WICKENBY

issue eleven 2015a whole-of-government approach

Targeting tax crime

A LASTING LEGACY

INTRODUCTION

3. Foreword 7. Wickenby: a lasting legacy

5. Government expands serious financial crime focus

6. Coordinated efforts strengthen the fight against tax crime

FINANCIAL CRIME IN FOCUS

A LASTINGLEGACY

11. Check out our Project Wickenby video

RESULTS AT A GLANCE

12. Project Wickenby results at a glance

13. Real-life case studies

FINAL REFLECTIONS

POSTSCRIPT

16. Reflections on Project Wickenby

19. Postscript

18. Targeting tax crime over the years

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Welcome to this special edition of Targeting tax crime magazine, where we reflect on Project Wickenby and see what the future of fighting tax crime will look like.

We are joined by our former Commissioner, Michael D’Ascenzo, for his unique reflections on the Wickenby journey, as well as our current Commissioner, Chris Jordan, who talks about how the Australian Taxation Office (ATO) and partner agencies will deal with serious financial crime in the future.

From the beginning of Project Wickenby in 2006, we were breaking new ground. Government agencies, both within Australia and overseas, had never worked so closely – and so successfully – together before. International revenue agencies looked to us as a model for agencies joining forces for a greater result.

Advances in technology set a fast pace, and meant that the landscape in 2006 was vastly di�erent to what we are faced with in 2015. For example, in 2006–07, industry submitted almost 16 million individual transaction reports to Australian Transaction Reports and Analysis Centre (AUSTRAC) for analysis. By the 2013–14 financial year that

number had increased to more than 91 million reports – a 479 per cent increase over seven years.

One of the achievements of Wickenby, the importance of which shouldn’t be

underestimated, was the change in community attitudes to tax crime.

Foreword

Michael Cranston

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Foreword>>

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Times have certainly changed from the days when you might have heard someone at the local pub bragging about how they managed to fool the tax man. Increasingly, we are seeing the community’s recognition of the tax system as a community asset. When someone doesn’t pay their tax, it may be to their own short term advantage, but it is to the detriment of the entire Australian community, and that’s not something to boast about.

In this edition, we will also take a look at the new Serious Financial Crime framework and the taskforces operating within it. The community should feel assured that although Project Wickenby is o cially coming to a close, the good work is being carried forward, with new focus areas and taskforces to tackle current and emerging threats to the integrity of our tax system.

This edition of Targeting tax crime is also special because it is the final edition of the magazine in this current, PDF format. In future, we will be publishing articles relating to tax crime under a new ‘news & updates’ section of the taxmatters.gov.au site.

I want to take this opportunity to thank all our readers for their support over the years and encourage you to continue to take an interest in the government’s targeting of tax crime.

Michael CranstonATO Deputy Commissioner Private Groups and High Wealth Individuals

Targeting tax crime articles will now be published on taxmatters.gov.au alongside a raft

of resources illustrating how the ATO and partner agencies are working to protect the

integrity of Australia’s tax system.

Subscribers will still receive an email with highlights from taxmatters.gov.au. So if you

haven’t already, subscribe now to make sure you don’t miss out on more great feature stories.

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Building on the success of Project Wickenby is the new Serious Financial Crime Taskforce, announced by the Government in May.

The Government will provide $127.6 million over four years to detect criminal activity and prosecute facilitators of serious financial crime.

'This type of crime poses a genuine threat to national security and to the integrity of Australia's economy, financial markets, regulatory frameworks and tax revenue collection,' Treasurer Joe Hockey said in a statement.

The initial intelligence priorities of the taskforce will focus on superannuation and investment fraud, identity crime and professional facilitators. The initial operational priorities will focus on phoenix fraud, trust fraud and international tax evasion fraud.

ATO Commissioner Chris Jordan acknowledged the role of Project Wickenby as the springboard for this new taskforce.

'Project Wickenby has provided significant benefits to the Australian community and we will continue to build on the learnings and success and demonstrate that tax crime will not be tolerated.The use of professional facilitators, opaque arrangements and trust structures all provide criminals with a layer of insulation from detection and prosecution.  We will continue to bring together the resources, knowledge and experiences of the Wickenby agencies to uncover and address this complex problem,' the ATO Commissioner said.

The Serious Financial Crime Taskforce is part of the Australian Federal Police (AFP) led Fraud and Anti-corruption Centre and includes the AFP, ATO, Australian Crime Commission (ACC), Attorney-General's Department (AGD), AUSTRAC, Australian Securities and Investments Commission (ASIC), Commonwealth Director of Public Prosecutions (CDPP) and Australian Customs and Border Protection Services.

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Government expands serious financial crime focus

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Building on the success of Project Wickenby is the new Serious Financial Crime Taskforce, announced by the Government in May.

The Government will provide $127.6 million over four years to detect criminal activity and prosecute facilitators of serious financial crime.

'This type of crime poses a genuine threat to national security and to the integrity of Australia's economy, financial markets, regulatory frameworks and tax revenue collection,' Treasurer Joe Hockey said in a statement.

The initial intelligence priorities of the taskforce will focus on superannuation and investment fraud, identity crime and professional facilitators. The initial operational priorities will focus on phoenix fraud, trust fraud and international tax evasion fraud.

ATO Commissioner Chris Jordan acknowledged the role of Project Wickenby as the springboard for this new taskforce.

'Project Wickenby has provided significant benefits to the Australian community and we will continue to build on the learnings and success and demonstrate that tax crime will not be tolerated.The use of professional facilitators, opaque arrangements and trust structures all provide criminals with a layer of insulation from detection and prosecution.  We will continue to bring together the resources, knowledge and experiences of the Wickenby agencies to uncover and address this complex problem,' the ATO Commissioner said.

The Serious Financial Crime Taskforce is part of the Australian Federal Police (AFP) led Fraud and Anti-corruption Centre and includes the AFP, ATO, Australian Crime Commission (ACC), Attorney-General's Department (AGD), AUSTRAC, Australian Securities and Investments Commission (ASIC), Commonwealth Director of Public Prosecutions (CDPP) and Australian Customs and Border Protection Services.

>>Coordinated e�orts strengthen the fight

against tax crimeThe Serious Financial Crime Taskforce joins other

national taskforces already underway to tackle crimes that threaten Australia’s economy.

The ATO is currently leading two inter-agency taskforces to combat expanding threats from phoenix businesses and the misuse of trust structures. The new Serious Financial Crime Taskforce will work with these

taskforces to address criminal activity. These taskforces enable intelligence and information sharing between partner agencies and pave the way for easier

identification, management and monitoring of suspected fraudulent behaviour.

With the combined powers these taskforces bring, the fight against tax crime has gained new strength.

For more information, read the ATO’s media release.

Wickenby: a lasting legacy

A laptop seized in a raid on a Melbourne hotel room in 2004 set off a chain of events resulting in the largest tax evasion investigation in Australia’s history – Project Wickenby. Now, 10 years on, the project is formally coming to a close, leaving a legacy that will live on.

Here we catch up with the heads of the partner agencies to learn what they think is the lasting legacy of Wickenby and how that will be used to continue the fight against tax crime in to the future.

When I joined the ATO as Commissioner in 2013, Project Wickenby was in its sixth year and was very highly regarded, both in Australia and abroad, as a model of how to operate an effective cross-agency taskforce. Cooperation with law enforcement agencies and international governments and organisations has greatly improved, proving we can be more innovative, agile and responsive – not only to the threats of tax crime but also in how the government operates more broadly.

COMMISSIONERCHRIS JORDAN

Australian Taxation O�ce

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The success of Project Wickenby demonstrates the value of multi-agency collaboration. Project Wickenby allowed law enforcement and regulatory

agencies to share information, knowledge, experience and resources to ensure the integrity of Australia’s financial and regulatory systems and

protect our revenue system against serious and organised crime.

FIRST ASSISTANT SECRETARY, CRIMINAL JUSTICE DIVISIONIAIN ANDERSON

Commonwealth Attorney-General’s Department

COMMISSIONER

Project Wickenby is unprecedented in terms of its scale, scope, achievements and its role engendering cooperation and trust between the partner agencies involved. By harnessing each agency’s skills and capabilities, Wickenby investigations have developed best practice in the investigation of serious fraud.

‘Following the money’ is a central focus for the AFP when investigating all crime types, and particularly when it comes to detecting and prosecuting tax fraud.

The results of our combined efforts speak volumes. Property and cash worth millions of dollars have been identified, restrained and forfeited. Additionally, a number of people have received lengthy prison sentences with more cases still underway. Equally as important, we have seen a significant shift in criminal behaviour away from using well known tax havens.

ANDREW COLVIN

Australian Federal Police

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Project Wickenby combines the data, specialist knowledge and expertise of its partner agencies

into a cohesive whole with a common vision. AUSTRAC’s expert capability in analysing financial intelligence and international funds flows is crucial

to the project’s work of combating tax crime.I’m proud of AUSTRAC’s longstanding contribution

to Project Wickenby. Its success means there are no longer any ‘safe’ havens for tax evaders.

CHIEF EXECUTIVE OFFICERPAUL JEVTOVIC, APM

During the past 10 years the CDPP has worked closely with our Wickenby partner agencies to prosecute successfully a large number of serious tax evasion matters, resulting in substantial terms of imprisonment in many cases. Those prosecutions have been important in dealing with specific individual criminality, often by wealthy and privileged individuals and their advisors, who (unsuccessfully) sought to place themselves above the law, sometimes using expensive and sophisticated methods.

The prosecutions have also been very important in sending a strong deterrent message, making it clear that tax fraud is a serious crime that will be punished severely, and maintaining the rule of law principle that no-one is above the law. This encourages and supports the great bulk of our population, who do the right thing naturally, as well as discouraging those who might be tempted to do otherwise. The need for, and importance of, co-ordinated investigation and prosecution of serious tax fraud is now well established and must continue for the benefit of our whole society.

DIRECTOR OF PUBLIC PROSECUTIONSROBERT BROMWICH, SC

Australian Transaction Reports and Analysis Centre

O�ce of Commonwealth Director of Public Prosecutions

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Project Wickenby has been a very successful cross agency taskforce. The greater information

sharing under the taskforce has proved invaluable for all the agencies involved to jointly decide on

priorities. The taskforce has been instrumental in enabling us to then take the most effective

action available, under the current law, to deter the illegitimate use of offshore tax havens. This

approach provides a model for future cross-agency cooperation and priority-setting, especially with

regard to serious white collar crime.

Project Wickenby has shown the benefits of taking a coordinated Commonwealth approach to protect the integrity of the Australian financial and regulatory systems. This coordinated approach has resulted in unprecedented international cooperation in a strategy against offshore secrecy havens and provides a future model for Commonwealth initiatives combating serious financial crime.

The ACC is proud to have provided key intelligence and analysis to support the outcomes of Project Wickenby. This includes providing an intelligence picture of the size and threat of serious financial crime impacting on the Commonwealth to focus and prioritise operational responses, and ACC investigations leading to 19 criminal charges.

CHIEF EXECUTIVE OFFICERCHRIS DAWSON, APM

Australian Securities and Investments Commission

COMMISSIONERGREG TANZER

Australian Crime Commission

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Check out our Project Wickenby video

The 10 year story of Project Wickenby is captured here in a short video.

See where it all started, how the agencies worked together, and the lasting impact on the Australian community.

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Project Wickenby results at a glanceThe results don’t lie: Project Wickenby recouped some significant revenue and stopped some serious crooks in their tracks.

As of 31 May 2015:

• Tax liabilities raised – $2.285bn

• Audits and reviews completed – 4,503

• Number of people charged with serious o�ences – 76

• Number of people convicted and sentenced for serious o�ences – 46

Total recouped

• A total of $946.53 million in outstanding revenue recouped. This includes $571.18 million in cash collections, $372.60 million made from increased voluntary compliance following intervention by the Project Wickenby taskforce, and $2.75 million in assets recovered under Commonwealth Proceeds of Crime provisions.

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Real-life case studiesUnderpinning the numbers and facts are the personal stories of the lives aected by Project Wickenby.

Here are two real-life case studies that depict the impact of Project Wickenby on people who thought they could operate above the law and get away with it.

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IT consultant sentenced to six years jail for tax fraud

The o�ender was the founder of a successful IT consultancy company when he became involved with a corrupt accountancy firm. The owner of that firm o�ered the o�ender the opportunity to participate in a tax scheme. The scheme involved the o�ender’s company transferring money to bank accounts in Australia and New Zealand which were then transferred to foreign companies operating in Vanuatu. These ‘transfers’ were disguised as business expenses on the company books and were also declared as such on his company tax returns, significantly reducing the company’s taxable income. Over four years he transferred more than a million dollars of bogus expenses.

Using information provided by AUSTRAC, the ATO was able to track the money being sent o�shore, before returning a short time later into the o�ender’s personal bank accounts. He was approached by the AFP and later convicted of a number of tax fraud o�ences.

His initial sentence of three years and four months in jail was appealed by the CDPP for being inadequate, given the nature of the o�ences, as well as the fact they impacted the whole community. His sentence was increased to six years, with a three-and-a-half-year non-parole period.

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Accountant sentenced to three-and-a-half years’ jail for fraudulent tax scheme

While working as a junior accountant at a Sydney accountancy firm, the o�ender was directed by the firm’s owner to prepare false financial accounts to underpin fraudulent tax returns lodged with the ATO on behalf of the firm’s clients. In the scheme, money was

transferred from Australian companies to entities controlled from the tax haven of Vanuatu as false expenses or fictitious loans. Over the years, his role in promoting this set up became more involved as the schemes became more complex and more of the firm’s clients became involved.

ATO audits of the firm’s clients led auditors to strongly suspect the firm’s involvement as promoter of the schemes. The firm attempted to mislead the ATO by fabricating documents and ‘rehearsing’ fake responses for meetings with ATO investigators. This plan unravelled as the investigation unfolded, ultimately leading to the successful prosecution. He was convicted and his initial sentence, a 500-hour Community Service Order was overturned on appeal by the CDPP. He wound up with a three and a half year jail sentence with a two year non-parole period.3

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Reflections on Project WickenbyWritten by Michael D’Ascenzo, former ATO Commissioner.

As Project Wickenby o�cially comes to an end, it seems timely to reflect on the journey, and the legacy the program leaves. As former Commissioner of Taxation I saw Wickenby as an important and pioneering way to protect honest taxpayers from those who would abuse Australia’s tax system.

During my tenure we saw a massive attitudinal shift in the way the community perceived and reacted to tax crime.

We began to see white collar crime being recognised by the community as serious crime. We recognised that there were real victims, and in relation to tax fraud it was the honest taxpayer that was being cheated. White collar crime was not to be left in the too-hard basket. For example, the prosecution of those involved in tax crime built community trust in the tax system. Such action rea�rmed for the general public that the perpetrators of so called ‘white collar crime’ were not above the law. Firm action showed that the Commonwealth had the resolve to bring these criminals to book notwithstanding the subterfuge, secrecy and misrepresentations that often clothed their fraudulent behaviour.

Project Wickenby had a lot to do with this change in perception. From the ATO’s perspective, Wickenby was our flagship in saying to tax evaders, ‘we will catch you’. We also reassured honest taxpayers - the vast majority of Australians - that we weren’t going to close our eyes to malfeasance. We and other Commonwealth agencies were prepared to do the hard yakka, collaboratively, to counter these secretive and fraudulent international schemes.

The rationale of Wickenby was to send a strong signal that would help sustain Australia’s tax system. It was this preventative, deterrent philosophy behind Wickenby that was its real strength. The message Wickenby sent is its primary legacy, more so than the actual dollar return on investment, although that too is impressive, with over $2 billion in liabilities raised. Promoters are no longer prepared to peddle these artificial international schemes and erstwhile or prospective participants now find them too risky.

It wasn’t always easy though. All sorts of claims were made against the project. The push back and evidentiary challenges were substantial. The evidentiary hurdles, the secrecy that enveloped the arrangements and the complexity of some of the schemes meant that at times the Commonwealth was not in a position to progress prosecution action. Nevertheless, the point had been made and substantial sums were often recouped in settlements.

Wickenby was also ground-breaking in that it brought the various arms of government together like never

before. We saw unprecedented levels of cooperation and information-sharing between agencies. We broke new ground and exemplified the way di�erent government agencies could work together in pursuing a common goal.

I would like to take this opportunity to thank everyone involved in the Wickenby cross-agency taskforce for their unwavering commitment to Wickenby and the harmonious working relationships that we enjoyed. I hope that they are as proud as I am about what we were able to achieve. Wickenby has been a spectacular success due to their e�orts.

More generally, Wickenby has provided a template for whole of government action against serious crime. Today there are many taskforces which bring together the expertise of various government agencies. In the fight against serious and organised crime the ATO is no longer an outsider or bystander, playing a critical role in helping to take the profit out of crime. In large measure, Wickenby has shown the way.

Even though Project Wickenby is o�cially coming to a close at the end of this financial year, its deterrent message has been heard. Wickenby has reduced international tax evasion of Australian taxable income, it has recouped substantial amounts of tax, and it has provided the community with renewed confidence in its tax system. Wickenby has also provided the template for collaborative cross agency responses to serious and organised crime.

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Michael D’Ascenzo

Reflections on Project Wickenby >>17

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As Project Wickenby o�cially comes to an end, it seems timely to reflect on the journey, and the legacy the program leaves. As former Commissioner of Taxation I saw Wickenby as an important and pioneering way to protect honest taxpayers from those who would abuse Australia’s tax system.

During my tenure we saw a massive attitudinal shift in the way the community perceived and reacted to tax crime.

We began to see white collar crime being recognised by the community as serious crime. We recognised that there were real victims, and in relation to tax fraud it was the honest taxpayer that was being cheated. White collar crime was not to be left in the too hard basket. For example, the prosecution of those involved in tax crime built community trust in the tax system. Such action rea�rmed for the general public that the perpetrators of so called white collar crime’ were not above the law. Firm action showed that the Commonwealth had the resolve to bring these criminals to book notwithstanding the subterfuge, secrecy and misrepresentations that often clothed their fraudulent behaviour.

Project Wickenby had a lot to do with this change in perception. From the ATO’s perspective, Wickenby was our flagship in saying to tax evaders, ‘we will catch you’. We also reassured honest taxpayers - the vast majority of Australians - that we weren’t going to close our eyes to malfeasance. We and other Commonwealth agencies were prepared to do the hard yakka, collaboratively, to counter these secretive and fraudulent international schemes.

The rationale of Wickenby was to send a strong signal that would help sustain Australia’s tax system. It was this preventative, deterrent philosophy behind Wickenby that was its real strength. The message Wickenby sent is its primary legacy, more so than the actual dollar return on investment, although that too is impressive, with over $2 billion in liabilities raised. Promoters are no longer prepared to peddle these artificial international schemes and erstwhile or prospective participants now find them too risky.

It wasn’t always easy though. All sorts of claims were made against the project. The push back and evidentiary challenges were substantial. The evidentiary hurdles, the secrecy that enveloped the arrangements and the complexity of some of the schemes meant that at times the Commonwealth was not in a position to progress prosecution action. Nevertheless, the point had been made and substantial sums were often recouped in settlements.

Wickenby was also ground-breaking in that it brought the various arms of government together like never

before. We saw unprecedented levels of cooperation and information-sharing between agencies. We broke new ground and exemplified the way di�erent government agencies could work together in pursuing a common goal.

I would like to take this opportunity to thank everyone involved in the Wickenby cross-agency taskforce for their unwavering commitment to Wickenby and the harmonious working relationships that we enjoyed. I hope that they are as proud as I am about what we were able to achieve. Wickenby has been a spectacular success due to their e�orts.

More generally, Wickenby has provided a template for whole of government action against serious crime. Today there are many taskforces which bring together the expertise of various government agencies. In the fight against serious and organised crime the ATO is no longer an outsider or bystander, playing a critical role in helping to take the profit out of crime. In large measure, Wickenby has shown the way.

Even though Project Wickenby is o�cially coming to a close at the end of this financial year, its deterrent message has been heard. Wickenby has reduced international tax evasion of Australian taxable income, it has recouped substantial amounts of tax, and it has provided the community with renewed confidence in its tax system. Wickenby has also provided the template for collaborative cross agency responses to serious and organised crime.

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Targeting tax crime over the years

2004 2015

ATO clears the air (December 2012)

Wickenby focused the spotlight on prosecutions of tax evaders and fraudulent tax scheme promoters. However, there are still some common misconceptions around key characteristics of the law. In this article, we attempt to clear the air.

Italy condemns tax evaders as ‘parasites on society’ (September 2012)

Here we looked at a bold advertising campaign in Italy that labels tax evaders as ‘parasites on society’.

Crime and punishment: White collar crime vs True crime (March 2012)

The Honourable Ray Finkelstein, QC, retired Federal Court judge, shares with us his perspective on the sentencing of white collar criminals versus 'true criminals'.

The criminogenic e�ects of fraud prevention advice and how to avoid them (February 2011)

How much information should government departments provide in order to help guard against fraud? When does information become 'criminogenic'? Guest commentator Dr Russell G Smith asks some important questions.

How much information is too much? The ATO experience (February 2011)

How much information about fraud prevention and tax crime should we

disclose to the community? The ATO provides its perspective.

As we say goodbye to Targeting tax crime in its current form, we thought we’d share with you some of the more memorable stories from over the years.

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Postscript

How to report a tax crime Commissioner Speeches

Media releases

Speeches and media releases

Help us ensure everyone pays their fair share of tax. Report information on suspected tax crime or report a concern using our ATO app, available from the app store or call 1800 060 062 or if you are a tax practitioner use Fast Key Code 3 4.

You can also report online anytime at ato.gov.au/reportaconcern

19 March 2015: Commissioner’s address to the Taxation Institute of Australia

11 June 2015: ATO Swoops on Phoenix Businesses

20 April 2015: Serious tax o�enders brought to justice

31 March 2015: Illegal tobacco farmer cops jail sentence

11 March 2015: ATO leads taskforces on serious financial crime

9 January 2015: ATO uses new powers to recover superannuation entitlements from phoenix operators

Find a full list of speeches and media releases on our website.

Making a voluntary disclosureWe encourage taxpayers who have made a mistake in relation to their tax a�airs to make a voluntary disclosure. This can lead to reductions in shortfall penalties and interest, particularly if the voluntary disclosure is made before the notification of an audit.

Voluntary disclosures can be made in writing, electronically, by phone, or other methods available in specific circumstances.

Read full details about how to make a voluntary disclosure.

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Stay up to dateTargeting tax crime articles will now be published on taxmatters.gov.au alongside a raft of resources illustrating how the ATO and partner agencies are working to protect the integrity of Australia’s tax system.

Subscribers will still receive an email with highlights from taxmatters.gov.au. So if you haven’t already, subscribe now to make sure you don’t miss out on more great feature stories.

FeedbackFeedback is always welcome, especially now as we move to a new way to communicate with you. Email us at targetingtaxcrime@ato.gov.au with any comments or suggestions.