THE INVESTMENTS OF ORGANISED CRIME ACROSS EUROPE

Transcription

1 The investments of organised crime in Europe Brussels, 24 March 2014 THE INVESTMENTS OF ORGANISED CRIME ACROSS EUROPE Ernesto U. Savona Michele Riccardi Transcrime Joint Research Centre on Transnational Crime Università Cattolica del Sacro Cuore Università degli studi di Trento

2 The research questions 2 1. Where are OCGs located? 2. In what illicit markets are OCGs involved? How much do they earn? 3. In what assets and business sectors do they invest the illicit proceeds? 4. How do they infiltrate into the legitimate economy? 5. How can infiltration risks be assessed and minimised? 6. How can the beneficiaries of OCGs transactions be traced?

3 The Transcrime research agenda These questions are translated into research projects both at national and EU level, e.g.: Project «Gli investimenti delle mafie» ( (May 2013) Project OCP - Organised Crime Portfolio ( (November 2014) Project ARIEL ( (March 2015) Project BOWNET ( (Nov. 2012) 3 Project EBOCS - European Beneficial Ownership and Control Structures ( (July 2015)

4 Project OCP - Organised Crime Portfolio Funded by EU Commission, DG Home Affairs December 2012 November partners 4 1. Transcrime/Università Cattolica (Italy) - Coordinator 2. Police College of Finland (Finland) 3. AGRASC (France) 4. CAB - Criminal Asset Bureau (Ireland) 5. Guardia di Finanza (Italy) 6. University of Utrecht (Netherlands) 7. Universidad Rey Juan Carlos (Spain) 8. University of Durham (UK)

5 Project OCP objectives To collect and produce estimates on OCGs proceeds from illicit markets in Europe To analyse where (what regions, assets, sectors) illicit proceeds are then invested in Europe To collect and analyse the data on the assets confiscated from OCGs in Europe Today s focus is on the analysis of OCGs investments: OCP preliminary findings are presented and then some research and policy implications are discussed 5

6 How much do OCGs earn from illicit markets? OCP is collecting available estimates and producing own estimates on main illicit markets in the EU Preliminary estimates: Illicit market Countries covered Revenues Estimate (euro millions - yearly) Heroin 1 ES, FI, FR, IE, IT, NL, UK 6,153 Cocaine 1 ES, FI, FR, IE, IT, NL, UK 4,850 Cannabis 2 ES, FI, FR, IE, IT, NL, UK 5,368 Counterfeiting (clothing, ES, FI, FR, IE, IT, NL, UK 18,886 accessories and food) 1 Sexual exploitation 3,1 IT, FR, UK 4,231 Firearms trafficking 4 IT 93 ITTP 5 IT 1,139 6 Sources: (1) Transcrime (2014) OCP preliminary estimate; (2) Caulkins, Kilmer and Graf (2013); (3) Mancuso (2014); (4) Transcrime 2013; (5) Calderoni (2014)

7 How much is available for OCG investments? Not all the revenues are available for investment There are costs for criminals, e.g. raw materials (e.g. drugs on wholesale markets), organisational costs and living expenses (e.g. housing, vehicles, etc) Net profits can be then invested in the legal economy or reused for illicit purposes (e.g. for corruption) For example, in the case of heroin: Heroin trafficking (ES, FI, FR, IE, IT, NL, UK) Euro millions (mean) Revenues 6,153 Net profits (Total) 2,268 Profitability 35.5% Net profits (Wholesalers) 1,528 7 Source: Transcrime (2014) OCP preliminary estimates

8 Where are OCGs illicit proceeds invested? 8 After analysing illicit markets, OCP is producing the first mapping of OC investments in Europe For doing so, it uses many sources and data: LEA/FIU/ARO reports Data on seized/confiscated assets Judiciary evidence Open sources (with development of inotitium search engine) Focus on 7 OCP MS (but other MS are also covered) The resulting DB (as of March 2014) includes about 550 cases of OCGs investments

9 9 Cases are then organized in database

10 Why do OCGs invest in the legal economy? OCP preliminary analyses show that OCGs investments respond to many drivers: Money laundering Profit Control of the territory Control of the political/administrative elite Social consensus (e.g. jobs offer) Cultural reasons Functional reasons (e.g. import-export for OCGs involved in organised property crimes) 10

11 In which EU countries do OCGs invest? 11 The preliminary OCP maps show that: Most EU member states are involved OCGs investments often have a transnational nature Same OCGs invest in more than one country For some OCGs, the illicit proceeds generated abroad are often invested back in their home country Other OCGs prefer to invest locally or in foreign countries Some countries (e.g. Spain) are attracting investments from many OCGs

12 Cosa Nostra OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

13 Camorra OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

14 Ndrangheta OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

15 Apulian OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

16 Russian/Georgian OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

17 Chinese OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

18 Motorcycle gangs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

19 Other OCGs investments in Europe Preliminary OCP map March Source: Preliminary analysis (March 2014) Project OCP (

20 Italian Mafias OCGs investments in Europe Preliminary results Project OCP 20 Source: Preliminary analysis (March 2014) Project OCP (

21 Russian/Georgian, Chinese, Motorcycle investments in Europe 21 Source: Preliminary analysis (March 2014) Project OCP (

22 Other OCGs investments in Europe 22 Source: Preliminary analysis (March 2014) Project OCP ( Transcrime elaboration

23 In which business sectors do OCGs invest? 23 Labour intensive (e.g. construction) and low tech (e.g. bars and restaurants) sectors Highly territorial specific (e.g. real estate agencies) With high involvement of public administration (e.g. public construction) With weak or developing regulation (e.g. renewable energies, VLT and slot machines) Functional to the illegal activity (e.g. import/export for property crimes; transport for drugs or arms) Sectors in which it is easy to commit frauds (e.g. petrol or LPG distribution) Close to OCGs cultures (e.g. sex and tattoo shops for motorcycle gangs)

24 But different OCGs have different preferences 24 Italian OCGs Chinese OCGs Russian/Georgian OCGs Motorcycle gangs Other OCGs (e.g. Eastern European) Real estate Bars and restaurants Hotels and other tourist accommodations Construction, mining and quarrying Transportation and logistics Wholesale and retail of food Petrol and gas supply Renewable energy (especially wind power) New sectors (e.g. «compro oro», VLT and slot machines) Bars and restaurants Wholesale and retail of clothing and textiles Manufacturing of clothes Money transfer Real estate Hotels and other tourist accommodations Bars and restaurants Private security Maintenance and cleaning services Tattoo shops and sexy shops Import/export Transportation and logistics Real estate activities Source: OCP Preliminary (March 2014) analysis; Riccardi 2014; Transcrime 2013

25 Why do these differences emerge among OCGs? Different purposes of the investments (e.g. profit, money laundering, control of the territory, etc) Cultural differences (e.g. wholesale and retail of food for Italian OCGs, but not for Russian/Georgian OCGs) Different know-how (e.g. repair of vehicles or private security for Motorcycle gangs) Investments functional to illegal activities (e.g. import/export for Eastern European OCGs involved in organized property crimes) 25

26 But differences exist also in the same OCG For example, Italian Mafia OCGs investments In Italy In other EU countries Construction, mining and quarrying Transportation Bars and restaurants Petrol supply Real estate Renewable energy (wind farm) New sectors (e.g. «compro oro», VLT and slot machines) Bars and restaurants Wholesale and retail of food Wholesale and retail of clothing and textiles Hotels and other tourist accommodations Real estate 26 Why these differences? Is control of the territory less important abroad? Weaker contacts with the public administration? Different regulations? Different structure of foreign markets?

27 Case 1: Chinese OCG infiltrations in Italy 27 Police operations Cian Liu, Cian Ba I e Cian Ba II ( ): More than 200 companies seized Pastry shops, bars and restaurants Wholesale and retail trade, especially of clothes and shoes Money transfer agencies (4.5 Euro bn illegally acquired transferred to China) Figureheads (both Chinese and Italian) and tax heavens Related illegal activities: Sexual exploitation and forced labour Counterfeiting Money laundering

28 Case 2: Motorcycle OCG infiltration in Spain Operation Casablanca (July 2013): 25 Hells Angels arrested in Mallorca Interpol, Europol and DE, ES, NL and LUX authorities Drug trafficking, THB, Sexual exploitation, extortion (also in Germany and Turkey) Investments in Spain: Luxury properties Luxury cars and other vehicles Plan to build Formula 1 circuit in Mallorca 28

29 29 Case 3: Cosa Nostra OCG in Romania Seizure of waste management companies connected to Cosa Nostra and Romanian OCGs (2013) Biggest landfill in Europe Front companies used to launder illicit proceeds Seizure of companies (2007) operating in different business sectors: Import-export companies Hotels Casinos Real estate activities Transportation Wholesale and retail trade Use of both Italian and Romanian figureheads

30 Case 4: Russian OCG infiltration in Spain Infiltration of Russian/Georgian OCGs in Spain: Cataluña, in particular Girona (Operation Clotilde, 2013) Bars and Restaurants Wholesale and retail trade Petrol and gas supply Real estate activities Costal area near Malaga and Valencia (2010) Real estate activities Bars, restaurants and hotels Wholesale trade, especially to foreign countries Mercantile companies, for concealing illicit capital flows from the mother country 30

31 Case 5: Camorra OCG infiltration in Spain Investments by a OCG related to Scissionisti clan: Restaurants Catering companies Wholesale of food products Connections to local politics and public administration: Catering service for a foreign Embassy in Madrid Organisation of events at a foreign Chamber of Commerce in Madrid Higher profitability compared to the average of the business sector 31

32 OCP preliminary findings, in summary 32 Transnational illegal markets produce significant revenues for OCGs Illicit proceeds invested in many EU MS economies Many investments in companies and real estate Many business sectors infiltrated Investment drivers are money laundering, profit but also control of the territory Increasing mafia nature of other OCGs? Different investment strategies - Across different OCGs - Within the same OCG in different countries - Depending on the vulnerabilities of each business sector and national system

33 What can we learn from these analyses? What issues emerge? What are the criticalities? What could be the remedies? What are the research implications? What the policy implications? 33

34 Differences between where investments occur and what is confiscated Preliminary OCP findings show that OCGs invest in real estate and companies But most confiscations at EU level regard cash and vehicles Only few companies and real estate. Why? 34 80% 70% 70.4% 60% 51.3% 50% 40% 30% 23.2% 24.0% 20% 17.4% 8.1% 10% 5.4% 0.3% 00% Real Estate Companies Registered Assets Movable assets (including cash) Italy 4 EU MS (Italy not included) Source: OCP ( exploratory analysis on 5 EU countries

35 How can we explain this contradiction? Some hypotheses can be made: 1. It is difficult to trace OC infiltrations in companies Are OCGs able to conceal themselves? Or do LEAs face difficulties in tracing them? In both cases problems regard the investigation stage 2. Weak national legislations regarding criminal asset recovery, which lead to difficulties in implementing seizure/confiscation of criminal assets Problems in the management of confiscated assets, which lead some agencies to decide not to confiscate (especially in the case of companies)

36 1. How can the traceability of OC infiltration be improved? By widening our knowledge of OC investment drivers across OCGs and countries By identifying the vulnerabilities and the relevant criminal opportunities. These may be: a) Specific to the business sector and its regulation b) Related to the national context (e.g. presence of OC, level of corruption, etc) Developing models for assessing these risks of infiltration and money laundering is useful to better profile criminal assets, thus strengthening investigations and easing confiscation 36

37 How can beneficial owners be better identified? Tracing OCGs transactions means improving the identification of beneficial owners, that can be obtained: By widening the availability of information on corporate ownership at transnational level By connecting different countries business registers By developing tools that can improve LEA investigations (e.g. EBOCS) 37 By developing supporting tools for intermediaries (es. banks) subject to AML obligations

38 2. How can asset recovery legislation and its implementation be improved? Differences exist across countries in terms of asset recovery legislation and implementation Among them, the lack of extended and preventative confiscation Moreover, technical and cultural criticalities complicate the international cooperation in asset recovery 38 A full implementation of the new EU confiscation directive would harmonize and reinforce the available tools, facilitating international cooperation and transnational confiscation

39 3. How can the management of confiscated assets be improved? 39 Awareness at EU level that only an effective management of confiscated assets (especially companies) can guarantee an effective confiscation It is necessary: To reduce the timing between seizure and confiscation To evaluate all possible options for confiscated assets, including sale To involve managers to avoid the loss of companies after seizure To explore alternative tools to confiscation (e.g. «controllo giudiziario» ex art. 34 of L. 159/11)

40 The investments of organised crime in Europe Brussels, 24 March 2014 THE INVESTMENTS OF ORGANISED CRIME ACROSS EUROPE Ernesto U. Savona Michele Riccardi Transcrime Joint Research Centre on Transnational Crime Università Cattolica del Sacro Cuore Università degli studi di Trento