This week, The Age, The Sydney Morning Herald, 60 Minutes and The New York Occasions revealed how a secretive international operation, half led by the ATO and codenamed Atlantis, is concentrating on dozens of Australian taxpayers who use a Puerto Rican financial institution, Euro Pacific, co-owned by American superstar enterprise determine Peter Schiff.
Atlantis can be monitoring the attorneys and accountants who’ve advisable to Australians that they use the financial institution, the ATO has confirmed. Flynn is below ATO scrutiny, official sources have confirmed, as a result of he refers his shoppers to Euro Pacific. Underneath Australian legislation, Flynn and different Australian proponents of offshore structuring are appearing legally, although they use loopholes.
This has prompted calls for brand new legal guidelines in Australia and higher enforcement as a result of, 4 years after the publication of the Panama Papers revealed that attorneys Mossack Fonseca have been directing rich Australians in direction of offshore accounts, the observe remains to be thriving.
Monetary crime consultants say the federal authorities should introduce long-stalled legal guidelines that might pressure Australian attorneys and accountants to report their shoppers to authorities in the event that they transfer cash in a suspect trend, together with offshore.
The consultants, together with Alex Erskine, a former senior govt from company watchdog ASIC, say advisers comparable to Flynn spotlight the necessity for adjustments to make sure attorneys and accountants face the identical obligations as banks and cash remitters to report suspicious transactions. As a substitute, they’re advising how to not go away a cash path.
On one recording, Flynn says to an individual who he thinks is a possible consumer: “I say to shoppers on a regular basis, ‘Look, there is not any reward with out danger. You are eager to arrange a tax-free state of affairs, to keep away from data trade [with tax authorities] … There isn’t any good world, mate’.”
It might not be good, however Flynn is there to indicate the way in which to greatest get there.
Within the late Nineteen Nineties, Flynn took an out-of-the-blue name from an outdated college pal that modified his life. Whereas Flynn had spent the previous decade operating his suburban agency, his mate had moved to London to turn into a big-time company solicitor. It was there, in keeping with covertly made recordings, that he learnt concerning the offshore finance business. The sights have been clear.
“Hold on a second, I can make more cash organising off-shore firms, [with] quite a bit much less stress than I can working as a litigation lawyer slash business lawyer in London. F— that,” Flynn mentioned on one recording.
His mate was on the lookout for referrals to his new enterprise within the Seychelles – the tax haven that boasts of “stable secrecy and enticing offshore enterprise legal guidelines”. In line with Flynn, “I immediately noticed the chance, and I mentioned, ‘Mate, is there room for 2?'”
Inside days, the Queenslander had boarded a flight from Brisbane to the island within the Indian Ocean, about 1600 kilometres east of Kenya. Seychelles is the stereotype of a tropical paradise – pin-striped hammocks overlook snow white sand and the crystal water is jammed with fish and holidaymakers.
“I spent per week over there, noticed the chance, noticed the nation, noticed the life-style and I believed, ‘Yeah, this can be nice.'”
He rushed again to Brisbane, offered his legislation agency, advised his household they have been transferring and in June, the tropical dot within the Indian Ocean was his new dwelling. Whereas brushing up on worldwide tax planning, Flynn pitched for shoppers. In his spare time, he performed solo gigs in inns throughout the island and jammed along with his rock band, The Purple Bushes.
In his critique of advisers who promote secrecy and loopholes, Australia’s deputy tax commissioner Will Day is not going to identify any firm or particular person. However he is scathing of those that push the bounds of the Australian legislation by providing “worldwide tax evasion” constructions.
“What they’re making an attempt to promote is advanced monetary preparations within the hope which you could conceal behind them … What you’ll get on this package deal is an organization in a single nation, perhaps a checking account in a foreign country, perhaps a belief in a 3rd nation.”
Whereas The Age and Herald will not be suggesting Flynn is breaking the legislation, Day’s description applies completely to his enterprise, Offshore Corporations Worldwide (OCI). Flynn tells one potential consumer his typical recommendation includes creating “a buying and selling firm up entrance, perhaps a holding entity in between after which an final holding entity on the backside”. This hides helpful possession. Flynn’s shoppers are additionally suggested to make use of encrypted e-mail companies Hushmail or Protonmail for “most confidentiality”.
Flynn is especially keen on Seychelles’ non-public foundations – a kind of company construction – for a similar motive.
“Within the occasion of a lawsuit or tax investigation or regulatory inquiry, your consumer can swear below oath, ‘I’m not the authorized or helpful proprietor of this Firm’, which may very well be the distinction between being charged with/jailed for tax evasion and strolling away a free man.”
A person pleased with his expertise
In his dialog with an undercover operative posing as a consultant for an Australia-based multinational businessmen, Flynn additionally describes “plenty of banking jurisdictions” the place “we are able to open up a checking account on your shoppers” that won’t share data with tax authorities.
“There isn’t any danger. There’s completely zero danger of checking account data sharing,” he says.
In his pitch, Flynn boasts of his relationships with dozens of offshore banks, and a companion in his agency, says Flynn, is a chartered accountant devoted to beginning offshore accounts.
“For the final 10 years, [that’s] all she’s accomplished all day, day-after-day.”
One “huge loophole”, he confides to the undercover operative, includes claiming any new offshore account is being set as much as run a enterprise, fairly than to obtain passive earnings.
“Once you open the checking account, for f—‘s sake, inform the financial institution, ‘Hey, banker, this firm is a buying and selling firm,'” says Flynn. “And the financial institution goes, ‘Nice – your file goes in pile B.’ Pile A are the information the place data trade [with tax authorities] will happen. Pile B is a pile of information the place data trade doesn’t have any utility.”
Puerto Rico is one other favoured vacation spot. It enjoys the 2 virtues in Flynn’s world of secrecy and low or zero taxes. Flynn has been “working with” Euro Pacific – the financial institution on the centre of international tax evasion probe Operation Atlantis – “for about eight years”.
For Flynn, the financial institution’s best promoting level is the very fact it does not mechanically share details about its Australian prospects with different nations’ tax authorities, as a result of Puerto Rico and the US will not be signatories to a global treaty designed to stop tax evasion.
Flynn says this implies Euro Pacific presents “a completely non-public checking account. That is the massive benefit.” Flynn has his personal account at Euro Pacific, linked to a forex buying and selling firm in Panama.
“I’ve personally received accounts there,” he says.
‘Designed to fail’
Monetary crime consultants comparable to Erskine and former Australian Federal Police detective John Chevis say advisers comparable to Flynn are far too calmly regulated. That is regardless of a bipartisan parliamentary committee in 2015 calling for legal guidelines that might make attorneys and accountants changing into cash laundering “reporting brokers”. The legal guidelines are additionally being pushed on Australia by the Monetary Motion Activity Drive, a world intergovernmental monetary crime company.
Erskine says Australia’s anti-money laundering regime because it stands is “designed to fail. Accountants and attorneys have to be handled as reporting brokers for this to alter.”
Australia’s high cash laundering and tax haven skilled, Professor Jason Sharman, directs his criticism in direction of a federal authorities that “does not actually care about most monetary crime”. In Sharman’s view, Operation Atlantis and different main probes are exceptions to a principally passive monetary crime legislation enforcement surroundings.
The ATO’s Will Day refuses to touch upon requires legislative change, however concedes he is “involved about professionals, whether or not they’re attorneys, tax brokers or accountants, who is perhaps the connector between an Australian-based tax evader or organised prison and a few of these offshore preparations”. However contemplating that the majority act inside the legislation, albeit at its fringes, stopping them is troublesome.
When the undercover operative implies to Flynn that the cash he’s in search of to park offshore is the proceeds of bribery, the lawyer says he does not need to be concerned with kickbacks.
“It is not an space that I will be, when it comes to my danger urge for food … ready to work with,” he says.
But Flynn does not finish the decision instantly. He gives recommendation for an additional quarter-hour about arrange a Euro Pacific account after which agrees to maintain coping with the operative.
‘I am a criminal offense boss …’
Flynn’s Australian rivals embody a agency known as Wealth Protected, which has workers in Perth and Melbourne. Its founders are attorneys and accountants who promote their companies because the chief in “artistic tax methods” to “slash your tax”. Wealth Protected is just not concerned with Euro Pacific.
Chief govt Warren Black markets himself as “not your on a regular basis accountant”.
Black claims to be an skilled in offshore constructions, having beforehand spent “10 years on the ATO together with time as an auditor and foundations and structuring specialist”.
Potential shoppers of Wealth Protected should fill in an internet questionnaire. One query asks: “How do you generate your earnings proper now?” A drop-down field suggests: “I am a criminal offense boss (I’ve a bizarre sense of humour!)” One other asks shoppers why they need to slash tax. “I owe the Tax Workplace some huge cash in my enterprise and so they’re chasing me. HELP!!!” is one drop-down choice.
When our undercover operative contacts Wealth Protected’s Melbourne supervisor, Virna White, she describes her agency’s means to drastically cut back tax saying: “We are able to do all strange issues.”
White, a educated accountant, presents the companies of a 3rd get together – a so-called “internationalisation architect” named “Stephen” – who may also help shoppers arrange offshore constructions. Stephen, says White, does not have “all these rules weighing him down like we do as professionals”.
“Stephen’s extra free to go a bit additional with our shoppers than we are able to, as a result of we’re watching our licence intently,” she says.
White additionally stresses that Warren Black’s earlier job as a senior tax workplace auditor pays dividends for shoppers.
“He understands quite a bit concerning the ATO system, how they perform, as a result of he was a senior one in there,” she says. “As a result of we all know what goes on in there … we’re at all times safeguarding issues to make it possible for in case of an audit or no matter, all of the information are lining up.”
Nick McKenzie is an investigative reporter for The Age. He is received 9 Walkley awards and covers politics, enterprise, overseas affairs and defence, human rights points, the prison justice system and social affairs.
Charlotte is a reporter for The Age.
Joel is a producer for 60 Minutes.