EUROPEAN REPORT REVEALS MECHANISMS FOR FINANCING OF GRAY ECONOMY

It is called gray or shady economy, or sometimes underground business. All these terms describe one and the same phenomenon that has become rooted in our lives. It is now clear that in order to achieve material success, one does not need education, professional qualification or hard work. The great number of examples of young people running shady businesses and living fabulous lives confirms the opinion that in order to succeed one needs to be part of a certain circle of friends or family that control a segment of the economy.

The problem with illegal business is not only national, but European. When combating this business, police and prosecutors in Bulgaria and Europe often overlook funding mechanisms. This was announced at the official presentation of a European report on the topic of "Financing of organized crime." Data was collected in the period 2012-2014 and the Center for the Study of Democracy (CSD) in Bulgaria also took part in the study.

A reason for the study became the EU Framework Decision of 2008, which requires members to criminalize financing of organized crime. The Penal Code of this country, however, the issue is not yet clearly defined. Usually the focus of organized crime investigations is put on money laundering. No less important, however, are investments in illegal businesses.

Just like the legal business, criminal activities also have a business cycle that requires funding at the start, in order to purchase goods and make payments to personnel. According to Dr. Atanas Rusev, a security expert, it is very important for governments to cut off the financial flow that allows illegal activities to thrive and attract more financing.

Mr. Rusev has pointed out that criminal business often operates through reinvestment of funds, but it was not the only way of investing in criminal activities.

“In Bulgaria loans from legal companies are also taken, as well as unsecured consumer loans. Incomes from activities in the gray economy and various criminal activities are also used. In a criminal market capital is easily generated where potential for big profits exists, combined with low risk.”

The bigger the risk, the greater the role of intermediaries who provide the link between different criminal networks becomes. So success in the shady business is not measured only by wealth but by the sphere of influence.

The report separates criminal economy into two main types - completely illegal, like the drug market, and "semi-legal", where a product is not prohibited, but is sold illegally without paying the due VAT and excise duty. Bulgarian criminal networks are well-known for VAT frauds when consumer goods like sugar, oil, meat and others are concerned. The scheme works with large companies with turnover of over a million euro per deal. These companies are also linked to various political parties, which allows the scheme to work for many years.

The political class benefits from criminal networks in exchange for providing "umbrella" or turning a blind eye. A society that sympathizes with the criminal economy and media that glamorize crime are also to blame.