EPPO Charges five in €115 Million ‘Designer Fuel’ Fraud Scheme
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The European Public Prosecutor’s Office (EPPO) has indicted five individuals in Germany for their alleged involvement in a large-scale diesel adn VAT fraud operation,estimated too have cost the German government over €115 million in lost revenue. The case, codenamed ‘Water into Wine,’ marks the first indictment stemming from the EPPO’s investigation into the illicit trade of chemically altered fuels.
The EPPO, the autonomous public prosecution office of the European Union, is responsible for investigating and prosecuting crimes against the EU’s financial interests. This case underscores the office’s commitment to tackling cross-border financial crime.
Complex Scheme Involved ‘Designer Fuels’ and Triangular Transactions
The defendants are suspected of defrauding approximately €20 million in unpaid Value Added Tax (VAT), with two also facing accusations of membership in a criminal institution. According to the EPPO, the scheme centered around the distribution of “designer fuels” – products chemically modified to evade taxation.
these fuels were allegedly moved through a complex network of companies based in Lithuania, Latvia, and Hungary, utilizing what authorities describe as “triangular transactions.” This intricate system was designed to obscure the origin and true nature of the products.
From Lubricating Oil to Diesel: Evading German Taxes
Evidence suggests the designer fuels initially entered the German market via Poland,falsely classified as lubricating oil.Once inside Germany, the products were reportedly relabeled and re-declared as diesel fuel, allowing the perpetrators to bypass significant energy taxes.
“This tactic breaks the traceability of the supply chain and conceals the nature and origin of the products,” a senior EPPO official stated. The scheme effectively allowed the defendants to profit from untaxed fuel sales, considerably impacting the German budget.
Arrests and Asset Seizures
Law enforcement officials arrested one of the defendants, identified as the non-formal managing director of two oil distributing companies, in June 2023. Prior to the indictment, tax authorities had already seized assets valued at €3.1 million from these companies in June 2024.
the EPPO estimates the total financial damage caused by the criminal organizations involved in the ‘Water into Wine’ investigation to be approximately €45 million in unpaid VAT and over €90 million in unpaid excise duties as 2023. Several companies under investigation allegedly failed to remit either VAT or energy tax to the German government.
Multi-Agency Investigation
The EPPO-led investigation received considerable support from tax investigation officers based in magdeburg, Bayreuth, Berlin, and Potsdam, as well as customs investigation officers from Hannover/Magdeburg, Hamburg, and Munich. This collaborative effort highlights the importance of inter-agency cooperation in combating complex financial crimes.
If convicted, the defendants coudl face significant prison sentences and financial penalties.
Why did this happen? The scheme was motivated by financial gain, exploiting loopholes in tax regulations to sell untaxed fuel and pocket the difference.Perpetrators chemically altered fuels and misclassified them to evade VAT and energy taxes.
Who was involved? Five individuals in Germany have been indicted. One was arrested in June 2023, identified as the non-formal managing director of two oil distributing companies. Companies based in Lithuania, latvia, and Hungary were also involved in the network.
What happened? A large-scale diesel and VAT fraud operation, codenamed ‘Water into Wine,’ defrauded the German government of over €115 million.Designer fuels were falsely classified as lubricating oil to enter germany,then relabeled as diesel to avoid taxes.
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