Economic and Financial Crime: One of the Main Forms of Criminal Activity in Romania

In recent years, economic and financial crime has seen notable growth, marked by evolving methods, areas of focus and influences across various sectors. This evolution stems from its ability to adapt to changing geopolitical, economic and social conditions, along with the rapid integration of technological advancements.

These changes have facilitated a shift in criminal activities into the online sphere. Key factors driving the expansion of crime include unrestricted access to advanced technology, the capacity for swift resource relocation, operational flexibility and the globalisation of networks. As a result, perpetrators have capitalised on new opportunities, strengthened alliances, boosted profits and enhanced their defences against state countermeasures.

The main trends in the tax evasion phenomenon include:

• avoidance of the tax and duty system amid the reorganisation of tax authorities and adjustments to the fiscal system;
• an increase in the number of criminal networks involved in large-scale tax evasion, acting independently in Romania or in connection with similar structures in EU member states;
• the transfer of taxable income to newly created companies within the same group that benefit from profit tax exemptions while the parent company records losses;
• the transfer of indebted companies to foreign citizens or insolvent individuals; and
• support from public officials or experts in the fiscal, financial and legal sectors, among other sectors.

As a response to this criminal phenomenon, in 2024, the E-factura (E-invoice) system was implemented, an electronic invoicing system implemented by the tax authorities in Romania that allows the issuance, transmission and receipt of invoices in digital format in relation to business partners and state institutions. It is managed by the National Agency for Tax Administration (ANAF), and its main aim is to improve tax transparency and reduce tax evasion.

This innovative electronic system represents an important step in modernising and streamlining the fiscal system in Romania, contributing to better revenue collection and combating tax evasion. It provides authorities with stricter control over the reporting of economic transactions and the accurate collection of taxes, thereby reducing the risk of tax evasion.

Following the implementation of this electronic system, the law for preventing and combating tax evasion was amended, introducing higher penalties for acts constituting tax evasion offences that cause damage (associated with VAT due) to the state budget and criminalising new tax evasion acts in cases where taxpayers do not use national IT systems, such as E-invoice.

Thus, the following acts now constitute the offence of tax evasion if committed with the purpose of evading tax obligations:

• the use by a taxpayer, in bad faith, of the national electronic invoicing system E-invoice to create the appearance of legality for fictitious transactions or to conceal the real transactional flow of goods/services; and
• The use of electronic fiscal devices that are not connected to the national IT system for monitoring and surveillance of fiscal data, as required by law, or the alteration of electronic fiscal devices to prevent the transmission of fiscal data or to transmit false fiscal data.

Moreover, any action committed within fraudulent schemes that results in a reduction of at least EUR1,000,000 – in the national currency equivalent – of state budget resources has been defined as an offence tantamount to tax evasion. These actions include:

• the use or presentation of false declarations or documents, false electronic documents, or incorrect or incomplete documents regarding VAT;
• the intentional withholding of information regarding VAT when such information is required to be disclosed by law; and
• the presentation of correct declarations or correct electronic declarations regarding VAT to fraudulently conceal non-payment or to create undue rights to VAT refunds.

Thus, it can be observed that by 2024, concrete measures had been taken to discourage and limit the commission of tax evasion offences. Furthermore, the Ministry of Finance continues its efforts against tax evasion and will make electronic invoicing mandatory for transactions between companies and final consumers starting from 2025.

Corruption in the public sector

According to the 2023 Corruption Perceptions Index for the public sector, calculated by Transparency International, a non-governmental organisation with the primary aim of preventing and combating corruption at the international level, Romania obtained a score of 46 out of 100, representing a high level of corruption, which places it 25th in the EU and 63rd globally.

Romania is involved in international and regional efforts to combat corruption, including collaboration with the EU and other international organisations. Additionally, internal reforms continue to be a priority for the government and civil society organisations fighting against corruption.

Given the international nature of economic operations, achieving progress in preventing and combating corruption in this area requires not only national efforts but also multilateral initiatives for co-operation, monitoring and tracking progress. This includes the creation of effective tools to combat criminal behaviours.

Following its accession to the Organization for Economic Cooperation and Development (OECD), Romania has committed to taking legislative action in response to the OECD ’s evaluation, which found that the scope of the bribery offence at the transnational level in its legislation is too narrow and that the sanctions for legal entities are too lenient.

At the initiative of the Ministry of Justice, the Romanian Government adopted, in July 2024, a draft law establishing measures for the implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

This draft law aligns national legislation with the requirements of the Anti-Bribery Convention, a commitment Romania made during its accession to the OECD. By adopting this law, Romania takes an important step in establishing the offence of bribing foreign public officials.

The new offence refers to the promise, offer or giving of money or other benefits to influence a foreign public official in performing or not performing acts related to their official duties or to induce them to act contrary to those duties. The offence applies regardless of whether the foreign public official’s action falls within their official duties and targets the acquisition of money or other benefits, or the maintenance of such benefits, in the context of international business transactions. The penalty for individuals convicted of this offence ranges from two to seven years of imprisonment, while for legal entities, the criminal fine is set between RON3,000 and RON150,000.

A foreign public official is defined as any person, appointed or elected, who holds a legislative, administrative or judicial position in a foreign country, any person who performs a public function for a foreign country, including for a government agency or a public enterprise, and any official or agent of an international public organisation.

As for the authority responsible for handing criminal cases related to this new offence, it was considered that the National Anticorruption Directorate is the most appropriate for conducting the criminal investigation. Additionally, the central authorities responsible for international judicial co-operation in criminal matters have been established, namely the Prosecutor’s Office attached to the High Court of Cassation and Justice and the Ministry of Justice.

Recovery and confiscation of assets

In April 2024, the European Council adopted a directive that establishes minimum rules at the EU level regarding the tracing, identification, freezing, confiscation and management of criminal property related to a wide range of offences. The directive will ensure better preparation of member states in their fight against organised crime and the illegal profits associated with offences. It will also require EU countries to ensure that authorities have the resources they need to carry out their activities.

Specifically, member states will be required to strengthen asset-recovery offices, whose role will be to facilitate cross-border co-operation related to asset-tracing investigations. The asset-recovery offices will also be tasked with tracing and identifying money derived from criminal activities, supporting the investigative activities of national authorities and the European Public Prosecutor’s Office. They will also carry out tracing and confiscation tasks for funds subject to a precautionary measure or confiscation issued by an authority from another member state.

To enable asset-recovery offices to perform their duties, member governments will need to ensure they have access to relevant national databases and registers; in some cases, this access will need to be immediate and direct. Thus, the fight against corruption and the recovery of damages caused by criminal activities will become much more effective at the cross-border level through the strengthening of national asset-recovery offices, which will support investigative bodies in identifying assets that may be subject to precautionary measures or confiscation.

National asset-recovery offices should have information about the annual financial statements of companies, information about bank transfers and account balances, and more recently, virtual currency account balances and transfers made with such currencies, as well as tax data, income information, and data contained in land registry and property books. Only by quickly accessing this information can measures be taken to efficiently recover damages.

A classic case of information exchange occurs when an office from one member state sends a request to an office in another member state, which must specify the subject of the request, the reasons, the relevance of the requested information for tracing or identifying assets, the nature of the procedures in the requesting state, the type of offence and details about the targeted asset (bank accounts, real estate, vehicles, etc).

However, there is also a provision for information to be provided without a request if asset-recovery offices are aware of income or assets that could be subject to precautionary measures or confiscation. At this time, it is not clear how these offices might have this knowledge, but the regulation stipulates that when providing such information, asset-recovery offices must explain why the information is considered necessary to achieve the objectives of the directive.

Money laundering in the digital era

Money laundering through cryptocurrencies and non-fungible tokens (NFTs) is a global issue, and Romania is no exception. The country has seen an increase in cryptocurrency use, which sometimes includes illicit activities, as the anonymity and ease of transactions make cryptocurrencies attractive for money laundering. NFTs are a newer phenomenon, and their use in money laundering is an emerging trend. While the NFT market in Romania is still developing, the potential for abuse exists as the market grows.

The extent of this phenomenon has led the National Office for the Prevention and Combating of Money Laundering to publish a guide on indicators of suspicion and money laundering typologies in the field of crypto-assets, with the aim of increasing awareness and informing financial institutions, regulatory authorities and all those involved in this field about the risks and challenges associated with money laundering.

The money laundering occurring through cryptocurrencies has been summarised as follows.

• Placement: Criminals begin by converting illicit funds – obtained through activities such as drug trafficking, cybercrime or other illegal means – into cryptocurrencies. This is commonly done by buying cryptocurrencies with cash or by transferring funds from traditional bank accounts to cryptocurrency exchanges.
• Layering: Once the funds are in cryptocurrency form, they are moved – through various transactions – between different wallets, exchanges or crypto-assets. This process is designed to obscure the origin of the funds and make it challenging to trace them back to their illicit source. Techniques such as using “crypto-mixing” services or automated trading bots are employed to further anonymise the transactions.
• Integration: After the funds have been layered, they are reintegrated into the financial system. Criminals can cash out cryptocurrencies by selling them for fiat currency, purchasing goods or services directly, or using them to finance further criminal activities.

A common method of money laundering by means of cryptocurrencies is using a crypto automated teller machine (ATM), with Romania being ranked ninth in the world in terms of the reported number of crypto ATMs. Through these types of ATMs, criminals conduct anonymous and confidential transactions without the need to disclose their identity or undergo rigorous verification processes. They can purchase cryptocurrencies through these devices using funds from illicit activities and then sell or transfer the cryptocurrencies to other addresses, thus concealing the origins and destinations of the funds.

As for the use of NFTs for money laundering, this involves transferring illicit funds through these unique digital assets, which allow criminals to conceal the illicit origin of – and launder – funds by exploiting the special characteristics of NFTs and the difficulty associated with tracing them.

The National Office for the Prevention and Combating of Money Laundering guide states that a tactic used with increasing frequency for money laundering is associating NFTs with digital art: criminals can create or purchase digital artworks and transform them into NFTs, giving them an appearance of uniqueness and value. These NFTs can then be traded on NFT platforms, and the money from these transactions can be considered “clean”; thus, such NFTs can serve as tools for money laundering.

The National Office for the Prevention and Combating of Money Laundering concludes that money laundering in this field represents a significant challenge due to the specific characteristics of crypto-assets, such as anonymity and decentralisation, which facilitate the concealment of the illicit origin of funds and make it difficult for authorities to trace them. Therefore, it is imperative that all involved parties collaborate to develop effective solutions to combat this phenomenon.