Caribbean bank to yield £200m after unpaid Vat fraud probe

December 01, 2008 6:04 AM

Financial sleuths acting for British taxpayers have won the legal right to recover an estimated £200m in unpaid Vat which is sitting in a Caribbean bank at the centre of an international fraud inquiry. The decision nine days ago by a judge in the Netherlands Antilles island of Curaçao will affect hundreds of British companies that had set up online accounts with the offshore bank to trade in hi-tech goods.

The First Curaçao International Bank (FCIB) must now start repatriating the money in accounts that the court had frozen two years ago on the basis that it was the suspected proceeds of crime.
Carousel or missing trader fraud costs the Treasury billions of pounds in lost revenue every year. It involves the repeated import and export of small items such as mobile phones and computer chips.
"The Vat is reclaimed each time as traders use sophisticated systems to create virtual trades without actually moving any goods. In effect, Customs is writing a cheque for 17.5% of the value of the goods, each time the goods go round the carousel," explained Stephen Hunt of Griffins, the insolvency practitioners working for HM Revenue and Customs.

"We are now finally breaking through to pursue bigger balances [at the bank]," he said.
However, Hunt and his team believe it will take up to two years to recover all the money.

In 2004, FCIB absorbed thousands of British mobile phone traders after high street banks warned off by the Treasury turned away their custom. The Home Office has also raised concerns that this type of fraud may be used to finance international terror networks.

FCIB's two-password system – one to access the balance and the other to carry out transactions – was a boon for carousel fraudsters needing to lay a false chain of trading activity with the click of a button.
Within two years, the bank's annual volume of business had increased from £32m to about £3 billion, said Nick Oliver of law firm Blake Lapthorn, who is working with Hunt.
One FCIB account led the pair to a nine-year-old British schoolboy with a £106,000 balance.
His uncle had set up a second account for his dormant London-based IT company through which £46,835,828 passed in a three-month period.
Both accounts, said Hunt, have led his team to a network of 100 mostly British firms.
"At least £8m has been frozen in accounts relating to these companies and it is hoped around £20m will be recovered," he said.

Hunt points out that carousel fraudsters are rarely prosecuted.
"There are just too many of them. Instead we go for civil actions and forced bankruptcy," he said.

FCIB was in effect closed and had its deposits frozen in September 2006 after a joint Anglo-Dutch money-laundering operation.
John Deuss, the controversial Dutch oil trader who owns the bank, was arrested in Bermuda and his London office raided.
A spokesman for the Dutch justice ministry said the investigation into Deuss and FCIB was continuing. His London lawyer and representatives at the bank did not return calls.

(Source: The Sunday Times)

30 November, 2008