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ACCORDO N° 2013 -1-IT2-ERA10-52933
Organized crime and
economic activities
A specific area of criminal law
dr Janusz Bojarski
Chair of Criminal Law and Criminal Policy
Nicolaus Copernicus University
Torun, Poland
[email protected]
On 23 June 2014 Polish Foreign Minister Radek
Sikorski said in Luxembourg, where he was
attending a meeting of EU foreign ministers:
• “The government has been attacked by an
organized crime group. I hope the
members of this group will be identified...”
Friedrich Schneider
At an estimated €2 trillion, the shadow
economy in Europe is significant—ranging
from 10 percent of gross domestic product
(GDP) in the United Kingdom to almost 40
percent in some Central and Eastern
European countries
How Much Has the Shadow
Economy Grown?
In the 21 OECD countries surveyed the shadow
economy has been growing for 30 years—doubling from
less than 10 percent of GDP in most of these countries
in 1970 to 20 percent or more of GDP by 2000 in
Belgium, Denmark, Italy, Norway, Spain, and Sweden.
Growth has also occurred in countries with smaller
shadow economies; in the United States, for example,
the shadow economy doubled from 4 percent of GDP in
1970 to 9 percent in 2000.
The Growth of the Underground Economy, Friedrich
Schneider with Dominik Enste, 2002 International
Monetary Fund
Shadow economy
Problems:
• what is „shadow economy” (Underground,
Unobserved, Non-Observed, Unrecorded
Economy)?
• is „shadow economy” something bad or
good? what about red tape? what about
low quality of legal regulations?
• is „shadow economy” something similar to
organized crime?
Shadow Economies All over the World: New Estimates for
162 Countries from 1999 to 2007,
Friedrich Schneider, Andreas Buehn and Claudio E.
Montenegro,
The World Bank July 2010
...shadow economy includes all market-based legal
production of goods and services that are
deliberately concealed from public authorities for any of
the following reasons:
(1) to avoid payment of income, value added or other taxes,
(2) to avoid payment of social security contributions,
(3) to avoid having to meet certain legal labor market
standards, such as minimum wages, maximum working
hours, safety standards, etc.,
(4) to avoid complying with certain administrative
procedures, such as completing statistical questionnaires
or other administrative forms.
Polish companies have the power, to carry on any business
activities with some exceptions established in Act on Freedom of
Economic Activity (Ustawa o swobodzie gospodarczej) 2004.
These exceptions where permit, license or approval shall be
required for the economic activity to determined in the
provisions:
1) Act on Upbringing in Sobriety and on Counteracting Alcoholism 1982 (Dziennik Ustaw 2002, No. 147, item 1231)
2) Act on Gaming and Mutual Betting 1992 (Dziennik Ustaw 2004, No. 4, item 27)
3) Act on Special Economic Zones 1994 (Dziennik Ustaw 1994, No. 123, item 600)
4) Act Maintaining Clean and Orderly Condition in local self government units1996 (Dziennik Ustaw 1996, No. 231. item 662)
5) Act counteracting drug addition 2005 (Dziennik Ustaw 2005, No. 179, item 1485);
6) Road Traffic Law 1997 (Dziennik Ustaw 2003, No. 58, item 515)
7) Act on Trading in financial instruments 2005 (Dziennik Ustaw 2005, No. 183, item 1538);
8) Act on Public offer and the conditions of introducing financial instruments to organized trading system and on public companies 2005 (D.Ustaw 2005, No. 184, item 1539);
9) Act on Organisation and Operation of Retirement Pension Funds 1997 (Dziennik Ustaw 2004, No. 159, item 1667)
10) Telecommunications Law 2000 (Dziennik Ustaw 2000, No. 73, item 852)
11) Act on Commodity Exchanges 2000 ((Dziennik Ustaw 2000, No. 103, item 1099)
12) Act on Waste 2001 (Dziennik Ustaw 2001, No. 62, item 628)
13) Law on Measures 2001 (Dziennik Ustaw 2001, No. 63, item 636)
14) Act on Collective Water Supply and Collective Wastewater Disposal 2001 (Dziennik Ustaw 2001, No. 72, item 747)
15) Act 2001 on Genetically Modified Organisms 2001 (Dziennik Ustaw , No. 76, item 811)
16) Act on Animal Feedstuffs 2001 (Dziennik Ustaw 2001, No. 123, item 1350)
17) Pharmaceutical Law 2001 (Dziennik Ustaw 2004, No. 53, item 533)
18) Act of 6 September on Road Transport 2001 (Dziennik Ustaw 2001, No. 125, item 1371)
19) Act on Fisheries 2004 (Dziennik Ustaw 2004, No. 62, item 574);
20) Aviation Law 2002 (Dziennik Ustaw 2002, No. 1 30, item 1112);
21) Act on Electronic Payment Instruments 2002 (Dziennik Ustaw 2002, No. 169, item 1385);
22) Act on Insurance Activity 2003 (Dziennik Ustaw 2003, No. 124, item 1151)
23) Act on Insurance Mediation 2003 (Dziennik Ustaw 2003, No. 124, item 1154)
24) Postal Law 2003 (Dziennik Ustaw 2003, No. 130, item 1188)
25) Act on Excise Tax 2004 (Dziennik Ustaw 2004, No. 29, item 257, No. 68, item 623);
26) Act on Investment Funds 2004 (Dziennik Ustaw 2004, No. 146, item 1546);
27) Act on Experiments on Animals 2005 (Dziennik Ustaw 2005, No. 33, item 289);
28) Act on Forests 1991 (Dziennik Ustaw 2005, No. 45, item 435)
29) Banking Law1997;
30) Nuclear Law 2000 (Dziennik Ustaw 2004, No. 161, item 1689).
31) Act on digital tachograph system 2005 (Dziennik Ustaw 2005, No. 180, item 1494).
32) Act on Road Transport 2001;
33) Act on Railway Transport 2003 (Dziennik Ustaw 2003, No. 86, item 786)
34) Act on Finality of Settlements Effected Through Payment Systems and Securities Settlement Systems and Principles of Supervision of These Systems 2001 (Dziennik
Ustaw 2001, No. 123, item 1351)
B. Mroz, The Shadow Economy in Poland
and its Socio-Economic Implications
Most of the unregistered business goes through legally
operating enterprises.
An attempt to present all forms of unregistered economic
activity in Poland would be as ambitious a task as it is
unfeasible,
Shadow economy fall into one of these two categories: tax
avoidance and unregistered employment.
Transnational corporations are no strangers to the practice
of transfer pricing,
The public service, poorly run, inefficient and indebted,
offers a wide range of extra-income opportunities for
physicians, nurses and managers
Shadow economy and other criminal
law statutes
1.
2.
3.
4.
5.
6.
Act of 11th January 2001 on chemical substances and
preparations
Act of 27th April 2001 on wastes
Act of 22nd June 2001 on genetically modified
organisms
Act of 16th April 1993 on combating unfair
competition
Act of 4th February 1994 on copyright and related titles
Act of 15th September 2000 - the Code of Commercial
Companies
Act on Counteracting Money Laundering and Counteracting Financing
Terrorism
Article 2:Whenever this Act refers to: obligated institution: it shall mean
banks, including the National Bank of Poland - within the scope it operates bank accounts of legal
persons, numismatics sale, gold purchasing and exchange of damaged legal tender in
accordance with the provisions of the law of 29 August 1997 on the National Bank of Poland
(Journal of Laws No. 140, item 938 with subsequent amendments), foreign bank branches,
electronic money institutions, branches of foreign electronic money institutions and settlement
agents on the basis of the Law of 12 September 2002 on electronic instruments of payment
(Journal of Laws No. 169, item 1385 and 2004 r. Journal of Laws No. 91, item 870 and No. 96,
item 959), investment companies and trustee banks according to the Law of 29 July 2005 on
circulation of financial instruments, as well as the subjects defined in the Art. 71 item 1 of this Act,
foreign legal persons conducting in Poland a brokerage activity in the scope of the turnover of the
goods of merchandise exchange, goods brokerage houses as defined in the Law of 26 October
2000 (Journal of Laws No. 121, item 1019 and No. 183, item. 1537 and 1538) on merchandise
exchange and trading companies referred to in the Art. 50 the Law of 26 October 2000 on
merchandise exchange, Joint Stock Company National Depository for Securities S.A. in the
scope, in which it keeps the securities’ accounts, entities conducting activity involving games of
chance, mutual betting and automatic machine games, and automatic machine games with low
prizes, insurance companies, the main branches of foreign insurance companies, investment
funds, investment funds societies, co-operative savings and credit banks, state public utility
enterprise Polish Post, notaries public insofar as notaries procedures concerning dealings in the
said property values are concerned, counsels performing their profession, legal advisers
performing their profession outside their labor relationship, foreign lawyers rendering legal aid
outside their labor relationship, competent auditors performing their profession, tax advisers
performing their profession, entities engaged in currency exchange, entrepreneurs running
auction houses, antique shops, conducting leasing and factoring activity, activity in the scope of
precious and semi-precious metals or stones trade, commission sale, giving loans on pawn
(pawnshops) or real estate agents and foundations;
Percentage participation of obliged
institutions in number of reports sent
to GIFI in 2007 and 2008
• banks – 95.90% in 2007, 96.11% in 2008
• co-operative savings and credit banks – 2.01%
in 2007, 1.55% in 2008
• brokerage houses – 0.96% in 2007, 1.63% in
2008
• insurance companies – 0.24%in 2007, 0.31% in
2008
Number of reports on suspect
transactions sent to GIFI by obliged
institutions
1400
banks
1200
1000
co-operative
savings and
credit banks
brokerage
houses
800
600
400
200
0
insurance
companies
2007
2008
Risk of such situation
• obliged institution (financial institutions)
are placed in a „grey zone” between legal
and criminal activity
Organized crime vs. legal economy
•
•
•
•
•
counterfeiting products
smuggling
dispose of waste
tax avoiding
human trafficking – forced labour
(low/no work cost)
THE ECONOMIC IMPACT OF
COUNTERFEITING AND PIRACY
OECD report 2007
• Analysis carried out in this report indicates
that international trade in counterfeit and
pirated products could have been up to
USD 200 billion in 2005.
• Counterfeiting and piracy are illicit
businesses in which criminal networks
thrive.
Source: Kroll 2013/2014 Global Fraud Report
http://ww2.cfo.com/accounting-tax/2013/11/globalsupply-chains-open-door-fraud/
Corporations as „organized crime
structures” ?
GSK scandal – one of the largest pharmaceutical companies in the
world with massive exposure to the China market finds itself
embroiled in a major corruption scandal, its consultants and
employees under arrest and investigation.
The Libor scandal is a series of fraudulent actions connected to the
Libor and the resulting investigation and reaction Because Libor is
used in U.S. derivatives markets, an attempt to manipulate Libor is an
attempt to manipulate U.S. derivatives markets and financial products
often rely on Libor as a reference rate, and thus a violation of
American law. The scandal arose when it was discovered that banks
were falsely inflating or deflating their rates so as to profit from trades,
or to give the impression that they were more creditworthy than they
were
• The Libor (London Interbank Offered Rate) is an average interest rate
calculated through submissions of interest rates by major banks in
London. It is controlled by the British Bankers' Association (BBA).
Connections between economic
activity and organized crime:
• crime against unit leading economic
activity (frauds against banks)
• unit leading economic activity as
camouflage for crime (trade in drugs under
cover of trade in drugs, money laundering,
VAT frauds)
• crime as a manner to make economic
activity more efficient (counterfeiting of
products)
Illegal cigarettes in Poland
• Hidden production (tax avoiding) and
smuggling
• Smuggling: Poland as destination country
and transit country
• Smuggling from Russia (north eastern part
of Poland) – competition for drugs
smuggling
• Always extended structure of distribution
(call centers)
„Coal mafia”
• Payment avoidance – bogus bankruptcy
• Selling of smuggled coal
• Buying old, used mine equipment and
reselling as new, good quality one
(connected to corruption)
• Bogus export
• Theft of coal
Fuel mafia
• Carousel VAT fraud
• Excise fraud (different excise for different
types of oil)
• Blending fuel with other elements
• Theft of fuel