In what is emerging as a brand-new sector of twenty-first century white collar crime, officers from Britain's HM Revenues and Customs (HMRC) arrested seven people in London on Wednesday in a suspected £38 million ($62.6 million) value-added tax fraud in the European market in carbon allowances.

The six men and one woman are believed to be the first people in the country to have made money through a so-called “carousel” Value Added Tax (VAT) fraud involving carbon emissions allowances, or carbon credits.

The suspects allegedly imported large volumes of carbon credits VAT-free from other countries then sold the credits to British businesses, having already marked up the price with VAT. The businesses purchasing the credits would then have been able to claim the VAT back from the British government. But the suspects allegedly never reported that VAT revenue, pocketing it instead.

"Those arrested are believed to be part of an organized crime group operating a network of companies trading large volumes of high-value carbon credits," British law enforcement officials said, adding that proceeds of the crime "have then been used to finance lavish lifestyles and the purchase of prestige vehicles."

Carousel fraud, also known as "missing trader fraud" has cost between 2-3 billion pounds in potential tax revenues between 2005-2006, HMRC estimates.

To prevent such fraud schemes the governments of France and The Netherlands have already removed the VAT from carbon credits traded within their countries. Britain followed suit last month.

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