Legitimate businesses and (organised crime) vulnerability Prof. Dr. Tom Vander Beken Crimprev Seminar The relation between organized crime and informal markets Ghent University 5 July 2007

Overview Economy, crime and irregularities: two sides Crimes and vulnerabilities Studying vulnerabilities – background and model Results from vulnerability research Comments on vulnerability research Some conclusions

1. Economy, crime and irregularities: two sides « Economic crime », « criminal markets », « grey » or « informal » economy can be studied from a crime/irregularity perspective, resulting in statements about actors (criminals/businessmen), activities (crimes/businesses) and their impact on the more formal/legal parts of the economy. The relationship between (in)formal economy, crime and irregularities can also be studied from an environmental perspective, resulting in statements about the (formal) economic setting and its (potential) impact on actors and activities in the informal/illegal parts of the economy.

2. Crimes and vulnerabilities Crime/irregularity focused studies have the advantage to be very concrete as they can show what people do. Their disadvantage is that they often only report on what people have done in the past and only about what is revealed (mostly by law enforcement) about these activities. Environmental focused studies have the advantage that they show what the economic environment allows people to do (opportunities) based on (open source) data about the formal economy. Their disadvantage is that they only reflect on vulnerabilities/weaknesses in the environment without concrete links to existing criminal/irregular activities.

3a. Studying vulnerabilities - background Describe economic activity (sectors) on several levels: from the trade (business processes), to the organisation (sector) and the broader economic environment (cluster) – see e.g. M. Porter . Put it on vulnerability grids, developed from criminological theory – see e.g. Albanese and Rozenkrans ande Emde. Assess vulnerabilities to (organised) crime/irregularities of economic sectors/activities.

3b. Studying vulnerabilities - model See Roadmap for vulnerability studies, 2005

3c. Studying vulnerabilities - model Vulnerability grid- transport

4. Results from vulnerability research a. Studies on sectors and industries b. Sector vulnerabilities c. Business vulnerabilities

a. Studies on sectors and industries Model so far known to be applied to the following sectors: Diamond sector (2003) Transport sector (2005) Music sector (2005)* Fashion sector (2005) – Couture project* Pharmaceutical sector (2006)* Waste management industry (2006) Fashion sector-Milan (2006) – PhD Francesca Calovi* Taxi dutch sector (2007)* * Study using the model but not conducted by Ghent University

b. Sector vulnerabilities Products/services can be attractive because of their seize, mobility and value (diamonds), their facilitating role for crime (transport), their price inelasticy (diamonds, waste management) and integrity (cds, toxic waste, pharmaceutical products, fashion) – related to « product proofing » studies (See e.g. Ron Clarke). Regulations may have lacunae (brokers in several sectors), be inconsistent (administrative/criminal approaches) or create opportunities for fraud/tax evasion (diamonds) – related to « crime proofing » studies (see special issue E.J. Criminal Policy and Research, 2006). Enforcement and (informal) control may be problematic (waste, diamonds) or poorly organised. Market conditions can create opportunities (small companies in a very competitive transport sector, shape and size of black market in diamond sector,…).

c. Business vulnerabilities Business processes within companies might be vulnerable: Personnel management: recruitment of and control on employees in transportsector, taxi sector,…; Production: Main activity « outside » company premisses in the transportsector, taxi sector; Bookkeeping: special rules, lack of transparency in diamond sector, taxi sector (taxation, fraud); Purchasing/sales: « cutting the corner » in waste industry, diamond sector.

5. Comments on vulnerability studies Potential added value of vulnerability studies, within the wider criminal opportunity approach Methodology and studies lengthy/complicated Questions about validity of the results and scoring system Relationship between vulnerability and studies on criminals/cases? From: External evaluation of the vulnerability approach (2006) (12 interviews with research users and academics by independent consultant) Our conclusion: more research to purify, dismantle, strenghten or link the approach and method.

6. Some conclusions Informal economy can be studied starting from the formal side. It can provide insights about opportunities which may not be detected or detected in different forms by research focusing on activities and actors at the informal side (e.g. crucial role of go-betweens like brokers). So far, methods and findings are not always « hard ». More focused (e.g. business processes and irregulaties) reseach needed.