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Company evaded millions in cigarette tax through duty free fraud

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AUSTRAC information assisted authorities with an investigation into a company suspected of a multi-million dollar duty free fraud. The investigation resulted in the company and its two directors being convicted of fraud-related charges.

The investigation revealed that, over a three-year period, a complex arrangement was set up where the directors of the company, which traded as a duty free store, sold large quantities of ‘underbond’ cigarettes (cigarettes on which excise duty had not been paid). (See the Australian Taxation Office website.) The directors sold the cigarettes and profited by avoiding paying the required customs and excise duty. In total, authorities believe that the suspects evaded more than AUD2.5 million tax.

In accordance with AML/CTF reporting requirements, reporting entities submitted a range of financial transaction reports indicating suspicious activity by the company and its directors, involving currency exchange business and casinos. Authorities believe the suspects undertook a range of activities to launder and hide the substantial proceeds of the cigarette sales:

  • One of the directors travelled regularly to Cambodia and would visit currency exchange businesses in Australia to convert funds to US dollars before each trip. When converting currency amounts worth more than AUD10,000, the two directors regularly refused to complete significant cash transaction reports (SCTRs), instead opting to structure the cash into smaller amounts to avoid the SCTR reporting requirement.
  • This structuring activity led to a total of 44 suspect transaction reports (SUSTRs) being submitted about the two directors, with the majority coming from a currency exchange business. It was also reported that the suspects had asked reporting entities whether or not their transactions would be recorded and reported to the Australian Taxation Office (ATO), a further indication that they were involved in illegal activity and were concerned about attracting the attention of authorities.
  • AUSTRAC also received SUSTRs from a casino highlighting one suspect’s continued use of a casino account to deposit and withdraw funds, despite undertaking limited gambling activity. The reports indicated the suspect was a regular patron at the casino. While the suspect’s gambling activity remained limited, the amounts gambled had increased substantially over an eight-year period. It was also reported that the suspect had collaborated with a number of third parties while depositing and withdrawing funds at the casino.
  • In all, AUSTRAC information showed that the two directors and associates made cash deposits worth more than AUD20 million into their business banking account.

The company and its directors were convicted and ordered to repay the AUD2.5 million in tax they had evaded. In addition they were ordered to pay penalties of more than AUD600,000, as well as the Commonwealth’s legal costs of AUD140,000. The convictions finalised a long-running and complex investigation.


  • Structuring
  • Tax evasion


  • Business
  • Individual


  • Banking (ADIs)
  • Currency exchange services
  • Gambling services


  • Electronic
  • Physical

Report type

  • SCTR


  • Domestic
  • International - Cambodia

Designated service

  • Account and deposit-taking services
  • Gambling services


  • Customer refuses to submit a significant cash transaction report (SCTR) or transaction threshold report (TTR)
  • Customer shows unusual interest in/concern about the reporting of transactions to authorities
  • Significant increase in amounts gambled
  • Structuring of multiple cash deposits below AUD10,000 conducted on the same day to avoid reporting obligations.
  • Third parties involved in depositing and withdrawing of funds at casino
Last modified: 30/07/2015 15:34