Current issues

In 2023, nearly 2,400 economic crime cases were reported to the police. The number is up by around 15% from the previous year and higher than ever before. More than half (54%) of all economic crime cases recorded by the police were tax and accounting offences or offences involving debtors. In particular, aggravated accounting offences, tax offences, dishonesty by a debtor and forgeries, as well as subsidy fraud cases and embezzlement cases increased from the previous year.

In 2023, more than 3,300 bankruptcy petitions were submitted, up by 24.8% from the previous year. The number of company reorganisations has also shown a significant increase since the beginning of 2023. In 2023, a total of 448 applications for company reorganisation were submitted, which is up by around 32% from the previous year. The enforcement authority collected nearly €1.2 billion, the second-highest of all time in terms of euros.

Undeclared wages, misuse of benefits and bogus self-employment

In the tax audits that the Tax Administration conducted in 2023 to combat shadow economy, a total of €95 million in unreported income and €16 million in undeclared wages were detected. The value of detected falsified documents amounted to €13 million. 

The total value of Kela benefit misuse cases that led to a police investigation request was over €3.8 million. The misuse of Kela benefits is also often linked to certain shadow economy phenomena, such as undeclared wages and falsified documents. Around 85% of the cases where Kela requested police investigation resulted in a judgment.

The supervision of foreign labour carried out by the Uusimaa Centre for Economic Development, Transport and the Environment (ELY Centre) and the occupational safety and health authorities revealed that labour-related exploitation and disguised employment relationships (bogus self-employment) are still on the increase. This is particularly evident in the construction sector, but it was also detected in the cleaning sector, in garages and laundries and in seasonal work. In addition, inaccuracies were detected in working hour accounting in nearly half (46%) of the cases audited. Inaccurate working hour records make it difficult to assess whether the pay is correct as the actual hours worked cannot be determined. 

The shadow economy is fragmenting – operators are increasingly small 

Because of the rapid increase in the amount of economic crime, the case processing times are increasingly long. “One reason for longer processing times is fragmentation,” says Janne Marttinen, Head of the Grey Economy Information Unit.

“Changes in working life from traditional employment relationships to platform economy, light entrepreneurship and forced entrepreneurship have led to a situation where smaller and smaller operators are engaged in the shadow economy. The economic impact of a single case may be small but, nonetheless, cases must be investigated. Control and criminal investigation of these cases require as much authority resources as large cases do,” says Janne Marttinen.

New phenomena give rise to new shadow economy phenomena, and operators occupy new sectors. 

“Cooperation and exchange of information between different prevention authorities are key to identifying cases of misuse and responding to them. Action Plans for tackling the shadow economy and economic crime have strengthened cooperation between authorities. This has improved competence, and phenomena of the shadow economy are now better identified,” says Janne Marttinen.

Highlights from authorities’ control activities in 2023: 

• Criminal damage recorded by the police totalled €147 million. The amount of criminal proceeds from economic crime, i.e. recovered assets, amounted to €24.5 million.
• Of the partial decisions on residence permits for entrepreneurs issued by the Uusimaa ELY Centre, 48% were negative, which is 8% more than in the previous year. The most common reasons for negative partial decisions include inadequate compliance with statutory obligations and non-viable business ideas.
• The impact of the investigation of economic crime conducted by Customs was €103 million in total. Customs recorded 492 regulation offences regarding violations of EU sanctions against Russia, and 58 of them were suspected to be aggravated regulation offences. Regulation offences were up 60% from the previous year. Before this, only some individual regulation offence cases were under investigation.
• In 2023, licence holders governed by the Regional State Administrative Agencies' alcohol administration paid around €1.2 million in tax debt due to control issues, and around €610,000 due to licence issues.

Read more:
Grey economy & economic crime – Prevention statistics
Action plan 2020–2023 for tackling the grey economy and economic crime
Impact assessment of the action plan 2020–2023 for tackling the grey economy and economic crime 

Media inquiries:
Janne Marttinen, Head of the Grey Economy Information Unit, tel. 029 512 6066, email: firstname.lastname@vero.fi

Illegal employment seen in more and more sectors in Finland

European Migration Network / Senior Specialist Tuukka Lampi, 26 February 2024

On 21 January 2024, the Helsingin Sanomat newspaper featured an article of an occupational accident in Sweden in which a free falling lift led to the deaths of five employees. Most of the victims came from third countries and had worked for several subcontractors under suspicious conditions. The tragedy placed the weak position of many foreigners in Sweden to the fore.

Citizens of other countries also work in Finland in unusual employment relationships as leased employees, subcontractors, through a platform business or completely without the right to work. In the article, editor-in-chief Antero Mukka stated that a two-tier labour market is already a reality in Finland.

The number of foreign companies and employees has increased in Finland in recent years, and the role of employees coming from non-EU countries has especially grown. Foreign employees have come to Finland to work in major building projects such as the Turku shipyard and in the ever-growing service sector, in particular.

Internationalisation on the labour market is also reflected in increased challenges in the supervision of occupational safety and the right to work. Third-country citizens who come to work in Finland must have a residence permit entitling them to work or carry out business activities here. However, this is rarely the case, or the situation is subject to interpretation.

New EMN study reviews illegal employment in Finland

According to a new study conducted by the European Migration Network (EMN), work permit violations can be observed in companies of all sizes, and both Finnish-owned and foreign-owned enterprises.

Certain activities are aimed to intentionally circumvent the rules, but often the question is of the negligence or ignorance of the employer or employee. The Finnish authorities are continuously analysing risks associated with various sectors, and their overview is updated regularly based on occupational safety and health inspections conducted by the Regional State Administrative Agencies, the Police of Finland’s supervision of foreign nationals, and the Finnish Tax Administration’s registered data.

Illegal employment has been found in the cleaning, construction and transport sectors, agriculture and the restaurant sector, among others. In addition, car repair shops, small beauty salons, berry picking, forest management and household work have been identified as more recent risk sectors, and new sectors are identified constantly.

The use of leased employees and subcontractors is increasing, and one end of the recruitment service chain may be far in another country. This adds another challenge to the supervision of the right to work. It has become more common in the construction sector in particular that employees are sent to Finland as posted workers of companies registered in another EU Member State. However, these employees may often carry out work which they are not entitled to do in Finland.

Supervising platform economy businesses (such as food couriers) is also a challenge due to the unclear position of employees and the misuse of the shadow economy status. Cases have been uncovered in which delivery volumes have not realistically corresponded to the work input of a single person. This has raised doubts that work has been chained between several employees.

Responding to challenges through the active engagement of the authorities

In recent years, significant steps forward have been taken in Finland in combating illegal employment. Development has especially taken place in cooperation between the authorities, communication and legislation.

Driven by the misuse cases in the cleaning sector uncovered in 2021, the Ministry of Social Affairs and Health was given additional resources and new public offices were established for occupational safety and health. Cooperation and the exchange of information between the authorities have also improved significantly as a result of multi-authority projects, for example. The study showed that there is still room for improvement in cooperation between the authorities, as challenges included the exchange of information and the siloing of stakeholder activities.

Awareness of the illegal employment phenomenon has also increased through media releases and active communication. Employees have often been difficult to reach due to work being carried out in multiple locations, the lack of trust in the authorities, and language barriers. The multilingual Work Help Finland app launched by the Ministry of the Interior in 2022 has helped provide information for foreign employees in Finland.

The amendments to the Aliens Act entered into force in 2021 have improved the position of employees in situations where they have been exploited by their employer. In addition, the EU directive on employer sanctions is implemented as part of Finnish law. The Finnish Immigration Service has started to actively impose penalties on employers that have recruited illegal immigrants.

Phenomena – Covid and Ukraine

The major phenomena of the recent years, such as the coronavirus pandemic and the Russian invasion of Ukraine, have also affected the supervision of illegal employment in Finland in unexpected ways.

When Russia invaded Ukraine, the EU Member States started to grant temporary protection for Ukrainians. Those applying for and receiving temporary protection have the right to work without any restrictions. Ukrainians staying in Finland being automatically given the right to work had a significant impact on statistics on illegal employment.

In addition, the internal border controls entered into force during the coronavirus pandemic helped uncover a significant amount of illegal employment, which would have otherwise gone unnoticed. The occupational safety and health authorities heard about these cases from the Finnish Border Guard.

The new EMN study Illegal Employment of Third-Country Nationals: 2017–2022 Situation Analysis – National Report of Finland is available at https://emn.fi/en/julkaisut/ [.fi]›

Foreign employees' employment relationships disguised as entrepreneurship – the growing phenomenon seeks financial benefit

18.4.2023

Authorities controlling the shadow economy increasingly encounter a phenomenon where employers disguise their foreign employees’ employment relationships as entrepreneurship. This is particularly common in the construction and cleaning sectors. The findings come out from the control results published today on the authorities' shared Shadow economy and economic crime website. 

According to the authorities' findings, employers blur the boundary between the employment relationship and the assignment relationship and increasingly transfer their obligations to employees. The authorities often have to draw a line between employment and entrepreneurship: the State Regional Administrative Agencies’ occupational safety and health authority alone found over 400 ‘light entrepreneurs’ during its 71 control visits last year. Other authorities that carry out control activities – the ELY Centre, for example – have also discovered employment relationships that employers have attempted to disguise as entrepreneurship. 

Some employers also misuse the residence permit system: an employee's residence permit may be applied for when an employee arrives in Finland, and yet in practice the employee may soon be made to work as a self-employed person or a light entrepreneur and their ‘employment relationship’ is either very short or does not materialise at all.

Even in employment relationships, employers often do not comply with the minimum requirements in the case of foreign employees. When performing enforcements, the occupational safety and health authority found shortcomings especially in the pay system. The biggest shortcomings had to do with the basic pay and various compensations. The largest number of shortcomings were discovered in the construction and restaurant sectors: in the construction sector, nearly 60 per cent of the enforcements revealed shortcomings, and in the hotel and catering sector, over 54 per cent. 

Hundreds of millions lost every year

Economic crime and the shadow economy cause significant damage to society. Last year, criminal cases completed by the police caused crime damage worth nearly €200 million. The Tax Administration, in turn, found a total of €235 million in unreported taxes in its shadow economy control measures. The social impact of the prevention of economic crime carried out by Customs was €18 million, and based on tax audits, over €4 million were collected through realisation of recovery.

The current action plan for tackling the shadow economy and economic crime is the eighth in a row. Janne Marttinen, Director of the Tax Administration’s Grey Economy Information Unit, says that the projects of the action plan have developed the cooperation between multiple authorities and the exchange of information between authorities. This helps uncover the shadow economy, address abuse, and thereby prevent losses caused to society.

“Securing society's assets is particularly important in the current economic situation. When we combat the shadow economy and economic crime, we improve more efficient use of shared assets. However, money is not the only issue. Compliance with shared rules and effective cooperation between authorities benefit society as a whole,” says Marttinen.

The current action plan will end at the end of this year. Marttinen hopes that the new Government will continue combating the shadow economy and economic crime.

“The shadow economy is becoming more and more complex, and especially in an economic downturn, the shadow economy and the tax gap typically increase. The action plan for tackling the shadow economy and economic crime provides an opportunity for close cooperation between authorities and helps address changes in the operating environment,” says Janne Marttinen.

Statistics on the prevention of the shadow economy and economic crime are published on the authorities’ shared Shadow economy and economic crime website. Control results are published, for example, by the occupational safety and health authorities (Regional State Administrative Agencies), the Tax Administration, the Social Insurance Institution (Kela), Finnish Customs, the Police, the Public Prosecutor’s Office, the Bankruptcy Ombudsman, the Enforcement Authority, the Finnish Centre for Pensions, the Accident Insurance Centre, the Employment Fund, Centres for Economic Development, Transport and the Environment (ELY Centres), the Supervisory Authority for Welfare and Health (Valvira), and the Finnish Food Authority.

Highlights from authorities’ control activities in 2022:

• A total of 2,085 economic crime cases were recorded by the police. This is 6% more than in 2021.
• Extortionate work discrimination grew for the fourth year in a row. A total of 74 cases were recorded by the police last year.
• Violations of sanctions against Russia brought regulation offences to a peak: last year, Customs launched nearly 300 preliminary investigations on sanction violations.
• The number of bankruptcy petitions is on the rise. In 2022, bankruptcy proceedings were launched nearly 13% more often than the year before.
• The Tax Administration’s tax control discovered a total of €235 million in unreported taxes.
• 60% of the Uusimaa ELY Centre’s interim decisions on foreign employees seeking to become entrepreneurs were acceptances. The number of acceptance decisions rose by 5% from the previous year.

Read more: 
Strategy and action plan for tackling the shadow economy and economic crime
Impact assessment of the action plan for tackling the shadow economy and economic crime

Renewed Bank and Payment Accounts Control System helps to combat crime and enables broader cooperation between authorities

Source: Customs, 24 October 2022

The combat against money laundering and financing of terrorism became more efficient with the renewed legislation on the Bank and Payment Accounts Control System on 15 September 2022. At the same time, the scope of use of the legal act is extended. With the renewal, the Bank and Payment Accounts Control System can in the future be used by even more authorities, and more efficiently than before.

The bank and payment accounts monitoring system was deployed in 2020. The amendments to legislation that took effect in mid-September will implement the EU Financial Information Directive, and complement the implementation and regulation of the fifth EU Money Laundering Directive.

– The renewal of legislation will improve our possibilities to combat money laundering and the financing of terrorism, and will extend the cooperation between authorities in for example preventing, uncovering and investigating serious crime, says Samy Gardemeister, Director of Enforcement.

The legal amendments will enable even more authorities with competence in preventing, uncovering and investigating various criminal offences, or with authorisation to obtain account details from financial operators, to use the information in the register. The legal amendments will also facilitate more accurate targeting of enquiries made in the register. There will be less need for overlapping data systems.

Aggregating application to facilitate register use

The aggregating application which is to be introduced with the renewal of legislation will facilitate the work of authorities and financial operators. The aggregating application enables competent authorities to receive, digitally and securely and with a single query, data from both the Bank and Payment Accounts Register that Customs maintains and from individual data retrieval systems. The aggregating application will provide information to data users, and financial operators do not need to create several interfaces for various data users. The aggregating application will be deployed on 1 November 2022.

– We are pleased with the competence that the renewal of legislation gives us for using the system in our won tasks that are relevant to society. The aggregating application that Customs provides will facilitate the use of the register considerably, as information can be used more conveniently. We have plans for deploying the system during the autumn as concerns the aspects that affect Customs. I also hope that data users start their own plans for making use of the system. We are for any plans in every way, says Mr Gardemeister.

Control system to be developed in close cooperation by authorities and financial operators

Customs has developed the system in close cooperation with both data providers and data users. The Bank and Payment Accounts Control System consists of an accounts register maintained by Customs, of data retrieval systems maintained by financial operators and, starting from 1 November 2022, of an aggregating application that Customs maintains. In addition to authorities, also the Bar Association can use the system in its tasks.

As a rule, credit institutions maintain data retrieval systems. Payment institutions, electronic money institutions and virtual currency providers usually store information in the Bank and Payment Accounts Register that Customs maintains. The aggregating application to be deployed in November will combine information from various operators into a single message for data users.

Foreign workers with no legal right to work in Finland found in 1 of every 5 workplaces inspected

12.4.2022

Public authorities in charge of control efforts against the shadow economy are very concerned with illegal practices connected to foreign workers. Last year, the units of Finland’s Regional State Administrative Agencies conducted some 1,600 control visits to business enterprises that employ foreign citizens. On average, the Agencies found at least one non-Finnish employee for every 5 control visits who did not have the right to carry out the work they were doing in Finland.

When we leave out other employers and look at the construction sector alone, the situation is even worse: whenever there were 3 checks carried out, the agency always found 1 construction company with foreign citizens that had not received the right to work in Finland.

– It is likely that the current circumstances in Ukraine will worsen the situation, so the number of illegal workers keeps on growing. The more we receive migrant workers in Finland, the higher the demands will be on Finnish public authorities, because we must control the foreign workers’ activity and make sure they have the legal right to work here, control the adequate legal wage levels, control the withholding of taxes and employers’ contributions, explains Janne Marttinen, Director of the Grey Economy Information Unit at the Tax Administration.

Finnish Regional Administrative Agencies have units in charge of occupational health and safety, which exercise control over foreign workers’ circumstances at places of work, including the existence of work permits and compliance with legal minimum wages and additional remuneration. For foreign citizens who have not been given the right to work but who still have accepted employment in this country, there is an increased personal vulnerability and a risk that a malicious employer takes advantage of them.

– During our control activity we often encounter workplaces where the wages paid to foreign citizens – who do not have the right to work – are below the minimum level under Finnish law. On the other hand, we also run into circumstances where it is difficult to ascertain what the actual terms and conditions of the work are. For this reason, when we visit places of work, we increasingly turn to the foreign citizens themselves and start talking to them, notes Riku Rajamäki from the Regional Administrative Agency for Southern Finland.

It is the Tax Administration’s responsibility, in turn, to perform the necessary control action to safeguard the national revenue that consists of employers’ taxes. Last year’s statistics on results from the exercised control indicate that the Tax Administration uncovered some 32 million euros of unreported payments of wages. However, a considerable part of the unreported employees are not identified during tax audits.

Detailed information and statistics on shadow economy issues are released today on the public authorities’ shared website. Not only the Regional State Administrative Agencies work with inspections and audits but also the Tax Administration, the Social Insurance Institution (Kela), the Finnish Customs, the Police, the Public Prosecutor’s Office, the Bankruptcy Ombudsman, the Enforcement Authority, the Accident Insurance Centre, the Employment Fund, Centres for Economic Development, Transport and the Environment, the Supervisory Authority for Welfare and Health (Valvira) and the Finnish Food Authority each have their own control activities aimed for combatting the shadow economy.

Control work in the field is important: new programs will soon be introduced in other business sectors to supplement the existing control action in the passenger transportation sector

In spite of the ongoing pandemic, the public authorities that combat the shadow economy were able to perform co-ordinated worksite inspections in the building sector.

– To carry out a visit in person is a significant deterrent, promoting the overall control directed toward illegal practices. During the first year of the pandemic, we made progress in other ways, including the methodologies of data analysis. Although these aspects of cooperation across administrative sectors improved and it has now become easier to choose the right company to investigate, there is nothing that could replace the powerful impact that live visits at the workplace can have, says Janne Marttinen, Director of the Tax Administration’s Grey Economy Information Unit.

During the final months of last year, the media devoted a lot of attention to the inspections that were carried out in the field in order to verify the compliance of taxicabs. The authorities that cooperated were the Finnish Transport and Communications Agency Traficom, the Tax Administration, and the regional units in charge of occupational safety.

– The compliant companies of the sector are the ones that reap the major benefits from our control action. When everyone can see that fraudsters tend to get caught/When there are consequences to breaking the rules, there is justice in our society. The completed inspections and audits also reduce the tax gap in Finland, says Janne Marttinen.

Working together, the public authorities will soon implement a new approach to the abusive employer practices related to foreign workers. The Police will lead the coordinated control effort. We will try out the new approach in industries that have many foreign workers: this means large construction sites, berry farms, and the house-cleaning sector. This is part of the Finnish Government’s program to combat the shadow economy.

Facts: Highlights of the 2021 statistics on control activities

• The Police was able to recover approximately 40 million euros in proceeds of crime last year. The number of open cases of economic crime has remained at the same level. Variations in the count of open cases depends on how many requests for police investigation arrive to the police force from other public authorities.
  
  
• On the basis of the Tax Administration’s audits directed to the shadow economy, 40 million euros in VAT and 11 million euros in employer contributions were charged. The Tax Administration uncovered a total of 147 million euros of unreported income.
  
  
• The Centres for Economic Development, Transport and the Environment in different regions of Finland have evaluated the question of whether their typical non-Finnish applicants for business status are people who meet the standard requirements for entering into business in Finland. 1,123 individuals submitted an application to the local Centre for Economic Development. According to last year’s statistics, the Centres approved 55 percent of the applications. The Centres compile a written evaluation of the applicant’s personal ability to meet the requirements because the evaluation is one of the enclosures to the official decisions on foreign citizens’ residence permits.
  
  
• The Finnish Customs’ statistics from last year indicate an effectiveness rating of 26 million euros based on recovered taxes and duties and the Custom’s criminal investigation activities.

Read more about statistics

Combat against undeclared work in the EU happens through cooperation and skills development

Promoting a fair labour market and combating undeclared work are at the heart of the European Union’s measures. Authorities in the EU Member States have worked hard to achieve these objectives. The activities of the European Labour Authority (ELA), which began its operations in summer 2019, will improve the implementation of the EU’s mobility rules, the fight against undeclared work and provision of access to information. The ELA supports coordinated and voluntary cross-border joint inspections and simultaneous inspections in the Member States.

An information campaign focusing on seasonal work, Rights for All Seasons [.fi]›, is currently under way. Because of the COVID-19 pandemic, the status and rights of seasonal workers are currently subject to a great deal of uncertainty, safety issues and increased risk of abuse. Information is needed on what rules apply and who to turn to for advice.

The European Platform tackling undeclared work shares information on the many forms of undeclared work

The smooth transition of the Forum to the ELA on 26 May 2021 as a permanent expert group ensures the continuity of its work. The European Platform promotes cooperation between Member States to combat undeclared work by:

- exchanging information and good practices
- developing competence and analysis
- encouraging and facilitating cross-border cooperation
- evaluating experiences of cooperation and
- increasing awareness on issues related to undeclared work.

Exchanging best practices to combat undeclared work helps the Member States to assess their own situation and identify issues requiring development. The Platform has promoted general expertise, expanded the knowledge base, commissioned studies, organised seminars and thematic discussions, and examined sectors prone to undeclared work and their specific issues.

Labour abuse affects Finnish authorities too

Increase in the exploitation of labour is a near-term threat. Political commitment and readiness to assess own systems and practices in place are essential for improving the effectiveness of measures in all Member States. The authorities must have cost-effective operating models that facilitate cooperation. In turn, regulation must support the exchange of information and cooperation between the authorities.

The Platform’s work programme for 2021–2022 [.fi]› guides the activities and recognises the reality of combatting undeclared work in a difficult economic situation. The programme aims to deepen understanding of the new ways undeclared work manifests itself and the sectors prone to it. The programme supports partnerships, innovation and development of capabilities and increases awareness of undeclared work among citizens. The Platform wants to promote broad-based and cross-administrative work at political and operative levels to combat undeclared work.

Finland actively participates in the Platform’s campaigns

The first EU-level campaign to combat undeclared work #EU4FairWork [.fi]› took place last year. Finland was actively involved in the #EU4FairWork campaign together with ministries, authorities and organisations. The campaign aimed to promote awareness among EU citizens and companies of the benefits of declared work and the importance of combating undeclared work. Not declaring work to authorities does not provide any protection the employee of any protections and is a risk to the employer. It also undermines the society’s opportunities to provide services. The seasonal work campaign Rights for All Seasons will also continue to provide information on combating undeclared work.

Finland combats undeclared work in a number of ways

Combating undeclared work is included in the strategy and action plan for tackling the grey economy and economic crime for 2020–2023. One of the strategic objectives is to promote fair labour markets and equal competition. Combating undeclared work was already part of the previous programme.

A project is currently under way to improve cooperation between authorities to increase the effectiveness of enforcement and to combat crime and undeclared work. Creating common operating models for cooperation between authorities should also help in this task. Another aim is to ensure adequate resources for enforcement.

Several other projects are under way to develop cooperation between the authorities, such as the national cooperation network to promote cooperation against undeclared work set up by the Ministry of Economic Affairs and Employment on 6 April 2020. The network supports the work of the ELA and the European Platform tackling undeclared work. Key ministries and authorities are represented in the network.

It is difficult to fight undeclared work in silos. This combat is a responsibility of us all – ministries, authorities, organisations, companies, and citizens.

More information:
European Labour Authority [.fi]›
European Platform tackling undeclared work [.fi]› 
#Rights4AllSeasons [.fi]›

Corruption risks and their prevention during the COVID-19 pandemic

Source: Ministry of Justice, Juuso Oilinki 17 May 2021

During the coronavirus pandemic, several international organisations have published warnings on the increased risk of corruption during the crisis and have urged states to increase their corruption prevention efforts. Among others, the Group of States against Corruption (GRECO) – operating under the Council of Europe – has published guidelines for its member states aimed at strengthening their fight against corruption during the pandemic. In addition, the OECD has published a brief on the significance of corruption prevention and related policy measures during the crisis.

The COVID-19 pandemic has increased the risk of corruption globally. The situation should be taken seriously in Finland and the necessary measures to prevent corruption should be implemented. According to GRECO, the key causes for the increased risk are the increased concentration of power required by the crisis, the derogations of fundamental rights and freedoms and the distribution of large amounts of money to EU member states as financial aid. The OECD brief on the pandemic and the prevention of corruption states that ‘the pace of implementation of economic stimulus packages inevitably requires adapting or relaxing routine control measures and ex ante due diligence, or simplifying requirements’. International organisations deem it important to make anti-corruption measures more uniform in all processes related to the pandemic.

Risks related to healthcare and public procurement

The healthcare sector is seen as particularly vulnerable to corruption. Bribery distorts healthcare markets and can lead to an influx of poor-quality or falsified products to the markets. According to GRECO, ad hoc procurement processes, overcrowding of medical facilities and the overburdening of medical staff related to the urgent need for medicinal products and medical supplies increase the risk of corruption even more. The appropriate processes are not always observed in emergency decisions or procurement, and the related documentation can be left insufficient, which hinders risk management and auditing. The types of corruption encountered in the healthcare sector include bribery related to procurement processes, other corruption related to healthcare services, corruption in product development, conflicts of interest, favouritism and fraud related to the COVID-19 pandemic.

The OECD’s analysis shows that many of the cases of foreign bribery have occurred in the healthcare sector. The OECD’s report on foreign bribery shows that the risk of corruption is always present in public procurement as well, and of the foreign bribery cases analysed by the OECD, 57 per cent were related to public procurement. The risks are increased in a crisis situation.

Risks in the private sector

The increased risk of corruption in the private sector due to the pandemic should also be noted. Extraordinarily large economic recovery measures are necessary, but also contribute to the risk of financial crime and corruption. According to GRECO, providing falsified documents or false information to meet the conditions of different state aid and subsidy applications, falsifying product certificates, neglecting the certification of alternative supply chains, misconduct of individual employees etc. have increased during the pandemic. In addition, the risk of insider trading has increased.

According to the OECD, organised crime groups have increasingly penetrated legitimate businesses during the pandemic by taking advantage of the citizens’ lack of trust in their governments and the less strict control resulting from the crisis.

Legislative drafting during the pandemic

GRECO urges legislators to consider the increased risk of corruption in legislative drafting as well. Governments around the world are urgently drafting new legislation related to the pandemic to ensure an efficient response to the pandemic and the mitigation of its effects. Legislative drafting in derogation of the regular legislative procedure does not necessarily enable the usual level of transparency or the organisation of extensive rounds of consultations. This can predispose the process to inappropriate lobbying.

Prevention measures

Due to the increased corruption risk caused by the COVID-19 pandemic, the OECD has urged governments to invest in the monitoring of services financed with public funds particularly in the healthcare sector. According to the OECD, the current situation requires governments to implement several measures to ensure the integrity of public procurement. These measures include developing detailed guidelines on procurement strategies under a crisis, favouring existing framework agreements, and monitoring and auditing all emergency procurement processes. Internal control systems, internal auditors and other regulatory authorities play a key role. Both internal and external auditors have excellent opportunities to support organisations in short-term risk management. Investments should be made in appropriate risk management and whistleblowing mechanisms in Finland as well. For example, whistleblowing mechanisms should be implemented with a wider scope.

Fraud and its prevention during the COVID-19 pandemic

The corruption risks related to the manufacture, procurement and distribution of COVID-19 vaccines are a global threat to the economy and public health. According to GRECO, these risks include non-compliant vaccines entering the markets, theft of vaccines that have entered the distribution system, inappropriate use of funding intended for the development and distribution of vaccines, nepotism, favouritism, and corrupted procurement systems. Several international organisations, such as the Interpol and the Financial Action Task Force (FATF), and national organisations, such as FinCen, have issued warnings on falsified medicinal products related to COVID-19. The online trade of COVID-19 related falsified medicinal products has grown exponentially according to GRECO. This type of criminal activity is often associated with organised crime, the prevention of which requires effective real-time cross-border collaboration between different authorities. In Finland, too, it should be ensure that the information flow between different national and international authorities on these matters is effective and that operational processes in cases of falsified goods are clear and pre-planned. Anti-money laundering authorities play a key role in combatting fraud during the pandemic as well.

Conclusions

As discussed above, measures for the prevention of corruption and misconduct should be heavily invested in during times of crisis. In a crisis, the responsibility for corruption prevention is increased for bodies issuing decisions on the use of public funds. Public procurement units, authorities granting government subsidies and bodies overseeing these should invest in the prevention and identification of corruption and misconduct. Uniform guidelines and appropriate tools should be readily available.

Both state enterprises and private companies should ensure that a risk-based method is used to maintain good governance and internal monitoring during the pandemic as well. Using agents and other middlemen in international trade should be carefully considered. Particularly in private business activities, background checks on stakeholders and partners in connection to changes in the company’s line of business, supply chains or market areas are important for controlling risks related to reputation loss and in preventing misconduct.

After the worst phase of the COVID-19 pandemic has passed, it will be important to start analysing the long-term recovery measures. The use of public funds and the related preparatory and decision-making processes should be assessed and audited in particular. Studying these will provide us with better tools for surviving any future crisis situations, which in turn will reduce the risk of corruption and misconduct. 

More information on this subject:

Policy measures to avoid corruption and bribery in the COVID-19 response and recovery [.fi]›  

Corruption Risks and Useful Legal References in the context of COVID-19 (PDF 400 kB)

Anti-Corruption.fi [.fi]›

Corruption can take many forms

The coronavirus year challenged the supervision of the shadow economy – the authorities have introduced new monitoring measures

20.4.2021

The coronavirus situation, congestion in investigation proceedings and a backlog of court cases added to the challenges of the authorities in their fight against the shadow economy. Economic crime cases reported to the police increased from the previous year, and the Finnish Tax Administration levied taxes of more than EUR 80 million on the basis of shadow economy audits. This information is indicated in the 2020 shadow economy prevention statistics published today.

The coronavirus situation made last year challenging for the authorities that combat the shadow economy. Despite all the challenges, the authorities were able to react to the new situation and find new ways for combating the shadow economy, such as remote audits. Due to the COVID-19 situation, more focus was placed on such previous measures as the exchange of information between the authorities and the analysis of information.

“The coronavirus crisis forced us to use information provided by other government agencies even more effectively in combating the shadow economy. Information was exchanged effectively, for example, in monitoring coronavirus subsidies granted for companies and compliance with the Act on the Contractor’s Obligations and Liability when Work is Contracted Out. Less physical supervisory work was carried out last year, while thorough background work ensured that it was targeted better than before”, says Janne Marttinen, Head of the Grey Economy Information Unit at the Finnish Tax Administration.

Congestion in the preliminary investigation of more aggravated misuse also presented challenges in combating the shadow economy. Courts are also facing a difficult situation: the processing times of shadow economy cases have increased.

Examples of results of shadow economy prevention in 2020

Economic crime cases reported to the police increased by 15 per cent from the previous year

Last year, the Police of Finland recorded a total of 2,251 new economic crimes. The number of unresolved economic crime cases has increased for the past two years. For example, aggravated tax fraud and various forms of bribery and fraud increased last year. No new types of economic crime have been discovered during the coronavirus pandemic.

Further information on the results of the police’s activities 

Non-Finnish employees without a right to work found in 79 workplaces

Last year, the Regional State Administrative Agency for Southern Finland found at least one non-Finnish employee who did not have the right to carry out the work in question in Finland in 79 workplaces. In 37 per cent of all audits regarding the right to work, a non-Finnish employee was working without the required work permit. In 2019, non-Finnish employees working without a proper permit were found in 20 per cent of the audited workplaces.

Further information on the results of the Regional State Administrative Agency’s activities 

The Tax Administration levied VAT of EUR 26.1 million based on shadow economy audits

Last year, the Finnish Tax Administration conducted 547 audits related to the shadow economy. On the basis of the audits, EUR 26.1 million in VAT and EUR 22.3 million in employer contributions were levied, plus punitive tax increases. During the audits, the Tax Administration discovered undeclared income of EUR 119.5 million in total, on which taxes of EUR 31.2 million were levied. Of its shadow economy audits, the Tax Administration conducted 11 per cent in cooperation with the Police of Finland and Finnish Customs.

Further information on the results of the Finnish Tax Administration’s activities 

Kela reported 1,218 cases of suspected misuse of benefits to the police

In 2020, the Social Insurance Institution of Finland (Kela) submitted 1,218 crime reports to the police regarding suspected misuse of benefits. Kela suspects misuse if a customer has given false information or has knowingly withheld information affecting a benefit. The total value of the misuse cases resulting in a request for police investigation was EUR 8.1 million.

Further information on the results of Kela’s activities 

Finnish Customs investigated 917 tax fraud cases

Last year, Finnish Customs discovered 917 tax fraud cases, of which 98 involved aggravated tax fraud. The number of tax fraud cases decreased from the previous year, with minor tax fraud decreasing the most. Passenger volumes collapsed in 2020 due to the coronavirus pandemic, and supervision focused on commercial freight and goods transport. The decreased passenger volumes were reflected in fewer summary penal orders due to tax fraud, for example.

Further information on the results of the activities of Finnish Customs 

Coming in 2021: monitoring of coronavirus subsidies

A total of EUR 2.1 billion have been distributed in coronavirus subsidies since last March.

“There are signs that these subsidies have also attracted self-employed persons with not so good intentions. Monitoring the use of coronavirus subsidies is one of the key themes in shadow economy prevention this year. We will also monitor misuse related to bankruptcies. The pandemic may have diverse impact on manifestations of the shadow economy and economic crime”, Marttinen says.

The first results of the monitoring of coronavirus subsidies can be expected this autumn. Whether the coronavirus crisis increases the shadow economy can be determined in the next few years.

Read more about statistics

Improvements to the status of foreign berry pickers  

Ministry for Foreign Affairs, Ministry of Economic Affairs and Employment, Ministry of Finance, Ministry of Social Affairs and Health, Ministry of the Interior 31.3.2021 

On 31 March 2021, the Government proposed new legislation to improve the legal status and earnings opportunities of foreign berry pickers and to make the competitive environment equal to companies in the sector. As foreign berry pickers have not been deemed to be in an employment relationship but instead to work as entrepreneurs, their status is currently unregulated from a legal point of view. 

A letter-of-intent procedure was introduced in autumn 2014 for the authorities and natural product companies. Because of this procedure, the conditions and earnings opportunities of berry pickers have improved. A persistent problem is, however, that the procedure is only loosely binding and slow to react to emerging problems. 

The new Act would lay down provisions on the rights of wild produce pickers, obligations of the operators in the sector, monitoring of compliance with the obligations and sanctions for failure to comply with them. The obligations of companies purchasing natural products would remain largely the same as currently laid down in the letter of intent. However, the obligations would be laid down in more detail and in more binding terms.  

“With this legislation, we will ensure that Finnish rules apply to berry picking. While the letter of intent has improved the situation substantially, it is clear we need binding laws on wild berry picking too. The need for new legislation is obvious“, says Minister of Employment Tuula Haatainen. 

The new Act would differ from the current letter of intent in that it would include an absolute ban on charging pickers for recruitment services and training. These proposals are relevant for improving the legal status of pickers from abroad. Operators in the sector would also have a cooperation obligation to improve the picking results.  

According to the new Act, operators in the natural product picking sector should be reliable, and this reliability would be assessed based on compliance with the provisions of the Act. In addition, the operator should have paid its taxes and charges properly and be in the financial position to organise its business activities. Obligation compliance reports produced by the Tax Administration and its Grey Economy Information Unit can be used to assess reliability. If the operator is not reliable, it could not invite pickers to Finland, offer them accommodation or equipment with the aim of purchasing natural products picked by them. The Act would not otherwise affect the status or obligations of those purchasing natural products from pickers. 

The occupational safety and health authorities would monitor compliance with the Act insofar as the monitoring is not the responsibility of another competent authority. The Employment and Economic Development Offices and the occupational safety and health authorities would be responsible for guidance.  

The Act does not apply to the entry or residence conditions of foreigners picking natural products. The Act would apply when the work is not carried out in an employment relationship. In the case of work carried out in an employment relationship, employment legislation would apply as before.  

The Acts are scheduled to enter into force before the start of the harvest season of 2021. 

Inquiries:  

Olli Sorainen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 504 8022 or email olli.sorainen@tem.fi           
Janne Marttinen, Director, Tax Administration, Grey Economy Information Unit, tel. +358 29 512 6066 or email janne.marttinen@vero.fi 
Arto Teronen, Director of Field Operations, Ministry of Social Affairs and Health, tel. +358 29 516 3493 or email arto.teronen@stm.fi

Working together to combat money laundering and terrorist financing

Published 18.1.2021

We can fight money laundering and terrorist financing by creating tools for detecting and preventing criminal activity. Increasing awareness of different types of crime is key in identifying criminal activity.

It is important that operators know what they should pay attention to in order to detect potential criminal activity. It is also important to know what you can do to combat suspected crime.

The fight against money laundering and terrorist financing involves various authorities and organisations. The prevention of criminal activity is a shared effort.

Check the new website: Moneylaundering.fi  

Moneylaundering.fi is a new website for increasing awareness about money laundering. The website contains information about different authorities’ roles and responsibilities in the prevention of money laundering and terrorist financing.

Go to Moneylaundering.fi [.fi]› and read more about combatting money laundering and terrorist financing and about indicators that help to identify criminal activity. The Moneylaundering.fi  website also advises parties with reporting obligation on how to report suspicious activity.

The Tax Administration is committed to combatting money laundering and terrorist financing

The Tax Administration pays close attention to preventing and disclosing money laundering and terrorist financing. All suspicious transactions are reported to the Financial Intelligence Unit. The reporting is based on the Tax Administration’s general duty to exercise proper care and order to report suspicious transactions as defined by law.

The Nordic tax authorities, led by the Finnish Tax Administration, have collaborated to create a training package for their personnel. The indicators specified in the training package are based on the OECD Money Laundering and Terrorist Financing Handbook. Some parts of the basic training module will also be made available to other authorities.

The Tax Administration’s Grey Economy Information Unit prepares compliance reports and customer classifications, and these are available to other authorities upon request. The Unit’s services help to target and conduct control measures and facilitate the prevention of shadow economy.

The compliance report is an updated summary of the essential records held by the authorities. The information is illustrative of the level of compliance of an organisation or a person with statutory obligations.

Also learn about the Grey Economy Information Unit’s phenomena reports.

Discrediting or “targeting” of officials is becoming more common

Published 19 October 2020

Coercion, threatening emails, malicious phone calls, discrediting on the web, or unfounded complaints and claims for damages. Issuing a negative decision to a customer can start a treacherous chain of events targeted towards a specific official. The targeting of officials has become more common, and it should be made into a punishable offence.

Targeting focuses on an individual, but in many cases the goal is to influence society more broadly. Targeting aims to undermine trust in the authorities, erode the principle of the rule of law, and limit the constitutional right of freedom of speech. The ultimate goal is to limit public discussion and public action.

Targeting may involve threating an official directly or indirectly, digging into their private life or falsifying information about them. However, criticising a public authority or a specific official act or utilising the standard legal remedies available to citizens are not considered targeting.

The goal of targeting an official may be to make them abandon their official duties. Officials subject to targeting include police officers, prosecutors, enforcement officers, tax auditors and other auditing officials. Just the fear of being targeted can cause an official to limit what they say or do.

New ways of coercing and harassing officials

Some of the authorities involved in combatting the grey economy have experienced an increase in targeting related to their operating area in the past few years. They feel that the increase has been moderate but that the harassment has become more threatening.

Using social media to discredit a specific official has clearly become more common. For example, photos of officials may be spread online in negative connections. Some of the online campaigns to discredit officials in Finland repeat formulas that are familiar from other countries. However, there are no indications that the campaigns have been organised by international parties.

Targeting erodes trust and puts the official in an unreasonable position

Targeting often causes mental and physical stress and reduces working capacity. It may even cause fear in the targeted official. The negative impact of discrediting may also spread to the official’s family members and friends. In the most extreme cases of targeting, the official may even receive threats on their life. Such cases affect occupational health and safety and the atmosphere at work.

Unfounded information can spread quickly, especially in social media. Investigating and intervening in the matter quickly often requires the cooperation and resources of several branches of government. If standard legal remedies are misused, for example by filing unfounded complaints or falsely reporting an offence by an official to the police, the authorities have fewer resources available for their other duties. 

Society and employers must firmly oppose the targeting of officials

Different authorities may have different instructions and practices on how to address threats towards officials. Sometimes the investigation of a matter requires the cooperation of several different units. In many cases, the investigation involves the targeted person’s supervisor, the unit’s legal counsel, the labour protection delegate, the communications unit and the security unit. Occupational health care services may also be involved in the process. If the case is serious, the employer or the targeted official will contact the police. Since targeting is a topical phenomenon, many authorities are in the process of updating their instructions concerning the matter.

Harassment and threatening of an official may already meet the statutory definition of several complainant offences. However, obtaining evidence of violence or the threat of violence may be difficult. At present, if the case proceeds to a criminal procedure, the official may be forced to handle the legal proceedings alone, even though the case started with the official handling their official duties. The official is only a means for the targeting party to reach their goal. Authorities widely support making targeting a punishable offence subject to public prosecution.

The phenomenon was studied by the authorities responsible for situational awareness on the grey economy in August 2020. Public institutions that shared their experiences included the Finnish Tax Administration, the Customs, the Police of Finland, contractor obligation and immigration control units of the Regional State Administrative Agencies, the Finnish Food Authority, the Office of Bankruptcy Ombudsman, and the enforcement authorities.

Government intensifies actions against the grey economy with a new strategy and an extensive action plan

11.6.2020 Ministry of the Interior

The Government has issued a resolution on a strategy and action plan for tackling the grey economy and economic crime in 2020–2023. Actions against the grey economy and economic crime will focus on prevention, clarification of powers, improving authorities’ access to information, and promoting cooperation between authorities.

The strategy for tackling the shadow economy and economic crime aims to:

1) promote healthy competition between companies and a fair labour market,
2) prevent the grey economy and economic crime,
3) ensure the ability of authorities to combat the grey economy and economic crime, and
4) develop measures to combat the grey economy and economic crime and improve cooperation between authorities.

The means to implement the strategy and to strengthen the fight against the grey economy are listed in the 20-point action plan.

“The plan focuses, among other things, on the prevention of undeclared work. In addition, the aim is to examine new ways for intervening in intentional or grossly negligent underpayment of wages. Cooperation between authorities will be increased in the fight against identity misuse and food fraud. Anti-corruption efforts will also be intensified,” says Chief Superintendent Juha Tuovinen from the Police Department of the Ministry of the Interior.

Other actions set out in the action plan include, for example, introduction of tax numbers in the shipbuilding sector and increasing the availability of information on the payment of taxes and charges. Communications and access to information will also be developed.

“A communication campaign aiming to promote responsibility among employees and employers will be targeted at immigrants and those just entering working life. Securing the tax authority’s access to information from third parties reduces the opportunities for grey economy activities,” says the director of the Tax Administration's Grey Economy Information Unit, Janne Marttinen.

Work led by the steering group on combating the grey economy

The steering group on combating the grey economy, chaired by the Minister of Employment Tuula Haatainen, is in charge of implementing and updating the strategy and monitoring the implementation of the plan.

The executive group on combating the grey economy and economic crime, composed of ministries and authorities, reports to the steering group on the progress of the action plan and, if necessary, proposes changes to the strategy or action plan.

The press release of the Ministry of Economic Affairs and Employment and Ministry of the Interior 11.6.2020 [.fi]›

Government Resolution on a Strategy and an Action Plan for Tackling the Grey Economy and Economic Crime for 2020–2023 (PDF, 500kB)

Combating the shadow economy prevents illegal activity and ensures tax revenue – the results are encouraging

20.4.2020

The statistics on the prevention of shadow economy and economic crime in 2019 have been published. The experiences gained from the new procedures and law amendments to combat the phenomena more efficiently are positive.

Based on the statistics, the co-operation between authorities in combating the shadow economy and economic crime is efficient and works well. For example, the Finnish Tax Administration gave other control authorities close to 750 tips on misconduct related to matters other than taxation discovered during its own control activities.

‘The statistics show successes. The Action Plan against the Shadow Economy and Economic Crime has offered new tools for identifying and preventing these phenomena,’ says Janne Marttinen from the Grey Economy Information Unit of the Finnish Tax Administration.

The current and previous action plans have been in force almost continuously since 1996. The preparations for a new action plan are nearly complete.

‘During difficult times, the importance of combating the shadow economy is emphasised. The work done to combat the shadow economy ensures tax revenue and public financing,’ Mr Marttinen continues.

New phenomena challenge the traditional operating methods

The rapidly progressing digitalisation and increasingly international operating environment have presented new challenges to combating the shadow economy. 

For example, the growth of the platform economy and the popularity of e-commerce, as well as virtual currencies and the related misuse, have expanded the need for control and guidance.

‘In the future, identifying new phenomena and co-operating when responding to them will be increasingly important,’ Mr Marttinen says.  
 
Link: Shadow economy prevention statistics, 2019