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UK faces EU fine over failure to take action against Chinese 'fraud hub'

Britain is facing a £1.7 billion fine after failing to stop Chinese criminal gangs using the country as a fraud hub despite repeated warnings.

Clothes and shoes were imported through the UK at fictitiously low values for years to avoid duties, the European Anti-Fraud Office (Olaf) found.

Investigators warned HM Revenue and Customs a number of times but they failed to take tough action to curb the problem, it said.

The fraud has cost the EU nearly two billion euro in lost duties between 2013-16 and Olaf has called on the European Commission to reap back the cash from the UK.

A spokesman said: "Olaf has repeatedly drawn the attention of the UK customs authorities (HMRC) over the last years to the scale of the phenomenon and to the on-going revenue losses.

"Olaf has also alerted the UK authorities to the need to implement EU-wide risk profiles and to investigate the fraud networks active in the UK.

"As far as Olaf is aware, the UK authorities have not introduced risk profiles and the measures that they have taken do not appear to have curbed this traffic.

"To date, they have not initiated any criminal investigations in relation to these frauds."

The UK was the "most significant hub" for the fraud in the EU, with gangs using fake invoices to undervalue the value of the goods being imported.

Investigators found most of the goods were destined for the black market in other parts of the bloc.

They found 80% of the £709 million losses in customs duties last year were through UK importation.

EU coffers are still being hit because the fraud is on-going, Olaf said.

A spokesman said: "Despite repeated efforts deployed by Olaf, and in contrast to the actions taken by several other member states to fight against these fraudsters, the fraud hub in the UK has continued to grow.

"This traffic harms the EU economy and its industry as a whole and has a negative impact on EU jobs and competitiveness, while the taxpayers pick up the tab to compensate for the revenue losses," he added.

Prime Minister Theresa May's official spokesman said: "We have only just received this report.

"We don't recognise the figures. They are currently being examined by HM Revenue & Customs.

"We have not received a bill from the European Commission. This report is not a bill, it is an estimate."

The spokesman added: "UK Customs takes all allegations of fraud seriously and investigates thoroughly.

"We would point you to their excellent record tackling fraud and rule-breaking, securing £26.6 billion last year."

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