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  • Data leaks

    The ATO is constantly receiving information that assists us to detect and prosecute tax evasion and other criminal activities. We receive intelligence from a range of sources, including:

    • concerned citizens and advisers
    • our domestic partner agencies
    • our international networks and tax treaties.

    The nature of the intelligence can vary from a simple phone call to a digital file, containing millions of electronic documents. The sharing of digital files with the intent of exposing confidential information is referred to as a data leak.

    We are dedicated to tackling tax crime committed by a small minority who attempt to evade their obligations at the expense of the rest of the community. We work together with domestic and international partners to manage offshore tax evasion risks and deter those considering entering into tax evasion schemes and arrangements.

    Data leaks explained

    A data leak occurs when confidential information is provided by an individual or a network and is shared with government agencies, media outlets, or other organisations usually with the intent of exposing individuals, groups, or businesses linked to potential criminal activity. However, not all parties that appear in the data do the wrong thing. We have been able to assure taxpayer behaviour; for example; many individuals, who hold offshore bank accounts have declared those assets and their tax affairs are in order.

    Data leaks normally attract public attention because of the controversial nature in which the information was obtained and the possible content of the data. They are just one of many sources that we have to detect and take action against offshore tax evasion.

    Intelligence we have derived from data leaks such as the Panama Papers and Paradise Papers, has assisted governments around the world, identifying those involved in offshore tax evasion arrangements. This has assisted us in also dealing with those who have tried to avoid their tax obligations.

    The ATO works collaboratively with alliance members of the Joint Chiefs of Global Tax Enforcement (J5) and members of Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) network to share, review and assess intelligence sourced from data leaks.

    Are offshore structures and accounts legal?

    It is not illegal to have an offshore bank account or business structure and there are many legitimate reasons for doing so. The vast majority of taxpayers included in data leak information have reasonable explanations for structuring their accounts the way they do. Appearing in a data leak does not imply wrongdoing.

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    Stakeholders

    Australian Taxation Office

    We are Australia's principal revenue collection agency. We administer the tax, excise and superannuation systems that support and fund services for Australians, and delivers various social and economic benefits and incentive programs.

    The tax and super systems are valuable community assets and in fairness to the majority of the community who do the right thing, we are strongly committed to tackling all forms of tax crime.

    See also:

    Domestic Partners

    A large portion of the data files we obtain are provided to us as a result of the work we have done to develop information sharing policy, procedures and legislation. We work in collaboration with government agencies, and domestic law enforcement agencies such as the:

    • Australian Criminal Intelligence Commission (ACIC)
    • Australian Federal Police
    • Australian Transaction Reports and Analysis Centre (AUSTRAC)
    • Australian Border Force
    • Australian Securities and Exchange Commission (ASIC)

    The ATO is also a member of the multi-agency Serious Financial Crime Taskforce (SFCT). The taskforce is responsible for bringing together intelligence, capacity, and capability from a range of law enforcement agencies to identify and treat serious financial crime.

    See also:

    International partners

    Transnational transactions are an unavoidable feature of a globalised economy that tax evaders use to conceal their income and assets. This does not just affect Australia; it is a problem for governments around the world.

    A global problem requires a global response so we have developed international relationships with national revenue agencies to share intelligence and expertise in financial investigations to fight tax evasion.

    We have a range of tax treaties and agreements with dozens of countries to help facilitate the exchange of intelligence bilaterally and multilaterally. We are heavily involved and support a number of international tax forums.

    We collaborate with key international tax administrations as a member of the Joint Chiefs of Global Tax Enforcement, also known as the J5. The group focuses on professional enablers and facilitators of offshore tax crime, cybercrime and cryptocurrency fraud. The other J5 members are:

    • Australian Criminal Intelligence Commission
    • Her Majesty's Revenue and Customs (United Kingdom)
    • Internal Revenue Service Criminal Investigation (United States)
    • Dutch Fiscal Information and Investigation Service (Netherlands)
    • Canadian Revenue Agency (Canada).

    International Consortium of Investigative Journalists

    The International Consortium of Investigative Journalists (ICIJ) is not associated with any tax agencies. They are an organisation of international journalists who collaborate on in-depth investigative stories in order to produce articles about issues that cross international boundaries.

    How we use data leaks

    Some people are tempted to think that a data leak by itself is enough to commence legal action but this is far from the truth. For example, the Paradise Papers leak that occurred in November 2017 contained over 13.4 million files. Not every file contained in the leak was relevant to tax evasion or tax crime, so understanding what is in a data leak requires considerable logistical and analytical modelling. While we respond to a data leak the same way we respond to information received from informants or other jurisdictions, large data leaks require a significant amount of man-hours and technical sophistication to process.

    As technology advances, we are further refining and developing skills and techniques to analyse information more rapidly. Not everyone who has offshore entities, structures or accounts is linked to criminal activities, and it is legal to enter into some of these arrangements. But we know many people opt to use the secrecy afforded by offshore jurisdictions to hide their income. After the data has been assessed, we identify and review names, addresses, phone numbers and link other details to form a complete picture of the behaviour of the individuals and entities contained in the leaks. Once this is done, we make a determination as to which entities identified in the data leak are:

    • acting lawfully
    • associated with existing investigations
    • appearing on our radar for the first time.

    Data leak activities

    We often have multiple investigations in progress, most of which are not known to the public. There are some investigations which capture the interest of the community. The following cases are good examples of our approach.

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    Panama Papers

    What happened

    In 2015 an anonymous source leaked 11.5 million financial and legal documents from Mossack Fonseca, the fourth largest offshore law firm operating globally with headquarters in Panama. The firm specialised in trusts, investment services, and international restructuring. The informant stated he had become disillusioned with what he considered to be the criminal complicity of the firm and provided the data to a German newspaper Süddeutsche Zietung. The newspaper quickly realised it would not be able to review all 11.5 million documents and approached the International Consortium of Investigative Journalists (ICIJ) for assistance.

    The data base consisted of the names of 200,000 offshore entities and over 2.6 terabytes of data in the form of emails, bank accounts and trust documents. All of this information was unstructured.

    After the ICIJ conducted their own investigative work into the data, they published the first stories about the information contained in the data in April 2016. The stories revealed a number of linkages to high profile individuals from around the world.

    At the same time, Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) member countries also obtained publicly available data, and incorporated the data with their own intelligence to identify risks.

    What we did

    As the chair of JITSIC, Commissioner Chris Jordan led members of the taskforce in developing a coordinated approach to investigating the Panama Papers. This collaboration clarified how resources would be combined and led to an agreed strategic approach on how to identify taxpayers using offshore institutions to evade tax.

    The effect of JITSIC's information sharing agreements came into force. Overall, there were a total of 736 exchanges of information. This includes a number of unprompted exchanges, meaning a member country identified information relevant to a partner nation's investigations, and forwarded it on for their consideration. Individually, Australia delivered 52 outgoing exchanges in order to assist its partners with their own investigations.

    Six months after the ICIJ published its first report about the Panama Papers, we made 15 unannounced access visits throughout Australia and informed the community that more than 100 taxpayers would be contacted to advise they were subject to compliance action. We also advised we had detected taxpayers and advisers linked to:

    • tax evasion
    • illicit fund flows
    • corruption.

    Results

    Our work with the Panama Papers yielded two types of results:

    • significant numbers of compliance actions against tax evaders
    • vast improvements in our understanding of how to approach these investigations.

    So far during our investigations, we have discovered approximately 1,400 Australians who are identified in the Panama Papers. Of those 1,400 we have matched 1,200 individuals to their tax file numbers which provides us with a high level of confidence about their identities. Of the 1,200 individuals, we found that 600 had come forward previously to advise us of their tax position and taken steps to ensure they had met their obligations to the community. This left us with approximately 570 taxpayers for us to assess for compliance. In addition to successful compliance action and recovering vital revenue for the community, our experience with the Panama Papers helped us to streamline our information sharing procedures with our international partners.

    Swiss bank tax evasion involvement

    What happened

    In 2017, the ATO and other domestic agencies were notified by our international partners they had information relating to a group of managers working with a prominent Swiss Bank who appeared to be facilitating tax evasion for their clients. Our international partner agencies had received information which indicated these managers were responsible for maintaining thousands of unnamed and numbered bank accounts.

    In March 2017, authorities from the Netherlands and the United Kingdom executed arrest warrants on the facilitators of the secret bank accounts. After this event we notified the community that our partners had supplied us with intelligence connecting 346 Australians with the facilitators of these bank accounts.

    What we did

    As soon as we received the data leak from our European partners we commenced an investigation into the information contained in the data. The investigations team pursued multiple lines of enquiry using our existing intelligence resources to link individual taxpayers to the accounts provided to us.

    Results

    As a result of the investigation, we expanded the initial number of individual taxpayers suspected from 346 to 578.

    During our investigation, we found the vast majority had complied with their taxation obligations. However, we identified 106 taxpayers where a range of immediate compliance action was needed. Compliance activity may include investigations of financial circumstances and audits to determine if they have used sophisticated systems of numbered accounts to conceal or transfer wealth to evade their tax obligations in Australia.

    Additionally, working with our partners at the Australian Transaction Reports and Analysis Centre (AUSTRAC), we have discovered over 5,000 cross-border transactions worth over $900 million over ten years.

    Finally, the complex process of investigations occurred quickly and has resulted in further improving our investigative skills and capability. The success of our network of treaty partners, and our ability to share intelligence is a clear message to those who devise or participate in tax evasion schemes, they will be caught.

    Paradise Papers

    What happened

    In 2017, media outlets around the world published stories about the largest data leak in history. The media attention concerned 13.4 million files downloaded from Bermudan law firm Appleby, Singapore based Asiaciti Trust, as well as corporate registries in 19 recognised tax havens around the world.

    The leak came about as a result of a breach of Appleby's database from an anonymous actor. The data was provided to a German newspaper that provided it to the ICIJ. The files included emails, statements, and other financial records dating back as far as 1950.

    The data contained personal details of high profile individuals and corporations from around the world. Many of the media stories covered specific cases of the tax structures and the use by multinationals to divert profits away from their country of origin.

    What we've done so far

    Hours after learning of the leak we met with our partners in JITSIC to discuss the approach to the Panama Papers. Projects were allocated to individual members nations. The ATO was assigned to lead a data working group and marshalled resources from member countries to assist. The methods and the lessons we learned during the Panama Papers were applied to the Paradise Papers and we've been able to identify individuals and entities more easily.

    Results

    While there is a lot of information to work with, the data does not include key pieces of information. For this reason, we are still hard at work with our domestic and international partners processing the vast amount of data contained in the Paradise Papers.

    However, we have used the Paradise Papers to develop a better understanding of the business models used by promoters of tax evasion. For example, firms like Appleby and Mossack Fonseca provide services focusing on registration and administration. They market the services to promoters and facilitators who design the tax evasion scheme, and task these firms with the mundane paper work.

    JITSIC plans to use information like this as well as its significant collective resources to disrupt the business model of the individuals who peddle these illegal schemes to their clients.

    Last modified: 12 Feb 2019QC 57844