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White-Collar Crime in CEE: Expanding the Toolkit

White-Collar Crime in CEE: Expanding the Toolkit

Issue 10.2
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Looking ahead to 2023, white-collar crime is likely to be a subject of close scrutiny by local and EU authorities across CEE. CMS CEE Partner Nedeljko Velisavljevic, from Serbia, and CMS Head of the Criminal Defense Practice in Romania Mihai Jiganie-Serban explore the current context, latest developments, and outlook of white-collar crime practices in CEE.

CEELM: Tell us a bit about the regulatory context relating to white-collar crime in your respective jurisdictions of Serbia and Romania.

Velisavljevic: Apart from an update to the Law on the Prevention of Corruption in 2020, there have been no new developments in legislation related to white-collar crime in Serbia. In theory, we have effective legislation to combat corruption and white-collar crime and, while there is room for improvement, the police and prosecutors in Serbia have the necessary forensic expertise to combat such crimes. However, what happens in practice is a separate question.

In general, white-collar crime in Serbia is not a new topic. Although we have general provisions defining white-collar crimes, new legislation has introduced additional criminal acts that specifically apply to economic activities, and updated acts include the prosecution of bribery, embezzlement, and fraud. Despite the introduction of new legislation, the statistics show that most white-collar crime cases in 2020 and 2021 still relate to “abuse of position,” because it remains the easiest crime to prosecute in the economic sector. While prosecutors now have more options to prosecute, some sectors, such as tax evasion, are usually prosecuted through misdemeanor and tax proceedings rather than criminal cases. In fact, the abuse of position by a responsible person is still the most common form of white-collar crime.

Jiganie-Serban: In Romania, the recent changes in Romanian legislation, including the implementation of EU Directive 2019/1937 of the European Parliament and of the Council (the Whistleblowing Directive) would raise the risk of criminal liability for multinational companies. Additionally, the recent interpretative decisions by the Constitutional Court and the High Court of Cassation and Justice changed the interpretation of the legislation related to the statute of limitations for criminal liability. There was no special statute of limitations provided by law for such crimes – between 2018 and 2022 – and only the general statute of limitations applies. Consequently, many high-profile cases are under threat of being closed due to the relatively shorter period provided under the general statute of limitations. Should that happen, following the money and the process for recovering it would be quite interesting in Romania. Although the Constitutional Court’s Decisions no. 297 of April 26, 2018, and no. 358 of May 26, 2022, could lead to the closing of many criminal files, the associated civil actions would not stop, so it would still be possible to recover any prejudice caused to the EU or Romanian budgets.

CEELM: In terms of advising companies on risk management, how would you describe the white-collar crime toolkit?

Jiganie-Serban: I’ve been working in this field for the past 18 years and a significant part of my work involves advising clients on the importance of taking measures to reduce their exposure to risks. We worked closely with compliance departments to review policies such as anti-corruption, anti-bribery, AML, competition, etc., particularly to prepare the company for a dawn raid in competition and white-collar crime cases. It is important to set in place a specific procedure, to ensure that the authorities follow the proper protocol and respect our clients’ rights. Most importantly, we advise our clients to train their people and have a list of contact people who can be reached in case of such an investigation.

Velisavljevic: In Serbia, in most cases, companies are reluctant to call attorneys in advance of unexpected visits or dawn raids by police and authorities. Internal investigations are still rare, as they can trigger authority attention. When clients already face legal action, they usually contact us for assistance during these dawn raids and interviews with the police and authorities. Their managers are often unprepared for these unexpected legal actions. It’s important to train both managers and employees to avoid risks and protect the clients’ interests during dawn raids or official visits. International companies have written policies and internal regulations to instruct their managers and employees on how to behave and protect their interests during unexpected visits. Such policies should be adjusted in accordance with local laws.

We have conducted two large internal investigations in Serbia. But in such smaller jurisdictions – with most large companies headquartered abroad – the managers are often reluctant to hire attorneys for internal investigations. Our firm uses advanced software for internal investigations, and local companies can also utilize these tools if they choose. Ultimately, it’s essential for companies to be proactive and prepared in advance of any legal action.

CEELM: What developments do you expect for the upcoming year?

Jiganie-Serban: When considering the future, it’s essential to look at the current context. At the EU level, there may be an economic crisis around the corner. During such periods, criminal aspects tend to rise in the private sector. The market is no longer competitive, and frauds or other shady (corrupt) arrangements tend to increase. This will likely be the case this year as well.

Also, when it comes to funds from the Romanian National Recovery and Resilience Plan, it’s important to note that we have had a tradition of not using EU funds or state infrastructure budgets according to plan. In Romania, we also have a big issue with highways and railroads not being up to standards, some of which are unusable despite being in their warranty period. A thorough investigation could target the expenses on infrastructure works and, notably, the EU Public Prosecution Office (EPPO) has jurisdiction in such cases and could follow the money across multiple jurisdictions.

It is essential for lawyers in white-collar crime to offer legal advice and preemptive solutions to multinational companies regarding potential risks and criminal liability of legal entities. At the EU level, the EPPO has the resources to develop a solid practice and access multiple jurisdictions. Firms like CMS can offer multi-disciplinary legal assistance to clients across jurisdictions and manage internal and external communications, including crisis communication management.

Velisavljevic: Looking ahead, the healthcare sector will likely continue to be closely monitored in 2023. For instance, the first indictment in Serbia filed against legal entities was against pharma companies, due to their relationships with local healthcare professionals. Additionally, bribery, fraud, embezzlement, forgery, and misuse of position will be monitored in all areas that are of special interest to each of the states in the CEE region, e.g., the construction industry, telecommunications, taxes, defense, sanctions, and various types of procurements.

The ESG sectors have come under focus (e.g., environmental issues, labor law rights) and we expect to see more proactive actions from officials in the coming years, as states face ESG pressures and develop the related regulations.

Overall, multinational companies need to understand that authorities’ capabilities are changing, and white-collar crime professionals must match their levels of specialization by working closely with colleagues from the compliance, tax, environment, and banking practices. This collaboration enables various legal practices to offer full advice with multiple focuses for clients. It’s possible that criminal dawn raids may become more common in the future, although that may not be until after 2023. Regardless, it is important for legal professionals to stay plugged in and prepared to provide their clients with effective advice and representation.

This article was originally published in Issue 10.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Romanian Knowledge Partner

Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

Țuca Zbârcea & Asociaţii is providing legal services in every aspect of business, covering all major areas of practice: corporate and M&A; litigation and international arbitration; corporate tax; public procurement; TMT; employment; insurance; banking and finance; capital markets; competition; healthcare and pharmaceutical; energy and natural resources; environmental; intellectual property; real estate; regulatory legal services.

Țuca Zbârcea & Asociaţii is a First-Tier law firm in all international legal directories and a multiple award-winning law firm both locally and internationally. It received the CEE Deal of the Year Award (DOTY Awards 2021) and the Law Firm of the Year Award: Romania (IFLR Europe Awards 2021). 

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