The Serious Organised Crime Agency (Soca), the UK equivalent of the FBI, has been strongly criticised by Law Lords in the Court of Appeal for its "unlawful" action in freezing payments to a company that the organisa-tion believed may have been involved in a VAT fraud.
In their judgement, Lord Justice Sedley, Lord Justice Hooper and Lord Justice Ward delivered a stinging rebuke to Soca and have granted the request by UMBS Online, an international money transfer company, for a judicial review. They said: "A feature of the way Soca operates is that it does not condescend to detail either in the reasoning for its decision or in disclosing the facts upon which it relies in coming to that decision. This is not a very satisfactory position."
Soca had frozen the UMBS transactions early this year on the suspicion they may be part of a VAT dodge known as "carousel fraud". No other action has been taken against UMBS or any of its clients in the case.
Carousel fraud, also known as missing trader fraud, occurs where fraudsters obtain VAT registration to acquire goods such as chips and mobile phones VAT-free from other EU states. They then sell on the goods at VAT inclusive prices and disappear without paying over the VAT paid by their customers to the tax authorities. …