ID thieves steal ATO tax returns

Ripping off the Australian Tax Office (ATO) is a seriously profitable business.

A fraudster requires little more than a victim’s name, address, date of birth and Tax File Number (TFN) to land thousands of dollars in fraudulent claims.

According to public documents, a staggering $33 million worth of suspected fraudulent tax refunds linked to identity crime has been blocked since July this year. Many more aren’t blocked – the number of which is difficult to guess at being that the ATO won’t discuss the matter.

This story is part two of a three part series into new frontiers in online fraud. You can read Part One (phone porting) here.

The alarm

The task facing the ATO’s team of anti-fraud investigators is hard to overstate. The $33 million in fraudulent returns blocked since tax time represented a mere 0.67 per cent of total returns processed over the same period. The ATO had withheld pending review 1.2 per cent of returns amounting to $401 million in claims which it considered “overstated” or “potentially fraudulent”.

And with the lion’s share of legitimate and fraudulent returns filed within four months, the office’s sophisticated fraud-detection systems are put on a hunt for the proverbial needle in the hack stack.

Elizabeth Camerson* and Paul Mansfield* were two unrelated Australians whose identities slipped through the cracks. Earlier this year, Camerson and Mansfield each filed two tax returns for the years 2010 and 2011, and 2009 and 2010 respectively.

Camerson received her 2010 tax return via her tax accountant, but was informed her return for that year was already claimed.

Mansfield filed for both returns directly with the ATO and received the claim for 2009 - but not 2010 – from which he expected to be paid around $500. Like Camerson, the ATO said his return was already claimed.

In both cases, fraudsters had exploited their accounts to fleece the tax office for about $6500 each.

Precisely how the accounts were hijacked is unknown to all but the scammers and potentially those within the ATO. With permission, SC Magazine supplied the office with detailed accounts from the victims of how the fraud took place with hopes of learning more about the rorts.

But a spokesman for the tight-lipped agency replied that it cannot by law discuss individual accounts, and also refused to engage in what it called “hypothetical cases”. Which doesn’t leave a lot to talk about.

However, the spokesman hinted that identity fraud was likely a major factor behind the scams.

Camerson and Mansfield received a similar response when they approached the Tax Office.

The ATO had told Camerson her return was filed through a tax accountant and paid into a Sydney CBD Westpac account. She has received no further assistance.

“I took off vigilante style to track down where this account number came from,” Camerson told SC Magazine. “I found the Westpac branch ... they said the account was not in my name, which I feared it was, and that eight ATO tax claims had been lodged into it.”

She said the ATO informed her that a $6300 return was lodged under her 2011 return using a bogus group certificate linked to a legitimate Sydney cafe.

Mansfield was told by the ATO that his 2010 return was filed through tax agents H&R Block and paid into a Commonwealth Bank account.

“I went into a branch and asked them about it,” Mansfield said. “They said I had to sign up to investigate, so I did.”

H&R Block could not be reached for comment by the time of publication. However, Mansfield told SC Magazine the company did manage to track down his record. A woman, Claire Davies, had registered as his wife last year and lodged a $6500 return using a fraudulent group certificate.

Both Camerson and Mansfield were told by the ATO to register for a new Tax File Number as their previous TFNs were now “compromised”.

While Camerson will file for her defrauded 2011 tax return, worth only around $50, Mansfield said he has been left in the dark after attempting to re-claim his 2010 claim months ago.

Next: Who does the law see as the victim? Read on to find out...

Buck passing

Tax accountancies and the ATO are not required to reimburse Camerson or Mansfield under law, according to Frank Egan, a tax lawyer of 30 years and director of Sydney-based LAC Lawyers.

Egan said that both entities had satisfied legal requirements to identify customers and it did not matter that the credentials were stolen.

“If someone is involved in identity theft and they receive a payment then it is fraud against that payer, against the Commonwealth or a person,” Egan said. “If they take someone's identity, that doesn’t alleviate the taxpayer.”

He said tax consultancies and the ATO were “entitled to rely on identity that is produced” because “as far as they are concerned, they have done what they can do”.

“They are not god, they only do due diligence”.

Mansfield had placed more than 30 phone calls to the ATO chasing his stolen return and had already obtained a replacement TFN.

Yet despite that his claim remains unpaid, the ATO said it would reimburse victims and had a “strong focus on raising awareness within the community about the importance of TFN protection and personal information”.

Mansfield said he had received no further help from H&R Block after they informed him of the fraud.

He said one Sydney branch office had not validated his identity documents when he was requested to sign up as a customer in order for H&R Block to provide details on the fraudulent claim.

“They took my word for it. I didn’t have anything with me. I just knew the details on hand. They were okay with that.”

SC Magazine has subsequently attempted to register as a customer with one H&R Block office and was asked to supply only a group certificate and a bank account number in which the funds would be paid.

The staffer said it “should not be a problem” when told identity documents were lost and could not be supplied.

Who’s the real victim?

NSW Police fraud squad detective superintendent Col Dyson, after hearing the stories of Camerson and Mansfield, said he believes the principle victim is the ATO.

“The ATO is a Commonwealth agency so that is a matter for the Australian Federal Police. The ATO was defrauded and it is the victim,” Dyson said.

The AFP would not discuss specific cases or its methods of investigation, but said in a statement that it "targets serious and complex criminal offences" notably those linked to organised crime.

Matters of individual tax fraud should be handled by the ATO it said.

It has five officers dedicated to investigating such fraud across Australia. it believed the victims should consult state police.

For Camerson and Mansfield, it remains unclear who they can turn to for assistance to recoup their lost tax claims.

Short of obtaining a new TFN, agencies could offer little advice for victims of tax fraud.

Government agencies broadly suggest victims of identity theft purchase a credit monitoring service and regularly check bank accounts.

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