Why VAT carousel crime schemes are almost impossible to prosecute
6. Conclusions and future work
VAT related crimes constitute tremendous danger to economic order, because they are relatively easy to commit. This paper presents a con-ceptual model which may be applied to the analysis of VAT carousel crimes and accompanying trade-based money laundering processes.
We demonstrated a difference between the English and Polish types of VAT carousel schemes. Currently, both schemes operate between the UK and Poland for fictitious scrap metal transactions (reclaiming VAT in both countries, which is a novelty, but serving as proof as how au-dacious the criminal groups have become).
The Polish scheme can be fully described by hard rules and there-fore analysis could be highly effective. However, because of the ne-cessity of investigating many straw companies and the inability to trace money to real beneficiaries of the criminal procedure, for a coun-try with primitive analytics and a lack of crucial databases, the admini-stration and police are helpless (if not worse). In the majority of cases, there are no indictments and no attempt to use evidence indicating VAT avoidance as shown in Figure 5. We have demonstrated that with novel tools, the time of investigations could be shortened several fold.
The English type of scheme is very much dependent on the legal interpretation for the full analysis of the case. For the analysis, fuzzy logic rules are necessary, which will be the goal of our next work. In particular, reactive elements have to be introduced for describing time dependence of flows and tax actions.
The Polish scheme relies on physical transport, so it could be ana-lyzed and prosecuted. Unfortunately the low analytic, legal and organ-izational competences of the Polish Police, fiscal services and prose-cutor’s offices are so low that practically criminals go un-punished.
Despite of some legal acts helping to prevent VAT avoidance we expect matters to get worse, endangering Poland’s stability. Maybe then the central institution structures will be shaken.
Our model is amenable to extensions and adding new actions (processes). It allows for building new VAT carousel crimes and com-bining them with money laundering schemes.
Acknowledgements
Our research is supported by the Polish Ministry of Science and Higher Education, statutory grant at PUT 45-105/2013 DS-PB. We thank Palantir Technologies for making their tool available for the purpose of this work.
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