El Chapo, Frank Costello, and Al Capone: Financial Crime’s CEOs

Welcome to RDC Insider Insights. This monthly series covers a multitude of modern-day financial crimes. We’ve analyzed our global datasets to understand how certain types of crimes and risks are changing over time, both globally and in regional splits, to uncover trends and provide insights.

Almost everyone knows about organized crime, from movies to newspaper headlines. It is easy to forget that money laundering is at the heart of organized crime activities. RDC Insider Insights has previously discussed a range of organized laundering operations, from human and wildlife trafficking to elder fraud and hate crime. In this piece, we analyze the lexicon of organized crime and investigate particular terminologies, their associated regions and distinct risk activities.

What is organized crime?

Is there a difference between an organization and organized crime? Although we expect organizations to adhere to laws and regulations, too often they are vehicles for Enterprise Corruption. A wildcard search of organization in GRID produces a range of arms and drug trafficking, terrorism, sanctions, money laundering, and even murder. In this sense, the major distinction between organizations and organized criminals is the jargon. Legitimate businesses are  LLC, Corp., and Inc., while crime groups are titled ‘mafia,’ ‘cartel,’ ‘gang,’ or ‘racket.’

These operations are similar to legitimate organizations by design. They have a corporate-style hierarchical structure, headed by a CEO counterpart known as a ‘kingpin’, ‘mob boss’, ‘drug lord,’ ‘crime lord,’ etc., depending on their selected identifier. Such coalitions may be as much of a stakeholder in community activities and political circuits as licit organizations, if not more.

ORG code definition

RDC’s capture of organization or organized crime activities fall within our organized crime risk code (ORG), it encompasses: “organized crime, criminal association, racketeering, RICO (Racketeer Influenced & Corrupt Organizations), enterprise corruption, gangsterism, gang related crimes/violence, and street terrorism” committed on a large scale and usually featuring a hierarchical organization. The graphics below show the prevalence of organized crime activity as well as the differences in types by region.

ORG Code Map, 2019 – YTD

world map with shaded areas to show

Source: RDC GRID

 

Organized Crime: Identifiers

The United Nations Office on Drugs and Crime (UNODC) defines organized crime as “a changing and flexible phenomenon” made increasingly efficient as a result of FinTech advancements. Geographic territory once defined criminal groups, but now smaller, more flexible networks spanning across countries of supply, transit and demand have taken their place. Nevertheless, the terms we use to define criminal organizations— ‘mafia,’ ‘racket,’ ‘gang,’ or ‘cartel’—remain associated with specific regions and product markets.

Searching within each top country’s ORG event descriptions with keywords ‘Gang,’ ‘Mafia,’ ‘Cartel,’ and ‘Racket,’ we see differences in the rates and contexts of terminology used across jurisdictions.

For example, of top ORG countries, Italy has the highest prevalence of the term mafia, and Italian mafia has a presence in the US as well. However, in the States, ‘mafia’ is also associated with groups from China or Mexico. In fact, there are more entities in the US associated with the phrase “La Mafia Mexicana” or the “Mexican Mafia” than total events in Mexico featuring the mafia keyword. Inversely, cartel is most prevalent in Mexico, but Italian cartel events include the Albanian, Colombian, and Brazilian cartels, as well as an Italy-India-Afghanistan heroin supply chain. In contrast, Indian 2019 event descriptions never use the term cartel.

ORG Plus Terms

Our analysis show how each of these four terms correlate with varying RDC Risk Codes, beyond the ORG code.

Mafia

Mafia crimes worldwide (2019) are associated with both financial money laundering crimes (MLA, FRD, BRB) as well as physical violence (MUR, AST). While these are side effects of criminal business, A fair amount of crimes are associated with the actual transport of illegal products (DTF, IGN, SMG). Although environmental crimes (ENV) do not seem to be in The Godfather trilogy’s wheelhouse, mafia-related environmental crimes include illegal:

  • Poaching (Portugal, South Africa, United States)
  • Mining (India, Venezuela)
  • Dumping (Portugal, US)
  •  Trafficking:
    • Toxic Waste (China, Italy)
    •  Sand (India)
    • Diamonds (South Africa, Italy)

Mafia Top Countries & Codes, 2019 – YTD

Color indicates number of profiles, descending from teal to green. Top non-ORG codes associated with ‘mafia’ include: Theft (TFT), Drug Trafficking (DTF), Murder (MUR), Fraud (FRD), Money Laundering (MLA), Arms Trafficking (IGN), Bribery (BRB), Assault (AST), Environmental Crimes (ENV), and Smuggling (SMG). Source: RDC GRID

 

Mafia Concentration, Italy and Neighboring Area 2019-YTD

Numbers indicate regional rate of profiles associated with ‘Mafia.’ High concentrations of mafia crimes (yellow) in the central and south of Italy speak to waterway accessibility. In line with ‘The Godfather’ narrative, more than 20% of Italian mafia events include multiple family relatives. Unique Italian 2019 risks include Business Crimes (BUS) and Loansharking (LNS). Source: RDC GRID

Gang

The UK is the top country for gang-related activity. British gangs have garnered recent attention for their connection to the human trafficking market, although they are more frequently associated with drug trafficking. By contrast, gang activity in the US tends to be more physically violent, including murder, hate crimes and arms trafficking— crimes often associated with gun violence. In contrast, the most prevalent gang-related activities in India are due to the criminalization of belonging to a gang (defined as 5 or more individuals).

Gang Profiles, Top Countries & Codes, 2019 -YTD

Number of profiles goes from dark to light, in descending order. Top ‘Gang’ associated risks are: Drug Trafficking (DTF), Theft (TFT), Assault (AST), Robbery (ROB), Burglary (BUR), Arms Trafficking (IGN), Murder (MUR), Fraud (FRD), Kidnapping (KID), and Sex Crimes (SEX). Source: RDC GRID

Racket

India is a hotbed for human organ and wildlife trafficking, while Pakistani rackets have received media attention lately for bride trafficking. Global Risk Codes associated with ‘Racket’ are similar to those of India itself, including counterfeiting (CFT)—a predicate crime to trafficking or smuggling.

Racket Top Countries & Codes, 2019 – YTD

Top codes associated with ‘racket’ in descending number of profiles (orange to green) are: Fraud (FRD), Drug Trafficking (DTF), Human Trafficking (TRF), Smuggling (SMG), Theft (TFT), Counterfeiting (CFT), Tax Evasion (TAX), Illegal Prostitution (IPR), Money Laundering (MLA), and Bribery (BRB). Source: RDC GRID.

Cartel

The top 5 countries associated with the keyword cartel, in ascending order, are: Brazil, Colombia, Russia, and United States, with an overwhelming majority in Mexico. Although not all of these are mutually affiliated, Mexico’s cartels have a strong presence in neighboring US and, to a lesser extent, across all major continents. Cartels in Mexico are notorious for controlling local political economies through bribery (BRB). The Sinaloa Cartel made famous by former fugitive (FUG) and leader Joaquín ‘El Chapo’ Guzmán, is no exception.

The rise of Sinaloa’s drug trafficking (DTF) operation reveals how criminal organizations avoid border patrol officers and international regulations. A state in Mexico, Sinaloa is a mining region appropriated by the cartel for underground tunnel access between countries. They transported products undetected through these tunnels, moving from Colombia to the United States via Guatemala. Due to domestic cartel wars, they required new revenue opportunities and expanded their business into international human trafficking (TRF), arms trafficking (IGN), extortion (TFT), assassinations (MUR), among others.

El Chapo & Sinaloa Cartel, Countries of Operations & Major Corresponding Risks, 1980 – YTD

Number of profiles associated with keywords ‘El Chapo’ or ‘Sinaloa Cartel’ descends from dark to light blue. While Mexico is home to El Chapo’s Sinaloa Cartel, neighboring US has the second highest associated crime events. Unsurprisingly, Colombia and Guatemala fall closely behind as source and transport countries, but operations reach as far as India. Countries uniquely associated with individual ‘El Chapo’ are Germany, Kosovo, Cuba, Curacao, Israel and Ukraine. Source: RDC GRID.

El Chapo a true organized crime CEO, ran his operations like a business. They were far less violent (though not non-violent) than other renowned Mexican cartels. He was involved in a wide range of crimes extending to his organization, including sanctions associations (SNX), money laundering (MLA), kidnapping (KID) and fraud (FRD).

The Role of Financial Institutions

As of 2020, emerging areas of organized crime activities include cybercrime, identity fraud, trafficking, environmental crime, piracy, and fraudulent medicine. Challenges to tracing cybercrime, for example, include the ongoing deficit of monitoring technology. Overcoming such challenges require financial institutions understand Country Risk Scores to identify policy weaknesses and criminal hiding spots. While the RDC GRID figure below shows potential for adequate legal frameworks against cybercrimes in the US, India, and Nigeria, statistics might miss cybercrime reports from higher risk countries, such as Venezuela or North Korea, due to limited press freedom.

Cybercrime Keywords & ORG code, 2019-YTD

Size based on absolute number of profiles in RDC’s GRID database. Color based on media volume. Keywords include: ‘Cyber’ OR ‘Website’ OR ‘Crypto’ OR ‘Bitcoin.’ India has the largest number of prosecuted organized cyber criminals, but the US has broader media coverage Notably, neither Venezuela nor North Korea are represented in the analysis. Source: RDC GRID.

Building an Improved System

Just as all businesses cater to different markets and manage industry-specific regulatory challenges, well-organized criminal schemes have cornered unique black-market opportunities based on their geopolitical perspectives. Being aware of the terminology used to label organized crime and how this operates in the context of the media’s jurisdiction, in addition to gathering insight on specific entities in question and the breadth of their supply chains, plays an important role in preventing laundered funds from entering the financial system.

As a side-effect of sovereignty, enforcement varies country to country, creating difficulty determining international risk connections. Critically, as we see an increasing range of money laundering activities, cross-border collaboration among legal and financial institutions is imperative to capture organized criminals in order to link seemingly individual crimes that are part of a much wider network. Without the net to capture these individuals, organized crime kingpins will continue to reign as the CEOs of large and far reaching multi-national organizations with significant flows of dirty money.