Fraud Scheme Centering on Fake Apparel Cost EU Upwards of $2.1B

Customs fraud has cost European Union states billions of euros, according to the European Union (“EU”)'s anti-fraud office. According to the European Anti-Fraud Office, coined OLAF, apparel brought from China to mainland Europe through Britain has resulted in a loss of $2.1 billion in taxes, which the organization has recommended billing the exiting-EU country. Coinciding with Britain's formal Article 50 Brexit announcement on Wednesday, OLAF announced that from 2013 to 2016, criminals evaded customs duties with false invoices and wrong declarations upon arrival in the U.K. 

According to EU investigators, U.K. authorities turned a blind eye to a massive fraud network that allowed ultra-cheap Chinese goods, largely consisting of textiles and shoes, to flood into Europe. OLAF officials said that U.K. customs’ “continuous negligence” also deprived €3.2 billion from the value-added-tax income of major EU countries such as France, Germany, Spain and Italy. 

The organization, which only has the authority to make recommendations that the EU may then act upon, has advised the EU Commission to try to rectify the situation by getting 1.99 billion euros from the British government since duties collected by member countries go into the EU budget. It said the commission and Britain must now agree on how to deal with the investigation.

According to OLAF, customs fraud grew in Britain while several other EU nations took action to prevent it. It said Britain had yet to initiate any fraud probe into the matter, even though OLAF kept London informed about its investigation.