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EUROPOL: Tax fraud loses EU carbon trading billions Euros

Tax fraudsters have targeted the EU's carbon emissions trading system, pocketing around 5 billion euros (7.4 billion dollars), the Europol police agency said Wednesday.

"The European Union Emission Trading System has been the victim of fraudulent traders in the past 18 months," said the agency in a statement.

"This resulted in losses of approximately five billion euros for several national tax revenues."

The agency, based in The Hague, added that it estimated "in some countries, up to 90 percent of the whole market volume was caused by fraudulent activities."

France, the Netherlands, the UK and Spain had all changed their tax rules on the transactions to prevent further losses, the agency said.

"After these measures were taken, the market volume in the aforementioned countries dropped by up to 90 percent," according to the statement.

According to a Europol official, the alleged fraudulent traders set themselves up in one country and bought carbon polluting allowances from a second country, making the allowances exempt from value-added tax (VAT). They were then allegedly sold on to firms in the country where the trader was based, but with the VAT added on, the official said.

The traders are accused of pocketing the VAT instead of handing it to tax authorities, the official said.

The Emission Trading System was launched in the EU in 2005 in a bid to reduce greenhouse gas emissions, which many scientists link to global warming.

Under the system, the EU allocates carbon polluting allowances to member states to meet its obligations under the UN's Kyoto Protocol.

The states then assign quotas to those industries that belch most CO2 into the atmosphere.

Companies that emit less than their allowance can sell the difference on the market to companies that exceed their limits, thus providing a financial carrot to everyone to become greener.

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EU Security Agency Highlights Cloud Computing Risks

Cloud computing users face problems including loss of control over data, difficulties proving compliance, and additional legal risks as data moves from one legal jurisdiction to another, according to a assessement of cloud computing risks from the European Network and Information Security Agency (ENISA).
Comments By Mikael Ricknäs

Fri, November 20, 2009 — IDG News Service — Cloud computing users face problems including loss of control over data, difficulties proving compliance, and additional legal risks as data moves from one legal jurisdiction to another, according to a assessement of cloud computing risks from the European Network and Information Security Agency (ENISA).

The agency highlighted those problems as having the most serious consequences and being among the most likely for companies using cloud computing services, according to ENISA.

ENISA examined the assets that companies put at risk when they turn to cloud computing, including customer data and their own reputation; the vulnerabilities that exist in cloud computing systems; the risks to which those vulnerabilities expose businesses, and the probabilities that those risks will occur.

When moving to cloud-based computing services, companies have to hand over control to the cloud provider on a number of issues, which may affect security negatively. For example, the provider's terms of use may not allow port scans, vulnerability assessment and penetration testing. At the same time, service level agreements (SLAs) may not include those services. The result is a gap in defenses, ENISA said in the report.

Compliance could also prove to be a big problem if the provider can't offer the right levels of certification or the certification scheme hasn't been adapted for cloud services, the report said.

One of the advantages of cloud services is that data can be stored in multiple locations, which could save the day in the event of an incident in one of the data centers. However, it could also be a big risk if the data centers are located in countries with a shaky legal system, according to the report.

Other areas of concern are vendor lock-in, failure of mechanisms separating different companies, management interfaces that get accessed by hackers, data not deleted properly and malicious insiders.

To minimize these risks the report proposes a list of questions that a company needs to ask potential cloud providers. For example, what guarantees does the provider offer that customer resources are fully isolated, what security education program does it run for staff, what measures are taken to ensure third-party service levels are met, and so on.

In the end a good contract can lessen the risks, according to the report. Companies should especially pay attention to their rights and obligations related to data transfers, access to data by law enforcement and notifications of breaches in security, it said.

ENISA's report isn't all doom and gloom, though. Using cloud computing services can result in more robust, scalable and cost-effective defenses against certain kinds of attack, according to the report. For example, the ability to dynamically allocate resources could provide better protection against DDoS (distributed denial-of-service) attacks, ENISA said.