Mafia and finance: an introduction

by Alessandro Valera

The word mafia often evokes quasi-romantic images from The God Father or The Sopranos. Mafia thugs are imagined as Sicilian men wearing traditional clothes, speaking with accents and carrying guns. Many in Europe think that the mafia is a problem confined to parts of Italy and maybe to remote places like Russia or Japan. Unfortunately, this assumptions are widely inaccurate. The globalisation of markets and trade has also meant that the mafias have gone global. It is not only about international traffic of drugs or arms, but especially about turning “dirty money” from illicit activities into “clean money” which can be invested. This process is referred to as money laundering and it has benefitted enormously from the liberalisations of financial markets in the last decades.

While criminal organisations in different countries preserve some of their traditions, they are increasingly becoming a corporation themselves. The twenty-first century European mafiosos are not only Sicilian men with their folkloristic hats, but smart business men wearing suits in London, Frankfurt and Milan.
The European Council in 1991 approved the Directive “on prevention of the use of the
financial system for the purpose of money laundering” which tries to regulate financial transitions in Europe to avoid it being used by organised crime groups. However, this regulation seems to be outdated in many aspects and stronger measures may be required. The multiplication of financial products, intermediaries and institutions in the last few years makes it easier and easier for the mafias to diversify their investments. Italy, a country in which mafias have been known to be active for the longest, is also a leader in anti-mafia fights. It may be desirable to adopt some of its relevant regulation at a European level.

In the next few weeks, European Alternatives will hold participative workshops on these themes in Otranto (Italy), Bucharest (Romania), London (UK) and Sofia (Bulgaria).

This theme in more detail

To understand more about this issue (on which surprisingly little information is available in English), you can consult this “mediagraphy”. It includes academic writing, newspaper article, documentaries and recordings of a conference held on this subject.

Circolo SEL Radio Londra (2011) London: the city of Mafia www.sinistraeliberta.co.uk/i-nostri-eventi.php

Santino, U. (1988)Business, Finance and Organized Crime: Proposing a Risk-Based Approach for Governance in a Law and Economics Perspective Centro Peppino Impastato Available here www.centroimpastato.it/otherlang/finmafiaen.php3

Schneider, F.   (2008) Money Laundering and Financial Means of Organized Crime: Some Preliminary Empirical Findingshttp://ssrn.com/abstract=1263868

Alessandri, A.,  Fiandaca, G., Masciandaro, D and Vigna, P.L. (2008) Business, Finance and Organized Crime: Proposing a Risk-Based Approach for Governance in a Law and Economics Perspective (the ‘Vigna Code’) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1136149

The Economist (2007) The toughest job in finance: a new man to tackle economic crime in Sicilywww.economist.com/node/9308096
AFP (2008) Italian writer Saviano assails EU over mafia money-laundering
www.youtube.com/watch?v=_wSIU7gn_i4

Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering, Brussels (especially pages 14- 20) http://europa.eu/legislation_summaries/other/l24016_en.htm