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Organised and Trans-National Crime - Criminology Dip 6

Updated on November 1, 2011

6 Organised and Trans-National Crime


***Before you continue to read this Hub may I mention that this is my work, written in my words for my Criminology Diploma. By all means read the Hub and absorb it's content but please don't plagiarize my work and present it as your own work towards your own diploma. This has been added as a request from a tutor/examiner of the Criminology Diploma program.***

Thank you!

6.1 Describe the principal forms of organised and trans-national crime.

Organised crime reaches into communities and ruins lives, generating fear and fuelling other crimes. These organised crime groups are similar to businesses in the fact that they exist to make money but the criminals running these groups will often resort to extreme violence, intimidation and corruption to protect their criminal enterprises.

These groups operate across international boundaries, hence the term “trans-national”. They take advantage of major current trends, the economic downturn, new technologies and globalisation to commit their crimes and to conceal their activities from the authorities.

Most would associate organised crime with gun and drug related activities but these groups are involved in much more than meets the eye: -

· Immigration Crime. People smuggling and human trafficking, including trafficking for the use of sexual exploitation.

· Fraud. Covering a variety of activities against individuals, businesses and even governments.

· Money Laundering. Hiding away the profits from criminal activities.

· Internet Related Crimes. Computerised fraud, viruses and hacking.

· Other Crimes. Including armed robbery, kidnap and extortion, freight crime, vehicle crime and counterfeiting.

The following pages try to describe in more detail some of principal forms of fraudulent criminal activities that organised crime groups could be involved with: -

Tobacco. Organised criminals are involved with the smuggling of tobacco because the risks and penalties are relatively low in comparison with the smuggling of drugs but yet the profits can be very high. Compared to the casual cross-channel smuggler who may smuggle in a few thousand cigarettes per trip, to sell on to friends and relatives, the organised criminals could smuggle in upwards of eight million cigarettes at one time causing lost revenue of up to £3billion per year. It is estimated that one in every five cigarettes smoked in the UK is smuggled.

Some of these smuggled tobacco products are the genuine item, obviously still an illegal operation as taxes and duty aren’t paid on them, though increasing quantities are being proven to be counterfeit. Counterfeit cigarettes do not comply with manufacturers specifications and are known to contain high levels of harmful chemicals. Primarily, counterfeit cigarettes originated from China, Malaysia, Singapore and Vietnam though more recently these operations have moved throughout Eastern Europe right through to Belgium and even into the UK. Belgium is also the primary source for hand rolling tobacco.

Duty suspended products are regularly moved about between bonded warehouses throughout the UK and EU, this is a legitimate operation and the couriers will have full documentation of the action to show if ever challenged. Sometimes these goods never arrive at their stated destination, they are diverted through the illicit UK market without any payment of duty, this is known as Diversion Fraud. Forged or substitute documents will be used to cover the tracks.

Alcohol. Up to £1Billion of lost revenue per year could be put down to alcohol smuggling. Of all alcohol consumed within the UK, 15% of spirits, 4% of beers and 2% of wines are believed to have been smuggled in. Most losses occur through cross-Channel smuggling of duty-paid products, mostly beer and wine smuggled in light vehicles and from the diversion of duty-suspended products, mostly spirits, transported as freight.

Relating to diversion frauds, the smuggler would favour less known brands as opposed to premium brands, these can be obtained duty free for around £10,000 per lorry load. The excise duty on such lorry loads could be as much as £100,000 giving an indication of the potential profit. It is estimated that the majority of illicit alcohol is sold on through legitimate outlets such as pubs, clubs and off licenses for similar to duty paid prices, giving the consumer the impression that they are getting the legitimate product.

Organised criminals will be involved with both alcohol and tobacco smuggling as the easy interchange highlights opportunity and the flexibility to react to tightened enforcement measures.

Fuel. Relating to motoring fuels there are several methods of fraudulent actions that organised criminals could be involved with, often to fund more serious crimes.

Due to fuel price differences between Northern Ireland and The Republic of Ireland much of the fuels, both petrol and diesel, supplied through legitimate garages in Northern Ireland could have actually been smuggled over the border, costing millions in lost revenue.

Most oil-based fuels are naturally duty-paid substances though some do become duty-privileged, for example, kerosene (paraffin) is fully rebated when it is used for heating purposes and diesel is rebated when it is for use on off-road vehicles or machinery. Duty-privileged diesel is artificially dyed red (green in the Republic of Ireland) to aid detection of misuse, using this dyed diesel in a vehicle stains engine components and can be detected years later. Dyed diesel can also be “laundered”, treated with strong acid and other chemicals to dissolve the artificial dye, disguising it as duty-paid diesel. As this product will now contain a percentage of acid it could severely damage the engines of unsuspecting motorists.

Other industrially used oils such as lubricating oil is also duty-free and known as “tied” oils. They are unmarked and can be used in a similar way to coloured diesel. Tied oil frauds are large-scale and complex, indicating the involvement of serious and organised crime.

VAT Frauds. Fraud relating to Value Added Tax is divided into three categories: Registered Evader Fraud, Unregistered Evader Fraud and Thief Fraud.

Registered Evader Fraud occurs when VAT Registered traders fail to declare their true liability by suppressing transactions.

Unregistered Evader Fraud involves genuine traders whose turnovers are above the VAT threshold but fail to register for VAT.

Both registered and unregistered evader frauds are usually concentrated around cash based businesses, such as construction and leisure industries, restaurants, bars, taxis, any business where payment is made directly with cash.

Though serious and organised criminals could be attracted to VAT evader type frauds they are much more likely to be involved with Thief Fraud. This involves the setting up of bogus company registrations in order to steal VAT, again there are three methods of thief fraud, Repayment Fraud, Missing Trader Intra-community Fraud (MTIF) and Third Country Export Diversion Fraud.

Repayment Fraud, which can occur dealing with either goods or services, involves recovery of either exaggerated or wholly fictitious transactions by a bogus business. More sophisticated criminals may engage in “multi-cell repayment frauds”, by setting up multiple bogus registrations, claiming small amounts with each can generate high profits.

MYIC Fraud is a sophisticated criminal attack on the UK VAT system. Largely perpetrated using goods such as mobile phones, computer components or other electronic goods. The criminals will obtain VAT registration that will enabling them to purchase VAT free goods elsewhere within the EU, these goods then sold on at an instant profit with full VAT attached, though not paid on to the Exchequer. Continuous movement of such items has become known as a “carousel fraud”, resulting in multiple tax losses, further losses occur when traders and purchasers attempt to reclaim VAT.

Third Country Export Diversion Fraud involves the diversion of goods from export to home use without charging VAT, basic consumer and luxury goods have been used in such frauds.

Benefit Fraud. Over £2 billion per year is lost due to various types of benefit frauds. The largest organised frauds relating to the benefit system would be the theft of instruments of payment (IOP’s), such as order books and cheques, whilst they are still within the postal system. Thefts planned ahead using information obtained through corrupt Post Office staff.

False and stolen identities, British or foreign, could be used to defraud the benefits system, identities being stolen by corrupt persons who have access to personal details or maybe created through purchases of deceased infants birth certificates.

Investment Fraud. Investment fraud embraces a number of methods used by serious and organised criminals to defraud investors, typically involving non-existent companies or fictitious commodities. Often an elaborate deception, the fraudster will promise generous returns for money invested, often paying out small dividends to prolong the life of the fraud.

Long Firm Fraud and Fraudulent Trading. Fraudsters either create a business or more commonly take over an existing business, build up a trust with suppliers and place genuine orders gradually building up in size. Eventually, a very large order through each supplier will be made, all products will be quickly sold on and the fraudsters will vanish without paying the suppliers.

In the UK, serious organised crime has been estimated to cost upwards of £20 billion a year, on the 1st April 2006, the Serious Organised Crime Agency (SOCA) was launched. Its aim is to reduce the harm caused to the UK by the serious organised criminal.

Any comments appreciated!


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