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Tue, 31st May, 2011 - Posted by

Lithuania's economic crisis leads to crime and social disparities

Article 1 of 3

A report published by Associate Professor Aurelijus Gutauskas at Mykolas Romeris University's Law Faculty gives a very interesting insight into how the economic downturn has led to increased social disparities, crime, fraud and widespread shadow economy in Lithuania.

These are some of his findings:

The economic decline will have far-reaching negative effects on the most vulnerable groups in Lithuania unless the government takes additional measures
As in many countries worldwide, the economic downturn in Lithuania has had an adverse impact on national, social, and economic development. The economic decline will have far-reaching negative effects on the most vulnerable groups in Lithuania unless the government takes additional measures to promote employment and provide social protection.

The major negative social consequences of the economic decline in Lithuania are job losses and a decrease in income. These result in rising long-term unemployment, growing social exclusion, and an increase in emigration and the shadow economy.

Criminal offences against the financial system have increased by 47%
The statistical data analysis has shown that during the economic decline the crime rate increased while unemployment rose and household income decreased. Since 2008, the number of recorded criminal offences has been increasing by 6 to 7 per cent annually and reached 83,200 in 2009.

In 2009, the number of recorded criminal offences against the financial system increased by 47 %, and criminal offences related to the possession of narcotic or psychotropic substances increased by 19 %.

The production of counterfeit currency and securities increased by 258.6 % (from 237 to 613 cases) and cases of fraud grew by 59.1 % (from 915 to 1456 cases). Furthermore, the unlawful production of alcoholic beverages and the number of crimes committed by intoxicated persons nearly doubled in 2009. Based on Lithuanian and foreign experience, an increase in crime is expected to continue until 2012–2013 as restraints on economic crimes take longer to implement and are related to a rise in the standard of living in the country.

Lithuania's shadow economy will account for more than 20% of the GDP by 2015
The economic downturn has resulted in an increasing number of businesses experiencing financial difficulties, and some of them turn to the shadow economy as a means of salvation. This is particularly the case in the area of labor relations and in regard to failure to pay taxes (such as income and social insurance taxes). According to official Lithuanian statistics from 2004 and 2008, the shadow economy in Lithuania accounted for about 15 per cent of the GDP. The declining profitability of business entities, the rise in tax rates, and the worsening macroeconomic environment may increase the scope of the shadow economy to 20-22% by 2015.

Younger criminals are taking over the organized crime
The most significant trend within the Lithuanian organized crime community is the shift in power between the older and younger generations. The younger generations are gaining ground and seeking to increase their influence at the expense of older members. Lithuanian OCGs (organized criminal groups) are also aiming to become more interregional within Lithuania.

Smuggling and distribution of drugs and excise good are the most important means for OCGs to gain power. These groups have created an infrastructure in the drug trade and developed channels of supply, as well as networks of distributors, in almost all regions of Lithuania. Even group members who are in prison remain in the drug trade and control it. Smuggling is a strong factor encouraging the creation of new OCGs that specialize in this function.

Free movement of people and commodities inside the EU facilitates the shipment of illegal cargoes, and flawed external border security allows smuggling. The increasing trade in used vehicles in Lithuania has become a factor in the infrastructure for handling stolen property, with vehicles stolen in Western countries being exchanged for drugs. This made it possible for Lithuanian OCGs to play an influential, international role in heroin smuggling from the East to the West. The proceeds of crime are laundered through businesses in the financial and construction sectors.

In Russia in 2009 and 2010, Lithuanian OCGs used opportunities related to the acquisition of excise goods to engage in smuggling goods into the West, and then into the Netherlands. The goods smuggled included cocaine, hashish, cannabis, amphetamines, methamphetamines and ecstasy (MDMA), heroin (in the region of Kaliningrad), stolen vehicles.

 

Lithuanian criminal groups now operate all over Europe

Article 2 of 3


The EU's criminal intelligence agency EUROPOL has in its Organized Crime Threat Assessment for 2011 defined Estonia, Latvia, Lithuania and the Russian Federation exclave of Kaliningrad as the northeast criminal hub, singling out the prevalence of crime groups in Lithuania. Europol Assesses Baltic Organized Crime Hub | News | ERR

A report published by Associate Professor Aurelijus Gutauskas at Mykolas Romeris University's Law Faculty gives a very interesting insight into how the economic downturn has led to increased social disparities, crime, fraud and widespread shadow economy in Lithuania.

VilNews is presenting some of Professor Gutauskas' findings over three issues. This is our article number two:

23 active organized criminal groups (OCGs) in Lithuania
In 2010, there were 23 active organized criminal groups (OCGs) in Lithuania. Over the last two years, the number has remained much the same. Higher level OCGs are characterized by long-term activity or are recomposed from the members of broken or dismantled OCGs. The leadership is constantly renewed by young, new members or criminals who have already served prison sentences.

The geographical location of Lithuania encourages the international activity of OCGs. Lithuania is located at the crossroads of illicit commodities traffic in both internal and external directions. The locality of OCGs preconditioned their specialization when it came to control of regions of the external European Union border. Some of them use their influence at the Belarusian border, others at the Russian border.

Smuggling and distribution of drugs and excise good are the most important means for OCGs
Smuggling and distribution of drugs and excise good are the most important means for OCGs to gain power. These groups have created an infrastructure in the drug trade and developed channels of supply, as well as networks of distributors, in almost all regions of Lithuania. Even group members who are in prison remain in the drug trade and control it. Smuggling is a strong factor encouraging the creation of new OCGs that specialize in this function.

Human trafficking
Human trafficking has taken a new form as some victims agree to travel to countries with higher standards of living and engage in voluntary prostitution. The women's social vulnerability (unemployment, absence of income) and absence of other information results in their allowing others to take half of their income. Human trafficking is organized and committed not only by OCGs but also, in some regions of Lithuania, by individuals with no direct connections with OCGs.
Human trafficking involves recruiting people (by deception or telling the truth), organizing transportation (by finding ways to forge documents and arrange transport), and searching for locations in which to sell and receive profit. Payment is sometimes extracted from the person's earnings. Victims of human trafficking are usually women aged 18 to 24. They are recruited through modeling agencies, radio shows, online dating, social networks such as Facebook and other websites, and often voluntarily leave their home countries. Cases are known in which women are offered legal jobs (as waitresses and dancers), but once transported abroad they are forced to provide sexual services. Violence is also often used to make them work and to intimidate others. Search and recruitment is conducted by low-level members of the OCGs. Women are not only recruited by procurers but also by working prostitutes who receive rewards of up to 600 Euros for a new woman.


The European police service Europol has recently wound up an investigation into child pornography which lasted two years. Raids were made on houses in 20 countries. A total of 221 suspected pedophiles were discovered and 115 of them were arrested. Some of the suspects had jobs working with children. Victims of various nationalities were identified in the course of the investigation. The youngest was five.

 

Increased fraud, corruption and money laundering

Article 3 of 3

A report published by Associate Professor Aurelijus Gutauskas at Mykolas Romeris University's Law Faculty gives a very interesting insight into how the economic downturn has led to increased social disparities, crime, fraud and widespread shadow economy in Lithuania.

VilNews is presenting some of Professor Gutauskas' findings over three issues. This is our article number three:

Fraud
In 2009, 4229 cases of fraud were registered by law enforcement agencies, and 2494 more were registered between January and July 2010. In comparison with 2008 (when there were 2773 cases of fraud), there is an obvious increase in the commission of this kind of crime.

The economic crisis has affected many fields of business. Payments among the participants in an economy in disarray and a massive increase in mutual debts raise the probability of an increase in fraud crimes. Business difficulties stimulate the rise of new ways of perpetrating fraud, manipulation, shady financial transactions, and other forms of misappropriation. An increase of insurance fraud is also predicted. Companies that are going bankrupt, receiving no bank loans, and short of liquid assets will easily be attracted by offers of financial assistance or investment and will not investigate the source of the money. Analysis of investigations shows a trend of OCGs working to create favorable environment for acquiring legal businesses. By taking over insolvent companies and using them to launder the proceeds of crime, criminal groups would more easily be able to control a legal business. There has also been an increase in the number of fraud cases among legal entities. Companies are established or purchased in order to commit fraud, and commodities are purchased on the grounds of consignation. There are also cases of fraud in the recovery of VAT. Companies of this kind later go bankrupt or are illicitly sold to other persons, and further activity is undertaken. The persons who acquire them are usually antisocial, and trade is conducted using lost or stolen identity documents.

Corruption
Many law enforcement officers, prosecutors, and lawyers, at all levels and ranks, particularly those who specialize in tax cases, become corrupt. They set out to receive unlawful rewards from persons suspected of crimes against the financial system, who can avoid prosecution by paying bribes. If the bribe fails – that is to say, if the pre-trial investigation is not dismissed or the criminal act is not downgraded to a milder article of the criminal code – these persons make up charges and pay officers to intimidate or financially weaken their business competitors.

Those who participate in corruption in public tendering are persons who in the administrative field (officials of ministries, budgetary institutions, and municipalities), employees of public institutions, and managers of private companies or companies run by the state and municipalities. Aspects of corruption are noticed in all fields and stages of public tendering. Corrupt activity manifests itself most in the organization of public tendering regarding constructions, refurbishment, and information technologies.

Different corruption mechanisms are employed at each stage of public tendering. The initial stage includes one type of fraud. Representatives of companies participating in this procedure come to an informal agreement on a winner in a certain town, region, or ministry, and fix the price for services, commodities, or work. Agreements of this kind maintain high prices and stable income (the company knows how many tenders it will win each year). They also exclude possible competitors.

Money laundering
In order to launder money, foreign companies transfer their money to the accounts of fake foreign or Lithuanian companies that are usually established in Lithuanian banks by foreign citizens. Money is then transferred from one country to another through Lithuania financial institutions using the accounts of these fake companies. The proceeds of crime acquired in Lithuania may be transferred to foreign states, or the proceeds of crime in foreign countries may be transferred to Lithuania.

Lithuanian companies transfer money to the fake company or non-profit (usually fitness clubs), and the money is cashed immediately after it has been transferred. After the money has been cashed, fake accounts are opened and managed by antisocial citizens of both Lithuania and foreign countries who often have connections with criminal groups.
It is assumed that the major reason for transferring assets to Lithuania is to conceal the illegal origin of the assets. Nevertheless, cases have been discovered in which Lithuanian nationals used accounts in foreign countries while engaging in similar criminal activity.

Lithuanian companies increasingly use companies registered in foreign countries and foreign nationals to transfer money to the accounts of fake companies or offshore companies in foreign banks. More cases occur in which money is cashed in neighboring countries and in which the citizens of that particular country are involved.


Former director of Lietuvos Pastas (Lithuanian Post) and Swedbank (Hanza) Leasing, Andrius Urbonas, was last year arrested for fraud. Urbonas was accused of having used his high position and connections in banking institutions to make loans to clients whose applications for loans were previously rejected. Authorities claim that he laundered money through the scheme. He denies the charges. A criminal case against him and other directors from Swedbank Leasing started in Vilnius District Court last week.

 

THE REPORT:

Economic Crisis and Organized Crime in Lithuania


Associate Professor Aurelijus Gutauskas
Mykolas Romeris University
Law Faculty
Criminal Law and Criminology Department
Head of the Department

Contents

1       Economic and Social Impact of the Financial Crisis. 4

1.1         Increase in the Crime Rate. 4

1.2         Growth of the Shadow Economy. 4

2       Trends within Organized Crime in Lithuania. 4

2.1         Transnational Links. 4

2.2         Organized Crime Groups Active in Lithuania. 4

2.2.1          Agurkas. 4

2.2.2          Beglikas. 4

2.2.3          Šmikiniai 4

2.2.4         Žemaičiai 4

2.2.5          Miliai 4

2.2.6          Buduliai 4

2.2.7          Švinius. 4

2.3         Description of Criminal Acts. 4

2.3.1          Drug Trafficking. 4

2.3.2          Cigarette and Alcohol Smuggling. 4

2.3.3          Counterfeiting of Euros. 4

2.3.4          Human Trafficking and Exploitation. 4

2.3.5          Fraud. 4

2.3.6          Corruption of Public Officials and Institutions. 4

2.3.7          Money Laundering. 4

3       Conclusions. 4

 

 

1         Economic and Social Impact of the Financial Crisis

 

Since the start of the new millennium, the Baltic region has enjoyed one of the highest growth rates in the world. This positive development was interrupted by the financial crisis and the recession that followed.

As in many countries worldwide, the economic downturn in Lithuania has had an adverse impact on national, social, and economic development. The economic decline will have far-reaching negative effects on the most vulnerable groups in Lithuania unless the government takes additional measures to promote employment and provide social protection. In order to mitigate the possible negative social consequences of the decline, an attempt should be made to assess its impact on the country's socio-economic development (development of the population, income indicators of households, etc.) as well as to recommend measures to address any problems identified.

The major negative social consequences of the economic decline in Lithuania are job losses and a decrease in income. These result in rising long-term unemployment, growing social exclusion, and an increase in emigration and the shadow economy. In the long run, all of these increase poverty and reduce the quality of the labor force. For instance, both diminished skills and reduced work motivation weaken the recovery potential of the national economy.

The economic crisis has had a major negative impact on the Lithuanian labor market.[1] In the first quarter of 2009, the national unemployment rate more than doubled compared to the first quarter of 2008. If these trends continue, Lithuania will see a dramatic increase in the number of long-term unemployed (in 2010, they constituted 30 per cent of the unemployed, or 78,000 persons). High long-term unemployment is likely to persist even after the anticipated recovery of the national economy between 2012 and 2015 as most unemployed people are less competitive in the market due to their weaker  or diminished skills after a long period of unemployment.

Rising unemployment also worsens the financial situations of households, as indicated by the ever-increasing number of persons receiving social benefits in Lithuania. The assessment of changes in earnings and unemployment in Lithuania shows that household income will continue to decline in 2010, but will then start rising slightly due to the growing shadow economy, as a well as the slow economic recovery anticipated in 2011. However, income levels in 2015 will not even reach those of 2008. Decreasing household incomes may boost the absolute poverty rate as high as 13.2 per cent in 2010. This means that the income of 440,700 persons will be below the poverty line. The absolute poverty rate is not expected to return to the level of the year 2008 (i.e. 4.8 per cent) before 2015.[2]

The deteriorating macroeconomic situation in the country boosts emigration from Lithuania.[3] Bearing in mind that the Lithuanian economy is expected to recover only in 2011–2012, emigration is likely to result in that Lithuania may lose another 100,000 to 150,000 residents by 2015.[4] In the long term, higher rates of emigration are associated with serious problems such as population decline, brain drain, and demographic ageing, all of which markedly weaken the growth potential of the national economy and slow down improvement in the standard of living.

 

1.1      Increase in the Crime Rate

The statistical data analysis has shown that during the economic decline the crime rate increased while unemployment rose and household income decreased.

Since 2008, the number of recorded criminal offences has been increasing by 6 to 7 per cent annually and reached 83,200 in 2009. Crimes accounted for about 90 per cent of all recorded offences. About 5 to 6 per cent of the crimes were serious or grave. In 2009 two-thirds of the criminal offences recorded were property-related, an increase of 6 per cent. Three-fourths of all property-related criminal offences recorded were thefts. In 2009, 40,000 thefts were recorded, which is 3 per cent more than in 2008.

In 2009, the number of recorded criminal offences against the financial system increased by 47 per cent, and criminal offences related to the possession of narcotic or psychotropic substances increased by 19 per cent.[5]

The production of counterfeit currency and securities increased by 258.6 per cent (from 237 to 613 cases) and cases of fraud grew by 59.1 per cent (from 915 to 1456 cases). Furthermore, the unlawful production of alcoholic beverages and the number of crimes committed by intoxicated persons nearly doubled in 2009. Based on Lithuanian and foreign experience, an increase in crime is expected to continue until 2012–2013 as restraints on economic crimes take longer to implement and are related to a rise in the standard of living in the country.[6]

 

1.2      Growth of the Shadow Economy 

The economic downturn has resulted in an increasing number of businesses experiencing financial difficulties, and some of them turn to the shadow economy as a means of salvation. This is particularly the case in the area of labor relations and in regard to failure to pay taxes (such as income and social insurance taxes). According to official Lithuanian statistics from 2004 and 2008, the shadow economy in Lithuania accounted for about 15 per cent of the GDP. The declining profitability of business entities, the rise in tax rates, and the worsening macroeconomic environment may increase the scope of the shadow economy to 20-22 per cent by 2015. It is important to note that shadow activities develop very fast, but eradicating them is a slow process.

The biggest part of the parallel economy is smuggling, closely followed by the unaccounted sale of goods and unreported remuneration[7]. In order to reduce the impact of the shadow economy, the government has decided to focus on extracting one billion litas from it, which represents roughly 5 per cent of total tax income, instead of increasing taxes or cutting social benefits and salaries of public servants.

The shadow economy not only has an adverse effect on the country's economy, but it also has negative social consequences such as an increase in social and economic differentiation, a rise of the level of corruption in the country, the reduction of social guaranties for individuals, poorly allocated resources across sectors, an unbalanced tax system and a slowdown of the country's economic growth.

 

 

 

2         Trends within Organized Crime in Lithuania

 

In 2010, there were 23 active organized criminal groups (OCGs) in Lithuania.[8] Over the last two years, the number has remained much the same. Higher level OCGs are characterized by long-term activity or are recomposed from the members of broken or dismantled OCGs. The leadership is constantly renewed by young, new members or criminals who have already served prison sentences.

The most significant trend within the Lithuanian organized crime community is the shift in power between the older and younger generations. The younger generations are gaining ground and seeking to increase their influence at the expense of older members. Lithuanian OCGs are also aiming to become more interregional within Lithuania.  

The dominant OCGs expand their authority and influence lower-level OCGs in different regions. Some OCGs started to seek dominant positions when members of higher-level OCGs return from corrective institutions.

Due to the change in criminal leadership, internal and external OCGs experience conflict and dishonesty between accomplices in continuing criminal deals. Violent actions are taken by OCGs seeking to be dominant. Interregional OCGs support their followers during conflicts between local OCGs. Firearms are used in campaigns of influence or revenge. During assaults, people are kidnapped, harmed, or killed, and their property is destroyed.[9]

In some situations, organized crime groups decide to make deals instead of turning to violence. They sometimes share the market and specialize in different trades. There is a trend for weaker OCGs to join bigger groups and find a niche within the larger organization. This development seems to be increasingly common among OCGs with international connections.

 In 2009 and during the first semester of 2010, crime indicators in Lithuania decreased. (paaiskinti teksta). However, there was an increase in crimes committed by OCGs. The number of criminal acts related to murder and attempted murder, possession of weapons and seizures of weapons, seizure of property, property extortion, destruction of property, drug distribution, and excise goods smuggling increased in the regions of activity of the most influential OCGs. The crimes committed by OCGs incorporated a high level of planning and the application of special means and measures.

Smuggling and distribution of drugs and excise good are the most important means for OCGs to gain power. These groups have created an infrastructure in the drug trade and developed channels of supply, as well as networks of distributors, in almost all regions of Lithuania. Even group members who are in prison remain in the drug trade and control it. Smuggling is a strong factor encouraging the creation of new OCGs that specialize in this function.

In certain regions of Lithuania, OCGs active only in the field of smuggling are dominant. The groups controlling international relations ensure provision of illicit commodities. Lower-level OCGs organize the distribution and/or implement smuggling. Competition for influence is more typical of the retail trade in drugs. Property seizure is also a criminal field in which OCGs have strong subgroups or new specialized groups. OCGs acting at the international level seize luxurious cars and watercraft, equipments of cargo shipments, agriculture, and buildings. Property is seized from trade points and residential premises in different ways. In 2009, there was a tendency to break into agencies where large amounts of money were kept or to organize armed raids on these agencies.[10]

During the crisis period, the number of crimes committed against the economy and, the financial system rose, along with other kinds of fraud. The disruption of economic activity by companies and the mutual debts held by those companies resulted in property extortion and abuse of authority. Businessmen controlled by OCGs or dependent on criminals became the target of property extortion due to their debts. Another reason for the profitability of property extortion was the rise in the number of persons engaged in the distribution of illicit commodities or smuggling. Managing financial resources gave Lithuanian and foreign OCGs a chance to invest in the business sector. However, some groups lost their influence during the economic crisis because they experienced a financial downturn and lost the power they had previously held by serving legal businesses.[11]

 

2.1      Transnational Links

The geographical location of Lithuania encourages the international activity of OCGs. Lithuania is located at the crossroads of illicit commodities traffic in both internal and external directions. The locality of OCGs preconditioned their specialization when it came to control of regions of the external European Union border. Some of them use their influence at the Belarusian border, others at the Russian border. Close international relations with neighboring countries are also typical of local OCGs like those at the internal EU borders with Latvia and Poland.

Free movement of people and commodities inside the EU facilitates the shipment of illegal cargoes, and flawed external border security allows smuggling. The increasing trade in used vehicles in Lithuania has become a factor in the infrastructure for handling stolen property, with vehicles stolen in Western countries being exchanged for drugs. This made it possible for Lithuanian OCGs to play an influential, international role in heroin smuggling from the East to the West. The proceeds of crime are laundered through businesses in the financial and construction sectors.

In Russia in 2009 and 2010, Lithuanian OCGs used opportunities related to the acquisition of excise goods to engage in smuggling goods into the West, and then into the Netherlands. The goods smuggled included cocaine, hashish, cannabis, amphetamines, methamphetamines and ecstasy (MDMA), heroin (in the region of Kaliningrad), stolen vehicles. The OCGs were also involved in  the running of LBSs. Some members of Lithuanian OCGs have settled in Russia.

In Poland in 2009 and 2010, Lithuanian OCGs used opportunities related to the transport and handling of smuggled excise goods, the counterfeiting of cigarette products, the transport of smuggled drugs, vehicle theft, and the use of counterfeit electronic payment instruments.

In Germany in 2009 and during the first semester of 2010, Lithuanian OCGs handled and smuggled cigarettes, transported smuggled drugs, traded in heroin, managed the organization of prostitution networks, engaged in human trafficking, seized vehicles and other property, distributed forged identity documents and euros, transported illegal migrants, purchased property, ran LBSs, laundered money, and engaged in corruption. Some members of these groups are serving prison sentences in Germany.

In Latvia in 2009 and 2010, Lithuanian OCGs handled and smuggled cigarettes and pure alcohol, transported and handled heroin, cannabis, and ecstasy (MDMA), counterfeited euros, and committed various thefts from vehicles, pipelines, cargoes, and equipment and chemicals for agriculture. The groups also engaged in the legalization of stolen vehicles, the use of false electronic means of payment, fraud, the use of forged documents, and the running of LBSs.

In Estonia in 2009 and 2010, Lithuanian OCGs smuggled drugs and ran LBSs.

In Finland in 2009 and 2010, OCGs smuggled cocaine, amphetamines, and methamphetamines and seized property. Some OCG members are serving prison sentences in Finland.

In Sweden in 2009 and 2010, OCGs transported and handled cannabis, amphetamines, ecstasy (MDMA), stole cars and watercraft, and seized other property. Some members of Lithuanian OCGs have settled in Sweden.

Finally, in Denmark in 2009 and 2010, Lithuanian OCGs transported and handled smuggled methamphetamines, stole cars, watercraft and their parts, and seized property.

 

2.2      Organized Crime Groups Active in Lithuania

The main sources of information about the major OCGs and their activities are reports by the Organized Crime Investigation Division of the Criminal Police and by Lithuanian police units between 2009 and 2010. Some data also come from the State Border Guard and the Customs Criminal Services. The following OCGs have been identified.

 

2.2.1      Agurkas

The Agurkas group is one of the strongest OCGs in Lithuania, and the level of organized crime in the country depends on its activity. It also influences trends in organized crime committed by Lithuanians abroad.

Agurkas' criminal activities cover the production and distribution of narcotics, the smuggling of excise goods, theft of vehicles from residential premises, robbery, extortion of property, fraud, human trafficking, the organization of prostitution, currency counterfeiting, and document forgery. In 2009–2010 Agurkas members were also suspected of criminal acts related to illegal activities by companies, possession of criminal property, possession of weapons, disturbance of public order, resistance to and offenses against officers, unlawful deprivation of freedom, threats of killing, maiming, and attempted murder and sexual abuses.

     The Agurkas group is active mainly in Russia, Latvia, and Estonia. The group also has some activities in Norway, the United Kingdom, Spain, and Ukraine. In the Baltic region, it poses a threat in Poland, Latvia, Estonia, Sweden, and Russia. In the EU, its activities affect Norway, the Netherlands, Germany, Belgium, the United Kingdom, Ireland, Spain, and eastern Ukraine. All of these countries are harmed by its drug distribution and property seizures. The grey economy in the West is stimulated by the handling of smuggled excise commodities and the handling of property seized in the East.

 

2.2.2      Beglikas

The criminal activities of the Beglikas group include drug and alcohol smuggling, money laundering, and other crimes against the financial system. Beglikas is present in Latvia, Estonia, and Russia as well as in Spain. Its power and influence may be related to the criminal authority of its leader, his connections, and his ability to entrench his influence and the effectiveness of countermeasures to drug smuggling in the Spain–Lithuania–Russia route. Its power is also increased by the economic activity of related LBSs. Society is harmed by drug distribution. The increasing economic power of the OCG also poses a threat.

 

2.2.3       Šmikiniai

The criminal activities of the Šmikiniai group include the smuggling and distribution of drugs, smuggling and distribution of excise commodities, robbery, theft of luxury vehicles, theft from vehicles, extortion of property, handling of stolen property, distribution of counterfeit money, organization of prostitution, possession of weapons, destruction of or damage to property, bodily injuries, and money laundering. The Šmikiniai group is present in Latvia, Estonia, Finland, Sweden, Germany, Spain, and Russia as well as in Switzerland and Iceland.  In the Baltic region Illegal commodities are transported through Latvia and Estonia. Drugs are distributed and property seized in the region of Scandinavia. The group is a threat in many north-western EU countries and in    Russia because of cocaine smuggling from South America. The societies of these countries suffer harm due to drug distribution and money laundering. Victims of human trafficking from Lithuania and the East may be exploited in prostitution networks.

 

2.2.4         Žemaičiai

The criminal activities of the Þemaièiai group include drug production, smuggling and distribution; the smuggling and distribution of counterfeit money; extortion of property; fraud; robbery; theft including the theft of vehicles, motorcycles and water motorcycles; handling stolen property; crimes against the economy and the financial system; money laundering; violating public order; possession of weapons; destruction and damage of property; illegal deprivation of freedom; bodily injury, and murder. The Þemaièiai group is present in Latvia, Estonia, Germany, and Russia and also in many other EU countries such as Belgium, the Netherlands, the United Kingdom, Ireland, France, Bulgaria, Italy, and Spain. Drug smuggling is facilitated by the free movement of people and commodities within the EU and by weak external border security. This OCG uses LBSs in the fields of haulage, agriculture, and finance for criminal purposes. It uses EU financial support to strengthen its powers. Thanks to communication technologies, distant members can maintain constant contact.

 

2.2.5       Miliai

The criminal activities of the Miliai group include drug smuggling and distribution, the smuggling of excise commodities, property extortion, crimes against the economy, and money laundering. Miliai is present in Sweden and Russia as well as in Norway, Belgium, the Netherlands, the United Kingdom, Italy, Belarus, and Ukraine.

 

2.2.6       Buduliai

The criminal activities of the Buduliai group include drug smuggling and distribution as well as cigarette smuggling. It is present in some regions of Latvia that play an important role in drug smuggling, and in Norway where it connects with immigrants from Lithuania. Latvia suffers harm from the activity of Buduliai, and the OCG also encourages trade in drugs and cigarettes smuggling in Norway.

 

2.2.7       Švinius

The criminal activities of the Švinius include cigarette smuggling, money laundering, crimes against the economy, fraud, property extortion, robbery, bodily harm and possession of weapons. This group is present in Latvia, Germany, and Russia as well as in the United Kingdom and Belarus where the OCG runs LBSs, operates in the field of business construction, and makes use of corruption.

 

2.3      Description of Criminal Acts

Information in this section, as in the previous section, mostly comes from the Organized Crime Investigation Division of the Criminal Police and regular police units.

 

2.3.1      Drug Trafficking

The drug market trends in the Baltic States are similar, and the problem is increasing. For instance, in 2010, 5.5 kg of heroin was found in a hidden compartment of a truck at the Latvian–Lithuanian border. This was the largest quantity of heroin ever seized in the country.[12]

            In 2009 heroin was the most popular intravenous drug in Lithuania and the demand which rose for it three years ago has remained. With reference to the results of work of law enforcement agencies in 2009 heroin prevailed among drugs withdrawn in doses in Lithuania and the data on detentions indicates that heroin replaced the previously used concentrate of poppies.

In 2009 3.7 kg and 853 ml of heroin were detained in Lithuania. In 2010, 1st half-year, 5.5 kg of a narcotic substance, namely, heroin, were found in a hidden compartment in a truck at the Latvian and Lithuanian border. This is the largest quantity of heroin detained in Lithuania. Its value on the black market would amount to one million Litas (i.e. 289620 EUR).

According to the intelligence, the wholesale price of 1g of heroin in Lithuania fluctuates from 90 LTL (26 EUR) to 160 LTL (46.33 EUR).

With reference to the information of law enforcement agencies, 1 kg of heroin is enough to produce about 14000 doses of drugs and the average price of one dose of heroin is from 30 LTL (8.6 EUR) to 50 LTL (14.4 EUR), the total price of all the quantity in retail market would amount to 420000-700000 LTL (i.e. 121640 – 202734 EUR).

The concentration of heroin in retail trade was from 0.01 per cent to 64.9 per cent (the average concentration made up 34 per cent).

It is believable that the demand for this narcotic substance will not cease.

            Cocaine has not been marketable in the illicit market of drugs in Lithuania due to the high price for there is amphetamine or methamphetamine, which are considerably cheaper and have similar influence. In 2009 6 kg of cocaine, which has remained the most expensive drug in Lithuania, were withdrawn from circulation, the average concentration of the drug seized made up 37 per cent (it was 36 per cent in 2008). In 2009 there were also cases disclosed in which Lithuanian nationals were detained abroad shipping cocaine the total amount of which was 99.1 kg.

When making the overview of the situation of this year, it should be mentioned that in January 2010 a container shipped to Lithuania from Peru was detained, a very large amount of cocaine (about 397 kg) was found in it. This smuggled cargo makes up the largest amount of drugs ever detained in Lithuania and one of the largest amount detained in the European Union.

With reference to the information gathered, the wholesale price of cocaine in the country recorded in 2009 has not changed several years, it fluctuates from 34 EUR to 43 EUR (i.e. 120-150 LTL). The retail price of cocaine in Lithuania was from 43 EUR to 72 EUR (150-250 LTL). Thus, the main consumer of cocaine has remained the person who receives income higher than average.

The profit received from cocaine distribution is not precisely known. It is thought that after the distribution of 1 kg of cocaine, the profit (with no outlay included) may be approximately 11584 – 14481 EUR (i.e. 40000-50000 LTL).

The increasing offer of cocaine has been noticed in Lithuania, however, it is early to state that consumption of cocaine is going to increase in the country. The detentions of 2009 and 2010 indicate that larger amounts are detained on the home market and it confirms the assumption of international organizations that the demand for cocaine in Europe is increasing and the underworld is looking for new unusual routes of cocaine smuggling intensively.

            Lithuania, just like Europe has faced a spreading phenomenon, i.e. indoor cannabis cultivation. For this reason cannabis may be cultivated in Lithuania or brought from the Netherlands or Spain.

Apart from several areas of cannabis cultivation in Lithuania in 2009, 2 specially equipped cannabis cultivation places were disclosed: 5.3 kg of cannabis were seized in one of them and 13 kg - in another one. In 2009 several cases of indoor cannabis cultivation (of small scale) were disclosed. In total 82 kg of cannabis were withdrawn from circulation in Lithuania.

Hashish is not a popular drug in Lithuania, so its circulation is not high. 10.5 kg of this drug were withdrawn from the circulation. This is an imported drug. As it was during the previous years, Lithuania has remained a transit country. Hashish smuggling is often organized from Western to Eastern Europe.

The wholesale price of cannabis and its parts (marihuana) was 14-26 LTL (i.e. 4-7 EUR) of 1 g and in retail market it was 20-80 LTL (i.e. 5.5 – 23 EUR).

The profit from the distribution of cannabis of criminals received is not precisely known. Having distributed 1 kg of cannabis the profit may approximately amount to 10 000 LTL (i.e. 2896 EUR).

            Amphetamine type stimulants (ATS) have remained the most popular in the country as it was the previous year. Quite a quantity of these substances is brought from foreign states. In 2009 2.5 kg of amphetamine were withdrawn from circulation in Lithuania. It has been noticed that there was a decrease of amphetamine in the local market for methamphetamine is the most popular ATS.

With reference to data on detentions and other information the fact indicating illegal production of methamphetamine and amphetamine may be confirmed, however, it is not extensive. The scale of drug production in Lithuania is often overestimated. Lithuania is one of the states in which the quantity of drugs imported is higher than the quantity produced. In 2009 there was one illegal laboratory of methamphetamine of average capacity detected in the country. 82 kg of methamphetamine and 34 kg of free base of methamphetamine extracted from intermediate products found in laboratories were withdrawn from circulation.

In 2009 69823 ecstasy tablets were withdrawn from circulation in Lithuania. It has been noticed that the place of ecstasy is being replaced by mCPP and its mixtures.

Retail market prices of 1g of amphetamine and methamphetamine fluctuated from 15 to 80 LTL (4-23 EUR). The price of a dose of methamphetamine amounted from 15 to 25 LTL (4-7 EUR) and that of methamphetamine was from 20 to 40 LTL (5-11 EUR).

1 tablet of ecstasy in retail market cost from 5 to 25 LTL (1-7 EUR).

Average purity of amphetamine powder amounted to 23 per cent that of methamphetamine was 24 per cent and that of ecstasy – 20 per cent.

New uncontrolled psychoactive substances are also becoming popular. However, there also are some differences between the Baltic States. Whereas heroin is common in Lithuania, in Estonia the preferred substance is fentanyl (a synthetic heroin alternate). In Lithuania, the most popular synthetic drug is methamphetamine, whereas in Estonia amphetamine is in higher demand. In Latvia, amphetamine and methamphetamine share the market almost equally. The three countries are used for transit of drugs from the East to the West and vice versa, and for the transit of synthetic drugs to Scandinavia.

In Lithuania the members of OCGs share functions among themselves: some are responsible for the production or acquisition of drugs, others are in charge of local logistics (i.e., the selection and recruitment of couriers), while others are responsible for handling. Assignments are usually distributed with regard to the capabilities of the members of the group.[13] Heroin is usually brought to Lithuania from Russia. Some remains in Lithuania while the remainder is shipped to the region of Kaliningrad and Latvia.

Organized criminal groups use the transportation and financial sectors and the illicit market of commodities and services. New technologies facilitate the organization of criminal acts and complicate the discovery of crime and the gathering of evidence. The groups are encouraged in the illicit circulation of drugs due to the ease with which they operate and the great profits resulting from constant demand for narcotic substances and the existence of a market of consumers.

Because of its high price, cocaine has not been marketable in Lithuania and has been replaced by amphetamines or methamphetamines, which are considerably cheaper and have similar effects.

Even though the demand for cocaine is small in Lithuania, large quantities are being brought into the country for re-export to other European countries or Russia, where the demand is higher. Cocaine traffickers thus use Lithuania as a transit country to mislead law enforcement.

Along with amphetamine-type stimulants (ATS), cannabis is the most popular drug among consumers. Lithuania, like Europe, has faced the spreading phenomenon of indoor cannabis cultivation. Cannabis may thus be cultivated in Lithuania or imported from the Netherlands or Spain. In 2009, 313 cases of cannabis detention were registered and 356 suspects were identified.[14]

However the availability of amphetamine has decreased in the local market, as methamphetamine has become more popular. Illicit facilities for the production of methamphetamine and amphetamine have been found in Lithuania. Their products are not solely for the local market but are also transported to Scandinavia (through Latvia and Estonia) and Russia.  Ecstasy, however, remains in Lithuania while other drugs are transported to Russia. The smuggling routes thus created are not only used for the transportation of drugs produced in Lithuania but also for the carriage of ecstasy and the import of amphetamine.

 

2.3.2      Cigarette and Alcohol Smuggling

In 2009, the retail price of tobacco products increased by 26.1 per cent compared to 2008 prices because excise and value-added tax (VAT) rates were doubled. Retail sales of tobacco products decreased by 31 per cent (for comparable prices), and statistics for the first semester of 2010 show that the legal market for cigarettes is shrinking.  

In comparison with previous years there was a significant rise in contraband cigarettes shipped from third countries (most often Russia and Belarus), as well as increase in the quantity of contraband cigarettes seized in Lithuania. However, Lithuania remains a transit country, and 85 per cent of the cigarettes detained in Lithuania are intended for the black market of European countries (the United Kingdom, Germany, and Poland). The most popular brand of cigarettes smuggled through Lithuania has always been Jin Ling. A 1000 per cent profit was made by legally acquiring tobacco products in third countries (most often in Russia) and selling them illegally on the black market of EU member states. It has been noticed that those who previously organized the smuggling of cigarettes via the green border have started transporting them in cargo trucks and cars equipped with hidden compartments, thus decreasing the cost of transportation.

Due to the different prices of cigarettes in neighboring countries, intensified cross-border shopping has lately been observed in Lithuania. Individuals can legally import a certain quantity of cigarettes and alcohol. However, much of what is imported is not intended for personal use, but for resale. There has also been an increase in the number of Polish citizens, who, in order not to attract the attention of the Lithuanian law enforcement officers, purchase cars with Lithuanian registration numbers. These cars are equipped with specially equipped hidden compartments (in a fuel tank, an airbag or a double floorboard) for the illegal shipment of cigarettes.

In comparison to 2008, the retail prices of alcoholic beverages increased by 9.2 per cent in 2009. The price increase was caused by a higher excise rate, which was applied on January 1, 2009 and was influenced by VAT, which was raised in 2009. The prices of fortified alcoholic beverages have also greatly increased. In 2009, 3.3 million decalitres of fortified beverages were sold, which is 559,000 decalitres (14.3 per cent) less than in 2008.[15] The principal trends in alcohol smuggling have remained the same: products are smuggled from neighboring EU countries (Poland and Latvia). The scope of the transportation of illegal alcohol from Poland and Latvia and the scope of the production inside the country has expanded. Due to a liberal application of regulations regarding  denaturing alcohol, legally produced alcohol, or alcohol brought from third countries is shipped to Lithuania (legally or illegally) where it is illegally processed under domestic conditions using simple technology and sold on the home market.

Special experience is needed to smuggle cigarettes and alcoholic beverages. The smugglers must be familiar with the terrain, have some minimal ability speak a foreign language, maintain contacts with criminal groups in neighboring counties, and have specially equipped cars and professional drivers. Members of the same OCG usually conduct all the stages of this criminal activity, but distribute tasks and roles. Some buy cigarettes from foreign suppliers or legally operating factories (in the region of Kaliningrad [Russia] or in Ukraine) while others bring cigarettes to Lithuania or arrange orders and sell cigarettes to the persons who later handle cigarettes in Lithuania or resell them. The smuggled cigarettes are most often shipped to Lithuania in hidden compartments or are hidden under various goods in trucks and cars. From the region of Kaliningrad, cigarettes are also shipped across the state border, bypassing the border checkpoints and are carried across the river on waterborne transport. Tobacco and its products illegally transit via Estonia, Latvia, Lithuania, Belarus, Poland, Greece, Hungary, and Sweden. The destination countries are Lithuania, Poland, Germany, England, Ireland, and Norway. Contacts are maintained with Russian, Polish, German, Latvian, Belarusian, Ukrainian, Israeli, and other criminal groups.

The main reasons for the increase of the smuggling of tobacco products are the general socio-economic decline and the considerable increase in cigarettes' prices. OCGs are attracted to this because it offers quick, high profits without much labor expenditure. As the organizers of the smuggling usually stay in the background, it is hard to identify them, and they are rarely imprisoned. The penalty for smuggling tobacco products is also lighter than that for smuggling narcotic substances.

Smuggling of cigarettes and alcohol direct damages the collection of state revenues, and the image and economy of Lithuania. Those who engage in this trade work illegally, do not declare their income, and do not pay taxes. Market competition is strained when the legal trade competes with illegal trade. Due to the fact that most of the cigarettes shipped via Lithuania are intended for the black market in EU countries, these countries must suffer similar damage. However, we do not possess any specific data on the influence of this criminal activity in the Baltic region inside and outside the EU.

 

2.3.3      Counterfeiting of Euros

The production and distribution of counterfeit currency is not common in Lithuania, since Lithuania is not a member of the eurozone. Nevertheless, the euro remains the most frequently counterfeited and distributed currency, particularly banknotes in denomination of 20 and 50 euros. The majority of counterfeit euros are handled in eurozone countries, but there are cases of people being paid for commodities in counterfeit euros. However, according to the data of the European Central Bank, the number of counterfeit euro banknotes is not very high in comparison with the increasing number of genuine euro banknotes in circulation.

[16]

The cessation of internal border control gives persons committing crimes the ability to travel freely in EU countries and to carry counterfeit money or other illicit items. The rapid development of technology allows organized groups to acquire high quality counterfeit money, which significantly hampers detection. As many countries have not yet introduced the euro, people have difficulties in telling the difference between real and counterfeit banknotes, and foreign citizens are very trusting. It is thus easy for those who wish to commit crimes to deceive them. Economic and financial problems in the Baltic states are partial preconditions for the commission of criminal acts such as the production, keeping, or handling of counterfeit money or securities.

The production and distribution of counterfeit euros do not have a particular influence on the economies of the countries of the Baltic region, although private persons suffer damage because they are ignorant about the security features of euros and accept counterfeit banknotes. Bank employees easily detect the counterfeits with special equipment used to identify security features of currency and immediately withdraw such notes from circulation.

 

2.3.4      Human Trafficking and Exploitation

Human trafficking has taken a new form as some victims agree to travel to countries with higher standards of living and engage in voluntary prostitution. The women's social vulnerability (unemployment, absence of income) and absence of other information results in their allowing others to take half of their income. Human trafficking is organized and committed not only by OCGs but also, in some regions of Lithuania, by individuals with no direct connections with OCGs.

Human trafficking involves recruiting people (by deception or telling the truth), organizing transportation (by finding ways to forge documents and arrange transport), and searching for locations in which to sell and receive profit. Payment is sometimes extracted from the  person's earnings. Victims of human trafficking are usually women aged 18 to 24. They are recruited through modeling agencies, radio shows, online dating, social networks such as Facebook and other websites, and often voluntarily leave their home countries. Cases are known in which women are offered legal jobs (as waitresses and dancers), but once transported abroad they are forced to provide sexual services. Violence is also often used to make them work and to intimidate others. Search and recruitment is conducted by low-level members of the OCGs. Women are not only recruited by procurers but also by working prostitutes who receive rewards of up to 600 euros for a new woman.

[17]

Poland is one of the main transit countries through which persons are carried, but persons were also carried through Latvia, Germany, and the Czech Republic (using land transport where there was no internal border control). The destination countries are states with higher standards of living, whose economies are more stable, and where there is a demand for cheap labor and sexual services (e.g., Germany).

Employment, dating, and modeling agencies, recreation centers, nightclubs, rented flats, and hotels are used to commit these criminal acts. The establishment of LBSs is often planned along with the criminal activity being organized. Companies are set up in the names of other, often antisocial, persons. LBSs are established not only in Lithuania but also in the countries in which criminal acts are committed. Favorable conditions for these criminal acts are created by tolerant national legislation, scarce state control, and the demand for sexual services and cheap labor in the destination countries.

The commission of these criminal activities is conditioned by complicated economic situations and high levels of unemployment in Lithuania. The reason OCGs participate in these criminal acts may be that they offer low risk and high profits. The proceeds of this crime are invested in legal business, and so destabilize the economy of the state.

 

2.3.5      Fraud

In 2009, 4229 cases of fraud were registered by law enforcement agencies, and 2494 more were registered between January and July 2010. In comparison with 2008 (when there were 2773 cases of fraud), there is an obvious increase in the commission of this kind of crime.[18]

The economic crisis has affected many fields of business. Payments among the participants in an economy in disarray and a massive increase in mutual debts raise the probability of an increase in fraud crimes. Business difficulties stimulate the rise of new ways of perpetrating fraud, manipulation, shady financial transactions, and other forms of misappropriation. An increase of insurance fraud is also predicted. Companies that are going bankrupt, receiving no bank loans, and short of liquid assets will easily be attracted by offers of financial assistance or investment and will not investigate the source of the money. Analysis of investigations shows a trend of OCGs working to create favorable environment for acquiring legal businesses. By taking over insolvent companies and using them to launder the proceeds of crime, criminal groups would more easily be able to control a legal business. There has also been an increase in the number of fraud cases among legal entities. Companies are established or purchased in order to commit fraud, and commodities are purchased on the grounds of consignation. There are also cases of fraud in the recovery of VAT. Companies of this kind later go bankrupt or are illicitly sold to other persons, and further activity is undertaken. The persons who acquire them are usually antisocial, and trade is conducted using lost or stolen identity documents. Recently, many cases have been disclosed in which companies participated in fraud involving social allowances. For example, the salary of a female employee is disproportionally raised before her maternity leave and she receives a "raised" social allowance for two years. Fraud of this kind is usually only possible in private companies.

Law enforcement agencies have shown that the key component in frauds is the use of personal data belonging to another person.[19] Thus fraud is closely related to forgery of identity documents. In recent years, criminal acts of an economic nature have been noticed, including handling real estate belonging to other persons, fraud in order to acquire valuable real estate, great, employment fraud in, deliberate bankruptcy (Phoenix Syndrome), cargo fraud, and so on. Criminal acts involving the so-called "Phoenix Syndrome" have been registered in recent years. They happen when companies transfer property or activities to newly established subsidiary companies in order to evade paying VAT or other taxes, or to avoid payment for commodities or services to suppliers. Analysis of police investigations revealed new trends in criminal acts committed by organized groups.

Lithuanian assets are also targeted by foreign nationals acting on behalf of foreign companies. They forge documents indicating purchase of commodities from Lithuanian companies. For example, in the case of telephone purchases, they provided falsified documents to the State Tax Inspectorate (STI), and requested the recovery of VAT due to overpayment. These are cases where commodities were allegedly bought for handling in the Lithuanian market and were then allegedly exported abroad.

When it comes to VAT fraud, Lithuanian companies are usually used rather than foreign enterprises. Recently there have been more cases in which companies tried to obtain VAT payments from the state, rather than evading VAT payments. In other words, they simulated trade and requested refunds from the state.

VAT fraud is usually related to trading in oil products, metals, vehicles and their parts, and consumer commodities, and to the construction sector. VAT fraud also occurs in relation to the provision of various services and work that is difficult to verify and assess completion (such as advertising, applying research, mediation services) as well as in the field of information technologies and meat processing.

[20]

Although the methods of OCGs are becoming more elaborate, our analysis shows that the methods of VAT fraud have remained the same as in previous years:

 

·         export of commodities is simulated using falsified documents;

·         purchase of goods or services from other companies operating within the territory of the Republic of Lithuania is simulated using forged documents;

·         forged documents certifying a supposedly legal purchase are used for legalization of illegally purchased goods. Later these commodities are resold for other undertakings;

·         front companies (which are not conducting actual activities) are involved in the chain of purchasing commodities or services in order to fictitiously increase the prices of commodities and services  purchased or to reduce the prices of goods and services sold;

·         despite being aware of the complicated financial situations of a company, such as an impending bankruptcy, company managers continue to recruit customers and sign contracts for work or services while taking advance fees.

 

The most popular model of VAT fraud is the purchase of commodities or services from other companies active in the territory of Lithuania using falsified documents. A variant of this is the involvement of companies that do not actually purchase commodities or services but which illicitly increase or decrease the price of commodities or services purchased. It has been found that companies conducting fraudulent operations are very often also involved in legal activities.

Moreover, it has been found that companies that allegedly trade illicitly to evade VAT also evade the compulsory corporation tax. When committing fraud, members of OCGs share roles in order to fraudulently evade taxes or obtain funds from the state.

In order to commit criminal acts of this kind private companies whose role is to purchase real estate and register them in their name, are usually used. It should be noted that OCG members work in the companies mentioned.

 

2.3.6      Corruption of Public Officials and Institutions

Many law enforcement officers, prosecutors, and lawyers, at all levels and ranks, particularly those who specialize in tax cases, become corrupt. They set out to receive unlawful rewards from persons suspected of crimes against the financial system, who can avoid prosecution by paying bribes.  If the bribe fails – that is to say, if the pre-trial investigation is not dismissed or the criminal act is not downgraded to a milder article of the criminal code – these persons make up charges and pay officers to intimidate or financially weaken their business competitors.

Those who participate in corruption in public tendering are persons who in the administrative field (officials of ministries, budgetary institutions, and municipalities), employees of public institutions, and managers of private companies or companies run by the state and municipalities. Aspects of corruption are noticed in all fields and stages of public tendering. Corrupt activity manifests itself most in the organization of public tendering regarding constructions, refurbishment, and information technologies.

 Different corruption mechanisms are employed at each stage of public tendering. The initial stage includes one type of fraud. Representatives of companies participating in this procedure come to an informal agreement on a winner in a certain town, region, or ministry, and fix the price for services, commodities, or work. Agreements of this kind maintain high prices and stable income (the company knows how many tenders it will win each year). They also exclude possible competitors.

Civil servants or employees of municipalities and state companies participate in one of the most popular forms of corruption at the initial stage. This stage involves the drawing up of tender conditions for a particular supplier or commodity, with the establishment of requirements for qualification or technical specifications. Competitors may be excluded from tendering on the basis of  requirements or qualification that have no direct connection with the commodity, service, or works required (e.g.. turnover, number of employees). Inside information is sometimes leaked at the this stage.

Future winners of tenders often arrange the tender conditions with the representatives of the contracting organization, set the requirements to suit their own qualifications, and sometimes even pay an illegal reward.

At the initial stages, those who able to influence the results of public tendering (members of the commissions of public tendering, high-ranking officials of ministries and municipalities such as advisors and consultants to managers and mayors) are bribed. In later stages, bribes are not only given to ministry or municipal officials but gifts may also be given to members of the commission.

Certain officers of the state receive monetary rewards for the organization of corrupt public tendering in the form of provision of certain services. Thus their real estate may be refurbished and they may receive discounts when purchasing a vehicle or gifts such as trips and furniture.

 

2.3.7      Money Laundering

In order to launder money, foreign companies transfer their money to the accounts of fake foreign or Lithuanian companies that are usually established in Lithuanian banks by foreign citizens. Money is then transferred from one country to another through Lithuania financial institutions using the accounts of these fake companies. The proceeds of crime acquired in Lithuania may be transferred to foreign states, or the proceeds of crime in foreign countries may be transferred to Lithuania.

Lithuanian companies transfer money to the fake company or non-profit (usually fitness clubs), and the money is cashed immediately after it has been transferred. After the money has been cashed, fake accounts are opened and managed by antisocial citizens of both Lithuania and foreign countries who often have connections with criminal groups.

It is assumed that the major reason for transferring assets to Lithuania is to conceal the illegal origin of the assets. Nevertheless, cases have been discovered in which Lithuanian nationals used accounts in foreign countries while engaging in similar criminal activity.

Lithuanian companies increasingly use companies registered in foreign countries and foreign nationals to transfer money to the accounts of fake companies or offshore companies in foreign banks. More cases occur in which money is cashed in neighboring countries and in which the citizens of that particular country are involved.

Quite a number of accounts for fake foreign companies have been opened in Lithuanian credit establishments. These may be called transit accounts. International payment transfers, including online transfers made into these accounts from abroad, are further transferred to another foreign commercial bank. This method of moving money in which money travels through many countries and into many accounts may be used in various tax evasion schemes and in the legalization of the proceeds of crime. It is difficult to identify the sources of the assets and the final receivers.

Money laundering has a geographic principle that is closely related to the principle of neighborhood (close in distance, no language boundaries) and the possibility of freely crossing the borders of EU countries. Since the Lithuanian border is one of the external borders of the EU, illegal assets are smuggled to third countries (the Russian Federation, Belarus) without being declared to the customs services of the Republic of Lithuania. Cash smuggling is one of the most frequent elements in money laundering schemes in order to conceal the illicit source and origin of money as well as its state of origin. Now that the internal EU borders are open, export of the proceeds of crime from the Republic of Lithuania has become extremely simple and, after further financial transactions, the origin of the illicit assets becomes particularly difficult to trace. The geography of the financial transactions of OCGs is also influenced by the geographical location of Lithuania, which is especially attractive for drug transit.

 

3         Conclusions

 

An increase in international crimes can be seen in Lithuania. For instance, Lithuanian OCGs have strong relations with criminals in the UK, Germany, and Spain. They jointly plan and engage in criminal activities, especially in the fields of drugs, human trafficking, smuggling, and forgery. It is indeed easier for them to implement their criminal activities together. Organized criminal groups are involved in drug dealing because it produces huge profits and can even be run from prison. They agree between themselves to control the whole drug business. Less financially affluent members of the criminal world, or weak criminal groups, attempt to join the most successful criminal groups. Criminal groups from small cities in Lithuania also try to join criminal associations operating in the capital, Vilnius. More and more often, the members of the criminal world are looking for opportunities to implement criminal activities in European Union countries, and many members of criminal groups are leaving the country in order to continue their criminal activities abroad.

It should be mentioned that globalization and the economic crisis have had a huge impact on the criminological situation in all countries. In Lithuania, the number of crimes against the financial system, committed by OCGs increased during the economic crisis. The most important measure in fighting organized crime is prevention of the financing of organized crime. Lithuania has already set in place laws concerning the confiscation of assets and the prevention and control of organized crime. Impeding the legalization of criminally acquired funds is an efficient mechanism to control organized crime. In order to destroy the economic potential of organized crime groups, as well as criminal businesses and their internal executive infrastructures and relations, special attention should be paid to the leading and organizing chains of the groups. To promote the fight against organized crime, groups of law enforcement, finance, and control institutions and other related institutions should cooperate.

The analysis of recent organized criminal activities suggests that there are many more professional criminals than before. Nowadays, unlawful activities are based on good mutual relations, at both domestic and international levels, and they rely on highly organized financial, technical, and information supplies.

It is very difficult to predict trends in the development of organized crime. Before 1993 the threat of organized crime was very real in Lithuania. Some researchers even raised the question of whether the country would be governed by criminal justice or organized crime.

Thanks to new laws directed against organized crime and the strengthening of the criminal justice system, there were a few successful trials and convictions in court, which weakened the position and influence of organized crime in Lithuania. However, organized crime in some fields such as smuggling, drug trafficking, theft of cars and from households, corruption and human trafficking and remains strong. The future depends on development of the political and economic situation and reform of the legal system and of the criminal justice system. There are enough options to bring organized crime under control.



[1] Labour Force, Employment and Unemployment. Statistics Lithuania, 2009. www.stat.gov.lt (2011 05 03 21:05:58)

[2] Gruzevskis B., Zabarauskaite R. Social Consequences of Economic Downturn (2008) in Lithuania // Economics. Research Papers. Vol. 89(3), Vilnius 2010. P. 83.

[3] International Migration of Lithuanian Population. Statistics Lithuania, Vilnius 2008. www.stat.gov.lt

[4] At the beginning of 2010, the company "Spinter tyrimai" conducted a survey on the attitudes of Lithuanian citizens towards emigration. In total, 1003 respondents were surveyed. According to the survey, 58.7% of the respondents would like to leave the country (65% of them were persons aged 18-25).

[5] Statistical Yearbook of Lithuania 2010, Vilnius 2010. P. 219-220.

[6] Gruzevskis B., Zabarauskaite R. Social Consequences of Ecomomic Downturn  (2008) in Lithuania // Economics 2010 Vol. 89 (3). 

[7] Lithuanian Free Market Institute, Survey of the Lithuanian Economy, 2009; T. Pedersen, What are the proposes for Lithuania's economy 2011-2013, 2011; V. Trasberg, Tax Administration and shadow economy in EU new members, 2004; World Bank, Tax Policy and Administration, http://www.worldbank.org/publicsector/tax/

[8] Information Analysis Board Criminal Police Bureau 2010.

[9] OCTA Europol, EU Organized Crime Threat Assessment 2009,

[10] Information from division of Lithuanian Criminal Police Bureau.

[11] Anti-organized crime Division of Criminal Police. Report of organized crime investigation.

[12] http://lkpb.policija.lt/index.php?option=com_content&view=article&id=135 .- LKPB oficiali internetinė svetainė

[14] Information Analysis Board Criminal Police Bureau 2010.

[15] Statistikos departamento tinklapis. 2010-06-11 d. pranešimas spaudai "Alkoholio vartojimas ir padariniai 2009 m". Department of Statistics website 2010-06-11.

[16] Lietuvos banko internetinė svetainė  http://www.lb.lt žiūrėta 2010-09-15. Bank of Lithuania website.

[17] Information Analysis Board Criminal Police Bureau 2010.

[18] IRD prie VRM statistika, žiūrėta 2010-08-26

[19] Information Analysis Board Criminal Police Bureau 2010.

[20]  "Lithuania to cut benefits, pay, hike VAT to fight crisis", EU Business, June 19, 2009. http://www.eubusiness.com/news-eu/1245249122.94/

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