Carousel Fraud

Criminals orchestrate repeated cross-border trades for the same goods or intangible services under different shell companies, submitting false or inflated VAT refund claims to government authorities. This systematically generates new illicit proceeds directly from the tax rebate system.

Criminals establish or control multiple shell and front companies with opaque beneficial ownership to carry out repeated import-export cycles. These entities obscure who truly controls the transactions, making it difficult for financial institutions and authorities to detect the circular flow of goods and the associated false VAT refund claims.

Carousel fraud exploits cross-border differences in VAT rules and inconsistent tax enforcement across multiple countries. Criminals repeatedly import and export goods or services through various jurisdictions, taking advantage of regulatory gaps and weak coordination among tax authorities. This allows them to claim illegitimate VAT refunds while obscuring the circular nature of transactions.

• Provides official data from customs and border authorities on imported and exported goods, including declared contents, shipping routes, and tariffs.
• Enables verification of repeated or cyclical shipment patterns inconsistent with genuine trade flows, helping identify potential carousel schemes where the same goods are re-imported and re-exported among related entities.

• Contains official financial statements, tax returns, and supporting business filings.
• Enables comparison of reported turnover and VAT returns against actual documented income and expenses.
• Detects discrepancies and anomalies indicative of carousel fraud, such as inflated or repetitive VAT refund claims.

• Provides details of contracts and invoices, including amounts, identifiers, parties, payment terms, and references to goods or services.
• Validates whether issued invoices correspond to actual commercial activities.
• Identifies fictitious or inflated invoices claiming VAT refunds in support of carousel fraud.

• Records comprehensive transaction data, including timestamps, amounts, account details, and counterparties.
• Enables tracking of circular or repetitive fund movements among shell companies.
• Assists investigators in identifying large-scale money flows consistent with carousel fraud patterns.

• Provides insight into a business’s genuine operational presence, such as physical premises, inventory, and workforce data.
• Allows investigators to compare the declared business scope with actual operations.
• Identifies the limited or nonexistent activity typical of shell entities used in carousel schemes.

• Comprises shipping records, customs declarations, bills of lading, and certificates of origin.
• Validates whether goods or services are physically moved or provided as described.
• Exposes repeated or cyclical shipments among related entities indicative of VAT carousel abuse.

• Captures details of cross-border funds transfers (e.g., amounts, involved banks, jurisdictions).
• Permits identification of repetitive or circular money flows across multiple accounts in different countries.
• Reveals patterns consistent with carousel fraud's cyclical trade and VAT-based illicit proceeds.

• Contains official or aggregated corporate registration data (e.g., beneficial owners, directors, shareholding structures).
• Helps identify overlapping beneficial owners and directorship changes across multiple entities, indicating potential shell company usage.
• Supports correlation of rapid or suspicious corporate changes with VAT obligations to detect carousel fraud networks.

Identify and categorize jurisdictions known for lax VAT oversight or weak trade regulations. Apply heightened due diligence and closer monitoring to cross-border activities involving these regions. Prioritize scrutiny of repetitive or large-scale transactional flows from higher-risk countries where carousel fraud proliferates.

Apply advanced verification for high-risk corporate clients engaged in frequent VAT-exempt cross-border trade. Scrutinize beneficial ownership layers, confirm real operational presence, review VAT registration details, and require robust supporting documentation for each transaction to detect fictitious or artificially repetitive shipments fueling improper rebates.

During onboarding, verify declared VAT or tax-exempt status, confirm legitimate business activities and operational presence (e.g., tangible offices, staff, or inventory), and cross-check historical trade records for consistency. This ensures foundational transparency, preventing the use of ephemeral or shell companies to cycle goods and claim illicit VAT refunds.

Configure transaction monitoring rules to detect cyclical cross-border payments among interlinked or shell entities, particularly those involving repeated invoice references for VAT refunds. Flag back-and-forth financial flows that exceed normal operational volumes or lack apparent commercial purpose, as these clusters are highly indicative of carousel fraud structures.

Leverage public data sources, including official trade registries and shipping logs, to verify actual business activity and confirm the movement of physical or service-based products. Identify and investigate repetitive shipments or intangible service claims among associated companies that may signal orchestrated carousel loops.

Collaborate with other financial institutions and relevant authorities to exchange data on repeated import-export patterns, overlapping shell ownerships, and inflated VAT claims. Jointly detect and disrupt extensive multi-jurisdictional carousel networks by sharing confirmed red-flag indicators and suspicious entity linkages.

Implement systematic checks of shipping documents, cross-check trade invoices with evidence of actual goods movement, and identify repeated or cyclical cross-border transactions involving the same or intangible goods. Investigate any declared trades where physical shipment is absent or inconsistent with official records, focusing on repeated or inflated VAT claims that indicate carousel fraud.

• Criminals open multiple business bank accounts under different shell or front companies to receive the proceeds of fraudulent VAT refunds.
• These accounts facilitate the ongoing circulation of funds across related entities, making it difficult for authorities to pinpoint the scheme’s true purpose.
• By leveraging the same or multiple financial institutions across jurisdictions, fraudsters exploit inconsistent oversight and obscure the illicit origin of the money flows generated by repeated import-export cycles.

• Criminals obtain letters of credit to guarantee payment among suspiciously interconnected entities, indicating supposedly legitimate cross-border deals.
• This formal banking instrument adds credibility to repetitive import-export transactions, reducing scrutiny and enabling VAT refunds on sham trades.
• The same or similar goods can cycle through multiple shell companies, all backed by letters of credit that give an appearance of genuine risk mitigation for normal trade.

• Documents such as documentary collections or bills of lading are leveraged to present a veneer of legitimacy, disguising repeated or circular imports and exports.
• These instruments help simulate authentic trade flows, enabling fraudsters to justify their VAT refund claims and obscure the repeated circulation of the same goods or services.
• By coordinating paperwork through multiple shell entities, criminals make it appear as if separate commercial operations are transacting internationally, when in reality, the underlying trades are largely fictitious.

• Fraudulent or inflated invoices are central to claiming unwarranted VAT refunds for phantom cross-border transactions.
• Criminals repeatedly bill the same goods or intangible services (e.g., VoIP minutes, marketing services) between interconnected companies, creating an appearance of legitimate trade.
• The artificially created invoices support false documentation of imports and exports, triggering VAT rebates despite minimal or nonexistent real economic activity.

• Facilitate the creation and management of high volumes of fraudulent or inflated invoices, a core method for claiming unwarranted VAT refunds.
• Streamline invoice workflows so that repeated or circular transactions among related entities appear legitimate on the surface.

• Criminals exploit instruments such as letters of credit and documentary collections to legitimize phantom import and export activity, masking repeated circulation of identical goods or services.
• Assists in presenting cross-border transactions as genuine, supporting fraudulent VAT rebate claims.

• Offer the essential mechanism for transferring and receiving funds among deceptive corporate entities, enabling the circulation of illicit proceeds claimed from bogus VAT refunds.
• Permit the layering of transactions with minimal scrutiny, especially when multiple accounts are opened within different institutions or jurisdictions.

• Coordinate documentation, customs, and logistics, providing a veneer of legitimacy to repeated import/export cycles that lack genuine commercial substance.
• Expedite movement and clearance of goods or intangible services, enabling fraudsters to secure multiple VAT rebates in quick succession.

• Enable criminals to rapidly establish multiple shell or front companies across jurisdictions, creating complex ownership structures that obscure beneficial owners and the flow of funds.
• Provide corporate management and administration to facilitate repeated VAT claims under different legal entities, making it harder to trace actual business operations.

• Orchestrates the carousel fraud scheme by establishing or controlling multiple entities that repeatedly trade the same goods for VAT refunds.
• Launders proceeds derived from other predicate offenses by injecting them into these revolving transactions.
• Exploits international networks and inconsistent oversight, making it harder for financial institutions to identify ultimate beneficiaries.

Criminals leverage these providers to:

• Rapidly create or maintain multiple shell or front companies across various jurisdictions.
• Provide management and administrative services that enable repeated VAT refund claims despite little to no genuine business activity.
• Obscure beneficial ownership and the repetitive nature of phantom trades, complicating financial institutions’ due diligence.

• Facilitates cross-border transactions by issuing invoices and shipping documents, often for the same goods repeatedly moved among related entities.
• Enables the submission of VAT refund claims that far surpass actual commercial activity, complicating financial institutions' ability to verify legitimate trade.
• May be fully controlled or infiltrated by criminals exploiting tax systems across multiple jurisdictions.

• Established or acquired to repeatedly import and export identical goods or services, generating fraudulent VAT refund claims without genuine commercial activity.
• Conceal beneficial ownership and the repetitive nature of trades, hindering financial institutions’ transaction monitoring and due diligence processes.
• Used knowingly by criminals to maintain the façade of legitimate cross-border operations and evade scrutiny.

• Provides the accounts and payment channels through which illicit VAT refunds circulate, often unwittingly used by criminals.
• May serve as a single hub for multiple related entities, making it difficult to identify cyclical or phantom trading activity.
• Faces challenges in detecting large-scale carousel schemes due to complex corporate layering and cross-border networks.