber Security Threats
  10. 10. How a Hacker Intercepted FBI and Secret Service Calls With Google Maps 27 Feb 2014
  11. 11. US Government Agency Compromised by Social Engineering 4 Nov 2013 2009: “Robin Sage” (The Security Blogger)! Information and intelligence obtained from US military personnel! 2011: “Emily Williams”! “What else can happen outside of data being leaked over social networks?”! Emily Williams Social Engineering
  12. 12. Virtual Currency Bitcoin is the offshore tax haven of the future 10 Oct 2013 14 Apr 14 Tax Evasion: Bitcoin Better Than An Offshore Bank Account 7 Aug 13 Bitcoin: Tax Evasion Currency •  Unreported Capital Gains •  Keep Income off the Books •  Corporate Slush Funds
  13. 13. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.13 What’s Happening? http://www.go-gulf.com/blog/60-seconds Big Data
  14. 14. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.14 VOLUME VELOCITY VARIETY SOCIAL BLOG SMART METER What is Big Data? VALUE Data Information Intelligence
  15. 15. “Free this week for a quick gossip/prep before I go and destroy America?” “3 weeks today, we’re totally in LA pissing people off on Hollywood Blvd and diggin’ Marilyn Monroe up!”
  16. 16. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.16 Detecting Tax Fraud & Evasion Through Big Data
  17. 17. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.17 Completing the Broadest Solution Oracle Tax Analytics Leading with Breadth and Innovation •  Leveraging recommendations by OECD (Organization for Economic Co-operation & Development) and EC (European Commission) •  Performance Monitoring at every level of the Agency •  Pre-Built Oracle Tax Data Model designed to integrate data from multiple sources •  Data to analyze Compliance •  Data to Identify & Manage Error, Fraud & Corruption •  Oracle Database & Data Mining •  OBIEE with Scorecard & Strategy Management •  Oracle Data Integrator •  Exadata and Exalytics certification Integrating Data from Multiple Sources World Class Oracle Technology
  18. 18. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.18 Oracle Tax Analytics’ Pre-Built Contents Accelerate Your Implementation Pre-built Foundational Data Model Point §  Store data in lowest level of detail §  Holds history of all entities & transactions §  Integrate data from MULITLE source applications and 3rd parties §  Extendable §  Upgradeable §  Star Schemas: §  Taxpayer Registration §  Taxpayer accounting §  Collections §  Aggregates by year, month, week, day & more §  Aggregates by tax type, industry segment & more §  ETL mapping §  Predict individual debt delinquency risk based on past behavior §  Beneish M-Score Model: business manipulating earnings §  Altman Z-Score Model: business predicted to go bankrupt §  Metrics & KPIs based on OECD & EC recommendations §  For directors/ commissioners, managers & other business users §  Perform ad-hoc analysis §  Create reports & dashboards Pre-built Data Models for Reporting Pre-built Analytical Models Pre-built Library of Metrics
  19. 19. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.19 Oracle Tax Analytics – Solution Overview Agency Systems Source SystemsPre-BuiltTaxDataModelPre-BuiltContent Motor Vehicle Department Land / Property Registration Oracle PSRM Customs Banks Population Registry … … Facts, Dimensions and Aggregates, Data Mining Models Entities Transactions Assets Interactions
  20. 20. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.20 Oracle Tax Analytics – Great, but… §  Fraud has already taken place, so money is gone… §  Models are based on historic perspective of non-compliance §  Models do not take into account the changes in behavior associated with non-compliance §  Models tend to be static and difficult to change/update §  Most fraud systems deliver and overwhelming amount of false positives We need more than “Needle in the Hay Stack”
  21. 21. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.21 A New Way – Compliant Taxpayer Modeling §  Capture behavior in a model of a ‘normal’ compliant taxpayer §  Capture relevant data – Big Data §  Reflect current behaviors and profiles against the “Compliant Taxpayer” model and the absence of good behavior is a pointer to non- compliance Needles in Stack of Needles You don’t know what you don’t know Endeca Information Discovery You know what you don’t know Traditional Business Intelligence & Analytics
  22. 22. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.22 Oracle Advanced Fraud Management Needles in Stack of Needles Oracle Tax Analytics Endeca Info Discovery Real-Time DecisionsMaster Data Management Oracle Big Data Appliance Exadata Oracle GoldenGate Oracle Data Integrator
  23. 23. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.23 What About Day Zero & Social Engineering Attacks ?
  24. 24. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.24 Day Zero & Social Engineering Attacks Big Data to the Rescue Oracle  Big  Data  Appliance NoSQL  DB  Driver Application HDFS,  Hadoop,  CDH Map  Reduce ORCH  -­‐ Stats Map  Reduce Hive  -­‐ Activities Map  Reduce Pig  -­‐ Sessionize Cyber  Information  Discovery Complex Event Processing Expert System Decision Engine Cyber  Real-­‐time  Analysis   API/NBI  SIEM/SOC   Mass  AnalysisAlgorithms  Layer Probe/ Switch LAN Probe/ switch Real-­‐time  Access   Batch  Processing System  Monitoring  &  Management §  Cyber Intelligence §  Network Behavior Anomaly Detection (NBAD) §  Analytics & Reporting §  DPI-based Router •  Big Data Appliance •  Oracle Event Processing •  Real-Time Decisions •  Endeca Information Discovery
  25. 25. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.25 Day Zero & Social Engineering Attacks Big Data to the Rescue
  26. 26. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.26 Prevention is Better than Cure And, converting unwilling customers to willing customers In addition to: •  Document/content management •  eFiling •  Single Window •  Multi channel •  PKI •  Payment gateway •  Etc.
  27. 27. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.27 1. Customer Relationship Management (CRM) •  Siebel Case Management Examples: •  Australian Taxation Office •  New Zealand Inland Revenue Department
  28. 28. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.28 2. Remove the Complexities Natural Language Taxation Policy Management •  Oracle Policy Automation Source Tax Policies Tax Policies in OPA Examples: •  Angola •  Hungary •  Netherlands •  Kuwait •  Mozambique •  New Zealand •  Qatar •  Sweden •  UK •  USA
  29. 29. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.29 3. Social Relationship Management (SRM) §  Engage the community as part of community policing §  Better understanding of public sentiments §  Improve crime analysis over social networks §  Early detection of suspicious activities and crime suspects §  Incorporate new techniques in crime investigation process A Federal Police Agency in Latin America
  30. 30. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.30 Back to the Two British Tourists…
  31. 31. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.31 Automated Targeting System (ATS) §  Rules based decision support system §  Data sources: government and public §  Historical data and trends analysis §  Deployed for air, land and sea travel §  Massive volume of data §  Identify high risk targets §  Faster clearance for low risk traveler/ cargo US Customs & Border Protection National Targeting Center Source: Internet •  Exadata •  Exalogic •  Exalytics
  32. 32. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.32 Parts versus Engineered Systems Big Data Appliance Exadata Exalogic
  33. 33. •  Exadata •  Exalogic •  Exalytics
  34. 34. Copyright © 2014, Oracle and/or its affiliates. All rights reserved.34 hong-eng.koh@oracle.com @he_koh linkedin.com/in/hekoh Thank You!

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