Convictions in VAT fraud case spanning 17 countries and involving €195 million

The European Public Prosecutor’s Office (EPPO) in Munich (Germany) has secured the first convictions in a large-scale VAT fraud case spanning 17 countries and involving an estimated damage of €195 million.

• https://www.eppo.europa.eu/en/media/news/eppo-investigation-cluster-midas-eu195-million-vat-fraud-spread-across-17-countries

On March 18, 2025, the Landshut Regional Court sentenced two individuals for organized VAT fraud. They were involved in fraudulent trading of protective face masks, exploiting VAT rules to evade tax payments.

• One defendant received a five-year prison sentence,
• The other was sentenced to three years and six months.

The VAT fraud scheme uncovered by the EPPO involved a complex network of companies and individuals across 17 countries. Here are some key details:

1. Modus Operandi: The fraudsters established companies in multiple EU Member States, posing as legitimate suppliers of goods such as protective face masks and electronic devices. They exploited VAT rules on cross-border transactions, which were exempt from VAT, to avoid paying taxes.
2. Fraudulent Transactions: These companies sold goods to customers within the EU, who paid VAT on their purchases. However, the selling companies did not fulfil their tax obligations and disappeared, avoiding transferring VAT amounts due to national tax authorities.
3. VAT Reimbursement Claims: Other companies in the fraudulent chain would then claim VAT reimbursements from national tax authorities, creating significant financial damage. The estimated VAT loss from this scheme is around €195 million.
4. International Network: The scheme involved over 400 companies and was linked to organized crime networks. The proceeds from the fraud were often moved to offshore accounts and used for laundering money from other criminal activities.
5. Convictions: The EPPO in Munich secured the first convictions in this case, with two individuals sentenced for their roles in the fraud. One received a five-year prison sentence, while the other was sentenced to three years and six months.

What happened?

🔹 Two individuals were convicted in Germany for their role in the fraudulent trading of face masks during the pandemic.

🔹 Estimated VAT loss? €5 million.

🔹 Sentences: 5 years and 3.5 years in prison, plus confiscation of criminal proceeds.

🔹 These convictions mark the first in the massive Operation MIDAS, which targets a transnational criminal network exploiting VAT rules via fictitious transactions & shell companies.

The fraud involved goods like:

• 📱 Smartphones
• 💻 Small electronics
• 😷 Protective face masks

Why does this matter for AML & compliance professionals?

• ➡️ VAT carousel fraud is complex, transnational, and highly lucrative.
• ➡️ Shell companies & trade misinvoicing are still widely used to move illicit funds.
• ➡️ Cross-border cooperation is key—no single authority can fight this alone.

Key takeaways:

• 🔍 Monitor for high-volume trade anomalies
• 🏢 Scrutinise business relationships with shell or short-lived entities
• 🔗 Collaborate with tax and law enforcement counterparts across jurisdictions

The above is linked to the iinvestigation Admiral 2.0, one of the largest VAT fraud cases ever uncovered in the EU, and it has links to organized crime.

Here are the key details:

1. Scale of Fraud: The investigation revealed a complex VAT carousel fraud scheme involving the trade of popular electronic goods. The estimated VAT loss from this scheme is around €297 million 1 2. The overall damage from the broader Admiral investigation is estimated at €2.9 billion  
2. Modus Operandi: Fraudsters established companies in 15 EU Member States, posing as legitimate electronic goods suppliers. They sold over €1.48 billion worth of devices via online marketplaces. While customers paid VAT, the selling companies disappeared without transferring the VAT amounts due to the national tax authorities  
3. VAT Reimbursement Claims: Other companies in the fraudulent chain claimed VAT reimbursements from national tax authorities, creating significant financial damage  
4. International Network: The scheme involved over 400 companies and was linked to organized crime networks, including possible involvement from Russian criminal groups. The proceeds from the fraud were often moved to offshore accounts and used for laundering money from other criminal activities  
5. Cross-Border Action: The EPPO mobilized 624 law enforcement officers to perform searches and arrests across 16 countries. During the transnational action, more than 350 searches were conducted, and 32 people were detained in Estonia, Latvia, and Lithuania  

📖 More about the case here - EPPO Case Details:  

• https://www.eppo.europa.eu/en/media/news/germany-first-conviction-eppo-investigation-cluster-midas
• https://www.eppo.europa.eu/en/media/news/eppo-investigation-cluster-midas-eu195-million-vat-fraud-spread-across-17-countries
• https://www.eppo.europa.eu/en/media/news/investigation-admiral-20-europes-biggest-vat-fraud-links-to-organised-crime