Economic downturns create opportunities for crime

While a recession entails hardship for the licit economy, criminal ventures are placed to take advantage and exploit opportunities emerging as a result. In particular, a number of sectors are more adversely affected by negative economic conditions, such as construction, hospitality, travel and tourism. Companies operating in these sectors in difficult times are often vulnerable to infiltration or takeovers by criminals.

Difficulty in accessing capital through loans during a recession pushes some individuals and companies to make use of unregulated financial services, which increasingly operate online as unlicensed banks or lenders that offer different types of loans and, in some cases, scam their customers.

Lack of accessible capital also potentially opens up struggling businesses and individuals to the investment of funds stemming from criminal activities. In the past, this type of vulnerability has been particularly observed in the real estate sector.

Economic stimuli such as those proposed in the wake of the COVID-19 pandemic will be targeted by criminals seeking to defraud public funding. In some cases, they are likely to attempt to use corruption in order to access these funds.

Various types of investment fraud flourish in times of economic hardship. It can be expected that some of these cases of fraud will emerge with a COVID-19 spin in the event of a sustained recession. This may involve fraudulent investment offers into companies producing hygiene and sanitary products such as masks and other personal protective equipment (PPE). Some of these companies will be set up to fail and are only operated to extract investments.

Previous investigations have shown that investment fraud schemes can generate profits of hundreds of millions of euros per year and are typically operated by networks of 10 to 20 suspects.