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The Australian Tax Office seeks real-time fraud detection technology to counter rising tax scams and unauthorised transactions.
By Julian Bajkowski FEBRUARY 17, 2025
The Australian Taxation Office will move to a more aggressive and ‘real-time’ counter-fraud posture in an attempt to arrest the ever-rising tide of scams and frauds aimed at taxpayers. Ordinary Australians are becoming prime targets of organised crooks who seek to steal annual refunds or claim fictitious deductions and expenses for reimbursement.
The ATO on Friday revealed it had approached the market for suppliers to build a sophisticated new fraud scanning and sniffing capability that can identify, quarantine, halt, delay or double-check suspicious transactions literally as they occur.
Tax refund fraud, where criminals essentially redirect funds to their own ledgers by taking over MyGov accounts was recently clocked at costing around $557 million in two years up to February 2023, with the fraud trend tracking strongly upward.
There is also an increased urgency around puncturing the Tax Refund fraud balloon quickly, indeed instantly as transactions occur, because the ATO is on the hook for the money, rather than, say, a bank.
Banks are also increasingly shifting to real-time transactions at the instigation of the Reserve Bank of Australia (RBA), which has been prodding institutions to speed up clearance and settlement times from the current two days for account-to-account transfers (known as “T+2”).
The RBA is also the transactional bank for major Commonwealth agencies like the ATO, Health (Medicare) and Services Australia (Centrelink), making it one of the key users of the New Payments Platform over which real-time transactions run.
Documents provided to industry by the RBA for the build of the new real-time counter-fraud capability said that the “sea of ATO digital services has increased exponentially over recent years” and that “2023-24 usage of … ATO online services for individuals [totalled] approximately 14.2 million users, 88.8 million sessions” while the use of the ATO app was approximately 2.4 million users, 24 million sessions.
The mobile app is vastly preferable as a first digital interaction for customers because it can use native biometric features in phones like facial recognition or fingerprints for access control.
“The Counter Fraud Program (CFP) is strengthening ATO digital systems and controls, preparing to adopt industry best practices, and implementing new fraud prevention capabilities to help the ATO prevent, detect, monitor and respond to identity crime-enabled fraud attacks on our systems,” the ATO said.
“In order to strengthen digital systems, its system integrity and fraud monitoring ecosystem, and reinforce its online fraud prevention capability, the ATO is seeking to:
- embed a greater upfront and client-centric fraud prevention focus across the ATO
-adopt industry best practices as shown by leading financial institutions e.g. banks
- assess external fraud risks in real-time to determine whether digital transactions should be allowed, stopped, flagged for review or initiate digital client interventions.”
The supposed industry best practice allegedly exemplified by banks could raise a few eyebrows, not least because it has primarily been companies like Apple that made security features such as biometrics mainstream on mobile devices, where the likes of electronic credit card fraud are minimal.
Conversely, fraud committed through so-called ‘authorised transactions’ — or where a person is duped into sending from their account to a fraudster’s account, rather than just having the money surreptitiously stolen — is where the huge growth has been.
The problem here is that when transactions go real-time, so too does fraud, and it’s often too quick to catch. Absurdly, banks are now literally retarding their real-time payment capabilities to have enough time to scratch and sniff bulk transfers like they used to in batch file days.
Not everyone, especially merchants and consumers on the hook for authorised transaction fraud agrees the system to date exemplifies best practice; meanwhile, banks remained viscerally opposed to taking on any new liability for authorised fraud losses.
According to the ATO, its new “online fraud prevention capability will align to … high-level principles” that include the ability to “ingest data in real-time and analyse for risks to trigger and apply dynamic treatment depending on the risk.”
Non-stop uptime is also required, specifically that the “system should be available all the time to ensure no transactions are processed without proper risk analysis being undertaken”.
It also has to be able to scale rapidly and be able to “grow and cater for emerging fraud patterns and data requirements as well as peak loads during tax time.”
Of particular importance is configurability, or perhaps re-configurability, given that once fraud typologies are identified and stomped, new ones emerge and need new parameters to detect.
The ATO said that to “establish the online fraud-prevention capability, the ATO will develop data ingestion and data storage in-house. The ATO is seeking market-leading products or a suite of technologies for a real-time fraud risk engine.”
The ATO’s statement of requirements that rank the mandatory ‘must haves’ as opposed to ‘highly desirable’ are also illuminating.
On the real-time analysis front, mandatory capabilities include the “ability to ingest and receive interaction, transaction, and historical data in real-time” with data received including structured and unstructured data.
There’s also the mandated “ability to analyse, identify, and classify events in real-time, including detecting connected activities, anomalies, patterns of behaviour, and emerging fraud threats.”
Perhaps the most important feature is what could loosely be termed an automatic handbrake on electronic transactions.
This is listed as a mandatory “ability to trigger/request orchestration actions in real-time (eg. event interventions). This may include (but is not limited to) allow, stop, alert/flag, or trigger action to an integrated system.”
Real-time rich reporting of the system is also down as mandatory, as is local hosting and data sovereignty.
The tender for the ATO’s Real-Time Fraud Risk Engine closes on March 21, 2025, at 3pm.
