Cross-border “missing trader” investigation

Five suspects have been arrested in connection with a €38 million VAT fraud following a Europol-supported investigation.

The investigation, code-named Huracán, was led by the European Public Prosecutor’s Office (EPPO) in Cologne after they discovered a large VAT fraud scheme concerning the international trade of more than 10,000 cars.

The investigation started with a report to EPPO from a tax authority in Italy in 2021 concerning unpaid VAT in Italy from the purchase, by companies registered in Italy and Hungary, of a high number of cars from Germany and the onward sale of vehicles to private buyers in other EU countries.

The organised crime group behind the scheme is alleged to have used a vast network of companies to perpetrate the fraud, with a German company buying cars online from a German car dealer.

That company paid the VAT on the cars and received VAT back from the German state.  The company then sold the cars to so-called “missing traders” based in Italy and Hungary which were able to avoid having to pay VAT due to intra-European-community VAT rules.

The missing traders then sold each car at a very appealing price to a final customer who paid the VAT.

Missing trader fraud is a well-established criminal practice that is perpetrated when someone buys goods from abroad which are VAT-free and then sells them, charging VAT without paying the VAT to the tax authority, before eventually disappearing.

Evidence from the investigation suggests that the suspects regularly issued false invoices to their suppliers, which made it seem as though they had legitimately bought the vehicles and paid VAT.

Thanks to the cooperation between the affected EU member states and facilitation by Europol, a team of over 2,000 tax, customs and police investigators from seven countries made five arrests, carried out over 450 searches, and seized property and cars in Belgium, Germany, Hungary, Italy, the Netherlands, Portugal and Spain.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “Missing Trader fraud is a considerable challenge for tax authorities throughout Europe and around the world.

“Prosecutions require a great deal of international collaboration between law enforcement agencies as well as forensic accountants and financial investigators who often have to “unpick”, complex webs of nominee and shell companies so as to demonstrate to a judge or jury who has been guilty of wrongdoing.

“Sometimes, criminal gangs use innocent or unwitting third parties to facilitate this type of fraud and following the money is often the best way to differentiate between the perpetrators and the patsies.”


Source: Europol

Posted in The Forensic Blog.