Belgium’s Success in Eradicating Carousel Fraud using Advanced Analytics
Carousel fraud, a type of Value-Added Tax (VAT) fraud, has been a significant problem across Europe, with estimated losses of nearly 100 billion euros per year. However, Belgium’s Special Tax Inspectorate (ISI) has made significant progress in combating this issue by employing an advanced analytics technique called the hybrid detection model from SAS.
The Hybrid Detection Model
The hybrid detection model uses a combination of analytical techniques to identify even the most elusive fraudsters. This approach is particularly effective in detecting VAT carousels, which often involve complex networks of transactions. The model focuses on certain transaction profiles rather than specific sectors or industries.
Key Features of the Model
- Social Network Analysis: Investigates connections within a network to detect VAT carousels
- Holistic Approach: Not confined to one area or sector, making it effective in detecting fraudsters who may change goods or countries
- Bundle of Elements: Uses multiple characteristics, such as company setup and transactions not declared, to identify fraudsters
Success Story
The hybrid detection model has saved the Belgian government nearly one billion euros annually. The success of this approach has led ISI to increase its number of specialists from 500 to 600.
Quotes from Yannic Hulot, Director of ISI
- “We’re really looking for the very essence of the fraud - someone who has certain characteristics, is known for other acts, for whom we received information from abroad, has put into place a company, and engages in transactions that are not declared. So it takes a bundle of elements to identify.”
- “A common cross-border analysis would make it possible for governments to save enormous amounts. It’s an important issue for citizens. We are aware of losing tens of billions of euros every year through fraud carousels perpetrated by criminal organizations, while we have a solution at our disposal.”
Potential for European-Wide Implementation
The hybrid detection model is a proven technical solution that could be used across Europe to combat carousel fraud. However, some member states may consider it a loss of sovereignty to entrust the analysis to others.
Quote from Yannic Hulot
- “Today, in the 28 EU member states, the data available for analysis of carousels is the same. This means that the Belgian experience is completely transferable.”
Overall, Belgium’s success in eradicating carousel fraud using the hybrid detection model serves as a model for other European countries to follow. By implementing this advanced analytics technique, governments can save significant amounts of money and combat fraudulent activities more effectively.