Key challenges in tackling economic and cyber crimes

Author:Sundaresh Menon
Position:Attorney-General's Chambers, Singapore
SUMMARY

Purpose – The purpose of this paper is to identify the key challenges in tackling modern economic and cyber crimes, evaluate the existing legal and enforcement mechanisms in place, and propose a way forward to address these challenges. Design/methodology/approach – The paper analyses the main difficulties posed by the borderless, complex and rapidly evolving nature of modern... (see full summary)

 
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Introduction

The proliferation of economic crimes in modern day society poses serious concerns. It distorts trade and investment flows, undermines the integrity and proper functioning of financial markets, and even threatens regional and global security through its financing of terrorism. Due to their scale and reach, economic crimes if left unchecked could have systemic consequences, retarding growth in countries and eroding confidence and support for the global economy.

The magnitude of the problem is compounded by the advent of cyberspace. As the internet grows and becomes ubiquitous, the cyber world provides tremendous opportunities for criminals to exploit its interconnectedness, accessibility and anonymity to achieve their illicit objectives, and it becomes harder for the long arm of the law to reach them.

Tackling modern economic and cyber crimes requires a critical understanding of their nature and unique characteristics. Although they cover a wide spectrum of criminal activities, it is possible to identify certain key aspects of such crimes which pose particular difficulties for investigators and prosecutors. This will also provide a better picture of the nature of the particular challenges that we face in combating the rise of such crimes, and enable us to evaluate the adequacies or otherwise of existing legal and enforcement mechanisms that are in place for dealing with them. In doing so, it will become apparent that a brave new response to these challenges is essential. We need a paradigmatic game change, from a hitherto territorially oriented approach, to one where investigations, prosecutions and law enforcement efforts are coordinated internationally. Legal and enforcement regimes must also be sufficiently responsive, and adapt to the changing nature and complexities of this area of crime. To meet these goals, it is imperative that a multilateral platform be set up to facilitate international co-operation in the fight against economic and cyber crimes. The aim is to create a network for collaboration and coordination among investigative and prosecutorial agencies and regulatory authorities, which incorporates both elements of a traditional “horizontal” state-centric approach as well as a “vertical” supranational framework ( Turner, 2007 ; Slaughter, 2004 ). At the same time, such a multilateral platform can set the stage for a joint international effort to promulgate common standards and key principles that govern international co-operation.

Key trends and challenges posed by economic and cyber crimes

Even as increasing emphasis is placed on stemming the rise of economic crimes, the concept remains notoriously difficult to define, not least because it could refer to a whole range of offences, from investment frauds to stock market manipulations to money laundering and terrorist financing. There is theoretical literature which seeks to provide some conceptual framework for understanding economic crimes: some focus on offender motivations, others turn to the fact of economic gain. The task is complicated by technological advances and the emergence of a cyber world, which add to the breadth and complexity of economic crimes. Moreover, cybercrime is very much a genus on its own, comprising diverse offences in which either the computer or network is the target of the criminal activity, such as hacking and malware, or where it is the tool used to commit the crime, such as child pornography and identity fraud.

While it is therefore difficult to provide a precise and comprehensive definition of economic and cyber crimes, there are certain key features of such crimes which raise particular challenges that we need to urgently assess and then address. First, and perhaps the most significant, is the non-territorial or borderless nature of many modern economic and especially cyber crimes; second, the complexity and increasing sophistication of such crimes; third, their rapidly evolving and ever changing nature; and fourth, the fact that economic and cyber crimes are very often profit-driven, with the perpetrators reaping substantial financial rewards from their criminal enterprises.

Non-territorial economic and cyber crimes

Modern communications and the growth in international trade have perversely fuelled a corresponding rise in economic crimes that cuts across borders. As legitimate businesses take on an increasingly transnational dimension, a similar trend can be seen in illicit commercial activities. In particular, inter-connected financial markets are being exploited as a platform for transnational movements of the proceeds of crime. According to the IMF, the aggregate size of money laundering in the world could be somewhere between 2 and 5 per cent of the world's gross domestic product. The worrying growth in cross border crime has been propelled further by technology and especially the pervasiveness of the internet. Cyberspace, by its very nature, ignores territorial boundaries. The recent busting of the massive child pornography internet ring “Dreamboard”, with members from five continents and spanning more than ten countries, is a startling illustration of the extensive reach of cyber crime.

This borderless nature of the virtual world, in which some of the most dangerous criminals operate, creates tremendous challenges for the law and its enforcement. While laudable attempts have been made by national authorities, these endeavours do not address the root of the problem, which is the fundamental mismatch between the territorially oriented legal enforcement mechanisms and the multi-jurisdictional character of such crimes. The response of the international community has been the promotion of international co-operation, primarily in the form of mutual legal assistance and extradition treaties. However, fairly serious limitations persist.

For a start, the agreements on mutual legal assistance, or MLA, are generally bilateral in nature. Thus, what appears to be a framework for international co-operation in fact masks the inevitable fact that there are bound to be plain and obvious gaps where the offences in question transcend national borders. In truth, criminals often take advantage of these gaps in structuring their operations. Even if the patchwork of MLA agreements manages to cover the multiple jurisdictions involved, there are invariably problems of coordination and the associated inefficiencies. The difficulties are compounded by the fact that legal definitions of offences in these areas can be especially hard to formulate, let alone standardise among different domestic laws. The divergence in substantive laws in turn means that the typical pre-condition of dual criminality often may not be met. Utilisation of the MLA mechanism, even when available, can thus generate vexing legal, policy and practical issues that may at times frustrate if not slow the provision of the requested assistance ( Snow, 2002 ). This is exacerbated by the ever changing nature of such crimes.

Turning to the area of extradition treaties, extradition between countries is usually based on a treaty between the country where the alleged offender is currently located and the country seeking to prosecute and punish him for an alleged crime. To determine whether an individual can be extradited pursuant to a treaty, the language of the particular treaty must be scrutinised carefully. The extradition process can often be time-consuming, expensive and complicated.

Moreover, the existing regimes lack a consistent and uniform framework for determining competing claims to jurisdiction over the same criminal conduct. If a large-scale online investment scam targets victims located in many different countries, where should prosecution take place and which country's courts should assert criminal jurisdiction? Should it be determined by reference to the place where the web site was set up, the location of the internet service provider, or the country in which the largest number of victims are to be found? Where a syndicate transfers huge amounts of embezzled funds to other jurisdictions, should ongoing criminal proceedings commenced for money laundering be transferred to the jurisdiction where the predicate offence of embezzlement is being investigated? Or vice versa? Or could it even be possible for the two sets of criminal proceedings to move concurrently? Focusing on the location where the criminals are found or apprehended may not offer a ready solution if that jurisdiction has less interest to act in the first place because its nationals have not suffered. The challenge today in prosecuting transnational crimes is to ensure that the collective efforts of law enforcement bodies are effectively coordinated with the legal proceedings being commenced in the most appropriate jurisdiction ( Hodgson, 2008 ).

The absence of rules to resolve such disputes of jurisdiction means that countries must rely on ad hoc diplomatic negotiations which can lead to delay and costs ( Seguin, 2001 ). Having clarity on some of these thorny issues of jurisdiction is not only conducive to an orderly, coherent and efficient process of investigations and prosecutions; it would also be an essential first step in the attempt to prevent jurisdictional arbitrage...

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