Missing trader intra-community (MTIC) fraud is a form of organised, sophisticated tax fraud carried out by criminals who attack the value added tax (VAT) regimes of EU Member States. This is not a victimless white collar crime that only affects governments. By depriving EU Member States of tax revenues the criminals are effectively robbing EU citizens. Traditional missing trader intra-community (MTIC) fraud schemes involve goods such as precious metals, mobile phones or high-value portable electronic items. The more damaging organised crime gangs have mutated their activities into intangible markets, such as the environmental and energy sectors.
It is estimated that VAT revenue losses incurred by MTIC fraud alone are between EUR 45 billion and EUR 53 billion each year11. These profits are often used to fund other forms of criminality, such as cigarette smuggling or drugs trafficking.
The basic MTIC fraud model involves at least two Member States. The criminals create a structure of linked companies and individuals across these states who seek to exploit both national and international trading and revenue accounting procedures. Links between participants are disguised to make early detection more difficult. The initial entities responsible for the tax damage, the so-called missing traders, may only be in operation for a few months before disappearing.
Also known as ‘carousel fraud’, the fraud takes advantage of legislation which allows trading across Member State borders to be VAT free; VAT is only applied to sales within a Member State at the applicable domestic rate. Any VAT charged on sales should be declared and paid to the Member State’s revenue authority. In cases of fraud, the first company in the chain charges VAT to a customer, but does not pay this to the government, becoming what is known as a ‘missing trader’.
The joint investigation team (JIT) comprising four EU Member States - Czech Republic, Germany, the Netherlands and Poland - and supported by Europol and Eurojust, targeted an organised criminal group behind an MTIC fraud scheme in electronic goods worth EUR 320 million. The same JIT group targeted the organisers and facilitators of ‘alternative banking platforms’ across the globe, which were used to transfer crime-related proceeds and the associated money laundering of several hundred millions of euros. Results: 23 suspects arrested in nine countries; 27 witnesses heard; 117 premises simultaneously searched; assets and equipment seized in 15 EU Member States plus Ukraine and Gibraltar.
In February 2015, Europol supported the Hungarian National Tax and Customs Administration to dismantle a massive illegal cigarette factory near Budapest. The action was the result of intensive cooperation between various law enforcement agencies including customs, police and security services from five EU Member States, supported by Europol.
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The support Europol provided included intelligence sharing and development, crime analysis, and coordinated international collaboration and interventions. Europol also deployed a mobile office to the operational control unit in Budapest. This allowed information gathering during the raid, which was cross-matched against Europol's databases. Real-time feedback was then provided to officers on the ground during the operation.
