Investigating Potential Tax Fraud: 6 Things Government Tax Authorities Should Look for in a Digital

Ruurd Dijkstra

May 23 2016

Earlier this month, one of the largest known data breaches occurred at a Panamanian law firm that represents clients from around the world. The subsequent disclosure of 11.5 million electronic files touched off a media frenzy worldwide as journalists published emails, contracts and other confidential documents related to more than 214,000 offshore companies.

All told, 143 politicians come up in the “Panama Papers”—including 12 current or former heads of state around the world. The leaders of Russia, the United Kingdom, Pakistan, Egypt, Ukraine and Iraq are all connected to the papers.

Of course, the use of offshore business entities is not illegal in the jurisdictions in which they are registered, and often times they are not illegal at all. But journalists from various media outlets found that some of the shell corporations revealed in the confidential documents may have been used to avoid tax responsibilities. Indeed, governments in France, the U.K., Mexico, Australia and Belgium are going to launch investigations into possible tax evasion.

These warnings are obviously more than hollow words. The European Union’s five biggest economies, including Britain and Germany, have even agreed to share information on company ownership to try clamping down on tax evasion.

As government tax authorities embark on their investigations into potential tax fraud, it’s important that they leverage digital forensics tools to their greatest advantage. This means deploying a centralized investigative platform that enables key processes such as division of labor, collaborative analysis, centralized case management and web-based review, in order to streamline the investigative process.

For example, one federal agency in the U.S. switched from a legacy workflow that was very manual and deployed a centralized digital forensics investigation software platform. The agency realized savings of more than $500,000 over a five-year period and reduced the number of workers needed to process, review and produce evidence by 25 percent.

Here are six things that government tax authorities should look for when selecting a digital forensics software platform to support their investigations:

1. Collaboration

Make sure that multiple investigators can work together on the same case. This allows forensic investigators to specialize in their own fields, such as internet history, video files, email research, etc. This collaboration will expedite the investigation and improve the quality of the work.

2. Remote Locations

Deploy a platform on which people can work together from various remote access points and share results with each other on the go. This is especially useful for forensic teams that travel a lot and have members working in different locations.

3. Role-based Access

Investigators should be able to control who is able to view specific data sets, with granular role-based permissions that control which users can view which files. This facilitates a collaborative environment to allow investigators to work more effectively, while maintaining strict protocols for access.

4. Scalability

Make sure to select a system that is capable of processing large amounts of data in the event you need to scale up quickly. The exact processing speed will depend on the type and amount of files that need to be processed, of course, but it’s important to have a platform that is flexible. An added bonus is a system that has elastic search capabilities, which enables faster processing speed.

5. Web Review

Look for a software platform that allows both forensic examiners and those without any digital forensics training to review and comment on data through a secure Web interface. This enables both computer forensics colleagues and non-technical players, such as attorneys, HR managers and outside experts to participate in the investigative process without delay.

6. Reporting

Choose a software platform that enables you to create a case report about the relevant information in a matter—at any time during or after the investigation and analysis of a case. You should be able to generate reports in different formats, including HTML and PDF, as evidence.

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