How was the trillion-dollar smuggling case related to Thuduc House solved? - Part 1: The journey to decrypt the unknowns

The results of the investigation show many violations caused by Thuduc House.

The case started in September 2019, when implementing professional customs control measures at Tan Son Nhat International Airport (HCM City), the Southern Anti-Smuggling Enforcement Unit (Unit 3, Anti-Smuggling and Investigation Department, General Department of Vietnam Customs) discovered that a number of enterprises had a very high export volume and value, showed many unusual signs, and as a result were suspected of violating the law.

“Blow up” export prices to appropriate tax money

Making in-depth analysis of import-export data of businesses in the area, Customs authorities found that there were irregularities related to two businesses, Thuduc House and Saigon Southwest Trading Joint Stock Company.

From 2017 to September 2019, these two companies had a large number of exports, worth up to trillions of VND. The main export items are electronic components, including chips, RAM and mainbroads. These are small but have a very high export price. After completing export procedures, exporting enterprises have refunded VAT up to hundreds of billions of VND by domestic tax authorities.

From here questions are raised around businesses buying and selling goods and pushing the price of goods up, in order to appropriate VAT money through tax refunds. Suspicions of illegal money transfers from abroad to Vietnam and vice versa, suspicion of illegal purchase, sale and use of VAT invoices are also big worries.

Faced with that situation, the Anti-Smuggling and Investigation Department had proactively directed its units to carry out professional activities. That included, collecting documents and verifying information of Thuduc House and Saigon Southwest Trading Joint Stock Company, issuing a warning letter about export fraud and paying attention to items such as electronic components, machinery and high-tech goods.

On November 18, 2019, the Anti-Smuggling and Investigation Department issued Decision 21/QD-ĐTCBL, establishing special project number DT919, to fight and clarify the suspicion of law violations of the two companies as mentioned above. In which, Unit 3 was assigned to chair, develop plans and perform the tasks of the project.

Occupying hundreds of billions of tax

After establishing a special case, the Anti-Smuggling and Investigation Department directed Unit 3 to urgently gather forces and coordinate with units inside and outside the sector to carry out special tasks.

The results of verification and investigation on Thuduc House showed that the Company worked and agreed with An Lanh Phat Co., Ltd to buy goods that are electronic components in the Vietnamese market and sell them to Thuduc House Wood Trading (a subsidiary of Thuduc House). After that, Thuduc House Wood Trading Joint Stock Company sold it to Thuduc House to carry out export procedures.

Meanwhile, in order to sell goods to Thuduc House Wood Trading Joint Stock Company under the signed contract, An Lanh Phat Co., Ltd. bought electronic components from four other companies in the country.

Foreign partners purchasing from Thuduc House include: DS Logistics Co,.Ltd, RO Import Export Co,.Ltd; ME Import Export Co,.Ltd and AK Plc. The payment was made mainly through a bank based in Ho Chi Minh City. The number of exported goods until August 2019 totaled 499 declarations, worth nearly US$223 million (equivalent to more than VND 5,200 billion).

After completing the export procedures, Thuduc House completed VAT refund procedures at the Tax Department of Ho Chi Minh City. From February 2018 to August 2019, the Company was refunded 17 times to the amount of nearly VND 261 billion.

For Saigon Tay Nam Trading Joint Stock Company, this was an enterprise that had purchased and exported electronic chips since March 2018. The company signed contracts to buy electronic components from many different businesses.

The companies delivered goods to Saigon Southwest Trading Joint Stock Company at the airport to export to foreign countries.

Foreign partners of Saigon Southwest Trading Joint Stock Company include, L Enterprise Inc and A Import Export Inc in the US, DS Logistics Co,.Ltd; and RO Import Export Co,.Ltd in Cambodia. As well as H Trading Private Co,.Ltd in Singapore. Payment was also made mainly through the bank that Thuduc House made transactions.

By May 2020, Saigon Tay Nam Trading Joint Stock Company had completed export procedures for 141 declarations, worth more than VND 1,645 billion. After completing the export procedures, the company completed VAT refund procedures at the Tax Department of Tay Ninh province. By July 2019, the tax refunded by the Company was nearly VND 75.6 billion.

"Bogus business" and mysterious cash flows

In order to investigate the case, the Customs force verified information at the local customs authority and the Public Security Agency. Notably, the domestic partner companies that bought and sold goods with Thuduc House and Saigon Southwest Trading Joint Stock Company were not headquartered at the address stated on the Business Registration Certificate.

On the other hand, through searching information on the National Business Registration Portal (the Ministry of Planning and Investment), these companies often changed information about the address of their head office, information about the owner of businesses, legal representatives and information about tax administration registration places.

During the investigation, the Anti-Smuggling and Investigation Department issued documents requesting 18 joint-stock commercial banks where businesses opened accounts, to help cooperate in providing information following regulations. As a result, the unit collected 113 accounts of dozens of businesses and individuals with thousands of pages of paperwork.

On the basis of documents provided by the bank, the Anti-Smuggling and Investigation Department had researched and found the flow chart of money, in order to determine the relationship between enterprises and individuals involved in export activities.

Signs of falsifying documents

After studying the files collected from companies, Unit 3 found that, in some of the collected documents, there were signs of modifying stamps and signatures of foreign partners. Accordingly, the shape of the stamp and the signature had many similarities, but the sizes were different. According to the inspection conclusion of the Southern Institute of Criminal Science (C09B, Ministry of Public Security), on some documents, the images of stamps and signatures were the same with the origin, but had been clearly edited.

Thus, the document was forged by the subjects by using computer tricks to cut the signature and stamp shape from another document, resize and paste it into the contract file drafted on the computer, then printed out.

Along with that, the Anti-Smuggling and Investigation Department sent a written request to foreign customs offices to verify the number of export shipments to Hong Kong (China) and Cambodia. According to Hong Kong Customs, all three export shipments that Vietnam Customs needed to verify from Thuduc House were not imported into this market. While Cambodia Customs confirmed that all export shipments of Saigon Southwest Trading Joint Stock Company were not imported into Cambodia. In particular, the majority of purchasing partners did not exist in Cambodia.

Reveal a lot of important information

During the process of researching records and exploiting data on the sector's information system, Unit 3 reported to the leaders of the Anti-Smuggling and Investigation Department to conduct extensive verification for relevant businesses.

Accordingly, in 2019, there were 29 enterprises exporting electronic components with the number of 7,670,075 products, with a total value of nearly US$203.5 million. From January 1, 2020 to May 31, 2020, there were 16 enterprises exporting electronic components with the number of 2,431,020 products, with a total value of nearly US$96.5 million.

In total, in 2019 and 2020, there were 32 enterprises exporting this item. The investigation results showed that 19 companies did not operate and did not hang their company's sign at the registered business address. Five companies registered a bogus business address and four companies set up virtual offices.

Thus, in a short period of time, Unit 3 had simultaneously implemented special combat tasks and achieved very important initial results. Namely, collecting information and documents (contracts, VAT invoices) on purchasing "electronic components" and of domestic enterprises for export (information "input" of exported goods). They also collected information and export dossiers for foreign partners of Thuduc House and Saigon Southwest Trading Joint Stock Company (information about the "output" of exported goods).

They collected information and documents that proved Thuduc House and Saigon Tay Nam Trading Joint Stock Company made a VAT refund dossier and received a huge refund from the tax authorities.

In addition, other important results are: collecting bank transaction documents between domestic companies and overseas organizations, detecting, assessing and proving acts of forging papers and documents of organizations and requesting the foreign customs authorities to verify foreign partners and some export shipments, in order to clarify that the export shipments of the two companies carried out import to the law. At the same time, conducting verification and clarifying the address of the head office and operation situation of 32 suspicious domestic enterprises.

Part 2: Collaborating to “raising the fishing net”