Commonwealth Offences Relating to Dealing in Proceeds of Crime in Australia

A Sydney lawyer has been sent to prison for 12 years over his part in the multi-million dollar Plutus Payroll tax fraud scheme.

He is the sixth person to be convicted and sentenced over the fraud, which has been dubbed the biggest in Australia’s history, with a value of around $105 million.

The offences

A jury found lawyer Sevag Chalabian guilty of conspiring to cause a loss to the Commonwealth as well as intentionally dealing in the proceeds of crime with a value of more than $1 million.

He was sentenced to a full term of 12 years behind bars and a minimum of seven years, which means that – taking into account time already served – he will be eligible to apply for release from prison on parole on 23 December 2029.

Using vulnerable people as ‘dummy directors’

According to evidence presented at the trial, a company called Plutus Payroll offered a “zero fees” service to handle company payrolls.

It collected gross wages from employers, promising to on-send funds to the ATO by way of GST and Pay As You Go (PAYG) taxation.

Instead of forwarding on the money, the group siphoned it via “second-tier” companies with dummy directors.

Some of these directors were dependent on illicit drugs and desperate unemployed people who willingly opened bank accounts in their names in exchange for money, without ever knowing they were involved in fraud.

The ringleaders had no issue with setting these vulnerable people up to “take the fall,” while they themselves spent the ill-gotten proceeds lavishly on luxury properties, cars, boats and jewellery.

Others who were involved

Adam and Lauren Cranston — who are the children of former Australian Taxation Office deputy commissioner Michael Cranston — along with another lawyer Dev Menon, as well as former ex-professional snowboarder Jason Onley and Adam Cranston’s childhood friend Patrick Willmott, were previously found guilty of the same offences for which Mr Chalabian has been convicted.

They remain in custody awaiting sentencing.

There is no suggestion that former ATO employee Mr Michael Cranston was involved in any wrongdoing.

The trials over the scheme began in April 2022 and the jurors heard evidence from dozens of witnesses and many hours of recording from listening devices.

Lawyer had an “indispensable role”

During Mr Chalabian’s sentencing hearing, Justice Peter Johnson said he played an “indispensable role” in the laundering of $24 million of the proceeds of the fraudulent scheme.

His Honour noted that, ss a solicitor, Mr Chalabian had access to a trust account which provided a “level of cover” for the criminal activity.

The scam was uncovered by the Australian Federal Police with assistance from the ATO in 2017 as part of Operation Elbrus.

A total of 16 people were charged.

Reform

The case also led to a raft of changes in the law, including tough new laws to stamp out “dummy” directors. New laws introduced last year tighten the process for the registration of directors to ensure their legitimacy, and will also help to stop the practice of directors being appointed to companies without their consent.

Section 1272C of the Corporations Act 2001 (Cth) contains both civil and criminal penalties for such conduct, including:

Failing to apply for a director ID within the required timeframe.
Deliberately providing false identity information.
Intentionally providing a false director ID to a government body or relevant body corporate.
Intentionally applying for multiple director IDs.

Penalties can include prison time as well as fines in excess of $1 million.

Commonwealth offences relating to dealing in proceeds of crime

Chapter 10, Part 10.2, Division 400 (sections 400.1 to 400.9) of the Criminal Code Act 1995 (Cth) is titled ‘Money Laundering’ and sets out a number of offences relating to dealing in the proceeds of crime, as well as the definitions that relate to those offences.

These laws apply across Australia.

The maximum penalties that apply to these offences are determined according to your state of mind at the time of the offence – namely, whether your conduct was negligent, reckless or intentional, as well as the value of the proceeds derived.

The following table contains:

The relevant offence sections of the Criminal Code Act 1995 (Cth),
The names of the offences,
The ‘essential elements’ of each offence, which are the ingredients the prosecution is required to prove beyond a reasonable doubt in order to establish the offence, and
The maximum penalty that applies:

Section of Criminal Code Act	Name of offence / essential elements	Maximum penalty
400.3(1)	Intentionally dealing in proceeds of crime – $1,000,000 or more You dealt with money or other property The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime, and The value of the money and/or property was $1,000,000 or more.	25 years
400.3(2)	Recklessly dealing in proceeds of crime – $1,000,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $1,000,000 or more.	12 years
400.3(3)	Negligently dealing in proceeds of crime – $1,000,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $1,000,000 or more.	5 years
400.4(1)	Intentionally dealing in proceeds of crime – $100,000 or more You dealt with money or other property The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime, and The value of the money and/or property was $100,000 or more.	20 years
400.4(2)	Recklessly dealing in proceeds of crime – $100,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $100,000 or more.	10 years
400.4(3)	Negligently dealing in proceeds of crime – $100,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $100,000 or more.	4 years
400.5(1)	Intentionally dealing in proceeds of crime – $50,000 or more You dealt with money or other property The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime, and The value of the money and/or property was $50,000 or more.	15 years
400.5(2)	Recklessly dealing in proceeds of crime – $50,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $50,000 or more.	7 years
400.5(3)	Negligently dealing in proceeds of crime – $50,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $50,000 or more.	3 years
400.6(1)	Intentionally dealing in proceeds of crime – $10,000 or more o establish the offence, the prosecution must prove beyond reasonable doubt that: You dealt with money or other property The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime, and The value of the money and/or property was $10,000 or more.	10 years
400.6(2)	Recklessly dealing in proceeds of crime – $10,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $10,000 or more.	5 years
400.6(3)	Negligently dealing in proceeds of crime – $10,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $10,000 or more.	2 years
400.7(1)	Intentionally dealing in proceeds of crime – $1,000 or more You dealt with money or other property The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime, and The value of the money and/or property was $1,000 or more.	5 years
400.7(2)	Recklessly dealing in proceeds of crime – $1,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $1000 or more.	2 years
400.7(3)	Negligently dealing in proceeds of crime – $1,000 or more You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime, and The value of the money and/or property was $1,000 or more.	12 months
400.8(1)	Intentionally dealing in proceeds of crime – any value You dealt with money or other property, and The money or property was, and you believed it was, the proceeds of crime, or you intended for it to become an instrument of crime.	12 months
400.8(2)	Recklessly dealing in proceeds of crime – any value You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime, and You were reckless as to whether the money or property was the proceeds of crime or would become an instrument of crime.	6 months
400.8(3)	Negligently dealing in proceeds of crime – any value You dealt with money or other property The money or property was the proceeds of crime, or there was a risk it would become an instrument of crime, and You were negligent as to whether the money or property was the proceeds of crime or would become an instrument of crime.	10 penalty units

The next three offences are the Commonwealth equivalents of the New South Wales offence of dealing with suspected proceeds of crime under section 193C.

400.9(1)	Dealing in property reasonably suspected of being proceeds of crime – $100,000 or more You dealt with money and/or property It was reasonable to suspect the money and/or property was the proceeds of crime, and The value of the money and/or property was at least $100,000.	3 years
400.9(1AB)	Dealing in property reasonably suspected of being proceeds of crime – $1000,000 or more You dealt with money and/or property It was reasonable to suspect the money and/or property was the proceeds of crime, and The value of the money and/or property was at least $1 million.	4 years
400.9(1AA)	Dealing in property reasonably suspected of being proceeds of crime – $10,000,000 or more You dealt with money and/or property It was reasonable to suspect the money and/or property was the proceeds of crime, and The value of the money and/or property was at least $10 million.	5 years

It is important to note that, for all offence that contain dollar values, you are not guilty if you are able to establish ‘on the balance of probabilities’ that you mistakenly but reasonably believed the value of the money or property was less than the specified amount.

In that case, however, you may be found guilty of an alternative, less-serious offence.

Definitions

The Act outlines the meaning of the terms used above as follows:

What is the definition of ‘dealt with’ property?

A person ‘dealt with’ money or property if he or she:

Received, possessed, concealed or disposed of it,
Imported it into, or exported it from, Australia, or
Engaged in a banking transaction relating to it.

What is the definition of importing or exporting in the context of proceed of crime?

‘Importing’ or ‘exporting’ includes physical transfer of property or money, as well as transferring funds or property by electronic communication.

What is property?

‘Property’ means real or personal property of any description, whether in Australia or elsewhere, whether tangible or intangible, including any interest in the property. The definition encompasses financial instruments, cards and other objects that represent or can be exchanged for money.

What is proceeds of crime?

‘Proceeds of crime’ means property that is wholly or partly derived or realised, directly or indirectly, by any person from the commission of an offence against the Commonwealth, a State or Territory, or a foreign country, that may be dealt with as an indictable offence.

What is an indictable offence?

An ‘indictable offence’ is one which may be dealt with in a higher court such as the District or Supreme Court.

What is an instrument of crime?

An ‘instrument of crime’ is money or property used in the commission of, or to facilitate the commission of, an offence against the Commonwealth, a State or Territory, or a foreign country, that may be dealt with as an indictable offence.

What is the meaning of reckless?

A person is ‘reckless’ if he or she is aware there was a substantial risk that the money or property is the proceeds of crime, or that there is a risk it will become an instrument of crime and it is unjustifiable to take that risk, but he or she goes ahead with the actions regardless.

What is the meaning of negligent?

A person is ‘negligent’ if:

His or her conduct represents a great falling short of the standard of care that a reasonable person would exercise in the circumstances, and
There is such a high risk the money or property in question is the proceeds of crime or will become an instrument of crime as to require that your conduct merits criminal punishment.

Legal defences

Like the New South Wales offences, the legal defences to Commonwealth proceeds of crime charges include self-defence, duress and necessity.

What happens to assets that are the proceeds of crime?

Assets that are determined to be the ‘proceeds of crime’ are sold and the proceeds of the sale are returned to the Commonwealth and placed into the Confiscated Assets Account.

This account is managed by the Australian Financial Security Authority (AFSA) on behalf of the Commonwealth.

Victims may be able to recoup losses by applying through this mechanism.

Suspected of or charged with a proceeds of crime offence?

If you have are suspect of dealing in the proceeds of crime, or have been charged with a proceeds of crime offence, call Sydney Criminal Lawyers anytime on (02) 9261 8881 to arrange a conference with an experienced, specialist criminal defence lawyer who will advise your options, the best way forward and fight for the optimal outcome.