Hungarian law enforcement have arrested 14 people after breaking up an organized criminal operation that systematically cheated the taxes due on imported mobile phones. A statement from Europol said the fraudsters’ scheme had effectively cost EUR29.8mn (USD35.4mn) in lost Value Added Tax (VAT). Law enforcement seized assets worth EUR14.2mn (USD16.9mn) in total, including real estate worth EUR4.2mn (USD5mn), bank accounts containing EUR2.8mn (USD3.3mn), and EUR500,000 (USD600,000) in cash (pictured above).
The criminals indulged in a form of missing trader intra-community (MTIC) fraud, a scam which will be familiar to readers of David Morrow’s articles on Commsrisk. Put simply, the criminals created a series of transactions between companies they controlled with that result that some of those companies claimed VAT refunds for purchasing mobile phones, whilst other companies disappeared before paying the VAT owed on the sale of the same phones.
David recently highlighted that MTIC fraud is not specific to countries which have VAT because the equivalent of MTIC fraud can also occur in countries that have Goods and Services Tax (GST). Telcos operating in countries with VAT or GST need to be wary of sales tax fraud because they can be held liable for the missing tax if they are judged to have made insufficient effort to identify fraudsters they conduct business with. David’s comprehensive advice on how to protect your telco from MTIC fraud can be found here.