The Underground Economy: Components

The aim of the studies is to understand the notion of underground economy and to make recommendations for improving the fraud management and control systems. We study the underground economy in terms of its components. The basic component without which we cannot talk about fraud is the economical agents with heterogeneous skills, seeking opportunities from the point of view of the disparities between the laws of the Member States of the European Union and the uncertainties of the national law regarding the risky commercial activities of enterprises. Asymmetrical provision between the laws of the Member States of the European Union imply an environment that offers the economical agents the possibility to take advantage of these disparities in order to operate an underground economy. Confronted with these underground economies the States choose financial policies that would determine the economical operators from the black market to respect their financial obligations. Member States are responsible for preventing and resolving irregularities and fraud in the areas managed in a distributed manner. In order to protect the Community's financial interests, Member States are primarily responsible for establishing management and control systems that comply with the requirements of Community law as well as for verifying the efficient operation of systems through audits by designated bodies for the prevention, correcting irregularities or fraud. The analysis has shown that the gradual approach is easier to understand, if the statistical data being analyzed, after the theoretical elements are presented. It is recommended that any classification of types of fraud be made according to the specific circumstances and the environment in which the organizations operate. The responsibilities of the Member States for setting up management and control systems that comply with Community requirements to verify the operational efficiency of these systems through audits by the bodies designated for the prevention, detection and correction of irregularities and fraud will be analyzed. Correlation with statistical data will clarify OLAF's financial recommendations to EU institutions or national authorities that also manage EU customs revenue collection. It will be highlighted that the customs activities of the Member States' are the first line of defense against any attempt to defraud the EU budget. Since its inception, OLAF has been monitoring the actions taken by national judicial authorities following its judicial recommendations to see the outcome of these cases on the ground and to find out whether they have led to allegations or other judicial measures. The key inference of the analysis is the study of the components of the underground economy according to legal provision, politic environment from the different states of the European Union with the purpose of improving the policies for controlling this phenomenon.