OCI-S
INDICATOR OF ORGANISED CRIME INFILTRATION IN THE LEGITIMATE ECONOMY - BUSINESS SECTORS
I p d e a e t c C C
IN BRIEF OCI-S is a composite indicator which measures the level of infiltration of organised crime groups across the business
sectors (at the 1-, 2- and 3-digits level of NACE Rev. 2 classification)1 of the legitimate economy in Italy.
BACKGROUND The concept of organised crime infiltration is broad in scope and can be defined as any event in which a criminal organisation, a natural person belonging to a criminal organisation or acting on its behalf invests financial and/ or human resources in order to influence the decisionmaking process of a legitimate private business or a public administration.2 Organised crime (OC) infiltration in the legal economy is proven to have substantial social, economic, political, environmental, reputational costs and to impact negatively on market competition, resource allocation, consumers’ wealth, safety and financial security. Businesses and institutions entering in contact with infiltrated businesses are exposed to risks of being victimised, defrauded, extorted,
1. The statistical classification of economic activities in the European Community, abbreviated as NACE, is a 4-digit classification of economic activities in the European Union (EU). NACE Rev. 2 was adopted at the end of 2006 and, in 2007, its implementation began. For further information: http://ec.europa.eu/eurostat/statistics-explained/index. php/Glossary:Statistical_classification_of_economic_activities_in_the_ European_Community_(NACE)
corrupted or misused for money laundering or other illicit purposes, as well as to reputational risks. This applies in particular to those areas (such as Italy) where the presence of mafias and other OC groups is pervasive and widely acknowledged.3 For this reason it is necessary, in both the public and private domains, to improve the prevention of OC infiltration with tools able to identify territories and business sectors at higher risk. These tools will ease the customer due diligence (CDD) of clients, suppliers and partners; facilitate anti-money laundering (AML) activities; and strengthen the monitoring of public and private procurements. The OCI-S indicator responds to these needs.
2. For more details see Riccardi & Berlusconi (forthcoming); Savona & Berlusconi (2015); Transcrime (2013). 3. Banca d’Italia (2015); Savona & Riccardi (2015); Pinotti (2015); Riccardi (2014); Transcrime (2013); Dugato et al (2013); Mugellini & Caneppele (2012).
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APPROACH The purpose of OCI-S is to measure the magnitude of OC infiltration across the business sectors of the Italian legitimate economy.
crimetech.it), the spin-off company of the Università Cattolica del Sacro Cuore and Transcrime – Joint Research Centre on Transnational Crime.
Information about this phenomenon is available from a range of open and institutional sources. However, due to the heterogeneity of this information, the ability to find, extract, interpret, and summarise it into reliable and comparable data requires deep expertise in the field and advanced technical skills. This is the expertise of Crime&tech (www.
After scanning all the available sources, Crime&tech collects the most reliable information. It then verifies, uniforms and condenses it into a composite indicator which is easy to interpret and incorporate into the client’s proprietary databases and models.
METHODOLOGY & DATA The OCI-S indicator builds on the methodology developed by Transcrime – Università Cattolica Sacro Cuore (www. transcrime.it) in previous research in this field.4 It covers both the infiltration of Italian-speaking OC groups (e.g. Italian mafias such as Camorra, Cosa Nostra and ‘Ndrangheta groups) and foreign ones (e.g. Chinese-speaking OC groups, Eastern European OC groups, etc). It combines a variety of proxies and information sources:
• Companies definitively confiscated from OC groups in Italy (sources: ANBSC - Agenzia Nazionale per l’Amministrazione e la Destinazione dei Beni Sequestrati e Confiscati alla Criminalità Organizzata);5 • Evidence6 of companies seized and confiscated from OC groups in Italy (source: DIA – Direzione Investigativa Antimafia); • Other evidence of OC infiltration in legitimate businesses in Italy (source: DIA – Direzione Investigativa Antimafia).
Table 1 – Indicator proxy variables and sources Proxy variable
Last available year
Source
Companies definitively confiscated from OC groups in Italy
2012
ANBSC
Evidence of companies seized and confiscated from OC groups in Italy
2014
DIA
Other evidence of OC infiltration in legitimate businesses in Italy
2014
DIA
4. For more details see Transcrime (2013); Calderoni (2014; 2011); Riccardi & Berlusconi (forthcoming); Savona & Berlusconi (2015); Riccardi (2014). 5. For a comprehensive description of the asset recovery system in Italy see Florio, Bosco & D’Amore (2014).
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6. ‘Evidence’ refers here to a case of one (or more) companies confiscated, seized or infiltrated by OC in a territory and/or a business sector as reported by DIA. Given the available information in DIA reports, it is not possible to count the exact number of companies seized, confiscated or with signs of OC infiltration. Therefore evidence is collected and assembled per each territory and/or business sector regardless of the exact number of infiltrated companies.
Per each of the proxy variables presented in Table 1, information on the relevant business sector is collected and sorted according to the NACE Rev. 2 (2007) classification of the European Community. The information is available at different detail levels: section (1-digit NACE Rev.2 classification), division (2-digits) and group (3-digits). The information indicating only higher levels (e.g. 1- or 2-digits) is distributed across the lower levels of the same category according to the proportion of the companies registered in those levels. A time span of 10 years before the last available year is covered in order to take full account of the medium-term trends of OC infiltration in Italy. The data collected are analysed with various statistical techniques (e.g. Principal Component Analysis) in order to check their consistency and the internal validity of the composite indicator. The raw data in each business sector (at 1-, 2- and 3-digits level) are then weighted by the number of registered companies in each sector in order to measure the relative level of infiltration. The ratios obtained are normalised and linearly aggregated using the weights reported in Figure 1 to produce the final composite indicator of OC infiltration in the legitimate economy – Business Sectors (OCI-S). Information about companies definitively confiscated provided by
ANBSC is attributed a higher weight because of its higher reliability. Business sectors are then grouped into 10 clusters (considering NACE 1-, 2- and 3-digits business sectors altogether) according to a hierarchical clustering analysis (HCA) based on Euclidean distances and Ward’s criterion. The divisions and groups (respectively NACE classification 2- and 3-digits level), for which no evidence of infiltration has been identified and retrieved, receive a value of the OCI-S which is derived exclusively from the relevant section or division which they belong to. They are distinguished from the other sectors, for which instead evidence of OC infiltration is observed, through an asterisk (*). The choice to attribute a value also to those divisions and groups without evidence of infiltration is due to the possibility that, under certain circumstances, business sectors which are close or are strictly related could be characterised by similar levels of risk of OC infiltration even in the absence of actual evidence. However, the Client may choose not to consider these sectors (i.e. those with an asterisk) in its assessment. NACE rev. 2 sections O (Public Administration And Defence; Compulsory Social Security) and U (Activities Of Extraterritorial Organisations And Bodies) are not assessed and receive no values because not applicable and not meaningful.
Figure 1 – Weights used in the construction of the composite indicator
Evidence of companies seized and confiscated from OC groups in Italy (DIA)
Indicator of 0.2
Other evidence of OC infiltration in private legitimate businesses in Italy (DIA)
Organised Crime Infiltration in the Legitimate Economy – Business Sectors
Companies definitively confiscated from OC groups in Italy (ANBSC)
0.8
(OCI-S)
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HOW TO READ IT On the scale 1-10, lower values should be read as lower levels of infiltration, so that 1=very low and 10=very high. The indicator is constructed controlling for the number of registered companies in a certain business sector. It should therefore be interpreted in relative terms and not as a measure of the absolute level of OC infiltration across business sectors. As mentioned, business sectors whose OCI-S value is reported with an asterisk (*) are those for which actual evidence of OC infiltration has not been observed. In this case the value is derived exclusively from that of the relevant NACE Rev. 2 division or section (see previous box Methodology & Data for further details). The Client may decide if to consider these sectors or not in its assessment.
The indicator OCI-S is not intended to be assigned to an individual entity (e.g. a company); rather, it is a measure of the level of OC infiltration in the business sector in which the entity operates or is registered. A high value of the indicator shall not be interpreted automatically as showing a high level of risk of infiltration for the legal entity itself. The assessment of an individual entity should be combined with investigation of other entity-specific risk factors (e.g. ownership structure, beneficial ownership, partnerships, management and financial information), and consideration should also be made of the territory in which the legal entity operates (see the indicator OCI-T). In this sense, it is recommended that the indicator be used in combination with the Indicator of Organised Crime Infiltration in the Legitimate Economy – Territories (OCI-T) in order to obtain a more comprehensive picture of the infiltration phenomenon.
APPLICATIONS & END-USERS The OCI-T indicator can be used by a wide range of subscribers in both the public and private sectors. For example:
• Private companies and public institutions wanting more accurately to assess the risk of criminal infiltration of their suppliers, vendors or business partners;
• Obliged entities subject to AML obligations to improve the risk-assessment of their customers during the CDD activity;
• Public institutions (e.g. government offices, local administrations) interested in mapping the risks of the stakeholders they deal with;
• Private companies or entrepreneurs interested in mapping the risks of business sectors where to invest or expand the business activity;
• Public organisations (e.g. local or regional governments, procurement agencies) wanting to improve the monitoring of their procurements and suppliers;
• Insurance companies wanting to improve the calculation of policies and premiums;
DISCLAIMER Whilst acknowledging that Crime&tech has diligently and professionally gathered and analysed the data and developed the indicators, the Client is aware that the data and indicators provided do not constitute any kind of opinion and/or consultancy. Crime&tech does not provide the client, who is cognizant and agrees, with any guarantee
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concerning the consistency and internal validity of the data and indicators provided. Moreover, Crime&tech does not provide the client with any guarantee that the information provided could change after the Client receives or consults it. The Client therefore renounces any claim towards Crime&tech in regard to the aforesaid.
REFERENCES Banca d’Italia (2015). “Prevenzione e contrasto della criminalità
Pinotti, P. (2015), “The Economic Costs of Organised Crime: Evidence from
organizzata”. Audizione del Governatore della Banca d’Italia alla
Southern Italy”. The Economic Journal, 125 (pp. F203–F232). doi: 10.1111/
Commissione Parlamentare d’inchiesta sul fenomeno delle mafiee sulle altre
ecoj.12235
associazioni criminali, anche straniere, 14 gennaio 2015. Riccardi, M. (2014). “When criminals invest in businesses: are we looking Calderoni, F. (2011). “Where is the mafia in Italy? Measuring the presence
in the right direction? An exploratory analysis of companies controlled by
of the mafia across Italian provinces”. Global Crime, 12(1), 41–69. doi:10.10
Mafias”. In S. Caneppele & F. Calderoni (Eds.), Organized Crime, Corruption
80/17440572.2011.548962
and Crime Prevention (pp. 197–207). Springer International Publishing.
Calderoni, F. (2014). “Measuring the Presence of the Mafias in Italy”. In S.
Riccardi, M. & Berlusconi, G. (forthcoming), “Measuring organised crime
Caneppele & F. Calderoni (Eds.), Organized Crime, Corruption and Crime
infiltration”. In E.U. Savona, M. Riccardi & G. Berlusconi, Organised crime in
Prevention (pp. 239–249). Springer International Publishing.
European businesses, Routledge.
Dugato, M., Favarin, S., Hideg, G., & Illyes, A. (2013). The crime against
Savona, E. U., & Berlusconi, G. (Eds.). (2015). Organized Crime Infiltration of
businesses in Europe: A pilot survey. Final Report of the Project: EU Survey
Legitimate Businesses in Europe: a Pilot Project in Five European Countries.
to assess the level and impact of crimes against business – Stage 2: Piloting
Final report of Project ARIEL. Trento: Transcrime – Università degli Studi di
the survey module. Transcrime - Gallup. http://www.transcrime.it/wp-
Trento. http://www.transcrime.it/pubblicazioni/progetto-ariel/
content/uploads/2013/11/EU-BCS-Final-Report_GallupTranscrime.pdf Savona, E. U., & Riccardi, M. (Eds.). (2015). From illegal markets to legitimate Florio, P., Bosco, G., & D’amore, L. (2014). Amministratore giudiziario.
businesses: the portfolio of organised crime in Europe. Final Report of Project
Sequestro - Confisca - Gestione dei beni - Coadiutore dell’ANBSC (II
OCP – Organised Crime Portfolio. Trento: Transcrime - Università degli Studi
Edizione.). Milano: Wolters Kluwer Italia
di Trento. http://www.transcrime.it/en/pubblicazioni/the-portfolio-oforganised-crime-in-europe/
Mugellini, G., & Caneppele, S. (2012). Le imprese vittime di criminalità in Italia. Milan - Trento, Italy: Transcrime. http://www.transcrime.
Transcrime. (2013). Gli investimenti delle mafie. Milano: Università Cattolica
it/wp-content/uploads/2013/11/16_Le_imprese_vittime_di_
Sacro Cuore - Università degli Studi di Trento. http://www.investimentioc.
criminalit%C3%A0_in_Italia1.pdf
it/files/PON-Gli_investimenti_delle_mafie.pdf
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