Definitions of the grey economy and economic crime
The Grey Economy and Economic Crime website provides information on the phenomena of the grey economy and economic crime and the prevention of these. As concepts, ‘grey economy’ and ‘economic crime’ are somewhat overlapping. Often what is considered as a grey economy activity is also an economic crime, but not all grey economy activities are criminal.
The definitions of ‘grey economy’ and ‘economic crime’ are illustrated with examples from the purview of authorities.
Grey economy, or shadow economy, refers to activity in which statutory obligations are neglected, for example, to avoid paying taxes, or statutory pension insurance, accident insurance or unemployment insurance contributions or fees collected by the Finnish Customs, or to receive unjustified refunds.
‘Grey economy’ or ‘shadow economy’ is also often used to refer to activity in which other statutory obligations are neglected to receive financial benefits.
Examples of ‘grey economy’ activities include:
- neglecting employer registration and still paying wages;
- neglecting filing monthly VAT returns;
- paying undeclared wages or receiving undeclared income;
- entering fraudulent information on income on a tax return, e.g., to conceal sales revenue;
- non-payment of overdue pension insurance, accident and occupational disease insurance or unemployment insurance contributions for reasons other than insolvency; and
- fraud related to tax refunds.
‘Grey economy’ often also refers to the following situations:
- a company trying to gain financial benefit by using leased labour providers and subcontractors that have not taken care of their obligations;
- underpayment, i.e., paying workers less than the minimum wage required by the collective agreement applied in the industry, or compensating entrepreneurs so little for their work that they cannot fulfil their own statutory business obligations;
- non-compliance with legislation on environmental protection; and
- non-compliance with regulations on food safety and consumer protection.
Economic crime refers to unlawful, criminal activity aiming at achieving direct or indirect financial benefit and occurring in connection with the operations of a company liable to keep accounts, a public administration entity or other corporate entity. A criminal act aiming at achieving personal benefit but connected to business activity can also be an economic crime.
Typical economic crimes include
- tax fraud (Criminal Code [CC], chapter 29),
- accounting offences (CC, chapter 30),
- offences by debtors (CC, chapter 39),
- security markets offences (CC, chapter 51) and
- company law offences (Limited Liability Companies Act, chapter 25).
- Criminal activity in which statutory financial obligations or other obligations are neglected to achieve direct or indirect financial benefit are also economic crimes. An example of these are employment offences (CC, chapter 47) and environmental offences (CC, chapter 48) committed in connection with business activities.