Hawker, David --- "Certainty of identity: a fundamental of security" [2001] PrivLawPRpr 34; (2001) 8(3) Privacy Law and Policy Reporter 66

Certainty of identity:
a fundamental of security

David Hawker MP

This paper was first presented at the UNSW CLE Seminar ‘E-security and e-crime’ in Sydney on 19 July 2001. It is reproduced here by kind permission of the author and the UNSW CLE Program.

You would think that in a country like Australia, with a well developed economy, robust legal system, recognised accounting and auditing standards and a well developed tax system, we would be fairly certain who should be paying tax and who should be receiving Commonwealth benefits.

Well, at present we can’t be as certain as we would like to be.

The tax file number (TFN) system has been introduced to assist in ensuring such certainty. The TFN system is a key element in Australia’s collection, regulation and distribution systems on which tax collection and benefits distribution are based.

In 1997-98 the TFN system contributed to the collection of over $110 billion in tax revenue; helped regulate a superannuation industry with annual contributions of approximately $30 billion; and supported the distribution of about $50 billion in Commonwealth benefits.

When a system is relied upon for the control of funds of that magnitude, it must operate with a high level of integrity.

However, in 1999 when the Commonwealth Auditor General undertook an audit to examine the operation of the TFN system, he found 3.2 million more individual TFN registrations than the number of people in Australia counted at the last census, an estimated 185,000 potential duplicate records of individual taxpayers among 17.1 million active tax records of such taxpayers, and much more.

Given those weaknesses and others identified in the audit report, the House of Representatives Economics Committee further examined the results of the audit and also some important wider policy issues.

The Committee’s findings are outlined in its benchmark report Numbers on the Run. The Committee’s report adds further evidence to 15 years of Auditor General and parliamentary inquiries that have found shortcomings in the quality of the Australian Taxation Office (ATO) data and systems.

The implications of these problems are serious, and even greater when the flow on effects to other areas of government administration, including the ABN system, are taken into account.

I will very briefly highlight the key findings and recommendations of that report as they relate to proof of identity processes and identity fraud.

We are still awaiting the Government’s response to the Committee’s report, so I can’t tell you yet how those recommend-ations will be implemented.

Definition, extent and cost of identity fraud

While the Committee found many weaknesses in the TFN system and the proof of identity (PoI) segments of the process, not all of those weaknesses were a result of fraud.

However, it was clear from the Committee’s enquiries that identity fraud is a significant issue for the Australian community.

The AFP advised the Committee that the concerns about false identity ‘... essentially revolve around the ease of availability of some documents which can then be used to prove identity and the ease with which technology permits the falsification of documents’.

While the definition of fraud has become easier with the introduction of changes to the criminal code last year, there is still a lack of data available on the extent and cost of identity fraud.

To rectify this deficiency the Committee recommended that the Commonwealth Government work with other levels of government and industry to develop national statistics on the extent and cost of identity fraud in Australia.

TFNs and PoI fraud

PoI fraud occurs through misrep-resentations to the ATO and through the misuse of falsely obtained TFNs.

Essentially the ATO faces two types of PoI fraud in relation to TFNs: that which relates to people born in Australia, and that which relates to people born overseas.

The Committee heard from a number of witnesses about cases of PoI fraud that involved the use of TFNs. For example, the AFP advised that they deal with a very small number of TFN frauds, such as people applying for benefits through Centrelink using false TFNs as part of their identification.

In the case of people born outside Australia, the Committee received information about TFN fraud committed by non-residents or through the use of TFNs issued to non-residents.

For example, there are cases of lists of TFNs that are displayed in youth hostels; people working that have quoted the TFN of friends, people that have left the country, or doubly using the TFN of another person. Temporary residents and foreign students paid to allow their TFN to be used to set up a ‘shell’ company that can be used for money laundering operations; and so on.

The use of TFNs as a means of establishing work rights for non-residents is an issue of particular concern, especially in the harvest industry. The Committee supported the general thrust of two important reports in this area, namely the Review of Illegal Workers in Australia: Improving Immigration Compliance in the Workplace and Harvesting Australia: Report of the National Harvest Trail Working Group.

The Committee found that the ATO had not adequately evaluated the extent and cost of identity fraud being perpetrated against the organisation, nor the risks and impact of such fraud. This was true for both residents and non-residents.

Accordingly, the Committee recommended that the ATO improve its internal processes for establishing identity and preventing identity fraud. This should include investigation of the extent of the problem within the ATO, including a trial of the NSW Registry of Birth, Deaths and Marriages Certificate Validation Service to determine the level of fraudulent NSW birth certificates being presented as identification to the ATO.

In looking for solutions to those problems, many of the Committee’s other recommendations in the Numbers on the Run report are relevant. For example, significant steps towards reducing identity fraud with both residents and non-residents would be:

• improving the TFN registration processes;
• improving the TFN data quality systems and the data itself through removing duplicate and excess TFNs;
• extending TFN data matching to additional data sets and additional transactions; and
• extending TFN quotation, including: considering unique numeric identifiers in the public and private sector, mandatory TFN quotation, and the possible introduction of a client service number (which could be the TFN) for use across Australia.

Obviously, the privacy implications of some of those options requires very careful consideration.

Specifically in relation to non-residents, the committee recommended that the ATO:

• identify the extent of tax fraud being committed by non-residents;
• review potential vulnerabilities with the current tax treatment of non-residents;
• propose ways to address this issue, particularly focusing on options within existing laws; and
• seek to implement these proposals as soon as is practicable.

Commonwealth PoI processes

Through the Committee’s work on TFNs it was clear that PoI issues extend across Commonwealth agencies. There is an interdependence of agencies’ identity processes, with agencies being highly reliant on the integrity of each other’s documents for establishing individuals’ identities.

Accordingly, the Committee recom-mended that the Commonwealth Government instigate a formal process for assessing PoI risks and reform across the Commonwealth, drawing on relevant policy and administrative departments and agencies.

The Committee also considered that an agency in the Attorney General’s portfolio should be tasked with the responsibility of addressing the issue of PoI processes and identity fraud across the Commonwealth.

A broader response

The issue of identity fraud is not just a problem for government administration. It affects many businesses and the wider community. The interdependence between sectors for reliable identification documents again stresses the importance of this.

In evidence the Australian Bankers’ Association called on the Government to develop both national standards for the production and issue of identity documents and a secure national gateway for the verification of documents.

The Committee considered there were merits in those proposals. It recommended that the Commonwealth Government formalise a process for working with other levels of government and industry to develop options for reducing and preventing identity fraud. This should include investigation and development of a national electronic gateway for document verification.

Recognising identity fraud as a crime

In its report the Committee also supported the introduction of the changes to fraud in the Criminal Code Amendment Act 2000 (Cth). The Act was assented to in November 2000. The new Act updates fraud and related offences, reduces their complexity and gives more certainty. It provides a modern and transparent scheme for preventing and punishing fraud and related offences, including uniformity of penalties for key offences. These have long differed between State and Federal jurisdictions and between different Acts. The key amendments cope with all the changes, including geographically, that technology has brought to criminal activity.

Conclusion

The Committee’s work in this area and the report Numbers on the Run are an important part of the Federal Parliament’s work to stay on top of identity fraud. This is an issue that is a serious issue not only for the functioning of government but also for maintaining the sound fabric of society.v

David Hawker MP is chair of the House of Representatives Economics Committee.