Organised Crime Vulnerability in Legal Sectors: Theory, Cases, and Risk Assessment

1. Organised crime and legal sectors Theory & cases Prof. Dr. Tom Vander Beken Seminar Organised and Corporate Crime, Leuven, 11 April 2005

2. Overview • Background • Theory • Risk Assessment • Existing research on vulnerability studies • Methodological aspects • Cases • The Belgian diamond sector • The European transport sector (project MAVUS)

3. 1. Background Belgium: • (annual) reports on OC • Action Plan 1996 • Long-term methodology European Union: • Traditional descriptive reports on OC needed improvement (CRIMORG 55 & 19) • Action Plan to convert the OCSR into an annual strategic report for planning purposes (CRIMORG 133) • future oriented (OCR)

4. 1. Background • EU Risk assessment Methodology for OC: 1. Organised Crime Groups 2. Counter Measures 3. Illicit Market Scans 4. Licit Market Scans • An urgent need for a reliable and common methodology for (vulnerability) studies of sectors (EUROPOL 2002)

5. 2. Theory 1.Risk assessment • Reporting on organised crime. A shift from description to explanation in the Belgian annual reports on organised crime (IRCP, 2001) • making better and more transparent assessments of the seriousness of OC, especially on the qualitative level • detecting and anticipating crime-facilitating opportunities and crime trends (pro-active approach) • Risk Assessment Matrix (RAM)

6. DESIRE INTENT EXPECTATIONS THREAT RESOURCES RISK CAPABILITY KNOWLEDGE HARM Risk Assessment Matrix(RAM) Source: Brown (1998)

7. 2. Theory 2. Existing research on vulnerability studies • There are studies… • The Netherlands (Van Traa) • Belgium (Parliamentary Comm. on OC) • US (Albanese, Reuter) • Europe (Levi, Savona) • .. but their methodological basis is weak • Vague conceptual framework • No elaborate methodology • Method not useful for all legal sectors

8. 3. Methodological aspects • “vulnerability study”: identification of crime opportunities that might be exploited by OC • Focus on OC task environment, not on OC capacity • Task environment = legal market • How? Analysing the external environment • Conceptual framework: • ‘spectrum of enterprise’ (SMITH) • Multidisciplinary approach: • Economic science: ‘cluster model’ (PORTER) • Criminology: ‘criminal networks’ (PAOLI, KLEEMANS et.al.), ‘nature of the legal-illegal interface’ (PASSAS) • Multi-directional relationship between OC and licit sectors

9. 3. Methodological aspects • Tentative methodology to scan legal sectors for OC: • 1. Sector analysis: economical approach of sector and market players (meso level) • Product, market structure, international position, price setting, economic situation…

10. 3. Methodological aspects 2. Cluster analysis: approaching the broader context of the sector (macro level) • Environmental scanning (PEST) • Cluster analysis (key actors): • Local, regional, (inter)national governments • Financial, legal players • National related and supporting sectors • Foreign related and supporting sectors • Social and other organisations • Relations outside the cluster (coincidence factor) • Crime

11. 3. Methodological aspects 3.Reference Models: identification of a chain of ‘business processes’ as a model for business entities in the sector (micro level) 4.Width and depth scan: analysis of the information from macro, meso and micro level on the basis of a diagram of indicators: 1.Illicit Market 2. Nature of the Product 3. Viability of the Entity 4. Threshold 5. International character

12. 3. Methodological aspects

13. Sector Analysis MESO Width Scan INDICATORS VULNERABILITY PROFILE Conclusions & Recommendations Cluster Analysis MACRO Reference Model Analysis MICRO Depth Scan INDICATORS 3. Methodological aspects • Methodology for licit market scans:

14. Very high Vulnerability: the exploitation of the vulnerability on this point is highly likely + indications from case studies, law enforcement material and/or circumstanstial evidence serve as indications High Vulnerability: the exploitation of the vulnerability on this point is highly likely + strong indications from the market analysis Low Vulnerability: the exploitation of the vulnerability on this point is probable Very low Vulnerability: the exploitation of the vulnerability on this point is unlikely 3. Methodological aspects • Scaling-technique for awarding a vulnerability score to the indicators in the width scan:

15. 4. Cases • The Belgian Diamond sector • Measuring the vulnerability of legal economic sectors for organised crime. (IRCP & Antwerp University, 2001-2003) • A Methodology (2001-2002) • Case Study ‘Diamond sector’ (2002-2003) • Principal: Belgian Federal Office for Scientific, Technical and Culteral Affairs (OSTC)

16. 4. Cases • A. General conclusions: • On the methodological aspects: • Cluster model = usable concept in sector scanning • Width scan = feasible instrument • Depth scan requires more methodological research • On the case study: the methodology allows to draw meaningful and relevant conclusions on the basis of the vulnerability profile of the different groups of indicators

17. 4. Cases • B. Conclusions on the case study • 1. A complex and barely transparent sector • Definition and registration problem • Government and sector insufficiently have the disposal of reliable information • Enormous fragmentation in the area of control and supervision • Lack of infrastructure, manpower & resources • Flow, origin and final destination of the financial transactions often remains unknown • Practical impossibility to trace the activities of Belgian diamond traders in an international context

18. 4. Cases • 2. More than just tax and economic crime • 3. Very high to high vulnerability: • Nature of the economic product • Mobility • Compatibility & flexibility • International character • Viability of the legal entities in the diamond sector • Solvency rate • Black market • Nature

19. 4. Cases 2. The European Transport sector • Project MAVUS: Method for and Assessment of Vulnerability of Sectors • Research Partner: Transcrime (Italy, University of Trento & Milan) • Time frame: 2003-2004 • Principal: European Commission (Agis programme)

20. 4. Cases • Research findings: SECTOR ANALYSIS (Literature/Eurostat/Sector organisations) • important economic sector • Open market with strong competition • Non-transparent price-formation CLUSTER ANALYSIS (Law enforcement authorities/Customs authorities/security sector representatives) • Important role of sector organisations • Low quality of regulation • Low quantity of enforcement • Sector subjected to various crime types

21. 4. Cases ENVIRONMENTAL SCAN: PEST (Literature/public and private sector bodies) • Political White Paper • Economic JIT/delocalisation/bipolarisation • Social Global Village/Image of the sector • Technological ITS & techno-preventive developments REFERENCE MODEL (Literature/private sector) • Business process ‘Production’ =activity outside the transport company • Business process ‘Personnel Management’ =lack of personnel-screening

22. 4. Cases

23. 4. Cases