ATO’s anti-fraud squad knows the type who think they won’t get caught

By Verona Burgess

Wednesday June 28, 2017

Sydney’s romance with conspicuous wealth was on display last weekend with the glamorised media coverage of the release from Cooma jail of convicted insider trader, Oliver Curtis.

Collected in a private jet by his independently rich ‘PR queen’ wife, Roxy Jacenko, the white-collar criminal was whisked home to the eastern suburbs for an ‘emotional reunion’ amid descriptions of his former lavish spending, not least the Ferrari wedding present to his Vera Wang-clad bride back in 2012.

No such breathless coverage is following the recently resigned Sydney-based deputy commissioner of the Australian Taxation Office, Michael Cranston, whose life (in unglamorous suburban Menai) has surely been ruined by the alleged crimes of his son and daughter in one of the biggest tax frauds ever perpetrated against the Commonwealth. Some $130 million in due PAYG payments were siphoned off, laundered and splashed on properties, luxury cars, watches and more.

According to the budget, the government will collect $404.3 billion in tax receipts (including GST) in 2017-18, which equates to 22.2% of GDP. The ATO costs about $3.9 billion a year to run and administers $11.7 billion in government programs.

A fraud of such magnitude strikes at the heart of the economy. Little wonder the Commissioner for Taxation, Chris Jordan, was in full damage-control mode at Senate estimates in May.

As well as advocating an overhaul of rules on company directorships and phoenixing, he stuck to three basic messages. First, the system worked – the ATO, the Australian Federal Police and the Australian Criminal Intelligence Commission all separately twigged to the fraud. Second, integrity was crucial and the ATO would review its policies, procedures and practices to ensure watertight ethical standards. Third, the ATO was continuing with business as usual.

He said, ‘I cannot overstate how seriously we take the allegations of wrongdoing by ATO staff. We do understand the ramifications of a loss of confidence in us.’

That’s a fair cop for crisis control but let’s not pretend a great deal of internal agonising is not going on – not just about reputational damage to the ATO but also broken personal trust.

Ironically, the Cranstons share a surname with actor Brian Cranston of the hit series Breaking Bad, and as the scheme allegedly perpetrated by son Adam and associates unfolds, both the plot and the fraudsters’ astonishing greed look almost as diabolical.

“Who could swear they wouldn’t do the same thing if their kids were in trouble? — Actually, quite a lot.”

Michael Cranston, despite, according to the AFP, being neither involved in nor knowing about the fraud, fell at the most basic ethical hurdle drummed into every public servant.

He is facing two charges of abusing his position — by obtaining information with the intention of dishonestly obtaining a benefit for his son; and by exercising influence (on two senior staff, who are subject to a code of conduct inquiry) with the same intention.

Who among public servants could swear they wouldn’t do the same thing if their kids were in trouble? Actually, quite a lot – because the ATO has some 20,000 staff, an array of powerful and intrusive internal fraud and corruption controls, and a very low rate of malfeasance.

In the financial year to date just 30 staff were caught making unauthorised access to ATO systems. Twelve were sacked, the rest fined, demoted, reassigned or reprimanded. Some 230 allegations boiled down to those 30 findings.

Jordan said, ‘Some people – they are stupid. They know they should not do it. They get picked up. Our fraud [detection] people are good.’

There are several ways staff can dob, including anonymously, and every allegation is checked by the ATO’s formidable fraud prevention and internal investigations branch. Its 30 Canberra-based staff, known as ‘the feared group’, range from classic public servants to former police investigators and forensic computer experts.

As well as strictly compartmentalised, high-security systems with need-to-know access and strong digital audit trails, the ATO, like all agencies, has a two-year fraud and corruption control plan which it reviews every year. It is a 17-page document with a clear narrative and links to online legislative and other detail.

There is no ‘one-size fits all’ approach. Staff are spread over all states and territories and a range of business lines but not all areas pose big risks — some are more vulnerable than others including, surely, the private groups and high wealth individuals area that Cranston himself ran.

As well as attempting fraud for their own gain, staff can be sought out, influenced, paid or blackmailed to assist tax fraud by such means as accessing taxpayer or other confidential information; providing information to a third party, friend, family member or an entity; disclosing sensitive or client information on social media; cherry-picking tax processes to provide favourable outcomes for others; or unduly influencing outcomes for others through confidential knowledge of systems.

The plan focuses on four main areas: the value of the ATO’s information and data; big data, including cross-matching arrangements; the changing workforce mix, including outsourcing; and the integrity of resources, including procurement and contracts.

Describing the ‘fraud diamond’, it says fraud and corruption can occur when there is incentive; the opportunity to exploit weaknesses in systems or controls; and when the fraudster has both rationalised that the behaviour is worth the risk, and has the capability to do it.

‘In Australia and New Zealand, fraud is typically committed by people who are tertiary educated, driven by a sense of being underpaid, undervalued, over-entitled and superior.’

Not much glamour about that.

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