Last year, the Police of Finland recorded a total of 2,251 new economic crimes, up by roughly 15 per cent from the previous year. Part of this increase can be explained by a single major criminal case under investigation, which involves dozens of individual offences across the country. In reality, the police has recorded slightly more economic crimes than what is shown in statistics due to the statistics compilation principle, as a result of which not all economic crimes are shown in the statistics of new offences reported to the police.
The number of open criminal cases is a good indicator to represent the workload of economic crime investigations. The number has increased for the last two years. At the end of last year, there were 3,202 open criminal cases, 15 per cent more than at the end of 2019.
In 2020, economic crimes involved a total of 4,073 offences, showing an increase of nearly 13 per cent from the previous year. For example, aggravated tax fraud, aggravated accounting offences, fraud and various forms of bribery, and breaches of a prohibition to pursue a business increased last year. In addition, clearly more cases of human trafficking and extortionate work discrimination were recorded last year than normal.
The pandemic has not so far had any significant impact on economic crime investigation
The forms of economic crime discovered during the pandemic have been conventional, and there have been no significant changes during the past 12 months. The coronavirus pandemic has not had any clear impact, apart from a few individual investigations. The cases of economic crime being investigated mainly consist of conventional economic crime: accounting offences, tax violations and debtor offences.
Criminal proceeds recovered by the police are primarily affected by the cases investigated
Considering the recovery of criminal proceeds, a key question is whether criminal proceeds are primarily recoverable. Not all economic crimes involve recoverable criminal proceeds, while they may have significant societal consequences, due to which it is important to investigate them.
In 2020, the police recorded a total of EUR 24.9 million in recovered assets, or criminal proceeds. This figure is slightly higher than the previous five-year average.
Last year, crime damage estimated in the economic crimes investigated by the police totalled EUR 200 million, higher than on average. Economic crime results in significant crime damage, averaging EUR 150 million per year. The statistics of crime damage and criminal proceeds cannot be compared with one another, as their compilation principles are not compatible.
Customs protects tax revenues, combats the shadow economy, and uncovers and investigates economic crime
The taxes collected by Customs in 2020 for the EU and the State of Finland amounted to approximately €0.4 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.
New phenomena, such as international economic crime involving e-commerce and intra-EU trade, are increasingly encountered by Finnish Customs in their fight against 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 – 2.1 % in 2013–2020. In 2020, the amount of tax arrears came to about €4.6 million, which is 2.1 % of the approximately €0.4 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 2020 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 2020, Customs conducted a total of 297 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. In 2020, the customs procedure audits focused on import and special procedures.
The total sum of debited taxes based on post-clearance recovery resulting from tax audits amounted to €3.75 million at the end of 2020. 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 2020 on shadow economy targets. These were based on either a criminal offence, the AM communications of OLAF, or reporting to the police.
The effects of counterfeit goods and COVID-19 on customs control
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. The control is largely based on cooperation between Finnish Customs and the right holders, since the crimes involving counterfeit goods that infringe intellectual property rights are complainant offences. 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 of counterfeit goods detained by Customs and their calculated value have been decreasing (Figure 3) between 2013 and 2020. The fluctuation in the number of detained counterfeit goods and their value is completely normal and strongly connected to the resources available at the time. The long-term trend clearly indicates a decline in large-volume detentions. This is because there is currently no eastbound transit traffic, which means Finland is no longer a transit country for counterfeit goods. Today, most detentions involve postal and express freight traffic, and these now reflect the situation of counterfeit goods in Finland better than before. The increase in online trade has a significant effect on the import of counterfeit goods. Online purchases are mostly transported in postal or express packages, which in turn has a direct effect on the size of the shipments, i.e., they are mostly small. A similar trend has been observed in other EU countries.
The large volumes of postal traffic make its supervision challenging. Identifying counterfeit goods requires a more detailed inspection of the goods, and usually, X-ray imaging is not helpful, as it does not show trademark markings, for example. 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 permitted Customs to focus on the identification of counterfeits among arriving goods.
The COVID-19 pandemic also had – and still has – an effect on the control of counterfeit goods. Some right holders have announced that they do not wish to be notified of any new detentions made during the pandemic. Some increased their threshold for the number of counterfeit articles found and announced that they would not take action unless the number of detained counterfeit articles was in the hundreds or even thousands. If a right holder does not want to take legal action in relation to a shipment of counterfeit goods detained by Customs, Customs cannot pursue the matter as an intellectual property right infringement. In the spring of 2020, Chinese factories were closed due to the coronavirus crisis, which meant that the availability of counterfeit goods dropped compared to normal. The strong decline in air traffic also had an effect on the number of detentions made, since counterfeit goods arriving in Finland primarily arrive by air freight. In 2020, Customs found no counterfeit goods related to the coronavirus pandemic.
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 2020 totalled €17 million, while the figure for the previous year was €33 million (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. The value of recovered proceeds of economic crime totalled slightly under €2 million. In the previous year, it was €6 million.The amount of recovered proceeds of crime varies from year to year.
In 2020, Customs investigated a total of 917 tax fraud cases, which is 455 cases less than in 2019. The number of minor tax fraud cases decreased the most (39%). A total of 98 cases of aggravated tax fraud were detected, which is 51 cases less than last year.
Customs collaborates with the Tax Administration and law enforcement authorities in other countries to combat the growing phenomenon of Intra-Community VAT fraud.
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.
All in all, the number of offences handled last year increased five per cent (5%) compared to the previous year, but there were eight per cent (-8%) fewer decided cases and the handling times of cases were longer. The main reason for the extension of handling times was the coronavirus, due to which some cases needed to be put on hold, and some of them are still on hold. More information can be found in the annual report of the National Courts Administration (in Finnish only, summary in Swedish) [.ﬁ]›.