English firms in trade-based financial crime network

Textile firms in the English city of Leicester have formed a trade-based financial crime network involved in money laundering and value-added tax (VAT) fraud according to an investigation by the British Broadcasting Corporation (BBC).

The state-owned broadcaster alleges the network centred on a Leicester-based company director, Rostum Nagra, who stole a firm belonging to a business associate and transferred its assets to his own company, Rocco Fashion. 

Nagra also took over the relationship with stolen firm’s biggest customer, Select Fashion, which has around 170 shops in the UK.

Modus operandi

When Nagra received an order from Select Fashion he would arrange for the garments to be made cheaply by so-called ‘cut, make and trim’ (CMT) suppliers.

Separate investigations have revealed CMT workers are often paid substantially below the UK’s minimum wage and sometimes on a piece-work basis, meaning they are paid only a set amount per garment made.

Hidden transactions

Nagra would pay the CMT workers in cash, hiding the transactions from his company’s official accounts and records.

But he would place a fake order for the garments with another company and invoice it at a much higher price. While this supplier appeared to be a garment factory, in reality it was usually just a shell company. 

VAT scam

Crucially, the invoice to the shell company included a 20 per cent VAT charge on top.

Nagra would pay the inflated amount into the shell company’s bank account, almost immediately withdrawing it in cash, typically keeping half the VAT amount to pay off accomplices. What happens to the cash after that has not yet been traced.

The Leicester-based businessman would be left with a VAT invoice from the shell company on which he would reclaim the VAT amount from the taxman. The shell supplier company would often fold after a short time with its VAT liabilities unpaid.



Categories: Trade Based Financial crimes News

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