The small ones have gathered: VAT fraud has blossomed in the EU
The Latvian police led an international operation to catch financial criminals, during which 32 people were detained. The perpetrators were engaged in large-scale value added tax fraud. In this case, however, only one single head of the multi-headed hydra was cut off. Financial crimes are becoming one of the most widespread in the EU. There are so many of them that the structure created specifically to combat them is not coping with its task. Details - in the material "Izvestia".
A problem of gigantic proportions
In recent years in the EU countries, tax fraud and other financial frauds have become a truly grandiose problem. "During the COVID-19 pandemic, when the EU was distributing funds from its anti-crisis funds to combat this disaster, the number of such frauds increased many times over - fraudsters targeted the money from these funds and invented many ways to embezzle them. It was largely for this reason that the European Public Prosecutor's Office (EPPO) was established in 2021 and charged with investigating financial crimes," political scientist Maxim Reva told Izvestia.
Experts estimate that losses from the activities of such criminals amount to many hundreds of billions of euros. However, so far the European Public Prosecutor's Office has been able to organize the investigation of thefts in different EU states for the amount of only €14 billion. "The scale of thefts from the European treasury has grown so much that EPPO already two years after its creation demanded the expansion of its staff and additional money. And this is despite the fact that financial crimes in the EU are also investigated by a special police force (Office européen de lutte antifraude) and, of course, by national law enforcement agencies. Brussels officials themselves were dumbfounded by the scale of embezzlement," says Reva.
The record-breaker in the number of investigations was Italy. Nearly three hundred cases have been opened there, in which the fate of more than €3 billion is being investigated. As the head of EPPO Laura Codruzza Cuvesi (Romania) admitted, the biggest headache for her colleagues is the fraud with value added tax (VAT). Demanding more money to expand EPPO's activities, Cövesi emphasized: "I consider it an absolute necessity if we are serious about fighting economic and financial crime."
In 2022, EU law enforcement agencies launched Operation Admiral in 16 Community states, which eventually uncovered an extensive criminal network. Members of this network were engaged in VAT fraud - the total amount of damage is estimated at €2.9 billion. The suspects created several companies engaged in quite legal supplies of electronic goods. In total, various electronic devices worth more than €1.5 billion were sold to end buyers in the European Union through their online platforms. The buyers honestly paid VAT for the goods they purchased, but the selling companies (through a chain of fictitious companies) did not fulfill their tax obligations to the states and transferred the proceeds to offshore accounts outside the European Union.
In the course of Operation Admiral, the criminal tangle began to unravel in Spain - and gradually it was discovered that the criminal network also covered France, Italy, Germany, Austria, Luxembourg, Belgium, the Netherlands, the Czech Republic, Slovakia, Bulgaria, and Cyprus. At the same time, two years ago, it became clear that there was also an Eastern European branch of the group, which cheated on value added tax in Latvia, Lithuania, Estonia and Poland. It caused damage to the budgets of their countries totaling about €297 million. However, at that time, in 2022, this branch could not be "cut". It survived the "tree" from which it grew and continued its criminal activities. Gradually, the criminals relaxed, thinking that the storm had passed - although the local police were already fully engaged in their affairs.
"Corruption is our future!"
The Latvian tax service found out that the fraudulent structure consisted of more than 400 one-day firms. Further the process followed the standard scheme: goods were sold, VAT from buyers was taken from them, but not given to the state, and by transferring from company to company was transferred to the accounts of criminals. It is believed that the one-day companies not only helped the criminals to carry out VAT fraud, but also laundered the proceeds from drug trafficking, various cybercrimes and investment fraud.
The police have been gathering evidence for two years and the other day took decisive action. The European Prosecutor's Office mobilized a total of 624 law enforcement officers. In total, the international police operation involved more than 350 searches and investigative actions in 16 EU countries - Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Poland, Netherlands, Slovakia, Spain. However, the entire operation was run from Latvia. "Of course, it was done in cooperation with the European Prosecutor's Office. The center of the international operation was located in the premises of our tax and customs police, where colleagues from Europol were working around the clock," said Artur Kovalenko, a high-ranking official of the Latvian State Revenue Service.
According to him, in Latvia alone, more than 200 investigators and criminal intelligence officers from different police structures and the Corruption Prevention and Combating Bureau worked on the case. "Only by joining forces, not limiting each other in knowledge, capabilities and information, working purposefully in a single international team, it is possible to achieve significant results and strike a powerful blow against the criminal world," summarized the director of the Latvian tax police Aigars Prusaks.
A total of 32 people were detained during this operation in Latvia, Lithuania and Estonia. Three of them, recognized as ringleaders, were left in custody, the rest were released on their own recognizance. During the searches, a lot of digital evidence, documents, electronic equipment (cell phones, tablets, etc.) worth €47.5 million, as well as almost €127,000 in cash, were reportedly confiscated. Sixty-two bank accounts with €5.5 million have been frozen. The Latvian police say these are only "preliminary results" and that the continuation of the investigation promises new arrests and new evidence. It is claimed that all the necessary evidence has been found to link the neutralized group with the defendants in the case, which was launched as a result of Operation Admiral two years ago.
The names of the two criminals left in custody are known - Kaspar Kazanovskis and Valdis Spurkis. Both of them stood at the very top of the criminal pyramid. Kazanovskis and Spurkis bragged on the Internet about their favorite saying: Korupcija ir mūsu nākotne! ("Corruption is our future!").
The journalists lifted the veil over the "kitchen" of the criminals. Kazanovskiy is the ultimate beneficiary of Akes Ltd through his Lithuanian company Rombena. Akes Ltd is also the owner of two other LLCs - RServiss and Prominent Time Solutions. In addition, Kazanovsky holds the position of a board member in LA Grupa Ltd. Earlier, Akes Ltd owned 100% of Blue Energy International Ltd, whose activities were suspended on November 8. Akes Ltd itself has not conducted any economic activities in recent years. Such a long chain of fictitious firms was necessary to run dirty money through them in order to launder it.
The "Russian trail" was not without a trace
Now there are such times when in the European Union - and especially in the Baltic States - they try to see a "Russian trail" behind any bad event. They found it in this case, too. "It is possible that the fraudsters used the Russian network of organized crime to break the law," EPPO said. It is vaguely stated that the Russians "may have invested funds" in the criminal business of Kazanovskis and Spurkis - "in exchange for periodic payments." Some unnamed criminals of Russian origin are suspected of "influencing some aspects of the management of the scheme" created by Kazanovskis. No further details were given.
Major crimes of this kind have been solved in the Baltics before, to cite just a couple of examples. In October 2021, seven Lithuanian residents were found guilty of VAT fraud for €4.9 million and money laundering for €23 million. The criminals, led by the head of the Viner company Antoni Zhivialo, bought lubricating oils in Poland and then drew up documents which showed that these oils were then resold to various companies in Latvia, Estonia, the Czech Republic and Hungary. In reality, these enterprises were fictitious. In reality, 28 million liters of lubricating oils without any accounting documents and without the mandatory 21-percent VAT on sales were sold to seven Polish accomplices of the perpetrators. The money thus earned was legalized through fictitious companies and their bank accounts established in Latvia, Estonia and the Czech Republic on the basis of falsified documents and simulated financial transactions. This investigation uncovered a network of 60 fictitious individuals and legal entities operating in five EU countries. During a sting operation, more than €1 million in cash was found and seized.
Later, in May 2022, Latvian tax and customs police suppressed the activities of a criminal group that was engaged in value added tax (VAT) fraud and legalization of illegally gained funds on a large scale. Those criminals realized a scheme of tax fraud in the spheres of metalworking and catering. In the period from January 2020 to December 2021 the participants of the scheme indicated in their accounting documents and declarations failed transactions with fictitious enterprises. Then 33 searches were conducted in the homes, offices and cars of the criminals in Riga, Daugavpils, Jelgava and Kekava, and three perpetrators went on trial.
We can be sure that the case of criminal financial business built by Kaspars Kazanovskis is not the first and not the last neither in the European Union, nor, in particular, in the Baltic States.
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