The EPPO’s “Emily” operation against an alleged multimillion-euro VAT carousel in the luxury car sector illustrates how quickly cross-border trade can slide from aggressive tax planning into full-blown criminal exposure – and how asset confiscation has become at least as dangerous as the threat of a prison sentence.
Luxury Cars and Missing Millions
In the “Emily” investigation, European prosecutors are targeting a network suspected of having orchestrated a large-scale VAT carousel centred on high-end vehicles, with an estimated tax loss exceeding 100 million euro. According to the published information, luxury cars worth hundreds of thousands of euro per unit were moved through a chain of companies in several EU Member States, many of them mere shell entities with straw men as directors. Car dealerships in Germany allegedly acted as visible anchors in this structure: they placed online offers, provided physical storage capacity and served as transactional hubs, while the real control of the scheme remained in the hands of a small core group. Law enforcement has already conducted more than a hundred searches across multiple countries, arrested several suspects and provisionally secured assets such as cash, cars, real estate and art worth millions of euro. For anyone active in cross-border trade, the message is clear: once you become entangled – even marginally – in such a structure, you are no longer dealing with a purely domestic tax issue, but with a coordinated transnational enforcement effort.
How a VAT Carousel Works
Carousel fraud, often referred to in EU jargon as “Missing Trader Intra-Community” (MTIC) fraud, exploits a structural feature of the EU VAT system: cross-border supplies of goods between taxable persons are zero-rated, while the purchaser in the destination state accounts for the VAT but may deduct it as input tax. This separation between the place where VAT technically becomes chargeable and the place where it is actually collected opens the door for organised schemes. A so-called “missing trader” buys goods VAT-free from another Member State, sells them domestically charging VAT – and simply disappears without paying that VAT to the tax authorities.
To disguise the fraud and to increase the volume, additional companies are interposed as “buffers”, creating long, complex supply chains on paper. At the end of the chain sits the “broker”, who re-exports the goods, claims a VAT refund for the input tax paid along the chain and thereby receives money from the state budget that was never actually remitted upstream. Because the same batch of goods can be fed repeatedly through such a carousel, the profit potential is enormous – especially when the goods are high-value, standardised and easy to move, such as luxury vehicles, electronics or precious metals. In “Emily”, luxury cars appear to have played precisely that role: ideal carriers for high nominal VAT amounts, suitable for use in a maze of intra-EU transactions which, on paper, look perfectly legitimate.
For bona fide traders, this set-up is dangerous because the façade of normality is part of the business model. Ordinary-seeming contracts, formally correct invoices and seemingly plausible cross-border transport documents are exactly what make such schemes work – and what makes it so easy for unwary companies to be drawn into criminal proceedings as alleged participants or at least as negligent facilitators.
Criminal Exposure: Beyond “Just” Tax Evasion
From a criminal law perspective, VAT carousel cases are rarely limited to straightforward tax offences. At their core, they involve large-scale evasion of VAT and related tax crimes, often over an extended period and with a significant degree of planning. On top of that, the use of sham companies and fake invoices typically triggers document-related offences, while misrepresentations vis-à-vis tax authorities and, in some cases, banks or trading partners open the door to fraud allegations. In more complex structures, prosecutors will also explore allegations of criminal organisation or similar group-based offences, which substantially increase sentencing ranges and lower the threshold for coercive measures such as pre-trial detention or extensive surveillance.
The European dimension changes the playing field for suspects and companies. The office leading “Emily” is specifically mandated to pursue crimes affecting the EU’s financial interests; large VAT fraud schemes are one of its core priorities. This means that domestic tax and criminal authorities do not act in isolation but within a coordinated European framework. Joint investigations, cross-border search operations and simultaneous asset seizures in multiple jurisdictions become routine tools rather than extraordinary measures. For individuals and businesses, this translates into a highly complex defence situation: parallel proceedings in different countries, potential European arrest warrants and intricate questions of jurisdiction and applicable law quickly become part of the risk landscape.
Asset Confiscation: When the State Targets the Balance Sheet
One of the most severe – and often underestimated – consequences of being drawn into a carousel investigation is modern asset confiscation. Over recent years, many Member States have overhauled their confiscation regimes to implement EU requirements, with the clear policy objective that “crime must not pay”. In practical terms, this means that any economic advantage derived from an offence can be taken away, regardless of whether a prison sentence is imposed and irrespective of whether the assets are still in the suspect’s possession. Confiscation orders may cover direct proceeds, substitute assets purchased with illicit gains and even equivalent value, resulting in monetary confiscation that operates like a parallel financial penalty.
The reach of confiscation is not limited to the direct perpetrator. In certain circumstances, third parties – such as business partners, family members or associated companies – may face confiscation if they acquired assets that originate from crime and either knew or grossly negligently ignored their illicit provenance. In carousel cases, this often translates into provisional freezing orders on bank accounts, vehicles, real estate or business assets at a very early stage of the proceedings, long before any court has ruled on guilt. For an operating company, such measures can be existential: frozen working capital, blocked accounts and seized inventory quickly undermine liquidity and creditworthiness.wirtschaftslexikon.
From a defence perspective, confiscation offers its own battleground. Central questions include whether a specific asset was actually “obtained through” the alleged offence or whether it merely replaced existing, lawfully acquired property. Defence counsel will also scrutinise whether the calculation of the confiscation amount improperly conflates gross and net gains, ignores legitimate business expenses or double-counts the alleged tax loss. In addition, the rights of third parties – for instance finance companies, lessors or creditors – must be asserted to prevent their lawful interests from being wiped out by a broad-brush confiscation order. Properly handled, these arguments can significantly mitigate the financial fallout of a carousel investigation, even in situations where a conviction is difficult to avoid.
Compliance and Defence Strategy
For legitimate businesses, especially in high-risk sectors such as car trading, electronics or other high-value goods, the lesson from “Emily” is not to admire the investigative prowess of European authorities, but to re-examine one’s own risk exposure. The sheer scale of recorded VAT and customs fraud – with aggregate damage figures in the tens of billions – means that enforcement pressure will remain intense and that prosecutors will continue to cast a wide net. Companies that cannot clearly demonstrate that they have carried out reasonable checks on their trading partners, scrutinised unusual pricing patterns and maintained transparent documentation of cross-border flows will find it hard to credibly distance themselves from any suspect structures they happen to be linked with.
An effective compliance strategy in this environment goes beyond standard know-your-customer routines. It should include stringent know-your-business-partner processes, systematic plausibility checks on the economic logic of each transaction and a clear escalation mechanism for red flags, such as frequent changes of corporate seat or management, opaque ownership structures or pressure to accept atypical payment channels. From a criminal law standpoint, such measures serve a dual purpose: they reduce the actual risk of becoming entangled in a fraud scheme and they document, for the file, that management took reasonable steps to prevent wrongdoing. This evidence can be crucial later on, both for avoiding an indictment and for limiting or defending against confiscation orders.
If, despite all precautions, a company or an individual is confronted with searches, seizure orders or interview requests, the priority must be to secure experienced criminal defence counsel early. The first hours set the tone: who speaks to investigators, which documents are handed over, whether and how suspects provide explanations – all of this has lasting strategic implications. In cross-border cases, the defence must also consider the interaction between criminal and tax procedures, manage information flows across jurisdictions and guard against contradictory statements being used opportunistically by different authorities. In the current climate, asset protection – limiting the scope of freezing and confiscation measures and defending third-party rights – is not a side issue, but a central element of any serious defence strategy in VAT carousel investigations.
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