ATO restructures Private Wealth division after Protego fraud hit

The Australian Taxation Office (ATO) has rung in the new financial year with a snap restructuring of two elite units targeting the super-rich and serial tax dodgers who reinvent themselves, confirming it is consolidating a raft of counter-avoidance, fraud detection and analytics functions into two new branches.

The ATO has told affected staff that a new “structural realignment within Private Wealth, Behaviours of Concern, between the Phoenix and Evasion Program (PEP) and the Emerging Behaviours Program (EBP)” will occur from July 1, 2024 — a move apparently intended to intensify focus on plump pickings.

The groups are the pointy end of Tax’s precision counter-fraud striking capability.

They specifically run the ruler over millionaires and billionaires who might be looking to squirrel away secret or undeclared income into tax havens offshore. The detection units also often pinpoint dirty and unexplained wealth from criminal enterprises.

Industrialised levels of goods and services tax (GST) refund fraud have exploded over the past two years under the hit on public revenue that culminated in Operation Protego.

Popularised and evangelised on social media platforms like TikTok, the GST frauds were overwhelmingly committed in the first person; that is, in a person’s own name, with the ATO suffering losses of at least $2 billion courtesy of around 60,000 perpetrators.

The financial and revenue policy sectors have been closely watching how ATO Private Wealth will respond following Protego.

While cases that once scrutinised famous personalities under the decade-long Project Wickenby are the best-known activities of the ATO’s Private Wealth arm — think Paul Hogan and Glenn Wheatley — these days the ATO’s immense and well-established artificial intelligence and data-boiling activities ensure almost all the impurities rise to the surface.

“We recently ran a consultation process on a proposed structural realignment within Private Wealth, Behaviours of Concern, between the Phoenix and Evasion Program (PEP) and the Emerging Behaviours Program (EBP),” ATO deputy commissioner for Private Wealth Behaviours of Concern, Hoa Wood, told her staff.

“The Evasion stream client engagement teams and the GST Fraud Advisor function will be combined with EBP to form a new branch named Evasion & Emerging Behaviours Program (EEBP).

“The Phoenix stream client engagement teams, risk & strategy team and the Network Detection and Case Analytics team will form a new branch named Phoenix Program (Phoenix).”

The issue of GST fraud has been an epic headache for the ATO over the past 12 months after a massive post-COVID run on fabricated GST refund claims exploited by the rationale that the ATO would not bother prosecuting recoveries because they would cost more than the amount stolen. It was these that culminated in Operation Protego.

However, the rebalancing is clearly not without its challenges.

Wood asked for staff to “be patient as we work through the system changes required for the realignment.”

“For most team members there will be little to no change to your day-to-day roles, apart from the reporting line. While the new EEBP streams of Evasion and Emerging Behaviours will work closely together, we recognise as conveyed in the feedback during the consultation the importance of maintaining distinct areas of identity, brand and expertise,” Wood told staff in an email.

The rationale cited for the restructuring is that it will enhance the ATO’s ability “to apply holistic treatment strategies by consolidating income tax and GST teams under one branch.”

Another reason given is the expansion of “treatment of fraud against the tax and super systems”.

An ATO spokesperson told The Mandarin that there would be no job losses under the structural realignment.

That’s hardly a surprise, given the ATO, like other agencies, is struggling to retain staff.

In the meantime, there is chatter in some security circles that the huge GST fraud sting may have been an experiment in so-called cognitive warfare — or hostile behavioural modification using externally augmented destabilising triggers — but this is contested.

Viral first-person fraud is not unknown in marginalised communities. The Commonwealth Bank, among others, has previously detected hits on bank accounts via ATMs during network and software maintenance periods when cash access defaulted back to daily withdrawal limits irrespective of account balances.

That genie won’t go back into the bottle, but it might get dispersed by a giant industrial fan before it manifests in billion-dollar public revenue losses again.

One thing is clear. The already very sharp focus on private wealth is about to get laser-like in its focus and cutting power.

Happy new financial year.

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