Jozef Imrich, name worthy of Kafka, has his finger on the pulse of any irony of interest and shares his findings to keep you in-the-know with the savviest trend setters and infomaniacs.
''I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center.''
-Kurt Vonnegut
Statement on ANAO performance audit: ATO’s management and oversight of fraud control arrangements for the GST.
In the final paragraphs of a 75-page report, the Auditor-General on Tuesday revealed that officials working for the ATO found themselves within the crosshairs of Operation Protego — the response to a tax fraud scandal that resulted in the payment of at least $2 billion in bogus GST refunds.
The ATO confirmed to the Australian National Audit Office that, as of October 2023, 150 ATO-related officials “suspected of Operation Protego behaviours” have been investigated through the tax office’s own internal fraud procedures.
“A range of treatment strategies have been applied by the ATO, including termination of employment and criminal investigations,” the report said.
The Tax Office has revealed at least 150 of its staff had their identities stolen or were suspected of taking part in a social media scam that fleeced the nation out of $2 billion in GST refunds.
In an auditor-general’s report into how the ATO protects the $90 billion goods and services tax from fraud, the Tax Office revealed it had axed some people and launched criminal investigations into staff who might have been involved.
A GST scam that populated TikTok included people who worked for or were contractors to the Tax Office. ALAMY
The Tax Office created Operation Protego in 2022 after banks, led by Westpac, noticed unusually large payments going into the accounts of its customers, particularly those whose main source of income was welfare payments.
The scheme started as videos on social media such as TikTok explaining how people could get the Tax Office to deliver money directly into their account. Facilitators then emerged who promised to help people gain the “free” cash by handing over their personal details.
This was used to invent fake businesses with their own ABN, which then submitted fake business activity statements to claim GST refunds.
The Tax Office said people targeted by Operation Protego were suspected of fraudulently gaining GST refunds of between $38,900 and $2.4 million. Attempted fraudulent refunds ranged in size from $8100 to $32.3 million.
Since the Tax Office established Operation Protego, more than 100 people have been arrested, with 16 convictions and $120 million in fines. The ATO estimates there have been at least 57,000 people involved, with $2.7 billion in suspect GST refunds stopped before payment.
Some of those arrested have included members of outlaw motorcycle gangs, organised criminal groups and youth crime gangs.
But the Tax Office also revealed to the Australian National Audit Office (ANAO) that tax staff were involved in the scam.
“The ATO confirmed with the ANAO that, as of October 2023, 150 ATO officials suspected of Operation Protego behaviours have been investigated using the ATO’s standard internal fraud procedures,” it said.
A Tax Office spokesperson said of the 150 people identified by Operation Protego, some were victims of identity theft rather than perpetrators.
But of those involved, the majority were either former contractors or ex-employees who were not working with the ATO at the time they were suspected of committing fraud.
Formal action has been taken against 12 people who were found to have committed fraud while working with the ATO.
“This includes termination of contract, administrative action and criminal prosecutions,” the spokesperson told this masthead.
As a result of our actions, we are not aware of anyone currently working at the ATO who is suspected of committing the fraud.
“The ATO has always treated fraud and corruption seriously and has zero tolerance for such behaviour.”
The audit report found that while the ATO’s processes to detect and deal with suspected GST fraud were largely effective, its management and oversight of fraud control arrangements were only partly effective.
“The lack of clarity for roles and responsibilities, inadequate implementation of assurance requirements, and absence of a holistic and contemporary view of GST fraud risks undermines the effectiveness of efforts to prevent, detect and respond to fraud events in a timely manner and minimise fraud losses,” it said.
In a statement, the ATO said it had acted swiftly and decisively throughout Operation Protego to disrupt what it described as a “large-scale fraud event” that “proliferated at an unprecedented rate”.
It said it had taken action to strengthen its anti-fraud activities in light of Operation Protego.
“The ATO recognised the need to examine our response to heightened GST fraud risks and has already undertaken action to strengthen and enhance our management of GST fraud, including the establishment of the fraud and criminal behaviours business line to focus on further protecting the system and clients against fraud and have since implemented a range of additional fraud defences,” it said.
The Tax Office lacked the ability to respond to the widespread fake GST claims uncovered in late 2021, the Australian National Audit Office finds.
The Australian National Audit Office has damned the ATO’s processes for assessing GST fraud risk as “not fit for purpose” nor operating as intended and says it lacks procedures to respond to a “large-scale fraud event” after $2 billion went missing in 2022–23.
The ANAO investigation, set up after a “significant increase in attempts to obtain false GST refunds” during 2021–22, also found the ATO’s fraud prevention strategies, management and reporting of incidents were only “partly effective” and made five recommendations for improvements.
These included that the ATO “should develop and implement a response for large-scale fraud events that do not meet the criteria specified in the extant Integrity Incident Response Framework” with the ability to detect early warning signs of fraud across the tax office, clear allocation of decision-making authority and actions to prevent and recover losses.
“The lack of clarity for roles and responsibilities, inadequate implementation of assurance requirements, and absence of a holistic and contemporary view of GST fraud risks undermines the effectiveness of efforts to prevent, detect and respond to fraud events in a timely manner and minimise fraud losses,” the ANAO report said.
“The ATO has implemented partly effective strategies to prevent GST fraud. The ATO has established an enterprise framework for fraud, but it is not fit for purpose and is not operating as intended.”
The ANAO was asked to report after the ATO became aware of widespread GST fraud in December 2021 and responded by setting up Operation Protego in April 2022 in conjunction with the Serious Financial Crime Taskforce.
The ANAO set three criteria to assess the ATO’s management and oversight of GST fraud control arrangements:
Has the ATO implemented effective strategies to prevent GST fraud?
Has the ATO effectively implemented strategies to detect and respond to GST fraud?
Has the ATO implemented effective arrangements to oversee, monitor and report on fraud control arrangements for the administration of GST?
The report found GST receipts had increased 68 per cent over the decade to 2022–23 with $81.4 billion collected and an additional $6.1 billion in liabilities raised from the processing of 11.2 million BAS.
The ATO said its Operation Protego had pursued more than 57,000 perpetrators of GST fraud and by the end of August last year, criminal investigations resulted in more than 100 arrests and 16 convictions.
However, the ANAO cited a report by the ATO’s chief internal auditor which highlighted shortcomings exposed by Operation Protego, which found the office “could experience a large-scale fraud event at any time” and said it should have been ready to respond rather than reacting to events.
Operation Protego found $2 billion in total liabilities from April 2022 to June 2023, with fake GST refund claims ranging from $8,100 to $32.3 million. It said the ATO had stopped $2.7 billion in suspect refunds before payment and had investigated 150 of its officers suspected of being involved, resulting in terminations and criminal investigations.
Operation Protego was closed on 3 November 2023 to new cases and the ANAO said the ATO had not quantified the administration cost of the operation.
However, it said the ATO had made improvements during the audit, including reviewing responsibility for managing fraud risk, developing processes to ensure all its business lines were examined for fraud conformance, reviewing its training material, better handling of tip-off data, and updating its internal fraud investigation procedures.
Major scandals or fraud resulting in formal audits and autopsies can often, even usually, teach the federal and state bureaucracies a few reflective lessons on strategy and culture, but occasionally there’s a doozy that just makes everyone recoil in disbelief and ask the basic question: “Why?”
After decades of tight external fraud controls, and even tighter intrusive internal fraud controls, the Australian National Audit Office has concluded the Australian Taxation Office’s (ATO) external fraud controls need to be able to detect sudden massive frauds coming out of left field that nobody really thought of before.
That’s the great thing about one-off, opportunistic and calculated frauds and why people go for them. They yield, they go from naught to 100 overnight, and the cost of recovery is usually several factors above the take…
