UK taxing authorities have charged seven individuals in connection with an alleged tax fraud involving the cross-border sale of carbon credits. Her Majesty's Revenue and Customs charged the suspects with conspiracy to cheat the public revenue and conspiracy to transfer criminal property representing a person's benefit from criminal conduct.

The individuals are alleged to have run a "carousel fraud" that netted them up to £38 million. A carousal fraud is one in which fraudsters import goods from a country that does not impose a value-added tax (VAT) on such goods ((in this case carbon credits originating in the UK) and then sell the goods to buyers in other countries, charging them VAT. The fraudsters then disappear without remitting the tax to the relevant authorities.

The arrests occur during a period of uncertainty for European carbon markets, which saw trading suspended last week as a result of security vulnerabilities in the electronic registries that track carbon trades.