Carbon Trading conviction for money laundering
A French Criminal Court has convicted and sentenced five people for money laundering for defrauding the European Union’s carbon trading system of €1.8 billion over loss tax revenue. The defendants were arrested as part of a French investigation into money laundering, fraud and tax evasion in the carbon market that began in 2009, dubbed “L’affaire Nathanaël,” concernant la fraude à la taxe sur le marché du dioxyde de carbone.
The apparent leader of the scheme, Fabrice Sakoun, was sentenced to five years in prison and ordered to pay a fine of €1 million, and €43 million in damages and unpaid taxes. His accomplices were sentenced to between a year and four years in prison. During his trial, Sakoun testified that carbon trading was the Lady Gaga of carbon, meaning that the revenues from his type of scheme were similar to revenues earned by Lady Gaga.
It’s Like Leaving a Ferrari on the Street
Another defendant testified that the CO2 market was, by design, inherently and irresistibly suseptible to fraud and money laundering, testifying that: “It is like putting a Ferrari in ‘La Courneuve’ with the keys – it won’t last an hour.”
Collecting the fine may be problematic for France. Several defendants were tried in absentia and most of the proceeds of crime were transferred to Israel. Assets seized thus far include a yacht, a luxury car, seven apartments in Paris and €13 million.
According to the Court, Sakoun bought carbon rights tax-free from foreign brokers and resold them on a taxable basis (with 19.6% VAT) to firms in France. The tax was retained by the defendants instead of being remitted to the French treasury.
The facility with which people can set up front companies under beneficial ownership schemes and lax internal controls and regulatory oversight are some of the reasons why the carbon market has suffered from fraud and money laundering issues.