Concurrent session 2c—Modelling: Redefining the Organised Crime Model—A profit motivated enterprise balancing business risk and return

Dr Hugh McDermott, Senior Lecturer and Course Director—AML/CTF, Fraud and Financial Crime Programs, Australian Graduate School of Policing and Security, Charles Sturt University

Current definitions fail to address a key element of the essence of organised criminal activities—the modern crime organisation as a ‘profit motivated enterprise’, which at its higher levels involves the separation, or minimisation, of investment from risk. Ultimately, organised criminal activity is not singularly about commodities, methodologies, or ethnic crime gangs, or any other historical crime dynamic, it is about ‘business risk and return’. For example, multinational narcotic businesses mirror a corporate vertical line management approach in their operations. At each level of the business, ‘operational managers’ manage discreet operational functions and are directly responsible to upstream controllers. The operational managers personally carry the risk of functional failure or compromise of the imported goods.

The myriad of functions undertaken by operational managers include:

• sourcing, manufacture and/or supply;
• packing disguise methodology;
• determination of transport routes, border crossings and customs evasion;
• interim storage and onward shipment; •clearance through ports of entry;
• collection, unpacking and separation; •delivery to principal, then secondary domestic suppliers;
• coordination and collection of payments; •laundering of illegal funds into legitimate funds and assets;
• repatriation of laundered funds or proceeds of crime to diverse offshore locations through third party entities;
• collection of investment funds, assets and profits; and
• ultimate delivery of funds and assets to entity owned or ultimately controlled by the original investor.

Each function in the chain of production, supply and sale comprises a number of discreet individuals and activities, including the setting up of shelf companies, hiring transport, identifying vulnerable border officials and/or ease of route passages, sourcing benign or complicit money laundering facilities, recruiting trusted cash collectors and converters etc.

The principle risk for the operation is that law enforcement generally strikes at one or two of these functional arms, arresting persons involved in limited aspects of the overall operation. But law enforcement rarely unravels or disrupts the entire manufacture, supply and sale structure, or the ultimate control structure, which remains untouched and anonymous. Thus, the ‘business risk’ for the senior organised crime figures, principal entrepreneurs and financial investors is minimal but the ‘return’ is substantial.