Europol has supported the European Public Prosecutor’s Office (EPPO) and law enforcement authorities from 16 countries in taking down a major criminal network involved in VAT fraud.
The international investigation, codenamed Admiral 2, uncovered a complex VAT fraud scheme involving the trade of popular electronic goods, resulting in an estimated VAT loss of EUR 297 million. During the action day, 32 people were detained, and authorities seized a large quantity of smartphones and other electronic devices, worth more than EUR 47.5 million, several luxury cars and EUR 126 965 in cash. In addition, 62 bank accounts with a combined value of over EUR 5.5 million were frozen. These are preliminary results and they will likely evolve throughout the coming days and weeks.
The investigation revealed that the criminal network used the same modus operandi and, in part, also the same organisation and infrastructure as the perpetrators previously investigated under Operation Admiral. Announced in November 2022, the investigation is considered the largest VAT fraud ever uncovered in the EU, with damages now estimated at EUR 2.9 billion.
The EPPO established links between individuals and companies investigated in Operation Admiral and suspects based in the Baltic states. Members of this criminal network carried out a massive VAT carousel fraud, which is a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from VAT.
Fraudulent chain of deception
According to the investigation, the suspects established companies in 15 EU Member States, which acted as legitimate suppliers of electronic goods. They sold over EUR 1.48 billion worth of popular electronic devices via online marketplaces to end customers in the EU.
Although the end customers paid VAT on their purchases, the selling companies failed to fulfil their tax obligations. By disappearing, they avoided paying the amounts owed to the respective national tax authorities. Other companies in the fraudulent chain would subsequently claim VAT reimbursement from these national tax authorities, resulting in an estimated VAT loss of EUR 297 million. The proceeds of this criminal activity were then transferred to offshore accounts.
Poly-criminal and international criminal network
The EPPO suspects that over 400 companies are involved in this complex fraudulent scheme, which is also believed to have been used to launder proceeds stemming from drug trafficking, different types of cybercrime and investment fraud.
The investigation also uncovered a possible Russian organised crime connection, indicating that certain Russian criminal networks may have been involved in this network. Evidence suggests that these groups injected assets into the criminal operation in exchange for periodic payments and exerted influence over certain aspects of its management.
Cross-border action
This week’s international action led by the EPPO resulted in more than 300 searches in 16 countries and 36 arrests in Latvia and Lithuania. In Latvia alone, over 200 Customs and Tax Police, State Police and Corruption Prevention and Combating Bureau investigators and criminal intelligence officers supported the investigative measures.
Europol supported this investigation by providing analytical support in the run-up to the action day by deploying four forensic experts and a specialist with a mobile office.
The specialist carried out cross-checks, provided expertise, and coordinated and monitored the Virtual Command Post accounts created for the field investigators involved in the searches. With the support of Europol and national law enforcement authorities, the EPPO connected the dots between organised crime networks and implemented a coordinated investigative strategy to dismantle this complex web of fraud.
Story: EUROPOL.
