Organised Crime And Corruption
Organised Crime and Corruption: National profiles and Policies of the EUMember-StatesPolicy Brief No. 26, November 2010The European Commission (EC) contracted the Centerfor the Study of Democracy (CSD)1 to analyse the linksbetween organised crime and corruption. The mainobjectives of the study were to identify: causes and factors that engender corruption byorganised crime (including white-collarcriminals) the scope and the impact of that corruption onsociety and institutions; organised crime’s main corruption schemes, theareas or risks they create, and the relateddifferences amongst European Union (EU)Member States (MS); best practices in prevention and counteringcorruption linked to organized crime;MAIN CONCLUSIONSØBased on a statistical analysis of 14 indicators (measuringcorruption, organized crime, the effectiveness of government,macro-economic indicators and the grey economy), sevenclusters of countries emerged. Starting from the cluster wherethe manifestation of corruption and organized crime wasweakest, the clusters were: (1) Denmark, Finland and Sweden;(2) Austria, Belgium, Ireland, Germany, Luxembourg, theNetherlands, Slovenia, Spain and the UK; (3) France; (4)Estonia, Latvia, Lithuania, and Portugal; (5) Czech Republic,Cyprus, Greece, Hungary, Malta and Slovakia; (6) Italy; and (7)Bulgaria, Poland and Romania.ØPolitical corruption is organised crime’s most powerful tooland local level political and administrative authoritiesrepresent the most likely criminal groups’s target. In the caseof police corruption the main reasons why organised crimeuses corruption are to obtain information on investigations,operations, or competitors, (FR, NL, UK) and protection forcontinued illegal activities. In the majority of Member States,organised crime targets the judiciary, particularly the courts,much less than the police or politicians. corruption of customsofficers mainly helps organised crime avoid detection ofsmuggled goods, avoid investigations.ØAmong the recommendations addressed to the EuropeanCommission is undertaking steps to widen the information andanalysis tools such as benchmarking indicators to measure thethreats from organized crime and corruption, and to assess theimpact of measures to curb these threats. Anotherrecommendation is to develop detailed guidelines toencompass a broad range of criminal offenses under thedefinition of corruption in national Penal Codes.ØEU Member-states are urged to further develop theirinstitutional capacities in order to conduct impact evaluationof measures against organized crime and corruption, and tobuild public-private partnerships to facilitate anti-corruptioncooperation.1Center for the Study of Democracy, Examining the Links betweenOrganized Crime and Corruption, European Commission, 2010. The studywas commissioned by Directorate General Home Affairs of the EC. Themain evidence for the report comes from 156 semi-structured interviewsconducted across all 27 Member States. The views consulted includethose of anti-corruption bodies, law-enforcement, judiciary, private sector(lawyers, auditors, and fraud-investigators), academics and journalists. Indepth country studies, based on a larger number of face-to-faceinterviews and more comprehensive secondary sources were undertakenin six countries (Bulgaria, France, Greece, Italy, the Netherlands andSpain).
No 26 POLICY BRIEFframework for a future assessment of trendsin the link between organized crime andcorruption, as well as corresponding countermeasures2.Key findingsBased on a statistical analysis of 14 indicators(measuring corruption, organised crime, theeffectiveness of government, macro-economicindicators and the grey economy), seven clusters ofcountries emerged. Starting from the cluster wherethe manifestation of corruption and organized crimewas weakest, the clusters were: (1) Denmark, Finlandand Sweden; (2) Austria, Belgium, Ireland, Germany,Luxembourg, the Netherlands, Slovenia, Spain and theUK; (3) France; (4) Estonia, Latvia, Lithuania, andPortugal; (5) Czech Republic, Cyprus, Greece,Hungary, Malta and Slovakia; (6) Italy; and(7) Bulgaria, Poland and Romania.The study also showed that historical, social andeconomic differences throughout the EU modulatethe ways organised crime uses corruption: Historical factors: large, informal economiesand criminal transformations of security services inEastern Europe have arisen amid economic transitionsand privatization processes; violent independencemovements in France (Corsica), Spain (BasqueCountry) and the UK (Northern Ireland); Social factors: differing sizes of illegal marketsand income disparity throughout the EU; differing sizeand specificity of immigration; closed professionalnetworks (e.g. judiciary) or elite networks; Cultural specifics: levels of informality ofsocial relations, or the importance of family ties.2Across the EU, there is unequal understanding about how organizedcrime uses corruption. Only a handful of governments have paid attentionto the issue, and have analysed it in depth (UK). Some governments thatdeclined to participate in the study, officially stating there was noorganised crime (Cyprus) or corruption (Luxembourg) in their countries.Some countries also lack empirically grounded research on organizedcrime at all (Cyprus, Malta and Portugal). For most others, such researchwas at best patchy and incomplete. For the above reasons the reportavoids making assertions about the state of affairs in individual MemberStates. The MS abbreviations indicate only the interviewee’s country, nota conclusion that applies only to that MS.November 2010The report presents two different analytical viewsof organised crime’s use of corruption: First, it examines how politicians/government administration, police, customs, thejudiciary, and private companies are targeted. Second, it depicts how corruptionfacilitates the operation of illegal markets (illegalcigarettes, drugs, prostitution, car-theft andextortion).The report concludes that prostitution and illegaldrugs markets exert the most corruptive effect inthe EU. It shows how some illegal markets, like theillegal cigarette trade, target primarily customs orlocal governments and law enforcement in borderareas. In other illegal activities, such as motorvehicle theft and protection rackets, corruption isneeded much less because of the nature of thecriminal operations.The prostitution market provides a good exampleof the wide-range of corruption tactics used byorganised crime. Members of police forcesthroughout the EU engage in corrupt exchangeswith prostitution networks, even extorting bribesor even directly running brothels. Such criminalnetworks use corruption to obtain information oninvestigations, ensure continuity of operations, oreven to develop monopolies in local markets.Immigration authorities, including embassy orborder guards, have also been targeted to ensurelegal entries or stays of prostitutes. In MemberStates with legalised prostitution (e.g. Germanyand the Netherlands) criminal groups havecorrupted some local administrative authorities inorder to avoid brothel regulations. Finally, criminalnetworks also use prostitutes to lure lawenforcement officers, magistrates and politiciansinto inappropriate behaviour, later using evidenceof the behaviour to blackmail the officials forprotection or information.2
No 26POLICY BRIEFTargets of corruptionDue to the big differences among Member States’institutions, the criminal structures in the EU takeadvantage of corruption in a variety of ways. In somecountries (IT, BG, RO), ‘political patronage’ creates avertical system of corruption that functions from topto bottom in all public institutions: administrativeapparatuses, the judiciary and law enforcement (i.e.police and customs). In other countries politicians,magistrates, and white-collar criminals form closedcorruption networks that are not systematic innature. White-collar crime at the middle level ofgovernment bureaucrats is common (at variousdegrees of intensity) to almost all member states. Incountries with low level of corruption, the cases aresporadic. The mostly wide-spread and systematicforms of corruption targeted by organized crime areassociated with the low-ranking employees of policeand public administration. Organised crime alsotargets tax administrations, financial regulators andany other regulatory body that might impact criminalactivities, but in a less systematic and significantway In addition to public institution, criminal networkshave a special interest in the private sector. Bytargeting company employees they have greatopportunities to extract significant revenues, avoidanti-money-laundering regulations, or facilitateoperations in illegal markets. Oftentimes, the effortsof organised crime to influence private sectoremployees fall outside the priorities of lawenforcement and judicial institutions.November 2010and Italy) political corruption is primarilyassociated with ‘white collar crime’ (DM, FI, IE, SE,UK). In EU-10E countries (Greece and Italy),political-level corruption was occasionally linked toorganised or white collar criminals (often referredto as ‘oligarchs’, ‘barons’, or ‘tycoons’). Organisedcrime-related corruption amongst Members ofParliament (MPs) or high-level political appointees(heads of agencies, departments) were quoted byseveral MS (CS-BG, CS-EL, CS-IT, RO).Local level administrative and political corruptionwas more commonly observed across the EU.Examples of mayors or city councillors convicted ofassociations with organised and white-collarcriminals were found throughout the EU (BG, CZ,DE, EL, ES, FR, HU, IT, NL, PO, RO).Local political corruption was especially observedin regions economically dependent on illegalmarkets (e.g. along EU’s eastern land borders), thegrey economy (tourist areas / booming real estateareas such as Costa del Sol in Spain) and areas witha strong presence of organised crime-controlledbusinesses (Corsica, Greece, Southern Italy, andvarious small towns in EU-10E countries). In theseregions, organised and white-collar criminals usetheir legitimate face to finance and supportpoliticians or even directly participate in localpolitics.The case studies on Bulgaria, France and Greeceshowed that anti-corruption activities and thepublic visibility of political corruption are especiallystrong when governments change.II. Police corruptionI. Political corruptionPolitical corruption is organised crime’s mostpowerful tool. In most of the EU-174 (except GreecePolice has the most direct exposure and frequentcontacts with organized crime and, as such,organised crime most often targets them. Themain reasons why organised crime uses corruption3For instance, environment regulators that might detect environmentalcrime; or forestry agencies that might prevent illegal timber exports;arms-exports control bodies; gambling industry regulators; anti-moneylaundering bodies; museum and national heritage regulators that impacttrafficking in antiquities;4In the process of the research a number of important differences(historical and social) emerged that allowed to make some generalizationabout two groups of Member States. The first group, to which we refer asEU-10E (to avoid confusion with the standard reference used EU-10)includes: the Czech Republic, Hungary, Poland, Slovakia, Slovenia,Latvia, Lithuania, Estonia, Bulgaria and Romania. The second groupEU-17 includes Austria, Belgium, Cyprus, Denmark, Finland, France,Germany, Greece, Ireland, Italy, Luxembourg, Malta, The Netherlands,Portugal, Spain, Sweden and the United Kingdom. This is done tofacilitate and simplify the referencing, and to avoid stereotypicallabels such as ‘Western Europe’ and ‘Eastern Europe’.3
No 26arePOLICY BRIEFtoobtaininformationonNovember 2010investigations,III. Judicial corruptionoperations, or competitors, (FR, NL, UK) nally, corrupt officers become directlyengaged in criminal activities, running drugdistribution rings or prostitution rings (CS-BG, CS-ES,CS-FR, UK).Both institutional and external factors make thepolice vulnerable to corruption. In EU-10E countries,the low prestige level of police leads to organisedcrime’s recruitment of officers with low educationand problematic behaviour. The closed nature of thepolice and their relative isolation from otherinstitutions leads to a high level of loyalty betweenofficers and protection of their colleagues.Nevertheless, in countries with less corruption, grouployalty has the opposite effect on police corruption:even though when police work is not consideredprestigious or well remunerated, police officers reportor put pressure on corrupt colleagues (DE, DK, FI, SE,NL, UK).Political and judicial influences on police can facilitatecorruption. In some MS, local government officialsunder the influence of criminal networks exercisepressure or even influence the appointment of highlevel police officers (BG, FR, HU, IT, LV, RO). This typeof influence can reach national levels, where largecriminal entrepreneurs control appointments of staffin police forces and special services. Pressure fromprosecutors and magistrates can obstruct policeinvestigations of influential businessmen who are partof criminal networks.Intermediaries, such as former police officers orspecial service agents, lawyers and informants canfacilitate corrupt exchanges with criminal groups.Clientelist networks can also facilitate direct contactsbetween criminals and police officers. Such networksinvolving active or former police oliticians are typical for countries like Bulgaria,Cyprus, Greece, Portugal and other EU-10E MS.In the majority of Member States, organised crimetargets the judiciary, particularly the courts, muchless than the police or politicians. In some MS,there have been hardly any detected cases inrecent memory (DK, FI, NL, UK). White-collarcriminals exert more pressure on the judiciary, asthey have easier access to social networks thatfacilitate corruptionThe most frequent reasons to corrupt magistratesare to avoid pre-trial detention, to delay courtaction (CS-BG, CS-EL CZ, PO), or influence the trialoutcomes. Judges, prosecutors and theiradministrative staff are also corrupted to leakinformation to criminals about ongoinginvestigations.Members of the judiciary are bribed to consult oradvise criminal networks on avoiding detectionand investigations (ES, NL). Finally, companiesrelated to organised crime or white-collarcriminals corrupt the judiciary (often via politicalinfluence) to rig public tenders (i.e. by disputingthe result of tenders) (BG, IT, LT, PO, RO).Political influence over the courts is a key factor ofjudicial corruption, especially in countries withhigh levels of political corruption. The relation ofthe Prosecutor General to the government andHigh Court Judges or Supreme Judicial bodies tothe parliament affect the independence of thejudicial system. (CS-BG, CS-ES, CS-FR). The politicaldependence of prosecutors in countries where theMinister of Justice is also Prosecutor General wasalso highlighted (CS-BG, CS-FR, PL). Legislativeloopholes that allow a high degree of judicialdiscretion also make the judiciary vulnerable tocorruption (CS-BG, RO).Criminal groups corrupt the judiciary by accessingmagistrates via social, political, professional andfamily networks. Elite social networks allowcriminals to enjoy direct contact with members ofthe judiciary. Professional networks also facilitatesuch contacts, where defence lawyers (oftenformer prosecutors) intermediate betweenorganised crime and the judiciary (BG, EL, PL).4
No 26POLICY BRIEFIV. Customs corruptionCorruption of customs officers mainly helps organisedcrime avoid detection of smuggled goods, avoidinvestigations5 (where customs possess investigatorypowers) or facilitate the commitment of customsfraud (reduce import duties). It is particularlyassociated with the smuggling of excisable goods:particularly cigarettes (AU, BG, CZ, EL, HU, IE, LT, LV,MT, RO), alcohol (BE, BG, CZ, IE, MT, RO) oil and oilproducts (BG, CZ, EL, IE, MT, PL). Customs officersconsider corruption related to drugs as risky, and it israre (CS-BG, CS-EL, ES, FR, NL, UK), while VAT fraudschemes are likelier to involve customs officers (BG,DE, EL).November 2010Another significant factor that impacts customscorruption is political influence. High-levelcustoms officers (or those at potentially ‘bribelucrative’ border crossings) are often politicallyappointed (CS-BG, CS-EL). Police corruption mayalso go hand-in-hand with customs corruptionwhere police officers can racketeer or establishcollaborations with customs officials to protect theillegal goods smuggling (CS-BG, CS-EL). The largesize of the grey economies of EU-10E and Greecepredicates customs corruption that facilitatesconsumer goods smuggling.V. Private sector corruptionThe detected levels of customs corruption in EU-10Eand Greece are markedly different from the rest ofthe EU. There are numerous explanations for thisdifference. Eastern land border crossings are underthe most pressure, particularly from cigarettetraffickers, but also from smugglers of counterfeit orother consumer goods from outside the EU. In smalltown border areas, family ties and local politiciansalso create favourable environments or pressuresfacilitating customs corruption. In such areas, localeconomies are often dependent on cross-bordertrafficking or shuttle trade.Data on organised crime’s corruption of theprivate sector was generally not available, as mostgovernments do not collect such data. Privatesector corruption has only recently been includedin legislations of (not all) Member States, followingthe adoption of Council Framework Decision2003/568/JHA on combating corruption in theprivate sector. ‘Collusion’ is often a moreappropriate way of describing professionals’corrupt behaviour, including that of lawyers,accountants, doctors and real-estate surveyorswho provide services to organised crime.In most of Western Europe, big sea ports or airportsused for smuggling have such large volumes of cargotraffic that smugglers prefer to rely on the lowchances of being caught than on corruption. Lowersalaries of customs officers in EU-10E countries alsocontribute to customs corruption. The involvement oflaw enforcement in customs-like duties (e.g. CivilGuard in Spain, Financial Guard in Italy) reducescorruption opportunities for customs officers in thesecountries. Finally, many customs agencies do not haveinternal investigation departments, which affects thedetection of corruption (BE, DK, NL).The report has provided a long list of corruptpractices related to:5Bulgaria is among the few MS, where the Customs administration doesnot possess investigatory powers. the production and procurement of illegalgoods (e.g. cigarette factory managers divertingproduction to illegal markets); illegalgoodstrafficking(e.g.transportation industry staff – drivers, ship, portstaff) (AU, BE, IR, PL, RO, SE); distribution of such goods (e.g. clubbouncers allowing drug sales (ES,UK); car dealersselling stolen vehicles (BG, EL).Money laundering was identified as one of the keyreasons to use corruption in the financial,gambling and real estate industries. In these cases,5
No 26POLICY BRIEFthe most common issue is bribing employees so thatsuspicious activities won’t be reported to regulatoryauthorities. The private security industry, wheresecurity firms are often instrumental in regulating thedistribution of drugs in clubs, and the constructionindustry also cover up illicit cartels.White-collar-crime-related corruption has a specialcharacteristic in EU-10E countries (and also in Greece,Italy and Spain). In the 1990s, internationalcorporations set up local offices, hiring localmanagers. In many cases, these local managersrepresented local criminal elites that facilitated themarket entry of the multinationals. Still, at presentthey continue
organised crime’s main corruption schemes, the areas or risks they create, and the related differences amongst European Union (EU) Member States (MS); best practices in prevention and countering corruption linked to organized crime; 1 Center for the Study o
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