EC: Stop The Carousel Ride

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Critics of the EU often point to the abuse of structural funds (€703m, up 17% with 60 out of 95 audited projects showing “material errors” in last audit.)

Yet, this fraud pales when compared to VAT fraud, a crime typically associated with our industry, with our small-but-valuable (and easily portable) components and devices such as chips and phones.

Carousel

Carousel and VAT fraud is a giant that dwarves Europeans' other favorite financial fiddles, For example, carousel fraud accounted for 87% of total fraud reported in UK for the first half of 2007 and will reach £4.75bn for one year in the UK alone.

Angry MEPs now want the European Commission to overhaul its anti-fraud operation and pull together the investigatory powers of the antifraud unit OLAF under a single regulation.

Carousel fraud, also known as missing trader intra community (MTIC) fraud, has been a big headache for some years. Critics say sentencing is too lenient to deter serious criminals as the average sentence for frauds up to £50,000 would be just three years (while larger frauds over £50m inspire sentences of only six years.)
 
In other legal news, Microsoft has won a seven figure sum from a distributor found guilty of selling tens of thousands of units of grey software from outside the European Economic Area (and distributing this unbundled and with recycled certificates.)

Furthermore, government agencies this year seized 360,000 counterfeit computer goods, mostly computer networking hardware and integrated circuits.

The European Commission Taxation and Customs Union Directorate General joined forces with US Customs and Border Protection agency in "Operation Infrastructure," aimed at fighting piracy and preventing the spread of counterfeit chips.

Criminal entrepreneurs re-mark chips, often replacing the label with a different brand name and different part number. The chip might work in equipment but may not have been tested for speed, and the part number might not have been checked, which can lead to equipment failure.

The U.S. and EU have established the Anti-Counterfeiting Trade Agreement to encourage countries to follow intellectual property rights established by the World Trade Organization and other global trade groups.

According to EC research, more than 130 million counterfeit items are seized each year, so it seems in this category (unlike VAT fraud) our industry can only claim participation and not leadership.