Crime In Public And Private Sectors

Introduction

Corruption is prevalent at both the public and private sectors. Organised crime groups attain their status through various means including corruption. There is a greater level of penetration of public sector by organised crime using the means of corruption. Corruption is the greatest threat from organised crime, and is considered a defining characteristic of organised crime. This link between the two phenomena has received great attention across governmental agencies around the globe. This paper will examine the link between the two phenomena and identify the components common between them with a view to examine whether corruption facilitates organised crime or organised crime lays the ground for corruption.

This paper will determine that corruption is a key component of organised crime, which uses corruption to carry out organised criminal activities. Pressure tactics through the means of corruption are used on local communities, public services, and legitimate businesses. Such situation normally involves corruption of public officials in most countries, thereby allowing criminal organisations to survive and reduce risk of being prosecuted. For instance is the case of the FIFA Corruption Scandal where FIFA officials were indicted for fraud, racketeering, and other offences. This paper will discuss various events and cases occurring or occurred in certain regions to determine that it is in fact corruption that facilitates organised corruption. This paper will further elaborate on the issue by identifying penetration of organised crime through the means of corruption in the area of judiciary, politics, administrative corruption, and corruption across multi-national companies. In all such cases, the interplay between organised crime and corruption takes a transnational form whereby there is co-existence of criminal organizations and law-abiding productive agents, where corruption enables crime syndicate to obstruct economic and governmental activities.

Is there a link between Organised Crime and Corruption?

Organised crime groups attain and retain their status through various means including corruption of public officials, actual or threatened violence, and other similar tactic (Hess & Orthmann, 2010, p.564). The US Federal Bureau of Investigation (FBI) observed that transnational organized crime (TOC) groups perpetuate individual associations operating through illegal means and often protect their activities through various means including corruption and other organizational structure that exploit national boundaries (FBI, 2018). As such, criminal organisations share certain common features in their structural forms, use violence as well as corruption, and launder proceeds of their activities. The World Bank describes that corruption being rooted in bureaucratic and political institutions, involves particular types of activities or transactions amounting to abuse of public office for private profits. Corruption is prevalent at both the private and public segments. Certain offences are considered corruption, including systemic corruption on a large or small level in routine dealings between public and private players among other offences such as political and bureaucratic corruption; individual acts of corruption; and acts of fraud and bribery in private sector (The World Bank Group, 1997). This description of the World Bank finds support in the Organisation for Economic Co-operation and Development that identifies the components of abuse of office, both public and private, for individual gains (OECD Glossaries, 2008). Observing the components involved in both the phenomena of organised crime and corruption, it could be stated that organised crime and corruption share an interdependent nature acknowledging a link between the two.

Elaborating on the link between organised crime groups and corruption, Edgardo Buscaglia demonstrated the association between public sector corruption and the growth of organised crime by conducting an analysing of qualitative as well as quantitative information collected from a large sample of countries. Some of the results found by the analysis were that indicators that measures economic freedom and criminal justice systems effectiveness and organised crime are negatively correlated; weak private sector governance has positive correlation to increase in organised crime; and buying state protection leads to growth of organised crime (Buscaglia, 2003 ). Jan van Dijk conducted a study in October 2007 that established the link between corruption and organised crime. The study found correlation between indicators of high level corruption, extent of the black market economy, money laundering and Organised Crime Perception Index (Chêne, 2008). It is also observed that corruption is the greatest threat posed by organised crime (Hess & Orthmann, 2010, p.570). It is considered a defining characteristic of organised crime. This has received great attention in the United States, Latin America as well as Europe (Gounev & Bezlov, 2010). Reports by Europol show use of corruption by organised crimes. As mentioned in the 2016 Europol report, the set up of a special committee on Organised Crime, Corruption and Money Laundering (CRIM) in 2012 demonstrates this aspect. It also describes the how the structure, international dimension and type of crime practices of the organised crime group affects their potential for the use of corruption (European Parliament, 2016).

From the events and discussion of the components of organised crime and corruption as herein mentioned, more weight could be placed towards stating that corruption facilitates organised crime. The following paragraphs will elaborate more on this aspect with relevant examples.

Corruption facilitates organised crime

From the earlier discussion above, it is observed that corruption is a key component of organised crime and is a means to carry out organised criminal activities. Criminal networks employ corruption in executing their criminal activities and avoiding investigation and prosecution. They use pressure tactics through the means of corruption on local communities, public services, and legitimate businesses (Transparency International UK, 2012). In such organised crime, there is normally an involvement of corruption of public officials in most countries (Desroches, 2007). This permits criminal networks and organisations to ensure their survival and decrease of risk of arrest and prosecution. For instance is the case in Bosnia Herzegovina, where a businessman escaped police raid 2000 after he allegedly received confidential information concerning the raid while he was supervising unloading of 164 kgs of pure cocaine procured from Panama (Chêne, 2008). Similar employment of corruption as a tool to carry out organised crime is the case of Mozambique, which has turned into an international transit-point for narcotics, contraband and persons. This cannot happen without high level collusion between state officials and criminal groups. This has resulted to undercuts in service delivery and accountability and further permits allows money laundering and existence of other financial crimes (US Department of State, 2018). Potential corruption of law enforcers occurs from co-existence of criminal organizations and law-abiding productive agents. The means of corruption enables crime syndicate to obstruct economic activities. The factor of a trade-off generated from existence of corruption between lower supply of crimes and probability of success of the crimes determines the outcome of effect of organised crime as to whether it affects growth (Blackburn et al., 2017). All these events show that apart from weak governance and enforcement mechanism, corruption is a feature common to as well as a facilitator of trans-border organised crime networks.

Organised crime has invaded private and public mechanisms of the society in which corruption plays a main part. In the UK, high level corruption could be found across different sectors (Transparency International UK, 2007). It has penetrated all criminal justice, border security, private sector, and procurement systems, as well as local authorities (HM Government, 2014). Organised crime does not seek to differentiate between public section and the private sector and it employs same means including corruption to carry out its activities. As for instance is the case of the FIFA Corruption Scandal where FIFA officials were indicted for fraud, racketeering, and other offences to include accepting bribes in exchange for grant of rights for hosting events and broadcasting games like the World Cup (Matthews & Gandel, 2015). This paragraph will briefly show such penetration in the area of judiciary, politics, administrative corruption, and corruption across multi-national companies. In case of corruption at the judiciary, it is observed that there are elements of the judiciary who protect corrupt exchanges between politicians and mafia and other participants. Such cases were observed in Italy, Poland and Lithuania (Gounev & Bezlov, 2010). Similar is the case with organised crime and political corruption. This is supported by the findings of a collaborative international research project conducted by the National Strategy Information Center. It was focused on the political criminal nexus by conducting a comparative analysis of Mexico, Nigeria, Russia, Hong Kong, Italy, the United States, and Colombia. The project pointed out to the “concentration and fusion of official political and professional criminal power” (Gounev & Bezlov, 2010). Similar is the scenario at the various branches of government administration, where organised crime have a stake and activities of organised crime such as issuing arms export permits to arms smugglers are facilitated by corrupt government officials. An example to support such administrative corruption is the case of deforestation and illegal logging, which is reportedly $10 billion a year business. There is presumably a link between commercial operators and organized crime, as is arguably shown herein that the timber industry, the third largest political campaign contributions in the US, obstructed the introduction of effective prevention policies of illegal logging in US (Gounev & Bezlov, 2010).

In the sphere of regulatory and policy execution and enforcement, companies through collusion and cartels regularly employ corruption as a means of profit gain from public funds (Gounev & Bezlov, 2010). Multinational Corporations (MNCs) occupy an influential political place particularly in underdeveloped or developing countries. They exert influence on national political set up and business structure to achieve personal gains (Cherunilam, 2008). For instance, companies in rich countries corrupt rulers and their officials in developing countries for securing export deals. Purchase of concessions by stronger countries and MNCs in Third World countries are found induced by corruption in certain cases. Bribes are also reflected as legal business expenses and companies apply for tax deduction claims on such expenses (Hawley, 2000). The pervasive nature of MNCs’ collusion and cartels could be gauged from the World Bank estimation that businesses and people pay $1.5 trillion in bribes annually. This forms an estimate 2% of global GDP. Specific example could also be that of Paraguay where 12.6 % of the poor’s income are directed to bribery (The World Bank, 2017). An example of how corruption facilitates the activities associated with organised crime is that of Associated Octel Corporation (AOC) which is regarding bribery to secure supply contracts. AOC was fined $12.7 million in the UK as well as imposed with penalties in the USA for allegedly bribing public officials and agents of Iraqi and Indonesian governments in May 2008 in order to secure supply contracts of its products with Tetraethyl Lead (TEL) as its component, considered highly dangerous compound (Transparency International UK, 2007). From these events, there is a glimpse of the factor of globalisation that plays a role brining up such transnational activities. Globalisation covers transnational activities from social, political, and economic perspective activities (Scholte, 2000). It brings economic privatisation and deregulation that enhance the power of MNC (Weiss & Wilkinson, 2014). MNCs transcend borders (Boran & Cox, 2007). They possess such level of power and influence enabling them override states sovereignty and legal systems in particular relevance to their commit illegal activities (Compa, 2008). As seen above, it is observed that one of the means to conduct its illegal activities is the means of corruption.

Corruption complements crime in the absence of measures that could curb corruption. For instance, increased sanctions as well as policing may create higher rates of corruption and crime in situation where rents from criminal activity are significantly higher than that of legitimate activities; costs of bribing are lower due to dishonest and low-paid law enforcers; and weak governance environments (Kugler et al., 2003). Furthermore, it can also be argued that organised crime may provide an employment alternative desirable for youth in the existence of highly corrupt societies. For instance, in the 1920’s when alcohol was prohibited in the United States, the profit level of mob activities was high to the extent that organised crime was able to keep government officials, politicians and law enforcer at its pay roll (Kugler et al., 2003). In relevance to many developing or transition countries, the element of widespread corruption facilitates the operations and illicit activities of organised crime, thereby enabling its proliferation (Shelley, 2003). This is supported by the root foundation of multiple transnational criminal organisations in such countries that is often wrapped with weak governance (Zaffaroni & Oliveira, 2013). As such it could be stated that corruption creates opportunities for crime groups to safely operate their activities. As seen above, weak governance benefits organised crime, which may utilised corrupt networks to penetrate and exploit government institutions and economic or financial activities. This was shown in a UN Center for the Study of Democracy study, in particular relevance to Southeast Europe. Criminal networks may infiltrate agencies and higher levels of the Government at various levels and may also infiltrate the political arena. They may penetrate mid-ranking public bodies to access employment in various legal enforcement agencies in order to facilitate criminal operations. They may also infiltrate higher levels of government by targeting higher ranking officers placed at sensitive departments in order to solicit long term benefits and protection. In such way, they may achieve systematic and access to confidential information to a great extent and may also achieve increased protection. Furthermore, they may also gain access to high ranking officials including senators or ministers and persons in similar ranks in order to gain control of state’s policies and other lawmaking, enforcement, and judicial machineries (Center For The Study Of Democracy, 2003).

Corruption enables organised crime groups to infiltrate the various segment of a state machinery, including security forces, judiciary, and the political arena. It has enabled organized crime to affect state officials in the aim of seeking the ultimate protection of highly placed political figures. This could be seen in the case of the Cali Cartel, which allegedly paid $6 million in 1994 to ensure presidential victory of Ernesto Samper (McDermott, 2014 ). Organised crime takes another higher form as in the case of Red Mafia in China where mainly corrupt public officials posted in criminal justice system, allegedly abuse power and exercise monopoly over protection business in criminal underworld. Corruption provides an alternative choice of governance and controls organised crime networks (Wang, 2013). Similar abuse of power and utilisation of corruption as a means could also be found in Russia, which shows relationship between private and public bodies and organised crime. Criminals penetrate state apparatus at such an extent that even in the privatisation process the state retains 51% of shares advancing the opportunities of fostering closer relationships between crime groups and officials. There is corruption between corrupt businessmen and government officials where crime groups lend shares of businesses to government officials for survival, securing public contracts, or influence law and decision making process (Chêne, 2008). Russian organised crime is also in existence in the United States. It began creating a base in the late 1970s. There are reportedly 213 such groups in the United States, engaged in white-collar crimes and violence-oriented crime in large scale. Main activity reportedly involves laundering through U.S. financial institutions of illegal proceeds out of overseas operations. The New York State Insurance Fraud Bureau reported fraudulent no-fault insurance claims arising out of staged accidents led to tens of millions of dollars costs annually in New York State alone, and hundreds of millions of dollars countrywide. Russian organised crime groups work in close quarters with established American criminal organizations, such as La Cosa Nostra (LCN). It has been observed that they use corruption to advance their criminal activities (Sukharenko, 2004 ).

Existing national and international legal systems also recognise the key role corruption plays in the effective operation of organised crimes. They significantly focus on the prevention and penalisation of individuals from involving in corruption activities related to organised crime. For instance, the United Nations Convention against Transnational Organized Crime 2002 aims to act as an effective legal framework that calls for international cooperation against transnational organised criminal activities, such as corruption, and illicit trafficking among other crimes (UN Office on Drugs and Crime, 2004). Recognising organised crime as an element of national security, the UK’s Serious Organised Crime Agency (SOCA) aims to assess the extent to which organised crime use corruption (Transparency International UK, 2012). In New Zealand, the Organised Crime and Anti-Corruption Legislation Bill was passed into law in 2015 with the sole aim of strengthening laws to combat organised crime and corruption. It intended to ratify the United Nations Convention Against Corruption. As discussed earlier regarding collusion of MNCs and foreign bribery and how corruption helps organised crime penetrate all state’s machineries, this Bill recognises all these elements when it calls for penalising foreign bribery, money laundering activities, and brining reforms in existing acts like the Crimes Act 1961 that affects persons and MNCs and criminalises bribing public officials and other government acts such as judges, members of parliament, ministers, etc (Parliament Counsel Office , 2014). These few legal mechanisms mentioned herein demonstrates how organised crime use corruption to exploit the existing state machinery in their favour. As earlier discussed to a certain extent as well, the existing of low effectiveness of preventive mechanisms irrespective of low or high effectiveness of law enforcement enables organised crime to indulge in their illegal activities through the means of corruption. In this respect, the situation of Slovenia in 2015 could be cited. Organise crime finds favours in such scenario. The prevention mechanism only deals with traditional crime ignoring the recognition of organised crime. As such, organised crime uses economic means and corruption is the prevalent strategy employed by crime groups to exercise monopoly over illegal markets. Furthermore, even in the presence of effective law enforcement, but lesser ineffective preventive mechanism, it could not stop the collaboration between multiple criminal networks, though it may disrupts individual crime groups. Such enforcement approach is not systematic though it may be effective to detect organised crime activity. This leads to operation of illegal activities by several organised crime (Valencic & Mozetic, 2015, pp.108-09).

Most of the organised crimes share the defining factor of a structured group for profit, and employment of violence and corruption as modus operandi. Organised crimes are transnational, but if one looks at the West, the traditional hot beds would be based in Italy, Mexicon, and cities like New York, Baltimore and Marseille. They conceal their illegal activities by laundering proceeds into the legal economy. The amount of costs of organised crime could be gauged from examples such as the EU Parliament’s estimate that organised crime facilitated by corruption costs EU up to the range of 71 billion in pounds annually. Corruption thus facilitates organised crimes as well as helps conceal them (Cockcroft & Wegener, 2017). Apart from the argument that corruption facilitates organised crime, there could also be a counter that organised crime lay the ground for corruption. U4 Helpdesk Transparency International, while recognising corruption as a core section of modus operandi of organised crime, found that a high existence of organised crime may create higher corruption levels (Chêne, 2008). In a 2007 study conducted by Jan van Dijk, a proxy indicator of “high level corruption” as derived from the governance indicators of World Bank, was reportedly found significantly and positively correlated with the Composite Organized Crime Index (COCI). COCI was built for this study by blending on perceived prevalence of organised crime, grand corruption, money-laundering, extent of black economy, and unsolved homicides, the data of which was derived from annual surveys covering CEOs of MNCs conducted by World Economic Forum, assessments by Merchant International Group of investment risks in hundred and fifty (150) countries, studies conducted by World Bank Institute, and crime statistics. Jan van Dijk reached the confirmation that organised crime is more in existence in regions where the rule of law is weaker and vice versa. Law enforcement machineries probably occupy a significant role in shaping organized crime and related corruption. As could be deduced from the discussion earlier, the state machineries and organised crime are in collusion, establishing an inter-link between corruption and organised crime (Dijk, 2007). As seen here in this paragraph, it could be derived that organised crime makes rule of law and policing weak and enhances further corruption. According to the study conducted by Jan van Dijk in October 2007, it was observed that corruption has significantly negatively affected GDP of a country, but organised crime was positively related to GDP, which indicates that criminal proceeds are reinvested in legal economy by means of money laundering (Dijk, 2007). In this light, mention may be made here of the statement of Transparency International UK that “Corruption feeds organised crime and organised crime feeds corruption.” The Defence & Security team of Transparency International UK have recognised organised crime to majorly contribute to corruption, particularly in the defence and security sector (UN CICP, 2018).

Though the above paragraph shows some favourable argument towards recognising organised crime as being the mechanism to lay down the ground for corruption, given the events discussed so far, there is a stronger argument towards recognising corruption as a facilitator of organised crime.

Conclusion

The use of corruption by organised crime groups has facilitated their operation and retention of their status. Criminal organisations can perpetuate associations and government institutes through illegal means, including corruption. They normally share certain common features in their structural forms; one common key feature is the use of corruption. Components of involved in both the phenomena of organised crime and corruption demonstrate an interdependent nature acknowledging a link between the two. This was shown by the 2007 study conducted by Jan van Dijk as well. The paper has elaborately demonstrated that corruption is the greatest threat generated by organised crime and has significantly facilitated the organised crime operation and their illegal activities. Private and public actors also extend their role in these activities. As was discussed in the paper, organised crime could not be functioning or they could not employ corruption as a tool if not for the support and high level collusion between state officials and criminal groups. This has costs public revenue and undercuts in service delivery and accountability.

It could for a fact be stated and determined by this paper that the existence of weak governance and enforcement mechanism, as well as weak prevention mechanism are the common flaws in a state that cause the growth if organised crime and their increase used of corruption to facilitate their activities. Organised crime and their activities have attained a transnational form, which exploits weaknesses of political, administrative, and other such public and private mechanisms. Corruption plays a major role in that way organised crime penetrates all the levels of private and public mechanisms of the society, including judiciary, politics, administrative corruption, and corruption across multi-national companies. Organised crime possesses high level of power and influence enabling them to influence policy and decision making processes. They are effective in presence of weak governance environments and corruption creates opportunities for crime groups to safely operate their activities. As seen above, weak governance benefits organised crime, which may utilised corrupt networks to penetrate and exploit government institutions and economic or financial activities. Example is that of the Cali Cartel, Red Mafia, and Russian organised crime groups in the US. The degree of attention over the issue could be seen both the international and national legal implementation measures undertaken. For instance United Nations Convention against Transnational Organized Crime 2002 or the New Zealand Bill that was passed to ratified this Convention. Furthermore, the seriousness could also be gauged from the amount of costs of organised crime facilitated by corruption as was shown by the EU Parliament’s estimates.

While recognising corruption as an core component of organised crime’s modus operandi, certain level of recognition should also be given to the argument that organised crime creates increased levels of corruption. In some way, it is also right about what Transparency International UK observed that “Corruption feeds organised crime and organised crime feeds corruption”. This does not take away the favourable arguments towards recognising corruption as a facilitator of organised crime.

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