Two crime gangs dismantled over fraud in hydrocarbons sector worth over 150 million euros

A joint operation by the Tax Agency and the Guardia Civil

  • The organised crime network is charged with non-payment of VAT on wholesale petrol and diesel sales through shell companies or fronts

  • 21 arrests have been made and 61 luxury vehicles, two boats and two million litres of product have been seized. Over 300 bank accounts have been frozen and more than 1,000 accounts inspected

  • The operation is considered the biggest blow to organised crime in this energy sector to date

4 April 2019 .- The Tax Agency and the Guardia Civil, in what is being called "Operation Drake" have dismantled two alleged crime gangs carrying out criminal activity in the hydrocarbons sector, mainly involving fraudulent sales of large quantities of wholesale products, in which over 150 million euros were defrauded. The operation was carried out in the provinces of Castellón, Valencia, Lleida, Girona and Madrid.

These alleged criminal gangs basically operated by using vehicle companies or fronts, controlled by their own management, through which they defrauded millions of euros in VAT; this operation alone revealed an estimated amount of over 150 million euros defrauded.

These vehicle companies pocketed the VAT charged to their customers on sales of petrol and diesel, largely using a series of different tax evasion mechanisms.

Tax evasion and money laundering

The mechanisms used entailed using fake invoices to reduce the amounts of tax payable, declaring lower sales than actual figures and filing returns without payment. The fraud cycle was completed with asset dumping by the entities required to pay the tax.

This criminal activity, in addition to generating multi-million fraud, undermines the sector, pushing out legitimate players who are unable to compete with the prices being offered by the tax evading companies. At the same time, these companies operate in a coordinated manner, taking orders from criminal leaders, extending their criminal activity and, consequently, systematically cornering a larger market segment.

This coordination enables them to secure sales of as much product as they can buy on the national and international market, turning over billions of euros a year, since their positioning on the market was consolidated precisely by their permanent capacity to undercut the prices offered by their competitors.

In turn, the gangs generated high profits that were allegedly laundered by their own criminal organisations through corporate structures set up for this purpose, ultimately investing the profits in real estate or placing them in third countries. This money laundering operation has also been investigated, in order to identify all the assets resulting from the fraudulent activity and fence in these two criminal organisations, preventing them from reproducing.

"Operation Drake" in numbers

In addition to the fraud valued at over 150 million euros detected, during this operation, 21 individuals have been arrested, 292 companies and 150 individuals investigated, 1,085 bank accounts analysed and 22 homes searched. Furthermore, 61 luxury vehicles, two boats and two million litres of product were seized, and 347 bank accounts and 155 real estate properties frozen.

Fraud in this sector is significant, precisely in this area of commercialisation. The Tax Agency and the Guardia Civil have been intensively investigating these criminal schemes since 2010, with hundreds of millions in fraud activity surfacing.

This joint operation between the Tax Agency and the Guardia Civil represents the biggest ever blow against organised crime in the hydrocarbons sector due to its incidence and positioning in the market, with these two dismantled organised crime gangs deemed to be the most important in operation in recent years.

The investigation was carried out by the Tax Agency's National Fraud Investigation Office (ONIF) and the Regional Inspection Delegation of the Tax Agency in Madrid and by the Central Operations Unit (UCO) of the Guardia Civil, under the direction of the Central Court of Instruction no. 4 and Court of Instruction no. 5 in Getafe (Madrid).

In the operation established to undertake "Operation Drake", 50 agents of the ONIF and the Tax Agency's Regional Inspection Delegations in Madrid, Valencia and Catalonia, as well as members of the Central Operations Unit, different intervention units of the Guardia Civil such as the Search Dog Service, USECIC Madrid and investigation and citizen security units of the Guardia Civil regional headquarters in Lleida, Madrid, Girona, Castellón and Valencia.

Footage of the searches carried out in "Operation Drake" (to download the video, enter the following web address):

https://we.tl/t-XDWICUhc3W