The European Public Prosecutor’s Office in Rome is investigating a multimillion-euro customs and value-added tax (VAT) fraud scheme in which 13 Chinese nationals and four Italians were arrested for the illicit import of clothing, shoes, and accessories from China.
The syndicate imported handbags, shoes, and other accessories into the country and exploited the European Union’s Customs Procedure 42—which waives the need to pay import VAT at European ports of entry if the final destination of the goods is another country within the bloc.
According to the European Public Prosecutor’s Office (EPPO), the contraband entered the European Union through Bulgaria, Hungary, and Greece before being transported to distribution centers in Italy.
The prosecutor’s office revealed that the syndicate generated fake invoices for nonexistent transactions “between fictitious operators.”
To evade taxes, the syndicate allegedly established 29 companies across the Italian provinces of Florence, Prato, and Rome, before shutting them down within two years.
Referring to the syndicate as a “criminal enterprise of Chinese entrepreneurs,” the EPPO noted that they also ran an underground money transfer operation, that circumvented traditional financial intermediaries and offered the service to other Chinese nationals living in Italy for a fee.
The latest prosecutions follow arrests in another case last year in which EU law enforcement officers uncovered a money laundering operation that was capable of handling a million euros per day.
The officials confiscated 160,000 euros ($173,786) in cash and arrested the kingpin along with four other suspects—all of whom were of Chinese origin.
French customs officers were also involved in the investigation, which started when their country’s police discovered 500,000 euros in cash ($543,082) hidden in a car in the south of France three years prior.
It was established that the money laundered in the operation was generated by counterfeit goods, prostitution, and tax and customs fraud.
EU authorities froze 116 million euros ($126 million) in a suspected 113 million euros ($137 million) tax evasion scheme after 20 locations in Italy’s Marche, Emilia Romagna, Puglia, Veneto, Toscana, Lombardia, Abruzzo, Campania, Piemonte, and Lazio were raided simultaneously.
“Based on the evidence, the illicit profits were laundered using a Chinese underground banking network with clandestine branches in the region of Marche (central Italy),” a statement by the EPPO noted.
Five Chinese restaurants, eight luxury vehicles, a house, an apartment, and a shopping center associated with 33 individuals were seized while their bank accounts were frozen.
The EPPO reported that five suspects were placed under house arrest and made to wear electronic bracelets, two were imprisoned, and another two were instructed to report to the police routinely. All of them were implicated in money laundering.
The European office noted that the scheme was part of an underground banking network that moved money around Europe through Bulgaria, Denmark, Estonia, France, Ireland, Germany, Greece, Spain, and the UK before it arrived at its ultimate destination: China.
Authorities estimated that the money generated by the racket amounted to 500 million euros and was the proceeds of a “complex scheme of international tax fraud” involving “missing traders.”
The EPPO cited hundreds of containers of clothing and accessories that, like the investigation this year uncovered, entered Europe through Bulgaria and Greece before being redistributed in Italy.
