Financial crime is a cover term for all the illegal activities in the financial sector. The master minds of such crimes are not petty thieves but very intelligent people and at times honored in the society. They do their undertakings without any care and these activities do affect thousands negatively.
The consequences of financial crime have far-reaching impacts on society.
At a macro level, some countries have entire industries, such as construction and hotels, financed because of the short-term interests of money launderers, rather than actual demand. When these industries no longer suit the needs of money launderers, they abandon them, causing these sectors to collapse and greatly damage the economy.
International Monetary Fund experts have also singled out concerns for privatisation of previously government-held businesses, saying it is not inconceivable that organised crime could raise the finance to purchase such assets, as occurred following the collapse of the Soviet Union.5
Single businesses are not immune either. The private sector is vulnerable to what is known as the ‘crowding out effect’. This is where front companies that derive their main source of income from crime create unfair competition with legitimate businesses. These legitimate businesses are eventually forced to close, which also results in unemployment.
Things are now becoming even difficult thanks to the internet. Most of the financial crimes are being committed online. This makes it even easier for the criminals to do their activities without being noticed or traced. This is where Interpol steps in to minimize the impact of the crime.
Closely connected to cybercrime, financial crimes are often committed via the Internet and have a major impact on the international banking and financial sectors – both official and alternative.
Financial crimes affect individuals, companies, organizations and even nations, and have a negative impact on the entire economic and social system through the considerable loss of money incurred.
At INTERPOL, our main initiatives to counter financial crime focus on:
- Payment cards;
- Money laundering;
- Counterfeit currency and security documents;
- Social engineering fraud (such as phishing and telecom fraud).
- The challenges
So the question is where do things get complicated? The complication comes in during prosecution of persons who have engaged in financial crimes.
In a September 17 speech at New York University School of Law, Attorney General Eric Holder emphasized the importance of identifying the company decision-makers who ought to be held criminally responsible because prosecution of such individuals “enhances accountability,” “promotes fairness,” and “has a powerful deterrent effect.” The Attorney General observed that “few things discourage criminal activity at a firm – or incentivize changes in corporate behavior – like the prospect of individual decision-makers being held accountable.”
The Attorney General then floated an idea for changing the law that raises serious questions. Out of a concern that corporate executives “enjoy all of the rewards of excessively-risky activity while bearing none of the responsibility,” he suggested extending the “responsible corporate officer doctrine” to the financial services industry. That doctrine, which grounds criminal liability in someone’s official position and responsibilities, not his or her culpable knowledge or conduct, is problematic enough where it now applies, in areas of food and drug safety primarily; it would become even more troubling where issues of knowledge, intent and willfulness are quite substantial. If the Justice Department believes more individuals should be prosecuted, is the right approach to lower the standard of criminal liability?