What is economic crime

Economic crime is a significant area of criminal activity, involving various forms of illegal activity aimed at obtaining financial gain or advantage. This type of crime can take many forms, including fraud, corruption, tax evasion, money laundering and embezzlement, and often involves sophisticated methods to circumvent the law. Economic crime has serious consequences not only for the victims but also for the economy as a whole, as it distorts markets, undermines trust in economic institutions and creates inequalities in society. Combating this form of crime requires a combination of effective legislation, strict supervision and international cooperation.

What is economic crime?

Economic crime is a type of crime that targets financial gains or property benefits through illegal or unethical practices. This type of crime can include various forms of fraud, corruption, money laundering, tax evasion, embezzlement and other illegal activities related to trade, business and financial management.

Economic crime is often linked to complex transactions and networks, which can make it difficult to detect and investigate. It can have serious consequences not only for individuals and companies, but also for the economy as a whole, as it can undermine confidence in economic institutions and destabilise markets. Examples include investment fraud, misuse of public funds, corrupt practices or falsification of accounts.

To combat economic crime, there are special bodies and legal instruments that aim to detect and punish the perpetrators of these crimes.

Terminology

In the field of economic crime, specific terms and terminology are used to describe different types and aspects of economic crime. Here are some of the most common terms:

1. Fraud(Fraud): is the deliberate misrepresentation for financial gain or other advantage. Fraud may involve lying, falsifying documents, concealing important information or other manipulative practices.

2. Corruption: unethical or illegal conduct in which a person of influence in an area (e.g. a public official) accepts or offers bribes to obtain or give undue advantage.

3. Money laundering (money laundering): the process by which illegally obtained money (e.g. from criminal activities) is converted into legal funds through a series of transactions in order to conceal its true origin.

4. Tax evasion (tax evasion): illegal practices aimed at avoiding the payment of taxes, for example by falsifying tax returns or concealing income.

5. Sprenevera(embezzlement): the unauthorised use or transfer of property which has been entrusted to a person or entity in trust, with the aim of enriching oneself at the expense of the owner of that property.

6. Insider trading: unauthorised trading in securities on the basis of inside information that is not publicly available, with the aim of making a financial gain.

7. Bribery (bribery): the giving or receiving of money, gifts or services in order to influence a person’s decision-making in the public or private sphere.

8. Counterfeiting (forgery): the creation of false documents or other materials in order to deceive or defraud other people or institutions.

9. Misuse of confidential information (breach of confidentiality): the unauthorised use of confidential information obtained in the course of an employment or other relationship for one’s own benefit or for the benefit of third parties.

10. Cartel agreements (cartel agreements): illegal agreements between competitors which have the object of restricting competition in a market, for example by fixing prices, limiting output or dividing the market.

11. Economic crime (white-collar crime): crime committed by people from higher social classes or high-level employees, often in the course of their professional activities. The term is used to refer to crimes that are linked to economic activity, such as fraud, embezzlement or insider trading.

12. Financial fraud (financial fraud): crimes related to financial transactions, such as fraudulent investment schemes, fraudulent loans or bank fraud.

These terms are key to the understanding and analysis of economic crime and are often used in a legal context to refer to specific types of wrongdoing.

What types of economic crime do we know?

Economic crime encompasses a wide range of illegal activities aimed at financial gain. The main types of economic crime you may commonly encounter are:

Scams

• Credit fraud: obtaining credit on the basis of false information or with the intention of not repaying it.
• Insurance fraud: the deliberate causing or pretending to cause damage in order to wrongfully obtain an insurance claim.
• Investment scams: scams such as Ponzi schemes, where the perpetrator promises high returns on investments that are financed with new investors’ money.
• Credit card fraud: the unauthorised use of someone else’s credit or debit card to make purchases or withdrawals.

Corruption

• Bribery: the giving or receiving of bribes to influence decisions in the public or private sector.
• Abuse of power: public officials or employees use their position for personal gain or to favour certain entities.

Money laundering

• Money laundering: the process by which illegally obtained funds are ‘cleansed’ to appear legal.
• Terrorist financing: the provision of funds to support terrorist activities, often linked to money laundering.

Tax evasion

• Concealment of income: hiding some or all of your income from the tax authorities.
• Fictitious expenses: claiming non-existent or inflated expenses in order to reduce tax liability.
• Offshore accounts (tax havens): hiding income in offshore accounts where there is less or no tax liability.

Sprenevera

• Misappropriation of company funds: the unauthorised use of employer funds for personal purposes.
• Misuse of trust funds: the use of trust funds or other forms of entrusted property for purposes other than those intended.

Counterfeiting

• Document forgery: the creation or alteration of documents (e.g. contracts, bills of exchange, cheques, identification documents) for the purpose of fraud.
• Counterfeiting money: the creation of counterfeit banknotes or coins.

Insider Trading

• Insider trading: buying or selling securities on the basis of information that is not publicly available in order to make a profit.

Cartel agreements

• Price fixing: agreements between competitors to fix prices jointly, which is against the principles of free competition.
• Market sharing: agreements between competitors to divide markets according to geographic areas or customers.

Economic crime

• Fraud against investors: for example, false information in securities prospectuses or company financial reports.
• Fraud within companies: false accounting, hiding financial problems or deceiving shareholders.

These types of economic crime can be intertwined and can have serious consequences. Regulators therefore pay considerable attention to their prevention, detection and punishment.

Penalties for economic crime

Penalties for economic crime in Slovakia depend on the specific type of crime, the seriousness of the offence, the amount of damage caused and other circumstances. The Slovak Criminal Code contains specific provisions relating to different types of economic crime and provides for appropriate penalties for them. Some of the levels of penalties as defined by the law:

Punishment for fraud

Fraud can be punishable by imprisonment from 1 to 15 years, depending on the amount of damage caused and whether it was an organised group or a repeated offence. The greater the damage caused, the higher the penalty.

Punishment for corruption

Corrupt practices, such as accepting or giving bribes, can be punished by imprisonment from 2 to 12 years. If the perpetrator is a public official or the bribe is large, the penalties are increased.

Money laundering

Money laundering can be punishable by imprisonment from 2 to 20 years, depending on the amount of money “laundered” and other circumstances, such as membership of an organised group.

Penalty for tax evasion

Tax evasion can lead to a prison sentence of between 1 and 12 years, depending on the amount of money being concealed and whether it was an organised group.

Punishment for embezzlement

For embezzlement, the offender can be punished by imprisonment from 1 to 15 years, depending on the value of the embezzled property. Higher penalties apply for large values and repeated offending.

Penalty for forgery

Forgery of documents, money or other materials can be punishable by imprisonment from 1 to 10 years, depending on what documents have been forged and the damage caused.

Punishment for cartel agreements

Participation in a cartel agreement can be punishable by 2 to 8 years’ imprisonment. This depends on the seriousness of the agreement and the consequences for the market.

In addition to imprisonment, other sanctions such as fines, prohibition of activities (e.g. prohibition to exercise a profession or business), forfeiture of property or prohibition of residence may be imposed on perpetrators of economic crime.

The court may also take into account various mitigating or aggravating circumstances, such as cooperation with law enforcement, mitigating family circumstances, prior criminal proceedings, or the extent of complicity in the offence.

How many economic crimes are committed in Slovakia

Economic crime is one of the monitored areas of crime in Slovakia, encompassing various forms of economic crime, such as fraud, corruption, tax evasion, counterfeiting, money laundering and other crimes related to the financial sphere.

According to the available statistics of the Ministry of Interior of the Slovak Republic and the Police Corps of the Slovak Republic:

• Year 2022: approximately 10 000 crimes related to economic crime were registered in Slovakia.
• Year 2021: around 9 500 cases of economic crime.

The most commonly committed economic crimes include:

• Tax fraud and evasion: one of the most widespread, especially in the area of VAT and income taxes.
• Corruption and bribery: cases involving the giving or receiving of bribes, abuse of position.
• Fraud: includes various forms of financial fraud, including insurance fraud, bank fraud, etc.
• Money laundering: the laundering of the proceeds of crime through various financial transactions.

The number of economic crimes can fluctuate depending on various factors, such as economic crises, changes in legislation, or improvements in crime detection techniques. Recent years have seen an increasing number of sophisticated forms of economic crime, including cyber fraud.

Publicised cases of economic crime in Slovakia

In Slovakia, a number of cases of economic crime have been reported in the media in recent years and have attracted a great deal of public attention. Among the most well-known are:

The Váhostav case

Váhostav, one of the largest construction companies in Slovakia, ran into financial problems and decided to restructure in 2015. However, this restructuring resulted in many small creditors losing a large part of their claims. This case caused a huge outcry as it turned out that while small creditors lost money, the owners of the company and some large creditors received favourable terms.

The Ladislav Bašternák case

Ladislav Bašternák, a businessman close to political circles, has been accused of tax fraud related to fictitious real estate deals. This case has become a symbol of the problems with corruption and abuse of the tax system in Slovakia. In 2019, Bašternák was sentenced to five years in prison.

The Bonul case

The Bonul security service, run by Nitra businessman Miroslav Bödör, has been linked to allegations of corruption and influencing public contracts. Bödör was close to government politicians and his company won many lucrative state contracts, raising questions about possible corruption and clientelism.

The case of Jozef Majský

Jozef Majský, a former businessman, was involved in the case of the non-banking companies BMG Invest and Horizont Slovakia, which collapsed in 2002 and deprived thousands of people of their savings. Majský was accused of bankrupting these companies and after a long trial he was finally sentenced to nine years in prison in 2020.

Case Slovak Land Fund

This case concerned suspicious transfers of state land to private individuals at suspiciously low prices. The case became public knowledge after it was discovered that land that should have been in the hands of the state had been transferred into the ownership of private individuals close to government politicians.

The Cattleman’s Cause

This is a major corruption scandal involving agri-subsidies, where several people have been charged, including former high-ranking officials and businessmen. The case involved alleged bribery in the handling of subsidies and influencing tenders.

These cases are only part of a series of cases that have shaken public confidence in state institutions and the legal system in Slovakia. All of these cases have had a wide media coverage and have contributed to increasing the public debate on the fight against corruption and economic crime in the country.

In conclusion

Economic crime is a serious problem in Slovakia, with widespread impacts on the economy, public finances and citizens’ trust in the legal system. Although the competent authorities are actively trying to combat this form of crime, the development and sophistication of economic crime requires constant improvements in technology and legislative measures. Cooperation between the state, the private sector and civil society is essential to effectively curb economic crime and ensure a healthy economic environment for all.