Concern over Ireland's absence from prosecutor's office

The incoming European Chief Prosecutor has warned that Ireland's absence from the European Public Prosecutor’s Office (EPPO) may have created a gravitational pull for organised crime gangs to operate out of Ireland for the purposes of VAT fraud and money-laundering.

Andrés Ritter, who assumes the role on 1 November, told RTÉ News: "If we're talking very concretely about Ireland, Ireland is a problem.

"What we can establish is that there are a lot of shell companies being established in Ireland, which could be participating in VAT fraud schemes but also when it comes to money laundering.

"When we’re talking about online fraud and VAT fraud, because of course there are a lot of tech companies which are based in Ireland - we need to get information on where the money is being paid out."

The EPPO is a transnational prosecutor’s office set up under EU law to investigate crimes which damage the EU’s financial interests, notably through VAT, customs fraud and money laundering.

When it was launched in 2017, Ireland opted not to join on the basis that it may not be compatible with Ireland’s common law system.

While the government has been cooperating with EPPO as a non-participating member state, it has recently been working closely with the agency with a view to fully joining, with the Chief Prosecutor suggesting Ireland could join in the second half of next year.

In a written Dáil response in October last year, Minister for Justice Jim O’Callaghan said Ireland has transposed into law the EU directive which gives partial effect to EPPO membership.

The Government set up an Inter-Agency Working Group (IAWG) in November 2022 to reconsider the issue of participation and in October 2023 the group recommended that preparations for opting-in EPPO begin and approved the drafting of a European Public Prosecutor’s Office Bill.

By joining, the EPPO would have at least one office in Ireland staffed by Irish prosecutors operating under Irish law.

The difference to the current situation is that prosecutors would not have to make formal requests to other member state prosecutors for information.

"We are not coordinating, we are doing it ourselves," he told RTE News. "We have the power to investigate and prosecute in every member state in which there is a criminal offence that has been committed for which we are competent, which means that it damages the financial wellbeing of the European Union."

He said he expected that Ireland would need to change its legislation in order to accede to the EPPO regulation.

The EPPO currently has 182 prosecutors working in 50 offices in the 24 member states which have signed up.

Hungary expected to join EPPO

At the end of last year, EPPO was investigating over 3,600 cases where VAT or customs fraud were affecting the EU’s financial interests. The cases accounted for a total estimated impact on EU finances of over €67.27 billion

Following the ousting of prime minister Viktor Orbán, Hungary is expected to join EPPO, and if Ireland accedes next year, Denmark will be the only non-participating EU member state.

Mr Ritter said that VAT fraud - which affects both national and EU budget revenue - went hand in hand with international organised crime and money laundering.

Last year, Ireland participated in an EPPO investigation which uncovered alleged VAT fraud worth €48 million.

Following a request from the EPPO office in Munich, police arrested seven suspects and over 100 searches were carried out in Ireland, Czechia, Germany, Hungary, Italy, the Netherlands, Romania, Spain and the United Kingdom.

During the searches electronic devices and evidence were seized, as well as cash, mobile phones, jewellery, cars, watches and gold worth €4 million.

The investigation centred on a suspected criminal scheme whereby shell companies fraudulently applied a reduced VAT scheme to the sale of electronic goods to illicitly increase their profits.

According to the investigation, new mobile phones and other electronic goods were sold under the so-called "margin taxation" scheme to end-customers and between shell companies.

This meant the reseller only paid VAT on the profit made and not on the full sale price.

Mr Ritter said: "Ireland joining [EPPO] means we can have a full picture [on data from shell companies] which, for the time being can only be incompletely discussed, even if Ireland has cooperated [with EPPO] since November 2023."

Ireland made 15 requests for legal assistance from EPPO

He said Ireland made 15 requests for legal assistance from EPPO last year.

"This is a number which would be much higher if we had a direct operation and a direct request," he said.

In 2022, EPPO uncovered a large-scale VAT fraud operation worth €2.2b involving a transnational organised crime gang operating across more than 30 EU and non-EU countries, including Ireland.

Operation Admiral targeted a complex fraud scheme involving VAT reimbursements for apparently "clean" companies that were actually setting electronic devices on to individual customers and channeling the proceeds offshore as a way to launder funds raised through organised crime.

Mr Ritter said: "We need to have dedicated investigators in every member state which means you have investigators who are working constantly on cases, who gain experience, and gain a connection to other investigators, so that you don't just have a network of prosecutors, you have a network of investigators.

"This is what we have to discuss with the Irish authorities."