Corruption
Tax Fraud Network Busted: Rs 2,600 Crore Scam, 36 Arrests, 300 Searches Across 16 Countries
Europol, in collaboration with the European Public Prosecutor’s Office (EPPO) and law enforcement agencies from 16 countries, has successfully dismantled a major criminal network responsible for large-scale value-added tax (VAT) fraud. The international investigation, codenamed Operation Admiral 2, has unveiled a sophisticated VAT fraud scheme linked to the trade of electronic goods, resulting in an estimated VAT loss of Rs 2,600 crore.
Key Actions and Seizures
During a coordinated action day, authorities detained 32 individuals and seized a significant cache of assets, including electronic devices worth over Rs 420 crore, luxury cars, and Rs 1 crore in cash. Furthermore, 62 bank accounts holding a combined value of more than Rs 487 crore were frozen. These preliminary results are expected to evolve as the investigation progresses.
Unraveling the Fraudulent Scheme
The investigation revealed that the network employed the same methods and, in part, the same infrastructure as those implicated in Operation Admiral, announced in November 2022. Considered the largest VAT fraud uncovered in the European Union, damages from this ongoing criminal activity have now reached a staggering Rs 25,000 crore.
The criminal network executed a VAT carousel fraud—a highly complex scheme that exploits EU rules exempting cross-border transactions from VAT. The suspects set up companies across 15 EU Member States, presenting themselves as legitimate suppliers of electronic goods. They sold over Rs 13 crore worth of devices through online marketplaces to end customers in the EU, who unknowingly paid VAT on their purchases.
However, the selling companies evaded their tax obligations by disappearing, avoiding payment of VAT to national tax authorities. Other entities in the fraudulent chain falsely claimed VAT refunds, further compounding the losses. The illicit proceeds were laundered through offshore accounts, highlighting the international scope of the operation.
A Multifaceted Criminal Network
The EPPO has linked over 400 companies to this sprawling fraud scheme, which also served as a channel for laundering proceeds from drug trafficking, cybercrime, and investment fraud. Evidence suggests connections to Russian organised crime groups, which reportedly financed parts of the operation in exchange for periodic payments and played a role in its management.
Coordinated Cross-Border Action
This week’s international operation included over 300 searches across 16 countries, with significant activity in Latvia and Lithuania, where 36 individuals were arrested. In Latvia, more than 200 officers from Customs and Tax Police, the State Police, and the Corruption Prevention and Combating Bureau participated in the operation.
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Europol provided critical support by offering analytical expertise, deploying forensic experts, and coordinating investigative efforts through a Virtual Command Post. This collaboration allowed the EPPO to connect the dots between organised crime networks and execute a unified investigative strategy.
The Fight Against Organized Crime
Operation Admiral 2 underscores the importance of international cooperation in combating sophisticated fraud schemes. With the dismantling of this network, authorities have taken a significant step toward addressing VAT fraud and its associated criminal activities, sending a strong message to those exploiting cross-border financial systems. Further developments are anticipated as investigators continue to uncover the full extent of this complex web of criminality.