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
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.
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 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)
- Toxic Waste (China, Italy)
- Sand (India)
- Diamonds (South Africa, Italy)
Mafia Top Countries & Codes, 2019 – YTD
Mafia Concentration, Italy and Neighboring Area 2019-YTD
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
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
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
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
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.