73 Million Reasons Why MTIC VAT Fraud Fell Off a Cliff

This week I have confirmed with several multi-national carriers that UK transiting traffic has dropped dramatically. The plunge has been so extreme that you might say the volume of traffic has ‘fallen off a cliff’. This is almost certainly a consequence of the UK tax authority (HMRC) introducing a domestic reverse charge for the wholesale supply of telecommunications services from February 2016. HMRC guidance on reverse charge is available here but it’s probably not UK TelCos that should be worrying. Missing trader intra-community (MTIC) transit traffic is migrating to markets without reverse charge arrangements. The UK has squeezed the MTIC balloon and the bulge is popping out as increased transit traffic in Spain and Italy, both of which have seen telecoms MTIC fraud activity in the past – most recently, the issues at ONO of Spain (which reportedly cost EUR 73 million).

One major carrier seems to be paying attention, having terminated a number of resellers in Spain after performing risk-based due diligence earlier this year. Has your TelCo seen a recent upturn in transit traffic and do you fully understand where its coming from and why its been routed to you? Is it from:

  • a new customer?
  • a newly formed business or one that’s new to the industry?
  • an introduction from another customer/supplier?

Tax authorities will hold TelCos liable for any MTIC losses unless they can show they have taken:

every precaution which could reasonably be required of them to ensure that their transactions are not connected with fraud

See my previous article on telecoms MTIC fraud here and if you want to know what to look for, I’ve produced a free guide, which is available here.

David Morrow
David Morrow
Dave has 35 years of law enforcement, investigation and fraud management experience including multiple international assignments. He is a recognised telecoms fraud expert and for a number of years chaired the GSMA workgroup responsible for Security & Fraud Risk Assessments.

Starting in HM Customs & Excise, Dave moved from uniformed duties to spend 5 years in Investigation before taking a commercial investigation role with Network Security Management. Amongst other assignments, this included a secondment to help establish the Jamaican Government’s Revenue Protection Division, where he made Jamaica’s largest ever financial recovery.

Following 6 years of commercial investigation, Dave joined Vodafone where, in the early days of mobile, he worked closely with law enforcement; he was one of the few civilians invited onto the Computer Crime Course at Bramshill. Dave’s counter-fraud initiatives saved millions in UK (e.g. £24m p.a. on credit card fraud) and he was seconded to help establish Corporate Security in the company’s largest networks, Turkey and India, and also performed fraud reviews for partner networks including Azerbaijan, Croatia, Libya and Ukraine. Dave now provides fraud management support as an independent consultant.