Victims struggle with recovery after tax fraud leaves them out of pocket. Could this type of identity crime threaten their  credit file?

According to public documents, a staggering $33 million worth of suspected fraudulent tax refunds linked to identity crime have been blocked since July this year. Last week SC Magazine released an article ‘ID thieves steal tax returns’ revealing these figures.

It reports criminals are lodging fraudulent returns with the ATO and also creating fake group certificates linked to real businesses.

SC reports that the process of finding the fraudsters and reimburing victims is complicated and difficult:

“Australian Federal Police are understood to be only able to investigate instances of fraud against the ATO if banks supply suspect account details. This is thought to scarcely occur.”

“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,” the article says.

The ATO says it could not comment on investigations, but has promised to reimburse victims, saying they have a:

“strong focus on raising awareness within the community about the importance of TFN protection and personal information,” it told SC Magazine.

In the meantime, two of the victims interviewed by SC reported experiencing many issues with attempting to get to the bottom of the fraud themselves. There has reportedly been little assistance from the accountants responsible for lodging the fraudulent claims (they are reportedly not liable having lodged the claim in good faith), and after 30 calls to the ATO from one of the victims, still no answers and no refund yet.

What we found most interesting about this article, was the last few paragraphs on the Australian Federal Police’s response to SC:

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

[the AFP] said.

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

For Cameron and Mansfield [the alleged fraud victims featured in the article], 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,” the article says.

The comments illustrate where we believe Australia can do more when it comes to identity theft – identity theft recovery.

The media seems to frequently speak to identity theft victims, but many of them seem to have been unable to recover their lost monies, to find someone who shoulders the responsibility or gives them the answers or help they are looking for.

Albeit it is early days for identity theft as a crime, but with a recent survey commissioned by the former Attorney-General revealing 1 in 6 people know someone or themselves have been a victim of identity theft, and the Australian Crime Commission citing identity crime as the fastest growing crime in Australia, it may be a pertinent time for victim recovery to be given more focus.

In the SC article, it was recognised that the actual victim of fraud was the ATO, whose money was stolen by fraudsters. But what about the person whose identity was stolen? Are they at risk of further fraud in other areas?

The fraudsters have detailed personal information on the victims, what to say they can’t take credit out in the victim’s name or use the information for other illegal purposes? Where should they go to be given advice on what to do?

Recently we investigated identity theft recovery, and how it specifically relates to repairing a damaged credit rating. A damaged credit rating from identity theft can hurt the victim sometimes more than the original fraud. Not only can they owe the debt, and all subsequent fees to creditors they can be blacklisted from obtaining further credit in their names for 5 to 7 years. An identity theft victim who is not able to recover their credit rating is facing years of hardship. So where can victims turn for help?

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

This is true, but what was missed from the quotes in this article, was the fact that these victims may be eligible to apply at a Magistrate’s Court for a Commonwealth Victims of Identity Crime Certificate. Were victims told about their options in this regard?

This Certificate is designed to give Commonwealth identity theft victims some kind of official substantiation to their claims of fraud.

“A Commonwealth Victims’ Certificate helps support your claim that you have been the victim of Commonwealth identity crime. You can present the Certificate to an organisation such as a Government agency, or a business (such as a financial institution or credit agency).  This may help you negotiate with them to re‑establish your credentials or to remove a fraudulent transaction from their records.

A certificate does not compel any organisation to take a particular action. It will not automatically re-establish a person’s credit rating or remove a fraudulent transaction from their record. It is also not admissible in any legal proceedings.” The Attorney-General’s website says.

With recovery obviously so difficult, victims need any help they can get.

If victims have their credit rating damaged for example, black marks are quite difficult for the individual to remove. When it comes to identity theft in our experience, creditors demand documentary proof to help with establishing that the victim did not initiate the credit in the first place. This certificate could certainly be a very valuable document for victims and we feel would greatly assist victims in substantiating their claims to creditors.

During our investigations, we found it difficult to establish the ground rules as to what constituted a Commonwealth Indictable Offence, and a State Offence.

The Attorney-General’s office advised us that the list of offences against the Commonwealth are so great, it is difficult to provide a full list for the public. They say that if any person suspects identity theft, they may be eligible and should just apply  for the Certificate, and a magistrate in their State will decide whether it is possible to obtain one on Commonwealth grounds.

And as to whether these tax fraud victims would be eligible? A spokesperson for the Attorney-General advised us that that a Commonwealth indictable offence would include some instances of tax fraud:

“This includes conduct relating to tax fraud such as when an individual dishonestly obtains a financial benefit from the Commonwealth by using another person’s identity,” the spokesperson said.

They say it is up to the Police to pass on information on the Certificate to victims as they see appropriate for each individual fraud case. Apart from that, information is available on the Attorney-General’s website.

It may be that the tax fraud victims at this stage have no need or claim for an identity crime certificate. But broadly speaking, it should be something which is promoted by all agencies as an avenue for recovery for victims. It could also be something State-based agencies could also look at adopting for identity theft victims.

In the meantime, identity theft continues to affect 1 in 6 of us, and while Australia continues to iron out its laws and streamline its investigations, we believe the current victims are unlucky to be at the beginning of our development of effective recovery processes.
For further help with credit repair information following identity theft, contact MyCRA Credit Repairs tollfree on 1300 667 218 or visit the main website www.mycra.com.au.

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