Operation ‘Flash’

 

• The organization had created a network of front men and shell companies in Spain, Portugal and Hungary to falsify the real circuit of the merchandise.
• 12 arrests and six raids and searches have been carried out in private homes and companies of the plot in Madrid and Castilla La Mancha
• 300,000 euros in cash have been seized at the home of the person responsible for the scheme and 700,000 euros have been frozen in accounts abroad and various balances in Spain.

 

February 5, 2015.- The Tax Agency has dismantled an organization dedicated to VAT fraud in the IT and electronics sector that could have defrauded more than 35 million euros between years 2011 and 2014 through a network of front men and front companies in Spain and other EU countries with which they falsified the real circuit of the merchandise. The operation, called 'Flash', is based on investigations by the Tax Agency that began in 2013 and led yesterday to the arrest of 12 people, the expected indictment of another 13, and the search of six private homes and companies of the plot in Madrid and Castilla La Mancha.

The investigations, initiated by the National Fraud Investigation Office (ONIF) in collaboration with the Regional Operational Headquarters of Customs Surveillance of the Tax Agency in Madrid, have made it possible to verify the existence of a plot for VAT fraud in the marketing of products computer and electronic devices (phones, tablets and televisions, among other products), creating a complex corporate structure with companies in Spain, Portugal, and Hungary.

The merchandise subject to fraud travelled directly from the supplier in Europe to Spanish logistics warehouses and, from there, was sent to the final marketers. However, to carry out the VAT fraud, the organization interposed a series of companies created in other European countries and in Spain.

The fraud involved the products, despite travelling directly to Spain, being invoiced by the real suppliers to shell companies created in other European countries. These instrumental companies were nominally the first recipients of the goods, limiting themselves to re-invoicing the product to other Spanish companies, also instrumental, which finally invoiced the real distribution companies.

 

Front men and entertainment venues for money laundering

The investigation revealed that a significant part of the criminal organisation was engaged in the continuous creation of shell companies, for which they contacted front men who they made appear as administrators of these fictitious companies. At the same time, the plot also reached agreements with entertainment venues to launder the profits derived from its fraudulent activity.

The group under investigation used the companies for a few months and was very cautious in its communications and meetings, which made it difficult to investigate the modus operandi, on the one hand, and to determine the real masterminds of the plot, on the other. Finally, the investigations carried out allowed the reconstruction of the network after analysing the clients and suppliers of the different companies that were being used to defraud, as well as the movements of the money.

The goods that the organisation traded in were original and high-quality materials, which gave them an advantage over other suppliers in the market, given that the scheme played on the margin that their fraud against the Treasury gave them.

 

Blocking bank accounts

The operation has been accompanied by measures to freeze balances in bank accounts and other financial assets, prohibitions on the disposal of movable property (cars) and real estate of all persons and entities involved, and seizure of money and merchandise.

Nearly 300,000 euros in cash were seized at the home of the person responsible for the organisation. Foreign accounts worth around 700,000 euros have also been blocked. The balance seized in Spanish accounts is pending evaluation.

Documentation has also been seized from the records, both in paper and digital format, which will allow for greater detailing of the commercial operations. The detainees will be brought before the court in the next few hours. The investigation is still ongoing and new arrests and charges are not ruled out.