Polish former mafia bosses move into illegal oil trade

Senior members of former Polish organized crime groups are moving into the illegal oil trade, chasing higher gains and lower risk, the Polish media reported April 17.

“They are principally former top-rank members of the Pruszkow gang,” a Central Bureau of Investigation officer told Polish economic daily Puls Biznesu. “After they completed their sentences, they began to move into the illegal oil trading sector. They are either setting up operations of their own accord, or they are coercing other entrepreneurs into paying them a part of their proceeds as ransom money.”

The illegal oil is being sold by the fraudsters at a price considerably lower than official rates, and still allows them to cash in a solid profit margin, thanks to the standard carousel VAT scam that such groups apply.

Typically, fraudsters buy oil from a legal entity in Lithuania, Latvia or any other neighboring country that is a member of the EU and sell it to a front company in Poland. The oil is transported to Poland, the front company pays for the oil, but never reports it to the Polish fiscal authorities and does not pay the 23% VAT tax for the goods. The 23% price difference allows the criminals to offer oil at much lower prices and still have considerable profits.

Two facts are particularly worrying about this trend and raise concern in legal and law enforcement circles.

First, the scale of the defrauded money and the rapid growth rate: the newspaper quotes official statistics provided by the Polska Organizacja Przemyslu I Handlu Naftowego (POPiHN), which show that the State Treasury lost some PLN 5 billion on unaccounted for VAT tax from illegal oil trade in 2013 (compared to PLN 4 billion in 2012).

Second, according to General Adam Rapacki, the founder of the Polish Central Bureau of Investigation, the trend indicates that criminals have learned their lesson in prison and are no longer pursuing obviously high-risk violent crimes, for which they can get caught relatively easily. Now criminals are using increasingly sophisticated methods and engaging in white-collar crimes, which are both more secure and more profitable. Rapacki also told the newspaper that criminals could be using the proceeds from the illegal oil trade to reconstruct the organized criminal structures that operated in Poland in the 1990s.

Photo courtesy of Lars Christopher Nøttaasen