‘There Is No Reason for Criminal Gangs to Compete’: The €50 Billion Fraud That Out-Earns HSBC

‘There Is No Reason for Criminal Gangs to Compete’: The €50 Billion Fraud That Out-Earns HSBC

Rich Duprey

Thu, September 10, 2026 at 6:45 PM GMT+3 5 min read

• HSBC +1.54%

Quick Read

• Carousel VAT fraud drains €50 billion annually from European treasuries, outpacing HSBC's $22 billion net income and inflating compliance costs for global lenders.

• Bullough argues carousel fraud has no earnings ceiling, pushing criminal gangs to collaborate rather than compete, enabling ever-larger and more elaborate schemes.

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One number reframes how to think about financial crime in Europe, and it does not come from a bank's income statement. It comes from a journalist's estimate of what one particular scam drains out of national treasuries every year.

Fifty Billion Euros, Every Year

On the Bloomberg podcast Odd Lots episode "Why Money Launderers Love $100 Bills", journalist and author Oliver Bullough put carousel VAT fraud, technically known as missing trader intra-community fraud or MTIC, at roughly €50 billion a year in cost to Europe, according to Odd Lots (Bloomberg). That is Bullough's estimate, stated on the episode, not an official Europol or European Commission VAT-gap statistic. Place it next to the most recent full-year bottom line at HSBC (NYSE:HSBC), the London-based lender that reported $22.285 billion in net income for fiscal year 2025, and the scale of the scheme starts to register. Two different currencies. Two different kinds of number. One is money vanishing from public treasuries, the other is a bank's audited profit. Weigh them as you like.

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What It Means

Bullough's core point is what makes this figure land. Most organized crime has a finite pie, so gangs fight over territory and margin. Carousel fraud does not work that way. In his words, "Essentially there is no limit to the amount of money that a criminal gang can make out of this. So there is no reason for criminal gangs to compete. The more they collaborate with each other, the more elaborate the schemes can get and the more money they can claim." A crime with no ceiling and a built-in incentive to cooperate produces a very different growth curve than street rackets do.

The mechanics, in plain terms Bullough walks through on the episode: a product is imported across an EU border zero-rated for VAT. It is then sold on inside the destination country to a shell company, and VAT is charged on that intra-country sale. The goods are exported again, and the exporter reclaims the VAT from the treasury. The catch is that the trader who was supposed to hand that VAT over to the treasury simply disappears. That vanishing counterparty is the "missing trader," and it is why the scheme is called missing trader intra-community fraud. The reclaim is real. The payment behind it never was. 20% of a shipment's value gets conjured out of nothing, and the rest of the taxpayer base absorbs it. The scheme spans the continent geographically, running through thousands of shell entities shuttling goods back and forth.

Market Reaction

HSBC appears here strictly as a scale benchmark. There is no suggestion the bank is involved in, or connected to, carousel fraud. As a size anchor, HSBC disclosed $3.438 trillion in total assets at its most recent quarterly filing. Shares last printed $107.78 at the Q2 2026 filing on August 4, 2026. No post-Q2 stock reaction to the podcast or to the fraud discussion is present in the available data.

Bear Case

For long-term holders of any large European-exposed lender, the read-through concerns the environment banks operate in, not any single filing or quarter. HSBC's own risk disclosures show what happens when financial-crime exposure lands on a balance sheet: a $0.4 billion fraud-related UK securitisation exposure in Corporate and Institutional Banking flagged in Q1 2026, $1.1 billion of Madoff-related provisions booked in Q3 2025, and ongoing criminal investigations involving HSBC Private Bank (Suisse) for alleged money laundering. Those are line items in a bank that produced $29.91 billion in profit before tax in 2025. When the surrounding crime economy compounds at the pace Bullough describes, compliance costs and legal provisions do not shrink over time. They tend to become permanent features of the cost base.

Bottom Line

Bullough's payoff is the part policymakers keep ignoring. He argues the UK actually got good at fighting carousel fraud by using "a really fully multi Agency approach, like not just leaving it to the banks like we do with money laundering, but really fighting it with everything that the state had". The working model exists. It is just never the one applied to anti-money-laundering enforcement, where compliance is pushed onto the banks and the bill shows up in provisions, settlements, and staff headcount. For retirement-focused shareholders in global lenders, that is the number behind the number: a €50 billion annual reminder that the crime side scales faster than the compliance side, and the compliance side is on the income statement.

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