Economic crime

Owing to the generally recognized difficulty of giving an exact definition of economic crime, the European Committee on Crime Problems of the Council of Europe found it necessary to delimit the concept by means of the following list of offences: (a) cartel offences; (b) fraudulent practices and abuse of economic situation by multinational companies; (c) fraudulent procurement or abuse of state or international organizations' grants (d) computer crime (theft of data, violation of secrets, manipulation of computerized data); (e) bogus firms; (f) faking of company balance sheets and book-keeping offences; (g) fraud concerning economic situation and corporate capital of companies; (h) violation by a company of standards of security and health concerning employees; (i) fraud to the detriment of creditors (bankruptcy, violation of intellectual and industrial property rights); (j) consumer fraud (in particular falsification of and misleading statements on goods, offences against public health, abuse of consumers' weakness or inexperience); (k) unfair competition (including bribery of an employee of a competing company) and misleading advertising; (l) fiscal offences and evasion of social costs by enterprises; (m) customs offences (evasion of customs duties, breach of quota restrictions); (n) offences concerning money and currency regulations; (o) stock exchange and bank offences (fraudulent stock exchange manipulation and abuse of the public's inexperience); (p) offences against the environment.

Economic crime causes loss to a large number of people (partners, shareholders, employees, competitors, creditors), to the community as a whole, and even to the state, which has to bear a heavy financial burden or suffers a considerable loss of revenue; it harms the national and/or international economy and causes a certain loss of confidence in the economic system itself.

Economic crimes constitute a large proportion of the dark figure of unreported or insufficiently reported crimes. These appear to cause economic and social institutions and the public much greater harm than is suggested by the small number of crimes which are successfully prosecuted, because they trigger off chain reactions. Sweden has found that the receipts of different kinds annually withheld from taxation, through tax offences of a systematic kind in various economic activities, run to very substantial amounts; and a recent calculation of the taxation revenue withheld annually shows that in Sweden some 10% of the GNP escapes tax. This figure includes tax evasion by individuals as well as by large business firms.

A comparative study of economic and ordinary crime further shows the former's potential victims to be much more numerous than those of the latter: partners or shareholders (in the case of offences against company law, such as non-existent, inaccurate or incomplete accounts), the state (tax evasion); employees (failure to comply with labour legislation especially in respect of health and safety regulations); competitors (interference with free competition, whether direct by means of cartels, or indirect by means of misleading advertisement); consumers (sometimes the same offences as the preceding category, but also offences in connection with price regulations or the quality of the goods offered); people with small savings (stock exchange offences); and neighbours or local residents (pollution of the environment). Such fraudulent practices are familiar and economic crime continues to increase; so much so that the question has often been asked whether the essential factor does not lie in the very economic systems of societies of a liberal type, where free enterprise in a market economy fosters, perhaps even stimulates, the commission of offences. But whilst certain forms of economic crime seem clearly to be associated with a specific economic system (interference with free competition), their equivalent none the less exists elsewhere (non-observance of the rules laid down in the plan). On the other hand, offences which seem totally independent of the economic system are on the increase almost everywhere in the world: tax evasion, customs offences, trafficking in foreign currencies (where exchange controls exist), pollution of the environment, infringements of labour legislation, and so forth.

According to the prosecutor general in Russia, the scale of the economic crime problem had overwhelmed them. They had only 36,000 people in 300 police districts, 300 of whom lost their lives in 1992, and prosecuted 18,000 people for murder, 10,000 for rape but only 1,000 each for bribe taking, 1,000 embezzlement and corruption.

In 1998, the European Commission's task force UCLAF investigated 5,318 cases in which it was suspected that EU rules and procedures had not been respected or that EU aid had been diverted. Fraud was uncovered in some 20% of these cases.