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The number of economic crimes ascertained has increased on a long-term basis. On the other hand, the majority of such offences (95 %) are cleared up. This number should be interpreted positively in terms of decreased latent crime in this field.26)
The development in the number of ascertained economic offences committed in the CR from 1993 to 1999 and development changes by years. | |||||||
1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | |
Ascertained crimes | 18.431 | 18.440 | 25.431 | 25.539 | 30.156 | 36.031 | 42.907 |
Percentage change | 55.54 | 0.05 | 37.91 | 0.42 | 18.08 | 19.48 | 19.08 |
The number of ascertained economic offences in the regions of the Czech Republic in 1999 and development changes by years. | |||||||||
Prague | CBR | SBR | NBR | WBR | EBR | SMR | NMR | CR | |
Ascertained crimes | 7.119 | 7.068 | 3.303 | 3.613 | 5.194 | 5.228 | 5.531 | 5.851 | 42.907 |
Percentage change in comparison with 1998 | -2.06 | 29.05 | 40.49 | 48.44 | 25.52 | 11.33 | 9.01 | 27.42 | 19.08 |
Damage caused by crime came to almost CZK 21,102.605 thousand (+0.5 %), accounting for 59.2 % of the damage ascertained from the total. Since 1993, there has been a 132.8 % increase in the number of economic crimes ascertained, with damage increased by 401.1 %.
The main reasons behind the sharp increase in serious economic crime in the Czech Republic in the 90's were - as it was stated in many documents concerning issues of economic crime - a low quality of legal and institutional framework for economic transformation, mainly:
Although the relevant authorities make efforts to eliminate the roots of the growth of serious economic crime27) the current results are not satisfactory.
Most information acquired, verified and processed by the Czech police, is related to the fiscal issues. It particularly concerns fraudulent conduct relating to financial operations (a relatively frequent and widespread phenomena is issuing rubber (uncovered and forged drafts and bills of exchange, certificates of deposits etc.), financial fraud in connection with the provision of subsidies (the example can be the attempt to fraudulently get a subsidy from the Ministry of Agriculture), depositing capital, providing loans (counterfeit documents, misinterpretation of data, etc), frauds related to winding up of the companies and bankruptcy and settlement proceedings or giving preferential treatment to creditors or debtors. Mismanagement of consumer and credit co-operatives is considered to be another serious issue. The current investigations have brought to light the fact that a range of official representatives of credit co-operatives participated in non-standard financial transactions.
Among the most frequently employed forms of “money laundering” are rounds, when the banking sector is used to transfer high volumes of money30) (These are mainly transfers of funds through accounts opened to third parties, including company accounts, but also via P.O. boxes and non-existing companies). More and more often offenders use banks in third countries. The number of persons involved professionally in money laundering has increased. Another potential hazard is the use of electronic communication that enables access to the account and money transfers via various firms and companies. Such transfers are anonymous and they are performed outside the banking system. The Internet enables fast financial transactions without any limitation of amounts transferred. Under the information from abroad post offices are frequently used for money laundering (Act No. 61/1996 Coll., is not according to DCDSEC related to the Czech Postal Services). There is more information available on utilising insurance companies for money laundering - there are several issues: termination of the agreements with lapse charges, using insurance agreement to secure the loans provided by other financial institutions, cash prepayment of insurance fees, disbursement of insurance amount to the third person etc. The capital market is also very remunerative for criminal organisations. They manipulate deposit security accounts with banks, use multiple transfers of funds while selling and purchasing securities, which makes it hard to identify real parties to the transaction. As the banking and customs laws are currently stricter, cash smuggling seems to be the way how to transfer money to the countries with less strict laws. Enormous sums are used in financial transactions in exchange offices. Fictitous persons are used especially for purchasing gold, jewellery, antiquities and real estate.
The Ministry of Interior receives, based on the Agreement between the Ministry of Finance and the Ministry of Interior, criminal complaints concerning the notification of so called unusual transactions and criminal information concerning the relevant companies and individuals. (DCDSEC received 45 criminal notifications, of which 4/5 were assessed as crimes of tax curtailment or unauthorised trading.) The Ministry of Finance Financial Analysis Department received from financial institutions altogether 1,699 notifications of unusual transactions (trades), and this department informed the bodies responsible for penal proceedings on 46 suspects of crimes.31)
The number of frauds ascertained, accounting for the largest portion (39.3 %) of economic crimes, increased substantially (16,861; +2,971, +21.4 %). The damage caused by fraud amounted to CZK 5,986,045 thousand (i.e. 28.4 % share in total economic claims). The majority of frauds are caused by concluding fraudulent business contracts and by sharp practices with financial resources (money, sales, fees). The insurance offences are not latent any more (Sec. 250(a), in 1997 the police recorded only 2 cases, while in 1999 there were 183 cases). The same applies to credit frauds (Sec. 250(b), in 1997 the police did not record any case of a credit fraud, while in 1999 228 cases of such a crime were recorded). Supervision is the major problem in misusing subsidies. Credit frauds conducted with the help of bank officers, who provide a loan for a commission, are very dangerous. The brand new form is the so called “guarantee for a loan”. The number of ascertained peculation offences has not changed.
Tax curtailment, which significantly upsets the country's economic stability, displays a high latency.32) The offence of tax curtailment (1,361 cases, +53 ) has ranked among security risks on a long-term basis, with the damage of CZK 2,280,444 thousand, i.e. 10.8 % out of the total damage claims caused by economic offences. Tax administration authorities submitted 1,468 suspicious cases (+235) concerning curtailment of taxes, and 1,065 cases (+936) related to other similar offences. For value added tax, there are crimes connected with unauthorised tax benefits and misconduct of accounting procedures directed towards the lower tax base for the calculation of VAT. For consumption tax, some of the most serious cases are tax manipulations concerning production, distribution, transport and export of spirits. On the basis of customs authority information, illegal importation of pure spirits continued to be transported in special trucks from the EU countries. Customs officers captured four times more cigarette packets without duty stamps than in 1998 (the most frequent country of origin was Ukraine and other countries of the former Soviet Union). Misuse of imported technical petrol was confirmed. Such petrol is used for illegal, untaxed production of fuels. Customs as well as tax regulations are breached in terms of import of agricultural goods (fake documents were used for the organised import of 24 trucks from Poland and Hungary, the inspection results confirmed the suspicion of customs and tax frauds relating to the import of table wine in carton boxes). Production and distribution of crude oil products is another field of delinquent taxes. Tax curtailment of indirect taxes33) (consumption tax and value added tax) results in very high losses. The most significant increase was recorded in the crime known as failure to transfer statutory social insurance and health insurance contributions (Sec. 147 of the Criminal Code). There were 474 ascertained offences (in 1998) of the total 2,395 crimes. The Czech Social Security Administration and the District Social Security Offices lodged altogether 1,942 complaints concerning suspicion of a crime (of which 286 complaints were lodged by the State Prosecutor's Office) in compliance with Sec. 147 and 148 of the Criminal Code (in 1998 1,528 complaints were lodged).
The Czech police also recorded a substantial increase connected with economic discipline and economic competition, offences of misuse of information in business relations (Sec. 128 of the Criminal Code - the term “tunnelling” is often used for such offences) - the number of such offences increased from 49 to 208, and offences of breaching of the duty to administer another's property (Sec. 255), with 835 offences (+165 offences) recorded. Crimes relating to financial pyramid games have continued. To avoid prosecution, the organisers of such games included an amendment to the rules, which states that the purchasers also buy “a product”. In the year monitored, unauthorised trading concentrated also on deceptive intermediation to “help” with official documents or intermediation of work abroad or “assistance” with the sale of flats or other real estate where fictitious real estate agencies were established.
The Czech police recorded unambiguous growth in suspicion of corruption. This very dangerous conduct exceeds the frame of economic crime. It does not only include abuse of power by public officials, bribe-taking, bribe-giving, breaches of the duty to administer another's property, unauthorised use of information in business relations, or breach of obligatory rules in trading, but also the corruption results in gaining material and immaterial advantages in connection with the function of a public official or with favouritism, ect.34) Corrupt behaviour by organised criminal structures in the Czech Republic is mainly apparent in politics, in the social field and the economy. It is usually very difficult to prove corruption by using common police means.35)
The development in a number of ascertained corruption crimes committed in the CR from 1993 to 1999 and development changes by years. | |||||||
1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | |
Sec. 158 - abuse of the power of by a public official | 189 | 321 | 370 | 334 | 356 | 365 | 403 |
Sec. 159 - thwarting of a task by public official's negligence | 5 | 21 | 7 | 23 | 16 | 16 | 19 |
Sec. 160 - bribe-taking | 52 | 54 | 77 | 51 | 40 | 49 | 55 |
Sec. 161 - bribe-giving | 127 | 138 | 200 | 185 | 107 | 138 | 109 |
Sec. 162 - indirect bribery | 7 | 2 | 3 | 6 | 8 | 4 | 3 |
Crime in intellectual property, which is increasing rapidly, has continued36). It covers the rights to trademarks, commercial names, and protected designations of origin, industrial rights and copyrights,37) as well as computer piracy. Trading in counterfeit and pirate goods (pirate musical CD and MC recordings, clothes and shoes marked by protected trademarks without any authorisation - in 1999 these offences concerned for example: Adidas, Diesel, Repley, Nike, Levi Strauss, Hugo Boss etc.) - causes high losses to producers, shop owners who respect laws and to copyrights. Such offences also deceived consumers. Observation of intellectual property rights is an essential precondition for decisions by foreign companies operating in the Euro-Atlantic region to make investments into the up-to-date technology in the Czech Republic. The Czech Republic was in 1999, suggested to be put on the Watch List. In the U.S.A. opinion the Czech Republic ranks among the countries that do not sufficiently protect intellectual property rights and moreover, they do not prove to be making any progress. With regards to such a list the U.S.A. can apply ex-parte economic sanctions. As a consequence of slow and inefficient enforcement of intellectual property rights, the Czech Republic is currently being threatened by international disputes in the World Trade Organisation, which could heavily impact the national economy in the form of payments to the intellectual property right owners for loss of their profit.38) However, fighting production piracy and trading in counterfeit products is the consequence of market globalisation and it should be stressed that it is not solely the problem of the Czech Republic. There were in total, 2,520 (+52.2 %, +864 crimes) infringements of copyright. The damage claims reached CZK 79,575 thousand. The police recorded 1,801 (+81.4 %, +808 crimes) infringements of trademarks, commercial names and protected designations of origin, with a total loss of CZK 9,120 thousand. These offences are particularly detected at market stalls.
Computer crime including information technology and Internet is a specific form of a crime with high latency. It concentrates especially on unauthorised use and dissemination of computer programmes - in accordance with Sec. 152 (software piracy). Dissemination of pornography and all forms of extremism via Internet is considered a very serious crime. Computer crime, as it was mentioned in the 1998 Report, also takes other forms apart from classical cases of misuses of information records - for example unauthorised use of credit and debit cards. In statistics such offences underlie frauds in the financial and banking sector. Misappropriation of funds or tax offences, where unauthorised access to a computer or computer programmes, is a means to carry out another offence. The punishment of crimes committed via the Internet is still complicated by difficulties in establishing a specific person.
Sustained and highly latent environmental offences are storage, transport and disposal of waste, unauthorised production of timber and its export and water conservation (large environmental breakdowns are hazardous and could cause damage to the quality of surface and ground water - in 1999, the Czech Environmental Inspection examined 186 cases). The Czech Republic is known at the international level as a transit country with a large number of illegal transactions. According to information from abroad, organised crime is active in such areas. There are also infringements upon the international CITIES agreement on protecting endangered species of plant and animal realms. Fighting this type of crime is difficult due to the missing legal provisions of the Criminal Code.39) Release of oil as well of other products into the air, soil and water is an ongoing problem.40) 28 crimes hazardous to the environment (wilful damage to the environment) were recorded with the damage amounting to CZK 16,531 thousand, and 12 crimes hazardous to the environment (negligent damage), where the claims reached CZK 140 thousand.
In 1999 the investigation authorities investigated in total 24,577 crimes of economic crime (20,487 new cases and 4,090 cases from the previous period), 8,141 of them were terminated by prosecution. As of 31st December 1999, 5,266 cases were not executed. 2,463 of them were commenced, while 2,803 were not commenced. The Co-ordination and Analytical Group of the Government Committee for Protection of the Czech Economic Interests submitted (through the departments of the State Prosecutor's Office) 63 cases for criminal proceedings to the relevant investigative authorities. 19 of them were closed, of which the prosecution was commenced in two cases. All other cases were either suspended or the prosecution was discontinued. As for the remaining 44 cases where the relevant authorities have not closed the investigation yet, offenders were charged of a crime in 12 cases, and the verification of suspicion continues in 32 cases.41)
935 persons were lawfully sentenced for economic offences (Sec. 118 - 152 of the Criminal Code) (1.4 %), which represents an increase by 399 persons. The majority of persons (481) were lawfully sentenced for infringement rights relating to trademarks, commercial names and protected designations of origin (Sec. 150 of the Criminal Code). 240 persons were sentenced for curtailment of taxes, fees and similar mandatory dues (Sec. 148 of the Criminal Code.).
110 persons were sentenced for bribery (Sec. 160 - 162 of the Criminal Code).
2. Crime, Development in Individual Kinds of Crime and Security Risks