Criminal proceedings initiated and investigated by the Tax and Customs Police of the State Revenue Service (VID), the European Public Prosecutor’s Office (EPPO) in Riga and Vilnius have lead to a large-scale operation against a criminal syndicate suspected of employing complex VAD fraud operations with trade of electronic goods. The operation took place in 16 countries, including Latvia, Lithuania and Estonia.
624 employees of law enforcement authorities of different countries were involved in the operation, including employees of the Tax and Customs Police Department of the Latvian VID, the Internal Security Department, the State Police and the Corruption Prevention and Combating Bureau.
The implemented fraud schemes had resulted in significant VAT losses to the budgets of several EU countries in the amount of approximately EUR 297 million. The investigation found that the suspects had founded companies in 16 EU member states acting as legal suppliers of electronic goods. In total, over EUR 1.48 billion worth of popular electronic devices were sold to end-customers in the EU via online marketplaces, causing significant losses to the budgets of several EU member states, VID reports.
The buyers paid VAT on the goods purchased, while the companies (possibly through a fictitious chain of companies), which were obliged to pay taxes, defaulted on their tax obligations. Funds derived from the sale of goods were transferred to offshore accounts.
There is reason to believe that the fraudulent scheme consisted of more than 400 companies that also allegedly committed money laundering from drug trafficking, various cybercrime and investment fraud.
Financial intelligence reports point to the possible influence of Russian organized crime, indicating that certain Russian criminal networks could be involved in this scheme, which allegedly invested funds in exchange for periodic payments and influenced some aspects of its management.
The state police agency LETA informed that the international operation is related to the so-called “Admiral” investigation in 2022, which is considered to be the largest VAT fraud in the history of the European Union, with damage of more than EUR 2.9 billion. The EPPO was able to uncover the links between the individuals, companies and criminal group investigated in the Admiral case, based in the Baltics.
During the international operation led by the EPPO, more than 300 searches were conducted in 16 European countries (Germany, France, Italy, Austria, Estonia, Lithuania, Poland, Spain, Slovakia, Luxembourg, the Netherlands, the Czech Republic, Cyprus, Bulgaria, Belgium and Latvia).
The state police informed LETA that 32 persons were detained in this transnational operation led by the EPPO in Estonia, Latvia and Lithuania, three of whom remain in custody.
In Latvia, more than 200 investigators and criminal intelligence officers from VID Tax and Customs Police Administration, the State Police and the Corruption Prevention and Combating Bureau participated in the investigation.
During the searches, law enforcement seized a significant amount of smartphones worth more than EUR 47 715 574, several luxury cars, jewellery, new gold watches, weapons, drugs and EUR 126 965 in cash. Frozen 62 bank accounts in several countries, the total amount of money in euros is still being calculated, but the total amount of frozen accounts in Latvia, Lithuania, Estonia and Poland alone is EUR 5 839 000.
Investigators of VID Tax and Customs Police Department, European prosecutors, European Delegated Prosecutors and financial fraud analysts of the EPPO, using a unique overview of cross-border activities, managed to connect the threads of organized crime networks.
With the support from EPPO’s case management system, Europol and national law enforcement agencies, a coordinated investigation strategy was developed and implemented to disrupt this complex VAT fraud network.