Vast VAT fraud network dismantled, more than 500 million euros seized

This is a very big haul. The European Prosecutor’s Office announced this Thursday the dismantling in the European Union (EU) of a vast VAT fraud network involving the Italian mafia, leading to around forty arrest warrants and the seizure of property worth 520 million euros.

At the request of the branches of the Office of the European Attorney General (BPGE) in Milan and Palermo, a Milanese judge took these measures aimed at repressing a “criminal association whose object is intra-community VAT fraud in the trade of IT products and the laundering of its profits,” indicates the BPGE in a press release. The investigation made it possible to estimate the amount of false invoices issued at 1.3 billion euros.

Spain, Luxembourg, Czech Republic…

In addition to Italy, searches and seizures are still underway in the European Union countries affected by this fraud, notably in Spain, Luxembourg, the Czech Republic, Slovakia, Croatia, Bulgaria, Cyprus and in the Netherlands, as well as in Switzerland and the United Arab Emirates, according to the same source. In total, 200 people and more than 400 companies are involved in the current investigation.

Four of the people arrested on the basis of a European warrant as part of this operation, called “Moby Dick”, were in the Czech Republic, the Netherlands, Spain and Bulgaria. Property and money amounting to more than 520 million euros were seized. The leaders of this network are also accused of having “favored mafia criminal associations”.

So-called “carousel” VAT fraud costs the European Union nearly 50 billion euros per year, according to the latest available estimates from Europol. It involves several companies established in at least two EU Member States. It consists of obtaining the deduction or reimbursement of the VAT relating to an intra-community supply of goods even though this VAT has not been remitted to the tax administration concerned.

An investigation deemed “decisive”

In this case, this “carousel” fraud in the trade of electronic and IT products involved several EU countries (Netherlands, Luxembourg, Spain, Czech Republic, Slovakia, Bulgaria and Romania), as well as members of organized crime in Sicily and Campania (Naples region). “Anticipating the enormous profits from the carousel fraud business, they entered this sector by providing financing, thus recycling income from other criminal activities,” said the prosecution.

“Moby Dick is a decisive investigation for the BPGE. It has been some time since we started sounding the alarm about the strong involvement of dangerous organized crime groups in fraud against the EU budget,” commented the head of the European Public Prosecutor’s Office Laura Kövesi, quoted in a press release. “Beyond the colossal damage they are creating, we have warned of the threat their activity in this area represents for our internal security. Today we are shedding light on a first major case,” she said.

This operation “shows that there are not two distinct criminal worlds. On the one hand, the world of really bad and dangerous criminals who smuggle drugs and human trafficking; on the other, the world of white-collar criminals who are content to corrupt and launder money,” she concluded.