2. Overview of the Investigation Process in Latvia
This chapter provides a high-level overview of the investigation and prosecution of economic crime cases in Latvia, exploring actors, processes, and practices involved. It sets out the nature and type of crimes that are most commonly associated with economic crime investigation in Latvia and provides some statistical insights into the scale of the problem, before briefly looking at the laws most commonly used in this area.
The State Police are not the sole body responsible for investigating crime in Latvia, but it is described as one of the largest, investigating approximately 95% of registered criminal offences (State Audit Office of Latvia, 2017[1]). As a result, this study largely focuses on their role in the investigation of economic crimes, and their cooperation and collaboration with stakeholders. The chapter begins with an introduction to the policing organisation, its responsibilities and structure, specifically as they pertain to the investigation of economic crimes. The chapter also provides a brief identification of other law enforcement bodies in Latvia to demonstrate the multiplicity of actors working in this area. It outlines units, agencies, and organisations that the State Police work with and alongside in these cases and describes the roles, responsibilities and relationships that exist between them. In this way, the chapter serves as an informative insight into the eco-system pertaining to economic crime investigation and prosecution in Latvia.
The Latvian State Police is an institution of the state with the responsibility “to protect the State and society from criminal and other illegal threats to life, health, rights and freedoms, property and interests” (The State Police of Latvia, 2020[2]). It has the legal jurisdiction to investigate all offences except those assigned to bodies with specific competences. This includes having a remit to investigate allegations of economic crimes, such as money laundering (ML), false accounting and crime relating to excise fraud. The State Police has a central authority and five regional units (See Figure 2.1). The central authority organises and co-ordinates activities of the structural units within the organisation.
Source: Provided by the State Police of Latvia to the author.
In economic crime, the unit with specific responsibility is the Economic Crime Enforcement Department (ECED), which is positioned within the Central Criminal Police Authority, and at the time of writing, contained the Cybercrime Unit (see Figure 2.2).
Note: At the time of writing this report, the State Police of Latvia were undergoing structural changes that will include the Cybercrime Enforcement Unit becoming the Cybercrime Enforcement Department as of July 2022.
Source: Provided by the State Police of Latvia to the author.
The ECED, while a dedicated unit for the investigation of economic crime within the State Police, it is not the only one that investigates economic crimes. Regional units also have a remit in this regard. At present, there are no dedicated units to economic crime investigations at the regional level that specifically focus on the investigation of economic crimes, rather they do so in conjunction with other serious crimes1.
Other policing and investigative bodies and authorities that also have a remit to investigate economic and financial crimes in Latvia are set out in Table 2.1.
Economic Crime figures in Latvia
Anecdotally, the number of economic crime cases in Latvia is reportedly increasing, with the nature and scale changing and becoming more complex, in part, because of the increasing role of the internet in such crimes. The figures provided by the State Police do not confirm this observation in its totality. For example, there is a reduction in economic crime cases reported and investigated overall since 2018, a pattern similar to crime investigation more broadly. That said, figures for 2021 are already showing an increase on 2020.
For cases specifically relating to Money Laundering, however, there is an increase in cases investigated by the State Police, increasing from 177 in 2019 to 285 in 2020. 2
Eighty-eight percent of all crime cases reported to the police in 2020 were later investigated, which is similar (87%) to the rate in relation to economic crime cases. This is a marked improvement on the previous two years, where there was a 10% difference between economic crime reported and investigated compared with all crimes3. In cases moving from investigation to prosecution since 2017, there has been a year-on-year decrease in the number of cases going forward for prosecution. However, when examined as a percentage of the annual number of crimes, there has been a year-on-year percentage increase from 33% in 2017 to 47% in 2020, which is positive and in line with the goals to increase the rate of cases going from investigation to prosecution.
In financial and economic crimes in Latvia, the main type of crime includes those pertaining to “tax evasion, booking counterfeits, fraud in paying salaries (salaries paid in dark), violations of copyrights, money laundering, violation of commercial secrets, selling of excise goods, unregistered business activities, insolvency, smuggling, customs violations, cash smuggling at the borders, etc.” (OECD, 2021[3]). The different crimes that constitute economic and financial crimes illustrate how a simple term ‘economic and financial crime’ represents a myriad of activities, all with their own specificities. It is beyond this report to go in depth into any economic crime type but given the diversity of crimes under this category it is worth remembering that each one is likely to have its own peculiarities that require different responses and expertise–further placing demands on investigators and prosecutors.
When crimes are reported by the public or brought to light via intelligence gathering and related police work, an investigation is conducted to determine if a crime has been committed or is suspected to have been committed4. If a crime has been committed, a full investigation is initiated. According to the Criminal Procedure Law (CPL) in Latvia, the case should be reported by the police to the prosecutor to get their instructions on how best to investigate the case, what evidence should be gathered and from where, and other related activities required (State Audit Office of Latvia, 2017[1]). During the processes of investigation, the police gather and review material, intelligence, and evidence, and use this information to inform the case that is later passed to the prosecutor.
Depending on the case, investigators are likely to require different information and services from a myriad of individuals and organisations to help in the investigation. This need for additional expert skills reflects the complex methodologies that are increasingly being used by criminals in this area to maximise and exploit vulnerabilities (HM Treasury and Home Office, 2021[4]). These can result in the police needing to engage with a host of different governmental bodies for support, such as the Forensic Services, the Criminal Intelligence Department, and the Financial Intelligence Unit (FIU). Externally, they may also have to communicate directly with victims, businesses, financial institutions (FIs) (both at home and abroad), international policing bodies, notwithstanding the prosecutor’s office. It is within the context of these complex investigations and prosecutions that the next section is situated, setting out the range of other institutions and bodies the State Police (and other law enforcement agencies) engage and interact with during an economic crime investigation.
During investigations relating to economic crime cases, the State Police provide several services to support the operational activities, while other units or departments indirectly influence practices, for example, those involved in training and international relations. This section sets out the key units highlighted throughout the interviews that commonly provide such support, firstly looking at those who provide services during the investigation, before looking at those who provide indirect support:
Forensic Services
The mission of the Forensic Service Department (FSD) is to provide high-quality forensic services to law enforcement agencies in Latvia. The Department comprises several units: DNA Analysis Unit, Chemistry Examinations Unit, Orology Examination Unit, Questioned Documents Unit, Forensic IT and Forensic Audio and Speech Analysis Unit, Accountancy Audit Unit, Firearms, Tool marks and Fingerprint Examination Unit, Regional Bureau–Crime scene investigations, Quality management Unit (Forensic Service Department, 2021[5]). In economic crime investigation, the service most commonly requested relates to forensic accounting, and increasingly Forensic IT services.
Criminal Intelligence Department
The Criminal Intelligence Department does not get involved in active investigations, rather, it is a supportive office that oversees and considers investigative actions. Where gaps are identified, training is provided to ensure the police can maximise the investigative actions available to them. Experts are drawn from a host of different departments, internally and externally, to provide such training. The unit also routinely gathers and circulates information on new and emerging trends, and innovations in crime and crime types. They explore ways to respond and mitigate affects. The CID also collates statistics and provides them for inclusion in annual reports, etc. These are used to see if the goals of the State Police have been implemented effectively and are leading to improvements.
The CID is also pertinent regarding this study, as it managed the implementation of the recommendations set out in the State Audit Office Report of 2017, which is just being finalised. It created a plan of action in conjunction with the courts, police, revenue, and corruption office, to mitigate the criticisms identified. Their role in doing so came from a request by the Ministry of the Interior (MOI). It has worked with a host of units and experts to implement the changes recommended in the report.
Police Training College
Until several years ago, the State Police had two training bodies, the State Police College, which delivered vocational training to junior officers, and the Police Academy of Latvia, which delivered professional tertiary level education to specialists and senior officers. In 2010, the Police Academy closed, leaving the State Police College as the core educational establishment for the State Police. The aim or mission of the college is to “to train police officers for professional service in the national police, according to the requirements and order of the State Police, as well as the implementation of the State Police staff professional development system in conjunction with the course of future progress” (State Police College of Latvia, 2021[6]). The college has been providing training since 2006. It provides training to new officers, through three main programmes–vocational, graduate, and professional programmes5. It also provides less formal training to serving police officers in person and through e-learning. All training is accredited and delivered by qualified trainers, or former police and prosecutors. Training curriculums are currently designed after careful consideration and communication with the State Police, and through feedback from officers every year6. This helps to ensure the training provided meets the needs of the officers and police force at large.
International Cooperation Department
The International Cooperation Department (ICD) of which the Mutual Legal Assistance Unit oversees requests made by the police to foreign countries is situated within the State Police of Latvia. It is part of the Central Criminal Police Department and is made up of two other units dealing with international affairs. It was noted in the interviews that cases are increasingly requiring such assistance. The Department supervises the requests coming from the police and ensures that the request meets the standards expected and can actually be answered by the country receiving it. It currently has 8 police officers and 11 interpreters, with four investigators dealing with incoming Mutual Legal Assistance (MLA) requests and 4 MLA Orders issues by State Police, but with its increasing workload, reportedly requires more staff. Requests for additional staff have been made since 2019, and every year since, but no new positions have been sanctioned.
Investigations, however, require not only the services from other units within the State Police, especially in economic crime investigation, where external support is often required. This section sets out the key organisations and bodies most commonly involved in such cases, as identified in the interviews, and describes their role in the process, in brief. Box 2.3 illustrates other bodies involved in developing policy and legislation, and oversight in this area
The Prosecutor’s Office
The Prosecutor’s Office is the institution of the judiciary that supervises the respect of legality independently within the area of responsibility specified in the Law on the Prosecutor's Office and the Law on Criminal Procedure (OECD, 2021[3]). It supervises and conducts pre-trial investigation, initiates, and conducts criminal prosecution, maintains charges of the State, etc. In some countries, the lead police investigator leads the investigation, but in Latvia, the prosecutor has the power to lead the investigation from the outset, as legislated for in the Criminal Procedures Law (2005). The prosecution services are organised as a centralised, hierarchical structure with three levels of responsibility: central office of the Prosecutor General, regional offices and district offices. All prosecutors' offices have responsibility in relation to the investigation and prosecution of economic crimes, supervising the investigation by the relevant police force (OECD, 2021[3]). The prosecution of economic crimes resides at the district level prosecution offices.
Financial Intelligence Unit (FIU)
The Financial Intelligence Unit of Latvia is “an independent authority, and its responsibility lies with prevention of money laundering in Latvia, with the goal of eliminating the possibility of using the Latvian financial system to launder money or finance terrorism” (The Financial Intelligence Unit of Latvia (FIU), n.d.[7]). The function of the FIU is to provide information to pre-trial investigating institutions, the Office of the Prosecutor, and/or a court, relating to suspicion that someone has committed a criminal offence. For example, money laundering, terrorism, and proliferation financing, or attempt to commit same. In relation to the investigation of economic crime, the work of the FIU is critical to the work of the State Police and the other law enforcement authorities (LEAs), in active cases and also in relation to non-conviction-based confiscation.
An area of development in the courts specifically pertaining to the prosecution of economic and financial crimes relates to the establishment of a dedicated Economic Court in Latvia, as recently as March 20217. The aim is of this specialised and dedicated court is to provide quicker examination of complex commercial disputes, economic and financial crimes, and corruption cases. An interesting observation made in the European Commission Report relating to this court is the planned approach of appointing judges without previous experience (European Commission, 2021[19]). While mentoring, professional support and offered specialised training on legislation related to money laundering, as well as commercial, competition and financial law, will be given, the lack of judicial experience is likely to negatively affect the speedy process and prosecution of such complicated cases, at least in the short to medium term. That said, according to the European Commission Report (2020) it is hoped that the court will deal with between 250 and 500 cases per year. This will require sufficient resources as regards both staff and training, especially in complex economic and financial cases. Only time will tell if these objectives are achievable.
From an oversight and policy perspective, the following ministries and institutions play a significant role in Latvia with respect to economic crime investigation and prosecution. However, it is not an exhaustive list.
The Ministry of the Interior
The Ministry of the Interior (MOI) is the leading public authority in home affairs and develops policies and implements policy against crime. It has responsibility for drafting sectoral legislation and policy-planning documents. It also has a function regarding oversight, with responsibility and authority to conduct performance inspections and other inspections in public bodies subordinated to the Ministry, through, for example, the State Audit Office.
State Audit Office
The State Audit Office in Latvia is “an independent, collegial supreme audit institution and one of the state authorities specified in the Satversme (Constitution) of the Republic of Latvia… The activities of the State Audit Office aim at establishing whether public resources are being spent legally, correctly, efficiently, and in compliance with the public interest. The State Audit Office provides recommendations for the elimination of the identified deficiencies” (State Audit Office of Latvia, 2020[9]). Institutions, which are subject to an audit, must take on board the recommendations of the report and must make concerted efforts to address them, report, and evaluate progress.
The Ministry of Justice
The Ministry of Justice is the leading public authority in justice in Latvia, with responsibilities regarding the provision of the country’s legal framework, judicial system, and court administration. It also makes policy in relation to criminal law and criminal procedural law.
The Ministry of Finance
The Ministry of Finance has responsibility for developing policy in relation to anti-money laundering and terrorism financing measures in accordance with the defined area of responsibility. This is done in conjunction with the Ministry of Justice.
Crime Prevention Council
The Crime Prevention Council was established in 2004. Its responsibility was widened in 2020 to include “the function of implementing co-operation between the executive and the judiciary in order to set common goals and co-ordinate co-operation in strengthening the rule of law by respecting the principles of the separation of powers. The Crime Prevention Council is a collegial body that aims to strengthen the rule of law, coordinate, and improve the activities of state institutions to prevent and combat crime, especially corruption and organised crime, which threaten national security and economic stability, and promote a unified and effective cooperation of the executive and judiciary in strengthening the rule of law” (State Audit Office of Latvia, 2020[9]).
Source: Author.
The suite of legislation pertaining to the investigation and prosecution of economic crimes cases is comprehensive in Latvia. The power and authority of many of these aforementioned institutions and bodies, as they relate to economic crime, is also set out in this legislation. Some key acts in this regard are highlighted below:
National Legislation of Latvia
Criminal Procedure Law 2005
The purpose of the Criminal Procedure Law (CPL) is “to determine such procedures for the criminal proceedings that ensure effective application of the norms of The Criminal Law and fair regulation of criminal legal relations without unjustified intervention in the life of a person” (Saeima, 2005[10]). This law has been progressively updated since its introduction in 2005, with its last amendment in October 2021. The law is comprehensive and includes aspects that set out the basic principles of criminal proceedings, identifies the persons involved in such proceedings, and provides the legislative basis for international cooperation. Recent amendments also now allow for the termination of criminal proceedings for money laundering (as was called for in many of the interviews), if the following preconditions are met:
A fair settlement of property relations must be achieved, namely, in the case of criminal proceedings concerning property issues, they must be resolved by the end of the proceedings (e.g. the proceeds of crime must be confiscated pursuant to the regulation of Chapter 59 of the Criminal Procedure Law); secondly, the person's guilt in committing a criminal offence has not been proven within the frames of the pre-trial proceedings; thirdly, obtaining additional evidence will not ensure cost-effective pre-trial criminal proceedings or will cause disproportionate expenses (Vaisla and Petrov, 2020[11]).
Operational Activities Law
This law “prescribes the legal basis, principles, tasks, objectives and substance of operational activities, governs their process, forms and types, the official status, rights, duties and responsibilities of officials of bodies performing operational activities, and the financing, supervision and monitoring of such operations,” (Saeima, 1993[12]). In short, this law governs activities associated with covert and overt investigation activities, in all cases not just those pertaining to economic crimes.
Criminal Law
Section 7 of the Criminal Law provides for the Classification of Criminal Offences in Latvia. They are divided into criminal violations and crimes according to the nature and harm of the threat to the interests of a person or the society. Crimes are categorised as: less serious crimes, serious crimes, and especially serious crimes.
International Directives and Legislation are very relevant regarding the investigation and prosecution of economic crimes. Box 2.2 provides a list, which identifies a few of the most commonly used documents.
DIRECTIVE (EU) 2017/1371 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law
This directive “establishes minimum rules concerning the definition of criminal offences and sanctions with regard to combatting fraud and other illegal activities affecting the Union's financial interests, with a view to strengthening protection against criminal offences which affect those financial interests, in line with the acquis of the Union in this field” (European Parliament and Council of the European Union, 2017[13]). The Directive has been implemented with amendments to the Criminal Law in Latvia, which entered into force on 3 July 2019.
COUNCIL REGULATION (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (‘the EPPO’)
This establishes the European Public Prosecutor’s Office (‘the EPPO’) and sets out rules concerning its functioning. The Regulation automatically became legally binding throughout the European Union (EU) on the day it entered into force.
Law on the Exchange of Information for the Prevention, Detection, and Investigation of Criminal Offences
The purpose of this Law is to ensure the swift exchange of information between Latvia and other Member States within the framework of co-operation of law enforcement authorities, in order to prevent, detect and investigate criminal offences. This entered into force on the 15 April 2009.
Source: Author.
This chapter provides context as to the current units, organisations and bodies involved in the investigation and prosecution of economic crime investigations in Latvia. It sets out (albeit brief for some) the roles and responsibilities of each, and the services provided and/or activities conducted by these actors within economic crime investigations. It does this in advance of the next chapter to provide context to the assessments made about investigations and prosecutions in Latvia over the last number of years.
The next chapter provides insights on a range of assessment reports and audits that have been conducted since 2017 on institutions, activities, and processes pertinent to the investigation and prosecution of economic crimes
References
[8] European Commission (2021), Rule of Law Report Country Chapter on the rule of law situation in Latvia, https://op.europa.eu/en/publication-detail/-/publication/22d05caa-eb9f-11eb-93a8-01aa75ed71a1/language-en/format-PDF/source-255960452 (accessed on 27 April 2022).
[13] European Parliament and Council of the European Union (2017), Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32017L1371 (accessed on 27 April 2022).
[5] Forensic Service Department (2021), Forensic Service Department - About Us, http://www.ekspertize.vp.gov.lv/index.php?sadala=21&ln=en (accessed on 25 April 2022).
[4] HM Treasury and Home Office (2021), Economic Crime Plan, 2019 to 2022, https://www.gov.uk/government/publications/economic-crime-plan-2019-to-2022/economic-crime-plan-2019-to-2022-accessible-version (accessed on 25 April 2022).
[14] Legal Acts of the Republic of Latvia (2005), Criminal Procedure Law, https://likumi.lv/ta/en/en/id/107820-criminal-procedure-law.
[15] Legal Acts of the Republic of Latvia (1993), Operational Activities Law, https://likumi.lv/ta/en/en/id/57573-operational-activities-law.
[3] OECD (2021), Performance of the Prosecution Services in Latvia: A Comparative Study, OECD Publishing, Paris, https://doi.org/10.1787/c0113907-en.
[10] Saeima (2005), Criminal Procedure Law, https://likumi.lv/ta/en/en/id/107820-criminal-procedure-law (accessed on 27 April 2022).
[12] Saeima (1993), Operational Activities Law, https://likumi.lv/ta/en/en/id/57573-operational-activities-law (accessed on 27 April 2022).
[9] State Audit Office of Latvia (2020), Summary of Key Audit Findings and Recommendations. Does the operation of the Prosecutor’s Office of the Republic of Latvia require any improvements?.
[1] State Audit Office of Latvia (2017), Is pre-trial investigation of the State Police of Latvia effective?.
[6] State Police College of Latvia (2021), State Police College Website - About us, https://www.policijas.koledza.gov.lv/lv (accessed on 25 April 2022).
[7] The Financial Intelligence Unit of Latvia (FIU) (n.d.), The Financial Intelligence Unit of Latvia. About us page, 2021, https://www.fid.gov.lv/en/about-us (accessed on 25 April 2022).
[2] The State Police of Latvia (2020), The State Police of Latvia, https://www.vp.gov.lv/en/state-police-latvia (accessed on 25 April 2022).
[11] Vaisla, E. and S. Petrov (2020), AML cases in Latvia: fragile balance between facilitation of the proceedings and the rights of the person | NJORD Law Firm, https://www.njordlaw.com/aml-cases-latvia-fragile-balance-between-facilitation-proceedings-and-rights-person (accessed on 25 April 2022).
Notes
← 1. Interview No. 1.
← 2. Figures were not available for 2017 and 2018.
← 3. A single years figures do not evidence complete change, but could be an indicator that something is working, nonetheless, it will need to be monitored further over the next few years.
← 4. Interview No. 4.
← 5. State Police College offers formal and non-formal education programs. Formal education program, first level professional higher education program “Police Work”, vocational education program “Police Work”, professional development education program “Fundamentals of Police Work”. Non-formal education programs - non-formal adult education programs for State Police officials.
← 6. Interview No. 21.
← 7. Interview No. 12.