10 Arrested In UK-wide VAT Fraud Operation
6th February 2007
Customs officers investigating a suspected £250 million VAT missing trader fraud made 10 arrests this morning in UK-wide raids.
Codenamed Operation Euripus, today's action follows a five year investigation, which included one of the biggest swoops ever undertaken by Customs. In July 2003, 350 officers raided 93 premises across the UK and Spain, and made 42 arrests.
The unprecedented scale of that operation led to a vast amount of material which has been analysed over the last three years. More than half a million documents have been systematically examined, along with the hard drives of 391 computers, with a combined data capacity of 28 terabytes.
Today's arrests took place across England and Wales, and all 10 men are being brought to London police stations. Further arrests are expected and searches will continue at one address in Nuneaton. In addition, European arrest warrants have been issued in France and Spain against four individuals.
Euan Stewart, Deputy Director, Criminal Investigation for HM Revenue & Customs (HMRC) said: "Tackling missing trader fraud is HMRC's top priority. We have a duty to protect the revenue given the scale and nature of the attack we are seeing. Today's arrests follow years of painstaking effort by dedicated officers. The sophistication of the organised crime gangs behind these frauds means that our investigations are increasingly
complex but we are committed to bringing the criminals behind it to justice and to recovering the money stolen from the British taxpayer, wherever in the world our investigations lead. This is not victimless crime, it's organised crime that causes real harm."
Those arrested are believed to be part of a sophisticated network of companies that 'carouselled' large quantities of mobile phones, buying them VAT-free from the continent to supply to businesses in the UK, then defaulting without paying the VAT due.
Today's arrest took place in
* London
* Newport
* Nuneaton
* Uttoxeter
* Beaconsfield (x 2)
* Bedworth (Warwickshire) (x 2)
* Coventry
* Bowdon (Cheshire)
The arrests follow further investigation after a series of searches and arrests across the UK in July 2003. HM Customs & Excise News Release 44/03 refers.
A terabyte is 1,000,000,000,000 bytes. It has been estimated that 28 terabytes of data is the equivalent of 6 million copies of the complete works of Shakespeare.
4. Between April and December 2006, there were 11 successful prosecutions for missing trader fraud, resulting in 40 convictions with 180 years imprisonment imposed.
5. Anyone with information about activity they suspect may be linked to fraud should call Customs Confidential on 0800 59 5000.
6. Missing Trader Intra-Community (MTIC) VAT fraud is an organised criminal attack on the VAT system. HMRC estimates that the potential impact on VAT receipts in 2005 - 06 was between £2bn and £3bn. In its simplest form this type of fraud involves obtaining a VAT registration number in the UK for the purposes of purchasing goods free from VAT in another EU Member State, selling them at a VAT-inclusive purchase price in the UK and then going missing or defaulting without paying the VAT due to HMRC. The goods most commonly associated with this fraud are mobile phones and computer chips. The organised criminal networks behind these frauds are well resourced, innovative, resilient and known to be involved in wider criminality. A more abusive form of the fraud - known as carousel fraud - involves the same goods being traded around contrived supply
chains within and beyond the EU, re-entering the UK on a number of occasions with VAT being stolen each time.
7. HMRC's strategy for tackling MTIC fraud aims:
* To stop the fraud before it can begin - by identifying bogusbusinesses and refusing to register them for VAT purposes;
* Where fraudulent trading begins, to identify and stop it at the earliest opportunity - by operating close controls on suspectbusinesses and those trading in affected sectors; and
* Where it cannot be stopped, to disrupt the fraud - by tackling allpoints in the supply chains and those orchestrating them, using the full range of criminal and civil measures available to us and working closely with UK agencies and authorities abroad to identify and target suspect activity.
8. In response to increasingly sophisticated tactics by the fraudsters and an increase in activity associated with MTIC fraud, HMRC has strengthened its MTIC strategy through:
* operational improvements, including strengthening checks at registration to better identify fraudulent and bogus applications, redeploying almost 600 additional compliance officers to verify repayment claims from businesses trading in suspect supply chains and
using barcode scanning technology to better identify goods involved in the fraud;
* strengthened international co-operation with both EU Member States and non EU countries;
* a tougher approach to litigation with increased specialist resource targeted at criminal investigation;
* legislative measures in this year's Finance Bill to clarify/strengthen UK powers; and
* In addition the Government has applied to the European Commission for a derogation to introduce a reverse charge accounting system for goods commonly used in MTIC fraud. This would effectively remove VAT from business-to-business transactions.
