The Hungarian National Tax and Customs Administration (NTCA), supported by Europol, dismantled an organised crime group involved in cross-border VAT fraud (missing trader intra-community fraud) and carousel fraud.
The two action days in June led to:
59 house searches
Seizure of assets worth € 14.2 million including € 4.23 million in real estate, € 2.8 million in bank accounts and € 500 000 in cash
A Complicated Scheme to Evade VAT Payment
After the Hungarian authorities dismantled a large criminal network in October 2019, which managed to cause €12 million damage to the Hungarian budget, they shifted their focus onto three other related networks. The investigators unveiled a much more complex criminal activity. Missing traders who imported mobile phones submitted their VAT returns to the tax authorities but failed to pay the VAT to the national treasury. Their activity was registered to strawmen and hosted by company service providers.
After importing the items, the missing traders sold the mobile phones at a loss to several buffer companies, which then sold the products to broker companies. The brokers either resold the mobile phones at an attractive price on internet marketplaces or recorded intra-community supplies to several conduit companies located in different EU Member States. Again, the aim was to reclaim the VAT, which was never paid by the missing traders. The buffer and conduit companies did not carry out any real economic activities nor did they hire employees. These companies were used exclusively for fictitious invoicing. Used for only a short period, many of them installed foreign strawmen as managers. While achieving a significant price advantage at the end of the chain through VAT fraud, the criminal network caused tax losses to the state budget of about € 29.8 million.
Europol supported the investigation from the beginning by facilitating information exchange and providing analytical support. During the action days, Europol deployed three experts to Hungary to support the investigators in the field with real-time analysis of operational information against Europol’s databases. Technical support was also provided by extracting data stored on the mobile devices.
Bringing the Money Back to Taxpayers
Missing trader intra-community fraud (MTIC) does not affects only governments, but all citizens. The billions of euros that organised crime gangs defraud from taxpayers through this scam fraud scheme are ultimately robbing citizens affecting the funding of vital public services. A cross-border crime per definition, the effective fight against it requires internationally coordinated operations pulling together the affected Member States, Europol and trusted partners.
Europol recently created the European Financial and Economic Crime Centre (EFECC) to increase synergies between economic and financial investigations and to strengthen its ability to support law enforcement authorities in effectively combating this major criminal threat.