The Law Cracks Down on £35 Million 'Mafia-type' VAT/Duty Evasion Fraud

The immense profits that can be made from the fraudulent evasion of VAT and import duties makes it an attractive proposition for organised criminals. However, as a case concerning wine imports showed, HM Revenue and Customs (HMRC) are wise to such operations and come down hard on perpetrators.

The case concerned what was described as a Mafia-type conspiracy which involved massively understating the volumes of wine that were imported by a company from Italy into the UK. The company was said to have evaded nearly £35 million in duty and VAT by providing false returns to HMRC. The conspiracy unravelled following a joint investigation by British and Italian police.

The company's sole shareholder, who was the alleged mastermind of the operation, absconded from his trial after the jury had retired to consider its verdict. He was convicted in his absence of fraudulent evasion of duty and VAT and received a 14-year prison sentence. The company's financial controller was found guilty of the same offences and was jailed for three and a half years.

It was the prosecution case that the company's financial records were a sham, with the only true record of its dealings being stored on a computer server in Italy. A large quantity of cash had been found at its premises. The financial controller's defence was that she was not knowingly involved in any fraud. She said that it was inherently unlikely that she would have been taken into the confidence of serious organised criminals engaged in a very substantial fraud.

In dismissing her challenge to her convictions, however, the Court of Appeal noted that the case against her was not entirely circumstantial. Criticism of the trial judge's summing up of the case was misplaced and the jury was entitled to infer her knowing involvement from all of the evidence.