The Lycamobile offices were raided on suspicion of criminal money laundering and tax fraud after a Buzzfeed investigation revealed suspicious cash movements at the telecoms giant last year.
Police have been investigating the company since Buzzfeed released footage of cash couriers working for Lycamobile dropping rucksacks containing hundreds of thousands of pounds at post offices in London late last year.
Investigators said Lycamobile’s French arm received €75m over nine months last year from “shell” companies suspected of being fronts for money laundering, according to Buzzfeed’s report. The funds were allegedly transferred into Lyca’s offshore network via a bank account in London.
The firm’s general manager in France, Alain Jochimek, was among the nine people charged with money laundering and tax fraud following last week’s raids.
A statement from the French prosecutors at the Parquet National Financier, who were behind the Lycamobile arrests said, “On Wednesday and Thursday, 19 people suspected of being involved in a money-laundering system implicating Lycamobile and Lycamobile Services were arrested.
“The arrests were part of a Paris judicial investigation into money laundering and VAT fraud. Several places in Paris and its outskirts were raided and police seized about €130,000 in cash and €850,000 from bank accounts.
“Nine people were brought in front of a judge on Friday and charged with money laundering among other things, and eight were released on cash bail while one man remained in custody.
“The charges relate to money laundering of at least €17 million and VAT fraud of several million euros.”
Lycamobile is the biggest donor to the Conservative Party and the party has accepted £2.2m in donations since 2011.
The Tories come under fire for continuing to accept donations of more than £870,000 from Lycamobile since December, while it was being investigated for tax fraud and money laundering.
A number of Labour MPs have urged David Cameron’s party to stop accepting donations from the controversial donor while others have called on the Tories to hand back Lycamobile’s donations.
According to Buzzfeed’s report, Lycamobile’s auditors declared over the past two years that they could not account for total of £646m that moved through 10 companies in its complex corporate network.
In May it emerged that KPMG’s audit of Lycamobile was limited due to the complex nature of the company’s accounts.
In its auditor’s report on the accounts filed at Companies House, KPMG highlighted a £134m hole in Lycamobile’s accounts, owed to the company by related parties.
KPMG said, “The audit evidence available to us was limited because of the complex nature of the related party structure the company operates within.
“Owing to the nature of the company’s records, we were unable to obtain sufficient appropriate audit evidence regarding the measurement and disclosure of these related party balances by using other audit procedures,” the Big Four firm added.
The auditors also highlighted confusion regarding adjustments made to turnover and deferred income in the financial statements.
The report, written by David Neale, senior statutory auditor, on behalf of KPMG, concluded that the auditors “have not obtained all the information and explanations that we consider necessary for the purposes of our audit and we were unable to determine whether adequate accounting record have been kept".
Buzzfeed reported that HMRC are now investigating Lyca’s finances after being passed information from the National Crime Agency but HMRC declined to comment on whether or not is investigating the telecoms company.
A spokesperson said, “We don’t discuss identifiable taxpayers. We receive information from a wide range of sources and we use it to make sure the UK’s tax laws are respected.”
In a statement Lycamobile strongly denied all allegations of wrongdoing as reported by BuzzFeed media and subsequent news reports.
It said the allegations have been made directly against Lycamobile by French authorities when in fact no such allegations have been made.
The French authorities have not taken any action as alleged by BuzzFeed, against Lycamobile, it said.
Accordingly, Lycamobile is taking all appropriate legal action to ensure that its reputation is upheld, and to address the denigrating allegations propagated by BuzzFeed, it added.