The need to combat economic crime at a time of economic crisis

Bodewig, Kurt (2009): The need to combat economic crime at a time of economic crisis. Committee on Economic Affairs and Development, Parliamentary Assembly, Council of Europe.

Outline of report

I. Introduction: the new challenges posed by economic crime

1. Economic crime currently takes many forms. The main varieties are corruption, money laundering, cybercrime and organised crime.

2. Economic crime has long existed and has adapted itself to the modern world. Not only has it been transformed but it has also benefited from a tardy response from official agencies. The geopolitical upheavals of the last twenty years, the considerable progress towards globalisation and the major role now played by new means of communication, particularly the Internet, have all offered these forms of crime new fields of action and new operating methods. It is currently difficult to quantify financially and is probably underestimated, but it varies greatly between member states, ranging from at least 10% of GDP in Austria, Switzerland and the Netherlands to more than 60% in Georgia and Azerbaijan.

3. Quite apart from its financial repercussions, the economic crisis that has recently erupted in the Council of Europe's member states has further highlighted the issue of economic crime. This very often leads to human rights violations and poses a threat to democracy and the rule of law in numerous countries, particularly those known as the "new democracies", where the rule of law is still very fragile.

4. The Council of Europe also works closely on this subject with other international and European organisations, such as the Organisation for Economic Co-operation and Development (OECD), the World Bank, the European Union, the European Bank for Reconstruction and Development (EBRD), the United Nations, Europol and Eurojust. The European Union's Freedom, Security and Justice Directorate has developed a number of programmes to combat organised crime, such as the Octopus programme against corruption in eastern Europe, and it also fosters judicial co-operation through its Falcone programme, aimed at strengthening exchanges, training and co-operation between persons responsible for fighting organised crime. The OECD's Directorate for Financial and Enterprise Affairs (DAF) has made the fight against corruption a priority, via the Anti-Bribery Convention and a working group, which on 19 June 2009 issued a policy statement on bribery in international business transactions. The group acknowledges that "the global economic crisis may lead to increased competitive pressures on companies to potentially engage in corruption, notably in public procurement" and reaffirms that the fight against bribery remains a high priority.

II. Corruption

5. Corruption is an endemic disease that the Council of Europe takes very seriously, particularly through its Group of States against Corruption (GRECO) partial agreement. GRECO was established by the Council in 1999 to monitor member states' compliance with its anti-corruption rules and now has 46 members (45 member states plus the United States). Its main purpose is to combat bribery and corruption, which are still major problems in many of our member countries. It also offers advice on how to improve legislation. On 5 October, GRECO will be holding a conference to mark its tenth anniversary. It will be attended by the Council of Europe's Secretary General and numerous ministers of justice from members of the partial agreement. Since 2002, the Council of Europe has produced various legal instruments in this area, such as the Criminal Law Convention on Corruption (CETS 173) and its additional protocol and the Civil Law Convention on Corruption (CETS 174).

6. The Council of Europe's Parliamentary Assembly has also discussed this issue. A number of committees have looked at various aspects of bribery and corruption. Reference might be made to the report of Mr Alain Cousin or the report on judicial corruption by our colleague Kimmo Sasi of the Committee on Legal Affairs and Human Rights. The aim, therefore, is to offer a comprehensive overview of an issue that is a critical element of economic crime.

III. Money laundering

7. Economic crime has evolved considerably since our committee's report on the subject in 1997 . The 11 September 2001 and the resurgence of terrorist violence, followed by the economic crisis since 2008, have made the problem of money laundering much more complex and difficult to comes to grips with and counter. As the rapporteur stated in 1997, with a certain prescience, "economic crime, including the phenomena of money laundering and corruption, have over recent years grown to such an extent as to pose a serious threat not only to the economic and social stability of many countries and indeed the world, but even to the rule of law and democracy itself." The financing of terrorism through money laundering, via banks and tax havens, requires us to treat this problem very seriously, witness the different coloured lists of tax havens issued by the OECD and the debate on ending banking secrecy. To combat this scourge, the Council of Europe has adopted the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (CETS 141), which came into force in September 1993, followed by the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism (CETS 198), which came into force in May 2008.

8. Combating money laundering is now a major Council of Europe activity. It co-operates closely with FATF (Financial Action Task Force), an intergovernmental body that draws up and promotes policies to counter money laundering and terrorism financing at both national and international levels, and has its own highly effective tool, MONEYVAL, or the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, which regularly monitors the measures taken by member states to combat money laundering. The Council of Europe also organises technical co-operation projects, particularly the MOLI projects, in certain countries such as the Russian Federation, Ukraine and Moldova, on the basis of MONEYVAL recommendations.

IV. Cybercrime and organised crime

9. The fall of the Berlin Wall and the end of the cold war, together with the development of new means of communication, have encouraged globalisation, which is reflected in a number of new tools, particularly the Internet. The latter is used not just to disseminate ideas but also for economic transactions and financial capital movements. It is now common practice to purchase products on line, transfer shares and manage bank accounts from home. Simultaneously though, economic crime on the Internet has also developed rapidly. It is often well in advance of the resources available to counter this new form of criminal behaviour.

10. This is why the issue has to be taken so seriously, particularly in a period of economic crisis. The example of Northern Rock in September 2007, where cybercriminals had clients' names, addresses and contact details just two weeks after the bank's collapse, shows just how important it is to develop rapid and appropriate forms of response to this new type of crime.

11. The Council of Europe is now trying to fill the gaps through its legal instruments, particularly its Convention on Cybercrime (CETS 185), which is the only binding international treaty on the subject and has been signed by numerous member states and non-members such as the United States, Canada, Japan and South Africa. There is also co-operation with Morocco, Nigeria and the Dominican Republic. Once a year a committee consults the various signatories and the Council of Europe has fostered a number of initiatives, such as training in cybercrime for judges and prosecutors and the joint project with the European Commission against cybercrime in Georgia.

12. Organised crime, of which cybercrime is very often one aspect, has of course followed the same path. The development and adaptation of mafias in their various areas of activity, such as drugs, cigarettes, alcohol, prostitution and sexual tourism, arms, human organs, counterfeiting and casinos, are the subject of another report of our committee, on the underground economy. So as not to encroach too much on this report, the rapporteur will simply draw attention to mafia links with cybercrime and ways of combating these threats to economic recovery, following the crisis.

V. Judicial co-operation

13. Economic crime now knows no frontiers. It is transnational and multidimensional. Even if it focuses on one country, its effects are international because all market economies are closely interlinked. The new criminals are no longer active in specific, identifiable territories. To be effective, therefore, the response cannot be national, but European or international. Consultation and judicial co-operation appear to be the only effective means of combating economic crime.

14. The judicial authorities and police forces of the different Council of Europe member states, and beyond, must work together to offer a response to the major threat posed by this phenomenon. The Council of Europe has understood this and has launched a process aimed at strengthening its member states' capacity for action, particularly through projects such as PROSECO on south-east Europe (Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia, "The former Yugoslav Republic of Macedonia" and MINUK/Kosovo), which aims to strengthen their legislation and the institutional capacities of their prosecution services, and to establish judicial co-operation based on the Community acquis and European and international standards. The UPIC (International Co-operation in Criminal Matters in Ukraine) project is also part of the process. It involves judicial and police co-operation against organised crime to make Ukraine's legislation, more effective.

VI. Conclusion

15. Economic crime has undoubtedly expanded in this period of economic crisis. Bribery and corruption, money laundering, cybercrime and organised crime are all offences that deprive governments of financial resources and the necessary economic and political means to relaunch our economies. The Council of Europe is now at the forefront of the fight against economic crime. Its various instruments are acknowledged by all and its different projects are evidence of its great experience in this area.

16. The main objectives of this report will be partly to identify the different faces of economic crime but above all to put forward recommendations on how the Council of Europe's member states should adapt their legal responses to the new context and to propose a legal strategy based on the instruments that the Organisation has to offer.