Data Analysis

IT helps Treasury crack down on financial crime

man pocketing money

The IRS is catching its own dishonest employees as well as outside fraudsters, thanks to sophisticated technology. (Stock image)

Improved IT solutions at the U.S. Department of Treasury help the agency to respond to external threats and help it keep track of the people who keep track of your tax dollars.

James Jackson, who heads the Department of Treasury's Electronic Crimes and Intelligence Division, explained how the agency's cadre of IT tools is helping it investigate and mitigate risks posed by "bad guys" on the outside -- and wayward employees from within.

Jackson's team, for instance, responds to threats made by members of the public -- 'tis the season for tax-distressed folks to start phoning in threats and mailing in letters laced in anthrax to the IRS, he said -- pulling in cross-referenced data on subjects and feeding it to federal agents who waste little time arresting culprits. It doesn't matter if threats come in via mail, e-mail or to one of the IRS' call centers -- IT systems track it all and record everything, Jackson said.

"It ends up in a crying session -- we're on their doorsteps in four hours," Jackson said. "It's a tough line. The (IRS) isn't the most liked agency in government." He spoke at an FCW executive briefing on waste, fraud and abuse in Washington, D.C. on March 28.

Because the Electronic Crimes and Intelligence Division is housed within the Department of Treasury's Office of Investigations, Treasury Inspector General for Tax Administration, it's also charged with policing close to 100,000 IRS employees who oversee $2.4 trillion in annual tax revenue.

These employees, Jackson said, are "given the keys to the kingdom," and while the vast majority behave with the utmost professionalism, there are always a few who try to take advantage of their positions. Some will attempt to embezzle funds either through their own accounts or accounts of associates, and there is also the potential for employees to attempt to profit from leaking taxpayer information to identify thieves.

But they get caught, Jackson said, because everything on Treasury systems is traceable, and transactions made by employees, no matter how seemingly benign, can be cross-referenced with a growing amount of other data. Data systems highlight potentially suspicious transactions -- like unauthorized access to a taxpayer's records or a shady tax return -- and link them back to those feds who commit fraud, where a case is built.

"The IRS has systems set up where anything that leaves the IRS domain, we can catch it, flag it, and send out leads," Jackson said.

Jackson said there really isn't a limit to the information that can be cross-referenced at that point: Zip code proximity, relationships to that individual, database checks from the Social Security Administration and other personnel records and even open-source or online databases like Facebook or www.classmates.com. GPS data, he added, can be used to build a case, corroborating interactions between suspects.

"When we're done with one of these investigations, we turn the files over, and we're basically saying, 'Here's the handcuffs, too, this person is ready to go to jail,'" Jackson said.

Jackson said over a single 12-month period "a couple years ago," internal investigations by his team ended with 53 federal employees charged with crimes, 66 resignations, 74 suspensions, 8 disciplines and 20 admonished.

"The bottom line is IRS employees know what they are not supposed to do, they have the keys to the kingdom," Jackson said. "We can't afford to have another Wikileaks. This kind of information isn't classified. But we can't disclose it."

After speaking at the briefing, Jackson told FCW that fraud detection at the Department of Treasury continues to grow in sophistication, catching more potentially criminal actions inside and outside the agency and increasing fraud deterrence. The cybercrimes and digital crimes teams engage in "worldwide manhunts" for the biggest fraudulent fish in the sea, and Jackson said agents aren't running around waving guns and flashing badges.

"They're behind desks analyzing logs, trying to find out how big this thing is," Jackson said. With continuously improving IT tools serving as a backbone to cybercrimes teams like those as the Department of Treasury, fraudsters have some reason to worry: If they don't improve their methods too, they'll be in big trouble.

"We've uncovered a bunch of activity in recent years, and when we get something, it's almost like a live wiretap we're doing, but a legal live wire tap," Jackson said. "You want us doing that. I wish I could tell you more, but I'd be giving away trade secrets. But we're on top of tax fraud."

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