Clever and lucrative gold scam

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fascinating story in the Australian today. It will be interesting to see if anyone is charged.

"Twice a week, three Korean students would put in a regular order $6 million in pure gold bullion from the Australian Bullion Company in Sydney.

Every Tuesday and Thursday, the 20-something students would buy the gold and a Sydney man, a professional magician who had authority over the accounts, would collect the stamped bars from ABC, one of Australias largest bullion dealers.

The bars of pure gold ranged in size from 250g about the size of a matchbox to 1kg, similar in size to an iPhone 4. And $12m a week buys a lot: more than 200kg a week.

The first stop for the students gold was a red-brick house in Ashfield in Sydneys inner west, rented by a former property developer and bankrupt whom The Australian has chosen not to name.

There overnight the gold bars would be melted down and formed into rough blocks of gold weighing about 1.5kg.

As it transformed in one of the 10 gold-melting furnaces that fired through the night, the gold suddenly became more valuable.

But it was an alchemy of regulation, not chemistry.

Though still pure gold, it was no longer considered bullion; meaning the seller could claim it as scrap and add 10 per cent to the price as GST that should have been sent to the Australian Taxation Office. This was the halfway point for the elaborate get-rich plan hatched in the shady world of gold trading.

Every following Wednesday and Friday, the man would deliver the gold to a vacant office on Sydneys Pitt Street leased by a company. Sometimes another member of the syndicate would sleep alone with the gold, on the 10th floor of an office building on one of the citys busiest streets.

From there the company sent the gold to a metals processor in Melbourne, where it would be bought at the GST premium price, refined and onsold as bullion, without the GST. The refiner would then claim back a GST refund, but money owed to the ATO by the company would never be remitted. The Koreans would be paid, other syndicate members would take a cut, the cycle would continue.

For more than two years in 2012 and 2013, the syndicate bought, melted and sold gold. From scrap to bullion, from bullion to scrap. Again and again, until more than $400m of gold had passed through the syndicates hands, allowing it to pocket a lazy $41m of taxpayer funds.

The brazen scam is detailed in an affidavit from Australian Federal Police agent James Cutler filed in the Federal Court after the ATO attempted to recover the $41m in GST payments it says the company had no right to claim.

GRAPHIC: The golden trail

The company disputed the claim, saying it was acting in accordance with its main business activity of a second-hand dealership, and was legally entitled to claim tax credits selling the gold.

Cutler visited the Ashfield house late in 2013 and spoke to a man the ATO says is one of two people at the centre of this scam. In the transcript included in AFP evidence, the man who melted down the gold said he was not sure if he had done anything wrong.

I am just not sure where the criminality lies, says the man we will call Mr X.

It is alleged you have purchased gold for the sole purpose of defrauding the tax office, Cutler replies.

The conversation continues:

Mr X: I dont see how what I have done is an offence.

Cutler: You think what you have been doing, buying, melting gold and then selling the gold is legal?

Mr X: Well, yes, its a grey area, isnt it?

Cutler continues to probe the man, asking whether he thought what he was doing was lawful: You have defrauded the ATO of millions of dollars.

Mr X: I thought it was just a grey area, a loophole.

I didnt think it was any different to all the people who try to minimise their tax. I just found it amazing that it still existed.

The carousel arrangement is just one example of the national gold scam that has so far cost taxpayers $610m, a sum that has been rising since 2013 when the ATO established Operation Nosean to crack down on the rort.

Despite the detailed evidence contained in Cutlers affidavits, no criminal charges have been laid in this case, nor in others where GST is believed to have been wrongly paid, or not remitted back to the ATO.

Tax officials say a brief of evidence is being considered by commonwealth prosecutors, and another case has been referred to the AFP-led Serious Financial Crime Taskforce.

Questions are being asked across the industry about why it has taken the tax office so long to act when authorities have been aware of the loophole for years.

Many players were enriched by the scam and others similar, wittingly or otherwise.

The bullion house, the refiner and the middle men have all benefited from the increased volumes in gold traded, with the commonwealth and therefore taxpayers the victim.

The ATO has responded with widespread audits 81 at last count and since July has withheld almost $20m in GST refunds that some gold refiners say could force them to close their doors.

Refiners say they are conducting legitimate business operations and are being unfairly and potentially illegally penalised.

This week, refiners across the country received a letter from Deputy Commissioner Tim Dyce offering a new reverse charge option that allows buyers of gold to remit GST to the government on behalf of the sellers, in an attempt to stamp out the practice.

The new regulation comes into effect next week, but sources say it wont be enough to stamp it out, with second-hand dealers still free to rort the system.

Tax Commissioner Chris Jordan has admitted that cracking down on criminal syndicates has been difficult. Recovering $610m for taxpayers seems even harder."
 
Hope they don't use it for an excuse to introduce legislation where prospecting is affected.

8)

You just never know what the criminals will think of next , hopefully they keep their minds on legitimate tax collection.
 
DrDuck said:
fascinating story in the Australian today. It will be interesting to see if anyone is charged.

"Twice a week, three Korean students would put in a regular order $6 million in pure gold bullion from the Australian Bullion Company in Sydney.

Every Tuesday and Thursday, the 20-something students would buy the gold and a Sydney man, a professional magician who had authority over the accounts, would collect the stamped bars from ABC, one of Australias largest bullion dealers.

The bars of pure gold ranged in size from 250g about the size of a matchbox to 1kg, similar in size to an iPhone 4. And $12m a week buys a lot: more than 200kg a week.

The first stop for the students gold was a red-brick house in Ashfield in Sydneys inner west, rented by a former property developer and bankrupt whom The Australian has chosen not to name.

There overnight the gold bars would be melted down and formed into rough blocks of gold weighing about 1.5kg.

As it transformed in one of the 10 gold-melting furnaces that fired through the night, the gold suddenly became more valuable.

But it was an alchemy of regulation, not chemistry.

Though still pure gold, it was no longer considered bullion; meaning the seller could claim it as scrap and add 10 per cent to the price as GST that should have been sent to the Australian Taxation Office. This was the halfway point for the elaborate get-rich plan hatched in the shady world of gold trading.

Every following Wednesday and Friday, the man would deliver the gold to a vacant office on Sydneys Pitt Street leased by a company. Sometimes another member of the syndicate would sleep alone with the gold, on the 10th floor of an office building on one of the citys busiest streets.

From there the company sent the gold to a metals processor in Melbourne, where it would be bought at the GST premium price, refined and onsold as bullion, without the GST. The refiner would then claim back a GST refund, but money owed to the ATO by the company would never be remitted. The Koreans would be paid, other syndicate members would take a cut, the cycle would continue.

For more than two years in 2012 and 2013, the syndicate bought, melted and sold gold. From scrap to bullion, from bullion to scrap. Again and again, until more than $400m of gold had passed through the syndicates hands, allowing it to pocket a lazy $41m of taxpayer funds.

The brazen scam is detailed in an affidavit from Australian Federal Police agent James Cutler filed in the Federal Court after the ATO attempted to recover the $41m in GST payments it says the company had no right to claim.

GRAPHIC: The golden trail

The company disputed the claim, saying it was acting in accordance with its main business activity of a second-hand dealership, and was legally entitled to claim tax credits selling the gold.

Cutler visited the Ashfield house late in 2013 and spoke to a man the ATO says is one of two people at the centre of this scam. In the transcript included in AFP evidence, the man who melted down the gold said he was not sure if he had done anything wrong.

I am just not sure where the criminality lies, says the man we will call Mr X.

It is alleged you have purchased gold for the sole purpose of defrauding the tax office, Cutler replies.

The conversation continues:

Mr X: I dont see how what I have done is an offence.

Cutler: You think what you have been doing, buying, melting gold and then selling the gold is legal?

Mr X: Well, yes, its a grey area, isnt it?

Cutler continues to probe the man, asking whether he thought what he was doing was lawful: You have defrauded the ATO of millions of dollars.

Mr X: I thought it was just a grey area, a loophole.

I didnt think it was any different to all the people who try to minimise their tax. I just found it amazing that it still existed.

The carousel arrangement is just one example of the national gold scam that has so far cost taxpayers $610m, a sum that has been rising since 2013 when the ATO established Operation Nosean to crack down on the rort.

Despite the detailed evidence contained in Cutlers affidavits, no criminal charges have been laid in this case, nor in others where GST is believed to have been wrongly paid, or not remitted back to the ATO.

Tax officials say a brief of evidence is being considered by commonwealth prosecutors, and another case has been referred to the AFP-led Serious Financial Crime Taskforce.

Questions are being asked across the industry about why it has taken the tax office so long to act when authorities have been aware of the loophole for years.

Many players were enriched by the scam and others similar, wittingly or otherwise.

The bullion house, the refiner and the middle men have all benefited from the increased volumes in gold traded, with the commonwealth and therefore taxpayers the victim.

The ATO has responded with widespread audits 81 at last count and since July has withheld almost $20m in GST refunds that some gold refiners say could force them to close their doors.

Refiners say they are conducting legitimate business operations and are being unfairly and potentially illegally penalised.

This week, refiners across the country received a letter from Deputy Commissioner Tim Dyce offering a new reverse charge option that allows buyers of gold to remit GST to the government on behalf of the sellers, in an attempt to stamp out the practice.

The new regulation comes into effect next week, but sources say it wont be enough to stamp it out, with second-hand dealers still free to rort the system.

Tax Commissioner Chris Jordan has admitted that cracking down on criminal syndicates has been difficult. Recovering $610m for taxpayers seems even harder."

From my previous dealings with the ATO (along with a CPA ) this is politik talk for " we really have nothing on you, but if you pay us $xxx we will drop the case "
It's pretty common practice for the ATO to do this sort of thing, they figure it's quicker and easier to take quick $1 mil in hand than to take you to court for $5 mil and maybe loose the case + all the costs and time involved, and even if they win they may not get any payment
 
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