Britain’s HM Revenue and Customs, which investigates tax fraud, said earlier this month that it has arrested 8 people in Scotland and 13 more in the rest of the UK over suspected tax fraud in the emissions trading market. “There has been a search of 81 premises including businesses and residential addresses. Eight people in Scotland and 13 people in the UK have been arrested,” an HMRC spokesman told Reuters.
A man has also been arrested under a European arrest warrant, the spokesman said.
A number of items were removed from the premises searched, including computers, hard drives, memory sticks, mobile telephones and business records, and cash has been retained under the Proceeds of Crime Act 2002, he said.
Frankfurt prosecutors also said they had arrested four people in Germany and Britain in connection with suspected tax evasion in carbon permit trading and 50 more people were being investigated.
He declined to name individuals, as is customary under German law. Deutsche Bank said seven of its employees were suspects in the investigation.
“Deutsche Bank believes the allegations raised against its employees can be rebutted,” a Deutsche Bank spokesman said.
Britain’s HM Revenue and Customs, which investigates tax fraud, said it could not comment.
Apart from tax evasion, the authorities were also looking into allegations of money laundering, the Frankfurt prosecutor’s office spokesman said.
“There have been raids and other measures in Britain, Denmark, Belgium, Finland, the Netherlands, Norway, Portugal, the Czech Republic and Cyprus,” he said.
The probe in Germany, where total damage is estimated at 180 million euros ($239.7 million), follows investigations in Britain, France, Spain, Norway and the Netherlands into carbon credit fraud over the last year.
The UK has its own, separate investigation into tax fraud in the carbon market. It arrested and subsequently bailed nine people last August.
Spokespeople for utilities EnBW and Vattenfall Europe said they were not affected by the tax office raids. Frankfurt-based Noble Group, one of the world’s largest carbon credit aggregators, said it was unaffected by the probe.
RWE’s trading unit said on Wednesday that although it was not under suspicion, it had had business ties with one of the suspects and was cooperating with the authorities.
Italian bank UniCredit SpA said the investigation was not directed against the bank, but some of its customers had been affected.
German energy industry executives expressed concern that other energy markets or other European nations’ carbon sectors could also be targeted.
Wider-reaching EU regulations for carbon were agreed in March but member states need to implement them by passing national laws now, which in Germany’s case will only apply from July 1.
European police agency Europol last December put the amount of damage from fraudulent EU carbon credit trading at more than 5 billion euros in the previous 18 months.
German prosecutors said earlier they had searched more than 230 sites in a probe based on suspicions of tax evasion in the trading of EU carbon emissions permits.
It follows investigations in Britain, France, Spain, Norway and the Netherlands into carbon credit fraud over the last year. Reuters chronologically compiled the fraud process.
HOW DO FRAUDSTERS DO IT?
The fraud has high returns over a short period of time. It is difficult to prove, meaning convictions are sparse.
A simple version is ‘acquisition’ fraud where the goods are imported VAT-free into one European Union member state from another. Once the goods have been sold on the importer goes missing, taking the VAT, which is collected as part of the sale.
A more complicated form is called “carousel fraud”. Goods are imported VAT-free but are not sold for consumption in the home market. The goods are sold through a series of companies, each liable to VAT, before being exported, possibly even back to the original seller.
The first link in the chain often goes missing without accounting for the VAT. The final link reclaims the VAT it has paid from the government before disappearing.
APRIL 28, 2010 – German prosecutors search sites across the nation in a carousel fraud investigation.
MARCH 30, 2010
Spanish police say they have arrested nine people on charges of avoiding 50 million euros ( $67.54 million) in tax linked to trading in carbon credits.
Norwegian tax authorities said they will investigate all firms’ EU carbon permit transactions in the Nordic country as part of an ongoing probe into VAT fraud.
MARCH 29, 2010
Oslo police say a police investigation into carbon tax fraud is widening its scope into money laundering, with five men charged.
MARCH 1, 2010
Norwegian police say at least three more firms are under investigation over alleged carbon tax fraud.
FEB 26, 2010
Norway’s tax authority says three people are charged and at least two companies are under investigation in Oslo over alleged carbon tax fraud.
JAN 11, 2010
Belgian prosecutors say three Britons and a Dutch man are charged by Belgian authorities with money laundering in an investigation into fraudulent trading in carbon emissions permits.
DEC 10, 2009
Fraudulent trading in European Union carbon emissions credits in the past 18 months has led to more than 5 billion euros in tax revenue losses for several EU nations, European police agency Europol says in a statement.
SEPT 1, 2009
A patchwork of unilateral actions by few European Union nations to prevent suspected tax fraud in carbon permit trading could serve only to push the activity into neighbouring states.
AUGUST 19, 2009
The British tax office arrests seven people in London in a suspected 38 million pound ($57.13 million) VAT fraud in the EU carbon allowances market.
JULY 15, 2009
The Dutch ministry of finance says there are “clear indications” of fraudulent activity in the Dutch carbon emissions market and put the onus of paying VAT on the carbon permit buyer, instead of the seller.
JULY 11, 2009
The Paris prosecutor’s office says a probe is under way into a suspected multi-million euro VAT fraud in the French carbon emissions market, although no one is placed under investigation at this point. ($1=0.7508 Euro)