Revenues from organised crime in the EU are worth at least €110bn a year but authorities still confiscate only a tiny fraction of criminals’ ill-gotten gains, according to a major study.
Illicit markets — including drugs, arms, human trafficking, counterfeiting and tax fraud — are equivalent to 1 per cent of EU gross domestic product, according to an estimate by the Organised Crime Portfolio, which produced the study, co-funded by the European Commission.
Based on data from seven of the countries reviewed, the study estimates that 25 to 42 per cent of annual revenues from the heroin market alone — between €1.1bn and €3.1bn — could be available for this purpose.
Organised crime gangs invest in the legitimate economy to launder their proceeds, increase their profits and further their criminal enterprises by using the legitimate businesses as fronts for their illegal operations or to help them move stolen goods, for instance.
Criminals invest in a wide selection of sectors, but researchers have noted a particular focus on the hospitality sector, real estate, food industry and the construction and transportation sectors. More recently researchers have seen a trend to invest in renewable energy and the waste sector.
Law enforcement agencies across the EU have improved their ability to confiscate assets belonging to criminals over the past decade. However, the data show there is still a “significant discrepancy” between what organised criminals invest in and what is confiscated by EU authorities.
For example, from 2003 to 2013, £960m in criminal assets were recovered in the UK, of which some 14 per cent were recovered in the 2012-13 financial year alone.
The National Audit Office in 2013 estimated that for every £100 in illegal revenue in 2012-13, just 26 pence worth of assets were confiscated. More than three-quarters of the amount recovered was spent on enforcing confiscation orders, according to figures from the UK’s Controller and Auditor General.
Cash and assets that are most easily moved — such as cars or boats — are most often confiscated, while assets such as companies set up by criminals are rarely seized across the EU.
“In many countries the legal instruments are not effective enough, or there are problems with financial investigation capacity and skills,” says Michele Riccardi of Transcrime in Italy, one of the authors of the report. Once investigators seize an asset they have to manage it — which may be easy in the case of cash, but more complex when it comes to managing companies.
“Confiscation is a solution to combat the infiltration [into the legitimate economy] but we have to be prudent and be aware that confiscation without management is not really a winning game,” Mr Riccardi says.
The authors of the report call on policy makers to improve the seizure of companies by strengthening regulation and improving data collection to gain a better understanding of the dynamics of investment patterns of organised crime gangs.
Open source and police data analysed suggest that crime groups are shifting from high-risk markets — such as the illegal drugs trade — to less risky but equally profitable schemes like VAT fraud.
Organised crime groups pour their funds, in particular, into businesses in large urban areas, such as Madrid, London, Paris and Berlin, tourist areas such as the Cote d’Azur, Andalucía and southern and northwestern Italy
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