The quickest and most efficient investigation and prosecution of financial and economic crimes depend mainly on the effectiveness of pre-trial investigations and the quality of public charges brought to court. The audit performed by the State Audit Office confirms that the excessive workload of investigators and prosecutors, which one often mentions as the main reason for the prolongation of criminal proceedings, is by no means the only negative factor influencing the proceedings. Other long-standing challenges also affect the lengthy investigations and trials. The State Audit Office considers that the crucial ones are the lack of a common understanding of law enforcement, uncertainty about the most important circumstances be proved, and the set of evidence necessary for proving the guilt for various types of criminal offenses. The audit identified certain provisions of the Criminal Law and the Criminal Procedure Law that should be improved for the sake of clarity and uniform application and enumerated the opportunities for streamlining the legal framework regarding the organisation of legal proceedings.
This audit aimed at verifying whether the current laws and regulations and the activities of the responsible institutions ensured the effective investigation and prosecution of criminal offenses in the area of economics and finances. Factors hindering the progress of criminal proceedings were assessed at the Economic Crime Combating Department of the State Police, the 3rd Office of the Criminal Police Department of the Riga Regional Board of the State Police, the Corruption Prevention and Combating Bureau, the Tax and Customs Police of the State Revenue Service, and the Prosecutor’s Office and courts.
The audit of the State Audit Office on the factors hindering the investigation and trial of economic and financial crimes concludes the cycle of audits in the area of strengthening the rule of law. Already during the audit in the State Police in 2017, the State Audit Office found that there were long-standing unresolved problems in the investigation of criminal proceedings in Latvia related not only to the insufficient qualification of investigators. Following the audit conducted in 2017, the State Audit Office called on the government repeatedly to improve the supervision of pre-trial investigations. Seeing that one still does not address significant problems sufficiently and responding to the call of the Cabinet of Ministers, thus supporting the measures set out in the action plan of the government led by Mr Arturs Krišjānis Kariņš, the State Audit Office has conducted an extensive audit by obtaining opinions on factors hindering the progress of selected ongoing criminal proceedings from investigators in charge of proceedings, their immediate superiors, prosecutors, and judges. In their turn, there were experts in criminal law - both practitioners and legal scholars - involved in the research of completed criminal proceedings case files. As a result, the State Audit Office provides recommendations for solutions to problems based not only on its own opinion, but also on the opinions of law enforcers and legal scholars collected and analysed in the audit.
Quality of pre-trial investigation is a measure of a prosecutor’s professionalism
Although one has identified the investigation and prosecution of financial and economic crimes as a national priority, the audit findings do not suggest that the effectiveness of investigations into this category of crime has increased in recent years. In all investigative institutions included in the audit sample, the backlog of such criminal proceedings has not decreased much over the last three years, and the trial of this category of cases is also prolonging. For example, 44% of criminal proceedings are pending for more than seven years of the criminal cases in the audit sample that were still pending in August 2020 and four of them have not been solved for 12 years.
Auditor General Elita Krūmiņa emphasises, “For a fair settlement of criminal relations as quickly and efficiently as possible in those complicated criminal proceedings, which affect the national interests very much, one requires significant increase in the efficiency of pre-trial investigation whereon the quality of the public charges and bringing those to court depend. This requires the active involvement and participation of the Prosecutor’s Office, taking the lead both in the development of law enforcement practices and in the management and supervision of investigators.”
Even if an investigator is convinced that there is sufficient evidence and advances the criminal proceedings to prosecution, it is up to a prosecutor to decide whether to indict, whether the criminal proceedings should be returned to the investigating institution for further investigation, or whether the criminal proceedings should be terminated. The burden of proof in court also falls on the prosecutor as the official in charge of public prosecution. In addition, the court is restricted in changing the content or boundaries of the prosecution brought and maintained by the prosecutor. Thus, the cooperation between the investigating institutions and the Prosecutor’s Office is essential and crucial in order to establish a common understanding of the law enforcement already in the pre-trial criminal proceedings.
The State Audit Office sees solutions for the elimination of factors hindering the investigation and prosecution of economic and financial criminal offences in four directions.
A common understanding of the law enforcement must be found, id est, clarity on the essential facts to be proved and the set of evidence needed to prove guilt.
The audit revealed that the greatest uncertainties and difficulties in application are caused by the provisions of the Criminal Law, which provide for criminal prosecution of individuals for fraud. Namely, for embezzlement, tax evasion and payment of similar payments, for illegal financing of a political organisation or association of political organisations, mediation in illegal financing, acceptance and extortion of illegal financing, for exceeding official authority, abuse of office, inaction of public official, infringement of the restrictions imposed on a public official, and still for money laundering.
To determine the subject matter of evidence more effectively, the State Audit Office recommends the development of guidelines on typical evidentiary circumstances and related facts in certain categories of cases, as well as on typical ancillary facts to be considered when assessing the use of evidence in criminal proceedings. Most investigators, prosecutors, and judges acknowledged the lack of both guidelines on the different types of financial and economic crime and exchanges of experience on their investigation. Circumstantial evidence is becoming increasingly important and even crucial in proving financial and economic crimes. However, investigators, prosecutors, and judges do not have sufficient knowledge and understanding of the use of circumstantial evidence and therefore they do not use in practice much.
There is also a lack of common understanding of whether investigating all possible related episodes in criminal proceedings and trying to prove guilt for all of them are necessary, or to determine in good time what part of the investigation will be carried out and what will suffice to prosecute. The State Audit Office recommends the introduction of a common practice so that an investigator and a supervising prosecutor would agree on the directions and boundaries of the investigation, which are sufficient for prosecuting an individual, already at the beginning of the investigation. Thus, one should not devote disproportionate resources to detecting and proving all possible episodes and possible related offenses.
There is an urgent need to assess the possibilities for streamlining the laws and regulations what law enforcers, legal scholars, and foreign experts admit as crucial.
The State Audit Office sees opportunities for streamlining the provisions of the Criminal Law so that criminal liability for criminal offenses of public officers can be applied not only in cases where illegal action has caused direct financial loss but also in other cases when the illegal action of a public officer results in significant damage to the public power or administrative order. Such are, for example, the provisions of the Criminal Law, which provide for criminal liability of officials for exceeding the authority of the service, abuse of official position, and inaction of a public official.
The State Audit Office finds assessing the proposals on solving such shortcomings of the Criminal Law regulation deeply and comprehensively as crucial, which structural unit of the Prosecutor’s Office supervising the investigations, prosecuting, and maintaining the public charges in court within the most complicated criminal proceedings on corruptive criminal offences experiences in practice. Thus, for example, the Prosecutor’s Office sees the need to improve the provisions of the Criminal Law by assessing the introduction of criminal liability for the so-called “injection of officials”. Those are cases where property or other benefits are offered, transferred, and accepted not for a specific official activity, but in order to orient the official towards favourable treatment of the provider of such benefit or a third party in the future without an agreement on a specific official activity, or when such an agreement cannot be proved.
One should also assess the improvement of the Criminal Procedure Law in relation to when or under what conditions and how criminal proceedings should be initiated and terminated, as well as under what conditions and how criminal proceedings may be suspended.
The burden on the criminal justice system must be reduced by focusing on the investigation of the most complicated and national interest- jeopardising criminal proceedings
As an immediate solution to be implemented in Latvia, the State Audit Office recommends evaluating the possibility of standardising and simplifying procedures as much as possible, including in the simplest and insignificant criminal cases by also reviewing cooperation between investigators and supervising prosecutors and considering opportunities for introduction of in-depth specialisation among prosecutors as well.
In the opinion of the State Audit Office, one should implement at least two types of cooperation mechanisms between investigators and prosecutors to streamline pre-trial criminal proceedings, including more efficient use of available prosecutional resources. One mechanism is meant for complicated criminal proceedings that affect the state interests significantly, where involvement of the supervising prosecutor is great in the choice of the type of proceedings and directions of investigation, determination of the boundaries of the investigation, necessary evidence, and methods to be used. The second one would be for simple criminal proceedings, which have a standardised investigation, known steps of the initial investigation, the evidence required, the methods of proving to be used, and no need for close cooperation between an investigator and a supervising prosecutor.
Prosecutors should receive qualified technical and advisory support at different stages of criminal proceedings.
Resolving the issue of high-quality and fast account statements of credit institutions, as well as the processing and analysis of data provided by electronic communications providers is important. Investigators are analysing account statements and data provided by electronic communications providers to the best of their ability and understanding currently. The State Audit Office considers that it prolongs the criminal proceedings and poses a risk of data analysis of insufficient quality, which can be crucial for proving important circumstances and the guilt of the offender in criminal proceedings. The analysis of those data should involve experts with financial and economic knowledge who are well versed in financial and transaction flows, identify non-commercial practices, suspicious transactions, related parties, etc.
According to the State Audit Office, qualified specialists with financial and economic knowledge, analysts in the criminal justice system are needed at all stages of criminal proceedings, but their availability in the market is not so great for the institutions involved such as the Prosecutor’s Office, the Corruption Prevention and Combating Bureau, the State Police, the State Revenue Service, the Tax and Customs Police, the Financial Intelligence Service, and the courts would be able to develop a high level of competence alone. Therefore, one shall assess what competence should be developed centrally, for example in the Prosecutor’s Office, for the needs of all institutions, and what additional capacity should be developed in institutions individually. One should also solve the issue of high-quality advisory support on accounting, financial, and economic issues, the correct understanding and interpretation of which is important for the clarification of material circumstances in criminal proceedings.
The State Audit Office has provided the Crime Prevention Council with 19 detailed recommendations in total for the prevention of factors hindering the effectiveness of the investigation and trials of criminal offenses in the area of finances and economics.