Lumini ța Dragne, George Dorel Matei, AnaMaria Tranc ă 121 [602459]

Lumini ța Dragne, George Dorel Matei, AnaMaria Tranc ă 121
FINANCIAL CRIME IN THE RO MANIAN BANKING SYSTEM
LUMINI ȚA DRAGNE∗
GEORGE DOREL MATEI∗∗
ANAMARIA TRANC Ă∗∗∗
Abstract
The crime in the financial and banking system, through the disasters it produces, damages and large amount of
victims, generates the largest economy damages, both nat ional and international level. This phenomenon occurs
and is manifested in a specific environment, the econom y and finances one, takes different forms and operates
with appropriate techniques. Most of the times, the banki ng system from Romania, has been used for personal
grounds, which leads to serious damage of the Romanian economy. Insufficiently matured economic or
imperfect judicial environments are only some of the fact ors that led to the commission of crimes in this area.
Also, this type of crime has been determined, among other things, by the economic status, the social structure or
the stage of development of the society.

Keywords: banking and financial crime, corruption, banking fraud.
Introduction
Financial – economic crime, also known as the wh ite collar crime, generates great damages to
the international economy. Nevertheless, the transgerssors who do crimes in this field are regarded
by the society as people who found a way to avoid the coercitive action of the state, consisting in the
increasing taxes and impositions. Therefore, these individuals are not considered criminals, although
the criminal law makes no distinction; on the contra ry, they are treated with respect, are considered
businessmen, persons who don’t deserve to be held liable for the fact that they found solutions,
illegal even, to elude the financial legislation of the state where they conduct their business.
The phenomenon of the economic- financial crime takes place and manifests in a specific
environment, of economy and finances, which can di splay a large diversity of organisational forms,
which are in a permanent transformation, and offer a large gama of possibilities of actions, doubled
by the correspondent techniques.
The victims of this phenomenom are the citizens, but, somettimes, are also the business
parteners, governamental institutions, the business se ctor and the banking and financial environment.
The indirect victims are the citizens, those w ho, as a consequence of the embezzlements,
frauds and illegal misappropriation, and of the unauthorized management buy – outs, are seeing their level of life diminished, the medical assistance co mpromised, the acces to education and information
blocked by the illegal downsizing of the social fonds destined to fulfill these objectives.
The criminality in the business sector has as a result, by the great proportion of damages and
number of victims, an obvious inbalance of the whole society, with direct impact on the climate of
public order and national security
1.

∗ Associate Professor Ph. D., “Dimitrie Cantemir” Ch ristian University (email: [anonimizat]).
∗∗ Senior Lecturer Ph. D. candidate, “Dimitrie Cantemir” Christian University (email:
[anonimizat]).
∗∗∗ Judge, Bucharest Tribunal (email: [anonimizat]).
1 C. Voicu, G. Ungureanu, A. Voicu, Globalisation and bancking – financial criminality, Juridical Universe
Publishing House, Bucharest, 2005, p. 440.

122 Challenges of the Knowledge Society. Legal sciences
The long term consequences of this type of criminality are not yet wholy taken into
consideration, and in an economy in transition, like the one Romania has e xperienced, in which the
financial and fiscal legislation has had a difficult bi rth and an even more difficult ageing process, the
main consequence was the apparition of the cart on – billionaires class, on the background of the
pauperisation of the rest of the population.
After 1989 the foreign banking organisations have become available also for romanians, and
these institutions offered not only a more evolved and competitive frame for the evolution of
business, but also the means of creating an apper eance of legality for some illegal activities. The
same banking organisations have become also the place where the money coming from criminal
activities conducted on romanian territory have found their destination.
From this point of view, the year of 1989 was the moment of the beginning of the great
financial and banking criminality in Romania, when the romanian banking system has become concurential and private.
However, the possibilities offered by the sheer existence of this banking system, and also the
possibilities given by the unlimit ed acces to external banking syst ems were not known but by a group
of individuals which was very small in comparison to the rest of the population.
Among these few initiates there were persons who brought their contribution to the growth
and evolution of the romanian banking system and w ho knew to blend their personal interest with the
social one, but there were also those initiates who used the system only for their personal interest, in
most cases producing great prejudices to the romanian economy.
The bankrupcy of banks such as Dacia Felix, Credit Bank, Bankcoop, Banca Albina,
Bancorex and others ment not only the lost of the personal economies for thousands of romanians,
but also the impairment of public trust in nationa l banking system. Yet, the earnest effect of these
bankrupy was that o great part of the forfeiture were directly or indirectly absorbed by the national
economy, which therefore became weaker and more instable.

The infractionality in the financial – banking environment

A. Causes and factors which determine the perpetration of crimes in this sector. The
greatest desasters who took place in the world of fi nances and banks have ha d as a generator factor,
the immense potential this backround can have in the purpose of obtaining a meaningful material
gain
2. The huge profits that can be gained by malevolent use of the banking system determined the
apparition of a new type of criminal – danger ous and versatyle – who exercised his illegal
inclinations in a social environment characterised by the following factors:
▪ an economic backround insufficiently aged, marked by the easiness with which new
economic agents and new financial institutions can appear, offering promissing perspectives, in many
cases accompanied by a matching advertising.
In the absence of an established tradition in this field, the system becomes vulnerable due to
the fact that the possible intruders like these, wh o look for an illegal purpose, are tracked down too
late. Unfortunatelly, the economic environment existing in Romania in that period of time made
possible the action of such organisations who had as only purpose fast enrichment, regardless of means, of a limited number of persons, others then the deponents.
▪ the faulty judiciary environment offers the id eal terrain for the initiation and finalisation of
such illegal business, ended in co lossal damages. The judicial system is either defective, either
constantly behind the pace of business evolution, which is a dynamic environment, with his own
laws and economically motivated.
In most cases, the legislative discrepancies are the ones specul ated, but, equally dangerous is
the abbundance of bills, allways changing, which rends the development of a correct economic
activity almost impossible, even when one wants to act in good faith.

2 Ibidem.

Lumini ța Dragne, George Dorel Matei, AnaMaria Tranc ă 123
▪ the corrupt political environment is, undoubtedly, the factor who is the base of the economic
chaos.
Individuals who took their business to the limit of the law or even broke it, and who gained
enormous profits, afforded to buy themselves key positons in politics, which granted them immunity
and also an increasing power.
Politicians such these initiated and advocated unhealthy legislative initiatives, poisoned the
economic environment and developped an undergr ound world who bolstered their position, but
weakened the economic national power in the process.
▪ the utterly deficient external and internal c ontrol is another factor that encourages and
amplifies the frauds in baks and financial organisations.
The lack of experience, the faulty knowledge of laws, the absence of any motivation,
reproched to the organisations empowered with control powers, contributed to the creation of an instable and vulnerable environment, in which the pot ential factors could manifest themsefves freely.
▪ the defective management of a banking institu tion cand easily bring upon illegal activities,
either from inside the bank as well as the outside of it.
The desire of gaining immense and immedi ate profits cam generate wrong managerial
decisions, with untterly grave consequences.
One of the realities of the period we go through at this moment is the growth of the diversity
and dimension of criminality on a global level, and especially on the level of bank criminality. It is
obvious that, today, the banking criminality has extended to a wider area, takes new forms, some of
which are more sophisticated and unknown untill now, such forms being in fact the product of the actions of criminal groups organised by true specialists
3.
The analisys of the dimensions and forms of the ways of manifestation of the economic –
financial crime in Romania of the last 20 or 30 years brings to light the fact that this phenomenom was caused by the state of the econom ic, social and politic environment, by the social structure, the
level of economic development and the levelof social stability. The changes that took place in these
fields influenced the content and ways of manifest ation of economic and financial crime. There have
appeared new forms of delinquence, after the year of 1990 being revealed even a veritable agression
towards the state property, materialised in embezzlement and thefts of huge proportions, a real
industry of smugglers, a rioting outbreak of pyramidal games, the plunder of the most important banks, of the public finances and the dezas truous colaps of some investments fonds.
Taking advantage of the fact that the legi slation regarding the banking activity was not
brought to the realities of the day, (the bills were drafted in the seventies), untill 1990 the banks
bolstered their positions and intruded in the romanian economy by backing up the private sector, and
therefore consolidating their positions by offering a large number of credits, to which they tolled big
comissions and interests.
The financial and banking world extended the roots of its power so well and so deep in all the
state structures due, mainly, directly to the power of banking and financial institutions, organised and
handled according to a strict set of rules etablish ed by specific laws, re gulations and procedures.
Thus, we find ourselves in a spec that is so we ll guarded, that sometimes seems impenetrable,
and so sophisticated, that only the strict professiona l initiative can change the internal regulations and
law provisions, which, often through a appearent confuse enunciation, grants the system "imperviousness" against any instrument of assay and control
4.

B. Banking fraud. The term of banking fraud refers to th e illegal acts that affect banks,
financial services (loands, investments), and th at concern instruments of payment, checks,
promissory notes, notes of hand5.

3 Ibidem.
4 G. Ungureanu, A. Boroi, Introduction in applied crime , Juridical Universe Publ ishing House, Bucharest,
2004, p. 51.
5 C. Voicu , Business criminality , M-I Publishing House, Bu charest, 1997, p. 21.

124 Challenges of the Knowledge Society. Legal sciences
Accordind to the Explanatory Dictionary of the Romanian Language, fraud means deceit, that
act of bad – faith usually comitted in order to gain a material profit from damaging the goods or interests of another person, which is, finally, a sort of theft.
Referring to fraud as a way of deceiving the ba nk, the term means the summ of the illegal
actions and manouvers done by the bankers through the banking entity which is therefore directly damaged by the interloper transfer of some souces of money in the direct benefit of the bankers or
other persons
6.
The fraud wave of the banking system started in the USA and extended in Germania, Austria,
United Kingdom and Netherlands, in fact comprehended the enttire european community, and the analists forecasted a significant growth of crimes in the financial field.
Organised crime has targeted with predilecti on financial and banking activities and stock
exchange, generating international crime events.
This wave of frauds added in also Romania, which was in a period of transition towards the
free market economy, and experiencing an utterly alarming evolution.
Most of these crimes involve the granting ofbanking loans with no guarantees whatsoever or
based on false documents, the use of banking depos its fraudulently, the favouring of a few private
economic agents in the detriment of state organisations, illegal transfers of money between banking accounts, the essuing of false paying documents with no real coverageacts of abuse and corruption in
regards the activity of awarding of loans, the omission of paying the instalments and interests deriving from loans, or the omission of taking the legal measures against some economic agents who broke the financial legislation in this field.
The banking criminality has two components: – crimes comitted by persons outside the bank, the bank being the victim of the fradulent
manouvers.
– crimes comitted by persons inside the banks, by the stuff, with or without the aid of some
individuals from outside.
There are some notorious cases – Credit Bank, Dacia Felix, Bancoop, The Fond of Private
Property IV– Muntenia, BCR –Timi șoara, Ion Țiriac Bank–Br ăila, BRD, in which individuals with
leading responsabilities, sometimes with the aid of experimented outside elements, began illegal
banking operations, by astute means, in order to avoid being caught, produces great damages, by the
appropriation of fonds that summ up billions of lei
7.
The beginning of the fight against corruption is indeed a signal that society, at least at
decisional level, has noted one of the essential pr oblems that stand at the base of the growth of
financial – banking frauds, seldom rising to prejudices of hundreds and thousands of billions.
Irregularities were done also to cover up the huge proportions frauds that resulted mainly
from the omission of repatriation of foreign currenc ies generated by activitie s of export conducted by
the economic agents, the banks faultering in allerting the judicial organisations of the ones who did not complied with the obligation of giving the "collected foreign currencies "
8.
Crime has special aspects in the field of non – traditional banking organisations. Some
notoriety was gained between 1991 and 1994 by in tra – aid organisations such as Caritas and
Megacaritas, a genuine madness of multiplied ga ines, and after their collapse the foundation of
another, more sophisticated, se rious and generous system was put: the investments fonds which
began their activity in the absence of any form of control. The increase of non –banking organisations (assurance companies, pension fond s, investment fons, stock exchange), caused a
powerfull back stroke to the banks by attracting large sums of money from the public in the exchange of a number of attractive clauuses.

6 C. Voicu, F. Sandu, I. Dasc ălu, Fraud in the financial – banking and the capital market system , 3 Publishing
House, Bucharest, 1998, p. 112.
7 T. Amza, Criminal conotations and new riscs to the public order , Lumina Lex Publishing House, Bucharest,
2000, p.
8 F. Sandu , Smuggling and organised crime , National Publishing House, Bucharest, 1997, p. 87.

Lumini ța Dragne, George Dorel Matei, AnaMaria Tranc ă 125
In this period the romanian banking system was used also for the laundring of dirty money
which obtained through smuggling and embezzlement, illegal transfers over the borders of large
sums of dollars for which there were no justifications, and the hiding of the money coming from ersonal illegal operations under the coverage of the principle of secrecy of operations
9.
The reform of romanian banking system began in 1991 by the creation of two level system, in
which the National Bank looses its trait of commercial bank (by the detachment of the Romanian Commercial Bank) and this way the field openes to new categories of banking operators. Since 1990
untill now, despite some syncopes of some banks, negalively received by the public, the romanian
banking system is obviously more stable and more well brought under regulation in comparison to the rest of the economy.

C. Underground banking systems . The system hawalla . Twelve years ago, at the 58 th
Interpol General Gathering, in december 1989, were discussed th e systems of illegal international
financial transactions. This type of underground banking systems exist for a long time, probably
before the apparition of banking systems in the now adays sense and it appears that they have the
origins in Orient.
The underground banking system implies, in essence, the transfer, with no tracks left, of large
sums of money in various zones of the globe, by avoiding the legal banking procedures, especially in
those country which do not have regul ations regarding custom control.
The motives of using this system are diverse, from the sending of small sums of money to
relatives in poor countries, to the fiscal fra ud and financing the great criminality: political and
religious terrorism, arms and drug trafficking, etc.
The name under which this system is known varies from zone to zone: "chop shop" in
chinese, "chiti", "hundi" or "hawalla" on the indian sub – continent and "stash house" in Lattin
America. "Chop" and "chiti" are the names of an important document that keeps place for receipt and
also note of hand.
"Hawalla" is a word in the "urdu" dialect and means trust in hindu.
The trust between parteners is the key stone in underground transactions, without which the
whole structure collapses. This trust is obtained by any means, firstly through violence, that determines the partener to a ccept the rules of the game.
10
On the global level, this type of cases are considered extremelly complicated, with a low
procent of solving.
Imigrants which usually, but not allways, come from pauper countries, use a vast number of
small magasines, restaurants, internet – caffes and bakeries to send money in the natal countries, as a
way of helping. But these stores could be used to laundry money too, and for money transactions
ment to sustain terrorism, wars and great criminality.
Since the events of 11 sepptember, the occide ntal goverments realised that the risc that
transfer agencies might well financed terrorism.11
Brief conclusions

Banking and financial crime is a phenomenon that has implications not only in banking but in
all areas of activity and, by the consequences it produces, affects the entire economy of a state. In
fact, the main purpose of this type of crime is just obtaining the economic power.

9 I. Dascălu, The off shore financial centers , Argument Publishing House, Bucharest, 2001, p. 4 – 6.
10 Emilian Stancu, Treaty of Criminalistics , 3 rd Edition, Juridical Universe Publishing House, Bucharest,
2004, p. 590.
11 Almost all on Hawalla, the circuit of black Money, in National Courrier, year 11, nr. 4650, Monday,
05.06.2006.

126 Challenges of the Knowledge Society. Legal sciences
Although several measures were taken, even modalities to combat this phenomenon have
diversified and adapted new ways to commit these cr imes, some of them very sophisticated; we here
refer to those informative means which enable the performance of some banking transactions in just
few seconds; banking and financial crime has increase d. Some illegal acts are committed not only by
blackmail and corruption, and by threats and violen ce, which considerably increased the danger to
them.
Even if the causes, types of financial crime in the Romanian banking system and adverse
effects of them are well known, as shown in the above mentioned, then the question arises which
prevents us from easily combat the phenomenon a nd to draw people severely criminally liable
consequently guilty and restore the previous s ituation in the economy minimize negative effects.
The answer, we unfortunately believe, is simple and primarily aimed the incapacity of the
criminal repression authorities to identify in r eal time the indications fo r committing financial –
banking crimes, incapacity generated by objective factor s, such as lack of bank obligations to report
items showing these hints and opacity of these institutions who plays erroneously the bank secrecy
but also subjective factors such as lack of reputed specialists in the field which should be employed
among the judicial bodies.
Taking in account a very simple social economi c reality, namely that in the budget system,
which includes training criminal authorities, sa laries are not likely to encourage the highest
recruitment specialists, people working in the field being urged on, in most cases, only by passion.
Last but not least, extremely cumbersome judi cial proceedings marked by extremely complex
financial and banking expertise by legal experts paid from the budget with amounts ranging between
200 and 5,000 EUR, in conditions in which, the defendants are accused of creating damages that far
exceed the million hundreds of Euros, are elements of nature to severely delay the criminal
proceedings but effective drawing success chance of the guilty to criminal li ability and recovering
damages.
References
Books

ƒ C. Voicu, G. Ungureanu, A. Voicu, Globalisation and bancking – financial criminality, Juridical Universe
Publishing House, Bucharest, 2005
ƒ G. Ungureanu, A. Boroi, Introduction in applied crime , Juridical Universe Publishing House, Bucharest,
2004
ƒ C. Voicu , Business criminality , M-I Publishing House, Bucharest, 1997
ƒ C. Voicu, F. Sandu, I. Dasc ălu, Fraud in the financial – banking and the capital market system , 3 Publishing
House, Bucharest, 1998
ƒ T. Amza, Criminal conotations and new riscs to the public order , Lumina Lex Publishing House, Bucharest,
2000
ƒ F. Sandu , Smuggling and organised crime , National Publishing House, Bucharest, 1997
ƒ Dascălu, The off shore financial centers , Argument Publishing House, Bucharest, 2001
ƒ Emilian Stancu, Treaty of Criminalistics , 3 rd Edition, Juridical Universe Publishing House, Bucharest, 2004

Journal articles

ƒ Almost all on Hawalla, the circuit of black Money, in National Courrier, year 11, nr. 4650, Monday,
05.06.2006.