Source: The Police
In 2017, 2,069 new matters involving economic crime came to the attention of the Police. These involved a total of 4,271 crimes, which is only 4 per cent less than the previous year.
The great number of new matters involving economic crime that have come to the attention of the Police in recent years is visible in the large number of open cases related to economic crime. What is positive is that the number of criminal investigations closed last year was slightly higher than the number of opened investigations.
Tax crimes brought to the attention of the police
A majority of the economic crimes the Police becomes aware of are brought to its attention by other authorities involved in the prevention of economic crime. The enhancement of the Tax Administration’s target selection procedure and the new offence report instructions have contributed to the growth in the number of tax crimes coming to the attention of the Police.
In 2017, the number of aggravated tax frauds and tax frauds grew by 13 per cent in comparison to the year before. Particularly the number of aggravated tax frauds has grown clearly in recent years.
When comparing the tax crime statistics of the Police and the Tax Administration, it is easy to observe that they are not entirely uniform in terms of the number of matters. Last year, for instance, the Tax Administration made a total of 721 offence reports related to aggravated tax fraud, whereas the number of such matters reported to the Police was 621. The statistics of the Police are based on crimes pursuant to the definition of economic crime employed by the Police. Some of the offence reports filed by the Tax Administration may also be recorded under different years or a single matter in the statistics of the Police.
Following the legislative amendment in 2015, the Financial Intelligence Unit of the National Bureau of Investigation has made more than 1,100 data disclosures on suspicious business activities to the Tax Administration. As a consequence of the tax audits initiated on the basis of these data disclosures, a total of EUR 6.6 million in taxes had been imposed by the end of September 2017. In economic crime, money laundering is typically related to fraud, tax fraud and false accounting.
Last year, the Police also became aware of more identity thefts, frauds, embezzlements, falsifications, computer break-ins and marketing offences than in the year before. Identity thefts and falsifications relate to criminal matters in which the offender tries to obtain erroneous VAT refunds from the Tax Administration by exploiting falsified account change notifications. The enhanced cooperation between authorities has also increased the number of environmental offences coming to the attention of the Police.
The police recovered nearly eur 16 million of criminal proceeds in economic crime
The amounts of both the crime damage attributable to economic crime that have come to the attention of the Police and the criminal proceeds recovered by the Police have declined over the past couple of years. The criminal proceeds recovered by the Police is influenced by the nature of the criminal matters under investigation, which is why the amounts of criminal proceeds vary from one year to the next. In 2017, the Police recorded approximately EUR 15.7 million in criminal proceeds recovered from economic crime, which is slightly more than in the previous year. Usually only a part of criminal proceeds are recovered. The amount of the criminal proceeds recovered by the Police can nevertheless be considered good in international comparisons.
Economic offences investigated and criminal proceeds recovered by the police
In 2017, Finnish Customs collected a total of around 2.9 billion euros in taxes and charges. The statistics illustrate the impact of tax collection and crime prevention operations by Customs. The best way to examine the Customs statistics is to compare them with the observations and statistics of other authorities presented in this snapshot. This will help see the various issues and phenomena in relation and in proportion to each other.
Customs promote fair competition and takes prompt action against irregularities
Customs controls goods and collects taxes on them. Customers can only take possession of goods after paying all taxes and duties, except for credit customers.
The new phenomena of this decade, such as international economic crime involving e-commerce and Intra-Community supply, are affecting Customs in its efforts to combat economic crime. The Internet is increasingly used in the marketing and sales of highly taxed products to customers and for circumventing the tax provisions applying to such products.
Customs concentrates its control measures on areas and operators associated with considerable tax interest. Real-time customs control of different modes of transport and related goods, vehicles and passengers, flows plays a central role in ascertaining correct taxation and, consequently, the prevention of tax arrears. The measures preventing economic crime that fall under the investigative responsibilities of Customs also aim at reducing the amount of tax arrears.
Arrears on taxes and charges 2013–2017
The percentage of unpaid taxes of the total amount of taxes and charges has varied between 0.05%–0.25% in 2013–2017. In 2017, the amount of arrears came to approximately EUR 1.1 million, which is 0.05% of the nearly three billion euros collected by Customs in taxes and charges.
Customs conducts corporate audits and document controls
The purpose of the audits carried out by Customs is to ensure the fiscal correctness of customs and taxation matters, facilitate foreign trade and protect society by providing fewer opportunities for shadow economy operations.
Until the end of 2016, the audits carried out by Finnish Customs covered customs procedures, excise duties, car taxation, fairway dues, agricultural and internal market aid paid by the EU, and the tax boundary between Åland and Mainland Finland. Car taxation and most excise taxation tasks were transferred to the Tax Administration at the start of 2017. However, Customs still carries out controls of tax warehouses relating to excise duties on behalf of the Tax Administration.
Audits are carried out in real time and on an ex-ante and ex-post basis. In addition to corporate audits and document and warehouse controls, Customs also carries out account audits, as well as controls of procedures and goods. The audits and controls are carried out on a statutory basis or based on risk analysis. Risk-based selection of audited and controlled entities is supplemented by random sampling.
A corporate audit covers the operations, organisation, administration, internal control, business systems and accounting material of a company. Most corporate audits involve a company visit. A corporate audit may be conducted on an ex-ante basis before a licence, permit or position is granted, before a change in a licence or permit is approved or on an ex-post basis after customs clearance or the taxation process. The purpose of an ex-post corporate audit is to review a company’s operations and the correctness of its business transactions.
Document controls in this context refer to the controls of business transactions carried out after customs clearance or the taxation process. Usually, the controls are directed at a large number of transactions and customs clearance or taxation decisions. The number of document controls also include controls involving licences and administrative executive assistance.
Corporate audits and document controls 2013–2017
The year-on-year variation in the total number of audits and controls is the result of the priorities approved for the audits and controls each year, the areas audited and controlled as well as the increasing use of electronic material. The most significant reason for the reduction in the number of audits and controls is the transfer of excise duties and car tax audits to the Tax Administration. The area prioritised in 2017 was customs procedures.
Post-clearance recovery statistics are compiled by the year the decision was confirmed. The annual variation in the amount of post-clearance recovery depends on the auditing and control priorities, the risk analysis and critical selection criteria used in the selection of the entities, proportion of entities subject to statutory audits/controls, the size of the audited and controlled companies and the scope of the audits and controls. Even a single larger entity audited, or a major error will have a significant impact on the annual post-clearance recovery total.
Customs performed 244 corporate audits and documents controls in 2017. The total sum of debited taxes based on post-clearance recovery resulting from tax audits reached EUR 6.1 million at the end of 2017.
In 2017, six corporate audits aimed at shadow economy targets were based on criminal offences or resulted in a criminal investigation. The corresponding number of audits in 2016 was 25.
Growth in e-commerce affects counterfeit product control
Finnish Customs supervises goods infringing intellectual property rights pursuant to Council Regulation (EU) No. 608/2013. The purpose of the supervision is to protect consumers from exposure to products that may endanger their health and safety, and safeguard tax revenue and the financial interests of right holders. Most of the counterfeit products detained by Customs infringe a registered trademark or design. Patent infringements are also occasionally detained. The supervision takes place in connection with, for example, physical inspections.
The value and number of detained goods infringing IPR
The number and calculated value of counterfeit products detained by Customs have been showing a decrease of late, with 2016 as an exception. The number of counterfeit products grew substantially in 2017 while the calculated value continued its decline. There has been a substantial decrease in the detentions of large quantities of goods, and most detentions involve postal and express freight traffic. This is partly the result of the strong growth in online shopping, which has led to a high number of small shipments. A similar trend has been detected in other EU countries. The new EU Trade Mark Regulation gives Finnish Customs the powers to detain goods infringing registered EU trade marks while in transit to third countries via Finland.
Investigation of economic crime
Customs investigates suspected economic offences that fall under its jurisdiction. Economic crime refers to crime which is committed in connection with legal business operations and in which the aim is to obtain financial gain. The main offence usually involves tax fraud or aggravated tax fraud. Finnish Customs also investigates offences involving forgeries, as well as customs clearance, environmental and accounting offences. Finnish Customs also classifies the smuggling of excise products (mostly alcohol, snus and cigarettes) as economic crime when it is comparable with business and professional activity, and even when it is not disguised as business activity.
The impact of economic crime investigation, recovered proceeds of crime and uncovered tax frauds in 2013–2017
The impact of economic crime investigation by Customs means the sum of damages resulting from the cases investigated, i.e. evaded taxes, damages resulting from cases under or pending investigation, and recovered proceeds of crime, confiscations as security and freezing orders, assets recovered by Customs and assets assigned to the enforcement authority or another official.
The societal impact of economic crime prevention by Customs amounted to EUR 54.59 million in 2017. The amount in 2016 was EUR 29 million lower. Most of the increase in the impact is due to the increase in damages caused by offences investigated by Customs.
The amount of recovered proceeds of crime varies significantly annually, and it depends on the amount of assets recovered by Customs, on preventive measures (confiscations as security and asset freezing), and on assets assigned to the enforcement authority or another official.
Customs investigated 1 086 tax frauds in 2017, which is 172 cases more than the previous year. The number of uncovered aggravated tax frauds was 83.
Finnish Customs collaborates with the Tax Administration and law enforcement authorities in other countries to combat the growing phenomenon of Intra-Community VAT fraud. As in previous years, Customs uncovered a series of criminal activities in 2017 in connection with the export and transit procedures in the logistics sector. The cases that have been investigated by Finnish Customs have involved goods kept in customs warehouses for which no export declaration has been filed or false description of goods.
Efficient and well-targeted combat against the shadow economy
In line with its strategy for 2016–2020, Finnish Customs will combat the shadow economy and will protect society by ensuring product safety and preventing serious cross-border crime.
The impact of the combat against the shadow economy and economic crime prevention 2013–2017
The impact of the measures taken by Customs to combat the shadow economy and to prevent economic crime between 2013–2017 has varied between 45 and 87 million euros. The impact is measured by administrative measures and those based on criminal offences.
The number of tax frauds has increased by 95 per cent between 2013 and 2017. The annual number of aggravated tax frauds has varied between 51 and 109, tax frauds between 148 and 226 and petty tax frauds between 358 and 822 over the five-year period. The number of tax fraud offences has increased in all categories of severity.
Customs estimates the tax gap
Customs participated in the national development project to create tools for accurate estimates on the tax gap and, after the national project, continued to independently produce tax gap estimates on taxes and charges under its responsibility. Customs has also used the outcomes of the tax gap estimation work in optimising its own operations.
Tax gap estimates on taxes and charges collected by Customs
The tax gap is the difference between the amount of tax that should, by law, be collected and what is actually collected. The taxes collectible by law are taxes that customers should have paid according to legislation in force at the time. The tax gap is divided into two types: tax arrears and neglected or erroneous declarations. Errors and negligence are usually the result of a customer’s incomplete declaration or of an erroneous or incomplete declaration submitted by a third party. The actual tax revenue and tax gap do not include possible penalties for delays or damages. The tax gap is caused by lack of knowledge, negligence and deliberate actions, that is, the shadow economy, among other reasons.
Tax arrears and the development of the tax gap by tax type 2012–2016
Source: Ministry of Justice
Decided cases by year and type of judgment
The number of cases of financial crime decided by district courts has remained level in recent years.
Decided cases by type of offence, number of cases and handling times by year
The most common financial offence decided by district courts is aggravated accounting offence. Aggravated accounting offences are often connected to other offences, such as aggravated tax fraud. The handling time of a financial offence is influenced by factors such as the scope of the case. The median handling times of cases in district courts range from approximately 60 to 200 days, depending on the type of offence.