The European Public Prosecutor’s Office (EPPO) conducted a major cross-border investigation, code-named ‘Hermes’, targeting suspected organized criminal groups involved in carousel VAT fraud involving mobile phones and electronic devices. The scheme is estimated to have caused at least EUR 410 million in VAT losses across several EU countries. 

Results of the Investigation

Authorities carried out more than 300 searches in Austria, France, Germany, Italy, Malta, the Netherlands, Portugal and Spain, targeting suspects’ homes and the offices of companies, tax advisers, lawyers and transport businesses allegedly connected to the scheme. Authorities also detained 62 suspects.

Law enforcement authorities also took steps to recover assets linked to the suspected fraud, executing orders to seize up to EUR 310 million. Authorities froze bank accounts and company shares, while seizing real estate, vehicles, luxury cars, cash, and gold coins worth up to EUR 9 million.

According to investigators, the criminal groups allegedly established a complex network of intermediary companies across several EU countries to exploit VAT rules for intra-community transactions. The scheme involved trading mobile phones and electronic devices through a chain of companies, including so-called missing traders that disappeared without paying the VAT due. Other companies within the chain subsequently claimed VAT refunds from national tax authorities, enabling the groups to profit from fraudulent VAT claims and causing substantial losses to public revenues.

According to the EPPO, the syndicates employed methods similar to those identified in the earlier Admiral and Moby Dick investigations, with some individuals reportedly involved in multiple cases. Both criminal groups allegedly shifted their operations between countries to avoid detection and continue their fraudulent activities. One suspect was previously the leader of a criminal network involved in a VAT fraud scheme targeting Sweden between 2019 and 2023. 

After Swedish authorities began investigating the scheme and the companies involved went bankrupt, the suspect reportedly moved to Portugal and established a similar large-scale operation, using relatives and trusted associates to set up companies. Investigators also suspect that this branch of the network provided money-laundering services to other criminal groups.

Conclusion

Operation Hermes underscores both the scale of organized VAT fraud within the EU and the critical role of coordinated international law enforcement in dismantling such networks. While significant arrests and asset seizures mark a major success, the persistent adaptability of criminal groups, shifting operations across borders and recycling fraudulent schemes, highlights the ongoing challenge for EU authorities in safeguarding public revenues against sophisticated cross-border financial crime.