The European Public Prosecutor’s Office (EPPO) has escalated its probe into Investigation Admiral, uncovering staggering new dimensions of VAT fraud. With losses now believed to exceed €3 billion, this case highlights the sheer audacity and complexity of organized financial crime in the European Union. It not only exposes vulnerabilities in cross-border tax systems but also underscores the need for more robust measures to combat fraud on this scale.

Admiral 2.0: Europe’s Largest VAT Fraud Investigation

Launched in November 2022, Investigation Admiral initially revealed an estimated VAT loss of €2.9 billion, making it the largest VAT fraud case in EU history. At its core, the operation uncovered a massive carousel fraud—a sophisticated tax evasion scheme exploiting EU rules on VAT-exempt cross-border transactions. The fraudulent networks involved in Admiral exploited these loopholes by creating phantom companies and leveraging intricate supply chains to pocket VAT payments without transferring them to tax authorities.

The new phase of the investigation, dubbed Admiral 2.0, points to even greater losses. The EPPO has revealed that an additional Baltic-based criminal syndicate employed a similar modus operandi, mirroring the original fraudsters. Using over 400 suspected companies across 15 EU countries, the network sold high-value electronics like smartphones and tablets through online marketplaces. Customers paid VAT, but the fraudsters vanished, failing to remit these taxes while claiming false refunds from national authorities.

This fraudulent machinery generated an estimated €297 million in losses within the newer syndicate alone, pushing total damages above the €3 billion mark. This figure continues to rise as authorities uncover more layers of deceit.

A Poly-Criminal and International Web

The scale of Admiral 2.0 is not limited to tax fraud. The investigation has revealed a poly-criminal operation, connecting VAT evasion to other illegal activities such as:

• Drug trafficking
• Cybercrime
• Investment fraud
• Money laundering

Evidence points to Russian organized crime involvement, with certain groups providing financial support in exchange for management influence and a share of profits. These international connections added layers of complexity, making the operation one of the most intricate fraud cases ever handled by the EPPO. Offshore accounts were used to launder the proceeds, further obscuring the trail of money.

Sophisticated Modus Operandi

At the heart of this fraud lies the carousel scheme. This criminal tactic exploits the EU’s VAT rules for cross-border trade. The network would establish shell companies in EU Member States, appearing as legitimate suppliers. High-value goods were sold to customers who unknowingly paid VAT. Instead of transferring the collected VAT to the authorities, the fraudulent companies vanished, leaving no trace of their operations.

Adding to this, accomplice companies would file fake claims for VAT reimbursements, turning the system into a double-edged weapon against EU tax authorities. The estimated damages caused by the Admiral fraud highlight the systemic exploitation of a tax framework designed to promote trade but ill-equipped to handle such criminal innovation.

Massive Cross-Border Operation

The EPPO mobilized an unprecedented international effort to tackle Admiral 2.0. Over the last two days, more than 624 law enforcement officers coordinated across 16 EU countries, including Latvia, Lithuania, Germany, and Italy. The operation resulted in:

• 350 searches and investigative measures
• 32 detentions (including arrests in the Baltics)
• Seizures of over €47.5 million worth of electronic goods
• Freezing of €5.5 million in bank accounts
• Confiscation of luxury cars and cash worth €126,965

Authorities seized troves of digital evidence and documents, providing a clearer picture of the network’s scale. These initial findings are expected to evolve in the coming weeks, further expanding the scope of the investigation.

The Larger Implications of Admiral 2.0

The revelations of Investigation Admiral 2.0 extend beyond financial losses. They expose critical vulnerabilities in the EU’s tax system and the broader risks posed by organized crime.

Financial Impact

With losses now exceeding €3 billion, this case underscores the significant fiscal damage such fraud inflicts on EU economies. Member States rely on VAT as a critical revenue source, and the scale of this fraud diverts essential funds from public services.

Need for Regulatory Reform

Admiral highlights systemic flaws in VAT collection mechanisms, particularly concerning cross-border transactions. Strengthening these frameworks and improving digital oversight tools will be crucial in preventing future schemes.

Cross-Border Collaboration

The success of the EPPO-led operation showcases the importance of international cooperation in combating financial crime. Admiral 2.0 demonstrates how shared intelligence, coordinated raids, and joint investigations can dismantle even the most sophisticated criminal networks.

Looking Ahead

As Investigation Admiral continues to unfold, its implications will likely shape EU policymaking and law enforcement for years to come. The case is a wake-up call for the EU, underscoring the need to modernize its VAT systems and enhance collaboration between Member States.

Related Links

• European Public Prosecutor’s Office (EPPO)
• VAT Carousel Fraud Overview
• Europol Insights on Financial Crime
• EU Taxation Policy Framework

Source: EPPO