States, Frauds, and the Threat of Transnational Organized Crime

Article excerpt

Fraud and corruption are very serious threats to some states and are harmful to all; however, this threat is seldom connected to transnational organized crime (TOC). We cannot examine social problems in a vacuum; we have to construct images of threats through the lens of the social and political threats posed by different aspects of crime and its organization. (1) Harm and threat are not just about their economic cost, but also about how different phenomena hurt our confidence that we can control our surroundings and our future expectations. This anxiety can affect entities such as nation states or even trans-state entities such as "Ummah Wahidah" the Islamic global community. The aim of this article is threefold: to disentangle the real and imagined threats of fraud, detail the involvement of transnational organized crime groups in fraud, and determine who or what can be reasonably described as threatened by these phenomena. This article rejects the implicit binary view that states are either threatened or not threatened, referring rather to a scale of threat to both states and different sectors within the state. This article critiques the value of Moisds Naim's concept of 'mafia state' to explaining and understanding fraud. (2)

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Concerns about organized crime moving in on commerce are not new. (3) Such tropes date back to at least the 1950s and 1960s in the United States. (4) Past research has shown that though there was less of a moral panic about this "invasion" in the United Kingdom than there was in the United States, there were well organized bankruptcy fraudsters operating in the United Kingdom in the 1960s and at various times during the nineteenth century, including educated Germans who had migrated to London in search of employment and became "organized criminals" when this did not materialize. (5) Today the involvement of professional criminals in different forms of fraud varies. Experience and prejudice links Nigerians with crooked entrepreneurism, Romanians with skilled ATM fraud, and several parts of Eastern Europe, Russia, and China with cybercrime and, particularly in the case of China, online intellectual property theft. (6) We should not be surprised that the juxtaposition of technical education, social engineering skills, and poor economic prospects stimulates fraud and cybercrime, especially when the state is strong and encourages it, weak and cannot effectively suppress it, or even when its agents are active or passive participants.

CONCEPTUAL AMBIGUITIES IN THE RELATIONSHIP BETWEEN FRAUD AND ORGANIZED CRIME

In a recent Foreign Affairs article titled "Mafia States: Organized Crime Takes Office," Moises Naim, like Misha Glenny and many politicians and enforcement personnel, uses "organized crime" as a collective noun that has agency as well as identity, and that engages in a broad spread of illicit activities, not just drugs and extortion. It flourishes where the state is weak or where it is strong but venal. Naim's focus on kleptocratic states that have been taken over by TOC implies that TOC only occurs as an alien or concerted invasion. Alternative possibilities include a leadership that has deliberately organized itself to exploit opportunities in their environment illegally and where civil society bulwarks against monopolistic power may be absent.

Some critics counter that, rather than TOC being an alien import, American capitalism itself can operate like organized crime, in which the main threat of fraud and money laundering comes not from outsiders but from core institutions. (7) For fear of undermining public confidence in these institutions, however, actual prosecutions are reserved for marginal individuals who serve as signals to cease such behavior. This hypothesis is given some limited support by examples such as the role of major international banks in the manipulation of LIBOR rates, the laundering of drug money, and Iran sanctions evasions, as well as the deferred prosecution agreements with Wachovia Bank. …