Financial Crime World

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Financial Crimes Definition in Bulgaria: A Comparative Analysis with Russia

In the wake of rapid economic growth and legal system development, a significant proportion of crimes have taken on new forms, making it challenging for authorities to detect and prevent misconduct. This examination aims to identify the competencies and capabilities of responsible authorities in preventing and detecting financial crimes in Bulgaria and Russia.

Definition of Crime

From a legal perspective, there is no substantial difference between the definitions of “crime” in both countries. However, the properties of crime differ significantly. According to Bulgarian law, a crime consists of four elements: socially dangerous act, guilt, criminality, and attachment. In contrast, Russia’s Criminal Code defines five properties:

  • Behavior, which includes conscious and voluntary acts that can take various forms, not limited to physical impact but also psychological signs, gestures, or words.

Grouping of Types of Crimes

The main prerequisite for claiming responsibility and recognizing an act as a crime is fault. There are differences in the grouping of types of crimes:

  • Russia’s Criminal Code lists crimes against individuals, economic crimes, and crimes against the state.
  • Bulgaria’s Criminal Code categorizes crimes into those against property, against the Republic, against financial, tax, and social security systems, against marriage, family, and youth.

Economic Crimes

While there are no specifically regulated economic crimes in Bulgarian law, crimes against financial, tax, and social security systems, as well as crimes against property, can take on such forms. This includes:

  • Fraud
  • Misappropriation
  • Money laundering
  • Misuse of funds
  • Concealment of compulsory social security contributions

PwC Economic Crime Surveys

PricewaterhouseCoopers’ (PwC) Economic Crime Surveys in Russia and Bulgaria for the 2009-2018 period reveal more fraud in Russia, both globally and locally. In contrast, Bulgarian results show that assets misappropriation, corruption, and bribery, as well as cybercrime, are the most common types of economic crimes.

Methods Used to Detect Financial Crimes

The methods used to detect financial crimes also differ:

  • Corporate controls, internal audit (rotation), risk analysis are used in Russia.
  • Bulgaria relies on real-time monitoring and technological solutions implemented in the fight against fraud and/or other economic crimes.

Loss Assessment

Regardless of the methods used to uncover financial crimes, it is crucial for organizations and the state that their losses occur. Loss assessment is a process related to determining not only material damage but also psychological and reputational (demotivation of staff, deterioration of relationships with clients and partners, etc.) damages.

Research Findings

Our research findings can be summarized as follows:

Differences in Definition of Crime

  • There are differences in the definition of crime in Russia and Bulgaria, mainly expressed in the properties of crime.

Economic Crimes

  • Economic crimes in the Russian Federation are higher than those in Bulgaria and at the global level.
  • The main types include asset misappropriation, corruption, and bribery related to orders and deliveries, while in Bulgaria, cybercrime is also a top-three type.

Methods Used to Detect Financial Crimes

  • Clearly ineffective methods used to detect financial crimes. Bulgaria mainly uses real-time monitoring and implementation of high-tech solutions, while Russia uses data analysis, risk assessment, internal audit, with corporate controls (security) and internal audit being the most commonly used.

Conclusion

Economic crime is a serious problem area for both Bulgaria and Russia. Although methods, tools, and approaches used to combat them are being improved and rationalized, the number of crimes is not decreasing but rather increasing, mainly observed in the Russian Federation. The fight against financial crime is an ongoing, holistic process that requires coupled measures and mechanisms to deal with it effectively.