Moby Dick investigation freezes over $549M in mafia-run VAT fraud scheme

Moby Dick investigation freezes over $549M in mafia-run VAT fraud scheme

Investigators across Europe have frozen over half a billion dollars in mafia-linked revenue generated through Value Added Tax (VAT) fraud.

The European Public Prosecutor’s Office (EPPO) investigation into €520 million ($549.6 million) in VAT fraud, called ‘Moby Dick,’ led to the arrest of 43 suspects on Thursday. Financial prosecutors report that the individuals are connected to various mafia groups

Investigators across 10 countries, led by Italy’s financial authorities, froze in excess of half a billion dollars stolen from the tax bases of EU member states via fraudulent transactions.

A total of 195 individuals and 400 companies are currently linked to the ‘Moby Dick,’ tax evasion syndicate, with prosecutors alleging that the conspirators are headed by a consortium of several mafia clans.

Value Added Tax (VAT) fraud, also known as carousel fraud, exploits benefits in cross-border transactions between EU member states that exempt businesses from having to pay this tax.

Authorities believe the suspects established phony companies across the EU to sell their goods and then claim fraudulent VAT reimbursements from their respective national tax authorities. Other sales would be made through traders who would then disappear without fulfilling their tax obligations, EPPO said.

Prosecutors used this opportunity to highlight how financial crime is often interlinked with other arms of organized crime across the globe, namely drug and human trafficking.

“‘Moby Dick’ shows that there are not two separate criminal worlds,” said European Chief Prosecutor Laura Kövesi. “The world of the really bad and dangerous criminals smuggling drugs, trafficking people on one side; and the world of white-collar criminals, ‘merely’ corrupting and laundering money, on the other side.”

Investigators were impressed at the level of complexity and efficiency in the VAT fraud scheme. Between 2020 and 2023, the mafia-led syndicate issued $1.37 billion in invoices for consumer level electronic goods.

A Milan judge ordered that 34 of the 43 arrested suspects are to remain in jail; the remaining nine will be under house arrest for the duration of their pre-trial detention. Other arrest warrants have been issued across Bulgaria, Czechia, the Netherlands, Spain and several non-EU countries.

“It has been a while since we started to ring the alarm bell about dangerous organized crime groups’ heavy involvement in fraud to the EU budget,” Kövesi said. “Beyond the colossal damages that they create, we have been warning about the threat to our internal security their activity in this field represents.”