Second, organized crime is different from conventional crime because of the nature of the criminal activities it involves. Planning, preparation, complexity, and continuity over time are all characteristics that set organized crime apart from the spontaneous, perhaps ill-thought out transgressions involved in most everyday-life crime. An essential feature of organized crime, however, is that it involves the extraction of financial gain from the particular illicit activity, or range of illicit activities. Approached from this angle, organized crime can be understood fundamentally as criminal business.
Such monopolistic aspiration is often linked to the possibility of violence, as a means to eliminate competition. The idea, however, that organized crime may mimic the functions of a government arises from the special condition that its activities unfold in a power vacuum. A legitimate government exercising control over territory, people, and their activity by definition aims to disrupt and suppress illicit activity that occurs against the rules it sets. However, the production and supply of illicit goods and services is still a social activity that creates a demand for setting rules and enforcing them, resolution of conflicts, and also protection from external threats. Organized crime groups perform such a quasi-governmental role.
It also has its root in the gabellotti, individuals who acted as mediators between landowners who lived in the cities and peasants in rural areas, and who were able to extort from both parties.
Italian Mafias, and especially the Sicilian Mafia and the Calabrian ’Ndranghera, share common cultural characteristics, such as an emphasis on family bonds and kinship, masculinity, loyalty, and reliance on the “brotherhood,” respect, and honor, as well as rituals and symbolisms. An important rule, among others, is the obligation of Mafia members not to disclose information about the structure, composition, activities, and plans of their group to outsiders or the authorities.
Mafia involvement in politics and infiltration of the Italian local and national politics have been integral features of Italian organized crime. Apart from the collusion or support of politicians, which sometimes has been facilitated by links with masonic lodges, the mafias have strived for political control in their territories of origin. Along these lines, they could be seen as quasi-governmental structures that informally legislate, administer justice, settle disputes, and exert control on every economic production and decision-making process.
The sense was that local gangs were joining powers in a centralized, large, and extremely powerful illegal entity with the aim to monopolize the alcohol business.
A more careful look at the Valachi testimony reveals that the families were not centralized to any significant extent, nor were the members of each family “employees” of the family boss receiving orders. Instead, the “crews” were semi-independent sets of criminal actors, who were involved in illegal markets and activities knowing that they had the permission, support, and protection of the family for a share of the profits made.
At that time, when the eyes of the world were on the battlefronts, the British underworld thrived by taking advantage of shortages of any kind. Groups of professional criminals, many of whom avoided military service, raided government offices for ration books, and counterfeiters produced fake clothing and petrol coupon in bulk. The profits from criminal businesses were so big for some that the infamous gangster Frankie Fraser reportedly said: “The war years were the best years of my life. Paradise. I’ll never forgive Hitler for losing the war.”
In the same way young laborers were apprentices to more experienced laborers in various legal industries and trades, in the underworld younger criminals were “apprenticed” to older and more experienced criminals. Innovation in security technology, which raised significant obstacles to criminals, and very importantly the decline of the cash economy, led to these activities being replaced by what can be described as “project crime.” This depended on some specialist skills, precision, planning, and organization and very importantly the physical attributes that one was expected to find in industrial labor.
“Violent entrepreneurs” used violence to supervise contracts, settle disputes, and recover debts (since protection from the authorities was insufficient or non-existent), to negotiate with state organizations and help obtain permissions, registration, licenses, and tax exemptions as well as to incur damages and sabotage activities of competitor companies. Their efficiency was such that some of these entrepreneurs were hired by legal companies.
The so called “oligarchs” emerged through the acquisition of profitable state companies for small amounts of money. These oligarchs now form part of the business elite, and exercise influence over the political elite. Based on a diverse and rich criminal tradition, the nature of contemporary Russian organized crime is the product of the political and economic transitions that took place in Russia during the 1990s. The transition blurred the boundaries between licit and illicit businesses and markets, and the government, official groups, and criminal groups even further, and consequently allowed criminal groups to infiltrate and be incorporated into legal businesses and the state.
In the 1990s, Russian organized criminals established their own banks to manage their finances and launder money from other illicit activities. It has been suggested that, in the latter half of that decade, crime groups controlled as much as 60-80% of the Russian banking industry. In the last 10 to 15 years, many groups have been laundering their money through mainstream banking in locations with appealing financial and tax infrastructures, such as the City of London.
After the collapse of the Ottoman Empire in 1923, a vacuum of power emerged as the early Turkish Republic was not in the position to fully enforce the law. Local underworld groups and individuals such as the kabadayi served as informal agents of social control.
There has been a traditional, mutually beneficial relationship between organized crime and the authorities and state in Turkey. There have been, for instance, claims that large-scale drug trafficking would not have been possible without at least the tacit connivance of the Turkish state.
Profits from criminal activities are invested in legal businesses such as restaurants, cafes, and fast food shops in Western Europe, real estate, particularly in London, Turkish football clubs, gambling venues, the tourist industry and real estate estate in the Mediterranean coast of Turkey.
The score, 8-9-3, is pronounced ya-ku-za, and it was probably adopted by Japanese criminals themselves in the early 20th century to connote their self-images as losers or outcasts from mainstream, respectable society.
Unlike other organized crime groups, which aim for a discreet presence, the Yakuza groups are not secret societies, and this is reflected on them having offices with signs in business and shopping districts, and their members having business cards. Yakuza members were elected to serve in various public offices in the past; many leaders of the Yakuza groups still occupy the status of a celebrity in the Japanese society; and numerous Yakuza fan magazines are in circulation.
Readers should be aware that the combination of a prospect for financial gain and the existence of a legal prohibition is a uniquely powerful motor for innovation.
In the past, the drug trade was a legitimate and a highly important economic activity. In the 19th century the opium trade in China was a significant source of profit for British companies.
Approximately 250M people aged 15 to 64 have used drugs at least once in the last 12 months, the vast majority of them being recreational drug users.
Drug trafficking has been considered the biggest and most lucrative illegal economic sector — even more profitable than many legal trades. Reports suggest that the drug trade is worth $400B a year, or 8% of all international trade, when motor-vehicle trade makes up only 5.3%.
Much of the tobacco-related criminal entrepreneurial conduct presented in media, and law enforcement and industry narratives has been cast in the rhetoric of “transnational organized crime,” a phrase with much mystique and threat imagery. The available evidence from a variety of contexts shows that a substantial part of the distribution market is covered by somewhat older, lower middle-class individuals, who are not hardened criminals and are not involved in a diverse set of criminal activities. The closer one gets to those cigarette smugglers, the more the stereotypical “organized criminal” image dissolves. At the core of collaboration between and among entrepreneurs often lie family or kinship relationships as well as relationships forged within legal businesses. Violence or threat of violence are rare as they attracted unnecessary attention and are, therefore, bad for business.
The WTO has an oft-repeated estimate of 7% of all global commerce as counterfeit.
Generally, the illegality of the large-scale arms business is often a result of the quantity of arms produced and is subjected to international regulation, as well as a result of the false claims about the final use of the arms and their “end user” and the destination of arms. For example, occasionally, the transfer of arms is disguised as humanitarian aid. In the 1990s, during the war in the former Yugoslavia, arms ended up going to the Muslim Bosnians as humanitarian aid from Arab countries.
Extortion is the unlawful demand for money, property, behavior, or other goods and services from another through the threat of force or actual force or harm to a person or property. In extortion, the threat of violence, actual violence, and their management are the commodities trade. Very often it is difficult to distinguish between extortion and protection, and this is why the two terms are often used interchangeably.
It is an activity that targets primarily other criminals, since illegal enterprises cannot count on the state authorities for protection and for their right to be safeguarded. Indeed, illegal entrepreneurs have viewed extortion as an unavoidable “informal tax” that is often “legitimized” by the extortionists themselves.
Extortion has been present within immigrant communities, as they are generally unprotected by the authorities, and in which lack of trust of the authorities is pervasive.
Such an understanding returns to the idea that when the state is weak, private individuals and entrepreneurs may turn to extra-legal actors for protection, and in the Chinese case such a stance arguably depends on existing guanxi networks with such actors.
Criminals with a violent reputation and capital have been used in the US to break strikes, they often operated as mediators between employers and workers, and more often assisted in the suppression of the wage by controlling the labor union through violence and threat of violence. On the other hand, through the infiltration of the labor union, criminals could extort businessmen by threatening strikes. There are more sophisticated schemes through which criminals directly influence business decisions, for example, by setting up their own businesses selling goods and services to other businesses at inflated prices. Researchers have also identified extortion schemes with an online element such as the threat of DoS attack to pornography and gambling websites.
It has been found that the majority of clients of a Chinese loan shark in the Netherlands have taken out more than 2 loans. Loan sharks also maximize collection and reduce defaults by creating new loan opportunities. For example, they may reduce the interest of a client, grant a repayment extension, or even write off a part of the debt if the client introduces a potential client from his or her immediate social and business circle to the loan sharks.
Enforcing a repayment schedule is integral to the loansharking business. There is a continuum of loan sharks’ debt collection tactics. These may include “polite” methods which involve, for example, the loan shark regularly visiting the debtor at his or her workplace. Loan sharks use violence as a secondary option, when they see it as being necessary for them to collect payment from debtors. Kidnap, torture, and rape also have been reported as collection tactics.
Corporate crime possesses a number of distinct characteristics. Criminal activities take place within the confines of the corporation, providing relatively low visibility or complete invisibility. Moreover, these activities are based on at least some technical or specialized knowledge and expertise. For instance, large-scale financial fraud requires extensive knowledge of the financial markets. In addition, corporate criminal activities are usually the sum of actions or inactions of numerous individuals and departments within a corporation, resulting in a diffusion of the responsibility. Finally, most often there is no contact between the offenders and the victims, which occasionally may be other corporations.
Despite the huge costs of corporate crime, it is dealt with rather leniently by the authorities. The levels of inspection and detection are low, and most often corporate criminal offenders are not prosecuted. The reason for the poor prosecution rate of corporations is a result of the difficulty of proving liability; offshore accounts in which proceeds of crime are hidden; the diffusion of responsibility, which is an important feature of corporate criminality, especially when multinational corporations are concerned; lobbying on the part of corporations as well as the use of other resources by corporate criminals. When corporations pay fines, in the vast majority of cases these are extremely low compared to the harms and damages caused, and as such they are hardly a deterrent.
Money laundering is the process which obscures the link between the proceeds of crime, tax evasion, and corruption, and the original activity, and transform these proceeds to legitimate assets. Estimates suggest that the amount of money laundered are close to $1.6T or 2.7% of global GDP.
Money laundering is the platform for an extremely diverse set of schemes of varying sophistication and actors. Schemes may involve simple cash deposits of relatively small amounts that do not attract attention (also known as “smurfing”); small cash deposits in numerous bank accounts often in neighboring countries; or the physical transportation / smuggling of cash out of the country to jurisdictions with less diligent or rigorous enforcement of anti-money laundering procedures. Other laundering schemes may involve methods such as phony bookkeeping in cash-intensive, retail service business to allow crime money to be mixed with the cash flow of the legitimate business; buying transportable, high value commodities such as diamonds, art, and real estate; or the unwitting participation of a bank through the provision of “normal” services to clients. In some jurisdictions, such as Russia, criminals established their own banks to manage their finances and launder money.
The gallerist would receive a commission for his or her services, which corresponded to 10% of the supposed value of the painting (i.e. the amount that was essentially laundered).
This “layering” of companies, which is a popular practice in the money laundering business, confuses law enforcement with regards to ownership, and rich Russians own as many as 20 or 30 shell companies with a single asset to make the trail of dirty money disappear. A court case is needed to investigate and identify the beneficiary of each shell company, which is a time-consuming and costly process and may even then show no results.
More generally speaking, how authority is constituted in a given society appears to play a role in the outlook and activity of any organized crime within it. The survival of traditional social relations and weak state political controls and law enforcement encourage and sustain political parasitism and economic predation by organized crime.
Without the buying and selling of those goods and services, if the element of trade, and therefore the prospect of a financial gain, is taken away none of the activity make sense. Engaging in trade and mobilizing for profit through the trade is a process, and those engaging in it must be prepared — organized — to sustain it. This element of continuity or existence over a period of time, which legal definition of organized crime typically include, is what differentiates organized crime from the opportunistic crime intended to bring financial gain to a single perpetrator.
Organized crime and legitimate business are not economically distinguishable. Interestingly, crime appears to fall in the category of innovation, occurring in the absence of legitimate means to achieve the goals and aspirations society sets for people. It is not difficult to see that illicit enterprise is not organized around a value system radically different from that defined by the mainstream society.
At the same time, illicit enterprise can represent a threat to systemic stability and the established interests of society, locally, nationally, and globally: it opens the possibility for far more players to enter the money-making game in ways that cannot be predicted and controlled.