In the criminal proceedings initiated and investigated by the Tax and Customs Police of the State Revenue Service (VID), the European Public Prosecutor's Office (EPPO) has conducted a large-scale operation in Rīga and Vilnius against a criminal syndicate suspected of a complex value added tax (VAT) fraud scheme in connection with the sale of electronic goods.
According to the VID, the operation was carried out in 16 countries in total, including Latvia, Lithuania and Estonia. 624 employees of law enforcement agencies of different countries were involved in the operation, including employees of the Tax and Customs Police, the Internal Security Department, the State Police and the Corruption Prevention and Combating Bureau (KNAB).
The suspected fraud is believed to have caused significant VAT losses to the budgets of several European Union (EU) countries to a total of approximately 297 million euros.
The investigation – which is part of a wider investigation started in 2022 dubbed 'Investigation Admiral' – revealed that the suspects have founded companies in 16 EU member states, acting as legal suppliers of electronic goods. In general, popular electronic devices worth more than 1.48 billion euros were sold to direct customers in the EU through online trading places, causing significant losses in the budgets of several EU member states.
"Investigation Admiral, announced in November 2022, is considered the biggest VAT fraud ever investigated in the EU with a damage now estimated at €2.9 billion. Taking advantage of its decentralised model and central analytical capacity, the EPPO was able to establish links between persons and companies under investigation Admiral, and a criminal syndicate based in the Baltics," said the EPPO.
Buyers paid VAT on the goods they purchased, while companies, possibly using a chain of fictitious companies that were obliged to pay tax, defaulted on their tax obligations. Funds obtained from the sale of goods were transferred to offshore accounts.
"The investigation revealed that this syndicate was using the same modus operandi, and partly also the same organisation and infrastructure, as the perpetrators investigated under Admiral, to carry out a massive VAT carousel fraud – a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax," said the EPPO.
There is reason to believe that the fraudulent scheme consisted of more than 400 companies, which also allegedly laundered the proceeds of drug trafficking, various cybercrimes and investment fraud. It is also believed that Russian organized crime is involved.
During the international operation led by the EPPO, more than 300 searches were carried out in 16 European countries - Germany, France, Italy, Austria, Estonia, Lithuania, Poland, Spain, Slovakia, Luxembourg, the Netherlands, the Czech Republic, Cyprus, Bulgaria, Belgium and Latvia.
32 persons were detained in Latvia, Estonia and Lithuania alone, and three of them remain in custody.
In Latvia, the investigative measures were supported by more than 200 investigators and criminal intelligence officers from the Tax and Customs Police Department of the SRS, the State Police and the Corruption Prevention and Combating Office.
During the raids, law enforcement authorities seized a significant amount of smartphones worth more than 47,715,574 million euros, several luxury cars, jewelry, gold watches, weapons, drugs and 126,965 euros in cash. 62 bank accounts have been frozen in several countries, the total amount of money in euros is still being calculated, but the total amount of frozen accounts in Latvia, Lithuania, Estonia and Poland alone is 5,839,000 euros.
"These are preliminary results and they will evolve throughout the coming days and weeks," noted the EPPO.
The EPPO is the independent public prosecution office of the European Union. It is responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the EU.
