U.K. regulators may take a further two years to complete an investigation into fraud in the carbon market as it seeks data from companies including Royal Bank of Scotland Plc andCarbonDesk Group Plc. (CO2P)
The U.K. tax office is examining whether trading companies, motivated by transaction fees and discounted prices offered by fraudsters, continued buying and selling permits even as the doubling of volumes around June 2009 was suspicious, according to Cedric Andrew, a former investigator at HMRC, the British agency. Based on parallel cases in the mobile-phone industry, the inquiry into so-called missing-trader frauds may not be resolved until 2015, according to Jonathan Grant, a director of sustainability and climate change at PricewaterhouseCoopers LLP.
“The carbon market was particularly vulnerable to missing-trader frauds because spot trading and the delivery of the allowances and cash can be very rapid,” Grant, who has advised the European Commission on some of its carbon programs, said June 3 by e-mail.
HMRC served an 86 million-pound ($133 million) assessment in September related to value-added-tax fraud on a European unit of RBS Sempra Commodities LLP, a venture between Edinburgh-based RBS and Sempra, the San Diego-based company said May 2 in a filing to the U.S. Securities and Exchange Commission.
RBS is cooperating with the agency, Linda Harper, a spokeswoman for the bank in London, said May 31 by phone, declining to elaborate.
According to the Sempra filing, a letter from HMRC to RBS states that “HMRC believes it has grounds to deny RBS the ability to reduce its VAT liability by VAT paid during 2009 because it knew or should have known that certain vendors in the trading chain did not remit their own VAT to HMRC.”