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Sunday, July 14, 2024

Organized crime

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Organized_crime

Organized crime is a category of transnational, national, or local group of centralized enterprises run to engage in illegal activity, most commonly for profit. While organized crime is generally thought of as a form of illegal business, some criminal organizations, such as terrorist groups, rebel forces, and separatists, are politically motivated. Many criminal organizations rely on fear or terror to achieve their goals or aims as well as to maintain control within the organization and may adopt tactics commonly used by authoritarian regimes to maintain power. Some forms of organized crime simply exist to cater towards demand of illegal goods in a state or to facilitate trade of goods and services that may have been banned by a state (such as illegal drugs or firearms). Sometimes, criminal organizations force people to do business with them, such as when a gang extorts protection money from shopkeepers. Street gangs may often be deemed organized crime groups or, under stricter definitions of organized crime, may become disciplined enough to be considered organized. A criminal organization can also be referred to as an outfit, a gang, crime family, mafia, mob, (crime) ring, or syndicate; the network, subculture, and community of criminals involved in organized crime may be referred to as the underworld or gangland. Sociologists sometimes specifically distinguish a "mafia" as a type of organized crime group that specializes in the supply of extra-legal protection and quasi-law enforcement. Academic studies of the original "Mafia", the Italian Mafia generated an economic study of organized crime groups and exerted great influence on studies of the Russian mafia, the Chinese triads, the Hong Kong triads, and the Japanese yakuza.

Other organizations—including states, churches, militaries, police forces, and corporations—may sometimes use organized-crime methods to conduct their activities, but their powers derive from their status as formal social institutions. There is a tendency to distinguish "traditional" organized crime such as gambling, loan sharking, drug-trafficking, prostitution, and fraud from certain other forms of crime that also usually involve organized or group criminal acts, such as white-collar crime, financial crimes, political crimes, war crimes, state crimes, and treason. This distinction is not always apparent and academics continue to debate the matter. For example, in failed states that can no longer perform basic functions such as education, security, or governance (usually due to fractious violence or to extreme poverty), organized crime, governance, and war sometimes complement each other. The term "oligarchy" has been used to describe democratic countries whose political, social, and economic institutions come under the control of a few families and business oligarchs that may be deemed or may devolve into organized crime groups in practice. By their very nature, kleptocracies, mafia states, narco-states or narcokleptocracies, and states with high levels of clientelism and political corruption are either heavily involved with organized crime or tend to foster organized crime within their own governments.

In the United States, the Organized Crime Control Act (1970) defines organized crime as "[t]he unlawful activities of [...] a highly organized, disciplined association [...]". Criminal activity as a structured process is referred to as racketeering. In the UK, police estimate that organized crime involves up to 38,000 people operating in 6,000 various groups. Historically, the largest organized crime force in the United States has been Cosa Nostra (Italian-American Mafia), but other transnational criminal organizations have also risen in prominence in recent decades. A 2012 article in a U.S. Department of Justice journal stated that: "Since the end of the Cold War, organized crime groups from Russia, China, Italy, Nigeria, and Japan have increased their international presence and worldwide networks or have become involved in more transnational criminal activities. Most of the world's major international organized crime groups are present in the United States." The US Drug Enforcement Administration's 2017 National Drug Threat Assessment classified Mexican transnational criminal organizations (TCOs) as the "greatest criminal drug threat to the United States," citing their dominance "over large regions in Mexico used for the cultivation, production, importation, and transportation of illicit drugs" and identifying the Sinaloa, Jalisco New Generation, Juárez, Gulf, Los Zetas, and Beltrán-Leyva cartels as the six Mexican TCO with the greatest influence in drug trafficking to the United States. The United Nations Sustainable Development Goal 16 has a target to combat all forms of organized crime as part of the 2030 Agenda.

In some countries, football hooliganism has been linked to organised crime.

Models of organized crime

Various models have been proposed to describe the structure of criminal organizations.

Organizational

Patron–client networks

Patron–client networks are defined by fluid interactions. They produce crime groups that operate as smaller units within the overall network, and as such tend towards valuing significant others, familiarity of social and economic environments, or tradition. These networks are usually composed of:

Hierarchies based on 'naturally' forming family, social and cultural traditions;
'Tight-knit' focus of activity/labor;
Fraternal or nepotistic value systems;
Personalized activity; including family rivalries, territorial disputes, recruitment and training of family members, etc.;
Entrenched belief systems, reliance of tradition (including religion, family values, cultural expectations, class politics, gender roles, etc.); and,
Communication and rule enforcement mechanisms dependent on organizational structure, social etiquette, history of criminal involvement, and collective decision-making.

Bureaucratic/corporate operations

Bureaucratic/corporate organized crime groups are defined by the general rigidity of their internal structures. They focus more on how the operations works, succeeds, sustains itself or avoids retribution, they are generally typified by:

A complex authority structure;
An extensive division of labor between classes within the organization;
Meritocratic (as opposed to cultural or social attributes);
Responsibilities carried out in an impersonal manner;
Extensive written rules/regulations (as opposed to cultural praxis dictating action); and,
'Top-down' communication and rule enforcement mechanisms.

However, this model of operation has some flaws:

The 'top-down' communication strategy is susceptible to interception, more so further down the hierarchy being communicated to;
Maintaining written records jeopardizes the security of the organization and relies on increased security measures;
Infiltration at lower levels in the hierarchy can jeopardize the entire organization (a 'house of cards' effect); and,
Death, injury, incarceration or internal power struggles dramatically heighten the insecurity of operations.

While bureaucratic operations emphasize business processes and strongly authoritarian hierarchies, these are based on enforcing power relationships rather than an overlying aim of protectionism, sustainability or growth.

Youth and street gangs

An estimate on youth street gangs in the United States provided by Hannigan, et al., marked an increase of 35% between 2002 and 2010. A distinctive gang culture underpins many, but not all, organized groups; this may develop through recruiting strategies, social learning processes in the corrective system experienced by youth, family or peer involvement in crime, and the coercive actions of criminal authority figures. The term "street gang" is commonly used interchangeably with "youth gang," referring to neighborhood or street-based youth groups that meet "gang" criteria. Miller (1992) defines a street gang as "a self-formed association of peers, united by mutual interests, with identifiable leadership and internal organization, who act collectively or as individuals to achieve specific purposes, including the conduct of illegal activity and control of a particular territory, facility, or enterprise." Some reasons youth join gangs include to feel accepted, attain status, and increase their self-esteem. A sense of unity brings together many of the youth gangs that lack the family aspect at home.

"Zones of transition" are deteriorating neighborhoods with shifting populations. In such areas, conflict between groups, fighting, "turf wars", and theft promote solidarity and cohesion. Cohen (1955): working class teenagers joined gangs due to frustration of inability to achieve status and goals of the middle class; Cloward and Ohlin (1960): blocked opportunity, but unequal distribution of opportunities lead to creating different types of gangs (that is, some focused on robbery and property theft, some on fighting and conflict and some were retreatists focusing on drug taking); Spergel (1966) was one of the first criminologists to focus on evidence-based practice rather than intuition into gang life and culture. Participation in gang-related events during adolescence perpetuate a pattern of maltreatment on their own children years later. Klein (1971) like Spergel studied the effects on members of social workers' interventions. More interventions actually lead to greater gang participation and solidarity and bonds between members. Downes and Rock (1988) on Parker's analysis: strain theory applies, labeling theory (from experience with police and courts), control theory (involvement in trouble from early childhood and the eventual decision that the costs outweigh the benefits) and conflict theories. No ethnic group is more disposed to gang involvement than another, rather it is the status of being marginalized, alienated or rejected that makes some groups more vulnerable to gang formation, and this would also be accounted for in the effect of social exclusion, especially in terms of recruitment and retention. These may also be defined by age (typically youth) or peer group influences, and the permanence or consistency of their criminal activity. These groups also form their own symbolic identity or public representation which are recognizable by the community at large (include colors, symbols, patches, flags and tattoos).

Research has focused on whether the gangs have formal structures, clear hierarchies and leadership in comparison with adult groups, and whether they are rational in pursuit of their goals, though positions on structures, hierarchies and defined roles are conflicting. Some studied street gangs involved in drug dealing - finding that their structure and behavior had a degree of organizational rationality. Members saw themselves as organized criminals; gangs were formal-rational organizations, Strong organizational structures, well defined roles and rules that guided members' behavior. Also a specified and regular means of income (i.e., drugs). Padilla (1992) agreed with the two above. However some have found these to be loose rather than well-defined and lacking persistent focus, there was relatively low cohesion, few shared goals and little organizational structure. Shared norms, value and loyalties were low, structures "chaotic", little role differentiation or clear distribution of labor. Similarly, the use of violence does not conform to the principles behind protection rackets, political intimidation and drug trafficking activities employed by those adult groups. In many cases gang members graduate from youth gangs to highly developed OC groups, with some already in contact with such syndicates and through this we see a greater propensity for imitation. Gangs and traditional criminal organizations cannot be universally linked (Decker, 1998), however there are clear benefits to both the adult and youth organization through their association. In terms of structure, no single crime group is archetypal, though in most cases there are well-defined patterns of vertical integration (where criminal groups attempt to control the supply and demand), as is the case in arms, sex and drug trafficking.

Individual difference

Entrepreneurial

The entrepreneurial model looks at either the individual criminal or a smaller group of organized criminals, that capitalize off the more fluid 'group-association' of contemporary organized crime. This model conforms to social learning theory or differential association in that there are clear associations and interaction between criminals where knowledge may be shared, or values enforced, however, it is argued that rational choice is not represented in this. The choice to commit a certain act, or associate with other organized crime groups, may be seen as much more of an entrepreneurial decision - contributing to the continuation of a criminal enterprise, by maximizing those aspects that protect or support their own individual gain. In this context, the role of risk is also easily understandable,however it is debatable whether the underlying motivation should be seen as true entrepreneurship or entrepreneurship as a product of some social disadvantage.

The criminal organization, much in the same way as one would assess pleasure and pain, weighs such factors as legal, social and economic risk to determine potential profit and loss from certain criminal activities. This decision-making process rises from the entrepreneurial efforts of the group's members, their motivations and the environments in which they work. Opportunism is also a key factor – the organized criminal or criminal group is likely to frequently reorder the criminal associations they maintain, the types of crimes they perpetrate, and how they function in the public arena (recruitment, reputation, etc.) in order to ensure efficiency, capitalization and protection of their interests.

Multi-model approach

Culture and ethnicity provide an environment where trust and communication between criminals can be efficient and secure. This may ultimately lead to a competitive advantage for some groups; however, it is inaccurate to adopt this as the only determinant of classification in organized crime. This categorization includes the Sicilian Mafia, 'Ndrangheta, ethnic Chinese criminal groups, Japanese yakuza (or Boryokudan), Colombian drug trafficking groups, Nigerian organized crime groups, Corsican mafia, Korean criminal groups and Jamaican posses. From this perspective, organized crime is not a modern phenomenon - the construction of 17th and 18th century crime gangs fulfill all the present day criteria of criminal organizations (in opposition to the Alien Conspiracy Theory). These roamed the rural borderlands of central Europe embarking on many of the same illegal activities associated with today's crime organizations, with the exception of money laundering. When the French revolution created strong nation states, the criminal gangs moved to other poorly controlled regions like the Balkans and Southern Italy, where the seeds were sown for the Sicilian Mafia - the linchpin of organized crime in the New World.

Computational approach

While most of the conceptual frameworks used to model organized crime emphasize the role of actors or activities, computational approaches built on the foundations of data science and artificial intelligence are focusing on deriving new insights on organized crime from big data. For example, novel machine learning models have been applied to study and detect urban crime and online prostitution networks. Big data has also been used to develop online tools predicting the risk for an individual to be a victim of online sex trade or getting drawn into online sex work. In addition, data from Twitter and Google Trends have been used to study the public perceptions of organized crime.

Model type	Environment	Group	Processes	Impacts
National	Historical or cultural basis	Family or hierarchy	Secrecy/bonds. Links to insurgents	Local corruption/influence. Fearful community.
Transnational	Politically and economically unstable	Vertical integration	Legitimate cover	Stable supply of illicit goods. High-level corruption.
Transnational/transactional	Any	Flexible. Small size.	Violent. Opportunistic. Risk taking	Unstable supply of range of illicit goods. Exploits young local offenders.
Entrepreneurial/transactional	Developed/high technology regions	Individuals or pairs.	Operating through legitimate enterprise	Provision of illicit services, e.g., money laundering, fraud, criminal networks.

Typical activities

Organized crime groups provide a range of illegal services and goods. Organized crime often victimizes businesses through the use of extortion or theft and fraud activities like hijacking cargo trucks and ships, robbing goods, committing bankruptcy fraud (also known as "bust-out"), insurance fraud or stock fraud (insider trading). Organized crime groups also victimize individuals by car theft (either for dismantling at "chop shops" or for export), art theft, Metal theft, bank robbery, burglary, jewelry and gems theft and heists, shoplifting, computer hacking, credit card fraud, economic espionage, embezzlement, identity theft, and securities fraud ("pump and dump" scam). Some organized crime groups defraud national, state, or local governments by bid rigging public projects, counterfeiting money, smuggling or manufacturing untaxed alcohol (rum-running) or cigarettes (buttlegging), and providing immigrant workers to avoid taxes.

Organized crime groups seek out corrupt public officials in executive, law enforcement, and judicial roles so that their criminal rackets and activities on the black market can avoid, or at least receive early warnings about, investigation and prosecution.

Activities of organized crime include loansharking of money at very high interest rates, blackmailing, assassination, backyard breeding, bombings, bookmaking and illegal gambling, confidence tricks, forging early release prison documents, copyright infringement, counterfeiting of intellectual property, metal theft, fencing, kidnapping, sex trafficking, smuggling, drug trafficking, arms trafficking, impersonating armored truck drivers, oil smuggling, antiquities smuggling, organ trafficking, contract killing, identity document forgery, money laundering, bribery, seduction, electoral fraud, insurance fraud, point shaving, price fixing, cargo theft via fictions pickup, illegal taxicab operation, illegal dumping of toxic waste, illegal trading of nuclear materials, military equipment smuggling, nuclear weapons smuggling, passport fraud, providing illegal immigration and cheap labor, people smuggling, trading in endangered species, and trafficking in human beings. Organized crime groups also do a range of business and labor racketeering activities, such as skimming casinos, insider trading, setting up monopolies in industries such as garbage collecting, construction and cement pouring, bid rigging, getting "no-show" and "no-work" jobs, political corruption and bullying.

Violence

Assault

The commission of violent crime may form part of a criminal organization's 'tools' used to achieve criminogenic goals (for example, its threatening, authoritative, coercive, terror-inducing, or rebellious role), due to psycho-social factors (cultural conflict, aggression, rebellion against authority, access to illicit substances, counter-cultural dynamic), or may, in and of itself, be crime rationally chosen by individual criminals and the groups they form. Assaults are used for coercive measures, to "rough up" debtors, competition or recruits, in the commission of robberies, in connection to other property offenses, and as an expression of counter-cultural authority; violence is normalized within criminal organizations (in direct opposition to mainstream society) and the locations they control. Whilst the intensity of violence is dependent on the types of crime the organization is involved in (as well as their organizational structure or cultural tradition) aggressive acts range on a spectrum from low-grade physical assaults to major trauma assaults. Bodily harm and grievous bodily harm, within the context of organized crime, must be understood as indicators of intense social and cultural conflict, motivations contrary to the security of the public, and other psycho-social factors.

Murder

Murder has evolved from the honor and vengeance killings of the yakuza or Sicilian mafia which placed large physical and symbolic importance on the act of murder, its purposes and consequences, to a much less discriminate form of expressing power, enforcing criminal authority, achieving retribution or eliminating competition. The role of the hit man has been generally consistent throughout the history of organized crime, whether that be due to the efficiency or expediency of hiring a professional assassin or the need to distance oneself from the commission of murderous acts (making it harder to prove criminal culpability). This may include the assassination of notable figures (public, private or criminal), once again dependent on authority, retribution or competition. Revenge killings, armed robberies, violent disputes over controlled territories and offenses against members of the public must also be considered when looking at the dynamic between different criminal organizations and their (at times) conflicting needs. After killing their victims, the gangsters often try to destroy evidence by getting rid of the victims remains in such a way as to prevent, hinder, or delay the discovery of the body, to prevent identification of the body, or to prevent autopsy. The different ways that organized criminals have been known to dispose of dead bodies include but are not limited to hiding the bodies in trash or landfills, feeding the bodies to animals (such as pigs or rats), destruction by industrial process (such as machinery, chemical bath, molten metal or a junked car), injection into the legitimate body disposal system (such as morgues, funeral homes, cemeteries, crematoriums, funeral pyres or cadaver donations) or covert killings at health care facilities, disguising as animal flesh (such as food waste or restaurant food), creating false evidence of the circumstances of death and letting investigators dispose of the body, possibly obscuring identity, abandonment in a remote area where the body can degrade significantly, while exposure to elements (such as rain, wind, heat, etc.) as well as animal activity (such as consumption by scavengers) can contaminate the crime scene and/or destroy evidence before being discovered, if ever, such as a wilderness area (such as national parks or nature reserves) or an abandoned area (such as an abandoned building, well or mine). However, there are also many instances of gangsters putting the bodies of their victims on display as a form of psychological warfare against their enemies.

Vigilantism

Criminal syndicates often commit acts of vigilantism by enforcing laws, investigating certain criminal acts and punishing those who violate such rules. People who are often targeted by organized criminals tend to be individualistic criminals, people who committed crimes that are considered particularly heinous by society, people who committed wrongdoings against members or associates, rivals and/or terrorist groups. One reason why criminal groups might commit vigilantism in their neighborhoods is to prevent heavy levels of community policing, that could be harmful to their illicit businesses; additionally the vigilante acts could help the gangs to ingratiate themselves in their communities.

In the US during the roaring twenties, the anti-catholic and anti-semitic Ku Klux Klan was known to be staunch enforcers of prohibition, as a result Italian, Irish, Polish and Jewish gangsters would at times have violent confrontations against the KKK. On one occasion FBI informant and mobster Gregory Scarpa kidnapped and tortured a local Klansmen into revealing the bodies of Civil rights workers who had been killed by the KKK. During World War II, America had a growing number of Nazi supporters that formed the German American Bund, which was known to be threatening to local Jewish people, as a result Jewish mobsters (such a Meyer Lansky, Bugsy Siegel and Jack Ruby) were often hired by the American Jewish community to help defend against the Nazi bund, even going as far as attacking and killing Nazi sympathizers during bund meetings. Vigilante groups such as the Black Panther Party, White Panther Party, and Young Lords have been accused of committing crimes in order to fund their political activities.

While protection racketeering is often seen as nothing more than extortion, criminal syndicates that participate in protection rackets have at times provided genuine protection against other criminals for their clients, the reason for this is because the criminal organization would want the business of their clients to do better so that the gang can demand even more protection money, additionally if the gang has enough knowledge of the local fencers, they may even be able to track down and retrieve any objects that were stolen from the business owner, to further help their clients the gang may also force out, disrupt, vandalize, steal from or shutdown competing businesses for their clients. In Colombia the insurgent groups were trying to steal land, kidnap family members, and extort money from the drug barons. As a result the drug lords of the Medellín Cartel formed a paramilitary vigilante group known as Muerte a Secuestradores ("Death to Kidnappers") to defend the cartel against the FARC and M-19, even kidnapping and torturing the leader of M-19 before leaving him tied up in front of a police station. During the Medellín Cartel's war against the Colombian government, both the Norte del Valle Cartel and Cali Cartel formed and operated a vigilante group called Los Pepes (which also comprised members of the Colombian government, police and former members of the Medellín Cartel) to bring about the downfall of Pablo Escobar; they did so by bombing the properties of the Medellín Cartel and kidnapping, torturing and/or killing Escobar's associates as well as working alongside the Search Bloc, which would eventually lead to the dismantling of the Medellín Cartel and the death of Pablo Escobar. Because of the high levels of corruption, the Oficina de Envigado would do things to help the police and vice versa, to the point where the police and the cartel would sometimes do operations together against other criminals; additionally the leaders of La Oficina would often act as judges to mediate disputes between the various different drug gangs throughout Colombia, which according to some helped prevented a lot of disputes from turning violent.

On Somalia coastline many people rely on fishing for economic survival, because of this Somali pirates are often known to attack foreign vessels who partake in illegal fishing and overfishing in their waters and vessels that illegally dump waste into their waters. As a result, marine biologists say that the local fishery is recovering. In Mexico a vigilante group called Grupos de autodefensa comunitaria was formed to counter the illegal loggers, the La Familia Michoacana Cartel and a drug cartel/cult known as the Knights Templar Cartel; as they grew, they were being joined by former cartel members and as they got bigger they began to sell drugs in order to buy weapons. The Knights Templar Cartel was eventually defeated and dissolved by the vigilantes' actions but they ended up forming their own cartel called Los Viagras, which has links with the Jalisco New Generation Cartel. The Minuteman Project is a far-right paramilitary organization that seeks to prevent illegal immigration across the US-Mexico border; however, doing so is detrimental to gangs like Mara Salvatrucha, who make money through people smuggling, and as a result MS-13 is known to commit acts of violence against members of the Minutemen, to prevent them from interfering with their illegal immigration activities. Throughout the world there are various anti-gang vigilante groups, who profess to be fighting against gang influence, but share characteristics and acts similarly to gangs, including Sombra Negra, Friends Stand United, People Against Gangsterism and Drugs, and OG Imba. Gangs that are involved in drug trafficking often commit violent acts to stop or force out independent dealers—drug dealers with no gang ties—to keep them from taking customers.

In America, there is an animal welfare organization called Rescue Ink, in which outlaw biker gang members volunteer to rescue animals in need and combat against people who commit animal cruelty, such as breaking up cockfighting rings, stopping the killing of stray cats, breaking up dog fighting rings, and rescuing pets from abusive owners. In the American prison system, prison gangs are often known to physically harm and even kill inmates who have committed such crimes as child murder, serial killing, pedophilia, hate crimes, domestic violence, and rape, and inmates who have committed crimes against the elderly, animals, the disabled, the poor and the less fortunate. In many minority communities and poor neighborhoods, residents often distrust law enforcement, as a result the gang syndicates often take over to "police" their neighborhoods by committing acts against people who had committed crimes such as bullying, muggings, home invasions, hate crimes, stalking, sexual assault, domestic violence and child molestation, as well as mediating disputes between neighbors. The ways that the gangs would punish such individuals could range from forced apologies, being threatened, being forced to return stolen objects, vandalizing property, arson, being forced to move, bombings, being assaulted and/or battered, kidnappings, false imprisonment, torture and/or being murdered. Some criminal syndicates have been known to hold their own "trials" for members of theirs who had been accused of wrongdoing; the punishments that the accused member would face if "found guilty" would vary depending on the offense.

Terrorism

In addition to what is considered traditional organized crime involving direct crimes of fraud swindles, scams, racketeering and other acts motivated for the accumulation of monetary gain, there is also non-traditional organized crime which is engaged in for political or ideological gain or acceptance. Such crime groups are often labelled terrorist groups or narcoterrorists.

There is no universally agreed, legally binding, criminal law definition of terrorism. Common definitions of terrorism refer only to those violent acts which are intended to create fear (terror), are perpetrated for a religious, political or ideological goal, deliberately target or disregard the safety of non-combatants (e.g., neutral military personnel or civilians), and are committed by non-government agencies. Some definitions also include acts of unlawful violence and war, especially crimes against humanity (see the Nuremberg Trials), Allied authorities deeming the German Nazi Party, its paramilitary and police organizations, and numerous associations subsidiary to the Nazi Party "criminal organizations". The use of similar tactics by criminal organizations for protection rackets or to enforce a code of silence is usually not labeled terrorism though these same actions may be labeled terrorism when done by a politically motivated group.

Notable groups include the Medellín Cartel, Corleonesi Mafia, various Mexican Cartels, and Jamaican Posse.

Other

Financial crime

Organized crime groups generate large amounts of money by activities such as drug trafficking, arms smuggling, extortion, theft, and financial crime. These illegally sourced assets are of little use to them unless they can disguise it and convert it into funds that are available for investment into legitimate enterprise. The methods they use for converting its 'dirty' money into 'clean' assets encourages corruption. Organized crime groups need to hide the money's illegal origin. This allows for the expansion of OC groups, as the 'laundry' or 'wash cycle' operates to cover the money trail and convert proceeds of crime into usable assets. Money laundering is bad for international and domestic trade, banking reputations and for effective governments and rule of law. This is due to the methods used to hide the proceeds of crime. These methods include, but are not limited to: buying easily transported values, transfer pricing, and using "underground banks," as well as infiltrating firms in the legal economy.

Launderers will also co-mingle illegal money with revenue made from businesses in order to further mask their illicit funds. Accurate figures for the amounts of criminal proceeds laundered are almost impossible to calculate, rough estimates have been made, but only give a sense of the scale of the problem and not quite how great the problem truly is. The United Nations Office on Drugs and Crime conducted a study, they estimated that in 2009, money laundering equated to about 2.7% of global GDP being laundered; this is equal to about 1.6 trillion US dollars. The Financial Action Task Force on Money Laundering (FATF), an intergovernmental body set up to combat money laundering, has stated that "A sustained effort between 1996 and 2000 by the Financial Action Task Force (FATF) to produce such estimates failed." However, anti-money laundering efforts that seize money laundered assets in 2001 amounted to $386 million. The rapid growth of money laundering is due to:

the scale of organized crime precluding it from being a cash business - groups have little option but to convert its proceeds into legitimate funds and do so by investment, by developing legitimate businesses and purchasing property;
globalization of communications and commerce - technology has made rapid transfer of funds across international borders much easier, with groups continuously changing techniques to avoid investigation; and,
a lack of effective financial regulation in parts of the global economy.

Money laundering is a three-stage process:

Placement: (also called immersion) groups 'smurf' small amounts at a time to avoid suspicion; physical disposal of money by moving crime funds into the legitimate financial system; may involve bank complicity, mixing licit and illicit funds, cash purchases and smuggling currency to safe havens.
Layering: disguises the trail to foil pursuit. Also called 'heavy soaping'. It involves creating false paper trails, converting cash into assets by cash purchases.
Integration: (also called 'spin dry): Making it into clean taxable income by real-estate transactions, sham loans, foreign bank complicity and false import and export transactions.

Means of money laundering:

Money transmitters, black money markets purchasing goods, gambling, increasing the complexity of the money trail.
Underground banking (flying money), involves clandestine 'bankers' around the world.
It often involves otherwise legitimate banks and professionals.

The policy aim in this area is to make the financial markets transparent, and minimize the circulation of criminal money and its cost upon legitimate markets.

Counterfeiting

Counterfeiting money is another financial crime. The counterfeiting of money includes illegally producing money that is then used to pay for anything desired. In addition to being a financial crime, counterfeiting also involves manufacturing or distributing goods under assumed names. Counterfeiters benefit because consumers believe they are buying goods from companies that they trust, when in reality they are buying low quality counterfeit goods. In 2007, the OECD reported the scope of counterfeit products to include food, pharmaceuticals, pesticides, electrical components, tobacco and even household cleaning products in addition to the usual films, music, literature, games and other electrical appliances, software and fashion. A number of qualitative changes in the trade of counterfeit products:

a large increase in fake goods which are dangerous to health and safety;
most products repossessed by authorities are now household items rather than luxury goods;
a growing number of technological products; and,
production is now operated on an industrial scale.

Tax evasion

The economic effects of organized crime have been approached from a number of both theoretical and empirical positions, however the nature of such activity allows for misrepresentation. The level of taxation taken by a nation-state, rates of unemployment, mean household incomes and level of satisfaction with government and other economic factors all contribute to the likelihood of criminals to participate in tax evasion. As most organized crime is perpetrated in the liminal state between legitimate and illegitimate markets, these economic factors must adjusted to ensure the optimal amount of taxation without promoting the practice of tax evasion. As with any other crime, technological advancements have made the commission of tax evasion easier, faster and more globalized. The ability for organized criminals to operate fraudulent financial accounts, utilize illicit offshore bank accounts, access tax havens or tax shelters, and operating goods smuggling syndicates to evade importation taxes help ensure financial sustainability, security from law enforcement, general anonymity and the continuation of their operations.

Cybercrime

Internet fraud

Identity theft is a form of fraud or cheating of another person's identity in which someone pretends to be someone else by assuming that person's identity, typically in order to access resources or obtain credit and other benefits in that person's name. Victims of identity theft (those whose identity has been assumed by the identity thief) can suffer adverse consequences if held accountable for the perpetrator's actions, as can organizations and individuals who are defrauded by the identity thief, and to that extent are also victims. Internet fraud refers to the actual use of Internet services to present fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to transmit the proceeds of fraud to financial institutions or to others connected with the scheme. In the context of organized crime, both may serve as means through which other criminal activity may be successfully perpetrated or as the primary goal themselves. Email fraud, advance-fee fraud, romance scams, employment scams, and other phishing scams are the most common and most widely used forms of identity theft, though with the advent of social networking fake websites, accounts and other fraudulent or deceitful activity has become commonplace.

Copyright infringement

Copyright infringement is the unauthorized or prohibited use of works under copyright, infringing the copyright holder's exclusive rights, such as the right to reproduce or perform the copyrighted work, or to make derivative works. Whilst almost universally considered under civil procedure, the impact and intent of organized criminal operations in this area of crime has been the subject of much debate. Article 61 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) requires that signatory countries establish criminal procedures and penalties in cases of willful trademark counterfeiting or copyright piracy on a commercial scale. More recently copyright holders have demanded that states provide criminal sanctions for all types of copyright infringement. Organized criminal groups capitalize on consumer complicity, advancements in security and anonymity technology, emerging markets and new methods of product transmission, and the consistent nature of these provides a stable financial basis for other areas of organized crime.

Cyberwarfare

Cyberwarfare refers to politically motivated hacking to conduct sabotage and espionage. It is a form of information warfare sometimes seen as analogous to conventional warfare although this analogy is controversial for both its accuracy and its political motivation. It has been defined as activities by a nation-state to penetrate another nation's computers or networks with the intention of causing civil damage or disruption. Moreover, it acts as the "fifth domain of warfare," and William J. Lynn, U.S. Deputy Secretary of Defense, states that "as a doctrinal matter, the Pentagon has formally recognized cyberspace as a new domain in warfare . . . [which] has become just as critical to military operations as land, sea, air, and space." Cyber espionage is the practice of obtaining confidential, sensitive, proprietary or classified information from individuals, competitors, groups, or governments using illegal exploitation methods on internet, networks, software and/or computers. There is also a clear military, political, or economic motivation. Unsecured information may be intercepted and modified, making espionage possible internationally. The recently established Cyber Command is currently debating whether such activities as commercial espionage or theft of intellectual property are criminal activities or actual "breaches of national security." Furthermore, military activities that use computers and satellites for coordination are at risk of equipment disruption. Orders and communications can be intercepted or replaced. Power, water, fuel, communications, and transportation infrastructure all may be vulnerable to sabotage. According to Clarke, the civilian realm is also at risk, noting that the security breaches have already gone beyond stolen credit card numbers, and that potential targets can also include the electric power grid, trains, or the stock market.

Computer viruses

The term "computer virus" may be used as an overarching phrase to include all types of true viruses, malware, including computer worms, Trojan horses, most rootkits, spyware, dishonest adware and other malicious and unwanted software (though all are technically unique), and proves to be quite financially lucrative for criminal organizations, offering greater opportunities for fraud and extortion whilst increasing security, secrecy and anonymity. Worms may be utilized by organized crime groups to exploit security vulnerabilities (duplicating itself automatically across other computers a given network), while a Trojan horse is a program that appears harmless but hides malicious functions (such as retrieval of stored confidential data, corruption of information, or interception of transmissions). Worms and Trojan horses, like viruses, may harm a computer system's data or performance. Applying the Internet model of organized crime, the proliferation of computer viruses and other malicious software promotes a sense of detachment between the perpetrator (whether that be the criminal organization or another individual) and the victim; this may help to explain vast increases in cyber-crime such as these for the purpose of ideological crime or terrorism. In mid July 2010, security experts discovered a malicious software program that had infiltrated factory computers and had spread to plants around the world. It is considered "the first attack on critical industrial infrastructure that sits at the foundation of modern economies," notes the New York Times.

White-collar crime and corruption

Corporate crime

Corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals that may be identified with a corporation or other business entity (see vicarious liability and corporate liability). Corporate crimes are motivated by either the individuals desire or the corporations desire to increase profits. The cost of corporate crimes to United States taxpayers is about $500 billion. Note that some forms of corporate corruption may not actually be criminal if they are not specifically illegal under a given system of laws. For example, some jurisdictions allow insider trading. The different businesses that organized crime figures have been known to operate is vast, including but not limited to pharmacies, import-export companies, check-cashing stores, tattoo parlors, zoos, online dating sites, liquor stores, motorcycle shops, banks, hotels, ranches and plantations, electronic stores, beauty salons, real estate companies, daycares, framing stores, taxicab companies, phone companies, shopping malls, jewelry stores, modeling agencies, dry cleaners, pawn shops, pool halls, clothing stores, freight companies, charity foundations, youth centers, recording studios, sporting goods stores, furniture stores, gyms, insurance companies, security companies, law firms, and private military companies.

Labor racketeering

Labor racketeering, as defined by the United States Department of Labor, is the infiltrating, exploiting, and controlling of employee benefit plan, union, employer entity, or workforce that is carried out through illegal, violent, or fraudulent means for profit or personal benefit. Labor racketeering has developed since the 1930s, affecting national and international construction, mining, energy production and transportation sectors immensely. Activity has focused on the importation of cheap or unfree labor, involvement with union and public officials (political corruption), and counterfeiting.

Political corruption

Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by private persons or corporations not directly involved with the government. An illegal act by an officeholder constitutes political corruption only if the act is directly related to their official duties. Forms of corruption vary, but include bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement. While corruption may facilitate criminal enterprise such as drug trafficking, money laundering, and human trafficking, it is not restricted to these activities. The activities that constitute illegal corruption differ depending on the country or jurisdiction. For instance, certain political funding practices that are legal in one place may be illegal in another. In some cases, government officials have broad or poorly defined powers, which make it difficult to distinguish between legal and illegal actions. Worldwide, bribery alone is estimated to involve over 1 trillion US dollars annually. A state of unrestrained political corruption is known as a kleptocracy, literally meaning "rule by thieves".

Drug trafficking

There are three major regions that center around drug trafficking, known as the Golden Triangle (Burma, Laos, Thailand), Golden Crescent (Afghanistan) and Central and South America. There are suggestions that due to the continuing decline in opium production in South East Asia, traffickers may begin to look to Afghanistan as a source of heroin."

With respect to organized crime and accelerating synthetic drug production in East and Southeast Asia, especially the Golden Triangle, Sam Gor, also known as The Company, is the most prominent international crime syndicate based in Asia-Pacific. It is made up of members of five different triads. Sam Gor is understood to be headed by Chinese-Canadian Tse Chi Lop. The Cantonese Chinese syndicate is primarily involved in drug trafficking, earning at least $8 billion per year. Sam Gor is alleged to control 40% of the Asia-Pacific methamphetamine market, while also trafficking heroin and ketamine. The organization is active in a variety of countries, including Myanmar, Thailand, New Zealand, Australia, Japan, China and Taiwan. Sam Gor previously produced meth in Southern China and is now believed to manufacture mainly in the Golden Triangle, specifically Shan State, Myanmar, responsible for much of the massive surge of crystal meth in recent years. The group is understood to be headed by Tse Chi Lop, a Chinese-Canadian gangster born in Guangzhou, China. Tse is a former member of the Hong Kong-based crime group, the Big Circle Gang. In 1988, Tse immigrated to Canada. In 1998, Tse was convicted of transporting heroin into the United States and served nine years behind bars. Tse has been compared in prominence to Joaquín "El Chapo" Guzmán and Pablo Escobar.

The U.S. supply of heroin comes mainly from foreign sources which include Southeast Asia's Golden Triangle, Southwest Asia, and Latin America. Heroin comes in two forms. The first is its chemical base form which presents itself as brown and the second is a salt form that is white. The former is mainly produced in Afghanistan and some south-west countries while the latter had a history of being produced in only south-east Asia, but has since moved to also being produced in Afghanistan. There is some suspicion white Heroin is also being produced in Iran and Pakistan, but it is not confirmed. This area of Heroin production is referred to as the Golden Crescent. Heroin is not the only drug being used in these areas. The European market has shown signs of growing use in opioids on top of the long-term heroin use.

Drug traffickers produce drugs in drug laboratories and drug farms. A drug lab can range in size from small workshops to the size of small towns (such as Tranquilandia). A drug farm is a place where drug crops are grown before being made into illegal narcotics. A drug farm can range in size from smallholdings to large plantations. In addition to drug crops, it is also not uncommon for drug farms to also host livestock, both to have a legal source of revenue to help disguise the dirty money and so that the livestock can provide a source of organic fertilizer (such as manure) for the drug crops. There are multiple instances where traffickers set up some of their drug farms, safe houses and drug labs in remote wilderness areas. Once produced, the fully processed narcotics are then transported to more populated areas to be sold. Oftentimes the traffickers stationed in these remote criminal settlements, sustain themselves with a combination of survival skills and with food, supplies and workers being brought to them by associates. The reason that traffickers have been known to establish such remote compounds is so that the surrounding area can help to provide varying degrees of natural cover. Additionally the traffickers may also hope, that the surrounding terrain and local wildlife might serve to deter and/or impede either investigative authorities or rival gangs, if the location of the clandestine compound were revealed. While usually thought of as an urban issue, drug trafficking is also known to be a problem in both suburban and rural areas as well.

Human trafficking

Sex trafficking

Human trafficking for the purpose of sexual exploitation is a major cause of contemporary sexual slavery and is primarily for prostituting women and children into sex industries. Sexual slavery encompasses most, if not all, forms of forced prostitution. The terms "forced prostitution" or "enforced prostitution" appear in international and humanitarian conventions but have been insufficiently understood and inconsistently applied. "Forced prostitution" generally refers to conditions of control over a person who is coerced by another to engage in sexual activity. Official numbers of individuals in sexual slavery worldwide vary. In 2001 International Organization for Migration estimated 400,000, the Federal Bureau of Investigation estimated 700,000 and UNICEF estimated 1.75 million. The most common destinations for victims of human trafficking are Thailand, Japan, Israel, Belgium, the Netherlands, Germany, Italy, Turkey and the United States, according to a report by UNODC.

Illegal immigration and people smuggling

People smuggling is defined as "the facilitation, transportation, attempted transportation or illegal entry of a person or persons across an international border, in violation of one or more countries laws, either clandestinely or through deception, such as the use of fraudulent documents". The term is understood as and often used interchangeably with migrant smuggling, which is defined by the United Nations Convention Against Transnational Organized Crime as "...the procurement, in order to obtain, directly or indirectly, a financial or other material benefit, of the illegal entry of a person into a state party of which the person is not a national". This practice has increased over the past few decades and today now accounts for a significant portion of illegal immigration in countries around the world. People smuggling generally takes place with the consent of the person or persons being smuggled, and common reasons for individuals seeking to be smuggled include employment and economic opportunity, personal and/or familial betterment, and escape from persecution or conflict.

Contemporary slavery and forced labor

The number of slaves today remains as high as 12 million to 27 million. This is probably the smallest proportion of slaves to the rest of the world's population in history. Most are debt slaves, largely in South Asia, who are under debt bondage incurred by lenders, sometimes even for generations. It is the fastest growing criminal industry and is predicted to eventually outgrow drug trafficking.

Historical origins

Pre-nineteenth century

Today, crime is sometimes thought of as an urban phenomenon, but for most of human history it was the rural interfaces that encountered the majority of crimes (bearing in mind the fact that for most of human history, rural areas were the vast majority of inhabited places). For the most part, within a village, members kept crime at very low rates; however, outsiders such as pirates, highwaymen and bandits attacked trade routes and roads, at times severely disrupting commerce, raising costs, insurance rates and prices to the consumer. According to criminologist Paul Lunde, "Piracy and banditry were to the pre-industrial world what organized crime is to modern society."

If we take a global rather than a strictly domestic view, it becomes evident that even crime of the organized kind has a long if not a necessarily noble heritage. The word 'thug' dates back to early 13th-century India, when Thugs, or gangs of criminals, roamed from town to town, looting and pillaging. Smuggling and drug-trafficking rings are as old as the hills in Asia and Africa, and extant criminal organizations in Italy and Japan trace their histories back several centuries...

As Lunde states, "Barbarian conquerors, whether Vandals, Goths, the Norse, Turks or Mongols are not normally thought of as organized crime groups, yet they share many features associated with thriving criminal organizations. They were for the most part non-ideological, predominantly ethnically based, used violence and intimidation, and adhered to their own codes of law." In Ancient Rome, there was an infamous outlaw called Bulla Felix who organized and led a gang of up to six hundred bandits. Terrorism is linked to organized crime, but has political aims rather than solely financial ones, so there is overlap but separation between terrorism and organized crime.

Fencing in Ming and Qing China

A fence or receiver (銷贓者), was a merchant who bought and sold stolen goods. Fences were part of the extensive network of accomplices in the criminal underground of Ming and Qing China. Their occupation entailed criminal activity, but as fences often acted as liaisons between the more respectable community to the underground criminals, they were seen as living a "precarious existence on the fringes of respectable society".

A fence worked alongside bandits, but in a different line of work. The network of criminal accomplices that was often acquired was essential to ensuring both the safety and the success of fences.

The path into the occupation of a fence stemmed, in a large degree, from necessity. As most fences came from the ranks of poorer people, they often took whatever work they could – both legal and illegal.

Like most bandits operated within their own community, fences also worked within their own town or village. For example, in some satellite areas of the capital, military troops lived within or close to the commoner population and they had the opportunity to hold illegal trades with commoners.

In areas like Baoding and Hejian, local peasants and community members not only purchased military livestock such as horses and cattle, but also helped to hide the "stolen livestock from military allured by the profits". Local peasants and community members became fences and they hid criminal activities from officials in return for products or money from these soldiers.

Types of fences

Most fences were not individuals who only bought and sold stolen goods to make a living. The majority of fences had other occupations within the "polite" society and held a variety of official occupations. These occupations included laborers, coolies, and peddlers. Such individuals often encountered criminals in markets in their line of work, and, recognizing a potential avenue for an extra source of income, formed acquaintances and temporary associations for mutual aid and protection with criminals. In one example, an owner of a tea house overheard the conversation between Deng Yawen, a criminal and others planning a robbery and he offered to help to sell the loot for an exchange of spoils.

At times, the robbers themselves filled the role of fences, selling to people they met on the road. This may actually have been preferable for robbers in certain circumstances, because they would not have to pay the fence a portion of the spoils.

Butchers were also prime receivers for stolen animals because of the simple fact that owners could no longer recognize their livestock once butchers slaughtered them. Animals were very valuable commodities within Ming China and a robber could potentially sustain a living from stealing livestock and selling them to butcher-fences.

Although the vast majority of the time, fences worked with physical stolen property, fences who also worked as itinerant barbers also sold information as a good. Itinerant barbers often amassed important sources of information and news as they traveled, and sold significant pieces of information, often to criminals in search of places to hide or individuals to rob. In this way, itinerant barbers also served the role as a keeper of information that could be sold to both members of the criminal underground, as well as powerful clients in performing the function of a spy.

Fences not only sold items such as jewelry and clothing but was also involved in trafficking hostages that bandits had kidnapped. Women and children were the easiest and among the most common "objects" the fences sold. Most of the female hostages were sold to fences and then sold as prostitutes, wives or concubines. One example of human trafficking can be seen from Chen Akuei's gang who abducted a servant girl and sold her to Lin Baimao, who in turn sold her for thirty parts of silver as wives. In contrast to women, who required beauty to sell for a high price, children were sold regardless of their physical appearance or family background. Children were often sold as servants or entertainers, while young girls were often sold as prostitutes.

Network of connections

Like merchants of honest goods, one of the most significant tools of a fence was their network of connections. As they were the middlemen between robbers and clients, fences needed to form and maintain connections in both the "polite" society, as well as among criminals. However, there were a few exceptions in which members of the so-called "well-respected" society became receivers and harborers. They not only help bandits to sell the stolen goods but also acted as agents of bandits to collect protection money from local merchants and residents. These "part-time" fences with high social status used their connection with bandits to help themselves gain social capital as well as wealth.

It was extremely important to their occupation that fences maintained a positive relationship with their customers, especially their richer gentry clients. When some members of the local elites joined the ranks of fences, they not only protect bandits to protect their business interests, they actively took down any potential threats to their illegal profiting, even government officials. In the Zhejiang Province, the local elites not only got the provincial commissioner, Zhu Wan, dismissed from his office but also eventually "[drove] him to suicide". This was possible because fences often had legal means of making a living, as well as illegal activities and could threaten to turn in bandits to the authorities.

It was also essential for them to maintain a relationship with bandits. However, it was just as true that bandits needed fences to make a living. As a result, fences often held dominance in their relationship with bandits and fences could exploit their position, cheating the bandits by manipulating the prices they paid bandits for the stolen property.

Safe houses

Aside from simply buying and selling stolen goods, fences often played additional roles in the criminal underground of early China. Because of the high floating population in public places such as inns and tea houses, they often became ideal places for bandits and gangs to gather to exchange information and plan for their next crime. Harborers, people who provided safe houses for criminals, often played the role of receiving stolen goods from their harbored criminals to sell to other customers. Safe houses included inns, tea houses, brothels, opium dens, as well as gambling parlors and employees or owners of such institutions often functioned as harborers, as well as fences. These safe houses locate in places where there are high floating population and people from all kinds of social backgrounds.

Brothels themselves helped these bandits to hide and sell stolen goods because of the special Ming Law that exempted brothels from being held responsible "for the criminal actions of their clients." Even though the government required owners of these places to report any suspicious activities, lack of enforcement from the government itself and some of the owners being fences for the bandits made an ideal safe house for bandits and gangs.

Pawnshops were also often affiliated with fencing stolen goods. The owners or employees of such shops often paid cash for stolen goods at a price a great deal below market value to bandits, who were often desperate for money, and resold the goods to earn a profit.

Punishments for fences

Two different Ming Laws, the Da Ming Lü 大明律 and the Da Gao 大诰, drafted by the Hongwu Emperor Zhu Yuanzhang, sentenced fences with different penalties based on the categories and prices of the products that were stolen.

In coastal regions, illegal trading with foreigners, as well as smuggling, became a huge concern for the government during the middle to late Ming era. In order to prohibit this crime, the government passed a law in which illegal smugglers who traded with foreigners without the consent of the government would be punished with exile to the border for military service.

In areas where military troops were stationed, stealing and selling military property would result in a more severe punishment. In the Jiaqing time, a case was recorded of stealing and selling military horses. The emperor himself gave direction that the thieves who stole the horses and the people who helped to sell the horses would be put on cangue and sent to labor in a border military camp.

In the salt mines, the penalty for workers who stole salt and people who sold the stolen salt was the most severe. Anyone who was arrested and found guilty of stealing and selling government salt was put to death.

Nineteenth century

During the Victorian era, criminals and gangs started to form organizations which would collectively become London's criminal underworld. Criminal societies in the underworld started to develop their own ranks and groups which were sometimes called families and were often made up of lower-classes and operated on pick-pocketry, prostitution, forgery and counterfeiting, commercial burglary and even money laundering schemes. Unique also were the use of slang and argots used by Victorian criminal societies to distinguish each other, like those propagated by street gangs like the Peaky Blinders. One of the most infamous crime bosses in the Victorian underworld was Adam Worth, who was nicknamed "the Napoleon of the criminal world" or "the Napoleon of Crime" and became the inspiration behind the popular character of Professor Moriarty.

Organized crime in the United States first came to prominence in the Old West and historians such as Brian J. Robb and Erin H. Turner traced the first organized crime syndicates to the Coschise Cowboy Gang and the Wild Bunch. The Cochise Cowboys, though loosely organized, were unique for their criminal operations in the Mexican border, in which they would steal and sell cattle as well smuggled contraband goods in between the countries. In the Old west there were other examples of gangs that operated in ways similar to an organized crime syndicate such as the Innocents gang, the Jim Miller gang, the Soapy Smith gang, the Belle Starr gang and the Bob Dozier gang.

Twentieth century

Donald Cressey's Cosa Nostra model studied Mafia families exclusively and this limits his broader findings. Structures are formal and rational with allocated tasks, limits on entrance, and influence on the rules established for organizational maintenance and sustainability. In this context there is a difference between organized and professional crime; there is well-defined hierarchy of roles for leaders and members, underlying rules and specific goals that determine their behavior and these are formed as a social system, one that was rationally designed to maximize profits and to provide forbidden goods. Albini saw organized criminal behavior as consisting of networks of patrons and clients, rather than rational hierarchies or secret societies.

The networks are characterized by a loose system of power relations. Each participant is interested in furthering his own welfare. Criminal entrepreneurs are the patrons and they exchange information with their clients in order to obtain their support. Clients include members of gangs, local and national politicians, government officials and people engaged in legitimate business. People in the network may not directly be part of the core criminal organization. Furthering the approach of both Cressey and Albini, Ianni and Ianni studied Italian-American crime syndicates in New York and other cities.

Kinship is seen as the basis of organized crime rather than the structures Cressey had identified; this includes fictive godparental and affinitive ties as well as those based on blood relations and it is the impersonal actions, not the status or affiliations of their members, that define the group. Rules of conduct and behavioral aspects of power and networks and roles include the following:

family operates as a social unit, with social and business functions merged;
leadership positions down to middle management are kinship based;
the higher the position, the closer the kinship relationship;
group assigns leadership positions to a central group of family members, including fictive god-parental relationship reinforcement;
the leadership group are assigned to legal or illegal enterprises, but not both; and,
transfer of money, from legal and illegal business, and back to illegal business is by individuals, not companies.

Strong family ties are derived from the traditions of southern Italy, where family rather than the church or state is the basis of social order and morality.

The "disorganized crime" and choice theses

One of the most important trends to emerge in criminological thinking about OC in recent years is the suggestion that it is not, in a formal sense, "organized" at all. Evidence includes lack of centralized control, absence of formal lines of communication, fragmented organizational structure. It is distinctively disorganized. For example, Seattle's crime network in the 1970s and 80s consisted of groups of businessmen, politicians and of law enforcement officers. They all had links to a national network via Meyer Lansky, who was powerful, but there was no evidence that Lansky or anyone else exercised centralized control over them.

While some crime involved well-known criminal hierarchies in the city, criminal activity was not subject to central management by these hierarchies nor by other controlling groups, nor were activities limited to a finite number of objectives. The networks of criminals involved with the crimes did not exhibit organizational cohesion. Too much emphasis had been placed on the Mafia as controlling OC. The Mafia were certainly powerful but they "were part of a heterogeneous underworld, a network characterized by complex webs of relationships." OC groups were violent and aimed at making money but because of the lack of structure and fragmentation of objectives, they were "disorganized".

Further studies showed neither bureaucracy nor kinship groups are the primary structure of organized crime; rather, the primary structures were found to lie in partnerships or a series of joint business ventures. Despite these conclusions, all researchers observed a degree of managerial activities among the groups they studied. All observed networks and a degree of persistence, and there may be utility in focusing on the identification of organizing roles of people and events rather than the group's structure. There may be three main approaches to understand the organizations in terms of their roles as social systems:

organizations as rational systems: Highly formalized structures in terms of bureaucracy's and hierarchy, with formal systems of rules regarding authority and highly specific goals;
organizations as natural systems: Participants may regard the organization as an end in itself, not merely a means to some other end. Promoting group values to maintain solidarity is high on the agenda. They do not rely on profit maximization. Their perversity and violence in respect of relationships is often remarkable, but they are characterized by their focus on the connections between their members, their associates and their victims; and,
organizations open systems: High levels of interdependence between themselves and the environment in which they operate. There is no one way in which they are organized or how they operate. They are adaptable and change to meet the demands of their changing environments and circumstances.

Organized crime groups may be a combination of all three.

International governance approach

International consensus on defining organized crime has become important since the 1970s due to its increased prevalence and impact. e.g., UN in 1976 and EU 1998. OC is "...the large scale and complex criminal activity carried on by groups of persons, however loosely or tightly organized for the enrichment of those participating at the expense of the community and its members. It is frequently accomplished through ruthless disregard of any law, including offenses against the person and frequently in connection with political corruption." (UN) "A criminal organization shall mean a lasting, structured association of two or more persons, acting in concert with a view to committing crimes or other offenses which are punishable by deprivation of liberty or a detention order of a maximum of at least four years or a more serious penalty, whether such crimes or offenses are an end in themselves or a means of obtaining material benefits and, if necessary, of improperly influencing the operation of public authorities." (UE) Not all groups exhibit the same characteristics of structure. However, violence and corruption and the pursuit of multiple enterprises and continuity serve to form the essence of OC activity.

There are eleven characteristics from the European Commission and Europol pertinent to a working definition of organized crime. Six of those must be satisfied and the four in italics are mandatory. Summarized, they are:

more than two people;
their own appointed tasks;
activity over a prolonged or indefinite period of time;
the use discipline or control;
perpetration of serious criminal offenses;
operations on an international or transnational level;
the use violence or other intimidation;
the use of commercial or businesslike structures;
engagement in money laundering;
exertion of influence on politics, media, public administration, judicial authorities or the economy; and,
motivated by the pursuit of profit and/or power,

with the Convention against Transnational Organized Crime (the Palermo Convention) having a similar definition:

organized criminal: structured group, three or more people, one or more serious crimes, in order to obtain financial or other material benefit;
serious crime: offense punishable by at least four years in prison; and,
structured group: Not randomly formed but does not need formal structure,

Others stress the importance of power, profit and perpetuity, defining organized criminal behavior as:

nonideological: i.e., profit driven;
hierarchical: few elites and many operatives;
limited or exclusive membership: maintain secrecy and loyalty of members;
perpetuating itself: Recruitment process and policy;
willing to use illegal violence and bribery;
specialized division of labor: to achieve organization goal;
monopolistic: Market control to maximize profits; and,
has explicit rules and regulations: Codes of honor.

Definitions need to bring together its legal and social elements. OC has widespread social, political and economic effects. It uses violence and corruption to achieve its ends: "OC when group primarily focused on illegal profits systematically commit crimes that adversely affect society and are capable of successfully shielding their activities, in particular by being willing to use physical violence or eliminate individuals by way of corruption."

It is a mistake to use the term "OC" as though it denotes a clear and well-defined phenomenon. The evidence regarding OC "shows a less well-organized, very diversified landscape of organizing criminals…the economic activities of these organizing criminals can be better described from the viewpoint of 'crime enterprises' than from a conceptually unclear frameworks such as 'OC'." Many of the definitions emphasize the 'group nature' of OC, the 'organization' of its members, its use of violence or corruption to achieve its goals and its extra-jurisdictional character...OC may appear in many forms at different times and in different places. Due to the variety of definitions, there is "evident danger" in asking "what is OC?" and expecting a simple answer.

The locus of power and organized crime

Some espouse that all organized crime operates at an international level, though there is currently no international court capable of trying offenses resulting from such activities (the International Criminal Court's remit extends only to dealing with people accused of offenses against humanity, e.g., genocide). If a network operates primarily from one jurisdiction and carries out its illicit operations there and in some other jurisdictions it is 'international,' though it may be appropriate to use the term 'transnational' only to label the activities of a major crime group that is centered in no one jurisdiction but operating in many. The understanding of organized crime has therefore progressed to combined internationalization and an understanding of social conflict into one of power, control, efficiency risk and utility, all within the context of organizational theory. The accumulation of social, economic and political power have sustained themselves as a core concerns of all criminal organizations:

social: criminal groups seek to develop social control in relation to particular communities;
economic: seek to exert influence by means of corruption and by coercion of legitimate and illegitimate praxis; and,
political: criminal groups use corruption and violence to attain power and status.

Contemporary organized crime may be very different from traditional Mafia style, particularly in terms of the distribution and centralization of power, authority structures and the concept of 'control' over one's territory and organization. There is a tendency away from centralization of power and reliance upon family ties towards a fragmentation of structures and informality of relationships in crime groups. Organized crime most typically flourishes when a central government and civil society is disorganized, weak, absent or untrustworthy.

This may occur in a society facing periods of political, economic or social turmoil or transition, such as a change of government or a period of rapid economic development, particularly if the society lacks strong and established institutions and the rule of law. The dissolution of the Soviet Union and the Revolutions of 1989 in Eastern Europe that saw the downfall of the Communist Bloc created a breeding ground for criminal organizations.

The newest growth sectors for organized crime are identity theft and online extortion. These activities are troubling because they discourage consumers from using the Internet for e-commerce. E-commerce was supposed to level the playing ground between small and large businesses, but the growth of online organized crime is leading to the opposite effect; large businesses are able to afford more bandwidth (to resist denial-of-service attacks) and superior security. Furthermore, organized crime using the Internet is much harder to trace down for the police (even though they increasingly deploy cybercops) since most police forces and law enforcement agencies operate within a local or national jurisdiction while the Internet makes it easier for criminal organizations to operate across such boundaries without detection.

In the past criminal organizations have naturally limited themselves by their need to expand, putting them in competition with each other. This competition, often leading to violence, uses valuable resources such as manpower (either killed or sent to prison), equipment and finances. In the United States, James "Whitey" Bulger, the Irish Mob boss of the Winter Hill Gang in Boston turned informant for the Federal Bureau of Investigation (FBI). He used this position to eliminate competition and consolidate power within the city of Boston which led to the imprisonment of several senior organized crime figures including Gennaro Angiulo, underboss of the Patriarca crime family. Infighting sometimes occurs within an organization, such as the Castellamarese war of 1930–31 and the Boston Irish Mob Wars of the 1960s and 1970s.

Today criminal organizations are increasingly working together, realizing that it is better to work in cooperation rather than in competition with each other (once again, consolidating power). This has led to the rise of global criminal organizations such as Mara Salvatrucha, 18th Street gang and Barrio Azteca. The American Mafia, in addition to having links with organized crime groups in Italy such as the Camorra, the 'Ndrangheta, Sacra Corona Unita and Sicilian Mafia, has at various times done business with the Irish Mob, Jewish-American organized crime, the Japanese yakuza, Indian mafia, the Russian mafia, Thief in law and Post-Soviet Organized crime groups, the Chinese triads, Chinese Tongs and Asian street gangs, Motorcycle Gangs and numerous White, Black and Hispanic prison and street gangs. The United Nations Office on Drugs and Crime estimated that organized crime groups held $322 billion in assets in 2005.

This rise in cooperation between criminal organizations has meant that law enforcement agencies are increasingly having to work together. The FBI operates an organized crime section from its headquarters in Washington, D.C. and is known to work with other national (e.g., Polizia di Stato, Russian Federal Security Service (FSB) and the Royal Canadian Mounted Police), federal (e.g., Bureau of Alcohol, Tobacco, Firearms and Explosives, Drug Enforcement Administration, United States Marshals Service, Immigration and Customs Enforcement, United States Secret Service, US Diplomatic Security Service, United States Postal Inspection Service, U.S. Customs and Border Protection, United States Border Patrol, and the United States Coast Guard), state (e.g., Massachusetts State Police Special Investigation Unit, New Jersey State Police organized crime unit, Pennsylvania State Police organized crime unit and the New York State Police Bureau of Criminal Investigation) and city (e.g., New York City Police Department Organized Crime Unit, Philadelphia Police Department Organized crime unit, Chicago Police Organized Crime Unit and the Los Angeles Police Department Special Operations Division) law enforcement agencies.

Academic analysis

Criminal psychology

Criminal psychology is defined as the study of the intentions, behaviors, and actions of a criminal or someone who allows themselves to participate in criminal behavior. The goal is to understand what is going on in the criminal's head and explain why they are doing what they are doing. This varies depending on whether the person is facing the punishment for what they did, are roaming free, or if they are punishing themselves. Criminal psychologists get called to court to explain the inside the mind of the criminal.

Rational choice

This theory treats all individuals as rational operators, committing criminal acts after consideration of all associated risks (detection and punishment) compared with the rewards of crimes (personal, financial etc.). Little emphasis is placed on the offenders' emotional state. The role of criminal organizations in lowering the perceptions of risk and increasing the likelihood of personal benefit is prioritized by this approach, with the organizations structure, purpose, and activity being indicative of the rational choices made by criminals and their organizers.

Deterrence

This theory sees criminal behavior as reflective of an individual, internal calculation by the criminal that the benefits associated with offending (whether financial or otherwise) outweigh the perceived risks. The perceived strength, importance or infallibility of the criminal organization is directly proportional to the types of crime committed, their intensity and arguably the level of community response. The benefits of participating in organized crime (higher financial rewards, greater socioeconomic control and influence, protection of the family or significant others, perceived freedoms from 'oppressive' laws or norms) contribute greatly to the psychology behind highly organized group offending.

Social learning

Criminals learn through associations with one another. The success of organized crime groups is therefore dependent upon the strength of their communication and the enforcement of their value systems, the recruitment and training processes employed to sustain, build or fill gaps in criminal operations. An understanding of this theory sees close associations between criminals, imitation of superiors, and understanding of value systems, processes and authority as the main drivers behind organized crime. Interpersonal relationships define the motivations the individual develops, with the effect of family or peer criminal activity being a strong predictor of inter-generational offending. This theory also developed to include the strengths and weaknesses of reinforcement, which in the context of continuing criminal enterprises may be used to help understand propensities for certain crimes or victims, level of integration into the mainstream culture and likelihood of recidivism / success in rehabilitation.

Enterprise

Under this theory, organized crime exists because legitimate markets leave many customers and potential customers unsatisfied. High demand for a particular good or service (e.g., drugs, prostitution, arms, slaves), low levels of risk detection and high profits lead to a conducive environment for entrepreneurial criminal groups to enter the market and profit by supplying those goods and services. For success, there must be:

an identified market; and,
a certain rate of consumption (demand) to maintain profit and outweigh perceived risks.

Under these conditions competition is discouraged, ensuring criminal monopolies sustain profits. Legal substitution of goods or services may (by increasing competition) force the dynamic of organized criminal operations to adjust, as will deterrence measures (reducing demand), and the restriction of resources (controlling the ability to supply or produce to supply).

Differential association

Sutherland goes further to say that deviancy is contingent on conflicting groups within society, and that such groups struggle over the means to define what is criminal or deviant within society. Criminal organizations therefore gravitate around illegal avenues of production, profit-making, protectionism or social control and attempt (by increasing their operations or membership) to make these acceptable.This also explains the propensity of criminal organizations to develop protection rackets, to coerce through the use of violence, aggression and threatening behavior (at times termed 'terrorism'). Preoccupation with methods of accumulating profit highlight the lack of legitimate means to achieve economic or social advantage, as does the organization of white-collar crime or political corruption (though it is debatable whether these are based on wealth, power or both). The ability to effect social norms and practices through political and economic influence (and the enforcement or normalization of criminogenic needs) may be defined by differential association theory.

Critical criminology and sociology

Social disorganization

Social disorganization theory is intended to be applied to neighborhood level street crime, thus the context of gang activity, loosely formed criminal associations or networks, socioeconomic demographic impacts, legitimate access to public resources, employment or education, and mobility give it relevance to organized crime. Where the upper- and lower-classes live in close proximity this can result in feelings of anger, hostility, social injustice and frustration. Criminals experience poverty; and witness affluence they are deprived of and which is virtually impossible for them to attain through conventional means. The concept of neighborhood is central to this theory, as it defines the social learning, locus of control, cultural influences and access to social opportunity experienced by criminals and the groups they form. Fear of or lack of trust in mainstream authority may also be a key contributor to social disorganization; organized crime groups replicate such figures and thus ensure control over the counter-culture. This theory has tended to view violent or antisocial behavior by gangs as reflective of their social disorganization rather than as a product or tool of their organization.

Anomie

Sociologist Robert K. Merton believed deviance depended on society's definition of success, and the desires of individuals to achieve success through socially defined avenues. Criminality becomes attractive when expectations of being able to fulfill goals (therefore achieving success) by legitimate means cannot be fulfilled. Criminal organizations capitalize on states with a lack of norm by imposing criminogenic needs and illicit avenues to achieve them. This has been used as the basis for numerous meta-theories of organized crime through its integration of social learning, cultural deviance, and criminogenic motivations. If crime is seen as a function of anomie, organized behavior produces stability, increases protection or security, and may be directly proportional to market forces as expressed by entrepreneurship- or risk-based approaches. It is the inadequate supply of legitimate opportunities that constrains the ability for the individual to pursue valued societal goals and reduces the likelihood that using legitimate opportunities will enable them to satisfy such goals (due to their position in society).

Cultural deviance

Criminals violate the law because they belong to a unique subculture - the counter-culture - their values and norms conflicting with those of the working-, middle- or upper-classes upon which criminal laws are based. This subculture shares an alternative lifestyle, language and culture, and is generally typified by being tough, taking care of their own affairs and rejecting government authority. Role models include drug dealers, thieves and pimps, as they have achieved success and wealth not otherwise available through socially-provided opportunities. It is through modeling organized crime as a counter-cultural avenue to success that such organizations are sustained.

Alien conspiracy/queer ladder of mobility

The alien conspiracy theory and queer ladder of mobility theories state that ethnicity and 'outsider' status (immigrants, or those not within the dominant ethnocentric groups) and their influences are thought to dictate the prevalence of organized crime in society. The alien theory posits that the contemporary structures of organized crime gained prominence during the 1860s in Sicily and that elements of the Sicilian population are responsible for the foundation of most European and North American organized crime, made up of Italian-dominated crime families. Bell's theory of the 'queer ladder of mobility' hypothesized that 'ethnic succession' (the attainment of power and control by one more marginalized ethnic group over other less marginalized groups) occurs by promoting the perpetration of criminal activities within a disenfranchised or oppressed demographic. Whilst early organized crime was dominated by the Irish Mob (early 1800s), they were relatively substituted by the Sicilian Mafia and Italian-American Mafia, the Aryan Brotherhood (1960s onward), Colombian Medellín Cartel and Cali cartel (mid-1970s - 1990s), and more recently the Mexican Tijuana Cartel (late 1980s onward), Mexican Los Zetas (late 1990s to onward), the Russian Mafia (1988 onward), terrorism-related organized crime Al-Qaeda (1988 onward), the Taliban (1994 onward), and Islamic State of Iraq and the Levant (ISIL) (2010s to onward). Many argue this misinterprets and overstates the role of ethnicity in organized crime. A contradiction of this theory is that syndicates had developed long before large-scale Sicilian immigration in the 1860s, with these immigrants merely joining a widespread phenomenon of crime and corruption.

Legislative frameworks and policing measures

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International

Convention against Transnational Organized Crime (the 'Palermo Convention') - the international treaty against organized crime; includes the Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children and the Protocol against the Smuggling of Migrants by Land, Sea and Air

Canada

Criminal Code, RSC 1985, c C-46, ss 467.1 to 467.2 Archived 2015-10-05 at the Wayback Machine.

China

Anti-Organized Crime Law of the People's Republic of China

India

Maharashtra Control of Organized Crime Act

Republic of Ireland

Criminal Assets Bureau

Italy

Article 41-bis prison regime

United Kingdom

Serious Organized Crime and Police Act 2005

United States

Federal Anti-Racketeering Act (the 'Hobbs Act') 1946
Federal Wire Act 1961
Bank Secrecy Act 1970
Organized Crime Control Act 1970
Title 21 of the United States Code 1970
Continuing Criminal Enterprise (contemporary)
Racketeer Influenced and Corrupt Organizations Act (the 'RICO Act') 1970
Money Laundering Control Act 1986
United States Patriot Act 2001
Fraud Enforcement and Recovery Act of 2009

Loan shark

From Wikipedia, the free encyclopedia

A loan shark is a person who offers loans at extremely high or illegal interest rates, has strict terms of collection, and generally operates outside the law, often using the threat of violence or other illegal, aggressive, and extortionate actions when seeking to enforce the satisfaction of the debt. As a consistent or repeated illegal business operation or "racket", loansharking is generally associated with organized crime and certain criminal organizations.

Description

Because loan sharks operate mostly illegally, they cannot use the legal system to collect such debts, thus they often resort to enforcing repayment by terms of blackmail and threats of violence. Historically, many moneylenders skirted between legal and criminal activity. In the recent western world, loan sharks have been a prominent feature of the criminal underworld.

Loan sharking is not to be confused with predatory lending with extremely high interest rates such as payday or title loans, which is sometimes considered to be "loan sharking" (or, at least, unfavorably compared to loan sharking by critics) regardless of whether it is legal. A key difference between "traditional" loan sharking and predatory lending is that lenders alleged to be engaged in the latter practice are expected to stay within the law when making and collecting loans, and thus the debate into such practices often focuses on whether they are ethical as opposed to whether they are legal. However, laws regulating lending practices vary so widely between jurisdictions (even in the same country, particularly between states in the United States) that particular practices that might be technically legal (if arguably unethical) "predatory lending" in one jurisdiction might be considered illegal "loan sharking" if attempted in an identical manner in a different locale.

Japan

Regulation of moneylenders is typically much looser than that of banks. In Japan, the Moneylending Control Law requires only registration in each prefecture. In Japan, as the decades-long depression lingers, banks are reluctant to loan money and regulation has become tighter, illegal moneylending has become a social issue. Illegal moneylenders typically charge interest of 30 or 50% in 10 days (in Japanese, these are called "to-san" ('to' meaning ten and 'san' meaning three, or 10-3) or "to-go" ('to' meaning ten and 'go' meaning five, or 10-5), which correspond to effective interest rates of about 1.442 million % and 267.5 million % per annum respectively. This is against the law that sets the maximum interest rate at 20%. These lenders usually do business with those who cannot get more money from banks, legitimate consumer loans, or credit cards.

Ireland

The Central Bank of Ireland were criticized for doing nothing to protect those with low incomes, the vulnerable or those who have low levels of financial literacy, from loan sharks, when it emerged in 2015 that up to 100,000 of the 360,000 loans given by the moneylenders violated the law.

Israel

Loansharking is one of the main activities of the Israeli mafia.

Kazakhstan

The National Bank of Kazakhstan has been consistently fighting loan sharks since 2018. Thus, the maximum interest rate on a loan was limited to no more than 100% of the loan amount.

In 2020, a financial market regulation agency was separated from the National Bank of Kazakhstan to monitor the rights and legitimate interests of borrowers, to identify and eliminate systemic problems of the financial sector of the economy. A unified state register of microfinance organizations was introduced to legalize lenders.

Malaysia and Singapore

Ah Long (derived from the Cantonese phrase '大耳窿' ('big ear hole')) is a colloquial term for illegal loan sharks in Malaysia and Singapore. They lend money to people who are unable to obtain loans from banks or other legal sources, mostly targeting habitual gamblers. Often, they discreetly advertise by sticking notices, mostly on lamp posts and utility boxes around a neighbourhood, thus vandalising public property, as authorities must remove such advertisements. They charge high interest rates (generally about 40% per month/fortnight) according to Anti-Crime, Drug and Social Development Voluntary Organisation and frequently threaten violence (and administer it) towards those who fail to pay on time.

Ah Long tactics

When a person fails to pay on time, the Ah Long will set on fire, spray paint, lock up gates, splash, or write threats in paint or markers on the walls of the property of that person as a threat of violence and to scare, and perhaps shame, the borrower into repaying the loan. A common use of painting includes the characters "O$P$" meaning "owe money, pay money", as well as the debtors' unit number. According to local police authorities, there have been cases where borrowers and their family members were beaten or had their property damaged or destroyed, and some victims have committed suicide.

New Zealand

During the early COVID-19 pandemic in 2020, the New Zealand Government launched a crackdown against loan sharks to ease economic hardship. Commerce Minister Kris Faafoi announced that the Credit Contracts Legislation Amendment Act 2020 would come into force on 1 May 2020 rather than 1 June 2020. Under the new law, high-interest lenders charging interest at 50% or more would not be allowed to charge interest as well as fees over 100% of the amount loaned to borrowers. In addition, compound interest on high interest loans were banned while fees for defaulting on payments were capped. By June 2024, figures released by the Ministry of Business, Innovation and Employment showed that no customers had been granted high-cost loans in 2023.

Russia

Several organizations regulate the loan market in Russia:

Central Bank
RosComNadzor
Self-regulated industry organization MIR

In 2024, the Central Bank plans to impose higher requirements on loan loss provisions for loans with a full value of 250% or more.

Vietnam

Loan sharks in Vietnam are very common, especially in high population density areas and industrial park surroundings. They focus on poor workers and gamblers, advertising their services on walls and electric poles as well as online platforms such as Google and Facebook. Their operations vary from pawn shops to online operations via illegal applications. These operations are not usually controlled by Vietnamese, but rather Vietnamese people living in Cambodia or Chinese operators. Many of these sharks offer very high loan rates at 20% to 1000% per month. When the borrower is unable to pay their debt, the sharks will force the borrower to take out further loans. If the borrower is unable to pay those on time, the sharks will use intimidation tactics such as sending threatening messages to the borrower and their family and friends. Additionally, some resort to vandalism and kidnapping. Most borrowers only loan relatively small amounts of money, below 10 million VNĐ, but due to compound rates, the borrower will ultimately have to pay much more than they would have with official credit service suppliers. There are a lot of cases reported and most are solved by the police, but many remain unsolved.

In recent years, the government has tried to stop these loaners from operating and encouraged people not to borrow money from them. The victims are largely under-educated people with limited financial knowledge.

United Kingdom

The research by the government and other agencies estimates that 165,000 to 200,000 people are indebted to loan sharks in the United Kingdom. Illicit loan sharking is treated as a high-level crime by law enforcement, due to its links to organized crime and the serious violence involved. Payday loans with high interest rates are legal in many cases, and have been described as "legal loan sharking" (in that the creditor is legally registered, pays taxes and contributions, and can reclaim remittance if taking the case to adjudication; likewise there is no threat of harm to the debtor).

United States

19th-century salary lenders

In the late 19th-century US, the low legal interest rates made small loans unprofitable, and small-time lending was viewed as irresponsible by society. Banks and other major financial institutions thus stayed away from small-time lending. There were, however, plenty of small lenders offering loans at profitable but illegally high interest rates. They presented themselves as legitimate and operated openly out of offices. They only sought customers who had a steady and respectable job, a regular income and a reputation to protect. This made them less likely to leave the area before they paid their debt and more likely to have a legitimate reason for borrowing money. Gamblers, criminals, and other disreputable, unreliable types were avoided. They made the borrower fill out and sign seemingly legitimate contracts. Though these contracts were not legally enforceable, they at least were proof of the loan, which the lender could use to blackmail a defaulter.

To force a defaulter into paying, the lender might threaten legal action. This was a bluff, since the loan was illegal. The lender preyed on the borrower's ignorance of the law. Alternatively, the lender resorted to public shaming, exploiting the social stigma of being in debt to a loan shark. They were able to complain to the defaulter's employer, because many employers would fire employees who were mired in debt, because of the risk of them stealing from the employer to repay debts. They were able to send agents to stand outside the defaulter's home, loudly denouncing him, perhaps vandalizing his home with graffiti or notices. Whether out of gullibility or embarrassment, the borrower usually succumbed and paid.

Many customers were employees of large firms, such as railways or public works. Larger organizations were more likely to fire employees for being in debt, as their rules were more impersonal, which made blackmail easier. It was easier for lenders to learn which large organizations did this as opposed to collecting information on the multitude of smaller firms. Larger firms had more job security and the greater possibility of promotion, so employees sacrificed more to ensure they were not fired. The loan shark could also bribe a large firm's paymaster to provide information on its many employees. Regular salaries and paydays made negotiating repayment plans simpler.

The size of the loan and the repayment plan were often tailored to suit the borrower's means. The smaller the loan, the higher the interest rate was, as the costs of tracking and pursuing a defaulter (the overhead) were the same whatever the size of the loan. The attitudes of lenders to defaulters also varied: some were lenient and reasonable, readily granting extensions and slow to harass, while others unscrupulously tried to milk all they could from the borrower (e.g. imposing late fees).

Because salary lending was a disreputable trade, the owners of these firms often hid from public view, hiring managers to run their offices indirectly. To further avoid attracting attention, when expanding his trade to other cities, an owner would often found new firms with different names rather than expanding his existing firm into a very noticeable leviathan.

The penalties for being an illegal lender were mild. Illegal lending was a misdemeanor, and the penalty was forfeiture of the interest and perhaps the principal as well. But these were only ever imposed if the borrower sued, which he typically could not afford to do.

Opposition to salary lenders was spearheaded by social elites, such as businessmen and charity organizations. Businessmen were encouraged not to fire employees who were indebted to loan sharks so that the loan sharks could not blackmail their debtors ("pay up or we'll tell your boss that you're a deadbeat and you'll be fired"). Charities provided legal support to troubled borrowers. This fight culminated in the drafting of the Uniform Small Loan Law, which brought into existence a new class of licensed lender. The law was enacted, first in several states in 1917, and was adopted by all but a handful of states by the middle of the 20th century. The model statute mandated consumer protections and capped the interest rate on loans of $300 or less at 3.5% a month (51% a year), a profitable level for small loans. Lenders had to give the customer copies of all signed documents. Additional charges such as late fees were banned. The lender could no longer receive power of attorney or confession of judgment over a customer. These licensing laws made it impossible for usurious lenders to pass themselves off as legal. Small loans also started becoming more socially acceptable, and banks and other larger institutions started offering them as well.

20th-century gangsters

In the 1920s and 1930s, American prosecutors began to notice the emergence of a new breed of illegal lender that used violence to enforce debts. The new small lender laws had made it almost impossible to intimidate customers with a veneer of legality, and many customers were less vulnerable to shaming because they were either self-employed or already disreputable. Thus, violence was an important tool, though not their only one. These loan sharks operated more informally than salary lenders, which meant more discretion for the lender and less paperwork and bureaucracy for the customer. They were also willing to serve high-risk borrowers that legal lenders would not touch.

Threats of violence were rarely followed through, however. One possible reason is that injuring a borrower could have meant he could not work and thus could never pay off his debt. Many regular borrowers realized the threats were mostly bluffs and that they could get away with delinquent payments. A more certain consequence was that the delinquent borrower would be cut off from future loans, which was serious for those who regularly relied on loan sharks.

One important market for violent loan sharks was illegal gambling operators, who could not expose themselves to the law to collect debts legally. They cooperated with loan sharks to supply credit and collect payments from their punters. Thieves and other criminals, whose fortunes were frequently in flux, were also served, and these connections also allowed the loan sharks to operate as fences. Another type of high-risk customer was the small businessman in dire financial straits who could not qualify for a legal loan.

Violent loansharking was typically run by criminal syndicates, such as the Mafia and Irish Mob. Many of these were former bootleggers who needed a new line of work after the end of alcohol prohibition. Towards the 1960s, loan sharks grew ever more coordinated, and could pool information on borrowers to better size up risks and ensure a borrower did not try to pay off one loan by borrowing from another loan shark. The fearsome reputation of the Mafia or similar large gang made the loan shark's threat of violence more credible.

Mafia links

Origins in "salary buying", 1920-criminalization

Although the reform law was intended to starve the loan sharks into extinction, this species of predatory lender thrived and evolved. After high-rate salary lending was outlawed, some bootleg vendors recast the product as "salary buying". They claimed they were not making loans but were purchasing future wages at a discount. This form of loansharking proliferated through the 1920s and into the 1930s until a new draft of the Uniform Small Loan Law closed the loophole through which the salary buyers had slipped. Salary-buying loan sharks continued to operate in some southern states after World War II because the usury rate was set so low that licensed personal finance companies could not do business there.

Post-criminalization

Organized crime began to enter the cash advance business in the 1930s, after high-rate lending was criminalized by the Uniform Small Loan Law. The first reports of mob loansharking surfaced in New York City in 1935, and for 15 years, underworld money lending was apparently restricted to that city. There is no record of syndicate "juice" operations in Chicago, for instance, until the 1950s.

In the beginning, underworld loansharking was a small loan business, catering to the same populations served by the salary lenders and buyers. Those who turned to the bootleg lenders could not get credit at the licensed companies because their incomes were too low or they were deemed poor risks. The firms operating within the usury cap turned away roughly half of all applicants and tended to make larger loans to married men with steady jobs and decent incomes.

Those who could not get a legal loan at 36% or 42% a year could secure a cash advance from a mobster at the going rate of 10% or 20% a week for small loans. Since the mob loans were not usually secured with legal instruments, debtors pledged their bodies as collateral.

In its early phase, a large fraction of mob loansharking consisted of payday lending. Many of the customers were office clerks and factory hands. The loan fund for these operations came from the proceeds of the numbers racket and was distributed by the top bosses to the lower echelon loan sharks at the rate of 1% or 2% a week. The 1952 B movie Loan Shark, starring George Raft, offers a glimpse of mob payday lending. The waterfront in Brooklyn was another site of extensive underworld payday advance operations around mid-century.

1960s heyday–present

Over time, mob loan sharks moved away from such labor intensive rackets. By the 1960s, the preferred clientele was small and medium-sized businesses. Business customers had the advantage of possessing assets that could be seized in case of default, or used to engage in fraud or to launder money. Gamblers were another lucrative market, as were other criminals who needed financing for their operations. By the 1970s, mob salary lending operations seemed to have withered away in the United States.

At its height in the 1960s, underworld loansharking was estimated to be the second most lucrative franchise of organized crime in the United States after illegal gambling. Newspapers in the 1960s were filled with sensational stories of debtors beaten, harassed, and sometimes murdered by mob loan sharks. Yet careful studies of the business have raised doubts about the frequency with which violence was employed in practice. Relations between creditor and debtor could be amicable, even when the "vig" or "juice" was exorbitant, because each needed the other. FBI agents in one city interviewed 115 customers of a mob loan business but turned up only one debtor who had been threatened. None had been beaten.

Non-mafia sharks

Organized crime has never had a monopoly on black market lending. Plenty of vest-pocket lenders operated outside the jurisdiction of organized crime, charging usurious rates of interest for cash advances. These informal networks of credit rarely came to the attention of the authorities but flourished in populations not served by licensed lenders. Even today, after the rise of corporate payday lending in the United States, unlicensed loan sharks continue to operate in immigrant enclaves and low-income neighborhoods. They lend money to people who work in the informal sector or who are deemed to be too risky even by the check-cashing creditors. Some beat delinquents while others seize assets instead. Their rates run from 10% to 20% a week, just like the mob loan sharks of days gone by.

Non-standard lenders in the United States

In the United States, there are lenders licensed to serve borrowers who cannot qualify for standard loans from mainstream sources. These smaller, non-standard lenders often operate in cash, whereas mainstream lenders increasingly operate only electronically and will not serve borrowers who do not have bank accounts. Terms such as sub-prime lending, "non-standard consumer credit", and payday loans are often used in connection with this type of consumer finance. The availability of these services has made illegal, exploitative loan sharks rarer, but these legal lenders have also been accused of behaving in an exploitative manner. For example, payday loan operations have come under fire for charging inflated "service charges" for their services of cashing a "payday advance", effectively a short-term (no more than one or two weeks) loan for which charges may run 3–5% of the principal amount. By claiming to be charging for the "service" of cashing a paycheck, instead of merely charging interest for a short-term loan, laws that strictly regulate moneylending costs can be effectively bypassed.

Payday lending

Licensed payday advance businesses, which lend money at high rates of interest on the security of a postdated check, are often described as loan sharks by their critics due to high interest rates that trap debtors, stopping short of illegal lending and violent collection practices. Today's payday loan is a close cousin of the early 20th century salary loan, the product to which the "shark" epithet was originally applied, but they are now legalised in some states.

A 2001 comparison of short-term lending rates charged by the Chicago Outfit organized crime syndicate and payday lenders in California revealed that, depending on when a payday loan was paid back by a borrower (generally 1–14 days), the interest rate charged for a payday loan could be considerably higher than the interest rate of a similar loan made by the organized crime syndicate. However the violent collection practices of the organized crime can ensure a lower rate of unpaid loans. The absence of taxes further reduces the cost of lending in this case.

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