The Business of Organized Crime: Delivery of Illicit Goods and Services

1. 5 The Business of Organized Crime

2. Delivery of Illicit Goods and Services • Organized crime provides a wide array of illegal goods and services to millions of customers on a daily basis. • Some organizations operate world-wide. • Organized crime also conducts its business in a legal way.

3. Corruption • Corrupt relationships between organized criminals and public officials must occur: • At the law enforcement level. • Between the organized criminals who infiltrate businesses and the public officials who regulate these businesses.

4. Pornography • Soft-Core • Results from restrictiveness of public policy that prohibits hard-core pornography. (Simulated sex.) • Hard-Core • Depict more specific and explicit sexual acts (and private parts of the body).

5. Prostitution • Any sexual exchange in which the reward is neither sexual nor affection • Legal definition: (Something of monetary value) • Cash • Promiscuity • Relationship to a sexual partner • Subtlety

6. Prostitution • Types of Prostitutes • Streetwalkers • Massage Parlor • Stag Party Girls • Hotel and Convention • Bar Girls • Escort Service

7. Drug Trafficking • The Distribution Chain • Importers bring large quantities of cocaine or heroin into US. • Importer hires skilled smugglers to transport the drugs. • Once drug is in US, wholesaler purchases drugs from importer. • Mules or runners – transport drugs for wholesaler.

8. Drug Trafficking • Wholesalers receive nearly pure drugs. • Drugs must be diluted (stepped on) with chemicals to increase the amount of the drug.

9. Drug Trafficking • Drugs, Guns, and Armed Conflict • Transfer of Arms in “Gray” Market • Fraudulent documents issued by the company, may be used to disguise the actual customer. • Fraudulent documents may disguise the military nature of the goods.

10. Drug Trafficking • Drugs, Guns, and Armed Conflict • Transfer of Arms in “Gray” Market • False declarations by the company may hide the actual identity of the supplier. • The arms transfer may be disguised as humanitarian. • Difficult to do without corrupt customs officials.

11. Contraband Smuggling • Seeks to achieve high levels of illicit profits by avoiding taxes, tariffs, and duties on certain consumer items. • US is a primary transit country for contraband being shipped to other destinations. • US is a major source of considerable contraband. • Automobiles, alcohol, tobacco products.

12. Counterfeiting Currency • Typically outside the portfolio of organized crime • High risk • Labor intensive • Relatively low yield profits • Half of the counterfeit money is produced in US. • Therefore; half the counterfeit money is produced outside the US!

13. Counterfeiting Consumer Goods • Counterfeit goods are called knockoffs and is global. • Consumer goods that are desirable and easy to produce are targets of counterfeiting.

14. Gambling • The Process • Writers - write bets • Bets taken to central office. • Layoff bank covers extraordinary high bets. • Banker is the person that supplies capital to establish the business.

15. Loan Sharking • Provides money at a high interest rate to people who have little choice but to go to such sources in search of financial support. • Because the loan is illegal, default cannot be sought in a court of law “unclean hands doctrine”. This leads to “self-help measures” to collect the debt.

16. Environmental Crime • Legitimate business of waste removal for organized crime. • Illegal waste disposal. • Illegal international trade in animal parts. • Unsafe shipping of Hazardous Materials.

17. Business Racketeering • Reasons to seek Legitimacy • Organized crime groups seek profitable and safe investments. • Active participation in legitimate business enhance the integration of crime group members with members of the business community.

18. Business Racketeering • Reasons to seek Legitimacy: • Organized crime often supplies investment capital that would otherwise not be available from other sources. • Provides money laundering opportunity.

19. Labor Racketeering • The use of union power for personal profit. • Major activities by which organized crime realizes illicit profits: • Sweetheart contracts. • The misuse of union benefit funds. • Extortion or “strike insurance.”

20. High-Tech Crime • Target computer networks: • Government entities • Public utilities • Industries • Businesses • Financial institutions

21. High-Tech Crime • “Computer Crimes” (Any crime in which a computer is utilized): • Identity Theft & Subsequent Purchases • Trading in “kitty porn” • Arranging Prostitution • Communicating Conspiracies • Soliciting Financial Schemes

22. Human Trafficking • A significant current crime problem. • Individuals are usually sold for forced into agricultural or industrial labor.

23. Trafficking in Women and Children • Source Countries of Traffickers • Poor economic and employment prospects for women. • Well-defined and organized extant criminal organizations. • A culture that emphasizes a subordinate role for women in society (e.g. Asia, Middle East).

24. Money Laundering • Process where criminals conceal or disguise the proceeds of their crimes or convert those proceeds into goods and services. • Money Laundering Process: • Placement stage • Layering stage • Integration stage

25. Money Laundering • Methods: • Bulk movement strategy • Use of financial institutions • Use of nonfinancial and commercial businesses • Movement through the underground banking system • The Underground Banking System