Customs 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 (such as hydrocarbon oils, tobacco products, spirits, wine, beer and cider), betting and gaming duties, etc. Security is mainly put up by approved banks and insurance companies. There is a huge growth and a demand for security because Customs 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 decade have seen a massive growth in criminal activity exploiting 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. In the case of organised fraud, there is a great risk that illicit companies will fold and disappear leaving the financial institution underwriting the guarantee being liable for the duty or taxes due. Areas of particular risk are inter alia:
- Transit (i.e., duty suspended movement of goods, particularly spirits/tobacco);
- Excise warehouses; and;
- VAT registered businesses in non-compliant business areas.
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; 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.