One of the main organisations specialised in VAT fraud and money laundering has been dismantled

Joint investigation by the National Police and the Tax Agency, coordinated with Europol and Eurojust

  • The investigation uncovered a case of pan-European VAT fraud, amounting to almost 60 million euros, 45 million of which affects the Spanish public purse
  • As part of the operation, 58 people were arrested in Badajoz, Elche (Alicante), Madrid, Málaga, Córdoba, the Basque Country, Murcia, Navarre, Pontevedra, Catalonia, Germany, Belgium and Portugal. 62 searches were carried out in Spain, and another 39 in different parts of Europe
  • The main people under investigation, two Spanish citizens of Indian origin, relocated in the USA in 2014 as a result of pressure from the Tax Agency, who had already begun to take action
  • The organisation, made up of Spanish, Italian and Portuguese citizens, involved a network of more than 100 companies (mostly fictitious or shell companies), established in ten countries

4 May 2018.- Tax Agency officials and National Police agents have carried out a joint investigation, uncovering one of the biggest networks specialised in pan-European VAT fraud and money laundering.

As part of the operation, 58 people were arrested in Badajoz, Elche (Alicante), Madrid, Málaga, Córdoba, the Basque Country, Murcia, Navarre, Pontevedra, Catalonia, Germany, Belgium and Portugal. 62 searches were carried out in Spain, and another 39 in different parts of Europe. The investigations uncovered VAT fraud spread across Europe, amounting to a charge of almost 60 million euros, 45 million of which affects the Spanish public purse.

The complexity of the investigation required international coordination, both at the police level, through Europol, and the legal level, through Eurojust. For this to happen, meetings were held in both agencies, with representatives from the police, customs and fiscal and legal authorities of all the affected countries.

Origins of the investigation

The investigations began in 2015 following a financial intelligence report regarding a criminal organisation specialised in VAT fraud, derived from the sale of electronic goods, both real and fake, and money laundering.

The criminal organisation was allegedly managed from Spain by two men; father and son – Spanish nationals of Indian roots – believed to have been operating for more than nine years across Europe. As a result of pressure from the Tax Agency, in 2014 these two men relocated to the United States, where they continued with their criminal activities.

The organisation, formed mostly of Spanish, Italian and Portuguese citizens, involved a network of more than 100 companies (mostly fictitious or shell companies), constituted in various countries (Spain, Hungary, Germany, Italy, Romania, Bulgaria, Belgium, the USA, Portugal and Cyprus).

Modus operandi

The criminal organisation had two core centres (in Madrid and Elche), where they controlled the management of several instrumental companies, both Spanish and foreign (from Hungary, Bulgaria, Portugal, Italy, Cyprus and Belgium), whose only function was to avoid paying VAT on products imported into Spain, destined for consumption at abnormally reduced prices, specifically because of the lack of VAT payment, thus creating unfair competition with other traders in the affected sectors (primarily dealing with electronics).

Besides the damage this caused to the Treasury, that caused to the public purse was even greater, given that some of these products were re-entered into the fraudulent loop, simulating their sales outside of Spain and applying for a refund of Spanish VAT, which had not been paid previously.

Throughout the network, there was a significant structure in place to issue fake or cover-up invoices, which, as well as being used for VAT fraud on electronic products, were also used to bring high-end vehicles into Spain at significantly reduced prices, also as a result of not paying VAT. Investigators were able to prove that the organisation issued fake invoices for a value of almost 250 million euros over three years.

Furthermore, the organisation circulated money between the companies that comprised the business network using a funnel system, such that the money went through Hungary or Bulgaria. Specifically, investigators were able to determine that the organisation circulated 140 million euros over two years through two instrumental Hungarian companies.

As for money laundering, the operation was widespread: property investments - mainly in Spain and the United States, the purchase of a water spring for 3 million euros, the purchase of luxury vehicles and lines of bank loans and investments in the audiovisual sector, located in Spain, the USA and Hungary. The end destination of the money was the USA, Italy or Spain, depending on the area of fraud.

The articles seized include 52 luxury vehicles, IT material, a firearm, significant amounts of documentation and 400,000 euros in cash. The investigation was led by the Examining Magistrates' Court No. 5 of Elche, and the District Prosecutor of Alicante.

N.B.: Includes photographic appendix.