European authorities have taken down a massive VAT fraud network allegedly operated by the Italian mafia, leading to significant asset seizures totaling €520 million and the issuance of approximately 40 arrest warrants. This sweeping crackdown, coordinated by European Public Prosecutor’s Offices in Milan and Palermo, targeted a "criminal association" involved in VAT fraud through intra-Community IT product trading and the laundering of illicit proceeds.
The fraud scheme, known as "carousel" fraud, exploits VAT rules by generating fake invoices to claim VAT refunds on intra-EU transactions that were never taxed. The investigation estimated that false invoices linked to the network amounted to €1.3 billion.
Operations were conducted in Italy as well as in various EU countries affected by the scheme, including Spain, Luxembourg, the Czech Republic, Slovakia, Croatia, Bulgaria, Cyprus, and the Netherlands, alongside Switzerland and the UAE. Among those detained under European warrants in connection to the operation—nicknamed “Moby Dick”—four suspects were apprehended in the Czech Republic, the Netherlands, Spain, and Bulgaria.
Italian Prime Minister Giorgia Meloni praised the operation’s success as evidence of her administration’s commitment to curbing tax evasion, a problem costing Italy over €80 billion annually, equivalent to nearly 4% of its GDP.
The Milanese judge overseeing the case ordered preventive asset seizures from the leaders of the network, who were also accused of “supporting mafia criminal associations.” Europol estimates that carousel VAT fraud results in annual losses of nearly €50 billion for the EU, as companies across multiple member states manipulate VAT refunds without remitting the associated tax. This case highlights the ongoing threat posed by complex, cross-border tax evasion schemes to the EU’s financial stability.
