An international investigation led by the European Public Prosecutor’s Office (EPPO) has dismantled a massive VAT carousel fraud network spanning multiple EU nations. The operation, named “Moby Dick,” involved over 200 individuals and 400 companies, resulting in 47 precautionary measures, asset seizures totaling €520 million, and the reconstruction of €1.3 billion in false invoicing.
47 arrests and major seizures across Europe
The investigation revealed the intricate workings of an organized crime network dedicated to VAT evasion in the IT and electronics sectors. Authorities issued 47 arrest warrants, including seven European Arrest Warrants, targeting individuals in the Czech Republic, the Netherlands, Spain, and Bulgaria.
The network exploited EU VAT regulations by using fictitious entities, or "missing traders," to avoid paying taxes on cross-border transactions. These shell companies purchased goods VAT-free within the EU and sold them domestically, charging VAT but failing to remit it to the government.
Law enforcement seized assets, including € 520 million in profits from tax evasion and €10 million worth of properties across Italy, including luxury complexes in Cefalù, Milan, and Genoa.
Coordinated efforts across borders
This groundbreaking operation involved collaborative efforts between the Guardia di Finanza, the Palermo and Milan divisions of EPPO, and the Central Operational Service (SCO) of the State Police. Over 160 searches were conducted in Italy and across the EU in countries such as Spain, Luxembourg, Slovakia, Croatia, Bulgaria, and Cyprus. Investigators also extended their efforts to non-EU countries, including Switzerland and the UAE.
The fraud not only spanned multiple countries but also featured significant involvement from organized crime syndicates. Authorities identified links to the Sicilian Mafia and the Neapolitan Camorra, whose financial resources helped expand the fraudulent scheme.
Unmasking carousel fraud: the mechanics
Carousel fraud exploits the EU's tax-free cross-border trade system by inserting fake entities into the supply chain. These "missing traders" disappear without remitting VAT, enabling other entities within the chain to claim VAT refunds or sell goods at artificially low prices.
The network identified in this case involved 269 missing traders, 55 intermediary "buffers," 28 broker companies, and 52 conduit entities in other EU countries. The fraudulent invoices issued between 2020 and 2023 reached € 1.3 billion.
Criminal ties and economic impact
Prosecutors highlighted how profits from the scheme were laundered through legitimate-looking enterprises, with proceeds reinvested into other criminal activities. Judge-ordered preventive measures acknowledged that the network's activities directly benefited criminal organizations.
European Chief Prosecutor Laura Kövesi emphasized the significance of the operation:
"This investigation highlights the deep ties between white-collar criminals and organized crime networks. The damage caused extends beyond financial losses to the EU; it also represents a serious threat to internal security."
Combating economic crime
This landmark case underscores the importance of international cooperation in fighting complex financial crimes. Investigators from Palermo and Milan achieved an unprecedented synergy, enabling a comprehensive crackdown on fraudulent networks and safeguarding economic integrity.
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