Author: Fabrizio de’ Sanna
Co-author: Nicolò Barbero Mazzucca
Committee: Criminal Lawyers Committee
Date: 11/10/2024
The European Public Prosecutor’s Office (EPPO) has been particularly active recently in Italy, demonstrating significant power in combating financial crime and highlighting once again the importance of its mandate. These cases, ranging from cross-border VAT fraud to the evasion of anti-dumping duties, underline the EPPO’s crucial role in protecting the Union’s financial interests.
VAT fraud in the VoIP communications sector: a case of carousel fraud
On 2 October 2024, the EPPO announced the arrest of four people in Italy and the seizure of assets amounting to €97 million, marking a significant breakthrough in an investigation into a VAT fraud scheme involving Voice over IP (VoIP) services. This operation, spanning multiple EU Member States (Czechia, Germany, Italy, Romania, Switzerland), highlighted the need for an effective coordinating institution such as the EPPO to address this type of crime.
The suspects are alleged to have orchestrated what is commonly referred as a “carousel fraud”, a scheme that exploits the absence of VAT in intra-EU transactions. In this case, fraudulent VoIP services were sold across national borders with no VAT paid at the initial point of sale. The goods were then purportedly “resold” multiple times through a network of shell companies, artificially inflating the VAT liability and ultimately resulting in false VAT refund claims. These types of frauds are notorious for their complexity, as they involve a chain of transactions that appear legitimate but are in fact designed to defraud tax authorities.
The EPPO, in collaboration with Italian authorities, coordinated arrests and asset seizures, effectively dismantling the criminal network behind this large-scale operation. The investigation underscores the EPPO’s capacity to handle sophisticated financial crimes that involve multiple jurisdictions.
Evasion of anti-dumping duties: a €2.4 million seizure
In another significant case, on October 1, 2024, the EPPO announced the seizure of €2.4 million in assets from two companies accused of evading anti-dumping duties.
Anti-dumping duties are a critical tool used by the EU to protect European industries from unfair competition, particularly in cases where products are sold below market value. The evasion of such duties not only undermines fair competition but also results in substantial financial losses to the EU budget.
The investigation targets two companies from Ferrara operating in the steel sector and their administrators, who are suspected of customs duty evasion and falsifying official documents. Specifically, the companies under investigation are accused to have submitted false declarations to the Ferrara Customs Agency concerning the origin of their products in more than 110 import transactions. The three administrators involved reportedly certified that the steel originated from South Korea, while it was, in fact, imported from China.
This misrepresentation allowed the companies to benefit from exemptions on customs duties applicable to chinese goods, thereby evading nearly €2.4 million (€2,394,869.75) in additional duties imposed under the european anti-dumping regulation.
The investigation was initiated by the reports gathered by customs authorities, which raised suspicions about the unusually high volume of aluminium imports declared of South Korean origin. Subsequent inquiries by the EPPO revealed a well-organized scheme involving the falsification of trade documentation, allowing the companies to evade millions in duties that would otherwise have been levied on chinese imports.
The successful seizure of assets in this case is a testament to the EPPO’s growing operational capabilities and the critical importance of inter-agency cooperation between the EPPO, national law enforcement, and customs authorities.
Conclusion
These two cases in Italy (although still under investigation, with the final outcomes yet to be determined), one involving VAT fraud in the VoIP communications sector and the other concerning the evasion of anti-dumping duties, reflect the EPPO’s increasing vigilance in tackling financial crimes that harm the financial interests of the Union.
Through its work in Italy and beyond, the EPPO is proving itself to be an indispensable pillar of the EU’s broader strategy to enhance transparency and financial integrity across the Union.