Stopping Tax Fraud in Its Tracks: 4 Ways OSINT Enhances Investigations

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Fraud is often a crime of opportunity.

The tax season provides numerous opportunities for criminals to target unsuspecting citizens with the goal of stealing their refund. At the same time, some individuals and businesses are constantly looking for ways to evade paying taxes, filing false claims that defraud the federal government of billions of dollars.

Scammers are constantly adapting and modernizing their efforts. Moreover, organized criminal groups offer services on the deep and dark web, where they advertise methods and techniques to commit fraud, some offering specialties such as unemployment insurance, benefits or tax fraud.

Against this backdrop, federal and state tax agencies are recognizing there is an opportunity to use information derived from open-source intelligence—or OSINT—technology to aid in investigations and help mitigate tax fraud. While the use of OSINT to help mitigate tax fraud risk is still in its infancy, the impact it can have on investigating these offenses is immense.

Open-source intelligence is data that can be collected from publicly accessible sources on the surface, deep and dark web. Examples of such OSINT sources are forums, blog posts, news sources, articles, archives, interviews, company registries and documents that can be freely accessed. There is so much data available that searching and reviewing what is useful for an investigation is a difficult task. 

Here are four ways OSINT can help combat fraud, identify red flags and help investigators:

  1. Leverage advanced pattern recognition. Tax crimes usually involve repeated violations over time, instead of an isolated event or single occurrence. Certain behavior or patterns may indicate someone is committing tax fraud or evading taxes. For example, a person spending more money than is typical for their occupation—and posting about it online—and it is not clear where the additional funds are coming from. OSINT solutions can perform advanced pattern identification to identify possible assets being posted online or other anomalies. The ability to leverage keywords, hashtags and emojis provides granularity into text-based evidence analysis. This approach can help fraud investigators reclaim assets and money, saving the government billions of dollars.
  2. Apply advanced link analysis. Criminal networks and threat actors are exploiting the web’s vast amount of information, and darknet channels to create synthetic identities, share weaknesses of onboarding processes and exploit vulnerabilities. Sophisticated fraud generates digital footprints that can be followed, if discovered, including social platforms, connections with contacts or sharing information and data with connections. OSINT can visually connect and map those digital footprints as interactive node-links. Visual link analysis enables investigators to find and visualize real-world relationships between pieces of information from various sources located on the web in an organized, dynamic graph.
  3. Harness artificial intelligence. AI-powered OSINT correlates data from disparate sources and systems, enabling analysts to bring together large, disparate datasets and networks to detect trends and uncover criminal activity, flag illicit activity and provide agencies with the information necessary to trace fraud efforts. Analysts can view profiles, webpages or multi-signal queries to analyze and cache data. This previously required a significant number of analyst manhours but can be done in the background while analysts and investigators work on other cases. These AI-powered functions can search for and detect anomalies that may be indicative of changes in behavior online, signaling potential fraud.
  4. Track cryptocurrency. The IRS is seizing more cryptocurrency linked to tax fraud and other crimes. The IRS seized $3.5 billion worth of cryptocurrencies during fiscal year 2021, a figure that accounted for 93 percent of all the assets seized by tax enforcement that year, according to the IRS CI 2022 annual report.  Investigators are not getting a complete view of what is happening by just looking at blockchain ledgers. They need to see what is happening with crypto wallets and possible illicit financial flows. There is data on the deep and dark web that can give a full view of the wallet. OSINT allows investigators to trace the cryptocurrency money trail back to fraudsters, regardless of geographical location, language or cryptocurrency used. 

These four OSINT capabilities can be applied to both individuals, networks and businesses to discover possible funds and assets that were previously not visible to tax authorities.

Considering OSINT for tax fraud

With every filing season, there is another opportunity for fraud using new techniques and methods.  Innovative tax authorities recognize the need for enhanced research methods to address the opportunity and challenge of ensuring individuals and businesses meet their tax obligations. And after the filing season is the perfect opportunity to explore how OSINT can help.

For revenue authorities looking for a more efficient way of identifying resources and assisting with the collection of known tax deficiencies, leading to increased collection of revenue involving unfiled tax returns and other tax liabilities, OSINT tools represent an immediate opportunity to deploy innovative solutions to recognize, collect and resolve tax compliance cases.

Johnmichael O’Hare is the director of sales and business development with Cobwebs Technologies.