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UK Faces €2 Billion Fine for Accepting Chinese Fakes

U.K. negligence is blamed for a flood of Chinese counterfeits in Europe.

The European anti-fraud office, known as OLAF, is demanding the British government compensate the EU for lost customs duties to the tune of 2 billion euro ($2.12 billion).

EU investigators claim British customs agents allowed criminal gangs to present falsified invoices that grossly undervalued the shoes and apparel originating from China. The U.K. was warned about the ongoing activity multiple times but took no action, the office 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 U.K. has continued to grow,” a spokesperson for the anti-fraud office told Politico.

The lost customs revenue was calculated based on a study of port activity from 2013 to 2016, and it is just part of the total damage. The UK’s inaction has also cost France, Germany, Spain and Italy approximately 3.2 billion euro ($3.39 billion) in VAT income.

The Guardian supplied a real-world example that should have raised a red flag: Importers declared the price of women’s pants to be 0.91 euro (96 cents) per kilo while the price of cotton is 1.44 euro ($1.52) per kilo.

Why the U.K. failed to catch such blatant fraud is still an open question. Other countries, including Malta, Portugal and Spain, that were identified as hubs for major fraudulent activity put measures in place. The U.K. did as well, but only temporarily.

For its part, the British government stands by its efforts and says the matter is under review.

That issue comes at a sensitive time for U.K./EU relations, as Brexit looms. At that point, the U.K. will no longer be a part of the customs union to which all 28 member states belong, a development that has some worried in light of these reports.

Ultimately, it’s up to the European Commission to decide if it wants to press forward with the charge.