Source: Ministry of Justice, Juuso Oilinki 17 May 2021
During the coronavirus pandemic, several international organisations have published warnings on the increased risk of corruption during the crisis and have urged states to increase their corruption prevention efforts. Among others, the Group of States against Corruption (GRECO) – operating under the Council of Europe – has published guidelines for its member states aimed at strengthening their fight against corruption during the pandemic. In addition, the OECD has published a brief on the significance of corruption prevention and related policy measures during the crisis.
The COVID-19 pandemic has increased the risk of corruption globally. The situation should be taken seriously in Finland and the necessary measures to prevent corruption should be implemented. According to GRECO, the key causes for the increased risk are the increased concentration of power required by the crisis, the derogations of fundamental rights and freedoms and the distribution of large amounts of money to EU member states as financial aid. The OECD brief on the pandemic and the prevention of corruption states that ‘the pace of implementation of economic stimulus packages inevitably requires adapting or relaxing routine control measures and ex ante due diligence, or simplifying requirements’. International organisations deem it important to make anti-corruption measures more uniform in all processes related to the pandemic.
Risks related to healthcare and public procurement
The healthcare sector is seen as particularly vulnerable to corruption. Bribery distorts healthcare markets and can lead to an influx of poor-quality or falsified products to the markets. According to GRECO, ad hoc procurement processes, overcrowding of medical facilities and the overburdening of medical staff related to the urgent need for medicinal products and medical supplies increase the risk of corruption even more. The appropriate processes are not always observed in emergency decisions or procurement, and the related documentation can be left insufficient, which hinders risk management and auditing. The types of corruption encountered in the healthcare sector include bribery related to procurement processes, other corruption related to healthcare services, corruption in product development, conflicts of interest, favouritism and fraud related to the COVID-19 pandemic.
The OECD’s analysis shows that many of the cases of foreign bribery have occurred in the healthcare sector. The OECD’s report on foreign bribery shows that the risk of corruption is always present in public procurement as well, and of the foreign bribery cases analysed by the OECD, 57 per cent were related to public procurement. The risks are increased in a crisis situation.
Risks in the private sector
The increased risk of corruption in the private sector due to the pandemic should also be noted. Extraordinarily large economic recovery measures are necessary, but also contribute to the risk of financial crime and corruption. According to GRECO, providing falsified documents or false information to meet the conditions of different state aid and subsidy applications, falsifying product certificates, neglecting the certification of alternative supply chains, misconduct of individual employees etc. have increased during the pandemic. In addition, the risk of insider trading has increased.
According to the OECD, organised crime groups have increasingly penetrated legitimate businesses during the pandemic by taking advantage of the citizens’ lack of trust in their governments and the less strict control resulting from the crisis.
Legislative drafting during the pandemic
GRECO urges legislators to consider the increased risk of corruption in legislative drafting as well. Governments around the world are urgently drafting new legislation related to the pandemic to ensure an efficient response to the pandemic and the mitigation of its effects. Legislative drafting in derogation of the regular legislative procedure does not necessarily enable the usual level of transparency or the organisation of extensive rounds of consultations. This can predispose the process to inappropriate lobbying.
Due to the increased corruption risk caused by the COVID-19 pandemic, the OECD has urged governments to invest in the monitoring of services financed with public funds particularly in the healthcare sector. According to the OECD, the current situation requires governments to implement several measures to ensure the integrity of public procurement. These measures include developing detailed guidelines on procurement strategies under a crisis, favouring existing framework agreements, and monitoring and auditing all emergency procurement processes. Internal control systems, internal auditors and other regulatory authorities play a key role. Both internal and external auditors have excellent opportunities to support organisations in short-term risk management. Investments should be made in appropriate risk management and whistleblowing mechanisms in Finland as well. For example, whistleblowing mechanisms should be implemented with a wider scope.
Fraud and its prevention during the COVID-19 pandemic
The corruption risks related to the manufacture, procurement and distribution of COVID-19 vaccines are a global threat to the economy and public health. According to GRECO, these risks include non-compliant vaccines entering the markets, theft of vaccines that have entered the distribution system, inappropriate use of funding intended for the development and distribution of vaccines, nepotism, favouritism, and corrupted procurement systems. Several international organisations, such as the Interpol and the Financial Action Task Force (FATF), and national organisations, such as FinCen, have issued warnings on falsified medicinal products related to COVID-19. The online trade of COVID-19 related falsified medicinal products has grown exponentially according to GRECO. This type of criminal activity is often associated with organised crime, the prevention of which requires effective real-time cross-border collaboration between different authorities. In Finland, too, it should be ensure that the information flow between different national and international authorities on these matters is effective and that operational processes in cases of falsified goods are clear and pre-planned. Anti-money laundering authorities play a key role in combatting fraud during the pandemic as well.
As discussed above, measures for the prevention of corruption and misconduct should be heavily invested in during times of crisis. In a crisis, the responsibility for corruption prevention is increased for bodies issuing decisions on the use of public funds. Public procurement units, authorities granting government subsidies and bodies overseeing these should invest in the prevention and identification of corruption and misconduct. Uniform guidelines and appropriate tools should be readily available.
Both state enterprises and private companies should ensure that a risk-based method is used to maintain good governance and internal monitoring during the pandemic as well. Using agents and other middlemen in international trade should be carefully considered. Particularly in private business activities, background checks on stakeholders and partners in connection to changes in the company’s line of business, supply chains or market areas are important for controlling risks related to reputation loss and in preventing misconduct.
After the worst phase of the COVID-19 pandemic has passed, it will be important to start analysing the long-term recovery measures. The use of public funds and the related preparatory and decision-making processes should be assessed and audited in particular. Studying these will provide us with better tools for surviving any future crisis situations, which in turn will reduce the risk of corruption and misconduct.
More information on this subject:
The coronavirus year challenged the supervision of the shadow economy – the authorities have introduced new monitoring measures
The coronavirus situation, congestion in investigation proceedings and a backlog of court cases added to the challenges of the authorities in their fight against the shadow economy. Economic crime cases reported to the police increased from the previous year, and the Finnish Tax Administration levied taxes of more than EUR 80 million on the basis of shadow economy audits. This information is indicated in the 2020 shadow economy prevention statistics published today.
The coronavirus situation made last year challenging for the authorities that combat the shadow economy. Despite all the challenges, the authorities were able to react to the new situation and find new ways for combating the shadow economy, such as remote audits. Due to the COVID-19 situation, more focus was placed on such previous measures as the exchange of information between the authorities and the analysis of information.
“The coronavirus crisis forced us to use information provided by other government agencies even more effectively in combating the shadow economy. Information was exchanged effectively, for example, in monitoring coronavirus subsidies granted for companies and compliance with the Act on the Contractor’s Obligations and Liability when Work is Contracted Out. Less physical supervisory work was carried out last year, while thorough background work ensured that it was targeted better than before”, says Janne Marttinen, Head of the Grey Economy Information Unit at the Finnish Tax Administration.
Congestion in the preliminary investigation of more aggravated misuse also presented challenges in combating the shadow economy. Courts are also facing a difficult situation: the processing times of shadow economy cases have increased.
Examples of results of shadow economy prevention in 2020
Economic crime cases reported to the police increased by 15 per cent from the previous year
Last year, the Police of Finland recorded a total of 2,251 new economic crimes. The number of unresolved economic crime cases has increased for the past two years. For example, aggravated tax fraud and various forms of bribery and fraud increased last year. No new types of economic crime have been discovered during the coronavirus pandemic.
Non-Finnish employees without a right to work found in 79 workplaces
Last year, the Regional State Administrative Agency for Southern Finland found at least one non-Finnish employee who did not have the right to carry out the work in question in Finland in 79 workplaces. In 37 per cent of all audits regarding the right to work, a non-Finnish employee was working without the required work permit. In 2019, non-Finnish employees working without a proper permit were found in 20 per cent of the audited workplaces.
The Tax Administration levied VAT of EUR 26.1 million based on shadow economy audits
Last year, the Finnish Tax Administration conducted 547 audits related to the shadow economy. On the basis of the audits, EUR 26.1 million in VAT and EUR 22.3 million in employer contributions were levied, plus punitive tax increases. During the audits, the Tax Administration discovered undeclared income of EUR 119.5 million in total, on which taxes of EUR 31.2 million were levied. Of its shadow economy audits, the Tax Administration conducted 11 per cent in cooperation with the Police of Finland and Finnish Customs.
Kela reported 1,218 cases of suspected misuse of benefits to the police
In 2020, the Social Insurance Institution of Finland (Kela) submitted 1,218 crime reports to the police regarding suspected misuse of benefits. Kela suspects misuse if a customer has given false information or has knowingly withheld information affecting a benefit. The total value of the misuse cases resulting in a request for police investigation was EUR 8.1 million.
Finnish Customs investigated 917 tax fraud cases
Last year, Finnish Customs discovered 917 tax fraud cases, of which 98 involved aggravated tax fraud. The number of tax fraud cases decreased from the previous year, with minor tax fraud decreasing the most. Passenger volumes collapsed in 2020 due to the coronavirus pandemic, and supervision focused on commercial freight and goods transport. The decreased passenger volumes were reflected in fewer summary penal orders due to tax fraud, for example.
Coming in 2021: monitoring of coronavirus subsidies
A total of EUR 2.1 billion have been distributed in coronavirus subsidies since last March.
“There are signs that these subsidies have also attracted self-employed persons with not so good intentions. Monitoring the use of coronavirus subsidies is one of the key themes in shadow economy prevention this year. We will also monitor misuse related to bankruptcies. The pandemic may have diverse impact on manifestations of the shadow economy and economic crime”, Marttinen says.
The first results of the monitoring of coronavirus subsidies can be expected this autumn. Whether the coronavirus crisis increases the shadow economy can be determined in the next few years.
Improvements to the status of foreign berry pickers
Ministry for Foreign Affairs, Ministry of Economic Affairs and Employment, Ministry of Finance, Ministry of Social Affairs and Health, Ministry of the Interior 31.3.2021
On 31 March 2021, the Government proposed new legislation to improve the legal status and earnings opportunities of foreign berry pickers and to make the competitive environment equal to companies in the sector. As foreign berry pickers have not been deemed to be in an employment relationship but instead to work as entrepreneurs, their status is currently unregulated from a legal point of view.
A letter-of-intent procedure was introduced in autumn 2014 for the authorities and natural product companies. Because of this procedure, the conditions and earnings opportunities of berry pickers have improved. A persistent problem is, however, that the procedure is only loosely binding and slow to react to emerging problems.
The new Act would lay down provisions on the rights of wild produce pickers, obligations of the operators in the sector, monitoring of compliance with the obligations and sanctions for failure to comply with them. The obligations of companies purchasing natural products would remain largely the same as currently laid down in the letter of intent. However, the obligations would be laid down in more detail and in more binding terms.
“With this legislation, we will ensure that Finnish rules apply to berry picking. While the letter of intent has improved the situation substantially, it is clear we need binding laws on wild berry picking too. The need for new legislation is obvious“, says Minister of Employment Tuula Haatainen.
The new Act would differ from the current letter of intent in that it would include an absolute ban on charging pickers for recruitment services and training. These proposals are relevant for improving the legal status of pickers from abroad. Operators in the sector would also have a cooperation obligation to improve the picking results.
According to the new Act, operators in the natural product picking sector should be reliable, and this reliability would be assessed based on compliance with the provisions of the Act. In addition, the operator should have paid its taxes and charges properly and be in the financial position to organise its business activities. Obligation compliance reports produced by the Tax Administration and its Grey Economy Information Unit can be used to assess reliability. If the operator is not reliable, it could not invite pickers to Finland, offer them accommodation or equipment with the aim of purchasing natural products picked by them. The Act would not otherwise affect the status or obligations of those purchasing natural products from pickers.
The occupational safety and health authorities would monitor compliance with the Act insofar as the monitoring is not the responsibility of another competent authority. The Employment and Economic Development Offices and the occupational safety and health authorities would be responsible for guidance.
The Act does not apply to the entry or residence conditions of foreigners picking natural products. The Act would apply when the work is not carried out in an employment relationship. In the case of work carried out in an employment relationship, employment legislation would apply as before.
The Acts are scheduled to enter into force before the start of the harvest season of 2021.
Olli Sorainen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 504 8022 or email email@example.com
Janne Marttinen, Director, Tax Administration, Grey Economy Information Unit, tel. +358 29 512 6066 or email firstname.lastname@example.org
Arto Teronen, Director of Field Operations, Ministry of Social Affairs and Health, tel. +358 29 516 3493 or email email@example.com
We can fight money laundering and terrorist financing by creating tools for detecting and preventing criminal activity. Increasing awareness of different types of crime is key in identifying criminal activity.
It is important that operators know what they should pay attention to in order to detect potential criminal activity. It is also important to know what you can do to combat suspected crime.
The fight against money laundering and terrorist financing involves various authorities and organisations. The prevention of criminal activity is a shared effort.
Check the new website: Moneylaundering.fi
Moneylaundering.fi is a new website for increasing awareness about money laundering. The website contains information about different authorities’ roles and responsibilities in the prevention of money laundering and terrorist financing.
Go to Moneylaundering.fi [.ﬁ]› and read more about combatting money laundering and terrorist financing and about indicators that help to identify criminal activity. The Moneylaundering.fi website also advises parties with reporting obligation on how to report suspicious activity.
The Tax Administration is committed to combatting money laundering and terrorist financing
The Tax Administration pays close attention to preventing and disclosing money laundering and terrorist financing. All suspicious transactions are reported to the Financial Intelligence Unit. The reporting is based on the Tax Administration’s general duty to exercise proper care and order to report suspicious transactions as defined by law.
The Nordic tax authorities, led by the Finnish Tax Administration, have collaborated to create a training package for their personnel. The indicators specified in the training package are based on the OECD Money Laundering and Terrorist Financing Handbook. Some parts of the basic training module will also be made available to other authorities.
The Tax Administration’s Grey Economy Information Unit prepares compliance reports and customer classifications, and these are available to other authorities upon request. The Unit’s services help to target and conduct control measures and facilitate the prevention of shadow economy.
The compliance report is an updated summary of the essential records held by the authorities. The information is illustrative of the level of compliance of an organisation or a person with statutory obligations.
Also learn about the Grey Economy Information Unit’s phenomena reports.
Discrediting or “targeting” of officials is becoming more common
Published 19 October 2020
Coercion, threatening emails, malicious phone calls, discrediting on the web, or unfounded complaints and claims for damages. Issuing a negative decision to a customer can start a treacherous chain of events targeted towards a specific official. The targeting of officials has become more common, and it should be made into a punishable offence.
Targeting focuses on an individual, but in many cases the goal is to influence society more broadly. Targeting aims to undermine trust in the authorities, erode the principle of the rule of law, and limit the constitutional right of freedom of speech. The ultimate goal is to limit public discussion and public action.
Targeting may involve threating an official directly or indirectly, digging into their private life or falsifying information about them. However, criticising a public authority or a specific official act or utilising the standard legal remedies available to citizens are not considered targeting.
The goal of targeting an official may be to make them abandon their official duties. Officials subject to targeting include police officers, prosecutors, enforcement officers, tax auditors and other auditing officials. Just the fear of being targeted can cause an official to limit what they say or do.
New ways of coercing and harassing officials
Some of the authorities involved in combatting the grey economy have experienced an increase in targeting related to their operating area in the past few years. They feel that the increase has been moderate but that the harassment has become more threatening.
Using social media to discredit a specific official has clearly become more common. For example, photos of officials may be spread online in negative connections. Some of the online campaigns to discredit officials in Finland repeat formulas that are familiar from other countries. However, there are no indications that the campaigns have been organised by international parties.
Targeting erodes trust and puts the official in an unreasonable position
Targeting often causes mental and physical stress and reduces working capacity. It may even cause fear in the targeted official. The negative impact of discrediting may also spread to the official’s family members and friends. In the most extreme cases of targeting, the official may even receive threats on their life. Such cases affect occupational health and safety and the atmosphere at work.
Example: An official had been called as a witness in a criminal trial. During the presentation of evidence, it was revealed that the official's personal data, such as their medical history, their entrepreneur background and the entrepreneur background of their family members, had been researched in order to undermine their expertise, objectivity and reliability as a witness in the case.
Example: After an official made a decision, they became the target of a massive harassment campaign that was supposed to pressure the official into changing the decision. For example, the official received oppressive phone calls from an undisclosed number. The caller either did not say anything or left a voicemail saying that the official’s home address and the location of their office were known to the caller. Someone also called the office a number of times, asking whether the official was currently at work or at home. Furthermore, an unfounded complaint on the official’s work was submitted to the agency’s Director General. In addition, there were attempts to change the decision by pleading a process error and by trying to use public pressure and MPs as leverage.
Unfounded information can spread quickly, especially in social media. Investigating and intervening in the matter quickly often requires the cooperation and resources of several branches of government. If standard legal remedies are misused, for example by filing unfounded complaints or falsely reporting an offence by an official to the police, the authorities have fewer resources available for their other duties.
Example: A customer wrote confrontational and degrading posts on discussion forums, mentioning the auditor’s name. The posts were later deleted by the administrator after having received a notice about them.
Society and employers must firmly oppose the targeting of officials
Different authorities may have different instructions and practices on how to address threats towards officials. Sometimes the investigation of a matter requires the cooperation of several different units. In many cases, the investigation involves the targeted person’s supervisor, the unit’s legal counsel, the labour protection delegate, the communications unit and the security unit. Occupational health care services may also be involved in the process. If the case is serious, the employer or the targeted official will contact the police. Since targeting is a topical phenomenon, many authorities are in the process of updating their instructions concerning the matter.
Harassment and threatening of an official may already meet the statutory definition of several complainant offences. However, obtaining evidence of violence or the threat of violence may be difficult. At present, if the case proceeds to a criminal procedure, the official may be forced to handle the legal proceedings alone, even though the case started with the official handling their official duties. The official is only a means for the targeting party to reach their goal. Authorities widely support making targeting a punishable offence subject to public prosecution.
The phenomenon was studied by the authorities responsible for situational awareness on the grey economy in August 2020. Public institutions that shared their experiences included the Finnish Tax Administration, the Customs, the Police of Finland, contractor obligation and immigration control units of the Regional State Administrative Agencies, the Finnish Food Authority, the Office of Bankruptcy Ombudsman, and the enforcement authorities.
Government intensifies actions against the grey economy with a new strategy and an extensive action plan
11.6.2020 Ministry of the Interior
The Government has issued a resolution on a strategy and action plan for tackling the grey economy and economic crime in 2020–2023. Actions against the grey economy and economic crime will focus on prevention, clarification of powers, improving authorities’ access to information, and promoting cooperation between authorities.
The strategy for tackling the shadow economy and economic crime aims to:
1) promote healthy competition between companies and a fair labour market,
2) prevent the grey economy and economic crime,
3) ensure the ability of authorities to combat the grey economy and economic crime, and
4) develop measures to combat the grey economy and economic crime and improve cooperation between authorities.
The means to implement the strategy and to strengthen the fight against the grey economy are listed in the 20-point action plan.
“The plan focuses, among other things, on the prevention of undeclared work. In addition, the aim is to examine new ways for intervening in intentional or grossly negligent underpayment of wages. Cooperation between authorities will be increased in the fight against identity misuse and food fraud. Anti-corruption efforts will also be intensified,” says Chief Superintendent Juha Tuovinen from the Police Department of the Ministry of the Interior.
Other actions set out in the action plan include, for example, introduction of tax numbers in the shipbuilding sector and increasing the availability of information on the payment of taxes and charges. Communications and access to information will also be developed.
“A communication campaign aiming to promote responsibility among employees and employers will be targeted at immigrants and those just entering working life. Securing the tax authority’s access to information from third parties reduces the opportunities for grey economy activities,” says the director of the Tax Administration's Grey Economy Information Unit, Janne Marttinen.
Work led by the steering group on combating the grey economy
The steering group on combating the grey economy, chaired by the Minister of Employment Tuula Haatainen, is in charge of implementing and updating the strategy and monitoring the implementation of the plan.
The executive group on combating the grey economy and economic crime, composed of ministries and authorities, reports to the steering group on the progress of the action plan and, if necessary, proposes changes to the strategy or action plan.
Combating the shadow economy prevents illegal activity and ensures tax revenue – the results are encouraging
The statistics on the prevention of shadow economy and economic crime in 2019 have been published. The experiences gained from the new procedures and law amendments to combat the phenomena more efficiently are positive.
Based on the statistics, the co-operation between authorities in combating the shadow economy and economic crime is efficient and works well. For example, the Finnish Tax Administration gave other control authorities close to 750 tips on misconduct related to matters other than taxation discovered during its own control activities.
‘The statistics show successes. The Action Plan against the Shadow Economy and Economic Crime has offered new tools for identifying and preventing these phenomena,’ says Janne Marttinen from the Grey Economy Information Unit of the Finnish Tax Administration.
The current and previous action plans have been in force almost continuously since 1996. The preparations for a new action plan are nearly complete.
‘During difficult times, the importance of combating the shadow economy is emphasised. The work done to combat the shadow economy ensures tax revenue and public financing,’ Mr Marttinen continues.
New phenomena challenge the traditional operating methods
The rapidly progressing digitalisation and increasingly international operating environment have presented new challenges to combating the shadow economy.
For example, the growth of the platform economy and the popularity of e-commerce, as well as virtual currencies and the related misuse, have expanded the need for control and guidance.
‘In the future, identifying new phenomena and co-operating when responding to them will be increasingly important,’ Mr Marttinen says.
Link: Shadow economy prevention statistics, 2019