On 21 February, the European Public Prosecutor’s Office (EPPO) arrested 17 people during an extensive operation carried out in eight countries against a criminal organisation centred in Spain, believed to have orchestrated a massive €25 million VAT fraud through the sales of mobile phones and other electronic equipment.
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One of the main suspects in this investigation was arrested in Milan (Italy), in the scope of another EPPO investigation.
During the operation, led by the EPPO office in Madrid (Spain) and code-named ‘Marengo Rosso’, 39 searches were carried out and 17 people were arrested in several countries, in a simultaneous probe in Czechia, Hungary, Italy, Luxembourg, Portugal, Poland, Slovakia and Spain.
At stake is a suspected VAT carousel fraud, a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax (VAT).
According to the investigation, the fraudulent scheme involved the use of shell companies in different countries, through which phones, tablets, computers and other electronic equipment were ostensibly traded, using fictitious invoices, in order to evade the payment of VAT.
The chain of shell companies also allowed to claim VAT reimbursements from the national tax authorities to which the alleged perpetrators were not entitled, all leading to illicit profits of massive proportions. Finally, the goods were sold at very competitive prices through online marketplaces in several countries.
The criminal profits were then laundered and reinvested in high-value real estate in different countries, including Czechia, Italy and Portugal, according to the evidence collected.
One of the main suspects in this operation is also considered the ringleader in a separate investigation in Italy, in which the EPPO previously executed six arrests and a €40 million seizure was recently ordered by the judge.
This suspect has now been arrested in Milan (Italy), in the context of the Italian investigation, code-named ‘VAT Games’, and led by the EPPO’s Milan office with the operational support of the Italian Financial Police of Varese and Milano (Guardia di Finanza, Nucleo PEF Varese and Nucleo PEF Milano).
Operation ‘Marengo Rosso’ also allowed for the freezing of 95 bank accounts and the seizure of 24 properties (18 in Italy, 3 in Portugal and 3 in Czechia), as well as 5 cars (including luxury brands like McLaren, Aston Martin, Jaguar and Range Rover], following a request by the European Delegated Prosecutors in Madrid.
It is estimated that the activities under investigation have, since 2020, caused losses of more than €25 million to the EU and national budgets. The value of the damages is likely to increase, as the investigation is ongoing.
The operation, led by the EPPO office in Madrid, involved the Central Operational Unit of the Spanish Guardia Civil (Unidad Central Operativa) and the Central Unit for Economic and Fiscal Offences of the National Police (Unidad Central de Delincuencia Económica y Fiscal de la PolicÃa Nacional), as well as the Spanish Tax Agency (Agencia Tributaria).
In Italy, the searches and seizures – which included properties, dozens of bank accounts, high-value watches, cash and a handgun with the serial number erased – were executed by the Italian State Police (Polizia di Stato - Direzione Centrale Anticrimine - Servizio Centrale Operativo) and the Italian Financial Police (Guardia di Finanza – Nucleo PEF di Palermo), under the direction of the EPPO.
The operation also counted on the support of Eurojust and Europol, and that of several national law enforcement agencies. ■