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Vienna, 27.09.2017 Successful strike against international construction fraud network 24 property searches, 6 arrests, estimated damages EUR 55 million  

During 24 residential property searches in Vienna, Lower Austria and Upper Austria, forces from the Financial Police and the Vienna Regional Criminal Intelligence Service achieved a successful coup in the fight against international tax and social-welfare fraud. A hardened group of criminal perpetrators from the former Yugoslavia had engaged a total of more than 755 workers in an international network consisting of over 30 fictitious companies. Through illegal price-fixing, tax evasion and evading social-welfare contributions, the amount of losses suffered is provisionally estimated as being over EUR 55 million. Six men were arrested and are being held in custody pending further investigation.

The investigations by a team of 10 from the Financial Police and a further team of 12 from the Vienna Regional Criminal Intelligence Service into an international ring involved in construction-trade fraud lasted approximately three years. Through construction-site checks and observations, the officials assembled sufficient incriminating material to enable them to execute a large-scale action involving 24 simultaneous residential property searches in the early hours of 26 September 2017, 19 of which were in Vienna, two in Upper Austria and three in Lower Austria.

The police officers and officials from the Financial Police, numbering approximately 60 and including several forensic officers for the purpose of securing evidence in situ, carried arrest warrants for the backers and masterminds. The Public Prosecutor's Office also issued a credit transfer application for the entire assets of the backers and their families. As far as is known to date, in addition to various properties both at home and abroad, this also relates to both jewellery and monetary assets.

In addition to Austrian clients, both foreign and Austrian fraudulent and fictitious companies were involved in the international fraud network. The pretence involved workers being seconded from low-wage countries such as Bulgaria, Romania, the Czech Republic, Hungary and Slovakia, and then registered with fictitious Austrian companies. The registration and re-registration of the workers, job assignment and invoice processing took place via middlemen in Austria. The invoice monies were transferred to foreign bank accounts, but from there they were withdrawn by the fraudsters and in part transferred back to Austria in the form of cash ("kickback payments"). Furthermore, the investigations into social-welfare fraud revealed that the workers did not have social-welfare insurance in the seconding states or had submitted forged documentation.

The workers, aged between 20 and 60, mostly lived in Vienna all year round. In return for very low wages, the men worked on various construction sites and resided under inhuman conditions in mass accommodation or directly on the construction sites.

The provisional total damages calculated amount to approximately EUR 55 million, and consist as follows:

  • EUR 14 million from evading social-welfare contributions (social insurance contributions as well as contributions to the Construction Worker's Holiday and Severance Fund (BUAK));
  • EUR 20 million from illegal price fixing; and
  • EUR 20 million from tax evasion.

At present, these figures are only estimates, since the actual losses will presumably end up significantly higher as a result of fictitious/covering invoices in the accounts. Because of this, during the residential property searches, all relevant documentary sources were confiscated: laptops, mobile phones and several terabytes of IT data material. In addition, cash totalling EUR 110,000 and a car were also seized.

Ewald Engel of the Financial Police, who led the operation, expressed his satisfaction with its outcome: "Our cooperation with the Regional Criminal Intelligence Service worked excellently. Together, we have struck a significant blow against an international construction fraud network."

The fight against tax fraud is one of the main focuses of work undertaken by the Tax Administration. Fraud creates competitive distortions, damaging the economy and consequently also each individual who must as a result pay higher taxes. The aim of combating fraud is to secure and strengthen Austria as an economic centre over the long term. Tax fraud and social-welfare fraud jeopardize this intention, since honest economic operators are massively disadvantaged.