Economic and Financial Crime

This first chapter begins to present the concepts of economic and financial crimes and theirs main components of corruption, shadow economy, and money laundering. The historical issues, concepts, and characteristic features (volume, intensity, direction, and frequency) are presented in relation with the economic and financial crime acts. Then, this first chapter reveals the way to measure these types of crime, presenting the most known tools to measure corruption, shadow economy, and money laundering, along with assessing an economic and financial crime index. For each tool, the main data sources are provided. This chapter also includes practical approaches, referring to descriptive studies of corruption, money laundering and shadow economy in European Union countries. The relation between corruption, shadow economy, and money laundering is also theoretically and empirically investigated.

This chapter ends with the highlighting of the main determinants of economic and financial crime at micro level (corporate governance including also the quality of financial audit and reporting) and macro level: economic factors (economic development, tax pressure, financial and banking system development, technical and scientific revolutions, technology, digital economy); political and legal factors (public governance, reflected by the efficiency of institutions, quality of regulations, rule of law etc.); and sociocultural factors (attitude regarding the taxes or tax morale, culture, religion, education including intelligence, confidence). These determinant are detailed in the following two chapters.

This chapter presents the main economic and political determinants of economic and financial crime resulting at the reviewing of the specialized literature. Some of the main causes we identified are the following: the level of the economic development, the tax pressure, the public governance, the corporate governance, and the banking system soundness. Economic and financial crimes acts are poverty‐driven diseases, and they highly characterize low‐income countries. The tax pressure also is found among the most frequently mentioned causes of the economic and financial crimes. The specialized literature reveals the role of the tax pressure on the economic and financial crime by the fact that a high taxation rate may result in corruption actions of the public officers to avoid the tax payment or by getting involved in shadow activities. Then, we show the importance of best practices in the public governance which conduct to a high trust in government and a high compliance with the law, therefore reducing the economic and financial crime act.

Within our presentations, we have always in view both theoretical and practical approaches. Moreover, we have documented with our own empirical studies the influences of these variables on the economic and financial crime, adding a significant value to this work.

Various recent studies are beginning to go beyond the explanations of a strictly economic nature regarding to find causes of economic phenomena. Thus, the term behavioural economics has been developing more and more in the economic sciences, lately being associated with social values, norms, and attitudes. More and more authors among non-economists believe that attitude and opportunity are the main motivations for committing economic crimes.

In this context, this chapter is focused on behaviour factors which determine and influence the economic and financial crimes. Among these factors, a particular attention is paid to cultural factors, religion, tax morale, trust (trust in the state), or happiness (subjective well-being) condition of individuals. For each of these factors, there are presented theoretical approaches including definitions of concepts as well as the practical ways of measuring these variables, indicating some possible databases available worldwide. Descriptive statistics about these behavioural determinants are conducted for European Union countries. Additionally, the paper brings documentation from the specialized literature about the existence of some causality relations between the behavioural factors and the economic and financial crimes as well as own empirical studies.

The last chapter emphasizes the effects of such economic and financial crimes at economic, financial social, and political levels. The presentations made include, on one hand, a synthesis of the review of the specialized literature about the relations investigated and, on the other hand, the progress of own studies for documenting the existence and intensity of such influences.

The economic and financial effects of economic and financial crimes are presented within two opposite theories: “sand the wheels” theory and “grease the wheels” theory. An important strand in the literature supports the “sand the wheels” theory, documenting the negative influence of economic and financial crime upon the economy, under the various forms: on economic and sustainable development, on the state budget, and on business performance. We also discuss about the “grease the wheels” theory which document some positive effect of economic and financial crime upon the economic and sustainable development of countries. Then, social effects of the economic and financial crime on the volume and quality of public services, on population health, are analysed.

The negative effects of economic and financial crime acts calls for a focus on professional organizations to combat this scourge. For this purpose, this chapter summarizes the measures to prevent and fight against this scourge and the main international and national bodies meant to implement these measures in the fight against economic and financial crimes. Finally, we present short allegations about the usage of the judicial expertise as specific technical method meant to investigate the economic and financial crime.