The abuse of corporate vehicles in VAT refund fraud and money laundering: A forensic case study

The forensic analysis of complex tax fraud and money laundering schemes requires moving beyond the formal presentation of business relationships and focusing on their underlying economic substance. Using a forensic case study approach, this research examines the mechanisms through which interconnected corporate entities were used to generate fraudulent VAT refunds, conceal the origin of illicit proceeds, and facilitate their circulation through coordinated financial flows. The study draws upon evidence obtained from tax audits, customs documentation, banking records, expert examinations, digital forensic evidence, and investigative procedures. The investigation of the Serbian case established fraudulent VAT refunds amounting to approximately RSD 396 million, while the value of financial flows associated with the concealment of illicit proceeds was estimated at approximately RSD 1.5 billion. The evidence obtained through the forensic investigation formed the basis for criminal proceedings against fourteen individuals. The findings indicate that forensic reconstruction was essential for identifying the economic substance of the analysed business arrangements and revealing the functional links between formally separate corporate entities. The analysis further demonstrates that the distinction between predicate tax offences and subsequent money laundering activities often requires more than the examination of individual transactions and depends on an integrated assessment of business relationships, the economic rationale of transactions, and patterns of operational control. The study contributes to the literature on VAT fraud, money laundering, and forensic accounting by identifying forensic indicators relevant for the detection of complex financial crime schemes and highlighting the importance of forensic reconstruction in revealing concealed economic relationships underlying formally legitimate business structures.