A number of studies that have considered organised crime have suggested that illicit markets, such as drug markets, and the groups engaged in them can be viewed as part of a ‘continuum of business’ or a spectrum of legality (Savona and Riccardi, 2015; Murray, 2016). For OCGs, involvement in the legal economy is linked to the fact that legitimacy is important for achieving, and enjoying, wealth, power and influence. While they are to some extent similar to legitimate businesses, they also differ in some important ways. Most obviously they carry forward their criminal methods ‘use of force, threats, monopoly control, and/or the corruption of public officials’ into the licit business world, as in the case of an OCG in Scotland that rigged a contract tendering process for provision of hospital transport (see Case study 3 on page 28). Also, the risks they face and their goals in investment in the legal economy differ from those legal businesses (CSD, 2015), as discussed earlier in the section on the impact of drug markets on the legal economy.
It is also important to recognise that, as is the case in the legal business world, the size of organisations or entities involved in illicit drug supply is highly diverse, ranging from lone individuals or small-scale enterprises to large criminal organisations. For example, at one end there are young people engaged in what is known as ‘social supply’, who purchase drugs, such as ecstasy, on behalf of friends and may sometimes sell them for a small profit. At the other end are the large organised crime gangs, such as Italian mafia groups, engaged in trafficking large amounts of drugs transnationally. This same diversity can be seen in the different groups engaged in growing cannabis, from individuals growing for personal use to OCGs growing thousands of plants.
A potentially fruitful area for development would be the elaboration of a conceptual framework for understanding the business drivers and contextual factors that influence those involved in supplying the drug markets. The evidence suggests that key concerns for most people involved at all levels of the drug market are making a profit, sustainability and maintaining a competitive advantage, while minimising risk, for example by outsourcing or transferring it, as is the case for licit businesses. Therefore, viewing drug markets from a business perspective may provide valuable insights into their operations, including factors that may either enable or inhibit both expansion and diversification. Knowledge of such factors may in turn allow the development of more effective strategies for tackling drug supply and limiting the harms arising from it. Such an approach would require the collection of different kinds of information and intelligence as well as a different analytical focus. While it is still experimental, it is an approach that merits testing and builds on developments already under way in Europe.
As Murray (2016) describes in a working paper prepared as background for this report, factors that are likely to be important include the following:
Consideration of these broad drivers can help identify potential areas for cross-involvement in different criminal and legitimate activities, mechanisms for quantifying the extent of these overlaps and also areas of possible weakness that might be targeted. This also suggests that responses should target the processes rather than the groups or individuals involved, looking at what is done and how, rather than who is doing it.
For example, having certain types of key partners will be essential to enable OCGs involved in drug markets to access the profits they make and to deal with the vast sums of cash associated with this activity (see the section on money laundering in Chapter 1). Recognising this leads on to consideration of how many of such groups, that is, lawyers, bankers, accountants, etc., may be involved with drug trafficking organisations and the extent of this involvement. Appreciating that indoor cannabis farms require properties to house them leads on to consideration of how many estate agents and landlords wittingly or unwittingly are allowing their premises to be used for cannabis production and how they become involved. Case study 6 illustrates this sort of business analysis and also demonstrates many of the issues discussed in the previous chapter, including money laundering approaches and corruption. The importance of this approach is reflected in the SOCTA (Serious Organised Crime Threat Assessment) OCG indicators ‘Expertise’ and ‘Human Resources’ (Europol 2015b). Similarly, considering key activities would lead to the identification of the types of activities that are being undertaken by the drug trafficking organisations in both the criminal and licit spheres.
An OCG in Scotland regularly received cocaine from a Liverpool-based group, supplied on credit with payment due in 1 week. A network of retail-level dealers was used to distribute the drug to customers, each receiving a batch of cocaine to sell over a period of 1 to 2 weeks. Each dealer kept GBP 200 of the takings as wages, and the remainder of the proceeds was collected by the local wholesaler. After the Liverpool group were paid, the remaining substantial profits had to be laundered quickly and three legitimate businesses were used for this purpose.
The first scheme involved using dirty cash to buy stock for a bar controlled by the OCG: excess profits were hidden by raising false invoices or paying wages to fictitious staff. The second scheme involved setting up a legitimate company to supply home improvements for ‘Green Deal’, a government environmental initiative designed to let members of the public and businesses make energy-efficiency improvements to their properties. Once the company was established, subcontractors were paid in dirty money; meanwhile the clean government subsidy money was ‘stored’ on the balance sheet. The third mechanism involved acquiring properties using mortgages arranged by a corrupt financial adviser using false income declarations. The dirty money was used to make the mortgage payments through small bank deposits under the suspicious transaction reporting limit (‘smurfing’).
By taking a business analytical approach, it is possible to identify targets for law enforcement intervention; for example, the key relationships in the business architecture, the Liverpool cocaine supplier, the retail dealers, legitimate traders supplying goods to the bar, the subcontracted insulation installers and the corrupt financial advisor, all represent opportunities for disruption. The reputation of the group retailing the drugs is important, as it allows it to receive drugs on credit and the dealers know they will be paid on time; the exploitation of the Green Deal initiative shows innovation. Understanding these factors leads to opportunities to disrupt the activities of the group by damaging its reputation and inhibiting its access to the legal economy, for example by reporting the misuse of ‘Green Deal’, which may also serve to prevent other OCGs from attempting such schemes.
Source: Murray (2016).