Carbon Credit Fraud
Carbon credit VAT fraud has been the subject of an increased investigation by the government and prosecuting authorities but the bodies generating carbon credits are usually based overseas and authorities in the UK have no control of the quality or validity of the carbon credit schemes.
It’s is a fast-evolving industry and therefore difficult for prosecuting authorities to immediately understand the structure and mechanisms involved.
Carbon Credit VAT Fraud
The carbon credit industry is open to fraudulent activity because of its lack of central regulation. Credits have different values in different jurisdictions, and the lack of principal regulation can make provenance difficult to trace. This can mean that a person being investigated may not even be aware that credits are false or illegitimate. In some cases, evidence that credit is bogus may itself be subject to challenge.
Those being investigated must have knowledge about the illegitimate provenance or purpose of credit or transaction to be guilty of an offence of conspiracy or fraud by false representation which generally forms the common charges for carbon credit fraud allegations.
As with any investigation process, businesses and individuals can be unduly targeted in long-drawn-out investigations and prosecutions. This inevitably has a serious effect on any business and the personal lives of those connected to the business.
It is important if you are investigated for complex fraud that you have specialist legal advice with a defence team who understand the practises and background associated with the industry involved. Making the right choice on your legal team is important from an early stage. Whilst it is not impossible to change your legal representation down the line, it does prove challenging.
Carbon credits have value. They are a tradeable certificate to prove that a government or company has paid to have a certain amount of carbon dioxide removed from the environment. The trading of carbon credits is not illegal. One carbon credit is the equivalent to one tonne of carbon dioxide. Carbon credits are bought and sold by companies to encourage them to reduce their greenhouse emissions. Any ‘spare’ certificates earned as a result of reduced greenhouse gas emissions can be traded for profit. It is a rapidly increasing market, sparking many lucrative opportunities for business.
In 2009 the UK Government announced its decision to make carbon emission trading ‘zero-rated’ for VAT purposes, making it impossible to claim VAT on the sale of carbon credits in the UK.
Credits are not commodities and can pass between jurisdictions electronically and therefore instantly. One of the more common types of fraud relating to carbon credits is the MTIC (missing trader Intra-community) set up to give the appearance of legitimate trading, allowing companies to reclaim VAT paid out on purchases of credits along the fraudulent chain. The value of these frauds frequently run into many millions of pounds and function in the same way as any other missing trader fraud (MTIC).
In MTIC cases, the charge will usually be a conspiracy to cheat the revenue, or conspiracy to defraud. In other cases, various Fraud or Theft Act offences may be used.
The FCA used to concentrate its efforts using regulatory sanctions e.g. penalties for high-pressure sales targeting vulnerable investors. More recently they have brought prosecutions against individuals on the basis that carbon credit trading can be another version of a ‘boiler room fraud’.
Carbon credits have been the subject of investment scams. Investors are usually cold-called by salespeople promoting carbon credits, but contact can also come by email, post, word of mouth or at a seminar or exhibition. The opportunity to invest in a ‘green’ scheme with the promise of big returns is the lure.
Money is often lost on the investment because it has no secondary value. It has been sold at such an inflated rate that is unlikely to be sold on.
It may be you have been embroiled in a criminal enterprise without realising. It is important you do not underestimate the value of early legal advice. Those who are tasked to assist in your defence will have many years of experience in this field.
Carbon Credit Scams
Challenging the evidence is a crucial role in the defence team. The police and the prosecuting body will need to prove there is a link or a money trail between the accused/defendant and the criminal activity. The international nature of the industry and the lack of jurisdiction the UK has over the schemes, mean that any unsupported prosecution assumptions about credits should be challenged by the defence, and expert evidence on the industry should be presented at court.
If you think you may be the subject of a pending investigation, you have been requested to attend an interview or you have been charged with an allegation of fraud you must make attempts to secure the right person and team to assist you in the process of building your defence.
If you are under investigation for carbon credit fraud contact us today.