Dirty money

The regulator has increased its enforcement team with hardened former police officers as it targets criminals it believes are behind what amounts to a multi-million-pound landfill tax-evasion scam.

Sepa chairman David Sigsworth said: "We're getting to grips with waste criminals. Our capacity and capability to tackle waste crime is growing in response to the threat.

"Waste crime damages the environment. It undercuts – and takes business away – from legitimate companies. It leads to illegal landfilling and exports, and can also be linked to tax avoidance, intimidation, money-laundering and drugs.

"In plain terms, links to serious organised crime groups in Scotland have to be tackled and challenged."

Enforcement insiders acknowledge that rising landfill taxes – the charge will hit £80 per tonne next year – are making illegal dumps increasingly lucrative for the underworld. The new, higher rate of tax means that just one unlicensed landfill can relatively easily take enough trash to avoid £1 million tax in a month.

"It doesn't take many trucks tipping every day on a site for the tax evasion to get to seven figures," said one insider. "This is a multi-million-pound business."

"Some of these places are astonishingly brazen," said another insider. "They will be in a disused quarry, a coal mine or a farmer's field with lorries coming in and out right under people's noses every day.

"People just assume that because they are so big they must have planning permission and permits. Well, they don't."

The big-hitters of the waste industry have always had some competition from small criminal operators – even unconnected chancers – who bend or break the rules. Gangsters, for example, have long used scrapyards to launder money or as a front for other criminal enterprises, such as car chop shops.

But the Scottish Environmental Services Association (Sesa) admits rising landfill taxes – which they welcome – are incentivising offending.

A spokesman said: "Unfortunately, environmental criminals have been quick to seize upon opportunities presented by the landfill tax escalator, which has inevitably increased waste-disposal costs for many businesses.

"Considerable financial gain can be made by those handling waste outwith the scope of the regulatory regime or operating illegal landfill sites."

Sesa members are feeling the heat. After all, they invest in expensive green technology and pay their taxes, only to be undercut by gangsters.

The spokesman added: "Quite simply, without greater certainty that there will be zero tolerance of environmental criminals who deliberately flout the rules, there will be no market for well-run, legitimate waste-management services.

"More needs to be done to identify new illegal waste sites and shut down existing ones, and there are some positive signs that the authorities are giving this matter some much-needed attention.

The agency is currently trying to map illegal landfills "as a priority".

Sesa executive director Calum MacDonald acknowledges that higher dumping costs and taxes are leading to more crime.

He said: "In recent years, as the costs of landfill disposal have increased, there has been an increase in large-scale, organised, illegal waste activities.

"The overall scale, by their very subversive nature, is difficult to ascertain but can range from a few tonnes to many tens of thousands."

Sepa's response has been to increase its own enforcement by backing them with hardened investigators, a support group that has grown from three in 2005 to 14.

MacDonald said: "The team, which consists of a number of ex-police officers with experience in dealing with organised criminals, provides specialist support for complex investigations and also owns Sepa's intelligence database."

Last year, the watchdog signed intelligence-sharing protocols with the police and is working with the Scottish Government's Environmental Crime Taskforce.

MacDonald said: "In response to the increased illegal waste activities, Sepa has been developing intelligence-led investigations and working closely with partner organisations, such as Scottish Police, HMRC and councils, to tackle large-scale illegal waste activities.

"The link between serious organised crime and illegal waste activities has now been established and a priority for the Environmental Crime Taskforce is to investigate these further."

Sepa's main job is to protect the environment which makes illegal landfills – and their operators – a priority.

MacDonald said: "One of the main issues with illegal waste activities is that they do not have the necessary environmental controls in place.

"Therefore, pollution of groundwater and local watercourses will occur from leachate generated from the waste in addition to vast quantities of greenhouse gases being released.

"Odour and pests may also become an issue and the general amenity of the local environment is undoubtedly affected."

Sepa and other Scottish officials are not against landfill tax. Far from it. Britain's first green levy was introduced in 1996 and has been growing ever since, forcing councils and major corporations to find greener ways of getting rid of rubbish – such as recycling and, more controversially, energy-from-waste technology – than burying it in the ground.

Sepa reckons the amount of waste sent to landfill fell by more than one-fifth between 2005 and 2009 alone.

Crucially, the tax is currently being devolved under a bill being steered through Holyrood by Finance Secretary John Swinney. The proposed law will make Sepa the tax collector – and, for the first time, allow it to go after tax evaded by illegal landfillers and their clients.

Underworld waste companies have already been hit in the pocket. Forty have been convicted in the past four years and one fined a record £200,000. But MacDonald admits that being forced to cough up evaded tax would hurt much more than the current fines.

He said: "Being able to require back payment of tax from operators convicted of operating illegal sites would be a significant additional tool for Sepa and act as a deterrent to operators of illegal sites and those seeking to utilise them."

These words were chosen carefully: Sepa isn't simply interested in chasing criminals. It wants to make legitimate businesses which use illegal landfills pay up, too.

Sepa's Sigsworth has made the agency's intentions clear. In a message to the industry, he said: "Sepa is disappointed – and surprised – that so many companies appear to have known about and been complicit in the activities of illegal operators.

"We're carrying out fresh, robust and vigorous investigations into waste crime, so I'd strongly advise those involved to carefully consider their duties and responsibilities and take stock of their personal and corporate activities and business associations.

"Price is often a strong indicator of criminal activity. If it seems too good to be true then – almost certainly – it is."

Police and prosecutors are worried about the environment too, but can see that Sepa's efforts against illegal landfills are a way of disrupting a lucrative business being carried out by criminals also suspected of being involved in everything from drug-running to racketeering.

Craig Harris is procurator fiscal for wildlife and environmental crime, one of a new breed of specialist prosecutors developed over the last decade who are now working closely with Sepa and police on landfillers and commercial flytippers.

"Due to the potential profits to be made in the waste-management business, it is not uncommon to see elements of organised crime involved in illegal enterprises," Harris said. "These criminals make illegitimate gains, cheat the public by evading tax, destroy our environment and steal trade from law-abiding businesses."

Earlier this year prosecutors made their first confiscation order under Proceeds of Crime legislation for an environmental offence.

Harris added: "The Crown Office will continue to use innovative ways to pursue anyone who has profited from illegal activities, regardless of the nature of the offence, even if it means taking income made legitimately after the date of conviction.