Illegal Economy and Organized Crime

More details in http://www.tieproject.eu/wordpress/wp-content/uploads/tackling/tie6.pdf

Family-based: Case in Russia.

• The family ties between the members, besides cohesion also avoided conspiracy by concealing the origins of products' parts.

Mafia-type:

• Top level of management is composed of a single family and the solidarity among the group's members is reinforced by their common ethnicity.

Gang-type: Hells Angels. Canada

• Members belong to individual chapters and must abide rules.
• Membership highly controlled with no law enforcement history.
• Photos of the members are circulated to avoid infiltration by undercover police officers.

• Network: Cybercrime with vertical integration. Romania
• DATA: Layer 1: Skimming devices and phishing techniques
• LOGISTICS: Layer 2: Money transfer and administrative tasks
• PRODUCT: Layer 3: Acquiring and verifying credit card data
• EXECUTION: Layer 4: Illicit use of the PRODUCT

The key of the operation was international cooperation and the larger aim of eliminating an entire class of criminals conduct in a given country

Mixed models and participation of non-members. Italy

• Trafficking in cultural property had a fundamental role of art experts, museums and art dealers.

Complex networks: Italy

• Case of mass production, distribution and expenditure of fake euro notes. 174 people prosecuted.
• Didn't have Mafia-like structure, but interdependence between those who produce and those who utter.
• Keys:
• Knowing the structure/topology
• International cooperation
• Uttering of counterfeit currency cannot be considered occasional event, but stable associative structure to gain profit.

Il pesce puzza dalla testa: decentralized cells, more flexible groups, distribute responsibilities and are active in different markets so as to keep their options open.

Strategy to Tackle

Illegal Economy

International

Cooperation

Confiscation Proceeds of crime

Asset

Management

Prevention

Project Organised Crime Portfolio. Spanish Case Study lead by Prof. Jesús Palomo (URJC)

More details: http://www.ocportfolio.eu/_File%20originali/OCP%20Full%20Report.pdf

Global Illegal Economy

Secrecy score Qualitative data based on laws, regulations, cooperation with information exchange processes and other verifiable data sources

Financial Secrecy Index ranks secrecy jurisdictions according to their degree of secrecy and the scale of their trade in international financial services.

Full details: http://cdb.io/1pDEyPx

Organized Crime

Organized Crime: particularities

Topology examples

• Opportunistic and move from one crime to another to gain operational convenience, benefit, preserve continuity or ensure success: Criminal programs are indeterminate
• Produce huge profits. At the core of Illegal economy
• A priori low impact on security may hide important problem if a very dangerous group is involved.
• Ex: Counterfeit industrial products trafficked from China to Italy
• Eurojust Report 2010: "to raise awareness on the connections between apparently low-priority crime and OC cartels linked to Camorra"

Topologies: association makes it difficult

• Ethnic and/or hierarchical basis
• Family-based, mafia-type, gang-type

• Territorially based
• Business-centered

Topology examples

• Composed by persons only
• Mainly by legal persons

Investigation

• Group conducting entire action
• Numerous cells managed by a single coordinator
• Network of autonomous entities acting together

Offenses

Corruption

• Links between ordinary crimes and Terrorism

Topology examples

• Mixed models and participation of non-members

Research and Intelligence

Knowing the structure allows to expand the scope of investigation to the widest possible circle (facts and offenders)

• Association to OC
• Corruption
• Money Laundering
• Kidnapping
• Extortion
• Murder

• Cybercrime
• Identity fraud
• Trafficking in drugs
• Trafficking in arms
• Trafficking in human beings & organs
• Trafficking in natural resources
• Trafficking in cultural property/heritage
• Counterfeiting of products and medicines and money
• Environmental crime
• Maritime piracy

Crimes

International Coordination/Cooperation

Platforms of Liaison Officers

JIT agreements

Joint Investigative Teams: EUROPOL & EuroJust

It's based on the Principle of Shared Responsibility: the responsibility of multiple actors for their contribution to a single harmful outcome.

• Mutual Recognition of Foreign Confiscation Orders
• International Platforms
• UNODC
• FAFT: Financial Action Task Force. 34 members.
• CARiN; ARO Platform - SIENA: informal networks of contacts dedicated to improving cooperation
• GAFISUD: 12 countries of South-Central-North America to combat ML and terrorist financing.

• Establishment in Accra (Ghana) lead by UK
• Establishment in Dakar (Senegal) lead by France
• Establishment in Bogotá (Colombia) lead by Spain

• Problems:
• It should not be a response to immediate needs of a particular case.
• To avoid the delicate issue of jurisdictions
• Should be framed in a set of substantive general norms and detailed regulations agreed upon bilaterally.
• Pilot initiatives could be a good start.

Transforms bilateral and multilateral coordinated investigations into single common investigation within a new official legal entity.

Beneficial aspects:

• Max coordination, uniting operational efforts
• Simplification of activities not governed by rules of mutual assistance.

An officer of StateA, who is member of the team on StateB, can ask his own country to authorize or perform certain measure needed for the investigation without a letter rogatory or formal request of MLA

Examples: Romania + UK; France + Spain

• Strengthening of cooperation between law enforcement agencies or prosecutors and relevant private entities, including industry and Universities.
• Prevention of misuse of legal persons:
• Establishment of public records on legal and natural persons involved in the establishment, management and funding of legal persons.
• National record of persons convicted from acting as director of legal persons and the period.

• Facilitates the secure and rapid exchange of information and coordination
• Informal: cooperation with no intervention by judicial, diplomatic or high-level gov. authorities
• Formal channels.
• Avoid partial/national views of an International problem

Strategy

Civil Society:

• ASEM Galicia
• Pazo Baion
• Troika Operation: 2014

"Operacion Troika": 2008. Tambovskaya Malysherskaya group

"Operacion Troika": Mansion. Ex: non-conviction based Confiscation

• 2 years investigation: Guardia Civil, Customs and CNP (Spain); FBI and Organized Crime Prosecution (USA); German Police BKA and Organized Crime Prosecution (Germany); Russia; Swiss; Belgium.
• Offenses: ML, arms trafficking, contact murders, extortion, drug delivery, forgery, smuggling of cobalt and tobacco.
• ML: Since 1998 amassed movable and immovables assets of €30 mill.
• Money to buy Mansion came from 5 companies on Virgin Islands
• Frozen 90 bank accounts for €12.3 mill. from companies without activity.
• Prison 13/06/2008. Released on bail (€600.000 collected in 4 days) based on: russian intelligence report confirming there isn't any ongoing process on the suspect; his residency is in Spain and low probability of leaving country.
• Missing since 2012 after an authorization to attend funeral of mother in law.

• Estimated €3.5mill.; 500m2; gym, jacuzzi, sauna and heated dog house
• Frozen since 2008 but used by the family until May 2012 (disappeared).
• Article 367 quárter Penal Code, [..] owner express abandonment of them or when conservation and deposit costs are greater than the value of the object itself; When conservation can be dangerous to health or public safety, or may result in a substantial reduction of its value, or could seriously affect normal use and operation.
• AMADIP.ESMENT FOUNDATION focused on aiding mentally disabled people
• Requests: Restoration and preservation; temporary shelter; leisure activities.
• Reports every 3 months a list of cultural activities; preservation of property and pay the commodities.

Building blocks

to tackle illegal Economy

Criminogenic facilitators

Pull in factors: forces which draw OCGs to a setting

Push out factors: forces which drive

OCGs from a setting

Vaccination

Prevention

• Mass demand of an illegal good or service
• Access to supply/Proximity to trafficking routes
• Lax security/law enforcement/high impunity
• High corruption/Poorly regulated economic sectors
• High number of unemployment disenfranchised workers
• Porous borders
• Presence of criminal brokers and facilitators
• Lack of anti-Mafia legislation
• Period of vibrant economy (real estate bubble)
• Strategic location of illegal trafficking routes

• Increasing law enforcement (legal and operational capabilities) with holistic approach (all divisions following national strategic plan)
• Increasing competition among groups (dangerous)
• Regulation to ensure "Crime does not pay"
• International cooperation and regional coordination
• Increase academic research

Medical Protocol

Diagnostics

Recovery

Surgery

Advantages:

• Prevents errors
• Enables all procedures in a standard manner.
• Leads to inter-operator independence.
• Quickly spreads the knowledge and improvements.
• Operations rely less on memory.
• Consistent presentation of data.

Information gathering

• Physicians
• Anesthetist
• Surgeon

OCG typology

Una malattia come il cancro:

• l’effetti non si vedono e avanzano piano piano
• l’effetti si sommano agli effetti esistenti (corruzione)
• cuando ci accorgiamo degli effetti è già troppo tardi perché l’organismo è già troppo malato.
• soluzioni di prevenzione: è troppo forti per cambiare.

Intervention process

Supply groups: Those where the OCG offers a good or service

Demand groups: Those where the OCG demand a good or service

They are affected by competition rules. Examples:

• Drug Trafficking
• Illegal immigration
• Human trafficking

Enlarging the range o control do not necessarily increase their criminal earnings

They predominantly carry out predatory activities. Examples:

• Gang of burglars
• Motor-vehicles thefts
• Property crimes
• Credit cards theft
• Robbery
• Fraud

Expanding perimeter of criminal action increase earnings

The Model: Medicine

“Each Member State shall take the necessary measures, such as the establishment of national centralized offices or equivalent mechanisms, to ensure the adequate management of property frozen with a view of possible later confiscation.

Each Member State shall ensure that the measures optimize the economic value of such property, and shall include the sale or transfer of property which is liable to decline in value.”

UN Convention against Illicit Traffic in Narcotics Drugs and Psychotropic Substances (1988) sets international norms on Confiscation of proceeds of crime and tracing, freezing, seizure and related international cooperation.

Alternatives of Confiscation

Measures related to Proceeds of Crime

• Confiscation proceedings under criminal law or civil law
• Confiscation acting against the offenders or against the asset itself
• Confiscation strictly connected to the proceeds of individual offenses or including all illicit acquired wealth
• Confiscation hinged on a criminal conviction or independent of it

• Benefits of confiscation:
• Strong deterrent to profit-motivated criminality
• Deprive the offender of the benefits of crime.
• Effective mechanism to remove financial and other material resources that could be used to continue criminal activities
• Effective to dismantling criminal groups
• Helps in fighting against penetration of OC into licit economy

More details: http://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32014L0042&from=EN

Freezing and Confiscation: Examples

Non-Conviction Based Confiscation

4 legislative concepts

Art. 5 Proposal for Directive EC:

Creation of asset management offices or asset management rules (FR, IT, ES, UK)

Reuse of confiscated assets (IT)

Criminal NCB

Civil NCB

• Broad possibilities for investigating assets and carrying out economic assessment of suspects, close relationship and family (IT, NL)
• Restraint order made against a person and not against the asset (UK)
• Freezing possible at a pre-trial stage as a precautionary measure (NL)
• Distinction between simple, extended and global confiscations (FR) or between ordinary and special confiscation (NL)
• Value based confiscation (FR ,NL)

Each Member State shall take the necessary measures to enable it to confiscate proceeds and instrumentalities without a criminal conviction, following proceedings which could, if the suspected or accused person had been able to stand trial, have led to a criminal conviction, where:

• the death or permanent illness of the suspected or accused person prevents any further prosecution; or
• the illness or flight from prosecution or sentencing of the suspected or accused person prevents effective prosecution within a reasonable time, and poses the serious risk that it could be barred by statutory limitations.

Extended

confiscation

Unexplained

wealth

NCB in criminal

proceedings

Civil

recovery/preventive

confiscation

Extended Confiscation

Freezing and Confiscation: Examples

Civil Forfeiture

• The action is brought against the proceeds
• Civil forfeiture is based on balance of probabilities, whereas crime has to be established beyond reasonable doubt.

• Focused not only on the proceeds of offense for which an individual is convicted, BUT ALSO other assets proved or assumed to have been directly or indirectly produced by criminal activities.
• Conviction is a necessary precondition.
• Usually for OC offenses or closely related crimes.

• Estimation of benefit deriving from the offense and of the recoverable amount (UK, NL)
• Preventive system of seizure and confiscation for assets in possession of persons belonging to Mafia-type (IT)
• Civil recovery – confiscation (in rem) property obtained from crime even if no criminal conviction (UK)
• Confiscation made in rem. The burden of proof is shifted to the respondent (IE)
• Reverse/lowered burden of proof (BE, DK, EE, IE, IT, HU, NL, FI, UK)

Ex. Suspect accused of operating a drug manufacturing lab in his house

The State simultaneously brought civil forfeiture against the property.

Suspect was acquitted of the criminal charge on the basis of technical legal problems with a search and seizure warrant that led to discover the lab.

Finally, court ordered to forfeit the property to the State on the grounds it was used to manufacture drugs.

Suspect's request to stay forfeiture pending the outcome of criminal case was declined.

Ex. Art.72 & Art. 260 Swiss Criminal Code: forfeiture of all assets that are subject to the power of disposal of a criminal organization, until the contrary is proven.

Ex. Art.12-sexies Law No.356. Patrimonial Prevention Measure. Italy. Prosecutor has to prove that the assets are disproportionate to the legal sources of income of the convicted person; to avoid confiscation it is required licit "origin" of the property including licit origin of the means to acquire them.

Illegal Economy and Organized Crime

Recommendations

OC in Spain

Make sure Crime doesn't pay

Recommendations

CURRENT SITUATION OF OC

Lack of awareness

• A global strategy is crucial based on proper definition of the OCGs involved.
• Not facing the pull in-push out factors will reduce impact of deterrence measures.

• Partial investigation or ineffective operations causes:
• learning effect on OC
• Social impact
• Subgroups remain active and will realize the entire organization soon.

• Collecting data is crucial:

Member States shall regularly collect and maintain comprehensive statistics from the relevant authorities in order to better define the Strategy.

• Confiscation of proceeds of crime seems the most effective deterrence measure.

Spain is emerging as a major location for investments in the legitimate economy.

• Several OCGs have chosen Spain to launder their illicit earnings (Italian mafias, Chinese Triads, British and Russian OCGs among others)
• Spain has been included among the 5 hubs of OC in Europe (Europol)
• The Spanish government has implemented new measures to fight this phenomenon (creation of the ORGA)

Grazie per l'attenzione!

From Drug Trafficking to Wholesale Trade Business: Organised crime infiltration in Spain. Jesús Palomo et al. (2016) in

More details: https://www.routledge.com/Organised-Crime-in-European-Businesses/Savona-Riccardi-Berlusconi/p/book/9781138191099

Jesús Palomo

jesus.palomo@urjc.es

Jesús Palomo

Rey Juan Carlos University

Director of ReAS

photo copyright: http://www.nato.int/docu/review/2009/organized_crime/files