The modus operandi was well established and had been used for several years by a criminal network formed by suspects from the Baltic countries. This week, it came to an end. The European Public Prosecutor’s Office (EPPO), with the support of Europol, conducted Operation Admiral 2, involving more than 300 searches in 16 countries. This resulted in the arrest of 32 suspects in a €297m VAT fraud. Europol to a "complex VAT fraud scheme” involving trade in popular electronic products. More than 200 investigators and officers were mobilised, and Luxembourg was one of the countries involved in the operation.

This fraud is known as a “carousel fraud,” which is a scheme that takes advantage of European rules on VAT-free cross-border transactions in member states. Specifically, the suspects set up companies in 15 member states to operate as if they were legitimate suppliers of electronic devices. These companies sold over €1.48bn worth of products via online platforms. Customers paid VAT at the time of purchase, but the companies subsequently circumvented their tax obligations and disappeared before having to pay the amounts due to the national tax authorities. Other companies in the same fraudulent chain would then claim VAT refunds from the same authorities. The profits were then transferred to offshore accounts.

The European Public Prosecutor’s Office suspects that more than 400 companies were involved in this fraud scheme, which was also used to launder money from illegal activities such as drug trafficking, cybercrime and investment fraud.

As a result of the joint operation by the police forces, 32 people were arrested in Lithuania and Latvia and numerous electronic items, such as smartphones, were seized worth more than €47.5m. Several luxury cars and €126,965 in cash were also seized. 62 bank accounts with a combined value of over €5.5m were frozen as part of the operation.

The investigation also revealed that certain Russian criminal networks may have been involved by injecting assets into the criminal operation. The investigation is continuing and further details may be released shortly.

This article was originally published in .