Globalization and Organized Crime: Markets, Mobility, and Governance

Introduction: Globalization and Organized Crime

Globalization has caused many changes in society. Telecommunications technology such as the internet allows for large amounts of data to be transmitted across vast distances, making information more accessible and long-distance communication virtually instantaneous. Such developments have changed the way companies do business and the way society operates.

The benefits of globalization have not been lost on organized crime groups. These organizations seek any advantage they can find in their competition with other criminal groups as well as with law enforcement. Their flexibility as informal, underground organizations means they are well positioned to capitalize on economic developments.

Globalization has heightened and expanded the already large role that organized crime plays in the global economy. Organized crime organizations operate much like businesses, motivated by the same incentives. Just as legitimate multinational corporations have expanded global operations to capitalize on cheap labor, raw materials, and new markets, organized crime groups have also expanded their operations for these same reasons, among others.

Organized crime groups manage huge, profitable operations in human trafficking, migrant smuggling, heroin trafficking, cocaine trafficking, firearms trafficking, environmental resources trafficking, counterfeit goods trafficking, maritime piracy, and cybercrime (UNODC, 2010, p. vii). Globalization has helped to make these operations more efficient, more profitable, and more expansive.

The economic liberalization accompanying globalization has expanded the field of potential business opportunities for organized crime, opening up new markets, supply lines, and business opportunities. Additionally, advances in telecommunications technology have allowed criminal associations to coordinate operations from a number of different locations. Global governance mechanisms have not kept pace with these increasingly mobile organizations, and the worldwide organized crime problem will likely get worse before it gets better.

New Markets: Extortion, Fraud, and Human Trafficking

Globalization has provided a number of new locations for organized crime (OC) groups to set up familiar operations. It is usually the metropolitan-based groups that are the first to go overseas. In Japan, for example, it was not the largest Yakuza group that set up shop overseas first, but the Yakuza groups of Tokyo — the Inagawa-Kai in Hawaii and the Sumiyoshi-Kai in the Philippines (Kaplan, 2003, p. 98). OC groups from developed countries, such as the Yakuza of Japan, take advantage of their stronger currencies to buy a foothold in new markets.

Certain illicit activities, such as extortion, can be carried out in almost any location as long as there is a vulnerable victim. For the Japanese Yakuza committing extortion across various Asian countries, the victims were the multinational Japanese corporations that had set up outsourcing operations (Kaplan, 2003, p. 102). For Italian-American Mafia members engaged in construction fraud in Montreal, this element was provided by public construction funds (Cherry, 2011).

Globalization has exacerbated the problem of human trafficking by increasing the economic gap between developed and undeveloped countries. Due to increasing global inequalities and restrictive immigration policies in developed countries, many workers from developing countries are desperate to gain access to wealthier nations (UNODC, 2010, p. 4). Many hopefuls turn to criminal networks that offer to smuggle them into a country for a fee. These workers often exhaust their life savings and borrow money in order to pay for the "trip."

Firearms smuggling has benefited from access to many smaller, politically unstable states. This is immensely helpful to OC groups in Eastern Europe, where the fall of the Soviet Union left many countries with a huge surplus of military-grade firearms. Before globalization, these groups did not know of — or did not have access to — the insurgent and paramilitary groups that would be interested in buying those weapons. Now, Ukraine is shipping these firearms to states and groups in Africa, many of which are rogue states or under arms embargo (UNODC, 2010, pp. 8–9).

One of the most common activities OC groups engage in is money laundering, exploiting the gap in financial monitoring between different nations. Money laundering is particularly prevalent in weak states with poor financial oversight. The lack of transparency and effective state monitoring in the banking systems of many Latin American and Caribbean nations left them especially vulnerable to penetration by Russian money launderers (Bagley, 2004, p. 35).

OC groups, with their considerable financial resources, also take advantage of investment opportunities overseas. Despite the large cash reserves they hold, these groups often encounter difficulties investing such funds in their own country of origin. They are able to invest this dirty money in the legal economies of foreign countries through dummy corporations.

New Business Opportunities: Counterfeiting, Cybercrime, and Natural Resources

Globalization has enabled an especially dangerous type of criminal activity: the production and sale of counterfeit medicines. Because of cheaper labor costs, Asian countries such as India and China have become popular outsourcing destinations for pharmaceutical companies in Europe and the United States. OC groups manufacture diluted formulations or outright dummy pills and re-label them for sale in poorer countries in Southeast Asia and Africa (UNODC, 2010, p. 10). When drugs are not of the potency — or even of the type — they are labeled to be, the results can be fatal for consumers. Such deception can also carry broader public health risks, as diluted medication can fuel the development of drug-resistant strains of pathogens (UNODC, 2010, p. 11).

Globalization has also increased opportunities for organized crime in the trade of counterfeit goods. Much of the global economic growth in recent decades has derived from companies outsourcing their manufacturing operations to countries with cheaper labor costs. Counterfeiters have taken advantage of this outsourcing model, in which designers and manufacturers of a product may live on different continents.

OC groups exploit the large gap between the cost to produce consumer goods and their final market value. They utilize their connections in source countries — such as the Triads in China — to produce counterfeit goods for shipment to Europe, where the goods are often designed and sold (UNODC, 2010, p. 10). These counterfeit goods sometimes originate in the same factories that produce the official goods, as contracting manufacturers occasionally produce extra units for sale through unofficial channels.

Globalization has created a reliance on technology in the business world that has increased opportunities for cybercrime. One popular activity for OC groups is identity theft. Credit-card information can be acquired from consumers through hacking secured computer systems, phishing information from unwitting consumers, and distributing malware programs that relay data from the host computer after installation.

OC groups pose a serious threat in the area of identity theft because they can mobilize large numbers of people to perform low-skill cybercrime attacks, making viable criminal strategies that would be unprofitable to lone individuals due to high failure rates. For example, even though most consumers are on guard against phishing schemes targeting their credit-card information, these schemes remain profitable because the perpetrators need only succeed in locating one or two victims in millions of attempts (UNODC, 2010, p. 204).

Globalization has increased organized criminal activity in the field of natural resources crime. As global regulations protecting environmental resources grow, certain business activities have been made illegal — specifically, businesses are banned from harvesting endangered natural resources and trading in environmentally harmful substances. Some businesses that had come to rely on such resources have turned to the black market to procure them.

Organized crime is stepping in to provide goods and services now prohibited by environmental regulations. These activities include the dumping of hazardous waste for a fee, trading in ozone-depleting substances, and harvesting endangered natural resources (UNODC, 2010, p. 149). These activities are becoming more profitable as demand increases while the above-market supply of such resources diminishes.

Globalization has expanded the scope of environmentally harmful activities as OC groups find new sources of protected resources, often in countries with weaker environmental protection frameworks. OC groups obtain ivory and rhinoceros horn through poachers targeting endangered elephants and rhinoceroses in Africa (UNODC, 2010, p. 9). Although many poachers have no direct contact with organized crime, they sell their goods to local merchants who do. OC groups in Africa accumulate large amounts of illicit ivory and rhinoceros horn for shipment to Asia.

OC groups also engage in trade that is not absolutely prohibited but is highly regulated. Timber is an endangered natural resource in many parts of Southeast Asia, and timber shipments to countries in East Asia and Europe often require documentation demonstrating legal sourcing. OC groups will buy illegally sourced timber from illegal logging gangs in the Philippines and also purchase official paperwork from corrupt government officials to ensure acceptance at destination countries (UNODC, 2010, p. 10).