European prosecutors bust €2.2 billion VAT fraud scheme

The European Public Prosecutor’s Office (EPPO) announced on Tuesday that it uncovered the biggest cross-border VAT fraud scheme ever investigated in the EU worth an estimated €2.2 billion.

The investigation started in April 2021 in Portugal where authorities were probing a company selling mobile phones, tablets, earphones and other electronic devices, on suspicion of VAT fraud.

As required of them, Portuguese authorities reported the case to the EPPO after its launch in June 2021 despite the initial probe finding everything in order.

But additional digging by European prosecutors, financial fraud analysts, Europol and national law enforcement authorities soon established connections between the Portuguese companies and close to 9,000 other legal entities, and more than 600 natural persons.

These were located in most EU countries as well as Albania, China, Mauritius, Serbia, Singapore, Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States.

Searches were carried out in six EU member states in mid-October with an additional 200 searches executed in 14 other EU countries on Tuesday.

“All the data collected is being analysed, and the investigation into the organised crime groups behind this scheme is continuing,” the EPPO said in a statement.

“The estimated damages investigated under Operation Admiral currently amount to €2.2 billion. Measures to recover the damages have been taken,” it added.

According to the EU agency, the case is attention-worthy not just for its sheer scale but also because of the “extraordinary complexity of the chain of companies” involved.

“These activities would not be possible without the involvement of several highly skilled organised crime groups, each of which has specific roles in the overall scheme. Working transnationally, almost with an industrial logic, they have been avoiding detection for years,” the prosecutor’s office said.

Such fraud is the most profitable crime in the bloc and is estimated to cost EU states €50 billion annually in tax losses.

“Operation Admiral is a clear demonstration of the advantages of a transnational prosecution office,” said European Chief Prosecutor Laura Kövesi.

“When it comes to VAT fraud, from a national perspective, the damages can be assessed as relatively small or non-existent, or even remain undetected. You need a helicopter view, to see the whole picture,” she added.