Trial begins for five accused of $105 million ATO fraud conspiracy
A six-month trial has begun for five people accused of conspiring to defraud the Tax Office of $105 million, with one of them allegedly saying it “would be the biggest tax fraud in Australia’s history”, the NSW Supreme Court has heard.
Lauren Anne Cranston, 29, Adam Michael Cranston, 35, Dev Menon, 38, Jason Cornell Onley, 51, and Patrick Willmott, 35, have pleaded not guilty to conspiring to dishonestly cause a loss to the Commonwealth and conspiring to deal with $1 million or more, believing it to be proceeds of crime.
Their trial, expected to run for six months, began at Darlinghurst courthouse on Tuesday afternoon before Justice Anthony Payne. Crown prosecutor Paul McGuire, SC, for the Commonwealth Director of Public Prosecutions told the jury he anticipates his opening address will take three days.
The Crown alleges that between March 2014 and May 2017, the five accused developed a scheme through worker payroll services company Plutus Payroll to collect PAYG (pay as you go) withholding tax and GST (goods and services tax) that should have been paid to the Australian Tax Office. “Extraordinarily large amounts” were instead allegedly retained and used for their benefit and those associated with them.
The prosecutor said the charges arose from a police investigation called Operation Elbrus and “unbeknownst to the accused”, many of their conversations and telephone calls were recorded by authorities from about October 2016.
He suggested that in audio from January 2017, the jury would hear Adam Cranston had allegedly said, “If this was fully uncovered, and they knew exactly what was going on, it would be f--ing Ben Hur man, this is a big-sized company”.
McGuire expects the jury to hear evidence Dev Menon responded: “It would be the biggest tax fraud in Australia’s history. Definitely, there is no question, it would be the biggest tax fraud”.
The prosecutor said employers paid Plutus Payroll gross amounts covering their workers’ full salary, superannuation and other expenses including the PAYG component. Plutus charged and collected GST on the payroll services it provided.
Plutus was then to calculate the amount of net wages ... after taking out the PAYG, and then pay those net wages to the workers, pay the superannuation to the nominated superannuation funds, and was supposed to pay – what is sometimes called remit – to the tax office the PAYG it had retained and the GST that it had charged,” he said.
“That is what Plutus was meant to do. It’s the Crown case that those involved ... had no intention of paying all of the PAYG and GST it collected to the tax office.”
Approximately $105 million in taxes was allegedly collected which should have been paid to the ATO, he said.
McGuire expects the jury to hear evidence that another person selected the company name because “Plutus in Greek mythology was the god of abundance and wealth”.
“In circumstances of an alleged $105 million fraud, you might think that the name Plutus was a very appropriate selection indeed,” he said.
Regarding the alleged “money laundering conspiracy”, the Crown alleges the accused and others agreed to deal with the money withheld by the ATO by receiving it from clients, possessing it, concealing it, disposing of it and/or engaging in banking transactions relating to the money.
The trial continues.
AUSTRAC wants banks to identify, report suspicious crypto activity
The government’s financial intelligence agency wants banks to adopt more rigorous processes to monitor customers who may be using cryptocurrencies to facilitate serious crime and to report any suspicious activity.
AUSTRAC issued a “financial crime guide” last week, providing banks and digital currency exchanges with behavioural and financial indicators it expects will trigger enhanced due diligence on some customers.
The pseudo-anonymous and borderless nature of digital currencies presents a risk for the facilitation of serious crimes,” AUSTRAC said in the new guidance.
It warned crypto could be used for money laundering, purchasing of illicit products on the darknet, terrorism financing, scams, tax evasion and ransomware attacks.
“The increased use of digital currencies for various financial activities has created opportunities for criminals to operate outside of the traditional financial sector,” it said.
Decentralised finance (DeFi) and non-fungible tokens (NFTs) were singled out as emerging risks, with criminals attracted to anonymity and volatile pricing.
Senior lawyers say the fresh guidance points to DeFi and NFTs ultimately being regulated under the anti-money laundering (AML) and counter-terrorism financing (CTF) regime.
Banks and exchanges have been put on notice that AUSTRAC expects them to monitor activity and report dodgy crypto transactions via the “suspicious matter reporting” (SMR) regime, to help law enforcement authorities take legal actions. Commonwealth Bank and Westpac have previously been targeted by AUSTRAC for SMR failures.
Although AUSTRAC said it “recognises that most people engage with digital currency for legitimate purposes”, it wants banks and digital currency exchanges to improve surveillance of the $US2 trillion ($2.79 trillion) crypto market. Its more thorough guidance comes as the government prepares a new market licensing regime for digital currency exchanges to lift consumer protections.
Similar to what it does with banks via the Fintel Alliance to target criminal networks more broadly, AUSTRAC is keen to work closely with the private sector as it ramps up crypto policing.
It said criminals could “take advantage of conversion services, such as mixers, decentralised finance, or privacy coins to increase their anonymity and make tracing the movement of funds more difficult”.
However, AUSTRAC also recognises the transparency of blockchain technology could help banks and regulators target illicit activity.
The public nature of most digital currency transaction data – where a full history of transactions and the provenance of coins is recorded on blockchain ledgers that are publicly accessible – “creates opportunities to identify, target and disrupt criminal activities using digital currencies,” it said.
Chain-hopping red flag
Among the behavioural and financial indicators set out in the guide are “chain-hopping”, where customers attempt to obfuscate the source or destination of funds by using various ledgers.
Unusual transactions can be identified when customers use “mixers” resulting in multiple conversion, or “layering” via multiple exchanges before a customer cashes out into fiat. Other suspicious customers may attempt to provide as little identity information as possible, or use email accounts with high privacy features.
“Financial service providers need to be alert to the signs of criminal use of digital currencies, including their use in ransomware attacks,” AUSTRAC chief executive Nicole Rose said when the guide was released on Thursday.
Targeting NFTs, which have surged in popularity as traders speculate on things such as the value of digital cat pictures, AUSTRAC said the tokens could be created by anyone and presented an emerging risk that could enable criminal activity. “For example, the value of NFTs are subjective, so they can be purchased and sold for any value. This allows for criminal activities such as the laundering of funds which may have come from illicit activities,” it said.
By calling out DeFi and NFTs, Allens partner Simun Soljo said AUSTRAC was “flagging these as potential future targets for regulation under the AML/CTF regime”.
Release of the new guidance was foreshadowed by AUSTRAC deputy chief executive John Moss at The Australian Financial Review Cryptocurrency Summit on April 6.
AUSTRAC also issued a second financial crime guide last week for detecting and stopping ransomware, where crypto is being used to steal money from unsuspecting customers.
Commonwealth Bank was forced to respond to a crypto scam last week, after a link purporting to be a story from the ABC News website pointed to a false partnership with a cryptocurrency trading platform to encourage people to invest in crypto assets.
CBA said the article was “a scam designed to entice unsuspecting people to go to the scammer’s website and provide their personal details and money” and had been reported to Facebook and other authorities.
Tackling the issues
The new guidance by AUSTRAC came as the Australian Prudential Regulation Authority confirmed its new risk assessment framework for crypto assets, first reported by the Financial Review on April 7.
APRA told banks on Thursday that responsible supervisors should be notified if staff were undertaking activities associated with crypto assets. “While these activities can provide opportunities and benefits for the financial system and its customers, they also bring new risks that may be challenging for entities to identify, assess and manage,” APRA chairman Wayne Byres said in a letter sent to all regulated institutions.
At the Crypto Summit, Mr Moss’ detailed briefing included case studies on some criminal activity uncovered by authorities, including one involving terrorism sympathisers using crypto to buy weapons, uniforms and fund training for Taliban fighters and terrorists in Syria.
AUSTRAC does not want banks to adopt blanket bans on crypto, recognising its potential to drive innovation and efficiencies in sectors including payments, logistics and healthcare.
“AUSTRAC discourages financial institutions from indiscriminate and widespread closure of accounts across entire sectors,” it said. “De-banking legitimate and lawful businesses can negatively impact individuals and businesses. It can also increase the risks of money laundering and terrorism financing and negatively impacts Australia’s economy.”
Treasury has asked the Council of Financial Regulators to provide advice on policy options to address the de-banking of crypto players by the end of June.
Blockchain Australia chief executive Steve Vallas said the AUSTRAC guide would “help ensure greater awareness of the risks associated with the sector are not an impediment to innovation and economic opportunity presented by this technology”.
“The use of digital currencies for criminal purposes has no place in our sector,” Mr Vallas said in AUSTRAC’s release. “Open dialogue, pro-active guidance and strong relationships between government and industry are necessary to ensure businesses can identify and report behaviour that puts Australians at risk of harm”.