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Background
Increasingly, Customs Authorities are
developing systems that require businesses to put up financial
security to protect the revenue. The taxes collected by Customs
encompass VAT, customs duties, excise duties on certain products;
(hydrocarbon oil, tobacco products, spirits, wine, beer and
cider), betting and gaming duties, etc. Security is mainly
put up by banks. There is a huge growth and a demand for security
because Customs Authorities are increasingly seeking guarantees
from business especially where businesses are in ‘non-compliant’ areas,
have previously had a customs debt, or been insolvent in addition
to its usual demands.
The last few years have seen a massive
growth in criminal activity exploiting
the customs regimes. This ranges from
high-level VAT evasion by the so called “carousel” fraud
on high value computer and mobile telephone
products, to major frauds on excise products
such as spirits and tobacco. To undertake
these frauds, criminals need businesses
that are registered with Customs or,
businesses that assist in perpetrating
the fraud. Often
criminals set up ‘front’ companies that require guarantees,
with the sole purpose of committing revenue
fraud. Areas of
particular risk are inter alia:
- Community Transit (i.e., movement
of goods, particularly spirits/tobacco across the EU free of duty);
- Excise warehouses; and;
- VAT registered businesses in non compliant business areas.;
Clearly, particularly in the case of
organised fraud, there is a great
risk that the company will fold and disappear leaving the financial institution
underwriting the
guarantee being liable for the duty
or taxes due.
How we can help?
We focus on areas affecting our banking
and insurance clients, including
anti-money laundering; the provision of guarantees and bonds;
the use of trade finance instruments; export
licensing controls on software containing
strong encryption technology; insolvency;
due diligence; and risk management. We can provide assistance
in insolvency claims by, for instance,
establishing any outstanding customs
and excise duty liabilities. We can also review some of
the potential risks inherent in undertaking
some of the services offered by banks
and insurance companies and mitigate that risk.
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