HMRC Swoops On Money Laundering And VAT Fraud Gang

by Jason Gorringe, Tax-News.com, London

06 September 2007

HM Revenue and Customs officers investigating a suspected GBP20 million VAT missing trader fraud swooped in early morning raids on Tuesday, making 17 arrests across the north-west of England and Wales.

Codenamed Operation Vaulter, the action earlier this week followed a 21-month investigation into VAT fraud and money laundering.

Euan Stewart, Director of Operations, Criminal Investigations, for HM Revenue & Customs (HMRC) announced that:

"Tackling missing trader fraud is HMRC's top priority. We have a duty to protect the revenue given the scale and nature of the attacks we are seeing. Today's arrests are the result of a lengthy investigation by dedicated officers who work tirelessly, fighting criminal attacks on the tax system."

"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 an organised crime group operating a network of companies that 'carouselled' large quantities of mobile phones and other low volume, high value goods, buying them VAT-free from across the European Union and then selling them on to businesses in the UK, then defaulting without paying the VAT due.

It is thought that the proceeds of this crime have then been used to finance lavish lifestyles, and during searches a large amount of cash and valuables were detained.

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 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.

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