Economic crimes

Economic crimes

Economic crimes cover a wide range of offences, including swindling and fraud, money laundering, corruption, intellectual property crime and environmental crime . Criminal investigations primarily tackling some other form of crime, such as drug trafficking , terrorist activities or trafficking in human beings (THB) , usually also include economic crimes, such as money laundering.

Economic crimes often have a cross-border element: criminals move their assets to other countries to try to avoid freezing or confiscation orders. Working together to trace, freeze and confiscate assets that have been acquired by breaking the law is a strategic priority in the European Union’s fight against organised crime and a major focus of Eurojust’s casework.

Eurojust has built up significant institutional knowledge of solutions and best practice, which can significantly improve the effectiveness of the investigations, prosecutions and ultimately the recovery of criminal proceeds.

Swindling and fraud

In a general sense, the crime type of swindling and fraud comprises the act of illegally depriving another person or entity of money, property or legal rights. The perpetrator deliberately deceives the victim about facts. This deception results in an error on the part of the person who has been deceived, which in turn causes the victim, for instance, to hand over money, surrender things or provide services. This causes the deceived person or a third person to suffer financial loss and, at the same time, leads to an unlawful enrichment of the perpetrator or another person.

Swindling and fraud come in many shapes and forms, such as investment fraud, insurance fraud, benefit fraud, tax and excise fraud or consumer fraud. Since these crimes usually combine high profits and low risks, they are popular with organised crime groups (OCGs). The perpetrators often operate across borders, benefitting from differences in national legislations and adding complexity to the investigations required to uncover these criminal acts. Moreover, recent years have seen a rapid growth in fraud committed on the internet, with criminals taking advantage of huge numbers of unsuspecting users.

To guarantee effective prosecution of swindling and fraud, international judicial cooperation is paramount.


Types of fraud

Some of the most common types of fraud include:

  • tax fraud: the illegal evasion of taxes by individuals or entities, ranging from knowingly underreporting taxable income or overestimating business deductions to sophisticated international VAT carousel frauds;

  • excise fraud: a variation of tax fraud in which import duties or taxes are evaded by smuggling or illegally importing excise goods, illegally manufacturing excise goods or diverting excise goods, for example alcohol, cigarettes or fuel;

  • counterfeiting: fraudulently imitating or copying items with the intent to deceive, for instance consumer products, food, pharmaceuticals, technical products such as parts for aircraft or automobiles, artworks, money or documents (forgery);

  • investment fraud: luring investors to make purchase or sale decisions based on false information, often in variations of boiler room schemes, Ponzi schemes or pyramid schemes, resulting in high losses of the victims, and

  • benefit fraud: illegally claiming benefits a person is not entitled to, for instance unemployment benefits, grants, pensions or compensations, by providing false information or not reporting changes in the circumstances determining the eligibility for receiving such benefits.

 

Money laundering

Transnational criminal networks have one thing in common: money. Organised criminal activity is profit-driven, and all crime groups need resources to finance their activities. This is where money laundering comes into play. The introduction of illegally obtained assets into the legal financial and economic cycle aims to provide criminals with explainable and seemingly legal resources that make it increasingly difficult to be traced back to their true source.

Effective prosecution of money laundering including the recovery of illegally obtained assets contributes significantly to a successful fight against organised crime. As profits are taken away from perpetrators, crime becomes less attractive. At the same time, decisive action against money laundering prevents assets from being used to commit further criminal offenses.


Stages of money laundering

Money laundering is not a single act, but rather a process that can be divided into three stages.

  1. Placement stage: the proceeds of crime are, for the first time, introduced into the legal financial system, often broken up into smaller amounts. . The risk of being discovered is particularly high in this phase.

  2. Layering stage: financial transactions take place, which are often complex and involving banks and/or companies in multiple countries. The main objective of this phase is to separate the illegally acquired funds from their source, thereby obscuring the paper trail and severing any connection to the original crime. Through mostly international transactions, the funds are moved around between several actors in order not to be discovered. For this purpose, loopholes in the legal provisions of the respective countries may be used.

  3. Integration stage: the money comes back to the criminal from a seemingly legal source. The aim is to reunite the money with the criminal without attracting attention, while giving the money the appearance of legal origin. This money is subsequently reinvested in the legal economic cycle, for example through real estate, luxury goods or business ventures.