Criminal Connections

Territoriality remains paramount to organized crime, and in a globalised economy the geography of crime expands exponentially. Local criminal organizations are presented with new international opportunities almost daily, as shown by the recent transformation of the Camorra. Over the last few years, the Neapolitan organization internationalised its dirty business by entering into joint ventures with the Chinese Triads operating in Italy.

At the same time, in a globalised economy, competition from local organizations prevents the formation of international, centralized networks similar to Cosa Nostra’s twentieth-century monopoly on crime across the Atlantic, but encourages economic alliances. The new criminal model, therefore, revolves around business ventures between foreign and local crime. This is the paradigm followed by the n’drangheta.

“Rather than aspiring to establish control over the territory, the n’drangheta invests the proceeds of its illegal activities” abroad to serve its clients, reads a 2000 Italian parliamentary report on the activities of the n’drangheta in Germany, Eastern Europe, and Australia. During the 1990s, members of the n’drine moved abroad to establish hubs from where to supervise the smuggling activity and set up money laundering centres for their clients. Soon they went beyond the Old Continent, spurred by demand for their services from new clients. Across the globe, the organization replicated the highly integrated network established in Italy in the mid 19th Century. It expanded inside the community of Calabrian emigrants who had relocated in the wake of World War II, and at the same time it internationalized its cadres.

The new business model of crime maximizes profits because criminal organizations benefit from economies of scale previously unknown. These spur from the possibility of using local networks. The Chinese Triad in Italy do not have to set up a comprehensive infrastructure as Cosa Nostra did across the Atlantic. Instead, they can use all or part of the illegal network of the camorra. The most successful application of this model comes from the business of smuggling, such as trafficking in drugs, merchandise and people.

Smuggling of narcotics remains the most profitable criminal activity with a yearly turnover of about $400 billion. However, human trafficking is quickly catching up. In 2007 it is estimated that human trafficking generated $200 billion, up from $100 billion in 2004. Human trafficking is directly linked to globalization. Indeed as a criminal activity it kick-started on an industrial scale after the fall of the Berlin Wall.

With the dismantling of the Soviet Union, and the diffusion of democracy in the space of a decade, the number of democratic countries grew from 69 to 118. However, as democracy spread, so did slavery. By the end of the decade, an estimated 27 million people had been enslaved, including in Western Europe. As early as 1990, Slavonic sex slaves from the former Soviet Bloc began flooding Western markets. These women proved beautiful, cheap, and most importantly, desperate. Yet, this new sex trade was only the tip of the iceberg. Globalization brought the exploitation of slave labour to an industrial level, reaching an intensity never seen before, not even during the transatlantic slave trade. From the cocoa plantations of West Africa to the orchards of California, from the booming illegal fish industry to counterfeit-producing factories, slaves have become an integral part of global capitalism.

Shockingly, in modern times, democracy and slavery co-exist in what economists see as a strong, direct correlation. In other words, the two phenomena not only show identical trends, but one conditions the other. The 1990s confirm a surreal trend that had become apparent in the 1950s, during the process of decolonization. As former colonies gained independence from foreign powers and embraced freedom, the number of slaves soared and their cost plummeted. Today the average price of a slave equals less than one tenth of its value during the Roman Empire, a time in history when democracy was possibly at its lowest ebb. For the Romans, slaves represented scarce, valuable commodities that commanded high prices; today they prove to be plentiful, disposable merchandise, merely another “cost of doing international business.”

The booming illegal and criminal economy has also boosted money laundering. Until 9/11, the bulk of the $1.5 trillion generated by the illegal, criminal, and terror economies was laundered in the U.S. and in US dollars. In October 2001, the U.S. Congress approved the USA Patriot Act, legislation that, in trying to combat terrorism, some scholars have argued that it has greatly restricted civil liberties in America. Its financial section made money laundering inside the U.S. and in dollars much more difficult. For example, U.S. banks and U.S.- registered foreign banks can no longer do business with offshore shell banks. In addition, the USA Patriot Act gave the U.S. monetary authorities the right to monitor dollar transactions across the world. Today it is a criminal offence for a U.S. bank or a U.S.-registered foreign bank not to alert the authorities of suspicious transactions in dollars anywhere in the world.

The USA Patriot Act succeeded in blocking the entry of dirty and terror money into the U.S., but, because it applied exclusively to the U.S. and only to U.S. dollar transactions, it did not curb terrorist financing, criminal activity or money laundering abroad. These dirty business functions shifted instead to Europe where the newly unified European currency offered organizations already involved in the money-laundering business, including the n’drangheta and the camorra, unexpected opportunities for growth. “The entering into force of the Euro facilitated the transport and exchange of cash within the EU, preventing law enforcement authorities from establishing the geographical origin of these illegal proceeds,” admits a Europol source. Data from the Guardia di Finanza, italian financial police, show that from 2001 to 2004 money laundering in Italy increased by 70%. The introduction of the Euro also reduced the cost of money laundering. “In the old days, the n’drangheta used tourist exchange outlets to wash dirty profits in various currencies. These outlets proved costly, 50 liras per dollar, as well as time consuming,” explains a high-ranking officer of the Italian Guardia di Finanza.

The landscape of criminality has changed because of globalization; it has grown exponentially. New businesses such as human trafficking have boosted criminal profits and major changes in world finance, i.e. the advent of the euro, have facilitated money laundering. Against this bleak backdrop governments and international organizations must find a common ground to fight back.

Loretta Napoleoni is an eminent expert on the issue of terrorist financing and advises several governments on fighting terrorism. She is the author of the best selling “Terror Incorporated” and “Insurgent Iraq” and has worked as a foreign correspondent for several Italian financial papers.