Go to top of page

Local post office used for million dollar fraud and tax evasion scheme

Image of cheque

AUSTRAC information assisted authorities investigating a multi-million-dollar postal fraud and tax evasion scheme. The investigation revealed that, over a four-year period, a complex arrangement was set up which enabled the suspects to evade paying postage on bulk postal items.

Suspects A and B set up and operated the fraud using their knowledge of postal operating systems. Suspects A and B conspired with suspects C and D to defraud a Commonwealth entity, resulting in a total loss to the Commonwealth of approximately AUD2.4 million.

Suspects A and B were directors of company X, a bulk mail business which produced, printed and lodged bulk mail items with Australia Post on behalf of customers. Suspects C and D were managers of Licensed Post Offices (LPOs). (Licensed Post Offices (LPOs) are operated under licence from Australia Post. Each LPO forms part of Australia Post’s retail and delivery network.)

Suspects A and B had an arrangement with suspect C for the delivery and processing of bulk mail items over a four-year period. Under the arrangement, tens of thousands of bulk mail items were delivered to the LPO on a regular basis, sometimes twice a day. Suspect C processed these items without properly accounting for them in the LPO system. The amount company X paid for postage was substantially less than the standard payment which should have been made. As a result, the arrangement enabled company X to send bulk mail items at a much lower cost than legally required.

Suspects A and B had a similar arrangement with suspect D, which caused an underpayment of postage charges of more than AUD120,000 over a four-month period.

Suspects A and B also plotted to evade tax by providing the Australian Taxation Office (ATO) with false information about the sales and income of company X over a four-year period. Cheques payable to company X for postal services were disguised and redirected to avoid paying tax. Two methods were used.

Method 1

  • Company X used bank deposit books to deposit cheques from clients into the company bank account. The bank deposit books were falsified and the cheque deposits were recorded as ‘cash’.
  • An employee of company X was told to enter these amounts as directors’ dividends instead of company income in the company accounting system.
  • The cheques were then cashed at a bank. Suspects A and B received these funds disguised as directors’ dividends.

Analysis of AUSTRAC transaction data found a number of significant cash transaction reports (SCTRs) over a period of two-and-a-half years, where approximately AUD91,000 worth of cheques were cashed and withdrawn from company X’s bank account. The amounts ranged from AUD10,000 to AUD12,000. These funds were believed to represent directors’ dividends paid to suspects A and B.

Method 2

  • Suspects A and B sent invoices to clients for services provided. These clients sent cheques to company X as payment for the services.
  • Approximately 135 cheques made out to company X by these customers were intercepted by suspects A and B.
  • The cheques were directed into the personal bank accounts of both suspects.
  • These transactions and invoices were not recorded in the company’s accounting system. They were also concealed from the company’s accountant.
  • In doing so, the income of company X was understated and tax was evaded.

Analysis of AUSTRAC transaction data showed a number of SCTRs showing cash withdrawals from suspect A and B’s personal accounts. Suspect A withdrew approximately AUD33,000 in cash over a three-year period, and suspect B withdrew approximately AUD20,000 in cash over a three-month period. The amounts ranged from AUD10,000 to AUD12,000.These funds were believed to represent the proceeds stolen by the suspects.

The loss to the ATO was approximately AUD540,000, which included unpaid Goods and Services Tax (GST) and company tax.

The funds generated from the underpayment of postal charges were partly used to fund suspect A and B’s gambling habits. A SCTR submitted to AUSTRAC by a reporting entity showed that suspect B deposited AUD30,000 cash into a gaming account held with an online bookmaker.

Suspect C also stole approximately 55 cheques totalling more than AUD120,000. The cheques were made out by company X, payable to Australia Post. Suspect C deposited these cheques into his personal account and a bank account in the name of his son. He also used the cheques to pay for personal or family debts.

Suspects A and B were convicted of two counts for conspiring to dishonestly cause a risk of loss to a Commonwealth entity. They were both sentenced to seven years and six months imprisonment.

Suspect C was charged with one count of conspiring to dishonestly cause a risk of loss to a Commonwealth entity, and four counts of dishonestly causing a risk of loss to a Commonwealth entity. Suspect C was sentenced to three years and six months imprisonment.

Suspect D was convicted of conspiring to cause a risk of loss to a Commonwealth entity and sentenced to 15 months imprisonment.

Case 11 - Local post office used for million dollar fraud and tax evasion scheme

Case 11 - Local post office used for million dollar fraud and tax evasion scheme

Offence

  • Fraud (postal) (cheque)
  • Tax evasion

Customer

  • Business
  • Individual

Industry

  • Banking (ADIs)

Channel

  • Physical

Report type

  • SCTR

Jurisdiction

  • Domestic

Designated service

  • Account and deposit-taking services

Indicators

  • Use of third-party accounts
  • Same-day cheque deposits into a business account followed by immediate cash withdrawals of an equivalent value
  • Cheques made out to a company deposited or directed into a personal account of a customer associated with the company
  • Account activity inconsistent with business profile
  • Large cash deposits into online betting account
Last modified: 30/07/2015 15:35