1. INTO THE DATA MINE www.ato.gov.au SEGMENTAUDIENCEDATE Presented by: Alicia Peters Fraud Prevention and Control Australian Taxation Office Into the (Data) Mine! www.ato.gov.au GENERALCorruption Prevention Network 14 September 2006

2. INTO THE DATA MINE www.ato.gov.au Organisation Tax Office Executive (Audit Committee / Integrity Advisory Committee) Internal Assurance Branch Fraud Prevention and Control Intelligence and Analysis Investigations Fraud Control Planning Fraud Awareness Training Standards and Reporting Coordination Internal Audit Security Policy and Services Official Conduct Team

3. INTO THE DATA MINE www.ato.gov.au What is data mining?  ‘The nontrivial extraction of implicit, previously unknown, and potentially useful information from data.’  ‘…analysing data to show patterns or relationships; sorting through large amounts of data; and picking out pieces of relative information or patterns that occur…’ http://en.wikipedia.org/w/index.php?title=Data_mining&oldid=59371931

4. INTO THE DATA MINE www.ato.gov.au Data mining tools  There are many contemporary tools available  Tax Office -Microsoft Excel -Microsoft Access -ACL -Win IDEA

5. INTO THE DATA MINE www.ato.gov.au The data  Who owns it? -Internal -External  Where is it?  Quality: -Duplicates -Inconsistencies -Incomplete

6. INTO THE DATA MINE www.ato.gov.au What data mining can do  Compare different sets of data  Identify trends and outliers  Identify relationships

7. INTO THE DATA MINE www.ato.gov.au What data mining can’t do  Data mining cannot -identify fraud in isolation – generally requires further scrutiny -verify individual transactions -avoid false positives and / or false negatives -work without access to data  Data mining is less effective if the quality and quantity of available data is reduced

8. INTO THE DATA MINE www.ato.gov.au Outcomes  Data mining needs to be directed by the type of outcome sought -Identification of potential fraud incidents -Identification of fraud risks -Identification of system / process vulnerabilities

9. INTO THE DATA MINE www.ato.gov.au Where do the ideas / projects come from?  Criminal’s perspective of our systems and processes  Communication between Internal Investigations, Fraud Control Planning and Official Conduct Team  External information from liaison with other departments  Research  Media

10. INTO THE DATA MINE www.ato.gov.au Planning data mining projects  Projects are based on emerging risks  No strict work plan - maintains flexibility to deliver products and address emerging risks  Connections with Internal Audit

11. INTO THE DATA MINE www.ato.gov.au What we do with the results  Suspected fraud incidents -Internal fraud investigation referrals  Fraud risks and vulnerabilities -System / process owners -Fraud Control Planning as an intelligence product -Tax Office Executive

12. INTO THE DATA MINE www.ato.gov.au Products  Threat assessments  Data mining reports  Fraud investigation referrals  Tax Office Executive reports  Weekly staff newsletter articles

13. INTO THE DATA MINE www.ato.gov.au Data mining in the Tax Office from an internal fraud perspective  Two types are undertaken -Departmental – What makes the department work -Administered – What the department exists for

14. INTO THE DATA MINE www.ato.gov.au Data mining departmental systems  22,000 staff  60 locations around Australia  Projects -Cabcharge -Mobile telephones

15. INTO THE DATA MINE www.ato.gov.au Cabcharge  Context -Cabcharge cards and vouchers -135,500 transactions a year

16. INTO THE DATA MINE www.ato.gov.au Cabcharge Data:  Internal data quality was poor because of different management systems  Data sought directly from Cabcharge -Many duplicates -Incomplete data population -Inaccuracies around pick up and destination locations -Differences in data for card and voucher transactions  Imported 315,500 transactions into IDEA  Got rid of duplicates

17. INTO THE DATA MINE www.ato.gov.au Cabcharge  Focus -Large single expenses on cabs -Use of Cabcharge cards on Saturday

18. INTO THE DATA MINE www.ato.gov.au Cabcharge Validation process:  Large fares -35 emails sent to managers to confirm expenditure  Weekend use -301 emails sent to managers to confirm expenditure

19. INTO THE DATA MINE www.ato.gov.au Cabcharge Results  Fraud -Suspected personal travel  Fraud risks -Incorrect amounts approved  Observations -High traffic routes

20. INTO THE DATA MINE www.ato.gov.au Cabcharge  Reporting -Tax Office Executive -Process owners -Article in weekly staff newsletter

21. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Liaison meeting with Defence  Identified personal use of mobile telephones as an emerging risk – especially in relation to ‘190’ numbers  Identified that these types of calls were not being checked

22. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Context -6,500 handsets -4 million transactions a year

23. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Data -Internal data quality was good but did not provide a means of identifying who destination numbers belonged to -Imported 8 million transactions into IDEA -Got rid of duplicates

24. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Focus -Calls to ‘190’ numbers

25. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Identified ‘190’ calls which reduced the population size to just under 3,000 transactions  Used Internet to identify the services provided by each ‘190’ number  Excluded reasonable personal uses such as time and weather services  Identified telephones used to access large volumes of adult content / gambling hotlines  Identified other uses which constituted code of conduct issues, for example, competition hotlines

26. INTO THE DATA MINE www.ato.gov.au Mobile telephones Results:  Fraud -7 phones calling adult / gambling numbers  Misuse -14 phones calling other services  Fraud risks -No current review system  Observations -Reporting lost / stolen phones

27. INTO THE DATA MINE www.ato.gov.au Mobile telephones  Reporting -7 internal fraud investigation referrals -14 letters to managers to deal with individual minor matters -Tax Office Executive -System owners -Article in weekly staff newsletter

28. INTO THE DATA MINE www.ato.gov.au Data mining of administered systems  Longer term projects  Current project involving BAS processing -Initial data set – 6.5 million transactions -First cut – 3 million -11,000 records based on risk algorithm

29. INTO THE DATA MINE www.ato.gov.au Conclusion  Focussed on emerging risks  Flexible approach  Requires intelligence support  Work with what you have  Takes time  Good planning  Record keeping  Information sharing  Marketing of results

30. INTO THE DATA MINE www.ato.gov.au Thank You  Questions?

31. INTO THE DATA MINE www.ato.gov.au We are committed to providing you with advice and information you can rely on. We make every effort to ensure that our advice and information is correct. If you follow advice in this publication and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it. However, we will not charge you a penalty or interest if you acted reasonably and in good faith. If you make an honest mistake when you try to follow our advice and you owe us money as a result, we will not charge you a penalty. However, we will ask you to pay the money, and we may also charge you interest. If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to. You are protected under GST law if you have acted on any GST advice in this publication. If you have relied on GST advice in this publication and that advice later changes, you will not have to pay any extra GST for the period up to the date of the change. Similarly, you will not have to pay any penalty or interest. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. The information in this publication is current at September 2006. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at www.ato.gov.au or contact us. Our commitment to you