Customs and Excise officials should no longer carry out their own prosecutions, a judicial review has said.
The ruling follows a string of collapsed fraud trials
The review followed a string of collapsed multi-million pound fraud trials.
Mr Justice Butterfield, who carried out the review, said Customs should keep the right to investigate cases.
But the prosecutions should be conducted by "lawyers who are wholly independent", he said.
He suggested an independent prosecuting authority be set up specifically for customs cases such as smuggling and fraud.
The Butterfield review was sparked by the collapse of the London City Bond warehouse
prosecutions in Liverpool Crown Court on 26 November 2002.
These fell apart when the court heard customs officers had encouraged the offences in a sting operation.
The then owner of the warehouse had become an informant, telling Customs about alcohol meant to leave the UK but actually being sold to the domestic market.
Customs officers misled the court by not telling the defence the warehouse owner was actually an informant - thus meaning the accused could not have a fair trial.
The Butterfield review gave several other recommendations about changes which should be made.
Looking in particular at how Customs dealt with excise diversion fraud - where goods meant for export are sold in the UK without any duty being paid - it found a number of failings.
This included an "absence of strategic approach... poor communications; serious
deficiencies in the handling of informants; and failure to comply with
But the judge pointed out that the events in question had taken place in the 1990s, and many improvements had been made since then.
John Healey, Economic Secretary to the Treasury, also said things had improved.
"We've found no enticement, no entrapment, no encouragement by Customs to commit crimes, that's important," he told BBC News.
But defence solicitor Matthew Frankland described the scale of the problems which had led to the review.
"Potentially £2bn of taxpayers money has gone out the door, nobody really knows where that has gone.
An informant worked at a warehouse at the centre of scams
"Eighty-odd people have been convicted, and their convictions have now been overturned.
"A hundred million pounds have been spent trying to prosecute these cases and then deal with them in the appeal courts.
"And the whole integrity of Customs and Excise has been destroyed."
Mr Healey said Customs would implement all of the recommendations of the report and "continue to rebuild its reputation as an effective law enforcement agency".