The number of cases of economic crime reported to the police increased despite a decrease in crime overall
The total number of criminal matters reported to the police has decreased in recent years. The number of criminal cases classified as economic crimes that were reported to the police and investigated last year (1,963) was roughly 14 per cent higher than in the previous year. Several reports to the police may be filed in a single case of economic crime under investigation. On the other hand, an individual report to the police may involve several offences. Individually presented key figures as such do not reveal the extent of cases of economic crime or investigations.
In 2019, the number of cases of tax offences, tax fraud and offences or fraud committed by debtors reported to the police was higher than in the previous year. For example, there was a substantial increase in aggravated forms of tax fraud, accounting offences, and cases involving dishonest debtors. At the end of 2019, the number of cases of economic crimes under investigation was 2,795. Of this amount, approximately half were investigated by police departments located in the Uusimaa region.
Substantial criminal damage was caused through economic crimes – proceeds of crimes were recovered more effectively than before
Despite the increased number of cases of economic crime, there was a year-on-year increase of nine per cent in concluded investigations. The amount of criminal damage caused in the cases of economic crime investigated by the police was very high – more than EUR 320 million. Criminal damage has a major impact on society. Last year, police units concluded investigations in several criminal matters involving extensive criminal damage.
A significantly higher amount of proceeds of crime gained with economic crimes was recovered last year compared to the previous year, totalling almost EUR 32 million. Improving the outcome of recovering proceeds of crime were the capacity to track and seize proceeds of crime, successful co-operation during the pre-trial investigation phase, selecting the right type of forfeiture, and the use of coercive measures.
Most of the tax offences reported to the police are committed in business or activities comparable to business
Roughly half of the economic crimes investigated by the police are accounting offences, tax offences, and cases involving dishonest debtors. Accounting offences account for approximately one-fifth of all economic crimes reported to the police. Last year tax offences accounted for approximately 16 per cent of all economic crime reported to the police.
Almost 90 per cent of all the tax offences reported to the police were classified as economic crimes, i.e., the were either committed in or associated with business or activities comparable to business. Last year's total number of tax offences (all types) was roughly 13 per cent higher than in 2018. Compared to the previous year, 12 per cent more cases of tax fraud were recorded last year.
Highly variable types of offences are reported to the police, even though half of the offences may be deemed as typical economic crime, such as the types mentioned above. The police classification of economic crime covers approximately 100 different criminal offences, including offences related to food safety and environmental protection.
Customs protects tax revenues, combats the shadow economy, and uncovers and investigates economic crime
The taxes collected by Customs in 2019 for the EU and the State of Finland amounted to approximately EUR 0.3 billion. The statistics illustrate the impact of tax collection and both administrative and crime prevention operations by Customs. Customs statistics should be examined by comparing them with the observations and statistics of other authorities presented in this snapshot. This makes it possible to determine the correct scales and weights of issues and phenomena.
Customs promotes fair competition and takes effective action against irregularities
Customs controls goods and collects taxes on them. Customers can only take possession of goods after paying 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, affect Customs in its efforts to combat economic crime. The Internet is also being used increasingly often in the marketing and sales of highly taxed products to customers, while also circumventing the tax provisions applying to such products.
Customs focuses its control measures on operations associated with substantial tax interests. Real-time customs control of various modes of transport and related goods, vehicles and passenger flows also plays a central role in ensuring correct taxation and, consequently, combating the tax gap. The measures for preventing economic crime that fall under the investigative responsibilities of Customs also aim at reducing the tax gap.
The percentage of unpaid taxes relative to total taxes and parafiscal charges varied between 0.05–0.56% in 2013–2019. In 2019, the amount of tax arrears came to about EUR 1.54 million, which is 0.56 % of the approximately EUR 0.3 billion of the total taxes and parafiscal charges collected by Customs (Figure 1).
Customs conducts corporate audits and document controls
The audits carried out by Customs ensure the fiscal correctness of customs and taxation matters, facilitate and safeguard smooth foreign trade, and protect society by, for instance, weakening opportunities for shadow economy operations.
The audits carried out by Customs in 2019 covered customs procedures, fairway dues, agricultural and internal market aid paid by the EU, and the tax boundary between Åland and Mainland Finland. In addition, Customs still carries out controls of tax-free warehouses relating to excise duties on behalf of the Tax Administration.
Audits are nationwide and carried out both in real time and on an ex-ante and ex-post basis. In addition to corporate audits and document controls, Customs also performs, for example, warehouse controls as well as controls of accounting and goods. Audits and controls are carried out on a statutory basis and as 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 materials 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, as well as before approval of a change in a licence or permit. The purpose of an ex-post corporate audit is to review the company’s operations and the correctness of its business transactions and customs declarations after a customs clearance or taxation.
Document controls refer to controls on business transactions carried out after customs clearance or the taxation process. Usually, the controls are targeted at a large number of customs clearance or taxation decisions. The number of document controls also includes controls involving licences and administrative executive assistance.
In 2019, Customs conducted a total of 285 corporate audits and document controls (Figure 2). Year-on-year variation in the number of audits and controls is the result of the priorities approved for the audits and controls each year, the areas audited and controlled, and the increasing use of electronic materials. The customs procedures in 2019 prioritised import and special procedures.
The total sum of debited taxes based on post-clearance recovery resulting from tax audits amounted to EUR 9.5 million at the end of 2019. The annual variation in the amount of post-clearance recovery depends on the auditing and control priorities, risk analysis and critical selection criteria used in the selection of entities, the proportion of entities subject to statutory audits and controls, the size of the companies audited and controlled, and the scope of 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.
A total of 15 corporate audits and document controls were carried out in 2019 on shadow economy targets. These were based on either a criminal offence, the AM communications of OLAF, or reporting to the police.
Challenges were faced in the supervision of counterfeit goods in 2019
Customs supervises goods infringing intellectual property rights pursuant to Council Regulation (EU) 608/2013. The purpose of the supervision is to protect customers from exposure to products that may endanger their health and safety, as well as safeguard tax revenue and the financial interests of rights-holders. Most of the counterfeit products detained by Customs infringe a registered trademark or design. Products that infringe patents are also occasionally detained. The supervision takes place in connection with, for example, physical inspections.
The number and calculated value of counterfeit goods detained by Customs were in decline during the period under review, 2013–2019 (Figure 3). The number of counterfeit goods decreased significantly in 2019 compared to the previous year (99 %), while their calculated value decreased almost correspondingly. The long-term trend clearly indicates a decline in detentions of large-volume shipments, and most detentions involve postal and express freight traffic. This is partly due to very strong growth in online trade, which has led to a large number of small shipments. A similar trend has been seen in other EU countries.
The new EU Trademark Regulation that came into force in March 2016 gives Customs the powers to detain goods infringing registered EU trademarks while in transit to third countries via Finland. No large-volume shipments were detained in 2019; detentions were expressly related to postal and express freight traffic. In the supervision of intellectual property rights (IPR), a single larger article affects the calculated value at the annual level.
The large volumes of postal traffic make its supervision challenging. Identifying counterfeits requires more detailed inspection of the goods and, as a rule, X-ray detection is not helpful. More than 90% of the articles detained in Finland infringe a registered trademark. With the volume of packages constantly increasing, the resources allocated to supervising postal traffic have not enabled focusing on the identification of counterfeits among arriving goods.
Investigation of economic crime
Customs investigates suspected economic offences that fall under its jurisdiction. Economic crime refers to crime that is committed in connection with legal business operations with the aim of obtaining financial gains. The main offence usually involves tax fraud or aggravated tax fraud. Customs also investigates offences involving forgeries as well as customs clearance, environmental and accounting offences. Customs also classifies the smuggling of products subject to excise tax (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 societal impact of economic crime prevention by Customs in 2019 slightly exceeded EUR 33 million, while it was roughly EUR 6 million less a year earlier (Figure 4). The impact comprises the sum of damages resulting from the cases investigated, i.e. evaded taxes, damages resulting from cases under or pending investigation (sequestration and prohibition of transfer), assets recovered by Customs, and assets assigned to the enforcement authority or another official. For the most part, the increased impact is due to the increase in the amount of recovered proceeds obtained through economic crime. The amount of recovered proceeds of crime varies from year to year.
In 2019, Customs investigated a total of 1 362 tax frauds, which is 68 less than a year earlier. The number of tax fraud offences of all types has increased. In total, 149 aggravated tax frauds were uncovered, which is 33 more than in the previous year.
Customs collaborates with the Tax Administration and law enforcement authorities in other countries to combat the growing phenomenon of Intra-Community VAT fraud.
Efficient and well-targeted combat against the shadow economy
In line with its strategy for 2016–2020, Customs combats the shadow economy and protects society by ensuring product safety and preventing serious cross-border crime.
The impact of the measures taken by Customs to combat the shadow economy and prevent economic crime is measured by the number of administrative measures and those based on criminal offences. In 2013–2019, the impact varied between EUR 36 and 87 million (Figure 5). The number of uncovered tax frauds has increased by 145 per cent from 2013 to 2019. The number of cases of aggravated tax fraud during the seven-year period has varied between 51 and 149 per year, cases of tax fraud between 148 and 256, and cases of petty tax fraud between 358 and 957. The number of tax fraud offences of all types has increased.
In the case of shadow economy phenomena, this means that the prosecutor decides whether there are grounds for deeming that the preconditions of a criminal offence have been met. As a rule, the prosecutor must press charges when there are probable grounds for doing so on the basis of the evidence gathered in the pre-trial investigation. A criminal case is initiated in a District Court on the basis of an application for a summons and progresses to the main hearing after the related preparations.
Source: Ministry of Justice
The number of cases of financial crime decided by district courts has remained level in recent years.
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.