Fraud and money laundering prosecutions still woefully slow

Romania’s legal framework on fighting financial fraud and money laundering is adequate, but investigations into these kwos kind of situations, such as the FNI (National Investors Fund) case, are progressing at an extremely low pace, the IMF resident representative in Romania Graeme Justice said yesterday.

“In the stand-by agreement concluded in 2000, the Government pledged to take quick action against those who were responsible for the FNI crash. Four years on, the investigation has still not produced any tangible results,” Justice told a roundtable organised by the US Embassy in Bucharest.

Justice showed that the FNI bankruptcy directly affected the banking system, especially the Savings Bank (CEC) and Romania’s People Bank (BPR).

“Failure to complete these investigations could have long-term negative effects on the economic environment. The population’s plummeting trust in the banking system has led to fewer banking deposits, with banks having to obtain financing from their own profits or from the funds allocated by their mother-banks operating abroad,” Graeme Justice stated.

In his turn, the vice-governor of the National Bank of Romania (NBR) Mihai Bogza said the central bank was “worried about the evolution of the FNI investigation,” since failure to punish the guilty parties undermines trust in the banking system.

“The same person from the FNI case was also involved in the bankruptcy of Banca Romana de Scont. If this person is not stopped, such actions are likely to happen again. There must be a discouraging effect and that can only be obtained by punishing those who can be blamed for this situation,” Bogza said.

According to the NBR vice-governor, the slow pace of the investigations looking into financial fraud committed in Romania could be due to three main reasons, namely the policemen and magistrates’ lack of relevant experience, the receipt of bribes, and the use of intimidation.

“I believe that, in the case of Banca Romana de Scont, the NBR team sent very clear and precise information to the prosecutors, about the money transfers and the persons that had received the money. After the documents were sent, the role of the central bank was over,” the National Bank of Romania vice-governor maintained.

According to Justice, financial fraud and money laundering have negative effects upon the macroeconomic environment. Thus, the credibility of financial institutions is being eroded, and the development of the capital market and the money market is being obstructed. Moreover, capital is not used for productive investments, which slows down economic growth.

For instance, in Colombia, criminally obtained funds were channeled into real estate investments, leading to soaring property prices. According to the International Monetary Fund representative, similar effects were witnessed in the former Soviet states.