Following the large-scale VAT fraud discovered in the CO2 emissions market in 2009, criminal networks are now targeting other tradable goods such as gas and electricity. In order to prevent further major fraud with several billion euros in VAT losses in the energy commodity sector, the ten largest European energy associations have been coordinating their efforts in the fight against VAT fraud since 2010. The group aims at increasing the awareness among all relevant stakeholders of this high-level risk along the energy value chain and calls for legislative measures to end VAT fraud in gas, electricity and emissions trading in Europe.
A spokesman from Europol, the European Union’s criminal intelligence agency, commented "despite the application of VAT reverse charge in some Member States in relation to supplies in the energy markets, Europol continues to be notified by our partners in both the law enforcement and the private sector of organised criminal attempts to infiltrate this field. These can range from creating bogus companies with the sole purpose of stealing millions of euros of VAT from European governments, and therefore ordinary European citizens, to hijacking the activities of reputable companies in the market, therefore damaging legitimate trade. It is only right and proper that the European energy associations continue to warn against this danger and for all parties involved in the fight against fraud to do their utmost to minimise such threats".
In June 2013, the group welcomed the adoption of an ambitious anti-VAT fraud package by the European Union. At that time, we stated the importance that "all EU Member States make appropriate use of the possibility of applying the Reverse Charge Mechanism (RCM) to qualifying electricity and gas transactions in their national markets in order to actively eradicate VAT fraud and to prevent significant losses to their Exchequers as well as to affected organisations".
At present, only six EU Member States have transposed this set of legal measures into national law: Austria, France, Germany, the Netherlands, Romania and the United Kingdom. Hence, 22 EU Member States remain unprotected while law enforcement agencies have repeatedly reported signs of a major penetration of the gas and electricity markets by VAT fraudsters. Moreover, due to the specific VAT treatment of gas and electricity transactions, the wholesale markets of the six Member States applying the RCM can still be misused to perform illicit trading in order to steal VAT from unprotected third countries. Until all 28 Member States of the European Union transpose and apply the RCM, the integrity of the European energy wholesale markets remains significantly threatened. This creates important legal and financial risks for the legitimate market participants unwittingly involved in these fraudulent activities, and may also harm the fair operation of the market itself.
As a group of ten European gas & electricity associations, comprising regulators, exchanges, brokers, clearing houses, infrastructure operators, energy trading firms, utilities and guarantee of origin issuing bodies, we call upon the new European Commission together with the remaining 22 Member States to take proactive measures in order to quickly adopt the anti-VAT fraud package at national level. This relates to the RCM for gas and electricity transactions but also to emissions trading, given that a few Member States still have not implemented these measures for either type of transaction. In addition, it is important that Guarantees of Origin (GOs) are clearly recognised as falling under the definition of "electricity certificates" and are included in the RCM for electricity transactions given that they are very similar to emission certificates and also threatened by VAT fraud.
We call upon all firms involved in the energy value chain to reinforce their KYC (Know Your Customer) procedures and to monitor continuously the economic justification of transaction flows with their counterparties. In case of any suspicious activity, we strongly recommend immediately contacting the relevant local customs and/or law enforcement agencies.
The Group of Ten: Who We Are
The group of ten European gas and electricity associations consists of AIB, CEER, EACH, EFET, ENTSO-E, EURELECTRIC, Eurogas, Europex, GIE, and LEBA. Please find below short descriptions of their roles, missions and members:
About AIB – Association of Issuing Bodies
The purpose of the AIB is to guarantee the origin of European energy by using and promoting the European Energy Certificate System - EECS – which ensures the reliable operation of international certificate schemes, and operating an inter-registry communications hub. The AIB’s members are European energy certificate system administrators, almost all of which are competent bodies for guarantees of origin – usually transmission system operators, electricity regulators and energy market operators, or the service organisations that administer energy certificate systems on their behalf.
http://www.aib-net.org
About CEER – Council of European Energy Regulators
The Council of European Energy Regulators (CEER) is the voice of Europe’s national regulators of electricity and gas at EU and international level. Through CEER, a not-for-profit association, the
national regulators cooperate and exchange best practice within and beyond Europe’s borders. CEER includes national regulatory authorities from 33 European countries (the EU-28, Iceland, Norway, Switzerland, FYROM, Montenegro and growing). A key objective of the CEER is to facilitate the creation of a single, competitive, efficient and sustainable EU internal energy market that works in the public interest. CEER works closely with and supports the work of the Agency for the Cooperation of Energy Regulators (ACER).
http://www.ceer.eu
About EACH – European Association of CCP Clearing Houses
European central counterparty clearing houses formed EACH in 1991. EACH's participants are senior executives specialising in clearing and risk management from CCPs, both EU and non-EU. Increasingly, clearing activities are not restricted exclusively to exchange-traded business. EACH has an interest in ensuring that the evolving discussions on clearing and settlement in Europe and globally, are fully informed by the expertise and opinions of those responsible for providing central counterparty clearing services.
http://www.eachorg.eu
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Ten European Gas And Electricity Associations Call For A Comprehensive Implementation Of The EU Anti-VAT-Fraud Package By All 28 Member States
Date 26/11/2014