New MTIC Fraud Guide Reviewed

Missing Trader Intra-Community (MTIC) fraud is a kind of sales tax fraud where a bogus intermediary company is used to cheat Valued Added Tax (VAT) collectors in the European Union (EU). The scam works by claiming a repayment of input VAT on the fictional purchase of goods or services, but the relevant criminal enterprises disappear before anyone has paid any output VAT on the corresponding ‘sale’ of those same goods and services. Why should telcos care? Because the fictional products involved are often handsets or telecoms services, and if a telco is duped into being a party to one of these deals the tax collector will expect them to pay the tax owed – even if the telco is an entirely innocent victim of the criminals. And why should telcos outside of the EU care? Because even if superior anti-fraud vetting drives the organized criminals out of the EU, then those criminals will only seek to exploit similar sales tax regimes in other parts of the world. Fortunately fraud and tax expert David Morrow has written a new guide to MTIC fraud, explaining the risks to telcos and how they should mitigate them. And unlike a lot of good professional advice, David’s MTIC fraud guide is available for free!

I was happy to review the guide when David sent it to me, and I found it both helpful and readable, full of straightforward actionable advice that every telco should act upon. As David points out, the key for telcos is that they can only escape the clutches of the taxman if they have demonstrated they took…

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

Every precaution sounds like a lot of precautions, especially compared to the risky way a lot of telcos are run. That is why David’s guide is so helpful. It breaks down how the criminals work, what the legal obligations are, and hence how the telcos can implement controls that will identify the ‘red flags’ which indicate they are dealing with criminals. David’s slickly-produced 24-page guide provides workflows that telcos should follow and a list of references for further detailed reading. As an introduction to the risks and an explanation of how to address them I consider this guide to be essential reading for all telcos operating in the EU, and recommended reading for telcos elsewhere.

David also deserves praise for sharing his wisdom freely. His MTIC fraud guide can be obtained by registering at David’s website. And another positive development is that David is also encouraging feedback to his work by making his guide available for evaluation by members of the Risk & Assurance Group (RAG). Sometimes industry bodies make it unnecessarily hard to publish, circulate and maintain repositories for sensible professional guidance by being too bureaucratic in their approach to approving and managing new material. RAG members can download David’s MTIC fraud guide by logging on to the members’ section of the RAG website and clicking on the relevant links at the new members’ archive. That page also includes a form to provide feedback on David’s guide. Any feedback provided by June 25th will be passed on to David and will also be taken into consideration before the RAG Committee makes a final decision on whether to endorse the guide. Based on what I have seen I expect the guide will be accepted, but it never harms to receive helpful feedback which may further improve the advice contained.

So what are you waiting for? Download the guide to learn what your telco should do to safeguard itself from fraudsters and keep the taxman happy. And if you are not a RAG member already you should sign up and help us to ensure the industry is sharing the best possible risk management advice, for the least possible cost!

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.