Economic and Financial Crime, Sustainability and Good Governance

With the scientific work, a contribution is made to the investigation of the perception of economic and financial crime in Germany and Romania. With a survey in 2022 in the respective country with 1742 answers from Germany and 1856 answers from Romania, a statistically relevant database could be created. Using the chi-square model and intensity scoring in conjunction with the survey, the results show that there are some similarities in terms of the influence of education and age. Occupation exerts only a partial influence. Gender, in turn, does not show a specific pattern of behavior. The results also show different levels of tax honesty and tax morality, which can be explained by the fact that the Romanian government provides incentives for earlier payment of taxes. It also became clear that the level of corruption in Romania is almost twice as high as in Germany. These comparative analyses reflect the importance of the role that education plays in building high tax morale and tax compliance. Improving the educational system and the general education of citizens through various information campaigns and presenting the negative consequences of economic and financial crimes can be an important way to reduce the prevalence of illegal activities.

From the early stages of cards’ existence, a certain class of humans tried and unfortunately succeeded to commit frauds with this electronic payment instrument. The fraud with cards is a “disease” that affects the banking systems internationally, shaking the trust in this payment instrument and in the issuing banks. The paper starts with a short revision of the card typology and of the associated services that arise in time as an effect of the banks’ desire to acquire more and more clients. The recent pandemic offered a perfect motivation for banks to diversify their online platforms and services that can be used only if you have a card to perform online payments. Internet payments, so common today, increased the number of methods to do frauds with card payments and transactions, growing up the level of this type of financial criminality. The aim of this paper consists of reviewing the economic literature related to the methods old and new through which frauds with cards are committed in our days. Also, we highlight the methods that are used to prevent this type of frauds, and we reveal which are efficient in the fight against this scourge. We also analyze the evolution of frauds with cards at the international level. We find that the increasing card usage during the last years has led to a rise of the card scams. Finally, we discuss the measures required to prevent and mitigate the card fraud magnitude and policy implications.

Illegal logging has come to the attention of the public eye for several years. Violent conflicts resulting even into murdering the rangers that tried to protect the forests represent a serious alarm for the general population regarding the extent to which corruption can go. As one of the three pillars of economic and financial crimes, corruption represents the core of illegal logging, which brings ultra-high incomes to those involved. Interested groups become organized crime networks as they exploit wood without permits and avoid taxes. There is a stringent need for a clear and deep understanding of this phenomenon. The aim of this study was to provide a SWOT analysis of the role that corruption plays in the exploitation of wood and to find practical countermeasures by interviewing experts involved in protecting the forests. Even though the legislative framework in Romania is appreciated to be of good quality, its implementation seems to be the problem. The politicians, who are also considered to be highly responsible for the theft of the wood, are not eager to take and implement decisions in their power to stop these environmental crimes. Education and technology are identified as the key drivers for protecting the forests more efficiently. It is a general expectation of those interviewed that Romania will achieve higher sustainability over time.

Recently, the phenomenon of the informal economy has attracted the attention of policymakers and researchers alike in order to fight against its causes. This study has two main objectives. First, using bibliometric analysis, it comes up with a detailed literature review of the field of informal entrepreneurship in order to dimension its widespread in time and space. Second, through empirical analysis, it identifies the main determinants that stimulate engagement in informal entrepreneurship using the European Union (EU) as a case study. For sample collection, articles are selected from the International Web of Science database. In addition, an empirical cross-country analysis is performed for the 28 EU member states, and separately for old and new EU countries, using data extracted from the 2019 Special Eurobarometer Survey 92.1.

Our findings suggest that agriculture, cash in labor, trust morale, trust in tax and social security authorities, economic development, and urbanization are important determinants of the level of informal entrepreneurship. In addition, some economic and financial factors have a greater influence on old EU countries compared to new EU countries, while cultural factors sting harder in the new EU countries than in the old EU countries. These findings are very important for policymakers who have to consider various factors in a different manner, in their analyses of people’s behaviors regarding involvement in informal work.

This chapter investigates the impact of minimum wage on the shadow economy considering a panel data analysis for European Union countries from 2012 until 2021, using panel EGLS (estimated generalized least squares) and panel two-stage EGLS. The minimum wage is applied in 22 European Union member states in 2023 (it was applied only in 21 EU countries in 2021) and represents a crucial tool in labor policy strategy, which targets employee protection. In this study, we try to test if minimum wage can play a role in reducing the shadow economy. Based on empirical results, we found that minimum wage can reduce the shadow economy if certain conditions are accomplished. The minimum wage has to be established considering a minimum threshold, which can assure employees a decent standard of living and for employers an affordable labor force cost. In this context, the tax wedge represents another important factor with a positive influence on the shadow economy, validated by our empirical model. Based on the empirical estimations, increasing the minimum wage can lead to a decrease in shadow economy in more developed EU countries, in which the minimum wage is higher than 1000 euros and has a significant positive impact in less developed countries, where this minimum wage is below this threshold of 1000 euros. The main contribution of this paper consists in delimitating the different impacts of minimum wage considering a more complex system of factors and conditions necessary to be accomplished for a successful labor policy in reducing the shadow economy.

No doubt, corruption is a serious threat to human well-being and its development. The purpose of this chapter is to investigate the impact of perceived level of corruption in public sector on human well-being, by using cross-national data for a large sample of countries. Thus, the cross-national sample covers 132 countries (45 high-income, 39 upper-middle-income, and 48 lower-income countries) during the 2013–2020 period, and the analysis is developed for both the full sample and sub-samples. To measure well-being, we use two of the most well-known and well-documented composite indicators of well-being, such as the Legatum Prosperity Index (LPI) and the Human Development Index (HDI). The main results indicate clear evidence that the perceived level of corruption significantly influenced the level of well-being and human development, after controlling for some economic and governance dimensions such as the index of economic freedom, GDP growth, unemployment, press freedom, and country-level governance. The findings of this study could have relevant implications for policymakers and governments from all over the world who need to acknowledge the impact of anticorruption measures on people’s well-being and its development.

The aim of this research is to identify the main aspects of the impact of cybercrime on the business environment through quantitative research and comparative analysis by reviewing international literature. The applied research methodology also consisted of processing and analysing information gathered from the literature of international regulatory bodies, which formed the basis for syntheses and extracts of judgements and findings. The results obtained revealed a significant increase in cybercrime over the last decade, which is why several measures to combat cybercrime in business were proposed and discussed. The chapter concludes with the authors’ conclusions, the limitations of this study and future research directions proposed by them.

The importance of this chapter is aimed at both academic and business specialists, as well as at all readers interested in learning more about the subject.

The chapter analyses the impact of economic and financial crimes, such as money laundering, corruption, tax evasion, informal employment/entrepreneurship, cybercrime, illicit financial flows, on the state budget and the quality of public services, and what measures would help control the negative effects of the considered phenomena. The analysis of scientific literature leads to the conclusion that the use of digital technologies (artificial intelligence, cloud computing, interactive information sharing methods) at the control-state, control-enterprise, and control-society levels is seen as one of the solutions to reduce the volume of economic and financial crimes and increase the government budget revenue. E-government is one of the modern concepts, a new basis for the effective provision of public services to citizens and businesses. Modern ICTs improve the performance competence of public institutions, allow to establish particular compliance units that mediate the relationship between the government and society, and help achieve the required efficiency by ensuring cohesion among the structural components of the public service provision.

The chapter aims to analyse the effects of the main economic and financial crimes on countries’ economies and social inequality/poverty. Economic development and social inequality and poverty are examined together, since socioeconomic inequality and poverty is a deep problem that becomes an obstacle to the development of the entire world economy, so the study of the effects of crime on social inequality also affects economic development. The analysis of scientific literature revealed that economic and financial crimes distort market competition, demand, prices of products/services and production factors, diminish business performance, slow down business development due to the difficulties in accessing capital, destroy normal trust-based business relationship, cause reputational damage to legitimate business and discredit legitimate transactions, thereby discouraging investment and innovation. The indirect negative effects appear as fewer opportunities to improve working conditions, business enterprises face difficulties in protecting intellectual property and patents, more funds need to be allocated to cyber security, and the risk of illegal trade in harmful waste is increasing.

The effects of economic and financial crimes on social inequality are both direct (decreasing state budget funds, higher taxes imposed on other economic entities reducing their real income) and indirect (slower economic growth). Economic and financial crimes can deeply damage normal functioning of the economic system when market mechanisms and the principles of fair competition are violated; thus, income inequality increases not only due to insufficient financing of social support, which is determined by a lack of money in the state budget, but also due to violation of the principle of justice when all market participants operating under equal conditions should have the right to a fair return/earnings.

The aim of the chapter is to carry out an analysis of the effects of the main economic and financial crimes on business development and the activity and reputation of financial and banking institutions. Business development and the activities of financial-banking institutions are examined together, since business financing is inseparable from bank/financial institution funds. The analysis of scientific literature revealed that economic and financial crimes undermine the functions of financial-banking institutions to accumulate capital from local savings and foreign funds and to act as a stimulating factor for investment and efficient distribution of resources, thus creating an environment favourable to economic growth. Financial institutions with flows and deposits of proceeds of crime face additional challenges in properly managing their assets, liabilities and operations. Although acting in the informal sector can in some cases help to reduce high entrepreneurial entry and operating costs and allow business to survive in the conditions of an economic recession (literature mostly indicates the cases of inefficiently regulated low-income countries), the destructive effects of economic and financial crimes are most pronounced in the private sector. Economic and financial crimes distort market competition, demand, prices of products/services and production factors, diminish business performance, slow down business development due to the difficulties in accessing capital, destroy normal trust-based business relationship, cause reputational damage to legitimate business and discredit legitimate transactions, thereby discouraging investment and innovation.

This study undertakes a critical review of European policies and regulatory frameworks aimed at mitigating financial crime, intending to provide recommendations on their effective implementation towards the development of sustainable economic models. By employing a qualitative research methodology, the authors examine existing literature on policies and regulatory frameworks for addressing financial crime in the context of achieving a sustainable economy. The findings highlight the importance of an all-encompassing policy and regulatory blueprint that includes the use of state-of-the-art technology, global cooperation, exchange of intelligence, and unified oversight on disclosure obligations on sustainability. The authors emphasise the imperative for policymakers, regulators, financial institutions, and other stakeholders to embrace environmental, social, and governance (ESG) criteria and a consistent and harmonised framework of sustainability requirements and disclosure obligations to attain a sustainable economy model.

This chapter examines the effects of money laundering on economies and highlights the pressing need for a coherent legal framework that supports anti-money laundering (AML) and sustainable economic practices. Using a theoretical approach and qualitative research, the chapter analyses the effectiveness of existing EU AML regulations and identifies measures to improve them. It also explores the intersection of AML and environmental, social, and governance (ESG) efforts and the need for increased cooperation and stricter disclosure requirements for companies in a sustainable economy. Ultimately, the chapter provides valuable insights for the EU to address emerging technological challenges while combatting money laundering and promoting sustainable economic models.

The main purpose of this study is to determine whether forensic accounting is an effective tool for preventing fraud. To conduct a comprehensive analysis, the research examines three aspects: the skills and attributes of a forensic accountant, the techniques used in forensic accounting, and the challenges and opportunities in the development of the forensic accounting profession. The study’s sample includes 30 articles that were critically reviewed using a combination of systematic and traditional literature review methods. The main findings of the study suggest that the abilities and skills, as well as the techniques used in forensic accounting, make this function an effective tool in detecting and preventing fraud; however, they require more attention from academic institutions and specialized bodies that train accounting experts. Moreover, forensic accounting must be recognized as an independent profession. This study can assist businesses and policymakers in improving fraud detection and prevention methods. Furthermore, it can be used in schools to enhance accounting and audit curricula. The study has a social implication because it helps in the prevention and detection of fraud and discusses the forensic accounting profession.

This chapter provides comprehensive evidence on the effects of cyber-attacks (cyber-crime, cyber espionage, cyber warfare and hacktivism) and cyber security on three types of cryptocurrencies (Bitcoin, Ethereum and Litecoin). Our methodology is based on time series regressions using cyber-attack data; for the analysis, we consider realised returns, realised volatilities, trading volumes and risk-adjusted returns. Stronger cyber security is found to increase realised and risk-adjusted returns, to reduce risk and to increase trading volumes as investors build up their confidence to trade in a safer digital environment. Ethereum, which is a smart contract, benefits the most from cyber security. Bitcoin and Litecoin investors can be characterised as risk-loving and overreact in their attempt to exploit arbitrage opportunities in the event of cyber-attacks targeting cryptocurrency exchanges and industry sector; this type of behaviour is attenuated (intensified) by stronger cyber security in the case of the former (latter) type of attacks. On the other hand, Bitcoin investors in particular become risk-averse when cyber-attacks hit the US government sector. Ethereum is relatively more immune to cyber-attacks regardless of their targets and types in comparison to Bitcoin and Litecoin. However, hacktivism increases risk for all three cryptocurrencies considered. Our results suggest that policy makers and regulators need to be better informed about the impact of cyber-attacks on cryptocurrencies and that more appropriate strategies should be designed and put in place to enhance cyber security.

Cyber insurance is a necessity in the context of the digital transformation of society. We live in a world where the chains of usual operation, in general, and those of development and research in informatics must face the associated risks. Prevention and recovery processes are complemented by mitigation processes, which suppose, among others, complex cyber insurances, which involve a priori analyses and evaluations, before concluding the insurance policy and post-factum, after the occurrence of the insured risk.

The study seeks to substantiate the need to develop clear procedures, with levels and stages defined as much detailed as possible, formulating and assuming policies, supporting regulations, sectoral strategies to increase the level of maturity of consumers, individuals, institutions, and private legal entities, regarding protection against cyber threats. The study has identified the need for cooperation between insurers (and re-insurers alike) to provide appropriate types of coverage and exclusions, while splitting the risk among them.

We also intend to introduce in the article the schematic presentation of a reporting system to the state authority of attacks and losses generated by cyber risks, including those directed against critical infrastructures. This type of reporting can ensure transparency for the insurers about the entities they intend to ensure. Nevertheless, given the sensitive information it entails, the implementation details should be carefully thought out.