• Funding the fight

    In 2006, the Australian Government provided $308.8 million over seven years (to 2012) to fund the Project Wickenby cross-agency task force.

    In 2009, the Government increased this funding by an additional $122.1 million over four years (to 2013) to $430.9 million in total.

    • Phase 1: $308.8 million from February 2006 to June 2010, with the period of funding for the Commonwealth Director of Public Prosecutions extending to 30 June 2012.
    • Phase 2: $122.1 million over four years from 2009 to 2013.

    The 2012–13 Budget provided a further $76.8 million for Project Wickenby agencies. The ATO component of this funding ($48 million) commenced in 2013–14, while partner agencies started to receive Phase 3 funding in 2012–13.

    Project Wickenby funding by agency

    The following table shows how much funding each agency was allocated in each phase, per year ($m)

    Phase 1 funding

    Agency

    2005–06

    2006–07

    2007–08

    2008–09

    2009–10

    2010–11

    2011–12

    ATO

    14.4

    39.1

    37.9

    34.5

    34.9

     

     

    ACC

    3.0

    4.1

    3.3

    3.3

    3.4

     

     

    CDPP

     

    11.4

    15.4

    16.2

    14.0

    6.0

    1.1

    AFP

    2.9

    16.1

    13.4

    13.6

    13.6

     

     

    ASIC

    1.8

    2.7

    2.7

     

     

     

     

    AUSTRAC

     

     

     

     

     

     

     

    AGD

     

     

     

     

     

     

     

    Total

     

    22.1

     

    73.4

     

    72.7

     

    67.6

     

    65.9

     

    6.0

     

    1.1

    Phase 2 funding

    Agency

    2009–10

    2010–11

    2011–12

    2012–13

    ATO

     

    28.7

    24.6

    20.9

    ACC

    1.8

    3.2

    2.4

    2.0

    CDPP

    0.5

    1.6

    3.4

    3.8

    AFP

     

    7.9

    7.5

    7.4

    ASIC

     

    0.8

    0.7

    0.4

    AUSTRAC

    0.8

    0.7

    0.7

    0.7

    AGD

    0.4

    0.4

    0.4

    0.4

    Total

     

    3.5

     

    43.3

     

    39.7

     

    35.6

    Phase 3 funding

    Agency

    2012–13

    2013–14

    2014–15

    ATO

     

    29.7

    18.3

    ACC

    1.6

    2.1

    1.9

    CDPP

    0.6

    3.7

    3.7

    AFP

     

    5.2

    5.1

    ASIC

     

    0.7

    0.6

    AUSTRAC

    0.5

    1.0

    1.0

    AGD

    0.1

    0.5

    0.5

    Total

     

    2.8

     

    42.9

     

    31.1

    Total funding projected to 2014–15

    Agency

    Phase 1

    Phase 2

    Phase 3

    Total

    ATO

    160.8

    74.2

    48.0

     

    283

    ACC

    17.1

    9.4

    5.6

     

    32.1

    CDPP

    64.1

    9.3

    8.0

     

    81.4

    AFP

    59.6

    22.8

    10.3

     

    92.7

    ASIC

    7.2

    1.9

    1.3

     

    10.4

    AUSTRAC

     

    2.9

    2.5

     

    5.4

    AGD

     

    1.6

     

    1.1

    2.7

    TOTAL

    308.8

    122.1

    76.8

     

    507.7

    Project Wickenby questions answered

    Project Wickenby versus Operation Wickenby

    Operation Wickenby refers to the criminal investigations led by the Australian Crime Commission (ACC) since 2004.

    Project Wickenby refers to the broader cross-agency task force, which now consists of eight agencies, including the ACC.

    What is a secrecy jurisdiction?

    A secrecy jurisdiction is a country, region or state that does not divulge information about an individual’s financial/banking affairs or structures. These arrangements may be exploited to conceal income and evade tax because such countries do not have effective information-exchange arrangements with Australia.

    How is it decided which agency leads an individual investigation? What powers do the Project Wickenby agencies have and when do they enforce them?  

    Each of the agencies could come across matters in their day-to-day work that they believe may relate to Project Wickenby. These matters may be tabled at a cross-agency forum to determine the most appropriate response, which could include referral for criminal investigation. If it appears there are possible crimes being committed, which include tax fraud and money laundering, then agencies such as the ACC and the AFP will be asked to assist with the case.

    Each agency has its own statutory powers and functions, which are summarised below.

    ATO: conducts analysis, reviews and audits related to tax. Where it has been determined that the correct tax has not been paid, we will raise tax assessments and seek to recover the proper tax due, together with penalties and interest. We have officers that assist other agencies with criminal investigations by providing tax and financial analysis expertise relating to Wickenby-type schemes.

    ACC: conducts criminal investigations and manages the ensuing litigation. They will assist the ATO and AFP in dismantling organised syndicates. The ACC shares the intelligence it collects and analyses that is related to offshore organised tax fraud schemes.

    AFP: conducts criminal investigations into tax haven schemes and other criminal matters that may be unearthed as a result of the initial investigation. The ATO often refers cases to the AFP.

    ASIC: has the power to investigate matters where it has reason to suspect there may have been a contravention of the Corporations Act 2001. ASIC may take its own enforcement or regulatory action to enforce such contraventions and these could include contraventions relating to market manipulation or a failure to comply with director's duties, among other matters.

    AUSTRAC: provides intelligence and data sharing under the terms of the memorandum of understanding between AUSTRAC and the ATO, AFP, ACC and ASIC. AUSTRAC also provides analytical and intelligence support.

    CDPP: will progress prosecutions that result from Project Wickenby and be involved in cases, where appropriate, as early as possible. Prosecutorial activity will include summary offences, proceeds of crime actions and complex criminal prosecutions.

    AGS: (Australian Government Solicitor) provides high-level advice on legal risks and potential civil proceedings taken by or against the Australian Government or any joint agency. Where the AGS is the legal services provider for any of the joint agencies, it manages and coordinates those proceedings in line with Project Wickenby strategic objectives.

    Attorney-General's Department: manages mutual assistance requests for formal assistance from other jurisdictions on criminal investigations and prosecutions.

    Why is there a difference between assessments raised and money collected?

    The rate of collections compared to actual assessments differs for several reasons. Firstly, because Project Wickenby deals with people hiding assets and income in secrecy jurisdictions, recovery of monies located in those jurisdictions can take time. The ATO can issue Departure Prohibition Orders (DPO), preventing people from leaving the country until tax clearance is given. Collection can also be delayed where assets and monies are held through a series of offshore structures that need to be traced through secrecy jurisdictions.

    A further variation between collections and liabilities raised is that sometimes the available information does not make the ultimate tax position clear. Alternative assessments may be raised – for example, on both a company and the director – although ATO policy is to collect only one liability.

    What are the possible consequences for people who are convicted?

    Although tax minimisation schemes may appear attractive, people who promote or participate in illegal offshore schemes are running enormous risks – the consequences are severe, and range from civil sanctions and fines through to heavy penalties and significant jail terms.

    Why can Project Wickenby court cases take so long to finalise?

    The fight against tax evasion, avoidance and crime can be complex and lengthy, but Project Wickenby is working hard to ensure people involved in the abusive use of secrecy jurisdictions are held accountable for their actions.

    Offshore promoters attempt to design tax evasion schemes that both hide income and avoid the taxation laws of most countries. While some schemes are quite straightforward, others can be extremely complex, which makes detection, investigation and litigation time consuming.

    Who do we investigate?

    The Project Wickenby task force investigates people who promote, facilitate or participate in illegal offshore schemes.

    Promoters are mainly located offshore – they formulate and deliver international tax evasion schemes to participants, usually through intermediaries.

    Intermediaries are a key leverage point in tax evasion schemes and are usually located onshore – in this case, in Australia. They play a significant role in recruiting participants for promoters, and will often facilitate the arrangement. Intermediaries include, but are not limited to, accountants, tax agents and lawyers.

    Participants are Australian taxpayers who use the illegal offshore schemes offered by a promoter. Participants can come from all walks of life and are usually introduced to a scheme by an intermediary. Although most participants enter these schemes in an attempt to avoid or evade their taxation obligations, some are lured in without realising their actions are illegal.

    What is being investigated?

    Investigations have discovered illegal schemes where people are not only attempting to conceal their income, but are also creating false deductions and returning money to Australia as untaxed funds.

    Arrangements illegally concealing income or creating deductions most commonly include the following:

    • False or inflated invoices – international promoters providing Australian businesses with false or inflated invoices to claim tax deductions.
    • Sham loans – locally-designed and promoted arrangements where investors use ‘loans’ that are records only and no money is exchanged. The sham loans are provided by an international tax promoter to invest and claim a tax deduction.
    • Asset ownership and management – Australian assets are 'transferred' to an international entity legally owned by a promoter who acts on the wishes or directions of the owner. This transfer is a sham and is used to evade tax or deprive other family members or creditors of the assets. These may also be used to manipulate securities markets.
    • Share acquisitions – options or shares in public companies are sold to a foreign entity legally owned by a promoter, with 'beneficial ownership' remaining with the taxpayer. The Australian taxpayer’s beneficial ownership is concealed to prevent authorities from linking the taxpayer to the transactions and to shelter the taxpayer’s profits from tax in Australia. These transactions may also be in breach of the Corporations Act 2001 – for example, share warehousing, breach of director’s duties, failure to disclose, or insider trading.

    Schemes returning funds to Australian taxpayers in a deceitful manner as untaxed funds commonly include the following:

    • Debit and credit cards – these provide easy access to money. Accounts are generally held offshore in the Australian taxpayer’s name, the names of family members or friends, or in false names. The funds are generally withdrawn in cash from Australian ATMs.
    • Gift or inheritance – funds are returned to Australia as a gift from an alleged overseas relative or as an alleged inheritance from a relative who died with no children of their own. Promoters go to great lengths to check the family genealogy before using the ‘dead relative’ option.
    • Payment of expenses – the international promoter pays expenses incurred by the Australian taxpayer in Australia.
    • Rental schemes – Australian taxpayers ‘lease’ their holiday homes to an international promoter. These sham leases may be designed to return the taxpayer’s funds from offshore, or allow tax deductions for the costs of these holiday homes, such as interest or rate payments.
    • Back-to-back loans – an Australian taxpayer with funds offshore accesses the money by ‘borrowing’ it through an international promoter. The taxpayer uses the funds for working capital, then claims the ‘interest’ on the sham loan as a tax deduction. The interest is returned offshore to top up the funds there.

    Project Wickenby terms of reference

    Purpose

    1. These terms of reference clarify the objective and broad approaches of Project Wickenby with reference to the commitments and undertakings to government. They are designed to complement existing Memoranda of Understanding and other administrative arrangements between relevant agencies.

    Background

    1. In February 2006, the Australian Government approved additional funding of $308.8 million for a joint operation addressing the promotion of and involvement in tailored international tax schemes. The project now referred to as Project Wickenby is being undertaken by the ATO, the Australian Securities & Investments Commission (ASIC), the Australian Crime Commission (ACC), the Commonwealth Director of Public Prosecutions, the Australian Federal Police (AFP), AUSTRAC, Attorney-General's Department with the support of the Australian Government Solicitor. The funding commenced in February 2006 to allow the project to run through to June 2010. Additional funding totalling $198.9 million has since been provided through to 2014–15.
    2. Project Wickenby will address a significant threat to the integrity of the Australian taxation system. Investigations and audit activity as at 2005 identified extensive Australian participation in the arrangements, which are promoted and implemented by offshore providers and implemented by domestic promoters. The arrangements are tailored to individual circumstances and rely on falsity, international complexity and confidentiality to create false deductions or conceal income.

    Objective and outcomes

    1. The overall objective of Project Wickenby is to make Australia unattractive for tax fraud and evasion, as both promoters and potential participants perceive the risk/benefit ratio as weighing heavily against them. To achieve this objective, four primary goals have been identified:  
      1. Reduce international tax avoidance and evasion on the Australian taxation system
      2. Enhance strategies and capabilities of Australian and international agencies to collectively deter detect and deal with international tax evasion
      3. Improve community confidence in Australian regulatory systems, particularly confidence that the Australian Government addresses serious non-compliance with taxation laws
      4. Reform administrative practice, policy and legislation.
       

    Scope

    1. The scope of Project Wickenby extends to addressing tax mischief associated with the initial identified promoter and other identified promoters of similar arrangements, within the context of the Australian taxation system. Remedies to be applied in addressing the tax mischief include criminal sanctions such as prosecutions (money laundering or obtaining a financial advantage by deception) and proceeds of crime action. Civil action includes tax audits, assessment and Tax Administration Act action.
    2. Where agencies identify practices and issues that affect the revenue systems of other jurisdictions (domestic and international), liaison and cooperation will occur within the context of agreed legal and administrative arrangements.
    3. In the course of their investigations, agencies may identify practices that contravene laws other than taxation. For example, ASIC may identify and action structures contravening the Corporations Act 2001 that are directly, indirectly, or not at all associated with the tax mischief. The extent to which these are addressed under the umbrella of Project Wickenby will be considered on a case-by-case basis taking into consideration the objectives of Wickenby, interdependencies and any other factors deemed relevant.

    Strategic approach

    1. The strategic focus is to maximise the incentive for voluntary disclosure and establish a strong deterrent to future promotion and participation. The immediate focus will be to take decisive action against involvement with the initial promoter, before leveraging off this capability to address involvement with other promoters of similar arrangements. Continued progression of criminal cases already with the ACC, and deploying multi-agency capabilities to address other initial promoter cases involving serious tax avoidance and evasion, will send a strong signal to the community regarding the government’s intentions.
    2. Project Wickenby’s strategy takes into account the ATO’s compliance model by taking firm action against those setting out to avoid their responsibilities. The strategy recognises full voluntary disclosures should be encouraged, while behaviours involving avoidance, evasion and serious fraud must be treated firmly but fairly.
    3. Project Wickenby agencies have a substantial range of powers to assist in the investigation and prosecution of conduct associated with international tax mischief. Available methods include
      • letters
      • notices
      • access visits
      • search warrants
      • examinations
      • audits
      • proceeds of crime recovery
      • taxation assessments
      • action for breaches of taxation and corporation laws
      • criminal prosecutions of serious and summary matters.
       
    4. Participating agencies will use the full range of available approaches and remedies to address the international tax mischief. A differentiated strategy will be used with tougher actions and penalties applying to those more egregious cases. The choice of approaches will take into account relevant factors, including
      • levels of available information
      • encouraging voluntary disclosure
      • the degree and type of mischief encountered
      • cost-effectiveness, including expeditious treatment where practical the potential leverage.
       

    Agency roles

    1. Project Wickenby is a joint project involving the ATO, the Australian Crime Commission, Australian Federal Police, Australian Securities & Investments Commission, Commonwealth Director of Public Prosecutions with the support of the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Attorney-General’s Department and the Australian Government Solicitor. The Commissioner of Taxation is the administrator of the Australian Government’s taxation laws. Therefore, the ATO is the lead agency for the overall project.
    2. The ATO will obtain information, conduct analysis, investigations and audits, while supporting prosecutions of criminal and civil matters arising from the initial promoter and other promoters. An initial risk assessment of the other international promoters will guide the selection of promoters and/or individuals for further investigation and/or review, and subsequently the involvements of multiple agencies where warranted.
    3. The role of each agency is recognised and, subject to each agency's statutory powers and functions, includes but is not limited to the following roles
      • The ACC conducts criminal investigations and manages ensuing litigation. Additionally the ACC provides the deployment of an additional examinations team to assist AFP and the ATO by leveraging the use of coercive powers to accelerate the dismantling of organised syndicates. The ACC is also collecting and analysing intelligence that will improve the knowledge and understanding of how offshore organised tax fraud schemes operate and how these activities can be counteracted.
      • The AFP conducts criminal investigations including other high risk international promoter schemes referred by the ATO. The AFP’s focus includes key organisers and facilitators of tax fraud, as well as higher risk taxpayers involved in these schemes.
      • The CDPP conducts prosecutions resulting from Project Wickenby and is involved in cases, where appropriate, as early as possible. Prosecutorial activity includes summary offences, proceeds of crime actions and complex criminal prosecutions.
      • ASIC reviews international structures to advise on the application of corporations legislation, such as substantial shareholding provisions, market manipulation, takeover provisions or directors' duties. Subject to restrictions on dissemination of information, ASIC may take its own enforcement/regulatory action.
      • The Australian Government Solicitor provides high level advice in relation to legal risks and potential civil proceedings taken by or against the Commonwealth or any joint agency. Where the Australian Government Solicitor is the legal services provider for such civil proceedings or for any of the joint agencies, it manages and coordinates those proceedings in line with Project Wickenby strategic objectives.
      • AUSTRAC provides online access to its data holdings to the ATO, AFP, ACC and ASIC under the terms of the memorandum of understanding between AUSTRAC and these agencies. AUSTRAC has recently been funded to provide analytical support.
      • The Attorney-General’s Department manages mutual assistance requests for formal assistance from other national governments on criminal investigations and prosecutions.
       

    Cross-agency arrangements

    1. Project Wickenby Cross-Agency Advisory Committee – The ability of the Australian Government to address this attack on the revenue system is highly dependent on all the agencies having the collective capability to respond and collaborate. In order to achieve a whole-of-government approach, a Project Wickenby Cross-agency Advisory Committee has been established, that meets monthly to:
      • identify and advise the CEOs of each agency on strategic risks, approaches, cases and other matters relevant to Project Wickenby
      • share knowledge on methods, and develop and propose cross-agency approaches, including international liaison
      • assist and oversee the development and maintenance of cross-agency plans and reports for Project Wickenby
      • identify and advise the relevant person/body of legislative and other impediments to Project Wickenby
      • identify and facilitate improvements in cross-agency working arrangements and relationships
      • assist respective agencies in providing reports and advice to government on Project Wickenby, including assist with any reviews of expenditure that are required by government.
       
    2. The ATO, as lead agency, will have primary carriage of reporting to government on Project Wickenby’s overall progress, recognising that each agency will also have requirements to report to their own key stakeholders.
    3. The Project Wickenby Cross-agency Advisory Committee includes senior representatives of each agency and is chaired by an officer nominated by the Commissioner of Taxation. The Committee operates in accordance with statutory frameworks, including information sharing, secrecy and privacy provisions. Administrative support is provided by the ATO.
    4. Project Wickenby Chief Executive Officers – The Project Wickenby CEO meeting – comprised of CEOs from ACC, AFP, ASIC, AUSTRAC, CDPP and the ATO – meets every six months to review implementation progress and provide high-level governance oversight to the project.
    5. Other cross-agency cooperative arrangements on needs basis – A variety of other cooperative arrangements are in existence or will be established as required.
      Last modified: 10 Sep 2014QC 22385