€1.7 Billion Tax Scam Revealed: Chinese Shadow Banks Implicated

Italian police in Ancona disclosed on Thursday the unraveling of a massive tax fraud operation involving 85 suspects and a staggering 1.7 billion euros ($1.9 billion) through falsified invoices. The funds were reportedly laundered through a network of clandestine Chinese shadow banks.

The Guardia di Finanza (GdF) police, based in Ancona on Italy’s eastern Adriatic coast, executed seizures amounting to 350 million euros, including cash, luxury vehicles, and real estate. Additionally, they froze 1,569 bank accounts, ordered the confiscation of 140 companies suspected of issuing false invoices, and conducted searches in Milan, Lombardy, Florence, Padova, and Sicily.

Of the 85 individuals implicated, 64 are identified as Chinese nationals. Sources with direct knowledge revealed that investigations are ongoing to identify Italian clients who utilized the illicit service for money laundering.

This revelation sheds light on the existence of an underground banking system operated by unlicensed Chinese money brokers, which has been under scrutiny in Italy over the past year. Investigations conducted in various parts of the country indicate a broader range of services offered by Chinese-linked organizations, including concealing cross-border payments for drug cartels and facilitating tax evasion.

Prosecutors in Ancona, according to the GdF, discovered that fictitious “paper” companies issued false invoices, directing customers to specific Italian bank accounts for payments. Subsequently, the bogus companies would transfer the same amount to a Chinese bank account, justifying it as payment for non-existent product imports.

Upon receipt of the funds, the illicit companies would return the original sum, minus commission, in cash through couriers to the initial paying customer, as outlined in the police statement.

The GdF highlighted the alarming use of an “underground bank” network, enabling the laundering of billions of euros. The investigation is ongoing.

Credit: This report is based on information from Reuters.