By Martin Darling, Regional Manager for EMEA, TigerGraph.
It’s hard to remember a time when tax evasion has been such a hot topic. Now, promises to tackle tax evasion fill every political manifesto, stories of celebrity tax dodgers fill headlines and apparently stateless tech companies are hauled in front of televised parliamentary tribunals to explain why their tax bills are so low.
And while the will is there, the way is less clear. Tax evasion is still a pariah on state budgets.
The UK’s tax authority numbers for 2019, show a total loss of £35 billion an increase of 17 percent from 2016. The US Internal Revenue Service (IRS) predicts that it costs the US government $458 billion annually.
The last few years have seen a cascade of leaks from offshore tax havens which have given a glimpse of the true extent of global tax evasion. First there were the Offshore Leaks, then in 2014, the Luxembourg leaks. The next year, Swiss leaks, the Panama papers and then the Paradise papers.
Each leak has revealed thousands of documents, gigabytes of data and represented billions of pounds of tax avoidance and evasion. More still, the leaks have revealed illegality, high level corruption and the maneuverings of organised crime
It makes sense that in the wake of the global financial crisis of 2008 and the ensuing regimes of austerity and the contraction of credit, that tax evasion and white collar crime has reached new levels of importance in the public imagination. It was the massive corporate malfeasance in the finance sector that caused a crisis of a scale not seen since the great depression. Following that, governments around the world enacted often-harsh regimes of austerity on the basis that there simply was not any money left.
It has, at least in part, led to the political instability we now see in the western world: mistrust of elites; the rise of extremist populism; flagging faith in political institutions – least one root lies with the failure to properly tackle tax evasion and white collar crime.
It’s for that reason that these subjects have risen to the top of public imagination. But as I said before – a will does not always mean a way.
Tax havens are a big part of the problem. While much of the money there is not held illicitly, tax havens are estimated to hold up to 10% of global assets . Tax havens are prized not just for their low taxes but their bank secrecy laws. Territories like Switzerland, Panama and Belize allow clients to hold money there pretty much anonymously. This is where the money trails so often disappear and investigations go cold.
Another massively complicating factor is the use of shell companies. The complex chains of shell companies through which illicit capital flows make it tough for tax authorities, law enforcement bodies and civilian investigators such as journalists and NGOs.
It is common practice to set up a shell company which will obfuscate illicit activity. In fact, a thriving industry has grown up around this very practice. For a small fee, you can set up companies with fake or paid directors, concealing the actual beneficiary of the funds. Set up enough companies, and you have a confusing chain of names, addresses and business registrations which funnel funds from the tax evader back into their pocket. That’s enough to demotivate plenty of investigations.
And it’s here where our current tools are letting us down. Relational databases are still one of the cornerstones of this kind of investigation. And they’re failing us.
As it stands relational databases can only analyse a known relationship or path. In that case, researchers cannot ask whether two separate entities have a relationship, they must already know that relationship.
In a situation where money hides in multiple phantom entities and trickles down into ever more complex layers, relational graphs cannot dig much further down than three levels. They find it hard to identify patterns among disparate datasets and carry out deep analytics. They’re often overly complex and slow
Every level the investigator descends, comes with more computational expense and time consuming workload. Dig as few as four levels down and problems start arising. If the query cannot establish the path, analysis will time out and investigators will be faced with a dead end.
These chains of obfuscation aren’t static either. Criminal entities and tax dodgers can shut down these fraudulent subsidiaries as quickly as they set them up, running off once their funds are safely transferred offshore.
Investigators need tools which can not only accommodate the depth of these scams but their frenetic, ever shifting nature.
Native parallel graph databases may be useful here. They can dig deep through money trails, going as many levels as needed, 10, 20 or more, across datasets on a global scale. They are designed to traverse unknown paths to find connections, no matter how deep that connection goes.
They can also use temporal analysis to identify changes in company structure over time and help flag suspicious behaviour in the rapid opening and closing of subsidiaries set up specifically to funnel illicit funds.
Chiefly, native parallel graph databases are good at establishing relationships between the fine details. They can trace the flows of money and help establish the patterns which indicate tax evasion or money laundering. They can even incorporate data from multiple internal and external sources. OpenCorporates – the largest corporate information database in the world is already using Graph technology to do just that. The corporate information giant migrated its database earlier this year, to help marshall their vast amounts of data – over 170 million entries – and the complexity of the investigations such a massive database necessitates.
China Construction Bank (CCB) have started to use this technology to tackle its concerns around money-laundering and credit fraud. As the world’s second largest bank, the CCB generates over five terabytes of data a year. It is now using Native Parallel Graph databases to analyse the millions of personal and corporate accounts it interacts with every day.
CCB is just one organisation that is set to gain from this technology. In February 2019, Gartner predicted that graph processing and graph database management systems will grow at a rate of 100 percent annually through 2022. Much currently used graph technology cannot keep up with the demands made of it, they added: “Graph analytics will grow in the next few years due to the need to ask complex questions across complex data, which is not always practical or even possible at scale using SQL queries.” Furthermore, Gartner believes graph technology will be a critical underpinning of artificial intelligence and machine learning, enabling their ability to find connections and relationships in complex datasets which is crucial in fraud detection.
Tax evasion has now become a central political issue for democracies in the Western world but the tools we use to fight it are failing us. Native Parallel Graph databases provide the ability to turn wills into ways.
Gabriel Zucman (August 2014). “Taxing across Borders: Tracking Personal Wealth and Corporate Profits”. Journal of Economic Perspectives. 28 (4): 121–48. doi:10.1257/jep.28.4.121.
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Shining a spotlight on operational resilience and cyber-risk in financial services
By Miles Tappin, VP of EMEA for ThreatConnect, explores why the financial services industry must build a cyber security strategy in 2020
The new digital landscape has welcomed financial institutions with open arms. Emerging technology such as Artificial intelligence (AI), crypto-currencies and big data have shown widespread benefits throughout the years, particularly how they have driven innovation and change. When it comes to retail banking, fintech providers have quickly taken the chance to offer personalised services to ensure they remain relevant to their target market and stand out among their competitors.
This has been particularly evident with Klarna, now Europe’s most valued fintech firm. Providing payment solutions for online storefronts, consumers are now able to shop and pay later with top retailers including the likes of H&M, Ikea and Zara. This is just one example of how easy it has become to successfully and strategically disrupt the payments sector.
With several new players entering the banking scene, traditional financial institutions are making sure that they stay one step ahead and are developing robust digital ecosystems that deliver omnichannel service models. However, this comes at a price. As technological change becomes part and parcel to remaining relevant in the sector, the industry needs to be aware of the cyber security challenges that may present themselves and how to overcome them.
2020: The year for cybercriminals targeting financial services
2020 has become a definitive year for cybersecurity in the financial services industry. Financial institutions are a lucrative target – they hold highly sensitive information and have a mandate to protect the personal information of their customers. It started with an unprecedented attack against Travelex where hackers successfully took some of the currency providers offline for nearly a month. Then came Coronavirus which sparked a new wave of malware and phishing threats. Research from VMware Carbon Black Cloud revealed that threats against financial institutions have surged by 238% since the start of the pandemic.
The renewed interest from cyber criminals comes at a time when regulators are paying close attention to the resilience of the sector. After a string of IT failures and breaches, financial organisations in the UK have been given a mandate from regulators to improve operational resilience. This means ensuring business models can withstand disruptive events from hackers or adversaries and quickly recover to protect the stability of financial systems.
In December 2019, the UK’s financial regulators published a series of consultation papers outlining their proposed approach to achieving greater operational resilience. The proposals suggested that financial institutions will be required to map out the systems and processes that support business services in order to identify any potential vulnerabilities that would pose a risk to the stability of the UK financial system or the firm’s standing.
Working together in tandem
Where cybersecurity used to be a classic back-office concern, it’s now a central part of digital strategies and a key pillar of both reputation and customer retention – financial legislation leaves no room for failure. All financial institutions need to ensure they have full visibility of their systems and can detect any potential threats.
The challenge for financial institutions is making the security tools they have purchased separately work together in tandem. Security teams buy a firewall, an email filter, threat intelligence feeds, antivirus software or enhanced endpoint protection, and whatever else they need individually. Each of them does a good job but they don’t talk to each other and valuable time is lost tending to individual systems that become a burden to run. At the same time, running multiple security systems is expensive. The more systems you have, the more highly skilled staff you need to manage them, and they’re few and far between.
The importance of sharing across communities
To reduce complexity and simplify decision making, financial organisations need to unify processes and technology to harness the security intelligence that comes from across their own security programmes and external sources to drive down risk. However, no financial institution can tackle the problem alone. Experienced threat actors using advanced techniques are constantly targeting the financial sector. The industry needs to come together as a whole to foster a sense of collaboration and data sharing.
In the same way that financial institutions have introduced open banking to deliver a fairer service to customers, the same needs to apply to security – all parts of the financial ecosystem need to unite and share information to learn from one another and succeed in the fight against adversaries that operate across borders.
By sharing alerts on cyber hazards and risk across financial institutions and with law enforcement, government agencies and other relevant authorities, it’s possible to build industry specific insights into cyber security threats and quickly pivot to gain more information on those specific threats and threat actors. By working together, a picture can be painted on threats coming from all manner of malicious activity, from malware to ransomware, to phishing and software vulnerabilities.
Creating a single source of intelligence
Having the right intelligence is not enough to ensure that intelligence is turned into action. Breaking down information and process silos across security teams allows financial organisation to analyse and act on the most pertinent information. Everyone has access to the risk and threats that matter most, and orchestration and automation of response helps overwhelmed security teams prioritise response plans and improve efficiencies in their security programme.
Integrating internal security tools and technologies, while also connecting to external sources of intelligence, creates a single source of intelligence that feeds operations and enables organisations to direct action against the threats that matter most. The outcomes of those actions further feed intelligence, providing the ability to further refine the efficacy of the entire security lifecycle.
This approach provides a continuous feedback loop for the people, processes and technologies that make up the security programme. It allows financial institutions to keep up with threat actors that have consistently adapted their methods to profit at the expense of the financial industry. Something that won’t stop anytime soon.
While financial services institutions tend to operate with security front of mind, there is still an opportunity to collaborate more within the industry and increase intelligence sharing, so CSOs and CTOs can understand as much as they can about the threats they are facing. For example, what types or variants of malware have been used to steal, delete, or ransom personal identifiable information or IP specific to financial services? What ransomware has been used in attacks against other organisations within the industry? How does this ransomware work and how does it ransom the targeted data? Ultimately, the more you know, the better and quicker you’ll be able to respond to a new threat and remain protected.
Blackline reveals CEO succession plan
By President & COO Marc Huffman appointed CEO as of Jan. 1st, 2021;
Founder Therese Tucker to serve as executive chair
Accounting automation software leader BlackLine, Inc. (Nasdaq: BL) today announced that the board of directors has elected Marc Huffman as chief executive officer, effective January 1st, 2021. Mr. Huffman currently serves as president and chief operating officer. Therese Tucker, who has served as CEO since founding BlackLine in 2001, will continue to serve on the company’s board as executive chair.
A seasoned SaaS (Software-as-a-Service) executive with more than 25 years of experience driving growth at successful software companies, Huffman joined BlackLine in early 2018 as chief operating officer. He was named president in February 2020, leading the company’s worldwide sales, marketing, technology and all customer-facing organizations. Since Huffman joined, BlackLine has scaled its sales and customer success teams, strategically repositioned its go-to-market plan, completed a global reseller agreement with SAP, established a subsidiary in Japan, and entered into a number of strategic alliances with the world’s leading consulting and advisory firms.
Prior to BlackLine, Huffman served as president of worldwide sales and distribution at NetSuite. During his 14-year tenure, NetSuite grew from $3 million to $1 billion in annual revenue and became recognized as a global SaaS powerhouse.
“I’ve been so pleased with the leadership Marc has demonstrated over the past two and a half years, most recently driving our response to the COVID-19 pandemic – mitigating disruption to the business and our customers. Because of Marc’s leadership, skill set, cultural alignment and stellar performance, BlackLine is in a better position to grow and scale than ever before,” said Ms. Tucker. “I am incredibly proud of what we have achieved at BlackLine and believe Marc is the kind of leader I can trust to take our customer-centric values, vision and growth to the next level. I am also thrilled that in addition to providing strategic oversight as executive chair, I will now have more time to focus on the areas I love most – product innovation and customer success.”
The announced transition is part of a multi-year succession plan that has involved seeking potential successors, bringing the right person on board, seeing that person excel, and Tucker and Huffman working methodically together over several years to build out the leadership team and strategic growth plan and ensure values were aligned.
“I am ready and excited for this next step. BlackLine is a special place with a strong culture and I am looking forward to leading the company through its next phase of growth,” said Huffman. “We’ve got the team, the plan, and now we are focused on execution as we continue to scale the business and make BlackLine an indispensable platform for Finance & Accounting organizations globally.”
Commenting on the CEO and executive chair changes, John Brennan, BlackLine’s chairman of the board, said, “We are excited to announce Marc’s appointment as CEO. His experience successfully expanding and scaling NetSuite into new strategic and geographical markets is invaluable as BlackLine continues to penetrate what we believe is still an untapped market. Coupled with his proven track record at BlackLine we are confident that, under Marc’s leadership, the company’s momentum, growth and success will only accelerate.”
Mr. Brennan added, “Therese has been a strong and inspirational leader since she founded BlackLine just over 19 years ago. Her unwavering determination and commitment to both customers and employees has been the driving force behind the company’s incredible journey from start-up to global market leader. We look forward to having her serve as executive chair, a position in which she will continue to shape the future of the company she has built from the ground up.”
Upon Tucker’s assumption of the executive chair role, Brennan will serve as the board’s lead outside director.
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