Financial Crime World

Italian Financial Police Crack Down on Massive VAT Fraud Ring

Operation Against a Criminal Group Based in Naples

On March 21, 2023, the Italian Financial Police (Guardia di Finanza) conducted a major operation against a criminal group based in Naples, Italy, suspected of orchestrating a massive Value-Added Tax (VAT) fraud scheme. The operation resulted in the arrest of 12 people, including four public officials, for corruption offenses.

Searches and Seizures

Led by the European Public Prosecutor’s Office (EPPO) in Naples and Milan, 100 officers of the Italian Financial Police conducted 25 searches in seven cities across Italy. The searches led to the seizure of cash, high-value watches, vehicles, jewelry, and other assets worth millions of euros.

The Fraudulent Scheme

The operation uncovered a suspected VAT carousel fraud scheme that exploited EU rules on cross-border transactions between its Member States. The fraudulent scheme, which occurred between 2017 and 2022, involved:

  • 170 shell companies in 13 countries, including Albania, Austria, Bulgaria, Czechia, Germany, Italy, the Netherlands, Poland, Slovakia, Slovenia, Spain, and the USA
  • Trading electronic equipment, mainly AirPods, through these companies using fictitious invoices to evade VAT payments
  • Selling goods at competitive prices through large distribution companies in Italy, creating serious competition distortions in the market

Money Laundering and Corruption

The criminal profits were laundered and reinvested in metal companies selling copper and wire rods. The crimes under investigation include:

  • Conspiracy
  • VAT fraud
  • Corruption
  • Hacking
  • Money laundering

Frozen Bank Accounts and Ongoing Investigations

Bank accounts were frozen during the operation, and a massive fictitious VAT credit worth €200 million sold by a US company to several Italian companies is still under investigation. The evidence suggests that the criminal group was based in Naples and worked as a professional company selling VAT evasion models to clients.

Arrests of Public Officials

Four public officials, three from the Guardia di Finanza and one from the Tax Enforcement Agency (Agenzia delle Entrate - Riscossione), were arrested for their alleged involvement in the scheme. They are suspected of playing an active role in the VAT fraud mechanism and accepting bribes to slow down criminal proceedings and tax audits.

Collaboration with EPPO

The Guardia di Finanza worked closely with the EPPO in the investigation, leading to the officials’ arrests. All persons concerned are presumed innocent until proven guilty in the competent Italian courts of law.