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(Luxembourg, 15 November 2023) – Last week (7 November), the European Public Prosecutor’s Office (EPPO) in Munich carried out more than 200 searches in several locations in Germany and the Netherlands, during an operation against an alleged customs and VAT fraud ring understood to have caused damage of over €200 million in evaded tax and customs duties.
During this action day, over 300 tax and customs investigators raided more than 200 locations and seized over €450 000 in cash, two luxury cars and more than 80 smartphones, 30 hard disks and several servers. Four suspects, understood to have led the customs and VAT fraud scheme, were arrested and are currently in detention.
This investigation, code-named ‘Masquerade Ball’, centres on a suspected organised crime group involving Chinese nationals, alleged to have put in place a complex system to undervalue and evade customs duties and VAT due on the importation of goods.
Tightly choreographed scheme
According to the investigation, this group imported a high number of goods such as textiles, shoes and small electronic items from China to EU countries. By using fake invoices, the value of the goods was declared as far less than their actual value, which led to a lower payment of customs duties. In addition, it is understood that they evaded the payment of VAT by abusing an exemption linked to an EU importation mechanism known as ‘Customs Procedure 42’ – applied if goods imported from outside the EU into a Member State are subsequently transported, for final delivery, to another EU Member State – by pretending to ship the goods from one EU country to another.
Based on the evidence, the group falsified the movements of the goods by using shell companies all over the EU, which forged documents, issued false descriptions of the goods and generated fictitious transport documents. In so doing, the group pretended to move goods from one EU country to another, and did not have to pay the VAT, as this payment was deferred until the arrival of goods at their final destination. As these purported final deliveries involved shell companies as official recipients, the group managed to evade VAT payment entirely.
It is understood that, in order to carry out this type of scheme, the criminal group had to create a vast network of middlemen, mostly based in Germany, Belgium and the Netherlands, who oversaw customs clearance procedures and logistics in the EU, and also acted as intermediary sellers.
Outstanding cooperation
This action day is an example of how the EPPO works trans-nationally with different law enforcement authorities. This kind of investigation would have taken much longer without the EPPO’s ability to connect the dots between the different countries where the criminal group operated. The cross-border links may even never have been established.
The main partners and national authorities involved were:
- Customs investigation office in Munich, Germany (Zollfahndungsamt München)
- Tax investigation office, Munich, Germany (Steuerfahndung München)
- Federal Police, Germany (Bundespolizei)
- Fiscal Information and Investigation Service (FIOD), Netherlands
- Belgium’s General Administration of Customs and Excise ((Administration générale des Douanes et Accises, Algemene Administratie van de Douane en Accijnzen)
- Belgian Federal Judicial Police: The Central Office for the Fight Against Organised Economic and Financial Crime (OCDEFO-CDGEFID)
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.