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1.TransnationalOrganizedCrime.ppt
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Extortion, Racketeering, money laundering






Transnational Organized Crime

Defining Organized Crime

  • No generally accepted definition has emerged
  • Donald Cressey (was used by FBI)
  • An organized crime is any crime committed by a person occupying, in an established division of labor, a position designed for the commission of crimes providing that such division of labor includes at least one position for a corrupter, one position for a corruptee, and one position for an enforcer

Definitions Cont.

  • U.S. Department of Justice
  • All illegal activities engaged in by members of criminal syndicates operative throughout the United States and all illegal activities engaged in by known associates and confederates of such members
  • FBI current
  • OC = any group having some manner of a formalized structure and whose primary objective is to obtain money through illegal activities. Such groups maintain their position through the use of actual or threatened violence , corrupt public officials, graft or extortion, and generally have a significant impact on the people in their locales, region, or the country as a whole.

FBI Transnational OC

  • Which Transnational OC threats are discussed?
  • Which major thefts by TOC groups pose a significant threat to the US economy?

Attributes of Organized Crime

  • Has no political goals
  • Is hierarchical
  • Has a limited or exclusive membership
  • Constitutes a unique subculture
  • Perpetuates itself
  • Exhibits a willingness to use illegal violence
  • Is monopolistic
  • Is governed by explicit rules and regulations

Transnational organized crime is big business.

In 2009 it was estimated to generate $870 billion - an amount equal to 1.5 per cent of global GDP.

That is more than six times the amount of official development assistance for that year, and the equivalent of close to 7 per cent of the world's exports of merchandise.

The problem is so great that in 2000 the United Nations General Assembly passed the United Nations Convention against Transnational Organised Crime and its Protocols

The Business of Organized Crime

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Biggest organized crime groups in the world (Fortune magazine, 2014)

  • Yamaguchi Gumi – Revenue $80 billion (est.) “Yakuza”
  • Solntsevskaya Bratva – Revenue $ 8.5 billion (est.) “Russian Mafia”
  • Camorra – Revenue $4.9 billion (est.) “Italian Mafia”
  • N’Drangheta – Revenue $4.5 billion (est.) “Italian Mafia”
  • Sinaloa Cartel – Revenue $3 billion (est.) “Mexican DTO”

La Cosa Nostra

  • Has roots in mid 19C Sicily and started when Italy became a sovereign state
  • For centuries, Sicily, an island in the Mediterranean Sea between North Africa and the Italian mainland, was ruled by a long line of foreign invaders, including the Phoenicians, Romans, Arabs, French and Spanish.
  • These groups, which later became known as clans or families, developed their own system for justice and retribution, carrying out their actions in secret.
  • By the 19th century, small private armies known as “mafie” took advantage of the frequently violent, chaotic conditions in Sicily and extorted protection money from landowners. From this history, the Sicilian Mafia emerged as a collection of criminal clans or families.
  • Later during the Fascist period the mafia fell out of favor with the local government
  • Under fear of jail many of its members fled to the USA, developing several major families that ran OC in the US

Hierarchical Structure of a Typical Organized Crime Family

Adapted from US President's Commission on Organized Crime, 1986, p. 469.

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Figure 16.1 Hierarchical Structure of a Typical Organized Crime Family

BOSS

Underboss

Counselor

Lieutenant

lieutenant

lieutenant

Lieutenant

Soldiers

Soldiers

Soldiers

Soldiers

Associates

La Cosa Nostra

LCN Activities

  • Drug trafficking, murder, assault, gambling, extortion, human trafficking, loan-sharking, labour racketeering, money laundering, arson, petrol bootlegging, infiltration of legitimate businesses, stock market manipulation and various other frauds

Labor Racketeering

  • Labor corruption is the misuse of union office and authority for unlawful personal gain.
  • Labor racketeering is labor corruption committed by, or in alliance with organized crime groups. The types of crimes include:

extortion of employers by threatening unlawful strikes,

work stoppages and workplace sabotage;

soliciting and receiving bribes from employers in exchange for allowing the employer to ignore the terms of the collective bargaining agreement.

  • Labor racketeering has been a crime problem and a social problem since the beginning of the 20th century. There was no concerted political or law enforcement commitment to attacking the problem until the late 1970's and well into the 1980's.
  • It could also be approached from the standpoint of the criminal offenses that it spawns: extortion, embezzlement, fraud, violence, hijacking, restraint of trade, and denial of intangible rights of union members.

Gambling

  • Always a mainstay of LCN
  • Played a major part in creating and promoting Las Vegas
  • Partly through the financing from such as the Teamster’s funds (unions)
  • With the introduction of strict state laws Las Vegas is now considered to be relatively free from LCN influence
  • Now also involved in online gambling

Loan Sharking

  • Money lent at sky high rates
  • Interest called the “vig” added each week at the rate of 3 to 5 percent
  • For example a loan of $10,000 would need interest to be paid each week of $400
  • Equivalent to 300% per annum
  • No partial payment of principal is accepted

Money Laundering

  • Involves practices that hide the connection between the sources of funds and their legitimate use
  • For organised crime it means disguising the source of illegally gained money and making appear to have come from legitimate sources.
  • The laundering process “washes” dirty money to make it appear clean

Three Step Money Laundering Process

  • Placement phase
  • The money launderer introduces illegally obtained profits into the financial system
  • The main objective here is to get the money into the system in a way that cannot be traced to an illegal source

Layering phase

The money launderer uses complicated sets of transactions to move the money around the financial system and further distance it from its original illegal source

The main objective is to destroy any audit trail that could trace the original placement

Integration phase

The launderer moves the money a final time into accounts under his legal control to make it appear they arrived from a legal source

Three Step Money Laundering Process

  • Placement methods:
  • Smurfing – multitude of small deposits in different bank accounts. Below the limit for reporting purposes

  • Cash smuggling – aim to relocate cash across international borders where it is less regulated
  • Negotiable instruments – purchased, bundled and sold to a money laundering specialist

  • Cash exchange for negotiable goods – eg buying diamonds which are more easily stored and moved across borders

Three Step Money Laundering Process

  • Layering methods – the object to destroy the audit trail

Informal Value Transfer System – money transfer systems that operate outside the normal financial system. Some systems date back thousands of years. Used for legitimate and illegitimate purposes. Based on codes and very simple to arrange

Tax havens and offshore banks – Includes countries whose controls are good but whose banking officials are easily corrupted.

The more countries the money is moved through the more difficult it becomes to trace. Cayman Islands is the 5th largest financial centre in the world but is only a tiny group of small islands

Three Step Money Laundering Process

  • Integration methods - In this final stage the money launderer puts the money to personal use
  • Off-shore credit cards – used to withdraw money from a bank account and pay bills

  • Off-shore consulting fees – money launderers pay themselves generous consulting fees from companies they control

  • Corporate loans – money launderers borrow money from off-shore companies they control

  • Property – sold at inflated prices to companies they own for cash

The YAKUZA

  • Yakuza - the name Yakuza translates roughly to 8-9-3, one of the worst hands you can get in Japanese Blackjack, where the goal is 19 instead of 21.
  • Own approximately $85 billion in assets and has about 150,000 members
  • Known for corporate extortion, gambling, prostitution, and drug trafficking
  • Considered a “shadow government” of Japan

Historical Perspective

  • Origins are debated, but some trace them to 15th century samurai who robbed villages to survive
  • Current Yakuza claim ancestors were city servants who opposed the strong to help the weak
  • Other suggested origins:
  • Traditional gamblers (Bakuto)
  • Street peddlers (Tekiya)
  • Political right-wing extremists (Uyoku)
  • Common thugs (Gurentai)
  • Eventually Bakuto, Tekiya, Uyoku, and Gurentai merged and became more powerful and diverse.
  • Number of Yakuza members grew larger than Japanese army from 1958 to 1963.
  • This growth resulted in epidemic violence and turf wars.

Yakuza Today

  • Modern members are more economically motivated and materialistic than early Yakuza
  • Most are high school dropouts, delinquents, involved in drug use
  • Alliances with other global organized crime groups
  • Active in the United States since 1950s

Activities and Methods of Operation

  • Operated wherever a Japanese population was found
  • Amassing vast real estate holdings
  • Investing illegal profits in legal businesses
  • Alliances with Chinese Triads, Korean, and Vietnamese gangs in the United States
  • Business acquisition
  • Protection and extortion
  • Gambling
  • Narcotics trafficking
  • Pornography
  • Weapons and smuggling
  • Money laundering

The Russian “Mafiya”

The Russian “Mafiya” (sometimes called Red Mafia) is a catch-all phrase for a group of organized gangs that many experts consider to be the most serious organized crime threat in the world today.

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The Vory

  • The vory developed among hard-core prison camp inmates (gulag)
  • The vory developed a coded language decipherable only by other members of the criminal fraternity
  • Vory members often sported elaborate tattoos that reveal their status in the organization’s hierarchy and even their criminal specialty
  • In the FSU, the basis for criminal organization was driven solely by mutual participation in criminal activities, a connection that was economic, rather than ethnic or familial

The Russian “Mafiya”

The FBI lists the 8 most prevalent crimes committed by ROC as health care fraud, securities and investment fraud, money laundering, drug trafficking, extortion auto theft and interstate movement of stolen property

It is estimated that ROC syndicates exceed 1 million soldiers

The power of ROC is evidenced by intelligence estimates that indicate that the majority of all Russian businesses and banks, as well as dozens of stock exchanges and government enterprises are controlled by the ROC syndicates

Major links with Colombian and Mexican drug cartels

Computer crime is a major area of activity

Department of Defence attacks

Credit card thefts

Denial of service attacks

Citibank attack

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The Italian Mafia - The Mezzogiorno

  • The southern Italian experience, which dates back more than a thousand years, led to the development of a culture that stresses the variables necessary for survival in a hostile environment

The Mezzogiorno Cont.

  • This history led to the development of different types of criminal organization

Sicilian Cosa Nostra

Neapolitan Camorra

Calabrian ‘Ndrangheta

Sacra Corona Unita

Basilischi of Basilicata

Major groups

Camorra-Revenue: $4.9 billion

  • Camorra is the most successful of these groups
  • sexual exploitation, firearms trafficking, drugs, counterfeiting, gambling, extortion
  • group’s history dates back to the 19th century, when it was formed initially as a prison gang. 

‘Ndrangheta—Revenue: $4.5 billion

  • ‘Ndarangheta is the country’s second largest mafia group by revenue
  • involved in many of the same illicit activities as Camorra
  • Also made its name for itself by building international ties with South American cocaine dealers
  • controls much of the transatlantic drug market that feeds Europe
  • expanding its operations in the U.S. and has helped prop up the Gambino and Bonnano crime families in New York

Figure 1

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Hierarchical Structure of a Typical Organized Crime Family

BOSS

Underboss

Counselor

Lieutenant

lieutenant

lieutenant

Lieutenant

Soldiers

Sold

iers

Soldiers

Soldiers

Associates