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Client verification standards for tax agents must be made mandatory to combat the growing threat of identity fraud, an ID verification specialist warns.
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Tougher enforcement needed on client verification, says OCR Labs
16 May 2023
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10 minute read
OCR Labs general manager APAC, Paul Warren-Tape, said despite a rise in fraudulent tax returns, enforcement of ID verification guidelines for registered tax practitioners has been weak.
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The Tax Practitioners Board (TPB) and ATO first released client verification guidelines for tax practitioners in 2021 in response to criminals using increasingly sophisticated attempts to steal taxpayer identities.
Tax practitioners were encouraged to adopt the guidelines on a voluntary basis, with the ATO stating that it would consult further with the TPB and tax profession before mandating the minimum requirements.
Both sets of guidance were updated earlier this year. Tax agents following the guidelines from both the ATO and the TPB will be deemed to have met the requirements of both agencies.
Mr Warren-Tape said the adoption of these standards has so far been limited, with most businesses only complying with the minimum standards required by law.
“Everyone will be compliant to the minimum standards, whether they go above and beyond is purely an ethical decision,” Mr Warren-Tape said.
“I don’t think these identity verification guidelines have been very well followed. Therefore, while guidelines are nice because everyone knows what they should be doing, most companies always do the minimum required.”
Until the TPB and ATO fully mandate the use of these standards, this is unlikely to change anytime soon, he said.
“Until these guidelines are mandated, tax agents will see it as annoying step in the process that they have to follow,” said Mr Warren-Tape.
“Most tax agents until being told will take the easiest path.”
Following the release of the guidelines, the ATO said that tax agents should interpret them as minimum requirements and go beyond the requirements where they have concerns about a person’s identity.
The ATO and TPB also warned tax agents against retaining identification documents after the client identity has been verified.
“Retaining identification documents may increase your risk of being targeted by criminals undertaking identity theft. Instead, maintain contemporaneous records to demonstrate that you undertook proof of identity steps,” the ATO said.
ATO assistant commissioner, SMSF risk and strategy, Justin Micale said identity fraud remains a top priority for the ATO with the Tax Office seeing an increase in the number of individuals who were victims of identity fraud.
“Scammers are becoming increasingly sophisticated, impersonating well-known Australian companies and using personal details to gain trust,” explained Mr Micale in a speech last month.
Mr Micale said that verifying the identity of new clients was critical with some tax agents being unwittingly caught up in registering fraudulent SMSFs.
“Strong client verification helps to protect tax practitioners and their clients from identity fraud.”
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