Go to top of page

Suspect used offshore companies to avoid paying millions in tax

Image of globe

A money laundering and taxation investigation commenced into a suspect who, for more than 10 years, declared minimal income to the Australian Taxation Office (ATO) while living a luxurious lifestyle.

The criminal investigation into the financial dealings of the suspect revealed that he attempted to disguise from the ATO income he had derived from the trading of shares on the Australian Stock Exchange (ASX).

The criminal investigation revealed that the suspect created several offshore companies which, on paper, were owned by ‘stichtings’ (a foundation in which the identity of the beneficial owner is not publicly available) in the Netherlands. (See Glossary for definition of a ‘stichting’.) He then sold his ASX shares to the offshore companies at a value well below the true market value in an ‘off market’ trade. By selling his ASX shares at a discounted price the suspect was able to reduce his tax liabilities in Australia while still maintaining control of the ASX shares. The suspect later arranged for the shares to be sold via his offshore companies at market value. The proceeds of the sales were returned to the suspect in Australia disguised as loans from offshore companies.

By disguising the proceeds of the share sales as a loan, the suspect avoided paying tax on the proceeds in Australia. This method of transferring also created distance between the suspect and the ownership of the shares, while still allowing him to ultimately obtain the benefits from their sale.

Analysis of AUSTRAC information identified that, over two years, the suspect arranged 15 international funds transfer instructions (IFTIs) to send funds from offshore companies under his control based in Switzerland to his Australia-based company.

AUSTRAC analysed financial transaction reports submitted by reporting entities and identified:

  • All incoming international funds transfers were valued between AUD 50,000 and AUD 1 million, totalling approximately AUD 4.7 million.
  • All incoming international funds transfers were conducted via major banks and were sent in the names of offshore companies linked to the ‘stichtings’ in the Netherlands. These companies were under the suspect’s ultimate control.

The suspect was found guilty of dealing in money valued at over AUD1 million which was to become an instrument of crime (money laundering) and dishonestly obtaining a gain from a Commonwealth entity (ATO). He was sentenced to eight-and-a-half years imprisonment.

Offence

  • Money laundering
  • Tax evasion

Customer

  • Individual

Industry

  • Banking (ADIs)

Channel

  • Electronic

Report type

  • IFTI

Jurisdiction

  • International – the Netherlands

Designated service

  • Account and deposit-taking services
  • Securities market/investment services

Indicators

  • Account activity inconsistent with customer profile
  • Creation of offshore companies
  • Customer declares minimal income, which is inconsistent with the client’s luxurious lifestyle
  • Receiving loans from offshore companies
  • Selling shares to offshore company at a reduced value
Last modified: 30/07/2015 15:37