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(Luxembourg, 7 November) – At the request of the European Public Prosecutor’s Office (EPPO) in Milan (Italy), two people have been arrested by the Italian Financial Police (Guardia di Finanza) in an investigation into a large VAT fraud scheme, with estimated damage of approximately €50 million. The pre-trial detention of the two individuals was ordered by the judge for preliminary investigations of the Tribunal of Busto Arsizio.
The investigation uncovered a complex network of companies, established in several EU countries, used to commit VAT ‘carousel’ fraud – a criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax (VAT).
One of the primary suspects under investigation was based in Moldova, where he is thought to have managed a VAT carousel fraud based on the sales of over 3 million items – including wireless ear buds, electronics and hard drives – to numerous shell companies managed by strawmen in Italy.
According to the evidence, the goods were sold to companies in Italy below their market value and in multiple steps. The application of the lower price, by undercutting competitors, allowed the suspects to sell a large quantity of products, while the multiple steps involved made it more difficult to identify the scheme and its perpetrators. Overall, it is estimated that the suspects managed to evade the payment of €50 million in VAT.
The two individuals under investigation are understood to have been the primary managers of the entire scheme, and are long-standing friends. One suspect was already subject to previous personal precautionary measures for fraud and bankruptcy offences, and has been handed over to the German authorities to be arrested for acts committed on foreign territory. The other suspect was arrested on his return to Italy from Moldova.
During searches of the suspects’ homes, carried out at the time of the arrests, cash was found, as well as numerous smartphones used for home banking transactions relating to large daily transfers, and accounting and administrative documentation relating to the establishment of new companies useful for fraud.
The EPPO is the independent public prosecution office of the European Union. It is responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the EU.