As a matter of fact, criminal organisations are one of the main obstacles to the development of several regions around the world. To see this, one may well take into consideration low-income countries such as Mexico, Colombia or Albania. However, it is very interesting to consider the Italian Mafia and Organised Crime for three main reasons.
Firstly, the Italian Mafia is one of the most developed criminal organisation in the world with Russian Mafia, US Mafia (historically related to the Italian one), Mexican Narcos, Colombian Cartels etc. Secondly, from an historical prospective, Mafia-type organisations were born with the new-born Italian State in 1861, especially in the South. The organisations in the South have different features (duties and responsibilities of a family member, different godfathers, main area of investment etc.) and names. Camorra in Campania and ‘Ndrangheta in Calabria that are the most powerful organisations, very active also in Piemonte and Lombardia. Also, we have Mafia (or Cosa Nostra) in Sicily and Sacra Corona Unita in Apulia and Basilicata.
So, the most striking feature of these organisations is the ability to resist and evolve over time to economic changes, crises and judiciary forms of suppression in a developed country. They resisted changing the area of investments and emigrating, both in Northern Italy and abroad. The biggest businesses abroad are in the USA, Spain, Germany, France, Albania, and Romania. Colombia and Venezuela especially for drug trafficking and in China for counterfeiting goods and for trafficking of migrants.
Thirdly, according to a report released in 2013 by the Italian interior ministry (Ministero dell’interno), illegal activities are the biggest businesses in Italy, generating an annual revenue equal on average to 1.7% of the Italian GDP (25.7 billion €). For what concerns Mafiatype organisations, they don’t have the monopoly on illegal activities. Their revenues account for a minimum of 8.3 billion € and a maximum of 13 billion €. The biggest part of this revenue comes from rackets (45%).
Criminal organisations affect both public and private sectors and small and medium-size businesses are the main victims of rackets, but also, of robberies by criminal organisations. Also, Mafia is, nowadays, described as the “biggest bank” in the country with 65 billion € in liquidity and it has an income of 10% of total revenue generated by loan sharking. Drugs generate the 23% of this income. Mafia has a large income coming from forgery and prostitution (8% each).
The Mafia portfolio is made up mainly by real estate, followed by movable assets, companies and stocks. The Mafia invests in real estate mostly in their original areas (Southern Italy) where they have a stronger territorial connection. This serves not only as investments for speculative purposes, but also for personal use and as a reward for Mafia organization members. The main motivations of investment in companies are money laundering, territorial control and social consensus. The sectors of investment of Mafia are mainly construction, mining (crucial for both building and illegal waste disposal), quarrying, hotels and restaurants.
“EcoMafia” The new profitable frontier of Mafia
One of the most profitable activities today of Mafia in the South of Italy is illegal garbage disposal, especially involving toxic waste. This phenomenon has become very important in Campania, especially in Naples and Caserta areas. According to a document of the Italian Parliament of 2013, Mafia organizations organised it in a military style and use it to dispose of toxic waste (such as, coming especially from Germany, in fields, lakes and beaches of the area from 1988 onwards). They managed to control the area thanks to a process of vote control of the areas. All the mayors are and were controlled by Mafia and they allowed mafia-type organizations to control the waste disposal through companies or illegal activities. The results of 20 years of exploitation are a very high risk of contracting cancer in the area and the impossibility to conduct agricultural activities. Carmine Schiavone, member of the very famous Camorra clan of Casalesi and involved in these events, said in a questioning about these facts that “radioactive wastes are in grazing land where today we could find buffaloes, but where grass doesn’t grow anymore”.
Is Italian’s organized crime just mafia?
It is often the case that “mafia” and organized crime are considered as synonyms, but actually the second is a much more general term which includes the first. Moreover we just see that even the word “mafia” includes a much more diversified set of organizations whose activity could be considered independent, somehow comparable to two firms of the same industrial sector. Non-mafia criminal organizations share with Mafias the features to involve a sufficiently large number of people and to have a certain structure, characterised by a level of hierarchy and stable relations. On the other hand, for instance, they are generally less linked with the territory, lacking strong ties with the society. I would like to focus on Italy and on two particular kinds of organized criminal groups: drug dealers (which, at least in the case proposed, do not show mafia features) and an Informal Value Transfer Systems (IVTS). This choice is due to the fact that both of them are involved in a current study of Professor F. Varese, Professor of Criminology and Director of the Extra-Legal Governance Institute, University of Oxford to which I contributed, based on a police investigation carried in Italy during 2004 – 2006. Starting from the drug trafficking business, I want first of all to underline a judicial peculiarity, i.e. being forbidden by law, to prove the existence of the activity, it is itself enough to justify search warrants and convictions. The cited investigation collected evidence of quite large businesses, mainly based on the importation and sale of heroin in the Milan area from the Balkan countries and Turkey. Analysing the structure of the international trade, the conversations recorded by the police suggest that all the investigated drug traffickers groups are organised in a similar way. A part of the traders are established in Italy and receive the supply, store it, mix the heroin with other substances to reduce the purity level and sell it. Then one or more members of the group are staying in Albany or Turkey and in general nearer the producers. These individuals are in contact with the suppliers, they organise the imports in Italy and also directly manage the selling activity, finding costumers and addressing them to the Italian partners, as well as giving their partners advice and asking them to send Albanian/Turkish money to be able to pay for other supplies. Professor Varese was suggesting the possibility that they can also have a role of “hostage”. Being based near the producers they guarantee the fulfilment of the agreements, because cheaters could easily be punished. It seems that there is no violence between the groups caused by competition, even if they are all selling heroin in the same area of Milan : for instance there has also been a case of collaboration for the reception of the supplies.
In addition we can notice the lack of a strong hierarchy: even if the foreign based member of the group behaves as a supervisor, there is often the exchange of advices, reciprocal support on risk management and partial freedom of independent decisions. Finally, to give an idea of the size of the business, for what concerns the investigated groups of drug traders, between November 2004 and July 2005 the police had evidence of the transfer of 673 385€ (this is of course a lower bound estimate, being the police’s certain information). This fact shows that the Mafia is involved in a considerable share of the drug market.
During the investigation the Milan anti-drug operative group found the presence of a completely different kind of organization which appeared to complement the drug business. The features of the activity made it correspond to the so called “Hawala” or “Informal Value Transfer System”. The protagonists of this activity are the Hawala bankers, of Pakistani origin who, by the definition of H. van de Bunt[footnote2], are “financial service providers who carry out financial transactions without a license and therefore without government control”. The main service that this organization provides is the transfer of money. Customers could be migrants who would prefer to use this system instead of the legal one because of the trust existing between people of the same ethnicity, efficiency reasons (speed of transfer, no need of bureaucratic papers, etc.) and lower costs.
However notice that these reasons are not necessarily valid given legal money transfer services nowadays. In fact often the service does not charge anything and profit is based only on the foreign exchange black market. In the Italian case, drug traffickers started to use this service for security reasons : even if the physical transportation of money to pay suppliers was a cheaper solution for the drug traders, it was also very risky due to cheating behaviours or the crossing of many controlled borders during the transportation.
On the other hand the Hawala system was fast, efficient and in particular strongly believable. To ensure the loyalty of the bankers it appeared to present an extremely strong hierarchy and rigid structure, headed by an Indian businessman based in Dubai (picture). Every transaction was actually confirmed to him by both parts by phone, whose role was to create a sort of real-time connection between drug traders, drug suppliers and bankers. As in a normal bank, the money was not physically moved and a foreign branch was in charge of the delivery. For this reason the police accused these bankers of money laundering. The size of the transfers varied between a few hundred euros to millions. Apparently there was not a fixed amount charged at each transaction and it was often up to the Indian businessman to decide on the remuneration of the Italian banker. Besides more risky activities, for instance those involving large amounts of money or the need of physical movement of the banker, were charged at higher prices.
Apart from the money transfer service, the Italian IVTS was also involved with other typical banking activities, in particular a developed currency trade, taking place mostly in the Netherlands. This fact, together with clear differences on the management of “ordinary” customers and drug dealers confirms the hypothesis that the informal bank activity got involved with the international drug trade only later attracted by the huge profits. At the same time we have evidence of fear and worries from the banker and his family in relation to that part of the business.
These lines on non-mafia organized crime groups have then the purpose to give a hint on the size of the organized crime world which, in particular for European countries, is not often perceived in everyday life. They allow to better understand why the GDP can change significantly due to the inclusion of the informal sector, following the European directives on GDP computation.
by Brenda Medaglia and Jacopo Bregolin
Van de Bunt, Henk (2008) “The Role of Hawala Bankers in the Transfer of Proceeds from Organised Crime”, Organised Crime: Culture, Markets and Policies Studies in Organised Crime, Volume 7, Chapter 9, pp 113-126
R. Saviano, “Gomorra” Varese, Federico (2011), “Mafias on the move: How Organized Crime Conquers New Territories”, Princeton University Press
Gambetta, Diego (1996), “The Sicilian Mafia: The Business of Private Protection”, Harvard University Press
Calderoni, Francesco (2011), “Where is the mafia in Italy? Measuring the presence of the mafia across Italian provinces”,Global Crime, Vol 12, Issue 1
http://www.theguardian.com/world/2009/dec/08/india-arrests-naresh-kumar-jain http://www.hindustantimes.com/india-news/newdelhi/court-extends-jc-of-hawala-kingpin-naresh-jain-in-drugs-case/article1-509124.aspx http://timesofindia.indiatimes.com/india/ED-on-trail-of-Rs-250-cr-pulses-scam-probes-Naresh-Jain/articleshow/5453794.cms