OCCRP: Seven Arrested in Massive EU Fraud Scheme Selling Used Phones as New

• OCCRP says the criminal network allegedly sold more than one million used mobile phones as new, defrauding EU consumers of at least 300 million euros.
• OCCRP notes the scheme caused 30 million euros in VAT losses and exploited a margin taxation scheme since 2018.

An international law enforcement operation led by the European Public Prosecutor’s Office (EPPO) dismantled a criminal network suspected of selling over one million used mobile phones as new. Seven people, including two alleged ringleaders, were arrested after more than 1,700 officers conducted over 160 searches across 19 countries.

The syndicate assembled phones from used components in Hong Kong and the United Arab Emirates, shipped them through the Netherlands to Germany, and sold them online as new. Shell companies in Austria, Bulgaria, Germany, the Netherlands, and Switzerland were used to exploit a margin taxation scheme since 2018, causing significant VAT losses.

• 30 million euros VAT losses caused by the scheme

• Review transactions involving shell companies in Austria, Bulgaria, Germany, the Netherlands, and Switzerland for margin taxation exploitation.
• Scrutinize mobile phone imports from Hong Kong and the United Arab Emirates for signs of component assembly and resale fraud.
• Monitor online marketplace sales for devices classified as resold goods but priced as new, referencing the 'Troja' operation typology.

This case highlights the risks of cross-border fraud schemes exploiting tax loopholes and shell companies, resulting in significant financial losses and regulatory breaches. Compliance officers must be vigilant about margin taxation abuse, especially in high-volume sectors like electronics. The operation demonstrates the importance of international cooperation and robust due diligence to detect and prevent similar schemes, which can undermine tax systems and consumer trust across multiple jurisdictions.