POMFR: Challenges in the Field of Economic and Financial Crime in Europe and the US

By Katrien Verhesschen

Katalin Ligeti, Vanessa Franssen (eds), Challenges in the Field of Economic and Financial Crime in Europe and the US (Hart Publishing, Oxford, 2017)

“A European ‘fraud hunter’ is beneficial for taxpayers”, “Fraud costs 100 euros per EU citizen” (own translations). As these examples of newspaper headlines demonstrate, economic and financial crimes are ‘hot topics’. Newspaper articles report on fraud cases on an almost daily basis. Economic and financial criminal law is a constantly evolving field of law, not only within states but also at the level of the EU, as is demonstrated by the recently adopted Council Regulation on the European Public Prosecutor’s Office. However, the globalisation and interconnectedness of financial markets, the digitalisation of our daily lives and the particularities of economic and financial crime pose considerable challenges to legislators and law enforcement trying to tackle these types of crime. The recently published ‘Challenges in the Field of Economic and Financial Crime in Europe and the US’ gives ‒ as its title suggests ‒ an interesting and at times eye-opening description of several of these challenges.

The book, edited by Katalin Ligeti and Vanessa Franssen, is the second volume in the series ‘Hart Studies in European Criminal Law’. It is the first in a series on a comparative research project conducted by the University of Luxembourg and is based on papers that were presented at the 2014 conference on ‘Global Challenges in the Field of Economic and Financial Crime in Europe’. Legal academics and practitioners share their insights on four themes in particular: comparative law, innovation in the legal regulation, criminal and non-criminal responses to financial crime and transnational cooperation. The result is a mixture of state-specific and more general considerations. Although the book is based on papers that were presented in 2014 and predates some important developments, such as the previously mentioned Council Regulation on the European Public Prosecutor’s Office and the recent Directive on the fight against fraud to the Union’s financial interests by means of criminal law, the book is not at all outdated, the issues and challenges identified remain relevant to this very day.

The book starts with an introductory chapter. It attempts to give a definition of economic and financial criminal law. This, however, already proves to be problematic. Different states use different concepts that do not entirely overlap. Moreover, within a state one can find a multitude of concepts referring to ‒ different aspects of ‒ economic and financial crime. The authors, however, manage to find a common core in the different national terms and develop a working definition. They then give a brief overview of the challenges that will be addressed throughout the book.

Part I discusses the ‘Challenges with Respect to Substantive Criminal Law’. Its first chapter (by Bruce Zagaris, chapter 2 of the book) gives an accessible account of the use of non-prosecution and deferred prosecution agreements in the USA within the field of economic and financial crime. By giving a brief – historical – overview of different compliance actors, discussing proposed legislation and citing a lot of case law by way of illustration, it clearly explains the role and importance of corporate monitors. Although the chapter is very elaborate in its description of corporate monitors in the USA, it is, regrettably, very brief on the possible application hereof within the EU.

At first sight, it appears odd to place a chapter on prosecution agreements under the heading ‘substantive criminal law’ and it seems better placed near chapter 6 on negotiated justice. However, when reading chapter 3, the link becomes clear. Chapter 3 (by Alexander Cappel) discusses compliance management systems in Germany and describes a trend that promotes the implementation of these systems. Implementing compliance management systems can mitigate the civil, corporate, administrative and even criminal liability of board members. As a mitigating circumstance, it can lead to lower sentences. On the other hand, not taking sufficient supervisory measures can in certain circumstances be considered an act of complicity or even an offence in and of itself. Thus, chapter 3 explicitly deals with matters of substantive criminal law.

The book then moves on to part II, ‘Challenges with Respect to the Administration of Justice and Criminal Procedure’. Chapter 4 and 5 focus on the investigative stage and the detection of economic and financial crimes. Traditional investigative tools appear to be insufficient in this field of criminal law. The detection of these crimes requires new investigative measures and specialised investigating and prosecuting authorities. Chapter 4 (by Jeannot Nies) therefore presents and evaluates the investigative tools that are being used in Luxembourg. First, it discusses the obligations on civil servants and financial institutions to report offences. It then describes the new tools that are available to the investigating judge, such as access to databases that are operated by the state and measures concerning banking information. Although the introduction of the book mentioned digitalisation as an important challenge, this chapter regrettably does not elaborate on the gathering of digital evidence. By contrast, cooperation between administrative and judicial authorities, a recurring topic in this book, is touched upon for the first time in this chapter.

Chapter 4 briefly mentions the legislation on whistleblowing, without, however, elaborating on it. This subject is thoroughly dealt with in chapter 5 (by Christopher Harding). This chapter uses psychological, sociological and economic insights to distinguish between altruistic and strategic, self-interested whistleblowers. While using real and fictitious cases as illustrations, it paints the disturbing picture of sly, self-serving business whistleblowers and demonstrates the potential unintended consequences of legislation on leniency.

The next chapter, chapter 6 (by Sabine Gless and Nadine Zurkinden), moves on to the administration of justice and discusses the application of negotiated justice in the USA and Germany. It finds that procedural safeguards had to make way for efficiency and stresses the importance of carefully balancing the two. Due to increasingly vague criminal provisions and the major reputational damage connected to – even false – indictments, corporations hold a vulnerable position in negotiating prosecution agreements. Procedural safeguards, such as the right to a public trial and the presumption of innocence, are required to remedy this situation. Unfortunately, the chapter remains rather superficial in its description of the different procedural safeguards and how they are endangered by considerations of efficiency.

Part III relates to the ‘Challenges with Respect to Multi-agency Cooperation and Multi-disciplinary Investigations’. It defines multi-agency investigations as “investigations involving various (national and/or supranational) administrative authorities”[1] and multi-disciplinary investigations as “investigations involving different types of authorities, in particular the police, national (and potentially supranational) administrative authorities and national judicial authorities”[2]. Chapter 7 (by Lothar Kuhl) describes both horizontal and vertical cooperation in the protection of the financial interests of the EU. It first compares the investigative powers of the European Anti-Fraud Office (OLAF), of the Directorate-General Competition, of the European Securities and Markets Authority and of the European Public Prosecutor’s Office in a well-organised table. As said above, the book predates the adoption of the Council Regulation on the European Public Prosecutor’s Office, so the comparison is based on the Commission Proposal of 2013. The chapter then discusses the cooperation between OLAF and the national authorities and continues with a description of horizontal transnational cooperation in the field of customs regulation and anti-fraud cases. In its conclusion, it gives an orderly overview of the issues involved and it clearly demonstrates the need for a comprehensive legal framework for mutual assistance and information exchange and for multi-disciplinary cooperation.

Chapter 8 (by John Vervaele) covers another challenge connected to multi-agency and multi-disciplinary investigations. When these investigations are conducted transnationally, jurisdictional issues may arise. Examples of these issues are: concurring and overlapping investigations and prosecutions, inaction, and unilateral extensive use of extraterritorial investigations and prosecutions by powerful states. These raise important efficiency concerns, but also important legal concerns, for instance in relation to the principle of ne bis in idem and defence rights. In order to demonstrate this, the well-known cases of Fortis Bank, Rabobank and BNP Paribas Bank are discussed. The chapter then describes how the EU has tried to tackle these challenges within its borders, but also on a global transnational level. It also describes the attitude of the USA and of the international community at large. In its conclusion, the author identifies two fundamental choices that have to be made in order to find a coherent solution to the issues identified.

While several chapters already hinted at possible challenges connected to procedural safeguards and fundamental rights in transnational multi-disciplinary investigations, it is not until chapter 9 (by Michiel Luchtman) that a more detailed account of these challenges is given. The chapter starts with an overview of the available procedural safeguards at the national level and then proceeds to a clarification of why these safeguards in general fail to function adequately in cases involving transnational cooperation. For this, it examines the case law of the European Court of Human Rights on the one hand and the concept of EU-citizenship on the other hand. Although it mentions possible issues in relation to the legality principle and the privilege against self-incrimination, it does not give an in-depth analysis of the different fundamental rights.

Chapter 10 (by Martin Böse) then discusses one procedural safeguard that is closely linked to the risk of the consecutive application of different types of sanctions: the principle of ne bis in idem. It focusses on one aspect of this principle in particular, namely the question of which proceedings are considered criminal. For this, it looks at the formal approach that is adopted in the USA and the more substantive approach that is adopted by the Council of Europe and the EU. Although the chapter is rather brief, it gives an accessible overview of the different interpretations that are given to the material scope of ne bis in idem. However, it does not deal with the possible transnational application of this principle within the EU, making one wonder whether the chapter would be better placed in the next part of the book.

Part IV deals with the ‘Challenges with Respect to Shared or Integrated Enforcement Models’. It looks at the interplay between administrative and criminal enforcement systems and at possible issues concerning ne bis in idem. The first chapter of this part, chapter 11 (by Jeroen Blomsma), enumerates the legal bases on which the EU can take action within the field of criminal law, with a particular focus on Article 83(2) TFEU. The chapter is rather brief on the EU’s competence within the field of criminal law and does not add much to the analysis of the legal bases that was already given in the introductory chapter. However, it does elaborate more on the complementary administrative and criminal enforcement regime in the field of market abuse. In this context, chapter 11 discusses the question whether administrative sanctions can be criminal according to the EU, as was already done in general in chapter 10.

Chapter 12 (by Silvia Allegrezza and Ioannis Rodopoulos) deals with the interaction between administrative and criminal law as well. By using the European Banking Union as an example, it raises interesting questions on whether criminal law principles apply to administrative procedures, whether they should apply and to what extent. To this end, it also uses a more philosophical perspective. Although the chapter requires the reader to have a more than basic knowledge of the enforcement system in the European Banking Union and of prudential banking regulations, it manages to demonstrate the difficult balancing acts, for example, between broad administrative provisions on the one hand and the different aspects of the legality principle on the other hand and between administrative enforcement on the one hand and the principle of the separation between investigatory and adjudicatory powers on the other hand. It also repeats the potential tension with the principle of ne bis in idem.

The book ends on a positive note. Its final chapter, chapter 13 (by Stephen Blake), gives an example of an – according to the author successful – integrated enforcement model: the UK Competition and Markets Authority. It extensively discusses the cartel enforcement regime in the UK, which consists of a criminal track directed at individuals and a complementary administrative track directed at businesses. The previous chapter raised concerns about integrated enforcement models and stressed the importance of, among other principles, the principle of the separation of powers in criminal law. By contrast, chapter 13 mentions the advantages of including investigatory and prosecution functions within the same authority, such as a consistent strategic vision, expertise and more effective leniency programs.

The book does not contain a final and summarising chapter in which the different papers are brought together in a conclusion. However, the introductory chapter already performed this function, listing and linking the challenges dealt with in the different chapters of the book.

The book ‘Challenges in the Field of Economic and Financial Crime in Europe and the US’ gives a clear overall picture of the different challenges that are encountered in this field of law. At times, the book remains rather superficial in its description of possible conflicting interests. Moreover, it often repeats itself when discussing whether or not administrative procedures and sanctions can be considered criminal, making one wonder why none of the other aspects of ne bis in idem are discussed, for example its application in transnational cases. However, in general, the book gives a clear and accessible description of the different challenges. It thereby raises very intriguing questions and stimulates further research. Considering that the introductory chapter mentions these as the primary ambitions of the book, we can conclude that the book achieves its principal aims.

[1] K. LIGETI and V. FRANSSEN, “Current Challenges in Economic and Financial Criminal Law in Europe and the US” in K. LIGETI  and V. FRANSSEN (eds.), Challenges in the Field of Economic and Financial Crime in Europe and the US, Oxford, Hart Publishing, 2017, (1) 8.

[2] K. LIGETI and V. FRANSSEN, “Current Challenges in Economic and Financial Criminal Law in Europe and the US” in K. LIGETI  and V. FRANSSEN (eds.), Challenges in the Field of Economic and Financial Crime in Europe and the US, Oxford, Hart Publishing, 2017, (1) 9.

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