Stepping up the fight against organised crime

The ATO has stepped up its role in the fight against organised crime by working closely with law enforcement agencies to identify and respond to crimes that impact the community.

'By working in close partnership with law enforcement agencies we are getting better at identifying and dealing with criminal acts,' Commissioner of Taxation Michael D'Ascenzo said.

The ATO's relationship with these agencies has evolved significantly in the last three decades. Since the 1980s, as a result of progressive legislative change, the ATO has played a pivotal role in managing this risk to society.

'Taxation is a logical weapon to use against organised crime. While those at the top of the criminal hierarchy can distance themselves from the crime, as long as they are committing these crimes for a profit, they cannot distance themselves from the money,' the Commissioner said.

There are tax impacts in relation to the activities of most organised crime syndicates. The ATO is well-placed to identify unexplained wealth generated from illegal profits.

'At an international level, we are increasingly seeing revenue collection agencies used as a vital source of intelligence and as providers of expertise in financial investigations in the fight against organised crime,' the Commissioner said.

The ATO's role in the fight against organised crime has been strengthened by the development of the Commonwealth Organised Crime Strategic Framework. Contributing to this strategic shift is the ATO's role on the Australian Crime Commission board and the Heads of Commonwealth Operational Law Enforcement Agencies.

'The message is clear: if you do the wrong thing, you will get caught and we will take a hard line. Those who abuse the system do so to the detriment of the Australian community', the Commissioner said.

Case study

The ATO contacted a state law enforcement agency and the Australian Crime Commission (ACC) after identifying suspicious GST refund patterns using our refund fraud analytical models. A joint agency operation was established which identified a financial adviser who was assisting organised crime groups launder money through complex business structures. Specific intelligence was gathered through the use of ATO, state police and ACC powers in relation to tax evasion through Phoenixing businesses, fictitious entities, and cash-in-hand payments. These were all strategies designed to avoid tax and superannuation obligations.

Based on the initial intelligence the ATO was able to:

  • identify all of the financial adviser's clients and potential links to organised crime entities by working with law enforcement agencies
  • analyse the client base in comparison to other agents' clients
  • identify a number of entities not meeting their current lodgment obligations
  • identify significant wealth accumulated through related entities
  • compare the wealth of the private group to their tax performance to determine where there was unexplained wealth.

Through working in partnership with law enforcement agencies and designing a coordinated strategy, this sophisticated organised criminal network was dismantled, with 20 individuals being charged with multiple offences, including tax offences. Custodial sentences were significant, with up to nine-and-a-half years applied for the tax offences.

A number of civil sanctions were also applied as a result of subsequent audits, including tax assessments with additional heavy penalties and director penalties applied. Debt collection strategies were also put in place, including garnishee notices, Mareeva injunctions and departure prohibition orders to secure payment for the debts.

The ATO was also able to liaise with the Tax Practitioners Board to ensure that the financial adviser was de-registered and will be unable to practice again once released from prison.

Did you know?

Tax administrations have a long history of working with law enforcement agencies.

Back in the 1920s, Al Capone was one of America's most infamous gangsters, ruling an empire of crime in Chicago that dealt in everything from gambling, prostitution, bootlegging, bribery, narcotics trafficking, protection rackets, murder and more.

For a time he seemed untouchable.

In 1929, the Bureau of Prohibition set about bringing an end to Capone's reign but soon realised that the key to securing the gangster's conviction would ultimately be evidence of Capone's income tax violations gathered by Treasury agents.

On 24 October 1931 Capone was sentenced to 11 years in prison for income tax evasion. He served most of his sentence at Alcatraz and was too sick to carry on with his life of crime when he was released from prison in 1939. He died in 1947.

The successful conviction of Capone set a precedent for future law enforcement officials, with tax evasion becoming an increasingly common way to convict participants in organised crime where more substantial evidence is not available.

Find out more about the Commonwealth Organised Crime Strategic Framework (COCSF).

Find out more about the Heads of Commonwealth Operational Law Enforcement Agencies.

Read the Commissioner of Taxation, Michael D'Ascenzo's speech about the important role the ATO has to play in fighting organised crime.

    Last modified: 20 Mar 2012QC 28265