Can data on criminal assets speak about the investments of criminal organisations?

Transcription

1 Asset-Stripping: Responses to the Financing of Terrorism and Crime London May 2015 Can data on criminal assets speak about the investments of criminal organisations? Ernesto U. Savona Director of Transcrime and Professor of Criminology Transcrime Joint Research Centre on Transnational Crime Università Cattolica del Sacro Cuore Università degli studi di Trento

2 This presentation Presents the main estimates of illicit revenues Explains why data on criminal assets could work as indicators of criminal investments alone or together with other data Showing the main research results obtained Outlining the methodological pros and cons Discusses future research and policy implications 2

3 3 ESTIMATION OF CRIMINAL REVENUES OF ITALIAN MAFIAS

4 Steps followed for estimating mafias illicit revenues in Italy Break in different illicit markets Quantify demand supply and price Estimate the control quota owned by mafias Product the final estimate 4

5 Estimates of illicit revenues of mafias - Italy Revenues from illegal activities in Italy. Midpt estimates, share of total Revenues per type of mafia. Mn euros and share of the total Trafficking & sexual expl. 8% Firearms 0% Apulian mafias % Other mafias % C o s a Nostra % Extortion racketeerin g 45% Loan Sharking 10% Drugs 23% Cigarettes 2% Counterfeiting 8% Gambling 2% Waste 2% 'Ndranghet a % Camorra % Midpt. estimate 10.6 bn euros 0.7% of Italian GDP Source: Transcrime, 2013 Estimated mafia revenues divided among the five types according to their regional presence (MPI)

6 6 CONFISCATED ASSETS AS PROXY OF CRIMINAL INVESTMENTS

7 Geography of confiscated real estate - Italy Confiscated real estate Mafia presence index Real Estate values 7 Source: Dugato, Favarin, & Giommoni, 2015 OC groups exclusive presence

8 What data say about criminal investments in real estate Analysis on the 8092 Italian municipalities (meso level) Negative binomial regression models between the assets and the values of the areas Results 1) Maximize economic reward? NO 2) Aim to control territories? YES 8

9 Geography of confiscated businesses - Italy N. Confiscated companies ( ) every 10,000 registered companies In traditional areas but also in northern and central provinces Source: Riccardi, Soriani, & Standridge, Working paper

10 Business sectors infiltrated - Italy Business sectors of 1530 confiscated companies ( ). % on the total 0% 5% 10% 15% 20% 25% 30% Construction Wholesale and retail trade; repair of Not classified/not available Hotels, bars and restaurants Real estate, renting and business Agriculture, forestry and fishing Other community, social and personal Transport, storage and communication Manufacturing Financial and insurance activities Mining and quarrying Health and social work Electricity, gas and water supply Public administration and defence Education Activities of households Extra-territorial organizations and bodies 9.8% 9.3% 7.8% 5.9% 5.0% 3.6% 2.1% 1.5% 1.3% 1.0% 0.4% 0.0% 0.0% 0.0% 0.0% N = % 25.9% Source: Riccardi, Soriani, & Standridge, Working paper

11 Ownership strategies - Italy Legal forms of 1862 confiscated companies ( ). % on the total 0% 10% 20% 30% 40% 50% 60% Limited companies 49.6% Unlimited companies 23.9% Individual companies 21.9% Other forms 4.6% N = 1862 Source: Riccardi, Soriani, & Standridge, Working paper

12 Ownership strategies among OC - Italy Cosa Nostra prefers limited liability companies à conceal of beneficial owner Ndrangheta prefers Individual companies à direct control Type of OCG Limited companie s Unlimited companies Individual companies Average no. companies per decree Camorra 37.2% 32.4% 18.2% Avg. No. companie s per OCG member Cosa Nostra 51.8% 19.4% 18.7% Ndrangheta 34.5% 29.8% 30.1% Source: Riccardi, Soriani, & Standridge, Working paper

13 What these data say about businesses? Bad from the economic perspective because Inefficient and bad managed More employees than necessary (and often irregular) Relatively small: in 50% of the cases, share capital between 10 and 20 thousands euro Relatively young: on average final confiscation after 13 years from incorporation Able to «occupy» the market and the territory Good from the criminal perspective because Set up for criminal purposes (e.g. money laundering or frauds) Use of criminal means (e.g. accounting manipulation, corruption, intimidation) 13

14 Some facts, interpretations and implications Facts and hypothesis Banks limited the access to credit before the seizure (Donato, Saporito, & Scognamiglio, 2013) Productivity and capitalisation of confiscated companies might decrease after the confiscation (and even before seizure) Interpretations Criminal owners become aware of the investigation and start disinvesting from the company Companies would reach the seizure already emptied and deprived 14 Implications Need to change the investigative strategies Focus on on investigation rather than on asset management

15 15 ESTIMATION OF ILLICIT MARKETS IN EUROPE

16 Estimates of illicit revenues - Europe Estimation of several illicit markets in Italy Illicit market 7 OCP countries Whole EU Illicit drugs Heroin Cocaine Cannabis Amphetamines Ecstasy Trafficking in human beings (THB) Estimate available only in few EU MS Illicit trafficking in firerarms (ITF) IIllicit trade in tobacco products (ITTP) Counterfeiting Illegal gambling Estimate available only in few EU MS Extortion racketeering Estimate available only in few EU MS Usury Estimate available only in few EU MS MTIC fraud Cargo theft TOTAL In italics estimates by other authors. Source: Savona & Riccardi, 2015

17 What data on confiscated assets can say about criminal investments Analysis of criminal investments Direct observation of evidence of criminal investments Use of proxies of criminal investments (confiscated assets) 17 Data on confiscated assets show Where criminal invest In which assets they invest In which business sectors Which ownership strategies they prefer Which are the main drivers of investments

18 Data on confiscated assets Increase in the number and total value of confiscated assets CAB ANBSC PNSD Selected EU MS, Index 2005=100. Source: Savona & Riccardi, % 1.8% 14.5% 23.9% Most confiscated assets are movable goods while confiscated companies are almost absent 18 0% 20% 40% 60% 80% EU MS covered: Finland - Patja, France - AGRASC, Ireland - CAB, Italy - ANBSC, Spain -PNSD Source: Savona & Riccardi, 2015

19 Geography of criminal businesses - Europe Project OCP*; NUTS 2 level, % on country total NW Italy Paris SW Scotland Madrid Amsterdam/Rotterdam Southern Berlin Italy Andalusia PACA Bucarest London 19 * OCP Countries: Finland, France, Ireland, Italy, Spain, the Netherlands, the UK. Source: Savona & Riccardi, 2015

20 Business sectors OCP countries* HIGHER evidence Bars and restaurants Construction Wholesale and retail trade (in particular of food products and of clothing) Transportation and logistics Real estate activities Hotels EMERGING sectors Waste and scrap management Casinos, VLT, slot machines Renewable energy Money transfer businesses 20 * OCP Countries: Finland, France, Ireland, Italy, Spain, the Netherlands, the UK. Source: Savona & Riccardi, 2015

21 From characteristics to drivers of investment Drivers of infiltration Characteristics of sector 21 Profit Control the territory Influence on policymakers Culture, prestige and other drivers Commission or facilitation of illicit activities Conceal and facilitate illicit trafficking Develop fraud schemes Cash and labour intensive Territorial-specific Protected sector Key role of public administration or public subsidies Weak or developing regulation Front for other illicit activities

22 22 CONCLUSIONS

23 Availability of data on confiscated assets Lack of statistics on confiscated assets Use of IT systems to organise data is very infrequent (no centralised database) No information disaggregated by asset Lack of comparability of data across countries Data collection methods and criteria vary across EU MS Different datasets exist in the same country 23 Impossible to trace an asset since the investigation stage to the final confiscation Information on the single asset often available just in the last stage of the confiscation process

24 Research implications Widen our knowledge about OC investments in Europe Shift from macro to micro approach Identification of criminal opportunities Analysis of socio-economic vulnerabilities to criminal infiltration 24 Shift from cold maps to heat maps of risk Development of models for assessing these risks of infiltration and money laundering Development of tools that can improve LEA investigations and can help intermediaries

25 25 Policy implications Improve the collection and quality of data on confiscated assets Improve financial investigation techniques Improve the traceability of criminal assets Improve the identification of beneficial owners Adopting alternative instruments to seizure (e.g. administrative penalties and temporary suspensions) Improve the confiscation of criminal assets Improve the confiscation of companies Enhance the management of confiscated assets by improving the regulation and in particular the management of companies Reshape Law Enforcement action to investigate and manage risks of criminal infiltration Following the opportunity reduction approach Focusing on high-risk situations Increase data sharing among researchers, experts and LEAs

26 26 For more information.. Calderoni, F. (2014). Mythical numbers and the proceeds of organised crime: estimating mafia proceeds in Italy. Global Crime Calderoni, F., Favarin, S., Garofalo, L. & Sarno, F. (2014). Counterfeiting, illegal firearms, gambling and waste management: an exploratory estimation of four criminal markets. Global Crime Dugato, M., Favarin, S., & Giommoni, L. (2015). The Risks and Rewards of Organized Crime Investments in Real Estate. British Journal of Criminology. Donato, L., Saporito, A., & Scognamiglio, A. (2013). Aziende sequestrate alla criminalità organizzata: le relazioni con il sistema bancario. Roma: Banca D Italia. Giommoni, L. (2014). The retail value of the illicit drug market in Italy: a consumption-based approach. Global Crime Mancuso, M. (2014). Estimating the revenues of sexual exploitation: applying a new methodology to the Italian context. Global Crime Riccardi, M., Soriani, C., & Standridge, P. (Working paper). When the mafia is the beneficial owner: control strategies of mafia-owned companies. Transcrime. (2013). Progetto PON Sicurezza Gli investimenti delle mafie (No. Rapporto Linea 1, Deliverable D1.3). Milan: Università Cattolica del Sacro Cuore. Retrieved from Savona E. U. & Riccardi M. (Eds.) From illegal markets to legitimate businesses: the portfolio of organised crime in Europe. Final Report of Project OCP Organised Crime Portfolio ( Trento: Transcrime Università degli Studi di Trento

27 University of Notre Dame, London Law Centre Asset-Stripping: Responses to the Financing of Terrorism and Crime, London May 2015 Can data on criminal assets speak about the investments of criminal organisations? Ernesto U. Savona Director of Transcrime and Professor of Criminology Transcrime Joint Research Centre on Transnational Crime Università Cattolica del Sacro Cuore Università degli studi di Trento