Open-Source Intelligence (OSINT): What it is, and How it’s Changing the Game in Tax Compliance

The way businesses operate has evolved dramatically in the digital age. Transactions happen across borders, in real-time, and on a scale never seen before. With just a click, we can buy and sell anything, anywhere, at any time. The digital age has also enabled emerging markets such as short-term rentals, the gig economy, and crypto trading to flourish. Unsurprisingly, nearly one-third of global business activity now occurs online, with the U.S. eCommerce market alone generating $1.2 trillion in 2024. And In our 2024 report, IVIX estimated that Bitcoin-related capital gains in the U.S. alone totaled $30 billion annually.

While this digital transformation has fueled economic growth, it has also introduced significant tax compliance challenges. Individuals can operate multiple businesses, brands, and digital storefronts under different names and across various marketplaces and jurisdictions, while also running a sizable short-term rentals operation, getting paid to promote products on social media, and engaging in high-volume crypto trading. Intentionally or unintentionally, individuals may underreport their business revenue – or fail to report certain revenue streams altogether. The lack of information reporting in emerging markets, coupled with the speed and anonymity inherent in these markets, puts them at high risk for noncompliance and makes activity difficult to track.

Tax avoidance has become more sophisticated in the digital age, and for tax authorities, gaining visibility into revenue-generating activities has never been more challenging. Traditional methods used to enforce compliance are no match for the high-speed, high-volume, often-anonymous digital economy. How do tax authorities keep up?

The answer lies in Open-Source Intelligence (OSINT). While the term may sound daunting, it’s actually a simple concept, and something we’ve all been doing on a daily basis for years. Now, thanks to advancements in AI and automation, OSINT has also become instrumental in helping tax authorities around the world close the tax gap.

What is OSINT?

At its core, OSINT is the process of collecting and analyzing publicly available data to generate insights. We all use OSINT in our daily lives when we read reviews to decide which product to buy, peruse the careers page of a website, or google a recipe to make for dinner. (Fun fact: if you googled the term “OSINT,” you’d be using OSINT to learn about OSINT.)

The key element of OSINT is that the data is publicly available, drawing from public sources such as websites, social media, public records, business registries, news articles and the like. OSINT relies solely on legally accessible data, making it a non-intrusive, ethical, and highly effective way to gather information.

OSINT also respects privacy laws. OSINT practices are governed by strict legal and ethical frameworks, ensuring compliance with data protection laws such as the GDPR or similar national regulations. This means that OSINT tools cannot and do not intrude on personal privacy. In addition, advanced OSINT tools automate the collection of public data without targeting individuals unfairly or creating bias. This ensures that data collection is objective and impartial.

For all these reasons, OSINT is a powerful research tool. And as the vast ocean of public data grows, so does the value of OSINT. However, scouring increasingly massive volumes of data to parse out relevant information can be a tedious, all-consuming task. So how do resource-strapped tax authorities efficiently leverage OSINT without getting overwhelmed by data?

Unlocking the Power of OSINT

What has made OSINT so instrumental for tax authorities is the introduction of specialized, AI-driven automation tools like IVIX that have been purpose-built for tax authorities. IVIX taps OSINT to rapidly, and at scale, scour business activity across high-risk markets to pinpoint cases of noncompliance, then cross-reference that data for many thousands of entities – in a fraction of the time it takes to do manually.

IVIX also applies advanced data analytics to OSINT to detect anomalies, prioritize cases of noncompliance by risk and magnitude, and match this data against taxpayer records, automatically calculating any tax discrepancies.

IVIX unlocks the power of OSINT through:

1. Data collection and synthesis: IVIX’s specialized data extraction tools systematically scan the digital landscape, collecting OSINT and synthesizing it. Advanced Al algorithms identify, categorize, extract, and attribute relevant data.

2. Actionable insights: IVIX transforms this data into meaningful insights, aligning business activity with the entity behind the activity, and providing clear revenue resolution for each entity. While challenging to do manually, IVIX can do this at speed and scale, within minutes for many thousands of records.

3. Graph database: The structured data becomes part of IVIX’s vast links analysis database, where it is indexed and analyzed for context, resulting in documented evidence and actionable insights for existing cases, plus proven leads for new cases.

4. Automated data matching: Insights, leads, and evidence are seamlessly matched to authorities’ data in a secure on-premise environment, identifying corresponding taxpayer entities and calculating any subsequent tax filing discrepancies.

When coupled with the right technology, tax authorities can harness the power of OSINT without being buried in data. As a result, authorities get an efficient, cost-effective, and scalable solution that changes the game in tax compliance.

Some of the benefits tax authorities are seeing with IVIX include:

·      Better visibility into true business activity: By harnessing OSINT instead of relying solely upon self-reported data in tax returns, authorities get a more accurate and comprehensive picture of business activity and income, expanding and sharpening the investigative lens. A European tax authority used IVIX to uncover more than $4 billion in previously hidden offshore assets, while another tax authority surfaced 100 leads representing over $100M in unreported business activity.

·     Assured accuracy: IVIX has over 99% accuracy in identifying the taxpayer entity behind business activity, even when it is semi-anonymous, in several languages, or multiple locations. This becomes especially valuable in markets such as crypto trading, short-term rentals, or social media influencers, where true identities are often hidden.

·     Actionable leads: IVIX uncovers new leads by identifying businesses and individuals most likely to be under-reporting their real income, documented and ranked by potential impact. IVIX leads have been found to carry a remarkable 97% accuracy rate.

·     Operational efficiency: With IVIX, authorities can quickly pinpoint and prioritize the highest-impact cases, supporting each case from start to finish – with full access to underlying data. This reduces false positives while accelerating audits, expediting case closures and equipping tax authorities to more quickly close the tax gap.

OSINT is the Future of Tax Compliance

As digital commerce continues to evolve, traditional tax enforcement methods are no longer enough. It’s time for authorities to bring tax compliance into the digital age, and OSINT holds the key. As governments continue to modernize tax systems, the integration of OSINT capabilities will be pivotal in ensuring fair and accurate tax collection—benefiting both authorities and society as a whole.

For more on how OSINT can help tax authorities, check out former IRS-CI Chief and IVIX CBO Don Fort’s blog, published by the Inter-American Center of Tax Administrations (CIAT). For more about IVIX, visit https://www.ivix.ai.