R v Umerji  EWCA Crim 598 has thrust carousel fraud back into the spotlight. The Court of Appeal’s decision permits the prosecution of fugitive defendants in certain cases. It also highlights the ever-lingering impacts of such criminality. Post-Brexit, however, the future of carousel fraud remains in the balance.
In 2018, Mr Adam Umerji (also known, confusingly, as Shafiq Patel) was convicted in his absence and sentenced to twelve years’ imprisonment for conspiracy to cheat the public revenue, together with five years’ imprisonment for conspiracy to transfer criminal property, to run concurrently. The Crown subsequently obtained a confiscation order against him, for a healthy sum exceeding £37m.
The fraud itself was a classic carousel fraud. In 2005-2006, mobile telephones were acquired from the European Union, by a UK-VAT registered company, without payment of VAT. They were then traded within the UK through a series of companies, with VAT being charged, before being exported, whereupon fraudulent claims for VAT refunds were made. The importer in each case disappeared without accounting for VAT (a classic example of missing trader intra community or “MTIC” fraud), causing around £30m in losses to HMRC.
The proceeds were accumulated into a single account, and then laundered through bogus transactions between companies. They ultimately ended up in separate accounts outside the UK controlled by the defendants.
The fugitive fraudster
Having fled to Dubai and failed to attend any of proceedings against him (including his trial and re-trial) Mr Umerji instructed lawyers to apply for permission to appeal his conviction.
The questions in the appeal were (a) whether the Magistrates’ Court had the power to send an absent (but legally represented) defendant for trial in the Crown Court per s51 Crime and Disorder Act 1998 (“s51”); and (b) if not, whether the subsequent proceedings were invalid for want of jurisdiction.
The power to commit pursuant to s51 arises where a defendant “appears or is brought before a magistrates’ court”. Mr Umerji’s counsel argued this required the physical presence of the defendant. The Crown disagreed, arguing that s122 Magistrates’ Court Act 1980 (“s122”) operated such that the defendant, represented by junior counsel was “deemed not to be absent”. Whilst s122(3) makes it clear that the rule does not apply where another enactment expressly requires the defendant’s presence, this was not triggered by s51.
The Court of Appeal agreed, refusing permission to appeal – s122 applied, as there was no express provision requiring the accused’s presence in s51. The term “appears”, used in s51, is “chameleon and takes its colour and meaning from its statutory context”. Further, even if the Mr Umerji had been required to attend in person, he would not be entitled to raise the point unless he had done so in the Crown Court and asked for the indictment to be quashed at that stage, which he had not.
Some will welcome the decision. It prevents fugitive fraudsters from thwarting proceedings by fleeing the country, whilst simultaneously benefiting from submissions made by counsel on their behalf – a clear case of ‘having their cake and eating it’. The decision may prove particularly helpful in the worlds of tax evasion, fraud and money laundering – financial crimes which frequently span multiple jurisdictions.
There are limitations nonetheless – the decision does not apply to either-way offences (unless this is sent up with an indictable-only offence under s.51(1)(b) CDA), nor does it apply where the defendant is unrepresented – an important and necessary caveat. Of course, what happens post-sentence also remains fraught, with the legal intricacies of extradition and seizure of foreign assets forming stumbling blocks for the enforcement agencies.
Umerji also demonstrates that the after-effects of carousel fraud linger. Whilst Mr Umerji’s offending dated from 2005-6, the repercussions from his somewhat unimaginative activities continue to reverberate some 15 years later. There is, however, some hope that fresh carousel frauds may be scuppered by another (slightly less) recent development – Brexit. MTIC frauds traditionally exploited the cross-border EU VAT regime. Of course, most of the UK now operates outside of that regime.
The authorities cannot become complacent, however, as two concerns remain. First, new administrative regimes post-Brexit will bring with them confusion – the fraudster’s best friend. Loopholes and ambiguities may spawn fresh generations of international VAT fraud. Secondly, Northern Ireland remains within the EU VAT regime, making it an obvious target for traditional carousel fraud in the years to come.
Moreover, disconcertingly, ONS data appear to show that whilst the number of missing traders peaked in 2006, there was an uptick in June this year. Only time will tell whether carousel fraud is about to spiral out of control once more.