R5.6 million seized in international tax fraud |09 May 2014
The Seychelles Supreme Court recently ordered the permanent forfeiture of R5.6 million to the Republic in a tax fraud case.
The case was brought under the Proceeds of Crime Act by the Financial Intelligence Unit (FIU) and represented by the office of the Attorney General.
The seizure of the funds by the Court was the culmination of a court action initiated by the FIU against offshore company KAZOU BV, registered in Seychelles at Suite 9, Ansuya Estate Revolution Avenue.
In its original application to the Supreme Court the FIU identified an international carousel fraud conducted throughout the European Union (EU) as the source of the criminal proceeds.
The underlying criminality which had generated the criminal proceeds had then been hidden by creating a pattern of pretended trading through a large number of companies distributed widely across many jurisdictions in an attempt to launder the money.
The case was investigated in conjunction with a number of other States and agencies.
A typical carousel fraud involves setting up transient companies and illicit or false trading chains for readily disposable international commodities for the purposes of collecting Vat (Value Added Tax) on sales but not paying it to government or for falsely claiming tax rebates for traded goods or services that have not taken place.
The companies then cease trading, disappear and re-emerge as new companies to repeat the fraud elsewhere.
The seized funds in this case represented criminal proceeds which had been lodged in one of a number of local accounts established in Seychelles as part of the complex fraud.
Documents submitted to the court by the FIU identified that the person alleged to be controlling the account was in fact an undischarged bankrupt in the United Kingdom and that the funds being lodged in the Kazou account in Seychelles had been transferred from other companies being investigated in other States for involvement in international Vat carousel frauds.
The Kazou case was an offshoot of a much larger previous fraud case brought by the FIU where approximately R80 million in seized criminal proceeds was transferred by the Court to the Republic in 2011 under Section 19 of the Proceeds of Crime Act.
In that case, the account of a Samoan offshore company with a Seychelles bank account was investigated by the FIU in conjunction with Interpol and a number of EU States.
Investigations identified that almost every country in the EU had been targeted by the fraud and that the total value defrauded was of the order of €18 billion.
The funds were then extracted from the EU using companies and bank accounts in offshore jurisdictions.
Several transit accounts were subsequently found in Seychelles and it was identified that over €100 million had transited through Seychelles in a seven month period.
All of these offshore accounts had been set up using third parties as nominees to hide the true identity of the criminals.
In the EU, criminal proceedings have been brought against the main directors of the companies involved, for tax offences, fraud and money laundering.
Criminal prosecutions against the perpetrators are on-going in Europe. Ultimately, it is the ordinary citizens of the States where these financial frauds take place that are the victims as the monies they pay in taxes to provide local health, education and other government services are stolen by organised crime gangs, leaving shortfalls in services.
The Seychelles FIU remains committed to working with its domestic and international partners to protect Seychelles reputation by deterring the abuse of the jurisdiction by organised crime and to robustly confront such criminality when it is detected.