110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSEGROUP 3
ECONOMIC CRIME AGAINST CONSUMERS AND INVESTORS
Chairperson
Co-Chairperson
Rapporteur
Co-Rapporteur
Members

Advisers

Mr. Wilfredo Vizon Lapitan
Mr. Hiroshi Narikawa
Mr. Torsak Buranaruangroj
Ms. Kiyoko Yokota
Mr. Md. Mahfuzur Rahman
Mr. Burama Dibba
Mr. Akihide Nakamura
Mr. Shuji Ohta
Mr. Choi Joon-Weon
Professor Chikara Satoh
Professor Kayo Konagai

I. INTRODUCTION
The group consisted of nine members
from all pillars of the criminal justicesystem: one police officer (Gambia), threeprosecutors (Japan, Korea and Thailand),three from the judicial branch (Bangladesh,
Japan and the Philippines), one corrections
specialist (Japan) and one rehabilitation
official (Japan). This group workshop
focused on frauds, cartels, and securities
manipulation and insider trading. These
crimes principally involve an individual ororganization skilled or knowledgeable inbusiness, taking advantage of theignorance or gullibility of consumers andinvestors in business transactions throughfraud, conspiracy, undue advantage,
manipulation, or other deceits. The
complex and sophisticated methods withwhich these crimes are being committed
pose serious problems for the criminal
justice system which require moreadvanced and appropriate
countermeasures than the traditional ones.
This study aims to (1) focus on andanalyze actual situations, (2) identify the
problems confronting the pillars of thecriminal justice system, especially in theinvestigation, prosecution and trial stages,(Philippines)(Japan)(Thailand)(Japan)(Bangladesh)(Gambia)(Japan)(Japan)(Republic of Korea)(UNAFEI)(UNAFEI)and (3) propose countermeasures that willaddress such issues, not only in the
countries represented by the group
workshop members but likewise in allparticipating countries in this 110 thInternational Training Course. For thispurpose, the group members haveconducted this study on crimes against
consumers and investors, through surveys,
interviews, examination of the individual
country reports, experts’ lectures andpapers, and library and Internet research.
II. NATURE OF CRIMES UNDERSTUDY
The group agreed to analyze the natureof the crimes under study as to the:(i) Mode of Commission: Crimes against
consumers and investors are usuallycommitted through non-violentmeans. No force or intimidation is
employed. Generally, these crimes arecommitted by means of fraud:
through deception, concealment,
manipulation, and unjust advantage.
Sometimes the organization orbusiness enterprise may appear to belegitimate but would nevertheless be
exposed eventually as illicit or fake,259

RESOURCE MATERIAL SERIES No. 55
only after the damage had become
serious and widespread.
(ii) Offender: The offender, which may be
a person, persons or organization,
usually occupies a high status or is
i n f l u e n t i a l o r w e a l t h y. T h e ycapitalize on their specialized
knowledge, skill or high position or
influence in society or connection
with politicians or businessmen.
They generally employ fraud andother deceits.
(iii)Victim: The victims, usually in large
number, belong to the common massof people like housewives, employees,
senior citizens, etc who are gullible
or ignorant about businessprocedures and/or transactions. The
victims may also be motivated bygreed to make fast money with theleast or no effort at all.
(iv)Impact or Damage: These crimes
cause damage detrimental to society,directly or indirectly. The individualloss may be small but the total
damage to the various victims isgreat.
For the purpose of discussion, the Groupdecided to classify the assigned topics tothree major categories with correspondingclassifications and sub-classifications asfollows:
A. Fraud against Consumers andInvestors(1) Large Scale Fraud(a) High Interest Investment Fraud(b) Venture Capital Fraud(c) Advance Fee Fraud(d) Commodities Future Fraud(e) Membership Fraud(f) Fraud in Insolvent Stock Sale, and(g) Misrepresentation in Advertisement(2) Pyramid Fraud

260(a) Pyramid Investment Scheme and(b) Pyramid (Multi-Level Sale) Fraud(3) C o m m o d i t y F r a u d t h r o u g hTelecommunication / Computer
Networks
B. Unjust Enrichment through Unfair
Price Fixing of Commodities (Cartel)
C. Illicit Manipulation of Stock Prices
and Insider Trading
III. ACTUAL SITUATION OF
CRIMES DISCUSSED
The group discussion on the actual
situation of the crimes under study was notconfined to the members’ individual
country experiences, but included those of
the other participants’ countries as well.
Under the three categories of fraud, cartel/monopoly, and stock manipulation, thegroup discussed specific cases andexamples detailing the modus operandi
used by the offenders. Where data isavailable, it has been cited for better
illustration.
A. Fraud against Consumers andInvestors
1. Large Scale Frauda) High Interest Investment Fraud
In this type of fraud, the criminals
deceive the general public of money by false
stories. The offender’s modus operandi is
to ask the prospective victims for a loan ormoney deposit and lure the latter with apromise of a high interest return at somefuture time. This type of fraud is becoming
serious in Japan and Korea. In Japan, thisfraudulent scheme is increasing as a resultof the low interest rates. In 1996, there
were 12 cases of high interest investment
fraud in Japan where 6,000 people suffereda loss of around 45.5 billion yen and 48
offenders were arrested. In 1997, around2,650 people similarly suffered a loss ofover 89 billion yen in a scheme called110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE“Orange Mutual-Aid Association.”
A variation of high interest investment
schemes, commonly found in Thailand, iscalled a ‘chit fund’. A chit fund, or rotating
credit as it is otherwise called, is one of themost common means of fund raising amongindividuals and small business enterprises.
It is, in general, not illegal unless fraud is
involved. The operator in this scheme
promises a high interest return for loans
borrowed from the general public. Suchinterest rate return is promised despite thefraudster ’s knowledge that his/herbusiness cannot yield sufficient profits tomake such payment, or otherwise suchinterest payment is to be made throughloans from new members. This chit fundwill ultimately fail and the victims will
suffer when no more new members can be
recruited or there is a tight cash supply inthe money market.
Before 1984, there was a scheme in
Thailand called ‘oil share’ which promised
to give lenders and investors 72% interest
per year in return for deposits. It
accumulated an aggregate fund of ten
billion baht from the general public. In
1984, a tight cash supply in the money
market rendered the operator unable topay such an interest rate. The oil sharechit fund scheme collapsed in 1985 and theprincipal operator was found guilty of theoffense of contracting loans tantamount topublic cheating and fraud under theEmergency Decree on Loans Amounting to
Public Cheating and Fraud. However, thefraudsters had subsequently developed
other schemes, such as membership fraudand commodity future fraud, to circumventthe law, thus creating new problems for law
enforcers.
b) Venture Capital Fraud
Venture capital fraud is very similar tohigh interest investment fraud. However,venture capital fraud has a special featurein that the fraudsters concoct a story about
venture capital business. Usually theoffenders lure their prospective victims
with a promise of huge profits upon the
success of the business undertaking.
However, such a story is totally false
because the fraudsters really have no plan
to run their promised business at all. Thisventure capital fraud is increasing in
Bangladesh, Japan and Korea. In 1997 in
Japan, a loss of around 35 billion yen was
sustained by about 12,000 victims in the
KKC [Keizai Kakumei Club (Economic
Revolutionary Club)] case; a large-scaleventure capital fraud, where the head of
the KKC made a false story that the new
business would certainly succeed and makea lot of profit.
c) Advance Fee Fraud
The modus operandi of this fraudulent
scheme, which originated in Nigeria, is forthe fraudsters to inform the prospective
victims in another country, through lettersor faxes that the former are in possessionof, about a huge amount of money which
will be made available to the latter upon
payment of some advance fees. However,upon collection of such fees from theunsuspecting victims, the fraudsters
thereafter vanish into thin air. This typeof fraud is becoming serious in Gambia,
Japan and South Africa. It is also
spreading to Canada and the UnitedStates.
In Gambia, the advance fee fraud
scheme is structured to look as believableas possible. The fraudsters usually target
a company or a person (the victim) outside
Gambia, either by fax or mail, made to lookofficial with appropriate government seals,
stamps and signatures. They propose totransfer a huge amount of money or overbudget money, usually in American dollars,to the account of the victim. They promise
the victim a sizable percentage as acommission, sometimes between 30% and261

RESOURCE MATERIAL SERIES No. 55
35% of the money to be transferred, forusing that person’s bank account. To effectthe transfer of the money, the fraudsters
will ask the victim to forward a variety ofdata and blank forms like telephone andfax numbers, duly signed blank company
letter heads, blank invoices and especiallybank account details. Upon receipt of suchinformation, the offenders will ask thevictim to deposit money into a specifiedbank account to cover the expenses of thetransfer including money to somegovernment officials because of the large
amount of money. Once the fee is paid, they
will come up with another problem that
requires immediate payment by the victim.
Each problem is supported by official
documentation. This fraudulent scheme
may last as long as the victim stays gullibleor the victim desperately desires to recoup
losses. At some point during the fraud, thefraudsters will invite the victim to visit
them and if the victim does, they will takethe documents and force the victim to pay
more money by threatening him withphysical harm or even death.

transactions were victimized by thisfraudulent scheme. In 1994, about 3,600
people suffered a loss of over 9.1 billion yen,while 16 offenders were arrested in thiscommodities futures fraud. In somecountries, the lack of government
regulation also contributes to theoccurrence of commodities futures fraud.
This type of fraud has started to take root
in Bangladesh and Thailand.

As this type of fraud has a transnational
character, considering that in most cases
the offenders and the victims are situatedin different countries, law enforcers face
not only local investigation difficulties, butissues of jurisdiction and mutual
cooperation as well. Variations of the
Nigerian advance fee fraud have evolved.

In Japan, membership fraud cases were
often reported during the economic boom.
However, there has been a decreasing trend
in recent years as a result of the Japanese
economic downturn. In the Philippines,
variations of membership schemes had
been detected, such as membership in clubs
for time sharing of apartments orcondominiums or resort facilities, which do
not exist in reality, and fraudulent raffles
wherein facilities or services are offered as
prizes to unsuspecting individuals who
eventually end up paying membership fees
but do not get the promised prizes.

d) Commodities Futures Fraud
Generally, in commodities futures fraud
the offenders collect money from thevictims by promising the individual
investors huge profits through commodities
futures transactions they pretend to beengaged in. Commodities futurestransactions, being a business innovation,
has provided new opportunity for
fraudsters to victimize gullible customers.
In Japan, thousands of people who are notwell aware of commodities futures

262e) Membership Fraud
The felons in membership fraud usuallylure the general public into joining a clubor association requiring a membership fee,with the promise of entitlement to theprivilege of using club or association
facilities on a limited basis, or otherwise
obtain some discount on the cost of services.
However, as it will eventually turn out, themembers will not be able to take advantageof the promised privilege or service since
the fraudsters rarely provide such facilities
and services. This type of fraud exists in
India, Japan, Kenya, Korea, thePhilippines and Thailand.

In Thailand, one membership fraud caseis on trial in the criminal court. The
operator, Blissher International Co.,
advertised to the general public that it
operated a time-share business whereby,
through payment of a membership fee, the110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
members would be able to use
accommodation facilities without cost, andthat any member able to bring in newmembers would receive a commission
therefrom. At the end of the day, thecompany received a sum of 826, 266,000
baht from a large number of people who
never got any benefit from the promised
accommodation facilities.
f)

Fraud in Insolvent Stock Sale
In Korea, several nearly bankrupt
companies conspired with certified public
accountants to make it appear on official
documents that the former were in goodfinancial condition. These companies,
therefore, were able to sell their worthlessstocks to the general public who, in the end,
suffered the loss. This scheme involved
fraud in insolvent stock sale. In 1992, themanaging directors of 15 companies andfive certified public accountants wereprosecuted and convicted for such type offraud.
In Bangladesh, one decaying company
offered 135,000 shares in 1994. Out of
those shares, only 31,590 were subscribedby the shareholders and the sponsors ofthat company accepted the rest. Investingnothing, that company again offered
540,000 shares in the money market but
the shareholders subscribed only 79,570
shares in the same year. In 1996, with thehelp of stockbrokers, that company wasable to transact all of their shares without
remittance to the shareholders. The
Security and Exchange Commission (SEC)
initiated a case against that company inApril 1997, which is now under trial.
g) Misrepresentation in Advertisement
False or exaggerated advertising(misrepresentation in advertising) isdefined as an act which defrauds
consumers by means of indicating thecontents of goods and services, price,amount of supplier or competitor against

the real fact. It is difficult for consumers
to file a complaint against the fraudster
because of the low possibility ofcompensation and the vagueness of themisrepresentation. In Korea, false or
exaggerated advertising is increasing. The
fraud patterns of misrepresentation
frequently occurring in Korea are as
follows:(i) Misrepresentation of Price: This typeof fraud is often committed in thecourse of special sale periods. Some
department stores deceived
consumers by attaching a false pricetag to merchandise in order to makethe consumers believe that the stores
were selling the goods at a special
price. For example, the department
stores attached 400,000 won price tag
to the goods which they offered to sell
at a special price of 300,000 won, as
if they really offered a discount of
100,000 won on the original. In 1989,
the sales managers of six department
stores were prosecuted and foundguilty of fraudulent sale throughmisrepresentation of price.
(ii) Misrepresentation of Materials:
Falsely indicating synthetic fabric asnatural fabric, belongs to the categoryof the misrepresentation of materialsof goods.
(iii) Exaggerated Advertisement: This
type is in some sense acceptable incommercial transactions. However,according to the precedentestablished by the Supreme Court of
Korea, false information on concrete
facts related to importantcomponents of goods in transaction,
against good faith, constitutes fraud.
2. Pyramid Frauda) Pyramid Investment Scheme
Under this scheme, the general public
is induced to invest a fixed amount ofmoney with a prospect of high return byrecruiting new members through whom

263

RESOURCE MATERIAL SERIES No. 55that can earn percentage commissions. The
process is repeated as the pyramid expands
its base, as new members are recruited. No
product is involved in this type of fraud.
People invest their money in such a schemewith the prospect of earning enormous
profits because each member is expected
to recruit additional members and earn acommission in the process. The more
additional members one recruits, thegreater the profit a member makes.
However, this fraudulent pyramid
investment scheme is, of course, notsustainable indefinitely because of thelimited number of the population. The
people, particularly the bottom level
investors, eventually suffer a loss whererecruitment of new members has become
impossible. In Japan, the pyramid
investment scheme, itself, is prohibited by
the Law on Prevention of Unlimited Chain
Mutual Association (1978). Prior to thislaw, pyramid investment schemes weredetected in Japan. After the above law wasenacted, such a scheme has rarely occurred.
Recently, however, the so-called Pentagono
pyramid investment scheme, which is oftransnational character, has been detected
in Japan. Pentagono has also made its
presence felt in Bangladesh and thePhilippines where the scheme is not per seillegal, without a showing of fraud. This
scheme originated in Italy where thesupposed principals or masterminds arelocated; circumstances which create
jurisdictional problems for investigatorsand prosecutors.
b) Pyramid (Multi-Level) Sale Schemes
Pyramid (multi level) sale schemes area little bit different from pyramid
investment schemes. The operator makes
such a scheme similar to an ordinary sales
transaction where a commodity or service
is offered and purchased. In most cases,
the product or service is of inferior quality.
Nevertheless, the general public is still
induced to buy the product at a high price264

mainly because the fraudsters provide asort of guarantee that they will make a lotof profit (or commission) if they can recruit
more members or subscribers. In Japan,
the pyramid sale scheme is not, in itself,
illegal and does not correspond to fraud.
However, if the intention to defraud on thepart of the offender is demonstrated, theprosecution will be based on the Penal
Code. Otherwise, the applicable law is the
Door-to-Door Sales Law (of 1976), as
amended, which prohibits concealment ofmaterial facts in a transaction coupled withinducement and receipt of payment ofmembership fees and the price ofcommodities or services. Like the pyramid
investment scheme, the chance of successfor every member is impossible because of
the limited number of the population.
In Japan, about 0.6 million people
suffered a loss of over 126.4 billion yen, and131 offenders were arrested in 1994. In
1995, as a result of continuous efforts tocrack down on this fraudulent practice, thenumber of pyramid sale frauds has been
decreasing and only 4 cases where 27
people were arrested for the violation of the
Door-to-Door Sales Law have beenrecorded.
3. Fraud through Computer Networks/
Telecommunications
Advances in computer andtelecommunication technology brought
forth many advantages, but the same time
spawned disadvantages. From the late1980’s, inexpensive personal computerswere distributed for sale to the public andb e c a m e w i d e l y p o p u l a r. L i k e w i s e ,communication technology developments
enabled personal computers to beconnected to each other through networks.
As a result, average people, as well as
experts, had the opportunity to takeadvantage of computer technology which
afforded easy access to information.

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
As a result of this information
technology development, fraud throughcomputer networks has increased. In
Korea the number of computer fraud cases
increased to 123 in March 1997. The
criminals often disguise themselves as a
famous company by using an Internet
address and defraud the general publicthrough Internet or local Internet service
companies such as “Hitel” and “Naunurii”.
Since computer networks allow the
fraudsters to reach a large number ofunspecified customers, they need lessmoney from each individual customer thanthey do in cases where no computer
network is involved. This in turn makes
the individual victim more reluctant toreport or cooperate with law enforcement
officials, as the loss suffered is small.
In Japan, this type of computer network
fraud is increasing. The fraudsters
advertise on the home page of the Internetthat they sell certain commodities. The
customers make purchase orders of thesecommodities via e-mail. In 1996, 1,200
people were victimized; they suffered a lossof 11 million yen where the offender madefalse advertisements for the sale of audio
equipment on a bulletin board through a
computer network. In another case, one
junior high school student committed fraud
through the computer network. He opened
his home page on the Internet andadvertised that he was selling medicine, a
tranquilizer, but he in fact had no such
medicine. He was able to defraud his
customers to send their payments to his
fictitious account through the Internet.
The student victimized 60 people whosustained a total loss of 1,200,000 yen.
B. Unjust Enrichment throughUnfair Price Fixing ofCommodities (Cartels)
Cartels are agreements among
competitors that may result in the settingof higher prices, less efficient productions,fewer innovations and less benefit to theultimate consumers. Anti-monopoly or
anti-trust legislation seeks to prohibit
cartels, which are agreements among
competitors, such as price fixing or
limitations on production designed toeliminate or restrict competition among
themselves, as these inflict damage on
consumers and the national economy. Antitrust laws exist in Algeria, Brazil, Japan,
Korea, Pakistan, the Philippines, South
Africa and Thailand. In Japan, cartels areclassified by object, such as restriction via
price cartels, volume cartels, market
allocation cartels, and bid riggings.
Likewise, the Japanese Anti-monopoly Act
has special provisions to prohibit
unreasonable restraint of trade formed bytrade associations and cartels between
domestic and foreign firms (international
cartels)1. Monopoly is not by itself illegal,
but “monopolizing” is. In some countries,
administrative bodies play an active partin regulating cartels or monopolies,
through sanctions like cancellation ofbusiness license, suspension, andimposition of fines and surcharges. In
Japan, for instance, the Fair Trade
Commission investigates about 200 cases
per year under the Anti-Monopoly Law. Of
these cases, only one or two are indicted.
In 1997, in a case involving a cartel of 26
companies concerning an order from theTokyo Metropolitan Government for water
service meters, the defendants were
imposing a surcharge, the total amounting
to 385 million yen.
In Korea, collaborative acts like cartels
are subject to the most severe
punishments, among all the different typesof unfair business practices. Even in theabsence of clear agreements amongcorporations, when they engage in acts that
substantially restrain competition, they are
deemed to be engaging in undue
collaborative acts, the most common ofwhich is predetermination of price. In the265

RESOURCE MATERIAL SERIES No. 55
Philippines, it has been reported that theoil cartel of the three big oil companies had
been overpricing products by 14 billion
pesos per year.2
C. Illegal Manipulation of Stock
Prices and Insider Trading
The essence of illegal manipulation ofstock prices is fraudulent conspiracy toaffect either the upward or downward
movements of the price of shares or othersecurities, or commodities sold on theexchange. On the other hand, insider
trading consists of engaging in purchasing
and selling securities by using information
not available to the general public.
Securities fraud undermines the publictrust in the stock market, where theinvesting public is supposed to have an
equal opportunity of profiting fromsecurities transactions. Such erosion ofconfidence in the stock market reduces
capital investment necessary to financebusiness needs and thereby affects the
economic stability of the country. Moreover,the international standing and reputationof such countries will also suffer. There is,therefore, an imperative need to preventor minimize the occurrence of anomaloustransactions in the securities and exchange
market.
In Bangladesh, during the period from
October to November 1996, a handful ofstockbrokers and some international
securities swindlers and their accomplices
filched millions of dollars by fraudulent
manipulation of the share market.
Regarding the scam, the Security andExchange Commission conductedinvestigation into the matter andsubsequently filed several cases against
many securities companies, their directors
and brokers, for the alleged commission of
offenses under the Security and Exchange
Commission Ordinance 1963. Since then,17 cases have been pending in the courts
because of delaying tactics by the266

defendants, and use of political influence.
In Korea, the Security Transaction Law(1962) prohibits the manipulation of stock
prices. In 1977, the Security Supervisory
Board (SSB) was established to perform
comprehensive surveillance of the security
market.
The problem of stock
manipulation had become very serious inrecent years especially with regard to thestock of small but promising companies.
From January to July 1998, theprosecution has indicted more than fivecases of stock manipulation and these cases
are currently on trial in the Criminal
Court. For example, in the Daehan FabricCompany case where the defendants were
found guilty of stock manipulation in the
district court, it was established that thefollowing methods were used to effectmanipulation: (i) increasing the stock priceby purchase order at the highest pricepossible; (ii) placing purchase and saleorders intentionally at the same time toshow that the transactions of Daehan stock
were in a prosperous condition; and (iii)
disseminating false information such as
merger, acquisition and new development
to increase the price of Daehan stock. Other
co-conspirators, the so-called fundmanagers, purchased certain amounts ofthe floating supply of Daehan stock tomaintain the inflated price for aconsiderable period of time during which
the defendants would sell their holdings ofDaehan stock in the market to reap the
benefit of manipulation. The fund manager
in turn received a high commission.
The number of insider trading cases has
been rapidly increasing. In 1997, theSecurity Supervisory Board (SSB) detected
12 cases, 11 of which were settled
administratively. The SSB filed only one
accusation on insider trading with theprosecutor’s office. Currently this case ison trial in the criminal court.

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
In Japan, the securities business isregulated under the Securities Exchange
Law. In 1992, the Securities and Exchange
Surveillance Commission (SESC) wasestablished as an independent agency
charged with supervising the securities
dealings. From 1981 to 1994, there were
five stock manipulation cases, four of which
occurred before the establishment of the
SESC. Because of effective administrative
supervision after the establishment of the
SESC, only the case of “Nihon Unisys
Stock” was prosecuted. In this case, twooffenders were found guilty of stock
manipulation. One of them was sentenced
to two and a half years imprisonment withlabor (with suspension for 4 years) and theother was sentenced to 2 years
imprisonment with labor (with suspension
for 3 years).

Public Co. Ltd., Rattana Real Estate Public
Co. Ltd, and Siam City Bank. The culpritsin these cases manipulated the stock pricesof these companies by the so-called “Pool
Operation” scheme whereby they colluded
with others to conceal their collective
purchase or sale of the stock. For instance,from January to October, 1992 (before
manipulation), the total volume of tradingwas 1.7 million shares a day. In October ofthe same year, during which the defendants
manipulated the market for BBC stock
through their concerted purchases, thetotal volume of trading was 14.15 million
shares a day and the price was 40.75 bahton October 29, 1992.

Six cases of insider trading were
investigated from 1994 to 1998. Five cases
were prosecuted and one was to beprosecuted later. In fact, the offenders inthese cases were found guilty: one offender
was penalized with 6 month imprisonment
with labor (with suspension for 3 years) and38 others (including juridical persons) werefined. However, the defendants in two of
the five prosecuted cases have appealed thejudgment of the District Court.

The investigation revealed the existenceof several connections among defendants
such as “personal connection”, “financial
connection”, and other connections like theuse of same mailing address in securities
trading, some trading accounts opened by
the suggestions of others in the group, andtrading orders effected by others in thegroup. Convinced that defendants
collectively manipulated the stock of the
Bangkok Bank of Commerce, the Office ofAttorney General thus instituted criminal
prosecution. However, the court dismissed
the case for insufficiency of proof ofcomplicity among the defendants.

In Thailand, securities trading isregulated under the Securities Exchange
Act (1992). Since 1992, there have been
seven stock manipulation cases. Two ofthem were administratively settled and afine totaling one million baht was imposed.
Apart from these two relatively small-scale
manipulation cases, the other five werelarge in terms of the number of offenders,the amount of money used to manipulate
the stock price, and the number ofadversely affected investors. Each of thesecases involved the stock of the Bangkok
Bank of Commerce, Krisada Mahanakorn
Public Co. Ltd., First City Investment

Relying on the BBC decision, the Officeof the Attorney General subsequently
ordered no prosecution in the cases of First
City Investment and Rattana Real Estate.
However, criminal prosecutions have been
filed with regard to the case of Krisada
Makanakorn and Siam City Bank, andthese cases are presently on trial in thecriminal court. The SEC had so far
successfully dealt with insider trading
problems. Seven cases were investigatedand later settled in administrative
proceedings where the offenders paid a fineto the Commission. In these cases, theCommission imposed a fine totaling

267

RESOURCE MATERIAL SERIES No. 55
66,436,584.56 baht. No case has ever been
criminally investigated, prosecuted ortried.
IV. PROBLEMS RELATING TO
CRIMES UNDER STUDY
After deliberating on the actual situationof the crimes in the countries of all theTraining Course participants, the Group
Workshop members agreed to identify anddiscuss the problems that confronted thesecountries. First, the group focused thediscussion on the common problems in theinvestigation, prosecution, and trial stages.
Thereafter, the group deliberated on the
problems commonly found at every stageof the criminal proceedings.
A. Common Problems
1. Investigationa) Reluctance of the Victims to Report,
Resulting in Difficulty in Detection and
Delay of Investigation
With regard particularly to fraud cases,
the victims are generally reluctant tocooperate with the law enforcement
agencies. This problem arises on accountof disadvantages that the victims face inthe prosecution of these frauds. In mostcases, the victims are numerous and, while
the total amount of the damage may belarge, the individual damage is small. The
time, effort and expense (official andincidental) involved in filing suit andpursuing the case in court far exceeds thedamage suffered by individual victims.
Therefore, there is very little incentive forthe victims to report, or participate in, theinvestigation of fraud. This lack of interest
and/or cooperation of the victims results indifficulty in detection and delay ofinvestigation.
In the case of cartels, illegal stock
manipulation and insider trading, thevictim’s report of the crime is helpful in thedetection and investigation stages, but is268

dispensable in the prosecution thereof. In
some countries like Bangladesh, Japan,
Korea, the Philippines and Thailand, theadministrative agencies supervising suchbusiness activities, like the Fair Trade
Commission and Securities Exchange
Commission, play a far greater role in theprevention, detection and investigation ofthese crimes.
b) Difficulty in Identification of the
Offence/ Offender (Mastermind)
There exists the general problem ofidentifying the offence and/or the offender,
especially the mastermind, due to thecomplex and sophisticated nature of theeconomic crimes under study. Unless the
specific statute makes the scheme itself
illegal, such as pyramid investment
schemes in Japan, it is not easy to identify
whether the intent to defraud, necessary
for an offense of fraud, exists. Many fraudcases appear to be merely civil in nature.
Nevertheless, the fraudulent scheme inmany cases is a combination of various
kinds of fraudulent techniques, thereby
making it difficult for law enforcers todetect whether a crime has beencommitted. In a pyramid scheme, the fraud
is usually discovered only at the bottom of
the pyramid where the immediate
contracting parties are involved, as in thecase of a buyer and seller. The realmastermind is too far up the ladder or
pyramid to be identified. The difficulty ismore marked where the transaction is
initiated and consummated not on a face
to face basis, but merely through anelectronic medium such as a computer
network or telecommunication system.
As for cartels, it is clearly difficult toestablish that the offenders have agreed to
fix the price of commodities. Even if theconsumers have filed the complaint, thelaw enforcers still have to determine
whether an agreement to such effect exists.
Likewise, the case of stock manipulation,

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
where generally several people are
involved, presents similar difficulty. In
these cases, it is not exaggerated to say that
direct evidence of agreement is next to
impossible to obtain. Circumstantial
evidence, therefore, has to be carefully
analyzed. This analysis of circumstantial
evidence in most cases is very difficult andthere is a high possibility of disagreement
among law enforcement agencies.
c) Difficulty in Evidence Collection
Evidence collection poses a problem toinvestigating authorities as regards crimes
against consumers and investors.
Considering the nature and complexitiesof the crimes under consideration, theinvestigating officers, who are usually notfamiliar with and not specially trained for
economic crimes, face great difficulty incollecting evidence to be used in theprosecution of the offender. In fraud cases,
especially where a syndicate is involved,
the lack of cooperation of the victims andwitnesses (because of threat of reprisal)
makes it even more difficult forinvestigators to gather evidence. In caseof stock manipulation and insider trading,there may be a need for monitoring and/or
surveillance for several days or weeks,
aside from the great probability that
evidence may be in possession of third
persons, such as bankers or stockbrokers,
who may not be willing to cooperate withlaw enforcement officials in gathering orproviding all available evidence.
d) Statute of Limitations
The existence of statutes of limitations
in many jurisdictions is also a common
problem encountered in the investigation
stage. Crimes against consumers andinvestors are generally complicated due tothe fraudulent schemes employed by the
felons, and usually involve large numbersof victims. Given these facts, it is to be
expected that investigation would takemore time and effort. Because of theresulting delay in the detection of the crimeand in collecting evidence, as well as thereluctance or lack of interest andcooperation of victims and witnesses, theinvestigation of criminal complaints dragon for many years without reaching
resolution. Thus, the periods prescribedunder the Statute of Limitations may
expire even before the termination of theinvestigation stage. Both the time spentand efforts made by the investigating
authorities may go to waste.
2. Prosecution and Triala) Ineffective Coordination among theAdministrative, Investigating andProsecuting Agencies
The group agreed that successfulprosecution of large-scale fraudulent
schemes, cartels, and securities fraudrequires effective coordinated effort among
the administrative, investigating andprosecuting agencies, particularly in theinvestigation stage, because of the complex
and subtle nature, and modus operandi ofsuch illegal activities. Poor coordinationin the investigation stage frequently
jeopardizes the collection of evidence thatis of utmost importance in the cases. This
problem may be more severe in countries
where there is a complete separation
between investigation and prosecution
stages. Unless effective cooperation, suchas sharing of information and technicalknow-how among administrative,
investigating and prosecuting agencies inthe early stage of investigation, is strictly
observed, the prosecuting agencies in thesecountries hardly know about the case until
receiving the investigation report. Such alack of effective cooperation in theinvestigation process will adversely affectthe prosecution.
b) Failure of Witnesses to Testify or
Change of Testimonies
At the trial stage, the witnesses mayeither fail to testify or change their269

RESOURCE MATERIAL SERIES No. 55
testimonies. This negative attitude creates
serious problems since the successfulprosecution of the offender in a criminalcase depends principally upon thetestimony of the victims and other
witnesses. It is not uncommon that variouspressures and influences are made oncomplainants and/or witnesses todiscourage them from giving testimonies
in court. If the victims and/or the witnesses
fail to testify or change their testimony, thecase of the prosecution naturally crumbles
or fails.
c) Excessive Use of Delaying Tactics by the
DefenseThe defendants in the types of crimes
under study generally employs excessively
dilatory tactics, for they know that it is totheir great advantage if they can buy moretime in the investigation, prosecution andtrial of the cases against them. If the caseis delayed, the victim and witnesses usuallylose interest due to the increased time,effort and money expended. Where thecomplainant and the witnesses do notcooperate, the inevitable outcome is thedismissal of the case. Time is of utmost
importance since justice delayed is justicedenied.
d) Difficulty in Proving Guilt beyond
Reasonable Doubt
The perpetrators of the economic crimes
under scrutiny, being more intelligent and/or technically skilled, are able to cover theirillicit tracks through elaborate and complex
schemes. This makes it even more difficult
for law enforcement and prosecution
agencies, already burdened with therequired proof beyond reasonable doubt incriminal cases. This high standard ofevidence imposed on law enforcers andprosecutors works to the great advantageof the criminal offenders; who are alreadyseveral steps ahead of their adversaries inskill and techniques in the commission of
their nefarious activities. In general, it is270

difficult to prove the intent to defraud as,
in most large-scale fraud cases, theoffenders have the tendency to makeexcuses arguing that their business could
not otherwise be profitable to investors andthat the failure of their business resultsfrom normal business risks. Likewise, thestructure of the fraudulent scheme, likepyramid investments, makes it hard forlaw enforcers to determine the intent to
defraud on the part of the lower recruits.
The burden of proof being in the hands ofthe prosecutors, they are duty-bound toprove otherwise.
With regard to cartels, illegal stock
manipulation, and insider trading, such adifficulty stems from the clandestinenature of the offences. No one but theoffenders themselves know what is goingon in the cases. Both direct andcircumstantial witnesses are rare in suchcases. The prosecution thus has to rely
much on documentary evidence such as
daily securities trading, financial
statements, bank accounts and expert
opinions. Such documentary evidence byitself, without further analysis, does notshow the illegal nature of the transactions,thus making it even more difficult for theprosecution to prove the case.
4. Sentencinga) Too Lenient Punishment
Some of the participants observed thatthe imprisonment provided by law is toolenient. It is usually within the range ofsentence suspension as, for example, thetwo-year imprisonment for stock
manipulation and insider trading in
Thailand. Similarly, a maximum of three
years for both cartel and insider trading inJapan is also within the range of sentencesuspension. Furthermore in some cases,
the criminals receive only a suspended
sentence. For instance in Japan, six insider
trading cases from 1994 to 1998 wereprosecuted and one offender drew only 6

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
months imprisonment with labor (withsuspension for three years) and 38 others
were only fined. In one stock manipulationcase, two offenders were prosecuted andconvicted; one of them was sentenced to two
and a half years imprisonment with labor(with suspension for 4 years) while theother was sentenced to two years
imprisonment with labor (with suspension
for 3 years). In terms of fine, the maximum
amount is fixed without regard to the loss
suffered by the public and the benefit theoffender derives.
Under thesecircumstances, the offender will be
motivated to take the risk in thecommission of the offense, if the expected
benefit is greater than the expected loss.
B. Problems Commonly Found in
Every Stage of Criminal
Proceeding
1. Shortage of Competent Personnel
The economic crimes involved in thisstudy are just a few of the many crimes
being dealt with by the entire criminal
justice system. More controversial andserious cases get more attention andresources than economic crimes against
investors and consumers. There are notenough personnel to tackle the fast growing
crimes under study. The large number ofvictims and witnesses involved, as well as
the complex nature of the crimes, requires
a great deal of manpower to deal with thecrimes in terms of monitoring, surveillance
or investigation, prosecution, and trial.
Therefore, adequate manpower needed forthe successful investigation, prosecution
and trial of the offenders should be
provided, maintained and augmented toaddress the problem of the fast growing
crimes of fraud monopolies and securities
trading.
2. Lack of Expertise Among Criminal
Justice Officials
Economic crimes have become moreelaborate and complex with advances inscience and technology. The criminal
justice officials’ capability to deal with thesetypes of crime against consumers andinvestors has lagged behind those of thecriminal offenders, who are more skilled
and knowledgeable in their nefarious
trade. Fraudulent schemes, cartels andstock manipulations have grown moreelaborate, complex and sophisticated.
Therefore, there is an urgent need to train
and equip criminal justice officials with therequisite expertise to effectively combat
these new types of crime.
3. Political Influence
Because of the high status and wellplaced political connections of the economic
crime offenders under study, politicalinfluence makes significant impact on theinvestigation, prosecution and evensentencing of those criminals. Felons who
have high learning/skills or influential
status in society usually commit crimes
against consumers and investors. In many
developing countries, politicians interferewith the investigation, prosecution andeven judicial stages of a the proceedings incases involving cartels, stock manipulationand fraudulent schemes of a transnational
character, wherein connections exist
between politicians and the offenders.
Fraudsters usually come from the ranks ofpeople who are close to high government
officials; big business cartels are in manycases benefactors of high-ranking
politicians who rely on them for financial
contributions during election campaigns;
while crimes involving fraud or securities
manipulation are committed by influential
corporations or stockbrokers who derive
protection from powerful politicians in
exchange for bribes. In third world
countries, politicians usually wield so much
power and influence that subordinate
bureaucrats, like law enforcers,
prosecutors and even judges, who dependon political patronage for their careeradvancement or destruction, in several

271

RESOURCE MATERIAL SERIES No. 55
cases yield to their mischievous wishes.
Because of this situation, the offenders
often escape punishment and continue withthe commission of these types of offences.
V. COUNTERMEASURES
The modern and sophisticated methods
and means with which economic crimes
against consumers and investors are beingcommitted has outpaced the pillars of thecriminal justice system, which have been
lagging behind in terms of competence,
manpower, logistics and skill, and technicalknowledge. Therefore, it is the obligationof every country in the international
community to find appropriate ways andmeans to respond to the challenge of
combating the emergence of these new
economic scourges. The group, after
exhaustive deliberations, reached aconsensus that the following
countermeasures must be adopted,
installed and enforced to appropriately
address the corresponding issues orproblems arising from the actual situationin the participating countries.
A. Educating Consumers andInvestors
In many instances, the general public
becomes the victim of fraudulent schemes,
including illegal stock manipulation andinsider trading, because of ignorance of theexistence and modus operandi of thesetypes of crimes. Promoting publicawareness is therefore geared toward thegoal of prevention. To achieve this end, aneffective channel of communication
between law enforcement agencies and thegeneral public must be established. For
example, in Japan, there is a program
called “Dial 110 for Fraudulent Commercial
Practices” which entertains complaints andprovides counseling to consumers throughtelephone calls. Mass media should also
play an active role in exposing the nature,operation and the impact of these crimes.
However, mass media must not directly or272

indirectly induce the general public to haveinterest in such fraudulent schemes. Facedwith this dilemma, ethical standards orregulations of association must be
established, emphasized, and strictly
observed. These countermeasures seeks toprevent the general public from being
defrauded and to encourage victims toreport cases to law enforcement agencies.
B. Enactment of Adequate Laws
The advent of modern technology has
created new benefits, but at the same time
has ushered in corresponding problems
that must be addressed accordingly.
Economic crimes are being committed withmore sophistication and complexity. The
law however, has not been updated in many
countries to keep up with the criminal
mind, which has always been a step aheadof the law and law enforcers. The group
recognized the need for adequate laws thatwould address the issues brought about by
the new methods or schemes employed byfraudsters that victimize a large numberof consumers and investors. For example,
laws may be enacted to criminalize certain
fraudulent schemes under specified
conditions, to provide for extraterritorial
jurisdiction and to provide for increased
penalties sufficient to deter or discourage
the commission of the crimes.
Furthermore, the conspiracy offense(where criminal liability can be imposed
upon only an agreement to commit, not theactual commission of, the crime) should beavailable in order to immobilize thecriminals quickly, thereby effectively
preventing the general public from being
defrauded, injured or victimized. Theselaws may also provide for modification of
the law on evidence, allowing the shiftingof certain burdens of proof to the accused.
Finally, to encourage the victims to testify
in court, they should be entitled toincreased allowances to cover official andincidental expenses for their appearance
in court proceedings.

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
1. Criminalizing New Offenses/Crafting
Long-Arm Statutes
New technology always opens up newopportunities for criminals to victimize
consumers and investors. Where certain
frauds are exposed, the offenders think andemploy new ways or schemes to swindle
unsuspecting victims. Therefore, there isnecessity for enactment of new laws thatwould criminalize such fraudulent schemesor activities of certain businessestablishments. For instance, in thePhilippines, infringement of intellectual
property rights are now punishable withimprisonment and/or fine under certain
conditions. The pyramid schemes like thePentagono, which is per se not criminal, hasbeen criminalized in Japan. Moreover, socalled “long-arm statutes” like theComputer Misuse Act of Singapore, thatwould have extraterritorial reach, may beenacted to compliment bilateral or
multilateral agreements to effectively deal
with the growing transnational nature ofthese crimes.
2. Upgrading of Criminal Penalties
The gravity of the damage inflicted byeconomic crimes requires a corresponding
increase in the penalties in order to deteror minimize the commission of suchoffenses. In many countries, at present thelaws do not adequately address the
problem of appropriate punishment to be
imposed. The laws are outmoded andimpose penalties not commensurate to theseriousness of the offense. It is therefore
timely and proper to update these laws by
increasing the penalties imposed for
economic crime, which includes thoseunder study.
3. Increased Use of Measures to Deprive
Ill-gotten Benefits
Since the common motive of theeconomic crime under study is to gain
profit, one of the effective countermeasures
is to maximize the way in which such profit

deprivation can be effected. Private civil
enforcement is one such process. Its
purpose is to recover compensation fordamage done, whether by way of therestitution of the property deprived ofthrough illegal acts, or the value thereof.
However, if the damage done to a particular
plaintiff is less than the benefit derived
from the illegal act, private civil
enforcement does not rid the offender of all
such benefit. To forfeit such benefit fromthe offender, it is necessary that the classaction concept, under which a particular
plaintiff stands for all injured by the same
illegal act, must be recognized. Where thelaw requires the public prosecutor in acriminal suit to ask for restitution orcompensation for the victim, such a civil
enforcement will provide incentive to thevictim to cooperate more with law
enforcement as s/he is entitled to such
restitution or compensation. A view was
expressed that civil asset forfeiture isanother effective method to deprive illgotten benefit. Civil asset forfeiture isdifferent from its criminal counterpart inthat it is an “in rem” instead of “inpersonam” proceeding. This means that
asset forfeiture can be effected on the
preponderance basis of evidence, andwithout regard to the conviction of theoffender. It was opined that this system of
forfeiture, would allow law enforcement toproceed against white-collar criminals
more efficiently.
C. Augmentation and Training of
Criminal Justice Officials
Except in highly developed countries,
economic crimes do not get the sameattention and resources as being focusedon crimes against persons. In mostcountries this is due to the lack ofawareness about the serious impact of suchoffences on society. The group members
agreed that the time is ripe to give serious
thought and attention to addressing theneed for more resources and adequate

273

RESOURCE MATERIAL SERIES No. 55
training in accounting, auditing, andcomputer techniques for criminal justiceofficials involved in the investigation,prosecution and trial of perpetrators ofcrimes against consumers and investors.
Specialized training of all criminal justiceofficials involved in consumer andinvestors’ crimes would address the
problems of difficulty in identification of theoffence/offender, evidence collection,shortage of competent personnel, and lackof expertise.
D. Effective Coordination among
the Administrative, Investigating
and Prosecuting Agencies
As collaborative investigation among theadministrative, investigating andprosecuting agencies is required tosuccessfully prosecute large-scalefraudulent schemes, cartels and securities
fraud; it is necessary that a system tofacilitate such cooperation be established.
Such collaboration will guarantee that theexpertise of all law enforcement agencies
will be optimally utilized in theinvestigation, that promising avenues ofinvestigation are not overlooked, thatstrategies for prosecution are fully
exploited and that legal pitfalls are
avoided.3
E. Creation of Specialized
Investigating Body
The successful prosecution of economic
crime depends largely on the investigation
stage of the proceedings. Politicalinterference in this early stage ofinvestigation, during which evidence
gathering is conducted, plays a crucial rolein the outcome of the case. Some of theparticipants expressed the view that a
specialized independent investigating bodymust be set up to deal with the politicalinterference problem in economic crimes,
including those involving consumers andinvestors. This specialized investigating
body must be truly independent, meaning

274

free from the clutches of politicians or othertypes of influence or pressure. The
investigators must have fixed and secure
tenure in accordance with the laws ofindividual countries.
F. Use of Special Investigative
Techniques
Recognizing the growing sophisticationof the schemes and technology employed
by individuals or crime syndicates in thecommission of the economic crimes understudy, the group fully agreed that law
enforcement and investigating agencies
must have the minimum capability andskills to “outfox the foxes”, so to speak.
Regular and sustained training must be
implemented to attain personnel
preparedness, proficiency and efficiency inthe fight against these crimes. Special
investigative techniques may be employed
to solve the problem of beating theprescriptive periods under the statutes oflimitation. For example, law enforcement
should be authorized to use wire-tappingand electronic eavesdropping as a means
to detect and investigate economic crimes,
and the evidence discovered therefrom
should also be made admissible in court.
However, because of its intrusive nature,such practices in some countries are inviolation of the privacy rights of theindividual. With that in mind, the groupagreed that such electronic surveillanceshould be available only with judicial
approval and in limited circumstanceswhere the economic crime under study iscommitted by an organization. Moreover,undercover operations, traditionally used
to infiltrate traditional organized crimegroups, is now being used to fight economic
fraudsters who operate under the veil ofsecrecy. For instance, in securities
agencies, brokers are sometimes bribed byother competing companies, especially ininitial public offerings, to engage in insider
trading or stock manipulation activities.
Undercover operations have a deterrent

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
effect by keeping the criminal elements offbalance, since they can never be sure thatthe apparent collaborator may not actually
be an undercover agent who may expose
their criminal operations. 4 These
innovative techniques, together with theoffence of conspiracy, and immunity fromprosecution given to a co-conspirator
hereinafter suggested, will be a powerfularsenal for law enforcement agencies in thefight against organizational economic
crime.
These countermeasures are designed tosolve the issues regarding difficulties in
identification of offence/offender(mastermind), evidence gathering, andrestrictions of the statute of limitations,and also to detect the scope and modus
operandi of the crimes.
G. Setting-up of Witness Protection
Programs
A case is only as good as the evidence
presented before the court. The successfulprosecution of a crime depends largely on
the availability of a credible witness. It isthe natural tendency of a witness to be
reluctant, or in extreme cases to refuse, totestify in a case where their life or safety
would be placed in danger. Fear of reprisal,inconvenience and expense are among thefactors that prevent or discourage apossible witness. Such a tendency is very
likely in a case where an organization,
syndicate or a high ranking public official
is involved in the commission of an offence.
It is not uncommon that such a criminal
syndicate is behind many large-scalefraudulent schemes, cartels and securities
frauds. In some cases of cartels andsecurities fraud, the only probable witness
is themself a participant or a co-conspirator
in the crime. The covert nature of thesecrimes, together with the involvement of acriminal syndicate, makes it imperative tosecure the availability of witnesses during

investigation and trial of the case. It isthus necessary to set up a witness
protection program, the mechanics of which
would be dependent on the system that
may be adopted by each particular country,
consistent with its laws. This program
basically gives assurance of safety andsecurity to the witness and/or their family
through police protection, housing andfinancial assistance, in order to encouragethem to come forward and testify against
the principal offender or mastermind (sothat the latter may finally be accordingly
penalized for the offence). Many countries
have adopted this program and manyothers, who have felt and recognized theseriousness of these types of economic
crimes in their jurisdictions, are poised tomake the same move. Bangladesh, Gambia
and the Philippines have witness
protection programs.
H. Grant Indispensable Witnesses
Immunity from Prosecution
Some countries have adopted a system
whereby key witnesses, mostly coparticipants or co-conspirators or
accomplices, are offered and granted
immunity from prosecution so as to be able
to strengthen the evidence against, andsuccessfully prosecute, the principal
offenders or masterminds. In somecountries like Bangladesh, Gambia, and
the Philippines, such immunity of material
witnesses from prosecution is included in
the Witness Protection Program, as anecessary benefit for the co-conspirator
who turned state witness against themastermind or principal offender, to secure
the full cooperation of the witness.
I. Admission of Hearsay Evidence
In most participating countries, as a
general rule, a statement of an eyewitness
made before investigating officials pointing
to the culpability/guilt of the accused is notadmissible unless testified to by such awitness in open court. However, some of275

RESOURCE MATERIAL SERIES No. 55
the participants expressed the view thatsuch a written statement should be madeadmissible under certain circumstances
when proper foundation exists, even if sucha witness reneges on the previous
statement and does not appear in court.
Nevertheless, the court should be carefulin giving weight to such a written
statement.
J. Creation/Designation of aSpecialized Court
To complement the establishing ofspecialized investigating bodies,
specialized courts should be established/designated with specific powers to deal
exclusively with economic crimes against
consumers and investors. In thePhilippines and Thailand, some trial courts
have been established as specialized courts
to try and decide economic crimes,
particularly intellectual property crimes,
exclusively. This will promote and enhancethe expertise of the judges and court
personnel handling this type of crime. Thissystem will likewise expedite thedisposition of cases. In some countries thecreation of special courts is not allowed, butsome court divisions or branches have been
designated to handle only specific types ofserious economic crimes against consumers
and investors.
K. Shifting the Burden of Proof
In order to ease the burden ofprosecutors in proving intent to defraudand conspiracy in complex andsophisticated large-scale fraud, cartels andsecurities fraud, the group members fully
agreed that the system of shifting theburden of proof upon the accused shouldbe implemented. India, the Philippines
and Thailand have adopted shifting theburden of proof of certain elements of thecrime to the accused in some cases, like
corruption, embezzlement, cheating andfraud. For example in Thailand, section 5of the Emergency Decree on Loans

276

Amounting to Public Cheating and Fraud
shifts to the defendant the burden ofproving that s/he has no intention to
defraud, after the prosecution has
demonstrated the existence of certain facts
constituting the elements of the crime. It
provides in brief that “Whoever, inborrowing, propagates or publishes to thegeneral public or circulates news by
whatever means and pays or promises to
pay to the lender a benefit at a rate higher
than that payable by financial institutions
under the law, shall be guilty of the offenceof loan amounting to public cheating andfraud unless he can prove that his businesswill yield sufficient profits to make such apayment”.
To a c h i e v e t h i s e n d , c e r t a i n
modifications in the procedural laws ofsome countries may be undertaken in orderto keep pace with the technical skill andingenuity of the criminal offenders incovering their tracks or hiding
incriminatory evidence.
L. Private Prosecution
Some participants expressed the viewthat countermeasures against economic
crime offenders should not be limited to
public criminal prosecution, but may
likewise include private prosecution
through which alternative relief is given
to the victims. Moreover, this kind of
remedy supplements public prosecution
and thus creates a greater deterrent effectupon the offenders. Under this system, avictim, who may have been dissatisfied
with a non-prosecution order, may bring acriminal suit against the offender/s. Thissystem exists in Thailand and in
Commonwealth countries. In othercountries like Japan and the Philippines,
such private prosecution is not sanctionedby law; in these countries, a dissatisfied
victim has the opportunity of review by theProsecution Review Commission in thecase of Japan, or by the Secretary of the

110TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE
Department of Justice in the case of thePhilippines.
M. International Cooperation and
Coordination
The fight against economic crimes,
including those against consumers andinvestors, cannot be confined to individual
countries. Considering the transnationaland sophisticated nature of some of thesecrimes, every nation in the international
community should play an active part inpreventing, minimizing or controlling the
problems spawned by such crimes. For
instance, in large-scale fraud cases like thepyramid investment scheme and advancefee fraud, there must be effective
international cooperation and coordinationin order to combat these crimes
successfully. The Pentagono pyramid
investment scheme, which has its origin in
Italy, is a case in point. In this scheme,
the mastermind or principal, who occupies
the top of the pyramid, is apparently in
Italy and hence beyond the reach of otherjurisdictions. Therefore countries which
experience transnational fraud of this typeshould forge bilateral agreements andother forms of mutual cooperation andcoordination to control this illicit activity,and bring the principal offenders to justice.
VI. CONCLUSION
To successfully combat formidable
economic crimes, projected to reach serious
proportions in the near future as
information technology progresses, every
country, whether developed or developing,must as a first measure of defense,strengthen all the pillars of its criminal
justice system. This will ensure thatn e c e s s a r y, a d e q u a t e a n d e f f i c i e n t
manpower and mechanisms are in place todetect, investigate, prosecute, try andpenalize ingenious offenders or syndicates.
Aside from the requisite expertise, fullcooperation and close coordination among
all the pillars of the criminal justice system

is imperative to prevent, minimize, or
control the commission of economic crimes
against consumers and investors. As amatter of policy, every government mustsee to it that its law enforcement andjudicial system are a step ahead of thecriminal mind, and not the other way
around.
The transnational and complex natureof some economic crimes against consumers
a n d i n v e s t o r s , h o w e v e r, r e q u i r e sinternational cooperative action toeffectively prevent, minimize, or control thecommission of offences. One nation cannot
be a successful crusader against economic
crime offenders while others seek or allow
themselves to harbor the criminals who
spread this serious, global, economic
menace. It is the responsibility of every
country in the community of nations to playa crucial role in the global cooperative andcoordinated effort to adopt and enforce
countermeasures to effectively deal withthese economic crimes.
END NOTES
1. Antimonopoly Act Guidebook, Fair
Trade Commission, Lecture by Mamoru
Izumisawa, Director, Management andPlanning Division, Investigation
Bureau, Oct. 7, 1998.
2. Philippine Daily Inquirer, August 3,
1998, p. 9.
3. Economic Crime and The Global
Economy, Understanding The Threat
and Identifying Effective Enforcement
Strategies and Countermeasures, Paper
presented at UNAFEI by Mr. John D.
Arterberry, Deputy Chief, Fraud
Section, Criminal Division, UnitedStates Department of Justice, on
November 2, 1998, p. 11.
4. Ibid
5. USD $ 1= 116.35 yen; 37.8 pesos; 36.02
baht; 1,057.62 won; as of November 4,
1998.

277