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

Company Confidential - For Internal Use Only Copyright © 2012, SAS Institute Inc. All rights reserved. AGENDA VAT Fraud Technical Solution Conclusion Carousel fraud

EU PERSPECTIVE VAT gap of 195 billion € 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."

Role of Eurofisc 4 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 and appropriate reactions.

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

Appropriate reaction 6 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

New approach for criminal cases in Belgium 7 FRAUD DetectionNatural death Tax investigation Criminal investigation DetectionStop the fraud Tax investigation Criminal investigation

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

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

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

Company Confidential - For Internal Use Only Copyright © 2012, SAS Institute Inc. All rights reserved. AGENDA VAT Fraud Technical Solution Conclusion Technical Solution

Our data

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

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

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 + +

20 Building predictive models : Scorecard 1.Belgian missing trader10 points 2.CC under monitoring in an other MS 7 points 3.Missing trader in an other MS 8 points 4.Belgian CC under monitoring 5 points

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

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

Company Confidential - For Internal Use Only Copyright © 2012, SAS Institute Inc. All rights reserved. AGENDA VAT Fraud Technical Solution Conclusion

24 Cross Border Analysis Team Advantages AS ISTO BE No specific toolPowerful “Network analysis” tool National levelEU level Sectorial analysisGlobal analysis No correct access to dataDirect access to data 28 shares of VIESVIES -Economies of scale -To share knowledge (Analytics techniques) Slow reconstitution of fraud networksInstant global picture (~ CBoAT test) More risks of data leaks Data more protected -Automated reporting StaticDynamic (updating sources) Difficult to identify the prioritiesPrioritize (Top carousel)

Structure 25 ELO MS1 ELO MS28 ELO MS 2 Analystics + Business experts (THE TEAM) A specific team needed Analytics experts + Business Inside Eurofisc A tool

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

27 Thank you for your attention And Your support….