How the Australian Federal Police says it “smashed” a $165 million tax fraud ring through Operation Elbrus
Thursday, May 18, 2017/
The Australian Federal Police has claimed to have “smashed” a major tax fraud ring after charging nine individuals for their alleged involvement in a $165 million syndicate and seizing luxury cars, aircraft and residential houses believed to be the proceeds of crime.
Today the AFP and the Australian Taxation Office have released details of Operation Elbrus, an eight-month month investigation that resulted in the execution of 28 search warrants on Wednesday in Sydney, Wollongong and the Southern Highlands by 209 AFP representatives. Another six warrants are expected to be carried out today.
Six people have already been charged with conspiracy to defraud the Commonwealth through their alleged involvement in the scheme, while others are facing extortion and blackmail related charges.
The ABC reports one of those charged is Adam Cranston, the son of deputy tax commissioner Michael Cranston. According to the same report, Michael Cranston was also issued with a court attendance notice yesterday.
In a statement, AFP deputy commissioner Leanne Close said the case involves alleged activity that the agency has not seen before.
“The scale of this alleged fraud is unprecedented for the AFP; the response from our members yesterday is a direct response to the level of offending that we have identified during this operation,” Close said.
Nine people have been charged in relation to the investigation, including six individuals who have been charged with conspiracy to defraud the Commonwealth for their alleged roles in the syndicate.
One other man has been issued a court attendance notice for allegedly abusing his position as a public official, the AFP says, but this individual was not involved in the syndicate.
The AFP will allege the syndicate was involved in a scheme that involved the creation of a payroll company, through which it served legitimate clients. Funds from this company were allegedly passed on to subcontracted companies, also controlled by members of the syndicate, to process payments to individual workers of the clients. The AFP describes these subcontracted businesses as “Tier 2” companies.
It’s alleged these Tier 2 companies were required to send Pay-As-You-Go tax instalments to the ATO on behalf of the clients, but only part of the required funds were paid. The AFP alleges some of these funds were “siphoned” off and “channeled through a complex series of companies and trusts for their own personal gain”, according to a statement released this morning.
How it was uncovered
“Investigations such as this are inherently complex and we still have a lot more work to undertake as we analyse the material that has been seized,” AFP deputy commissioner Leanne Close said this morning.
According to the federal police, Operation Elbrus has to so far involved eight months of investigation and officials from the AFP, ATO and the AFP-led Criminal Assets Confiscation Taskforce. These individuals participated in the investigation and search warrant activity yesterday, which involved the seizing of assets suspected of being the proceeds of crime, including residential houses, luxury cars and aircraft.
In a statement, acting chief commissioner of taxation Andrew Mills confirmed one of the warrants was executed “on one of the ATO’s long-serving senior executive officers” and “that officer has been served with a court attendance notice”.
Mills said the investigation so far has “not revealed any evidence of actual intervention or influence on audit cases, or of money being refunded, or of tax liability being changed”.
“The information I have to date shows no compromise of the operations of our administration,” he said.
What happens next
The AFP says it will execute a further six search warrants in relation to the case today.
A number of those charged will appear in Sydney Central local court today, while two others have been scheduled for court dates in June. The man issued with a court appearance notice for alleged abuse of his role of a public official will appear in court on June 13.
Deputy tax commissioner Mills said in a statement this morning he has commissioned investigations into a “very small number of other employees” in relation to the investigation. These individuals have been suspended without pay.
“I cannot overstate the seriousness of these matters — Australians must have a tax administration they can trust and the people of the ATO must be of utmost integrity and good judgment,” he said.
“The threat posed by this syndicate to the revenue stream is demonstrated by the fact that $165 million was removed from the tax system, ultimately removing it from possible use by the community,” AFP deputy commissioner Close said.