Zappers BU Law - Boston University
Contents
1. Mellan 2005 03 11 EI 00 00 HusJbjuder Rabatt och 2005 03 11 EE 23 59 Korrigering av kvitto Kvitto Tid fran korrigerat i i i Mellan 00 00 och 23 59 Korrigering artikel Criteria number Filter Gost Konton Password fj Alla anvindas ID Bill Total ro Password Mellan o Unselect Betalning All xl x XK error 5 SP5 YAKINIKU Skapa kvitto Unselect Double Click on the secret module It is not all that apparent what you need to do here but by double clicking in the box in the lower left entering an ID and a password you will get to the next screen the Electronic Journal which be adjusted S gt Elektronisk journal Restaurant Change password E POS Nb Waiters Das 2CAFE 2 S SERV 3 x 20050311 IS au 20080311 J t Bill Total Recipt time Iv All 17 Upper to 0 Entre 00 00 och 23 59 EUREN Aa Date 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 TotalSales 40 836 31 kr Time Nb ticket Replaced by Total removed O00002 1 Direkt kr 000003 1 Direkt kr O00004 1 Direkt kr ooo0o0o0s 1 Direkt kr O00006 1 Direkt kr O00007 1 Direkt kr O10001 2 Bord kr O00008 1 Direkt kr O00010 1 Direkt kr O00011 1 Direkt kr O000122. 1 Direkt kr 000013 1 Direkt kr O00014 1 Direkt kr 0OD00015 1 Direkt kr 000016 1 Direkt kr O00017 1 Direkt kr 0O00018 1 Direkt kr 00001393 1 Direkt kr Manual selecting of replacement tickets PP PEPPEPHEHHPPPPHPHHPHPFPFPHHHH PEPEPEEEEPEPEEEEEEEEEE Total Total Total Gross 40 836 31 kr 2 auto repface So assume we take the selection of a ticket approach 1 When we select the first item ticket number 2 1 we then get x Elektronisk journal e Change password Restaurant MW aiters Date 2 CAFE 2 3SERv 2005 03 11 ais au 2005 03 11 sis 4 SER 4 Bill T otal Recipt time Upper to Entre 00 00 och 23 59 List of tickets paid in cash Articles exclure Date Time Nb ticket Replaced by Total removed O00002 1 1 lI ao 20 00 kr 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 05 03 11 PPEEEPEPEEPEEEEPEE Manual selecting of replacement tickets Total Sales Amount to remove Threshold amount Total P Total 20 00 k Total Gross Ticket 2 1 has been changed from 65 00 to 45 00 with a reduction of 20 00 on this ticket There is a running total kept in case you want to remove more x EX 3 Elektronisk journal Change password Restaurant Waiters Date 2CAFE 2 3SERv 3 2005 03 11 au 2005 03 11 4 SERV
3. 11 full roll out Results published February 14 2013 C 160 million voluntary increase by 2018 19 C 2 3 billion C 1 3 billion fines and assessments Based on Quebec State GDP billions of Quebec Est Tax Losses Quebec 5166 9 425 million California 1 1 118 7 670 52 847 billion New York 2 706 6 423 1 798 billion Texas 3 641 3 384 1 632 billion Illinois 4 422 2 253 51 075 billion Florida 5 413 9 248 1 054 billion Massachusetts 239 4 143 608 million Total 21 095 billion Three US Zapper Cases e Stew Leonard s Dairy 1994 e Custom made zapper former NCR IT expert e Zapper is kept in a hollowed out book in office 517m IRS income tax audit Customs uncovered e LaShish Restaurants 2007 e Zapper kept at owner s residence connected to ECRs at 13 restaurants e Skim 520m 4 years sent to Hezbollah Lebanon CIA mole sister in law wife in prison e Husband is fugitive from US in Lebanon e Theodore Kramer 2011 Installer Journal Sales Remover program 2 strip clubs over 500 000 gross sales 5 years in prison plea bargain will talk Ohio I HOPs US District Court Northern District of Ohio Western Division 3 12 cr 262 DAK filed 5 22 201 18 people indicted 53 million Tare Elkafrawi FBI ICE HSI Joint Terrorism Task Force Egypt Jordan Lebanon Change in POS 2010 Internet access Two franchise fees E
4. 4 5 SERV 5 Bill T otal Recipt time Unselect Upper to 0 Entre 00 00 Heplacement tickets och 23 58 List of tickets paid in cash Article List Tickets 334 FLASKOL SOCL Add Price Level Normal Erase Ticket Jj Total 45 00 kr Ticket with List of replacement tickets commission 334 FLASKOL SOCL Total Sales Total P Total Total Gross Notice the price reduction The Swedish VAT is at 25 aduction we could have gone lower Notice the tax 21 LUNCH 4 65 00 KONTANT Original 1 65 00 MOMS 25 1 13 00 TOTAL EVITTO Direkt POS number 1 Bord 0 GAST ANT 1 nr l 2005 03 11 11 13 Kvitto NBE 000002 1 Servit 1 FLASKOL SOCL Manipulated MOMS 25 TOTAL KVITTO Direkt POS number 1 Bord NE 0 GAST ANT 1 2005 03 11 11 13 Kvitto NE 000002 ee 4 Comparison Original amp Journal Notice the reduction in gross sales amp the reduction in If this record is tied into inventory control adjustments in related purchases will be necessary some zappers will do this for you because you may have just sold more beer than you ordered D TOO120050311 TIC Anteckningar Arkiv Redigera Format Visa Hj lp d 34 1 450 R 150 4 1 1 is h 21 1 60H x bees 001 K1 1 B 1103051113000002 1 4500076700060 08 H 111 3 1 6800 1103051113000002 1 650007670006001H 1 68000 Manipul
5. Sales Suppression Software Zappers Richard T Ainsworth Director BU Graduate Tax Program Thursday September 26 2013 1 00 2 00 Room 620 Theme Market place This is a Mid size business issue 1 Skimming has been an individual fraud issue not a market place issue 2 Phantom ware applications show skimming entering the market place Self help phantom ware Factory installed phantom ware 3 Zappers developed next Installers rogue developers smaller developers 4 Internet based programs Development Time Line Entering the market place 0 4 Skimming Factory installed Double Tills Phantom ware Self help Zappers Phantom ware Where are we going New Practice Area Tax Technology began writing on Zappers February 21 2008 Traditional tax audits federal and state CIT PIT SUT Tax amp employment withholdings oearch amp seizure of business records notably technology based records See NY regulations Employee embezzlement New security systems Mandatory not in US yet often found outside US Voluntary good business practices New Tax Technology Course Spring Term 2014 1 credit Online Tax Technology course outline Round table Tax Technology partners from Big 4 Direct Taxes corporate and individual Indirect Taxes VAT SUT Transfer Pricing engines used for comparable searches Brazil s technology revolution SPED IRS how t
6. ated Original 1 13608 SEI 2 0G D DOS 1103051120000003 1 68000767600600 N Comparison of the TIC files Manipulated 4 Original Notice the in the Manipulated version in contrast with the letters I amp P in the original version This one of the tell tale signs of manipulation in this particular program It may indicate that the system has not been correctly updated since the manipulation procedure
7. hey audit with technology TEXAS Justin Driscoll Possession of Automated Sales Suppression Devices and Phantom Ware is Illegal e Senate Bill 529 effective Sept 1 2013 makes it a state jail felony to knowingly sell purchase install transfer or possess any automated sales suppression device or phantom ware including any device that contains a sales suppression device or a link to sales suppression software Automated sales suppression devices and phantom ware sometimes known as Zappers are devices or software used to commit tax fraud by falsifying sales data on electronic cash registers at the point of sale Business amp Commerce Code Sections 326 001 and 326 002 Code of Criminal Procedure Article 59 01 State Legislative Activity 9 25 13 State Status State Status Arkansas AR SB 718 Michigan Law California Law North NC SB 465 Carolina Connecticut Law North Dakota Law Florida FL SPB 7128 Oklahoma Law Georgia Law Tennessee Law Hawaii HI SB 1189 Texas Law Illinois Law Utah Law Indiana Law Vermont Law Kentucky KY HB 185 Washington Law Louisiana Law West Virginia Law Maine Law Wyoming Law Massachusett MA SB 1389 17 6 S Quebec e Problem e 500 new cases each year e 10 000 delinquent accounts 425 million per year tax loss in restaurant sales only e Solution e Sales Recording Module SRM Hand help optical scanner 46 restaurants 7 cities pilot project November 2009 20
8. quipment land royalty advertising 8 net sales Manipulation of Sales payroll false SSN multiple SSN 200 illegal workers underpaid for overtime New system manipulation of hours worked weekly central administration credit 2 300 Remote access to Ohio new system with specific on line software viewer software from home computers reset clock manipulate cash transactions because tickets remained open new system taken off line Richard Found One was able to see a zapper in person interesting can not believe how easy it works con double click password e Eliminate manually or automatic Maybe 10 min All ECRs must be off to re index Installer identified installed in 2008 Owner showed how it works Proof of deficiency difficult estimates will pay in full e Will use Zapper for training Richard is a zapper in here o There is a chain of five restaurants in the same town two high end three middle to higher end Labor ratio is 26 percent should be around 38 to 40 mostly credit cards seems high though the average is about 88 percent on preliminary analysis same POS suspect that maybe credit cards could be diverted need to dive deep to see what is there the labor is out of line based on analysis of what we usually see Richard what do you think zapper Another one we have the electronic data and the orde
9. r numbers are missing throughout the audit at a rate of 11 percent per quarter Guest check numbers are missing at a smaller rate the order numbers are deep programmed where there are reasons for missing guest receipt numbers to be missed per software IT folks they say order numbers should always show zapper Phantom ware There are two types Self help Factory Installed Type 1 Self help Phantom ware Modern ECRs can be re programmed to eliminate the audit trail critical records Z Reports daily periodic end of day report that records sales taxes media totals discounts voids etc e X Reports same as Z Reports except they do not reset the system after being taken Electronic Journal records all transactions blow by blow entered in the machine Programming is secret not in user s manual limit access bad employee issues 2 Factory installed Phantom ware Does not require re programming e Secret hidden functionality built in to ECR Not discussed in user s manual Not visible in menu structure e Commonly revealed only in oral communications with Installer Sales representative The idea is to remove the need to re program appers There are three generations Zappers Past Zappers Present Zappers Yet to Come Zapper from the Past This is an old Quebec Zapper It has been hard wired into the ECR The picture sho
10. siness services So What s Happening Now Penalize the Installer law E A Stings with false businesses Privacy concerns with technology solutions some opt for severe limited enforcement Oklahoma broad conditional enforcement Missou bad apple enforcement New York Credit cards the internet the cloud What s Coming Credit card skimming e Virtual frauds e Virtual security The Future e Current technology solutions require a receipt http www skatteverket se privat kvitto webbfilmmedengelsktext 4 71004e4c133e23bf6db80003181 html Internet based Zappers Zapper as a Service Six cases in Portugal UK Norway Ng Carolina e Zappers have migrated to the cloud e Tablets phones hand held devices The ECR is a dinosaur Big retail stores hardware stores Amn Further Reading An American Look at Zappers A Paper for the Physikalisch Technische Bundesanstalt Revisionssicheres System Zur Aufzeichnung Von Kassenvorgangen Und Messinformationenthe http papers ssrn com so13 papers cfm abstract id 2026140 e Zappers amp Phantom Ware A Global Demand for Tax Fraud Technology http papers ssrn com sol3 papers cfm abstract id21139826 e Zappers Tax Fraud Technology and Terrorist Funding http papers ssrn com sol3 papers cfm abstract id21095266 Thanks e Richard T Ainsworth Director Boston University Graduate Tax Program va
11. tprof bu edu Supplemental Slides Details from Sweden based on the System presented above So before manipulation here is the electronic journal the sales report the sales receipt 2006 10 05 15 02 41 ELECTRONIC JOURNAL UTSKRIFT 2005 03 11 00 00 2005 03 11 23 59 2005 03 11 11 13 dece cde cde cde cde cde cde cde cde cde cde AA AA AA 23 LUNCH BUFFE 1 KONTANT MOMS 25 Electronic Journal before manipulation 1 Item number 21 is a Lunch B 2 It cost 65 00 kroner 3 The receipt is number 2 1 Fors per familj 2005 03 11 till 2005 03 11 Unknown family AVHANMTNING DRINK 41 046 01 kr Out of SALES Rabatt 209 70 kr Sales Report before manipulation We need this for comparison later TO0120050311 TIC Anteckningar Ark Redigera Format Visa Hj lp Ch 215 1 Cesoo Da mP T 4 wis x ik al 1300P Q 2 OG D S GP a103051112960002 2 3 650007670006001H F A 23 4 68006 R L 6800D x L 135606 Q 2 OG D EF 1103051120000003 1 680007676006001N Sales receipt before manipulation These are in the 1 files for tickets Notice 1 ltem number 21 2 Sales price of 65 00 kroner 3 Ticket number receipt number 2 1 To manipulate the data you insert the zapper silver memory stick There is a new version of the CMDCAR DLL program on the zapper m Utskrift av journal fees Restaurang Kvitto datum fran
12. ws the top of the ECR removed and the yellow arrow points to the device e When Zappers are added to ECRs this way it is very easy to find them People only do it this way in jurisdictions that are not looking for them C00003 jpg 1280x960x16M jpeg Zappers Present Note this Swedish zapper requires a lot of manual intervention Sal specific brand of cash register blood Manufactured in Paris since 1983 Popular in Italy Belgium Portugal Spain Germany Denmark Australia USA and North Africa Uses Specific kind of back office program Cash register is connected to a PC in the back office like the one on the following slide Back Office Notice the dongle grey memory stick protecting proprietary program Notice the silver memory stick this is the zapper Restodata is programmed to automatically download all information about transactions from all cash registers every morning at for example 5 00 am Details of a zapping from oweden oee supplemental slides Sweden Retail Innovation Now 75 of the market dominated by one transactional security company Retail Innovation program is called CleanCash may visit BU in November VAT rate 25 1 billion lost Certified Cash Registers required and yearly recovery is 355 million What is the new business model Where are the new jobs for lawyers with tax Skills in mid sized bu
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