Missing trader intra-community (MTIC) fraud has received a lot of domestic enforcement attention. True cross border enforcement (joint or coordinated multi-Member State audit) has been limited. There are signs that this is changing as the Member States become more aggressive in their search for revenue.
Along with this shift in enforcement focus, triangulation analysis has moved from being an interesting aspect of the MTIC fraud structure to the central element in a larger understanding of how a fraudster thinks and how he carries out his fraud. We are coming to understand that triangulations are not only the mechanism of how the fraud is carried out; they are a cloak of invisibility that the fraudster casts upon his fraud to hide it from the authorities.
Germany for example, is currently engaged in a multi-billion euro fraud investigation involving the triangulation of consumer goods and CO2 certificates. The Augsburg District Court is overseeing the investigation.
The Augsburg investigation is not only uncovering triangulations that “hide the goods,” but it is also uncovering sophisticated payment platforms that “hide the money transfers.” The intent of these structures is to make the fraud fully invisible to the authorities (goods and funds) until after the trader has disappeared.
The breadth of the German investigation is breathtaking, but with the Mutual Assistance for the Recovery of Claims (MARC) Directive, in effect as of January 1, 2012, this kind of comprehensive multi-jurisdictional MTIC investigation may be becoming the new norm. If so, triangulations will most certainly be at its core.
This paper focuses on the developing law. It explains triangulation, triangulation simplification, and then considers several recent court decisions where fraudsters manipulated the VAT system with triangular trades. The cases illustrate both the enforcement problems with triangular trades, and highlight how the courts’ examination of triangular frauds is leading to significant developments in the VAT law. Three cases are drawn from the Court of Justice of the European Union (CJEU), and three are from national courts.
Richard T. Ainsworth,
VAT Fraud & Triangulation
Available at: https://scholarship.law.bu.edu/faculty_scholarship/1447