Hundreds of Ghost Companies Assisting Tax Fraud Worth €2 Billion Send Shockwaves in Italy

January 26, 2024

The Italian Financial Police has dismantled a criminal network accused of facilitating Italian companies in evading €2 billion in tax, with the assistance of Chinese shadow bankers. According to report by Italian media, the police seized 140 ghost companies and confiscated €350 million. Around 85 people were accused of being part of the illegal scheme, out of which 64 are said to be Chinese nationals.

In the province of Ancona, the police discovered a network of paper mill companies from Chinese-based packaging laboratories involved in issuing false invoices valued at around €150 million. The companies managed to evade approximately €33 million in VAT, along with significant reductions in direct taxes from the tax authorities, which stand out as a considerable financial loss.

Guardia di Finanza, an Italian Law Enforcement Agency under the Ministry of Economy and Finance, with the collaboration of the Organized Crime Investigation Group, uncovered a network of 140 companies, mainly located in Lombardy, a region in Northern Itlay. The companies existed only on paper, without human or material infrastructure, and mostly registered at non-existent or improper addresses. The companies are reported to have issued fraudulent invoices reaching €700 million between 2022-2023.

The authorities executed nearly 30 searches, involving analysis and seizure of evidence, and blocking of 1569 bank accounts. The search operations were conducted with a team of 100 individuals and targeted locations including Milan and its province, Roncello (MB), Gallarate (VA), Montirone (BS), Florence and its province, Padua, Vittoria (RG), as reported.

Fast & Clean Investigation

The investigation was called ‘fast & clean’ because the illegal activities were swiftly executed, providing a means for money laundering via fabricated commercial transactions. The intention behind these transactions was to present them as legitimate business transactions, even though in reality, no such dealing occurred. This facilitated entrepreneurs from both China and Italy to access profits from tax fraud.

The investigation revealed that Chinese underground banking facilitated the laundering of illicit proceeds of crimes like drug trafficking and organized crime in Italy. The funds were allegedly supposed for the payment of import goods from China, which never happened in reality.  Further, it was reported that funds were moved back to Italy through Chinese shadow banking.

Also read: Taiwan Dismantles $32.2 Million in Cryptocurrency Scam, Arrests 14 in Money Laundering