Taxman targets illicit earnings of crime lords

IT WAS famously how they finally got Al Capone. Now Scotland’s Crown Office has revealed that it is pursuing more than £2 million of unpaid tax from some of the country’s biggest organised crime gangs.

Figures published by the government’s prosecution service today show that 20 cases of large-scale tax avoidance have been referred to HM Revenue & Customs for investigation.

The unpaid tax is believed to relate in some cases to the sale and purchase of property. In other cases, legitimate businesses known to be run by gang leaders and used for money-laundering of the profits from organised crime are being targeted.

• Read the Civil Recovery Unit’s annual report

The referrals to HMRC are on top of £10.5m seized last year from gangsters by prosecutors, which was deemed to be the wealth generated from criminal activity.

The Crown Office’s proceeds of crime team seized £7m, while the civil recovery unit, which pursues suspects who have not been convicted, confiscated a further £3.5m.

Prosecutors have also noticed a rise in benefit fraud committed by serious and organised crime gangs, which they believe is a sign that they too are feeling the impact of the recession.

For the Crown Office and the Scottish Crime and Drugs Enforcement Agency (SCDEA), the attraction of referring tax cases to HMRC for investigation is in stripping criminals of the wealth they need to carry out major crimes, such as large-scale drug deals.

Graeme Pearson MSP, a former director general of the SCDEA, believes cracking down on tax avoidance is key to tackling serious and organised crime, not least because completed tax forms give a clear picture of someone’s legitimate wealth.

“The development of the tax evasion focus is key for the future alongside the wider financial investigative efforts,” he said.

“In my time as director general of the agency, I tried to encourage an enhanced level of co-operation with the taxman, but could not obtain the kind of interest necessary to ensure success.

“Organised crime figures live lifestyles that demonstratively require earnings.

“The delivery of a tax return creates a significant challenge to them in terms of justifying how their lifestyle is maintained.

“Subsequent settlements to avoid investigation and thereby get people into the system is, therefore, an important step. Of course, for many of these individuals, they try to lie their way out of trouble and that plays into the hands of investigators.”

Solicitor-general Lesley Thomson QC said: “Just as important as the sum recovered is the disruption caused to individual criminals and serious and organised crime groups in Scotland.

“Depriving criminals of their money and assets can significantly disrupt their activities, prevent them from re-investing their profits, and make it difficult for them to carry out their criminal enterprises.

“When the money and assets go, so does the status and the power.”

The Proceeds of Crime Act came into force in 2003. Since then, £69m has been seized from Scottish criminals.

In recent years, criminals have increasingly turned to benefit fraud. The Crown Office uncovered £182,645 worth in 2011/12, more than double the figure three years ago of £74,558. It is seen as part of a pattern of growth in crimes against the public purse.

The SCDEA has signed information-sharing agreements with the Law Society of Scotland and other bodies as it seeks to find the lawyers and accountants who facilitate money-laundering, tax evasion and other “white-collar” crimes committed by gangs.

Gordon Meldrum, director general of the SCDEA, said: “While arresting and seeking imprisonment for those involved in serious organised crime will remain key elements in our approach, there are an increasingly diverse range of tactics being deployed to disrupt their activities.

“As serious organised crime has diversified, so too have we, including a very wide range of partners. For example, we are now targeting the lawyers, accountants and financial advisers who facilitate the laundering of money for crime groups.”

Kenny MacAskill, the justice secretary, said: “Last year amendments were made to the Proceeds of Crime Act to provide law enforcement agencies with additional powers to target a wider range of criminals and criminal conduct.

“We are continuing to look at other ways to refine the act to make it even more effective, and we are working closely with the Home Office to do so.”

Al Capone, the Depression-era crime boss, is one of the taxman’s greatest scalps.

In 1930s Chicago, where prohibition had led to bootlegging of alcohol, the gangster was jailed for 11 years, not for racketeering or extortion – or the St Valentine’s Day massacre – but for not paying his taxes.