In 1995, a seemingly terrified person anonymously reported information to the Lancashire Police, northwest of England. Arab Reporters for Investigative Journalism (ARIJ) obtained confidential documents leaked by the British Police regarding financial transactions that later came to be known as “the fraud of the century”. The informant provided information on companies evading taxes in Lancashire. This opened the door to track organised networks committing value-added tax (VAT) fraud in England and Europe.
At the time, the police department was concerned that those funds might be sent to support extremist groups such as Al-Qaeda. European authorities had been trying to track the network for more than two decades. An investigation conducted with more than 63 journalists in Europe by CORRECTIV, the German investigative organisation, showed that the total sum incurred by the treasury of member states in the European Union (EU) amounted to €50 billion per year.
What is the story, who is involved and to where does this money go?
One of the names that appeared in the fraud investigations was that of British citizen of Pakistani origin, Imran Yakub Ahmed. Initially, Ahmed was questioned by the British authorities in 1998 due to a suspected relationship with members of a network involved in fraud operations and VAT evasion.
Ahmed’s name appeared in leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ). These were shared with ARIJ and a large number of publishers around the world as part of a project termed the “Pandora Papers”. The leaks mark the biggest cross-border journalistic collaboration project in history and include millions of documents from lawyers’ offices regarding tax havens. They also uncover assets, secret transactions and the hidden fortunes of the rich, including more than 130 billionaires, more than 30 world leaders, a number of fugitives and convicted people, alongside sports stars, judges, tax officials and counterintelligence agencies.
The leaked documents show that Ahmed owns shares in four offshore companies under the following names: Diamond Estates Property Ltd, Primary Property Investments Ltd, IMCO Holdings Ltd and a fourth called Worldbase Trading Ltd.
IMCO Holdings Ltd was founded in the Jebel Ali Free Zone on 4 February, 2007, by registry No. 2931. In November 2010, Anisah Ahmad resigned from the management of Worldbase Trading Ltd, and IMCO reported the transfer of 50,000 shares she owned in Worldbase Trading Ltd to Ahmed. In the same year, Ahmed moved 50,000 shares from his companies of Primary Property Investments Ltd and Diamond Estates Investments Ltd to IMCO Holdings Ltd.
Ahmed and the funding of extremist groups
On 5 August, 2021, hundreds of relatives of injured US soldiers brought case No. CV-04400-21 against Deutsche Bank under the Counter-Terrorism Act in the United States District Court for the Eastern District of New York. The bank had permitted financial operations for people affiliated with Al-Qaeda and the Taliban, thus contributing to financing the killing and wounding of hundreds of US soldiers in Afghanistan and Pakistan.
Based on the information available to the prosecution, Ahmed was accused of being an agent of Al-Qaeda and the Taliban and of founding a cell for collecting funds. He had received specialised training from these organisations to execute a VAT fraud scheme. The plan was to use global financial institutions to convert fraudulently obtained Euros to US Dollars, and eventually send the money to Afghanistan, Pakistan and the United Arab Emirates (UAE) to support attacks against Americans in Afghanistan.
According to court documents, Deutsche Bank helped Ahmed carry out a massive VAT fraud scheme and obtain more than €1 billion. Millions of these were converted into US Dollars through Deutsche Bank to support attacks against Americans in Afghanistan from the mid-2000s until 2010. The Deutsche Bank transfers took place at its branches in New York, Frankfurt and London. Court documents reveal that US forces obtained documents on the Pakistan-Afghanistan border proving the involvement of Ahmed and others in financing Al-Qaeda and the Taliban.
After years of investigations and trials, Deutsche Bank paid €145 million, around $165 million, of the stolen value-added taxes to the German government, and a Deutsche Bank employee was imprisoned for his involvement in Ahmed’s VAT fraud.
The funds collected by Ahmed through this fraud, from the mid-2000s to 2010, are estimated at more than €1.15 billion.
In pursuit of Ahmed in Europe
While Ahmed was in the process of transferring shares, he travelled from Dubai to Bolton, northwest England. He booked a hotel suite at the Bolton Wanderers Football Stadium, which was later raided by the Manchester Police. He was arrested on suspicion of conducting money-laundering operations, and four cell phones and a memory card were confiscated. However, he was released without charge and returned to Dubai.
In the same year, the German Police raided dozens of places, including Ahmed’s company, in the aftermath of an investigation into fraud operations between 2003-2005 on value-added taxes amounting to €200 million.
In September 2014, the Italian Police announced that they were searching for Ahmed in connection with fraud. Documents leaked from the Public Prosecutor’s Office in Milan, Italy, show that the Italian Public Prosecutor accused Ahmed of defrauding Italy with €1.15 billion in value-added taxes. It is believed that Ahmed used funds and investments in Dubai for money-laundering purposes and that the money was reinvested in the Middle East as a cover for financing terrorist organisations.
In 2017, an Italian court convicted him of conspiring to steal the value-added taxes and demanded that the UAE extradite him, but the UAE refused to do so.
At the time of publishing this investigation, no response had yet been received from the law offices of Ahmed nor from Deutsche Bank.
How does a VAT carousel work?
Update: This page was updated at 07.10 BST on 6 October 2021 to remove non-functional references.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.