Parliamentary Seminar of the Baltic Assembly and Benelux

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Parliamentary Seminar of the Baltic Assembly and Benelux Parliament VAT Fraud RIGA 26 September 2013 Yannic HULOT (Special Tax Inspectorate - Belgium) 1

AGENDA VAT Fraud Technical Solution Conclusion Carousel fraud Company Confidential - For Internal Use

EU PERSPECTIVE Algirdas Šemeta, Commissioner for Taxation, said: "The amount of VAT that is slipping through the net is unacceptable; particularly given the impact such sums could have in bolstering public finances. However, there is also a positive message to be drawn from today's findings. Our ambitious reform of the VAT system, the EU measures to combat tax evasion and our recommendations for national tax reforms, are all targeted in the right direction. We know the problem; we have identified solutions to it, and now it's time for Member States to act. Today's figures will serve as a baseline to assess their progress in improving VAT compliance in the years ahead. " VAT gap of 195 billion €

Role of Eurofisc was set up in 2010 as a network to promote and facilitate multilateral cooperation in the fight against VAT fraud. Currently it is the right time for Eurofisc to make a step forward in the fight against MTIC and carousel fraud which are components of organised crime. Otherwise we’ll face a risk of stagnation in the exchange of information related to VAT while taking the financial challenge into account we must go further, especially as new tools allow a comprehensive analysis 4 and appropriate reactions.

Volatility of organized fraud Euros Carbon trade Electronics Dubaï road Classical & organised fraud Classical fraud Organised fraud time 5

Appropriate reaction When tax procedures reach their limits : • Late detection • Collusion almost impossible to establish • Recoveries insignificant • Restriction audit procedures • Human resources and legal means insufficient • Unable to trace the organizer And also lack in the judicial approach : • Accurate identification of the fraud • Understand the role of each protagonist • Rapid action on the assets of the fraudster • Aim at the head of the organization 6

7 Stop the fraud Detection FRAUD Tax investigation Criminal investigation Tax investigation Natural death Detection New approach for criminal cases in Belgium Criminal investigation

Prioritisation NB Items 8 EURO BUT Eurofisc is not an answer to small fraud and/or irregularities

Efficient approach in the fight against carousel frauds • Accurate identification of the most active fraud networks within the EU • Extended access to data • Coordinated approach and reactions on “EWS” in Eurofisc 9

Key success factors : Targeting Speedness Sponteous exchanges Between business and analytics experts Early detection European spirit Development Efficient of risk analysis tool European vision Appropriated common reactions 10

AGENDA VAT Fraud Technical Solution Conclusion Technical Solution Company Confidential - For Internal Use

Our data

Challenge with VAT Carousel Detection Complex environment High velocity Fraud Constantly evolving: Legislative changes Changes in the behavior of fraudsters Geographical shift “commodities” shift 13 QRM

Reducing the supercluster to see the essential SAS® Social Network Analysis Network Analytics Network Scoring Analytics Anomaly Detection Predictive Modeling Business Rules 16

TOP 50 CAROUSELS !

The Net-CHAID Algorithm Hierarchically aggregate network entities based on minimizing information loss

The Net-CHAID Algorithm + + Display part of supercluster containing nodes of highest interest

Building predictive models : Scorecard 1. Belgian missing trader 10 points 2. CC under monitoring in an other MS 3. Missing trader in an other MS 8 points 4. Belgian CC under monitoring 20 7 points 5 points

BENEFITS INCREASE DETECTION RATES Detect Fraud even before it’s committed => List of major fraudulent networks INCREASE EFFICIENCY Weeks of pre-investigation (Test CBo. AT) => 5 minutes pre-investigation 21 Increased efficiency during investigation: Global view. Risky transaction and the role of the different companies are provided to the investigator.

THE SOURCES -Recap statements of ICD’s -Vies on the web -Eurofisc files -Feedback from Eurofisc -Lists of CC under monitoring in Eurofisc For all MS, the source files are the same! Þ Are we ready to work directly together on the global VIES data? 22

AGENDA VAT Fraud Technical Solution Conclusion Company Confidential - For Internal Use Only Copyright

Cross Border Analysis Team Advantages AS IS TO BE No specific tool Powerful “Network analysis” tool National level EU level Sectorial analysis Global analysis No correct access to data Direct access to data 28 shares of VIES - Economies of scale - To share knowledge (Analytics techniques) Slow reconstitution of fraud networks (~ CBo. AT test) Instant global picture More risks of data leaks Data more protected - Automated reporting Static Dynamic (updating sources) Difficult to identify the priorities Prioritize (Top carousel)

Structure A specific team needed Analytics experts + Business Inside Eurofisc A tool 25 ELO MS 28 ELO MS 1 Analystics + Business experts (THE TEAM) ELO MS 2

THE FACE OF VAT CAROUSEL FRAUDS Revealed by our new risk analysis tools 26

Thank you for your attention And Your support…. 27

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