A cross-border VAT fraud case, in which seven persons have been accused of alleged 4.9 million euros fraud and 23 million euros money laundering, has been handed over the Vilnius Regional Court, the Financial Crime Investigation Service (FCIS) has reported on Thursday.
Cross-border VAT fraud case handed over to court
© AP / Scanpix

According to information available to BNS, the case involves Viner, a private company, its executive Antonijus Zivialo and his brother.

The investigation showed that the two brothers who owned the Vilnius-registered company and their accomplices – several Lithuanian and foreign nationals – used a premeditated and coordinated “missing trader” scheme to avoid VAT and to launder money earned from criminal activities.

“The main point is the scale – I have been working with VAT [cases] for 20 years and this is probably the biggest case sent to court by the FCIS and it is just the investigated part as there were even more transactions, including transactions with yet other countries,” Vytautas Kukaitis, a prosecutor who was delegated by the European Public Prosecutor’s Office and was in charge of the investigation, told BNS.

He pointed out that criminal activities took place between 2011 and 2013 when Lithuania still had the litas as its national currency hence the amounts involved were even more substantial.

According to the case materials, the fraud scheme involved the purchase of lubricating oils from fuel processing plants, which operated in excise warehouses in Poland, on behalf of the company. The purchases were documented as intra-EU supplies subject to zero VAT.

The accomplices who sought to avoid the output VAT allegedly falsified invoices specifying that oil was sold to bogus companies established for criminal purposes in EU countries (Latvia, Estonia, the Czech Republic, Hungary, etc.).

According to the falsified data specified in the invoices, the company allegedly sold more than 28 million liters of lubricating oil generating more than 23 million euros in revenue. In line with the invoices, oil was allegedly sold to 17 Latvian companies, 3 Czech companies and 4 Estonian companies, with zero percent VAT charged.

However, those transactions never took place and the entire quantity of oil was sold to at least seven accomplices in Poland without any invoices or other formal papers and without the mandatory 21 percent output VAT. Criminal proceedings against those accomplices are underway in Poland.

“According to the data available to us, all quantities of oil involved were sold illegally to natural persons in Poland and it was used in tractors, cars,” the prosecutor said adding that the buyers were not registered as VAT payers and they used to make payments in cash.

As estimated, the organized criminal group generated 23 million euros from the illicit sale of oil.

To legalize this money, the organized group used bogus companies established in Latvia, Estonia and the Czech Republic and their bank accounts, falsified documents and bogus financial transactions. Some 13 million euros were thus transferred to the accounts of the companies operating in Lithuania and the remaining 10 million euros were legalized using fake cash payments.

As estimated by investigators, the accused carried out more than several thousand transactions, including financial transactions, in an attempt to keep the real source of money unknown.

The investigation led to the disclosure of a network of at least 60 bogus persons and companies that operated in more than five EU countries. Officers found and seized more than 1 million euros in cash during the detention operation.

Simultaneously, competent authorities rolled out new effective administrative measures to prevent such criminal activities.

The State Tax Inspectorate has filed a claim worth 4.9 million euros in this case over the damage caused to the state.

Pursuant to the Criminal Code, a person who legalizes property obtained as proceeds from crime shall be punished by a custodial sentence for a term of up to seven years. Meanwhile, an international organized VAT fraud can bring punishment of up to 8 years in prison.

The pre-trial investigation, which took six years to complete, was led by the Prosecutor General’s Office. The investigation was conducted by officers from the Special Tasks Board of the FCIS and also involved a joint investigation team (JIT) from Eurojust.

The criminal case consists of 139 volumes of documents.

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