Five suspects responsible for EUR 38 million VAT fraud scheme arrested

 Europol supports EPPO-led investigation against criminals responsible for value-added tax fraud in the trade of more than 10 000 cars

Today, a team of over 2 000 tax, customs and police investigators from 7 countries has made 5 arrests, carried out over 450 searches, and seized real estate and cars in Belgium, Germany, Hungary, Italy, the Netherlands, Portugal and Spain. 

Europol supported the operation code-named Huracán, which was led by the European Public Prosecutor’s Office (EPPO) in Cologne after their discovery of a large value-added tax (VAT) fraud scheme concerning the international trade of more than 10 000 cars. The fraudulent turnover of the organised crime group behind the scheme is estimated at EUR 225 million, and the estimated VAT losses caused by the suspects amounts to at least EUR 38 million. The investigation and action day have been supported by the Operational Network @ON funded by EU Project ISF4@ON.

Missing VAT payments

Investigation Huracán started with a report to the EPPO from a tax authority in Italy in January 2021. The authority had received an alert when companies registered in Italy and Hungary, following their acquisition of a high number of cars from Germany and subsequent sale to private persons and companies in other EU countries, had not paid VAT to the Italian state. 

What began as a small report quickly turned into the discovery of a large-scale international VAT fraud scheme. The EPPO’s European Delegated Prosecutors, together with investigators from the EPPO’s Central Office, managed to discover the network of missing traders and the organised crime group behind the VAT fraud scheme within a couple of months.

A multi-million euro fraud

According to the evidence gathered, the organised crime group used a vast network to deploy a modus operandi as follows. A Germany-based buffer company, considered a legitimate company on paper, bought cars online from a German car dealer. The company paid the price including VAT, introduced a VAT claim and received back the VAT from the German state. 

Afterwards, the company sold the cars to missing traders outside Germany, namely Italy and Hungary. The price of the car was then marked slightly above the net price indicated on the original/initial invoice from the online marketplace, but already more attractive, as the so-called “missing traders” did not have to pay VAT due to intra-community VAT rules. 

The missing trader then sold the car at a very appealing price to a final customer or another company. The final customer paid the VAT, and instead of paying the VAT to the state, the missing trader – as the name implies – kept it as profit, and disappeared. 

It is estimated that more than 10 000 cars were sold using this scheme and in total, around 60 people are suspected of participating in the organised group or supporting the main suspects. Between 2017 and June 2023, the criminals managed to generate a total fraudulent turnover of over EUR 225 million and created VAT losses of over EUR 38 million. 

Behind the scenes

According to the evidence, the suspects regularly issued false invoices to the respective private individuals or traders, which made it seem as though the private individuals or traders had correctly purchased the vehicles and paid VAT. Thanks to those invoices, individuals were subsequently able to register the vehicles purchased in another country.

This scheme allowed unfair competition, as the cars were being sold for below the market price. In addition to the apparent VAT fraud and tax evasion, the investigation also provides grounds for suspicion of organised crime, money laundering and forgery of documents. 

Europol’s role

Europol provided full analytical support by crosschecking the information received and reporting the relevant findings to the EPPO. In addition, Europol facilitated the exchange of information with the other affected EU Member States and third countries. During the action day, Europol deployed a specialist with a mobile office in the coordination centre in Luxembourg, and three officers providing live forensics support and advanced capabilities for mobile device extraction on the spot. The agency also organised several operational meetings to discuss the support that was eventually provided during the action day.  

Participating authorities: 

Belgium: Federal Police (Federale Politie)

Germany: Customs Investigation Office Essen (Zollkriminalamt Essen); Tax Investigation Office Münster (Finanzamt für Steuerstrafsachen und Steuerfahndung Münster); Specialised Prosecution Office for White Collar Crime, Düsseldorf (Schwerpunktstaatsanwaltschaft für Wirtschaftsstrafsachen bei der Staatsanwaltschaft Düsseldorf); Central Investigation Office of Nordrhine-Westphalia for Fighting VAT Fraud, Bonn Office (Zentralstelle des Landes Nordrhein Westfalens zur Bekämpfung des Umsatzsteuerbetruges - ZEUS NRW); Federal Criminal Police Office (Bundeskriminalamt)

Hungary: National Tax and Customs Administration, Directorate General of Criminal Affairs, Central Bureau for Criminal Investigations (Nemzeti Adó- és Vámhivatal, Bűnügyi Főigazgatóság, Központi Nyomozó Főosztály); Chief Prosecution Office of the Capital (Fővárosi Főügyészség)

Italy: Financial Police (Guardia di Finanza)

Netherlands: Fiscal Information and Investigation Service Eindhoven (Fiscale inlichtingen- en opsporingsdienst Eindhoven)

Portugal: National Republican Guard – Fiscal Action Unit (Guarda Nacional Republicana - Unidade de Ação Fiscal)National Republican Guard (Guarda Nacional Republicana)

Spain: Civil Guard (Guardia Civil)