Chapter-1

Aim - Study the acts dealing with the cyber-crimes in different countries viz.,
India, USA, European Union.
Today, computer crimes are increasing in different countries. Computer crime is an illegal act
which is done by a computer. Considering the extent and complexity of computer crime in
cyberspace, and using different tools in this space for doing the crime made different the
conditions of dealing with the crime in cyber and physical space. There is the extent of occurrence
of computer crime these days, so computer users should be careful regarding to their computer
security. But if these attacks happened, how can we defend ourselves right? Is there any Law
enforcement for the protection of individuals, organizations for dealing with offenders in India?
The objective of this study was to describe the problems arising from computer crime, and also
introduces legal authorities to resolve complaints of computer crime and give information for
prevention of computer crimes to the beloved countrymen. In this study, there is a systematic
review on this matter. In addition, there are some recommendations regarding to computer crime.
Due to being in cyberspace and expansion of the use of computers and the Internet, problems
related to them is growing as well. Nowadays, all the people who are dealing with Internet and
computers are worried about being attacked by unknown persons and criminals. Computer crimes
may occur by anyone with variable purposes, whether with the goal of breaking the law or
learning about information systems and software. Computer crimes are so commonplace that we
all should be careful about the security of our computers.
Crime, as a human-social phenomenon, is the result of interaction between human and society.
Since personal characteristics of a person are affected by his surroundings, we can consider the
environment as the most fundamental cause of the tendency of people to commit crime. There are
various definitions of crime which three of them are given below.
1. Punishable under criminal law, as determined by the majority, or in some cases, by a
powerful minority.
2. Violations of criminal laws of a state, province or federal jurisdiction without any legal
justification.
Although the term computer crime is used every day, there is no general acceptable definition
for that. Below are four examples of these definitions:
1. A computer crime is an illegal activity that is executed via a computer.
2. The use of computers or computer related equipment by individuals, groups and organizations
with special knowledge of computers.
3. Misuse of computers, including any illegal or immoral behavior related to automated
processing and data transfer.
4. A crime which is related to technology, computer and Internet.
There are many different types of computer crime and they are getting more expanded. Here we
mention some of the most common computer crimes.
1. Use a computer to harm or access to information. Here the computer is the target.
2. Money laundering, child pornography and illegal banking transaction.
3. Logical bomb: It remains inactive in a system until a specified time or event. Then, it starts to
delete system or network files.
4. Identity theft: Criminals try to get username and password of others in order to access their
online accounts. If this is done by deceiving the account holder to reveal his confidential
information, using fraudulent sites or emails, it is called Phishing.
5. Denial of service: A purposeful attempt to disrupt the legitimate user to access a desired
service.
The enacted laws, current computer crimes and ways of reporting them in America, China,
Canada, Switzerland and Iran are as follows:
America
The first federal computer crime law, Counterfeit Access Device and Computer Fraud and Abuse
Act, was enacted in 1984 by Americas congress. Based on reports from 494 U.S. companies,
government agencies, financial and medical institutions, most attacks have been related to:
Domestic abuse of network access (59%), virus (52%), mobile or laptop theft (50%), phishing
(20%) and misuse of instant messaging (25%).
There are diverse centers in America to report computer crimes. The California Highway Patrol is
one of the state agencies that deal with computer crimes. According to its laws, some crimes
require immediate attention, such as damaging or changing data, accessing to computer systems
and using the Internet domain of another person.


China
Statistics show that computer crimes are increasing every year in China. In 2002, nearly 6633
offences, in 2003 about 11614 offences and in 2004, 13654 offences were reported. Most
computer crimes in China respectively include fraud, identity theft and dissemination of immoral
information. Since 1994, China has enacted several laws to monitor the Internet, such as: Security
of Computer Information Systems, Copy Right, Monitoring the Internet Information System and
Internet Publishing Right.
Canada
Canada was the first country that specifically addressed computer crimes in its federal law in 1983
and enacted several laws, including unauthorized use of computers, Mischief to Data, Sale of
Copyright Infringing Material.
Sweden
Article 143 of the Penal Code of Switzerland (Unauthorized access to data processing system),
mentions: Anyone, who without authorization, and without the intent of procuring an unlawful
gain, accesses a data processing system which are specially protected against unauthorized access,
by electronic devices, shall be sentenced to imprisonment or fines. Article 144 (Damage to Data)
mentions: Anyone, who without authorization alters, erases, or renders useless data which is
stored or transferred by electronic or similar means, shall be punished by imprisonment for a term
of up to three years or a fine of up to forty thousand Swiss francs if a complaint is made. The
National Coordination of the fight against crime on the Internet (CYCO) is the central point of
contact for people wishing to report the existence of suspicious Internet sites or content. After an
initial examination and a backup of data, the report forward the information received to the
competent criminal prosecution authorities in Switzerland and abroad.

Iran
Computer Crimes law was enacted in 2009 with 56 articles and 25 amendments. According to
Omidi, deputy director of police, the most common computer crimes are: Unauthorized
withdrawals from the account, unauthorized access to computer data, Internet Scams and others.
To report a crime, you can refer to courthouse or contact shora@isp.ir. Since 2009, there is a
specific section in courthouse to investigate computer crimes. Unfortunately, there is no website
to report and investigate computer crimes due to lack of financial support. Adolescents and youth
are the most frequent users of the Internet. Educating users about the good and bad consequences
of their behavior in cyberspace is very effective in preventing computer crimes.
Since computer crimes are growing every day, we must first think of prevention. Perhaps the first
step to prevent these crimes is to educate people and then strengthen the security of computer
systems. In addition, restrictive legislation can be effective to prevent such crimes. In many
western countries, the rules are so strict that these crimes occur less often. Since e-government in
Iran has been on the agenda, more laws should be enacted to reduce these crimes. Moreover, we
should ensure that these laws are fully and correctly implemented. At the same time, there should
be specific references in all cities, not just big cities, to report the crimes. Yet, it is not enough.
People should be informed that such places exist, so that they can easily refer to and report the
crime. Considering the laws in other countries, such as America, better solutions can be adopted.
For instance, computer crimes can be divided into categories and assign experts to each category,
so that peoples complaints can be easily addressed. As a result, complaints will be more
efficiently and quickly handled. In Iran, there are some places to investigate computer crimes. But
they are neither sufficient, nor efficient and the process of investigating the crimes is really time-
consuming. Thus, it is needed to implement a website, so that people can report computer crimes
without referring to any place. It is recommended that other researchers do comparative studies
about legal authorities to realize the weaknesses of the current system in Iran.











Chapter-2
Aim - Study the Intellectual Property Rights and the acts dealing with these
rights.
Intellectual property (IP) is a term referring to a brand, invention, design or other kind of creation,
which a person or business has legal rights over. In advanced economies like the UKs, innovation
is crucial to competitive edge. That makes Intellectual Property (IP) policy an increasingly
important tool for stimulating economic growth.
Every year in the last decade, investment by UK business in intangible assets has outstripped
investment in tangible assets: by 137 billion to 104 billion in 2008. Global trade in IP licenses
alone is worth more than 600 billion a year: five per cent of world trade and rising. Small and
young innovative firms are of crucial importance in terms of growth and jobs but proliferating use
of IP rights can push up IP transaction costs and block these new players from entering markets.
Almost all businesses own some form of IP, which could be a business asset. Common types of IP
include:
1. Copyright - this protects written or published works such as books, songs, films, web content
and artistic work.
2. Patents - this protects commercial inventions, e.g. a new business product or process.
3. Designs - this protects designs, such as drawings or computer models.
4. Trade marks - this protects signs, symbols, logos, words or sounds that distinguish your
products and services from those of your competitors.
IP can be either registered or unregistered. With unregistered IP, you automatically have legal
rights over your creation. Unregistered forms of IP include copyright, unregistered design rights,
common law trademarks and database rights, confidential information and trade secrets. With
registered IP, you will have to apply to an authority, such as the Intellectual Property Office in the
UK, to have your rights recognized. If you do not do this, others are free to exploit your creations.
Registered forms of IP include patents, registered trademarks and registered design rights.
India has been a member of the World Trade Organization (WTO) since 1995. This requires
member nations to establish intellectual property (IP) laws whose effect is in line with minimum
standards. As a result, there should be few major differences between Indias laws and those of
other developed countries.
1. Copyright-
India is a signatory to the Berne Convention on copyright. However, it may be a good idea to
register your copyright as doing so may help to prove ownership if there are criminal proceedings
against infringers. In most cases though, registration is not necessary to maintain a copyright
infringement claim in India. Registration is made, in person or via a representative, with the
Copyright Office. Internet piracy of films, music, books and software is an issue in India.
2. Patents-
Indias Patents Act of 1970 and 2003 Patent Rules set out the law concerning patents. As in the
UK, there is no provision for utility model patents. The regulatory authority for patents is the
Patent Registrar within the department of the Controller General of Patents, Designs and Trade
Marks, which is part of Indias Ministry of Commerce and Industry. Patents are valid for 20 years
from the date of filing an application, subject to an annual renewal fee. Indias patent law operates
under the first to file principle - that is, if two people apply for a patent on an identical invention,
the first one to file the application will be awarded the patent.
3. Designs-
The laws governing designs are the Designs Act 2000 and the Designs Rules 2001. Designs are
valid for a maximum of ten years, renewable for a further five years.
4. Trade marks-
Indias trade mark laws consist of the 1999 Trade Marks Act and the Trade Marks Rules of 2002,
which became effective in 2003.
The regulatory authority for patents is the Controller General of Patents, Designs and Trade Marks
under the Department of Industrial Policy and Promotion. The police now have more robust
powers in enforcing trade mark law, include the ability to search premises and seize goods
suspected of being counterfeit without a warrant.
But these powers are tempered by the requirement for the police to seek the Trade Mark
Registrars opinion on the registration of the mark before taking action. This adds to the delay and
may result in counterfeit goods being removed or sold. Trade names also constitute a form of
trade mark in India, with protection, irrespective of existing trade names, for those wishing to
trade under their own surname. Because of the widespread practice of cybersquatting - the
registration in bad faith of marks by third parties registering domain names for certain well known
marks in order to sell them to the original rights owners - it is advisable for rights owners to
register their domain names in India as trademarks as soon as possible. Registration takes up to
two years. A trade mark in India is valid for ten years and can be renewed thereafter indefinitely
for further ten-year periods.
IP law must adapt to change. Digital communications technology involves routine copying of text,
images and data, meaning that copyright law has started to act as a regulatory barrier to the
creation of certain kinds of new, internet based businesses. With two thirds of the worlds
population yet to achieve direct connection to the internet, this digital revolution has by no means
run its course. The Prime Minister asked the Review to consider whether our IP framework needs
to adapt in the interests of encouraging innovation and growth. The Reviews conclusion is that
such adaptation is required. The UKs current IP system is falling behind what is needed,
especially in the area of copyright.
Intellectual Property Rights (IPRs) support growth by promoting innovation through the offer of a
temporary monopoly to creators and inventors. But such rights can also stifle growth where
transaction costs are high or rights are fragmented in a way that makes them hard to access.
Poorly designed IP rules can help established players in a market obstruct new players by
impeding their access to technology and content. A carefully designed and dynamic IP system
can, by contrast, complement the spur which competition gives to innovation by enabling follow
on-innovation.
Because IPRs grant a form of monopoly, an overly rigid and inflexible IP framework can act as a
barrier to innovation. When a firm has acquired exclusive rights over its innovative technology or
content, other firms will be able to learn from that technology or see the content, but may be
unable to use them for further innovation unless licensing can be agreed. IPRs can constrain third
parties wishing to access or innovate on top of this protected knowledge or content, with
potentially serious economic and social costs.
Furthermore, IP systems impose transaction costs on the creator, on innovators and on society.
The costs of search, administration and enforcement, which fall on creators and innovators,
directly offset the incentives they receive through exclusivity. So the rewards to innovation can
sometimes be boosted as effectively by cutting transaction costs as by strengthening rights. The
optimal balance between these factors varies by industry and technology in complex markets
requiring multiple rights transaction costs can be especially onerous. And the expertise required to
deal with IPRs is largely a fixed cost: it falls harder on smaller firms trying to establish rights than
on large incumbents.
However, even for creative or technical companies, IP is only one relevant factor and rarely the
most important in the way they view their prospects. A number of responses to the Call for
Evidence took the opportunity to highlight the many other issues SMEs face, such as investor
appetite for risk, bankruptcy rules, availability of skills and the array of regulations with which all
companies contend.
At present, long established IP legal advisors (for example, patent attorneys) seldom offer
expertise on the commercial aspects of IP. Conversely, IP advisors with a business focus lack the
detailed legal knowledge to assist SMEs in obtaining IPRs. When, as part of the public
consultation phase of our work, the Review sought the views of young technology SMEs in a
meeting at TechHub, we were told that what they required was one stop shop provision for IP
management and commercialisation.9 There is some evidence that some such services are
beginning to be considered, but this type of provision is still in its infancy.
In the years ahead technological and societal changes will present further challenges to the IPR
system, as the relative and absolute share of economic activity based on creating and using IP
continues to rise. Technology will continue to develop in ways that destroy the boundaries of
existing markets. This in itself will create new uncertainties, and new interfaces between IP and
competition policy. At the same time, the boundaries between legal spheres, such as IP and
privacy law, are starting to dissolve. It is reasonable to suppose that in this atmosphere, with
governments around the world eager to promote economic growth and the creation of quality jobs,
there will be forceful demands for new IP interventions, in terms of both scope and intensity of
enforcement. In such an environment it is vital that policy is firmly rooted in evidence.









Chapter-3
Aim - Study the Copyright acts with reference to publishing the material on
the web.
Copyright is a form of intellectual property which is a generic term for a range of property rights
that provide protection for creations of the mind. Copyright does not, however, exist until a
work is recorded, in writing or otherwise. Copyright protects the recorded expression of a work
it does not protect the ideas or knowledge incorporated in the work. Among other things,
copyright law gives to the creator of a work the exclusive right to do certain specified things in
relation to the work, including copying it. But copyright is not only about copying: it includes a
number of other rights relating to a work as well to perform, play or show the work in public, to
broadcast the work, to communicate the work, or to make an adaptation of the work, for example:
These exclusive rights of the copyright owner are, however, qualified by the provision of certain
legislative exceptions, which permit others to make use of the copyright work under specified
conditions without first getting permission. The Copyright Act 1994, which is the New Zealand
law governing copyright, calls these exceptions permitted acts.
The first copyright legislation, known as the Statute of Anne, was introduced in Britain in 1710.
The purpose of that Act, which is true of most subsequent legislation, was to support learning
and the sharing of ideas. This phrase draws attention to the inherent tension that underlies
copyright law: the need on the one hand to encourage the creativity and protect the rights of
authors and publishers, balanced on the other hand by the needs of members of society to benefit
from and make use of the ideas and knowledge incorporated within publications, whether these
are in printed, audio-visual or electronic form.
Students are both users and creators of copyright work, and so have a particular obligation to
respect and comply with copyright law. Students need to know about copyright, because as
authors they will be owners of copyright; and as researchers they will be users of copyright works
and must avoid infringing the copyright of other people.
Copyright applies to a very wide range of literary, dramatic, musical and artistic works ,
irrespective of their quality or merit: books, periodical articles, newspapers, personal papers,
musical and art works, sound recordings, films, videos, DVDs, photographs, multi-media works,
communication works, sound and television broadcasts, computer programs and software,
computer databases, CD-ROMs, maps, charts, diagrams, tables, graphs, sheet music, paintings,
works of architecture, and typographical arrangements of published editions. There may be
separate copyright ownership in illustrations, photographs, maps, diagrams, tables, charts and
graphics that are included in a book, periodical article, CD-ROM or computer database.
In New Zealand you do not (and cannot) register copyright ownership. Rather, copyright
automatically exists as soon as a work is published, which is defined as issued to the public and
includes making a work available by means of an electronic retrieval system. However, in some
other countries such as the U.S., copyright is normally registered. Some people print a , the
name of the copyright owner, and the year of publication on the verso of the title-page to indicate
that there is copyright in the work, but this is not required to assert copyright ownership under
New Zealand law, and its absence does not mean that the work does not have copyright
protection.
Copyright ownership may be passed to others by contract or agreement: many authors of
periodical articles or books pass copyright ownership to their publishers, as part of the contract for
getting their work published. Thus, a student who publishes a periodical article based on his or her
thesis research is likely to pass copyright in the article to the publisher, while retaining copyright
in the original thesis. Copyright ownership may also be passed by bequest.
The copyright owner may waive copyright in a work; place a work in the public domain, or make
copyright in a work subject to an open content license. Copyright ownership is quite separate from
ownership of a work copyright does not pass to the purchaser when a work is sold. Copyright is
infringed by anyone who, without permission of the copyright owner, does any of the following
restricted acts: copies a work or any part of it; publishes a work; issues copies of a work to the
public; performs, plays or shows a work in public; makes a work available to the public by means
of an electronic retrieval system; broadcasts a work; communicates a work or makes it available
via a computer network to the public; makes an adaptation of a work; imports an infringing copy;
possesses or deals with an infringing copy; or authorizes another person to do any of these things.
Copyright in most commercially-published books and periodicals is owned by their publishers.
Many publisher web-sites provide information about copyright policies what is permitted, who
to write to for permissions, license requirements, fees payable, etc.
Material included in electronic databases subscribed to by libraries is almost always subject to
license agreements signed by libraries with database providers, aggregators or e-journal
publishers. These license agreements may provide information about use of the materials in
student theses. Copyright in books published by private or non-commercial publishers or by
individuals is usually owned by their authors. Addresses are sometimes printed in the front of the
books, or may be obtained from web-sites, telephone directories, electoral rolls and the like.
Copyright in reports published by government departments, universities, societies and
associations, etc. is usually owned by the issuing bodies, although it may be held by the individual
authors if these are identified. Web-sites often include a link to a copyright statement, for example
in the web page footer. Materials on web-sites sometimes have license statements attached to
them. Students should write or email to the likely copyright owner, stating name and
University, the degree being studied for, the title and theme of the thesis, the work for which
permission to copy for inclusion in the thesis is required, and the use to be made of the material.
Full bibliographic details of the work should be given, including the amount of material that is to
be copied. In the last two decades, it has sometimes appeared that the very idea of copyright as a
protected source of income to creators is under threat, swept away in a philosophical tide which
proclaims a world wide web which is open, unmanaged and essentially the domain of free speech
and free goods. More recently, this narrative has been tempered as some of the worlds biggest
companies, such as Microsoft, Apple, Google and Facebook, have successfully deployed business
models which depend upon managing the internet. At the time of writing, Apple is the most
highly valued technology company in global stock markets and Facebook is establishing itself as a
primary marketing medium for consumer facing companies. The further evolution of the internet
will depend on the ongoing interchange between the actions of large companies and those of
individual users.
Copyright involves a necessary balancing of divergent interests. When new opportunities arise,
the law sometimes needs to adapt so that the right balance is maintained. In education and
research in particular, but also in other fields including everyday consumer behavior, there is a
clear need to make that adaptation happen.
Copyright law was never intended to be an instrument for regulating the development of
consumer technology. But where it can block or permit developments or applications of
technology that is precisely what it becomes. When this happens, copyrights significant
economic benefits as a mechanism to incentivize individual creativity need to be measured against
their negative impact in impeding innovation elsewhere in the economy. Copyright holders have a
long history of resisting the emergence of technologies which threaten their interests, including
audio tape recorders and VHS recorders. When the first sound recording technologies emerged,
some music rights holders opposed the recording of music. At that time, it was the recorded music
industries that were seen as dangerous innovators.
The Copyright Act 1994 does, however, permit certain exceptions to these restricted acts under
specified conditions. Two main areas of exception relate to copying for educational purposes, and
copying by librarians. The main exceptions applying to students relate to copying for criticism,
review and news reporting, copying for research or private study and copying for educational
purposes.
It should be noted that the Copyright Acts definition of copying includes digital copying:
Copying means, in relation to any description of work, reproducing, recording, or storing the
work in any material form (including any digital format), in any medium and by any means.
Transient copying the display of a work on a computer screen when accessing the Internet or
other computer file does not infringe copyright in the work.
It is illegal for anyone to violate any of the rights provided by the copyright law to the owner of
copyright. These rights, however, are not unlimited in scope. Sections 107 through 122 of the
1976 Copyright Act establish limitations on these rights. In some cases, these limitations are
specified exemptions from copyright liability. One major limitation is the doctrine of fair use,
which is given a statutory basis in section 107 of the 1976 Copyright Act. In other instances, the
limitation takes the form of a compulsory license under which certain limited uses of
copyrighted works are permitted upon payment of specified royalties and compliance with
statutory conditions.












Chapter-4
Aim - What constitutes a cyber-crime in the country?
Cyber-crime is emerging as a serious threat. Worldwide governments, police departments and
intelligence units have started to react. Initiatives to curb cross border cyber threats are taking
shape. Indian police has initiated special cyber cells across the country and have started educating
the personnel.
Crime is both a social and economic phenomenon. It is as old as human society. Many ancient
books right from pre-historic days, and mythological stories have spoken about crimes committed
by individuals be it against another individual like ordinary theft and burglary or against the
nation like spying, treason etc.
Crime in any form adversely affects all the members of the society. In developing economies,
cyber-crime has increased at rapid strides, due to the rapid diffusion of the Internet and the
digitization of economic activities. Thanks to the huge penetration of technology in almost all
walks of society right from corporate governance and state administration, up to the lowest level
of petty shop keepers computerizing their billing system, we find computers and other electronic
devices pervading the human life. The penetration is so deep that man cannot spend a day without
computers or a mobile. Snatching some ones mobile will tantamount to dumping one in solitary
confinement!
The world of Internet today has become a parallel form of life and living. Public are now capable
of doing things which were not imaginable few years ago. The Internet is fast becoming a way of
life for millions of people and also a way of living because of growing dependence and reliance of
the mankind on these machines. Internet has enabled the use of website communication, email and
a lot of anytime anywhere IT solutions for the betterment of human kind. Internet, though offers
great benefit to society, also present opportunities for crime using new and highly sophisticated
technology tools.
Cyber Crime is not defined in Information Technology Act 2000 or in the I.T. Amendment Act
2008 or in any other legislation in India. In fact, it cannot be too. Offence or crime has been dealt
with elaborately listing various acts and the punishments for each, under the Indian Penal Code,
1860 and quite a few other legislations too. Hence, to define cyber-crime, we can say, it is just a
combination of crime and computer. To put it in simple terms any offence or crime in which a
computer is used is a cyber-crime . Interestingly even a petty offence like stealing or pick-pocket
can be brought within the broader purview of cyber-crime if the basic data or aid to such an
offence is a computer or information stored in a computer used (or misused) by the fraudster.
Regular stories featured in the media on computer crime include topics covering hacking to
viruses, web-j hackers, to internet pedophiles, sometimes accurately portraying events, sometimes
misconceiving the role of technology in such activities. Increase in cyber-crime rate has been
documented in the news media. Both the increase in the incidence of criminal activity and the
possible emergence of new varieties of criminal activity pose challenges for legal systems, as well
as for law enforcement.
Criminals can easily leverage the Internet to carry out traditional crimes such as distributing illicit
drugs and sex trafficking. In addition, they exploit the digital world to facilitate crimes that are
often technology driven, including identity theft, payment card fraud, and intellectual property
theft. Cybercrimes have economic, public health, and national security implications, among
others.
Cyber criminals can exhibit a wide range of self-interests, deriving profit, notoriety, and/or
gratification from activities such as hacking, cyber stalking, and online child pornography. As one
FBI agent specializing in cybercrime has reportedly stated, hacking into a company, whether its
to put information on the web for everyone to see or if youre going to make money, is still
hacking, its still a crime. Without knowing the criminal intent or motivation, however, some
activities of cyber criminals and other malicious actors may appear on the surface to be similar,
causing confusion as to whether a particular action should be categorized as cybercrime or not. As
noted in the National Strategy to Secure Cyberspace, he speed and anonymity of cyber-attacks
makes distinguishing among the actions of terrorists, criminals, and nation states difficult, a task
which often occurs only after the fact, if at all.

The FBI has noted three primary categories of cyber threat actors:
1. Organized crime groups that are primarily threatening the financial services sector, and they
are expanding the scope of their attacks.
2. State sponsorsforeign governments that are interested in pilfering data, including
intellectual property and research and development data from major manufacturers,
government agencies, and defense contractors.
3. Increasingly there are terrorist groups who want to impact this country the same way they did
on 9/11 by flying planes into buildings. They are seeking to use the network to challenge the
United States by looking at critical infrastructure to disrupt or harm the viability of our way
of life.
Of these three categories outlined by the FBI, the first organized crime groupfocuses on
cybercrime. However, this category appears limited to those crimes that target the financial
services sector. While the second category includes the theft of intellectual property and other
activities that may be considered cybercrimes, this category is more roughly aligned with state
sponsored espionage.


















Chapter-5
Aim - Definitions of electronic documents, evidences, the approved algorithms
etc.
Volumes of company information, paper files, electronic documents and emails continue to
accelerate. Legal requirements and good practice from regulatory bodies demand the retention of
considerable amounts of documentation for many years before destruction. For physical
documentation, this may be impractical or at least costly, slow and inefficient. Worse still, is the
scenario where misfiling means employees spending hours hunting documentation, sometimes
under deadline pressure.
Technology has tilted the balance from the physical paper document towards more electronic
transactions and documentation. Capture technologies and electronic document management
systems (eDMS) have revolutionized the processing and retrieval of paper documents. By
bringing them into the electronic world with the rest of the documentation (is it MS Office
documents, emails, line of business documents) there are clear and proven benefits:
1. Enhanced effectiveness and efficiency gains.
2. Superior information sharing/ knowledge management, specifically limiting information
silos, particularly email.
3. Improved customer/client/supplier service levels.
With the ever-increasing amount of documentary material coming before the courts it is of great
importance to provide a clear definition of a document for the purposes of admitting these as
documentary evidence. The relative position of a given piece of evidence will be greatly affected
should it not fall within the definition of a document. The basic unit of documentary evidence, the
document itself, therefore requires detailed investigation. With the growth and expansion of what
has now come to be accepted as a document, it is important to examine how it has evolved beyond
the traditional paper product to incorporate different media.
There are undoubted advantages in adopting eDM but also perceived barriers to change. Paper
documents and files are extremely vulnerable to loss and destruction but they are tangible and, if
unhampered, give absolute proof. This understandable comfort blanket effect will stop many
businesses from grasping the eDM nettle or at least doing so whole-heartedly. Destroying the
physical evidence feels unnatural so its important to know that the eDM you choose is not only
a good software choice, but that the ensuing improvements to operational process will not put
your organization at risk. The need to preserve original paper documents once scanned and
captured is the most common query faced by eDM/ ECM providers. Most organizations will want
to destroy original paper documents, free up filing space and stop using physical storage with all
the inefficiencies entailed. In the vast majority of cases original documents do not need to be
retained. However, certain key documents will need to be retained most notably artefacts
proving tax deducted for HMRC purposes and signed leases, title deeds and contracts. The most
sensible policy to adopt here is to retain what is obviously most legally critical and, if you are
unsure then seek further advice from any relevant professional body (ICAEW, HMRC, and Law
Society etc.).
Most operational documents can be destroyed without fear of comeback. After all, once captured
electronically and saved, the document is available more quickly and with more accuracy than any
physical filing system. Once lodged in the eDM/ECM system the document will always be
retrievable.
The Document at Common Law
This embodied the long established 18
th
century view of a documentary record as an instrument; a
thing, capable of conveying evidence. This also attempted to instil the definition with a certain
degree of longevity by not assigning an unduly prescriptive definition to the term document.
The wide scope of electronic evidence
At common law, therefore, a document was described as anything upon which information could
be visibly inscribed with recognizable and legible characters. The object or medium upon which
these characters were inscribed was itself unimportant so long as it was intelligible and
information could be gleaned from it by the human eye. This did not anticipate the advent of
computer disks or other modern information storage devices, and so the ongoing development of
technological innovation therefore required significant adjustment to the common law definition
of a document.
In general terms, electronic evidence can include any data generated or stored in digital form
whenever a computer is used. It includes information manually entered into an electronic device
by individual, information generated in a computational transaction or a response to a request by
an individual, where an electronic device generates information acting as an automaton, or
information produced and stored where a device processes information within its matrix.
Electronic documentary evidence is, therefore, any information captured, generated or maintained
in databases, operational systems, and application programs, computer-generated models which
extrapolate outcomes, electronic and voice mail messages and even instructions held inertly
within a computer memory bank.
The law of evidence must, of course, continue to accommodate the traditional notion of a
document as any written thing capable of being evidence, since such documents will continue to
be relevant to court proceedings for the foreseeable future. The Commission also recognizes,
however, that this concept of document must also be updated in a unified legislative framework to
accommodate electronically generated information capable of presentation in a permanent legible
form. This would serve to bridge the definitional gap between manually executed and
electronically produced documentary records capable of being admitted as evidence in legal
proceedings.
Statutory definitions of document in Irish law
The discrete circumstances of specific cases meant that the common law (judge made law) was
not always capable of extending itself to take adequate account of electronic innovation. This led
to the enactment of legislation which adapted the view of a document to one which was
recognized as essentially anything with distinguishable characters on it.
Statutory definitions are broader than the common law definition, even as expanded to include X-
rays (as in the McCarthy case), but they do not attempt to be exhaustive. The term document
and other associated terms have been defined for specific purposes in recent Irish legislation.
These definitions often accommodate the traditional document and modern electronic forms of
evidence.
The definition was indeed overtaken by advances in the of data collation and retention and courts
will now accept as valid any item which gives information as opposed to an item on which writing
can be inscribed.
Statutory definitions of documents and records in the English
Criminal Justice Act 2003
The English Court of Appeal described the computer printout as an element of a device by means
of which information is recorded or stored and which therefore fell within the Criminal Evidence
Act 1965 because without this document there was no other means of discovering the information
recorded in it.
An Expanded Notion of an Electronic Document in New Zealand
The New Zealand Evidence Act 2006 introduced an expanded definition of a document. It
operates on the understanding that there is a single, unified concept of a document which
incorporates both hard copy and electronic documents. The traditional concept of a document is
incorporated as including any material bearing interpretable signs or symbols, sounds or images or
writing that identifies or describes a thing. In this sense there has been an attempt at future
proofing the definition particularly with the inclusion in the definition of: information
electronically recorded or stored, and information derived from the information.
Reforming the Definition of a Document
The definition should embrace the concepts of writing and a record, which existing Irish
legislation has sometimes defined in extremely prescriptive terms, but which does not even
purport to be exhaustive. The concepts of writing and record are also, at least superficially,
narrower than the concept of document, which linguistically incorporates a wider array of
written material.
Electronic and automated documentary evidence may in turn be authenticated by evidence which
confirms that, where a device has been used to produce the evidence, the device used was reliable
and accurate.

The Definition of a document in the Australian Uniform Evidence
Act 1995
Uniform Evidence Acts enacted in 1995 defines document as any record of information,
including:
(a) Anything on which there is writing or
(b) Anything on which there are marks, figures, symbols or perforation having a meaning for
persons qualified to interpret them or
(c) Anything from which sounds, images or writings can be reproduced with or without the aid of
anything else or
(d) A map, plan, drawing or photograph.
Section 95 of the Evidence Act 1977 (Old) sets out the circumstances in which a statement
contained in a document produced by a computer and tending to establish a fact is evidence of that
fact can be admitted in evidence.
The admission of a document and the position of the opposing party to show that the computer
was prone to malfunction, or that there is some other reason to question the reliability of the
record is a matter that the court may take into account when ultimately deciding what weight to
give to the document.






















Chapter-6
Aim - Investigation methods.
What we have to do in social science is to apply the scientific method to the facts of social life.
There is only one scientific methodthat used in physical science. It consists of three parts
observation, conjecture as to the cause and effect of the facts observed, and afterwards verification
by renewed observation. That is the scientific method, but the application of that method is a
technical matter; for instance, observations in astronomy are carried on by means of telescopes
and other scientific instruments. The same is true of chemistry and biology; they proceed by
purely technical methods. And so in the case of sociology, which is the science of men in
combination, the application of scientific method needs the use of certain technical instruments. It
is these that we have to consider.
In the first place, we have two methods in common with all other sciencesobservation and
experiment; then a third, the statistical. Beyond these three methods, we have two which are
unique to our subject-matter, men in combination. One is the use of literature, the other is the
interview. Let us discuss these five methods; three are general and two are technical to social
facts. As regards observation and experiment, some authorities who have dealt with the subject-
matter of men in combination have denied that observation and experiment can be applied to the
facts of social life.
In the case of things in which human nature plays a part, personal observation is everything. It
would be useless to read about the infant mortality of the slums without personal observation of
slum conditions and influences. There is, however, one great fallacy to which the method of
personal observation is open, the fallacy of the individual instance. Much of the writing of the
present day describing the slums arid the horrors of white slavery, or even of Chinese slavery, is
vitiated by the fallacy of the individual instance. One must constantly verify his personal
observation by other methods.
In the case of the other method, that of experiment, it is sometimes said that it cannot be applied to
social facts. But as a matter of fact, this is always being done; for example, a railway company is
constantly experimenting with rates. A very astute American railway president once told me that
he kept a man, at L2, 000 a year, shut up in a little room. Be for e him every morning were
brought the different rates being imposed, and all the different tariffs on the various sections of the
company's line. He watched, day by day, what happened to certain classes of commodities if the
company raised the rate. Anyone who has been on the County Council is aware that it is
perpetually making experiments and watching the results. Though it is impossible for us to
experiment merely for the sake of experimenting, yet public administration forces the method
upon us.
Now let us consider another method, the first of the two which are technicalthe method of the
interview. Here one supplements his own observation by that of other people. Those who are
conversant with English blue books and reports of Royal Commissions and Commissions of
Inquiry know that a number of people are brought together to give evidence. They are interviewed
and cross-examined. Reliance is placed almost entirely on the method of interview. There is a
great danger, because dependence in that case is almost entirely upon hearsay; a witness tells what
he thinks has happened: He may give a few isolated facts, but his evidence is largely hearsay. I
suggest that the one great advantage of the method of the interview is not in giving facts, but
information as to the source where facts can be obtained by means of documents, and those
having personal knowledge, also by means of suggestions as to cause and effect which must be
verified. In his great work, "Life and Labor of the People," Mr. Charles Booth based his map of
poverty in London almost exclusively on the method of the interview. He wanted to discover the
circumstances of each individual living in a street, so he first got permission to call up the School
Board visitors, each of whom had charge of two or three streets. With his secretaries he went over
each individual in each street, and got from the visitors their idea of each person's circumstances.
The School Board visitors were going in and out of these houses every day. That was information
obtained from personal knowledge, and roughly speaking it would not be far wrongJones lives
in one room with a certain sized family, earns 20S and pays 5s rent. He got such facts as these and
then verified them by means of district visitors. I remember that he al so utilized the agent s for
Singer's sewing machines in the same way. He was getting not at the men's opinions, but at their
personal knowledge. That is the most important of all the uses of the interview.
Reliance is placed almost entirely on the method of interview. There is a great danger, because
dependence in that case is almost entirely upon hearsay; a witness tells what he thinks has
happened: He may give a few isolated facts, but his evidence is largely hearsay. There remains the
other of the technical methods- the use of documents and literature. This is a very important
method, because for the past as distinct from the present it is practically the only method that can
be employed. Now, there is an important difference between a document and literature. A
document is written testimony which is unconsciously secreted by a social organization for the
purpose, not of influencing thought, but of influencing action. Documents are therefore, likely to
be much more precise than literature. On the other hand, literature as found in books, newspaper
reports, and pamphlets is written for the purpose of informing people, what has happened.
In regard to the question of first-hand and second-hand literature, I would suggest that first-hand
literature is that which records the personal impression of the individual who writes about the fact
he is recording. For instance: Hansard is first-hand literature, but a book about Hansard,
describing these parliamentary debates, would be second-hand literature. All histories are second-
hand literature, but pamphlets or newspaper reports, written by persons who actually observed the
facts, are first-hand literature. Then there is the statistical method. It is quite clear that this is
necessary in nearly all observation, at any rate of present facts, to prevent falling into the fallacy
of the individual instance. One may observe that in a certain slum five babies have died in the
course of the summer. That fact will not tell accurately what effect slum life has on babies unless
it is verified by the statistics of infant mortality in all the slums. There may have been in this
particular slum a special cause of the mortality. Professor Edge worth said a very weighty thing
when he said that "the statistical method never discovers a truth, but it often prevents an error."
Attention was called to certain limitations of the methods. It was unfortunate that experiments
were scarcely ever made by sociologists themselves, so this method, so far as the science was
concerned merged into that of observation. Again, the interview was defective because of a bias it
tended to create. The difficulty with commission evidence generally was that it was taken from
individuals who had succeeded, and almost never from those who had failed. In this way, one side
of the matter being reported upon was neglected. The difficulty with the statistical method was
that sociological facts were collected and classified by mathematicians whose competence in the
science was not above question.
It was asked if the methods described as peculiar to sociology were really different from those
found in other sciences; for instance, the zoologist would keep in his laboratory a collection of
written records describing the observations of others. Again, sociology had necessarily to deal
with considerations of value connected with the emotions, in the treatment of which none of the
methods mentioned would be applicable.





























Chapter-7
CASE STUDY: TAX EVASION AND MONEY LAUNDERING
VULNERABILITIES
I. Background:
1. Identity related crime is regarded by many countries as a serious and increasing risk to
governments and the wider community. Some countries suggest that identity fraud is
costing their economy billions of dollars in terms of lost tax revenue, overpayment of
social security claims and losses incurred by consumers, banks, credit card firms,
retailers and other businesses. Identity fraud manifests itself in many different forms,
such as credit card fraud, stealing money from individuals bank accounts through
telemarketing schemes, income tax refund fraud and social security fraud. There is
evidence to suggest that identity crime is becoming more organised, rather than
opportunistic, particularly with regards to identity theft. The increasing use of
sophisticated electronic means and the associated speed of processing claims etc. provide
significant challenges for tax authorities to quickly implement effective controls. The
level of sophistication also increases the difficulty of detection of this type of crime and
the apprehension of offenders.
2. Taking into account the significant risks outlined above, delegates of the Working Party
No. 8 Sub-Group on Tax Crimes and Money Laundering (TCML) agreed in March 2006
to examine the tax evasion and money laundering vulnerabilities associated with identity
fraud. To facilitate this examination, the Secretariat distributed questionnaires to Sub-
Group delegates and it was agreed that the information contained in the responses would
be used as the basis for preparing a comprehensive report on the topic.
3. This report contains information on the tax evasion and money laundering vulnerabilities
associated with identity fraud
1
. The information contained in this report was provided by



19
2
countries represented on the Sub-Group in response to the questionnaire that was sent
to delegates in July 2006. Apart from providing a useful overview of the key tax evasion
and money laundering issues and risks associated with identity fraud, the report is also
intended to provide practical guidance to tax authorities that are seeking to implement
strategies to effectively address these risks. The report is also intended to assist tax
authorities in refining their existing strategies.
4. The report specifically addresses:
a. Definitions and examples of identity fraud;
b. Quantifying the risks associated with identity fraud;
c. How countries detect suspected cases of tax evasion and money laundering involving
identity fraud;
d. Red Flag Indicators used to detect identity fraud;
e. How countries investigate cases of suspected tax evasion and money laundering
involving identity fraud;
f. Effective measures undertaken by tax and other government agencies to increase
compliance and deter non-compliance in these areas; and
g. Results of activities designed to detect and address non-compliance, and to promote
compliance.
Definitions and examples of identity fraud
What is identity fraud?
5. Identity fraud and identity theft are often used to describe any situation in which personal
details are misappropriated for gain. Examples of identity fraud include using a false
identity or someone elses identity details (e.g. name, address, previous address, date of
birth etc.) for commercial, economic or monetary gain; or obtaining goods or
information; or obtaining access to facilities or services (such as opening a bank account,



applying for a benefit or obtaining a loan/credit card). The following definitions have
been developed by the United Kingdoms Home Office Identity Fraud Steering
Committee
3
to clarify these terms.
6. Identity crime is a generic term for Identity Theft, creating a False Identity or
committing Identity Fraud.
7. False identity is:
a fictitious (i.e. invented) identity; or
an existing (i.e. genuine) identity that has been altered to create a fictitious
identity.
8. Identity theft occurs when sufficient information about an identity is obtained to
facilitate Identity Fraud, irrespective of whether, in the case of an individual, the victim is
alive or dead.
9. Identity fraud occurs when a False Identity or someone elses identity details are used to
support unlawful activity, or when someone avoids obligation/liability by falsely
claiming that he/she was the victim of Identity Fraud.

10. These definitions are not legal definitions and are not tied to specipic criminal
offences,and they apply to both individual identity crime









II. Survey Findings and Observations Common methods and schemes used to commit
tax evasion and money laundering involving identity fraud.
11. Several methods and schemes involving false identities and identity theft to facilitate tax
evasion and money laundering have been detected by the tax authorities that participated in the
survey. The most commonly detected methods and schemes reported include:
Creation or takeover of a persons identity for the purpose of lodging false claims for
refunds and rebates (e.g. filing of false individual income tax returns, using false
information and documents, to obtain income tax refunds and GST credits);
Use of false and stolen identities to set up businesses to commit income tax and
GST/VAT fraud;
Creation of an identity on the basis of a stolen/fraudulently used passport or other major
source of identification, which is used to obtain a national identification number, which
in turn is used for social welfare claims, for tax or business registration, opening bank
accounts, printing invoices, etc;
Theft of correspondence from the tax authority and the use of those details to obtain
employment or to falsely claim repayments on medical expenses, etc., having changed
the contact details;
Creation of shell companies that do not conduct real operations, but only simulate
transactions to generate a refund or credit against VAT;
Carousel fraud, in which a shell company manager uses a bogus identity or stolen
identity.
Creation of shell companies that do not conduct real operations, but put money into
circulation through bad cheques taken from banks with false identity and documents;
Fraudulent use of documentation of suppliers with which no business was conducted,
with the purpose of reducing the applicable income tax rate or to generate fictitious
losses;
Deposit of large sums of cash that are subsequently transferred to other accounts, in
several countries, so that the money is transferred to legal businesses (in this case the
person with the false or stolen identity might be the owner or authorised on the first or
second bank account);
Use of the identities of immigrants who have returned to their home countries by relatives
or other persons to continue receiving benefit payments;
Hijacking of clients identity by agent who uses it to commit fraud;
Filing of claim by agent for person who does not exist bogus claim;
Nomination of a bank account not in the name of the claimant;
Taking advantage of vulnerable individuals to secure private password details, gain
illegal access to systems and manipulate to fraudulent personal advantage;
Thieves attempting to gain access to identifying information maintained at major
depositories of personal data (e.g. government agencies, banks). This access can take the
form of computer intrusion (hacking), compromise of employees with authorized access
to the data (corruption), or deception;
Use of computers and other means of deception to obtain identifying information directly
from the individual (e.g. phishing, spyware and skimming); and
Use of the Internet to obtain information of companies making sales on the Internet, for
the purpose of transferring money from those companies accounts to personal accounts
opened by using a false identity.


Case studies: Methods and schemes used to commit tax evasion and money laundering using
identity fraud:
Canada: False and stolen identities have been used to set up businesses to commit GST fraud and
to file false income tax returns in Canada. The filing of false individual income tax returns, using
false information and documents, to obtain income tax refunds and GST credits has also been a
problem. There have been cases where tax return preparers have inflated the refunds claimed on
their clients returns and kept the difference or used old client information to file false returns and
appropriated the refunds.
France: Identity fraud is also beginning to crop up in the advertising agency sector. This type of
scam involves identity and corporate identity theft to extort money from firms to which the bogus
advertising agency has sold advertising space. Sometimes, the advertising agencys clients are
in on the scheme and use this stratagem to lower their tax base. This scheme is sometimes
connected with money laundering.
Mexico: Individuals create fake official identifications; for example, using data from third
parties and placing the delinquent photo in an Official ID, with the purpose of constituting a
business, opening bank accounts, creating contracts and printing invoices. Criminals undertake
operations using fake IDs and do not report any income. They disappear shortly after without
having paid any taxes and, in the worst cases, launder money generated from illicit sources. When
the tax authority detects the omission in the payment of taxes, the investigation begins with the
original owner of the ID who does not recognize the operations and a long process begins of
trying to identify the real offender. This situation seriously affects the efficiency and costs of the
Ministry of Finance and Public Credit.
United States: Large-scale breaches of data repositories Thieves attempt to gain access to
identifying information maintained at major depositories of personal data. This access can take
the form of computer intrusion (hacking), compromise of employees with authorized access to the
data (corruption), or deception. Some of the major depositories that are vulnerable to large-scale
breaches are government agencies, bank records, credit card systems, credit report companies, and
Internet companies that require identifying information to use their services such as online
gambling. For example, employees at large businesses have a variety of records to choose from to
steal ID information, including job applications, personnel records, health and benefit records, and
payroll records.
Large-scale breaches of data from individuals Thieves using computers and other means of
deception to obtain identifying information directly from the individual. Common techniques that
fall within this category include (1) Phishing - Criminals will portray themselves as legitimate
organizations that would normally need this information, such as banks, credit card companies,
and government entities. For example, criminals have portrayed themselves as being IRS
employees to get ID information. Taxpayers are sent e-mails purportedly from an IRS website
falsely informing them that there is a problem with their tax returns and requesting ID information
in order to resolve the problem. Another example focuses on foreign citizens that have assets in
the U.S. Fictitious IRS Form W-8 BEN will be sent to foreign citizens to trick them into
disclosing their personal and financial data; (2) Spyware and other computer software programs
designed to gain access to Internet users computers and data without the users permission; (3) *
Skimming An inexpensive device that resembles a credit/debit card processor that when a
card is passed through it records the magnetically encoded identifying data recorded on the card.
Another form of skimmer is being placed on automatic teller machines (ATMs) to obtain the data
associated with the ATM card when it is inserted in the device; and (4) Unscrupulous tax return
preparers and individuals will steal social security numbers from their clients or acquaintances.


Which sectors and occupational groups are potentially affected by identity fraud?
12. Identity fraud potentially affects all sectors and occupational groups. However, the countries
surveyed report that the following sectors are particularly vulnerable to the use of false identities
and identity theft:
Services sector (e.g. catering, cleaning, security);
Any sector that would be in a credit position for VAT/GST purposes (e.g. exporters);
Tax return preparers, accountants, lawyers and other gatekeepers (or intermediaries);
Construction industry;
Unlicensed foreign exchange houses;
Real estate sector (including purchase and sale of real estate);
Sale of motor vehicles, yachts, second hand vehicles and industrial machinery;
Scrap metals industry;
Casinos and other entertainment venues (e.g. bars, nightclubs);
Professionals and individuals connected with sports and entertainment;
Art dealers and precious stones;
Activities related to the exploitation of land (cork, wood, etc);
Temporary work companies;
Hardware wholesaler sector;
Any large payroll database is an attractive prospect to an organised ID hijacker (e.g.
supermarkets);
Rogue agents in the immigration services sector;
Financial institutions;
Retailers (including Internet retailers);
Telephony and computer components sectors; and Government entitlement programmes.


Case study: United Kingdom research into areas of vulnerability
The United Kingdoms Home Office Identity Fraud Steering Committee has commissioned
research into areas of vulnerability, for example, use of identity data belonging to deceased
persons to commit identity crimes.
Research has been undertaken by various organisations and groups such as CIFAS (the UK fraud
advisory service) to determine which occupational groups, industries/sectors and individuals are
particularly vulnerable to identity crime.

Quantifying the risks associated with identity fraud
13. Most of the countries surveyed have not attempted to quantify the economic cost and/or the
level of tax evasion and money laundering associated with identity fraud. However, in the
countries that have made such estimations, the amounts are significant.

Examples of economic cost and level of tax evasion and money laundering associated with
identity fraud:
The estimated cost of identity fraud in Australia is between AUD$1 - 4 billion annually.
In Canada, it is estimated that consumers, banks, credit card firms, stores and other businesses
lost CAN$2.5 billion to perpetrators of identity theft in 2002.
In Ireland, an evaluation in 2000 by the Department of Social & Family Affairs estimated the loss
in social security claims to be between 25 million and 50 million per annum.
In Portugal, although the level of fiscal fraud in this area is not quantified, it is estimated that it
runs into many millions of euros.
In the United Kingdom, the Home Office Identity Fraud Steering Committee estimates that
identity fraud costs the UK economy 1.7 billion. The latest HM Revenue and Customs (HMRC)
estimates for 2005-06 show that attempts to defraud the tax credits system totalled 540 million;
of this, HMRC was able to detect and prevent attempts worth 409 million, the vast majority
before they were paid out.
In the United States, private sector research revealed that approximately 9.3 million adults had
been victims of identity fraud in 2003, and that total losses (individual and corporate) from
identity fraud exceeded US$52 billion. The research also found that approximately 8.9 million
adults had been victims of identity fraud in 2004, and that total losses exceeded US$56 billion.
The number of Suspicious Activity Reports (SARs) filed by financial institutions in the United
States where identity fraud has been suspected has increased over the last three years. The
numbers of SARs filed are 4,112, 17,011, and 23,791 for the years 2003, 2004 and 2005
respectively.


How countries detect suspected cases of tax evasion and money laundering involving identity
fraud
Detection strategies and techniques
14. Most of the countries surveyed use a combination of intelligence gathering, risk analysis, risk
profiling and data matching to detect cases of tax fraud and/or money laundering using identity
theft and identity fraud. Several countries report that data matching and other information sharing
activities between tax authorities and other government agencies are carried out to detect and
investigate suspected cases of tax evasion and/or money laundering involving identity fraud.
Case studies: Detection strategies and techniques
Canada: Specialized teams have been established within the Canadian tax authority that verify
the integrity of registration data and risk assess new GST registrations against risk criteria such as
those who do not appear to have the income to start a business or appear too young to start a
business. Other detection strategies include:
Using specialized high-risk teams that proactively search for potential GST fraud and look for
relationships between accounts to identify fictitious entities using internal and external
databases.
Carrying out computerized validity checks for processing credit returns and identifying
duplicate returns.
Profiling of known cases to identify the characteristics of such schemes.
Establishing a cross-functional working group to study the increase in fraudulent income tax
returns and make recommendations to improve identity procedures, systems and practices to
curtail this type of fraud.
France: Chief among the national methods used is the power to require disclosure, a procedure
that allows an official of the French tax authorities to obtain information from a third party. In
this particular case, it enables an official to request an identity check with the National Identity
Register, which is under the authority of another administration. National means can also be used
in tandem with international administrative co-operation, which is really effective in this area.
One example is the European EUROCANET Database which lists the largest telephony and
computer component operators. Using this base, member states can run cross-checks placing the
operators in question under constant surveillance.
Sweden: The transparency in the Swedish system has prevented identity fraud being used to
commit large-scale tax fraud. Every Swedish citizen can check what is registered in different
registers. If a person tries to steal an identity at one end of this system, it will always generate a
question or a message to the "real person" from another part of the system that something is
wrong or must be changed.
United Kingdom:
Developed random enquiry programmes designed primarily to detect internal fraud but will
highlight other issues.
Developed HMRCs risk assessment process to identify in advance those cases which are
likely to be fraudulent, so as to stop them going into payment.
Embedded compliance specialists in contact centres, thereby providing additional support and
specialist knowledge.
Increased pre-payment checks into claims where fraud or non-compliance is suspected.
Strengthened co-operation by working closely with other Government Departments and the
private sector for example referrals received under the Proceeds of Crime Act (POCA).
Use of Suspicious Activity Reports (SARs) under POCA.
General Risk analysis: Profiling in HMRC data of information from customer self assessment
returns and other third party information.
Directed case selection based upon knowledge of risk of specific industries, for example
Construction Industry.

United States:
The IRS Identity Theft Program Office-Identity Theft Enterprise Strategy: This strategy
represents a comprehensive approach to combating identity theft by focusing on outreach,
prevention and victim assistance. The outreach component seeks to alert and inform tax
professionals, taxpayers, and other interested parties of the threat identity theft poses to tax
administration. The prevention components objective is to proactively address identity theft
within the context of tax administration. An example of these activities is the IRSs efforts to
identify and deter phishing schemes before taxpayers can be victimized. The third prong of
the strategy is victim assistance, the important task of mitigating and correcting the harm
suffered by taxpayers that are victims of identity theft.
Case studies: Detection strategies and techniques
United States: continued

The IRS Criminal Investigations Questionable Refund Program (QRP) and Return Preparer
Program (RPP) are focused on identifying and stopping fraudulent tax refund claims schemes.
These schemes often involve hundreds of returns with refunds totalling hundreds of thousands
or even millions of dollars of revenue at stake. Investigating and prosecuting those
responsible for these ambitious schemes ranks among the programs' highest priorities. Though
identity theft is not a component of all fraudulent refund schemes, the rise of identity theft has
helped fuel an increase in fraudulent refund schemes and other tax frauds, specifically
employment tax fraud.


15. Most countries report that the strategies and techniques used by their tax authorities to
detect tax evasion and money laundering involving identity fraud have been successful in terms
of:
Improving identification of suitable cases to audit;
Preventing revenue loss through proactive data mining;
Enabling the prosecution of cases that otherwise may have never been detected; and
Providing the quickest opportunity to review returns that potentially use a stolen identity
before the refunds are issued and thereby likely irretrievable.
What red flag indicators are used to detect possible cases of tax evasion and/or money
laundering involving identity fraud?
16. Several red flag indicators are used by tax authorities to detect possible cases of tax
evasion and/or money laundering involving identity fraud. These indicators are outlined below in
six categories:
Geographic - Address/Location:
Address used to facilitate the identity fraud.
Address of the suspected person.
Use of common address and bank accounts by several people and corporations.
Client filing returns in different regions of the country.
Post Office Box addresses being used, or the use of non-existent addresses, e.g.,
residence, employer address, etc.; or the postal code for the client or employer is not
consistent with the address given.
Business not located where person lives.
Tax refunds posted to same address.
Tax refunds sent to post office/mail boxes rather than a real address.
Tax refunds mailed to address other than that listed on tax return as residence of taxpayer.
Tax refunds are being sent to return preparers address.
Financial Analysis:
Value of tax refund or rebate.
Large unusual claims and deductions, or similar claims all made in the same manner or
format.


Income appears unreasonable for the client; e.g., first year filer; tax deducted unusually high for
earnings reported.
Excessive deposits whose origins are not justified.
Acquisition of luxury transport means.
Under invoicing on real estate sector.
Analysis of Suspicious Activity Reports (SARs) indicating the use of several bank
accounts receiving large deposits from different sources.
Tax withholding amounts are much larger than would be appropriate for amount of
income earned.
Insufficient income to start a business. Transactions involving tax havens.
Documentation and Business Operations:
Similar typing, handwriting, addresses, signatures, format, refund amounts.
Apparently unrelated returns all packaged the same.
Same staples/paper clips used, and/or inserted in similar places on the return and/or the
Order of Attachments is the same.
Same discounter used on multiple returns. This may imply collusion or possible scheme
by discounter or employees.
Signatures on duplicate returns appear different.
Receipts of any kind appear to have been written or altered by client or tax preparer.
Income tax source deduction slips for different employers apparently prepared by the
same individual (e.g. same handwriting, or with the same typewriter or computer printer).
No employer identification on income tax source deduction slips, or curious/odd looking
employer names.
income tax source deduction slips filed by client is prepared differently from other
deduction slips filed by the same employer.


Information slips appear altered. Companies that do not report income but have
performed transactions reported by third parties.
Communications of the control financial authorities and public notaries to the tax
administration.
Use of nominees and the use of corporate vehicles to hide behind.
Individual Characteristics, Identity, Behaviour and Associations:
Residency status of suspected person(s).
Association with certain tax agents.
Compliance history of suspected person(s).
Group of clients in the same age group.
Tax Identification Numbers (TINs) in the same range; e.g. TINs beginning with the same
first 3 digits.
Similar style family names on a group of returns, e.g. White/Black/Green or
Anderson/Sanderson/Henderson.
Group of clients with different employers but in the same profession.
Multiple referrals with same employer.
Suspected person possibly too young or too old to start a business.
Contact purported registrant and they claim not to know anything about the business.
Taxpayers that cannot recognize or properly explain the operations associated with them
when questioned by tax auditors.
The repeated loss of an identity card (several times a year)
Taxpayers that cannot recognize ownership of relevant bank accounts.
Timing
Multiple numbers of returns filed simultaneously, or dated on and around the same date.



Other:
Some level of detection may be derived from requests for information made in unusual
circumstances, e.g. illegal approaches by bogus HMRC officers relating to a tax or
lottery- related issue.
Social Security number placed on tax returns does not match Social Security Database.
Multiple returns are filed with variations of the same Social Security Numbers
(Scrambled SSNs).
Information sources available to tax authorities to assist in the detection and investigation of cases
involving tax evasion and money laundering involving identity fraud.
17. Most of the countries surveyed use multiple sources of information, available within and
external to their tax authority, to detect and investigate possible cases of tax evasion and/or money
laundering involving identity fraud. Effective information sharing between tax authorities and
other domestic agencies is also crucial to detecting and investigating such cases.
18. Examples of useful sources of information available within or obtained by tax authorities
for such purposes include:
Information contained in tax returns.
Real estate transactions and mortgage loans/mortgage loan agreements performed by a
Notary Public.
Printing jobs undertaken by printing houses authorized by the tax authority.
Registers information on real estate, aircraft and vessels.
Transactions performed by agents of foreign non-resident taxpayers and/or reported by
third parties in the transaction.
Birth registers, driver licence registers etc.
Employer records.
Financial institution records.
Open source information (e.g. telephone records, Internet, newspapers, etc).


Disclosures from Financial Intelligence Units (FIUs).
Spontaneous exchange of information received from other States; and Credit reference
agencies.
19. Several countries reported that their tax authorities have arrangements with other
government and third party agencies [e.g. Memoranda of Understanding (MOUs)] to exchange
information on relevant matters. Such other government institutions include social security,
customs and immigration agencies; drivers licence and birth registrars; police and other law
enforcement agencies; overseas tax authorities; postal services and trade commissions.
How countries investigate cases of suspected tax evasion and money laundering involving
identity fraud (including multi-agency cooperation)
20. Several countries report that their tax authority investigates cases of identity theft/fraud either
independently or in partnership with other law enforcement agencies (including FIUs). In
Australia, tax agents and communications carriers also play an important role in the detection of
perpetrators. In Canada, some tax officials are seconded to Integrated Proceeds of Crime (IPOC)
units that investigate such offences. In order to combat the underground economy and organised
crime more effectively, France has put in place regional task-forces (Groupes dIntervention
Rgionaux, GIR). These are staffed by police and customs officers, the gendarmerie, tax
inspectors and personnel from the competition and anti-fraud directorate and from URSSAF
(social security). In Germany, if tax audits reveal grounds to suspect identity fraud (or money
laundering), the prosecuting authorities are informed and they may then conduct searches /
seizures as necessary. If when conducting searches/seizures because of tax evasion the tax
investigation service finds documents which point to identity fraud (or money laundering), these
are handed over to the prosecuting authorities for further action. In Ireland, the tax authority and
social welfare agency have joint investigation units that facilitate investigations.


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