When HMRC was formed in 2005, its fraud detection systems were arguably far from cutting edge. However, a new system that can work with more data than ever - from different tax systems - is paying for itself many times over
It also absorbs information from other government departments and data from foreign tax organisations via various treaties and arrangements. “Also, on occasion, we will bring in information that we may obtain from the internet and bring that into the picture,” he says.
Indeed, the new system means that not only can HMRC analyse tax data, but also information from credit reference agencies and online social-networking information to pinpoint both individuals and behaviours that may indicate tax fraud or evasion.
While management at HMRC might have needed some persuading before the pilot project proved the value of Connect, today it has become an integral part of the organisation. It draws on tax specialists, statisticians, and data specialists who work together across both public sector and HMRC’s outsourced providers.
Today, investigations that once might have taken weeks or even months to conduct, can now be carried out in a day – sometimes in just minutes. Indeed, many investigations would probably not have been launched because of the cost and complexity of just putting together the data for analysis.
Instead, HMRC is consolidating Connect by running year-long training schemes for staff in Enforcement and Compliance to ensure that they know how to use it, inside out, and to build up a cadre of specialists from the three specialisms of tax, statistical analysis and data.
“There are formal elements in that, as well as practical, on-the-job training. We have tried to build up a core set of skills and people within the department. We are now up to more than 110 people who have gone through that process,” says Hainey. It has now put together a large enough staff not to require the consultants from SAS Institute, the software provider, and Detica, its services partner, to help guide staff around the system.
It is, though, looking to bring in contractors with deeper skills in specialist areas such as predictive analytics, and experience in the commercial banking and insurance sector to provide extra depth in terms of thinking about the data and modelling approaches.
“It’s a similar kind of market. They are trying to risk assess individuals for giving people loans. And we are in the business of risk assessing people based on information around their tax affairs. They are very similar kinds of activities,” says Hainey.
However, it is still early days for this new development. “We are looking at how we can exploit the tool and build models to be more predictive. We are at the proof-of-concept stage right now, but our objective is to explore and see how predictive we can become around the potential behaviours of our customers. If we can intervene early and stop bad behaviours occurring, that benefits everyone,” says Hainey.
The cost of developing the system – some £45m over five years – certainly isn’t cheap, but the £1.5bn in “additional yield” to date, combined with the cost savings for investigations and the ability to intervene at an earlier stage has made it a key tool for HMRC. And, furthermore, the implementation was only finally completed in June 2011 and investigators have only just begun “playing” with the tool to see what they can do with it.
“Even today, what we find is that people are finding new things to do with it. It’s a constant evolution. We are constantly finding more and more innovative ways to exploit this capability,” says Hainey.
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