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AFP smashes $256 million tax fraud syndicate

Afp
Friday, May 19, 2017

THE Australian Federal Police (AFP) has arrested and charged nine people for their association with a syndicate allegedly responsible for a $A165 million ($F256m) tax fraud against the Australian Government.

The eight-month investigation, codenamed Operation Elbrus and conducted with assistance from Australian Tax Office (ATO) investigators, culminated yesterday with 28 search warrants in Sydney, Wollongong and the Southern Highlands.

A further six search warrants were being executed yesterday.

Six people were charged with conspiracy to defraud the Commonwealth for their alleged role in the syndicate, while two men were charged with money laundering offences.

One was charged in relation to an alleged extortion on the syndicate, which also resulted in additional charges against two people charged in relation to the syndicate.

Another man was issued a court attendance notice for allegedly abusing his position as a public official, but he was not part of the criminal syndicate.

It will be alleged in court that the fraud involved a company established by the syndicate to provide payroll services to legitimate clients.

The money received from these companies was transferred to subcontracted companies — allegedly controlled by syndicate members — to process payroll. While processing these payments, funds paid by legitimate clients to service tax obligations were allegedly diverted by the syndicate for their own personal gain.

Tax Office investigators estimate the amount of tax obligations not paid to the ATO to be approximately $165m.

Yesterday's search warrant activity also involved members from the AFP-led Criminal Assets Confiscation Taskforce (CACT) restraining significant assets suspected to be the proceeds of crime.

These assets include luxury residential houses, funds in bank accounts, luxury cars, boats, motorbikes and aircraft.

AFP deputy commissioner Leanne Close said yesterday's activity involved more than 290 AFP members.

"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," she said.

"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.

"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."

A total of six people were charged with one count of Conspiracy to defraud (causing a loss), contrary to section 135.4(3) of the Criminal Code Act 1995 (Cth):

a 30-year-old Bondi Beach man

a 28-year-old Waterloo man

a 33-year-old Wahroonga man

a 24-year-old Picton woman

a 24-year-old Balgownie woman

a 47-year-old Vaucluse man

Two people were charged with one count of dealing with property reasonably suspected of being proceeds of crime, contrary to section 400.9(1) of the Criminal Code Act 1995 (Cth):

a33-year-old Cronulla man

a 46-year-old Sutherland man

Three people were charged with one count of demand with menaces intend obtaining a gain or causing a loss (Blackmail) contrary to section 249K(1)(a) of the Crimes Act 1900 (NSW):

a 47-year-old Woollahra man

a 46-year-old Sutherland man (previously listed)

a 28-year-old Waterloo man (previously listed)

Most of the above are scheduled to appear in Sydney Central Local Court today. The Wahronga man is set to appear before Newtown Local Court today, while the Balgownie woman is scheduled to appear before Wollongong Local Court today. The Picton woman was granted police bail to appear before Narellan Local Court on 13 June, 2017. The Cronulla man was granted police bail to appear before Downing Centre Local Court on 8 June, 2017.

A 58-year-old Menai man was issued a court attendance notice to appear in Sydney Central Local Court on 13 June, 2017, in relation to his alleged abuse of his position as a public official.

How the scheme worked

The legitimate payroll company - run by the syndicate members - accepted money from legitimate clients to process payroll on their behalf. This money was transferred to seven sub-contracted companies known as Tier 2 companies, which then made payroll payments to individual workers of clients.

The directors of these Tier 2 companies are known as straw directors. They are essentially a front - individuals recruited to appear to be running the companies, but the syndicate members retain effective control.

As part of their contractual obligations to the legitimate payroll company's clients, the Tier 2 companies are required to remit pay as you go (PAYG) withholding tax payments to the ATO on behalf of the clients. However, investigators found that only part of these tax obligations were paid. The remaining money was allegedly siphoned off by the syndicate members and channelled through a complex series of companies and trusts for their own personal gain.








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