International Conference on Asian Organized Crime

2 – 4 May 2013

City University of Hong Kong

Summary1

An invited symposium of organised crime scholars and practitioners was convened by Professor Wing Lo and Professor Roderic Broadhurst to review and advance current understandings of organized crime in Asia from a broad perspective including legal, policing, and public policy dimensions. Another aim was to consider the research priorities and conceptual challenges in addressing the problem of organised crime. The meeting was held May 2-4 2013, at the City University of Hong Kong2.

The symposium also attended by several Hong Kong scholars, who participated in discussions and chaired sessions including Professor Simon Young, Dr Xu JH, Dr Michael Adorjan, Dr Alistair Frazer, Dr Philip Beh, Dr Kalwan Kwan, Dr Eric Chui and Professor Fu Hualing (all the University of Hong Kong), Professor Sonny Lo, Dr Dennis Hui (all the Hong Kong Institute of Education), Dr Kent Lee (Chinese University of Hong Kong) and Professor Dennis Wong, Dr Lennon Chang, Dr Lena Zhong, Dr Jessica Li, Dr Alfred Choi and Dr Oliver Chan (all the City University of Hong Kong). The symposium was also attended by senior police, customs and excise, Independent Commission Against Corruption, corrections and law officers including the commissioner of Customs and Excise of the Hong Kong SAR. The symposium was closed to the press in order to encourage frank conversation and exchange of views. Presentations summarised in the abstracts to follow are to be developed and prepared for publication.

Speakers included Professor Zhang (San Diego State3), Professor Varese and Dr Campana (Oxford), Prof Lo and Mr Eric So (CityU), Prof Levi (Cardiff), Mr Peng Wang (Kings College London), Professor Dina Siegel (Utrecht) and Mr Albert Ho (Customs and Excise). Julie Ayling, Rod Broadhurst, Peter Grabosky, Ben Chapman Schmidt and Sharon Kwok from the ARC Centre for Excellence in Policing and Security, Australian National University all gave presentations. Topics included: heroin trading in Kunming China, transplantation of organised crime (OC), suppression of black societies, the impact of Asian OC in Europe, the internet and financial crime and OC, state strategies for OC in Japan and Australia, drug dealing, smuggling counter-measures and triad recruitment. Full abstracts are provided below. Short summaries of the presentations and discussion follow.

Professor Peter Grabosky, opened the meeting with a presentation titled “Organized Crime and the Internet: Implications for National Security”. He noted that security is more than the defence of territorial borders against invading forces, something which has been known

1 Prepared by Rod Broadhurst with the assistance of Ben Chapman-Schmidt. Final version completed 6.6.2013. 2 The conveners thank Ms Carrie Li and the Department of Applied Social Studies for the administrative assistance provided for the symposium.

3 Prof Zhang also presented co-authored papers with Prof Chin, KL (Rutgers), who was unable to attend. Regretfully scholars from the Chinese People’s Public Security University were also unable to attend.

1 before the time of Sun Tzu, and that we need to consider cyber security as an integral component of national security. Furthermore, our definitions of organised crime are outdated and ignore new organisation forms such as botnets, which can create an organisation of unwitting accomplices, swarms and enhance state-sponsored crime. He argued that the current conceptualisation of both online organised crime and state sponsored organised crime are inadequate, and needed more attention. In the Q&A and discussion that followed it was recognized that cyber-attacks had already been used alongside traditional warfare. Among the problems facing law enforcement was a lack of resources for combating cyber-crimes, most of which were dedicated to child pornography.

The second presentation was Professor Michael Levi’s “Organized Financial Crime and Corruption and Their Control in Asia: Current Issues and Future Prospects”. He was concerned that the term ‘financial crime’ had become so broad that it included everything from market abuses, money laundering, the financing of terrorism and nuclear proliferation, and transnational bribery. He also challenged the reliability of the available data on financial crime since numbers are often generated to conform to bureaucratic needs, and reports are often hampered by patchy responses, time lapses and double or under counting. Financial crime itself needs to be considered more broadly as the result of structural forces, and law enforcement is but one of many responses. Beyond these problems, Prof. Levi also took issue with the lack of consistency with which the term ‘organised crime’ is applied, as well as the question of whether ‘Asia’ is a coherent region for analysis. Building on this point, discussants noted that some activities which are viewed as ‘corruption’ in a North Atlantic context may just be the customary way of doing business in other regions, which points to a need to view crime through the context of the culture in which it occurs. Also discussed was the question of the potential benefits of organised crime, since some crimes, such as online piracy, can actually generate a net social benefit. This is an area deliberately ignored by policy makers but which researchers should investigate.

The third presentation by Assistant Commissioner Albert Ho from the HK Customs and Excise Department provided an example of an investigation of marked oil smuggling (over 600 million litres over nine months) between the mainland and HK involving masters of ships engaged in cross-border trade. Mr Ho noted that since 1997 when Hong Kong returned to China that smuggling activities had diversified, outward-bound smuggling had increased and this was driven by mainland demand. He also noted that small loosely organised crime groups were common but some well-organised syndicates connecting HK and the mainland had been observed. Money laundering of the proceeds, however, occurred in HK. He also reported on the joint actions taken by the relevant PRC and HK authorities and noted the interesting case of a Shenzhen court operating to gather evidence from ships’ masters incarcerated in China according to the laws of HK in response to a letter of request from a HK court. Evidence obtained was then used in HK court. Prosecutions in HK resulted in five main players being charged with conspiracy to export un-manifested cargo and money laundering involving US 370 Million with some HKD 30 million assets restrained (note an abstract of this presentation is not available).

Professor Sheldon Zhang delivered two presentations, both on papers he had co-written with Professor Ko-lin Chin. In his first presentation, “The Heroin Retail Market in Kunming”, Professor Zhang discussed how drug trafficking in Kunming was a simple process that

2 differed considerably from that of the United States. The drug trade was not associated with mafia-like groups, and generally conducted either alone or with a partner, with drugs supplied for cash on delivery. There is also very little violence between drug dealers. Following this presentation, Professor Zhang presented “Women in the Heroin Trade: A Niche Market Perspective”. He noted that there had been limited empirical work on women in organised crime, as it was believed that a combination of a higher capacity for violence among males and homosocial reproduction, along with prevailing gender norms, had kept women from joining organised crime groups. However, of those arrested for drug trafficking offences in this prison study, one quarter were women. Although there were notable differences between female drug traffickers and male drug traffickers, including women being more likely to work with family members and to cite family pressures as their reason for entering the drug trade, this figure nevertheless represents considerable female involvement in a normally male-dominated world. Professor Zhang hypothesised that this may be a result of a lack of street-level dealing and the absence of violence may have helped de-gender the marketplace. In the discussion that followed, questions were asked about whether there was any link between drug dealing and prostitution. It was also asked if the lower female incarceration rate might not reflect gender profiling by police, and a reluctance to search women that could be responsible for a higher demand for (less at-risk) female drug traffickers.

Professor Wing Lo and Sharon Kwok presented on “Triadization of Young People and Quasi- Legitimate Opportunity Structure in Macau”. Professor Lo presented statistical analysis that showed triad influence had an impact on rates of juvenile delinquency in Hong Kong and Macau. He explained this as occurring through a process of “triadization” so that young persons are absorbed into triad societies first through a ‘Dai Lo-Lang Tsai’ (big brother and follower) relationship and then gradually adopt triad norms and values through internal sanctions, routine activities and participation in illicit activities. Prof. Lo used this process to explain the long-term survival of the triad societies. Ms. Kwok then took a closer look at the situation in Macau, where working in casino VIP rooms as part of the ‘bate-ficha’ system, offered jobs with good pay and flexible hours without any academic requirements for young men. However, entry into these jobs is by referral only, and triad reputation is crucial in winning the trust of the casino management. In this case, triad membership is primarily an economic opportunity, with the relationship between Dai Lo and Lang Tsai transformed from a sworn brotherhood to a contract between employer and employee. Furthermore, the VIP room is a legitimate business and the legality and profitability of gambling in Macau keeps violence to a minimum; as a result, becoming a triad to work in the bate-ficha system represents a quasi-legitimate opportunity.

Eric So followed these presentations with, “Triadization and Professionalization of Young Drug User-Dealers in Hong Kong”. Mr. So’s research was in process but he observed that the “Dai Lo-Lang Tsai” (“big brother - follower”) relationship could lead to drug dealing because that relationship brought with it the connections, opportunities, knowledge and techniques of this illicit trade. On the other hand, while membership in a triad society was not essential in becoming a drug dealer, some connection with triad members was necessary, because these connections were essential in building a trusted network and were necessary to protect one’s drug supply and enforce contracts. Mr. So’s work also found a high level of cooperation between groups, who shared resources and resolved disputes through

3 negotiation. He also noted a high level of drug use among dealers, who were apparently permitted to use drugs except heroin, and that young user-dealers could continue both their drug use and business even while on probation. During the discussion of these three presentations, a probation officer in the audience expressed surprise at finding that drug use was common while on probation, but noted that at present probation terms did not allow for restrictions on movement or association, which would be necessary to curb drug dealing during this period. An additional discussant suggested drug testing for those on probation, which is also not currently occurring. Discussants also asked Ms Kwok whether the operation of legitimate services by triads and a low level of violence meant that they did not adhere to Gambetta’s definition of mafias as groups whose primary business was protection, or whether the underlying threat of violence was still a crucial factor in the success of triads in the bate-ficha system.

Professor Federico Varese presentation was largely based on his chapter on Chinese organized crime in his book “Mafia on the Move” (Princeton 2011). In his presentation the conception of how such crime groups move, colonise or transplant their activities from one place to another was the focus. Prof Varese noted that he was sceptical about the role of the HK and Taiwanese triads in the development of organised crime groups in China. Transplantation of mafia, he noted, was likely to be a difficult to establish. However, it was apparent that their linguistic and financial resources enabled them to be engaged to a high degree but may have precluded the capacity to offer protection, especially if competing against elements of the state. Thus a key questions raised by Professor Varese was who can acquire this protection and what is the relationship between the central state and the periphery or provinces in managing or suppressing such activities. As noted by the discussants, policing in China is not highly centralised and is largely funded through local taxes and subject to local resource limitations and can thus vary in integrity and capacity across place. Further the collusion between organised crime and the role of “protective umbrellas” may be iterative and may have developed over considerable time. Also one discussant noted that many organised crime groups in southern China did not have triad connections and that even in Hong Kong where traditional triad groups had long operated other crime groups had also emerged with wider associations to other regions of China.

Wang Peng presented next on his research, “Extra-legal Protection in China: State weakness, guanxi and the rise of mafias”. Looking at the case of Chongqing, Mr. Wang found that ‘guanxi’ (reciprocal relations) undermined the criminal justice system in two ways, by facilitating the buying and selling of public offices, and by allowing criminals to create mutually beneficial networks with officials. He also found that both individuals and governments made use of underground ‘police’ to handle debt collection, protect actors in illegal markets and to offer dispute resolution services for demolition projects. These groups skirted the law and avoided police crackdowns by engaging in “soft violence”, that is, achieving goals through harassment, humiliation, blame, threats, stalking or coercion while avoiding direct violence. In the discussion that followed Mr. Wang’s presentation, questions were asked about the ‘Red-Black’ mafia. There was also discussion about the recent events in Chongqing, since the anti-mafia campaign that had generated much of his data had been conducted during the tenure of Bo Xilai, a man now charged himself with serious criminal conduct.

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Prof. Broadhurst’s presentation focused on the problems of suppressing organised crime in China and the growing problem of collusion between some state and party (CCP) actors and organised crime. Following on from Wang Peng’s account, the so-called “red-black” problem had become a leading challenge to state and party legitimacy. The scandals of corruption murder and abuse of power associated with the arrest of politburo member Bo Xilai and police chief Wang Lijun were illustrative of the scale and depth of the influence of crime groups. Whether this now amounted to signs of a kleptocracy was open to debate; however the reforming elements in the state had identified serious gaps. He also noted the absence of systematic research on crime and corruption in China by the Chinese Academy of Social Sciences and that the piecemeal nature of law reform with respect to organised crime had hampered the effectiveness of counter-measures. Criminal procedure reforms effective in 2013 placing human rights protection as the most important principle (excepting corruption and national security matters) were in tune with a ‘soft power’ approach to social management that may gain some traction. The procedure law also provided for witness protection and other measures that would help the prosecution of such groups. In short, the appetite for a full-scale comprehensive reform on the law on organized crime as well as current practice was present, given the failure of piecemeal and reactive reforms.

Following Professor Broadhurst’s presentation, two doctoral students from the Australian National University presented on their research projects. Ben Chapman-Schmidt presented on “Transnational Crime and the Globalised Sex Industry in Tokyo”, a research project that he proposed would focus on human trafficking, human smuggling, the economics of the sex industry and organised crime. His primary research question was what are the international financial flows involved with the sex industry in Japan, and the extent that profits are captured by criminal actors. He proposed to use both existing estimates of financial flows and interviews with women working in the sex industry, criminal actors, law enforcement agents, NGO workers and men that purchase sex. Sharon Kwok then presented her thesis topic “Tor Dei – Triad territory, dominancy and monopoly”. She defined Tor Dei as a variable concept that can refer to a geographical territory, a functional territory (a licit or illicit business), a functional territory within a geographic territory, or the person who claimed the rights over such a territory. She noted research gaps around questions of power and monopoly, competition and conflict in the market environment, and collaboration for dominance in the market. In examining these research gaps, she proposed to interview relevant parties and court cases related to triad societies. Discussion focused on the methodological difficulties involved in these projects, given the potential inaccessibility of subjects, as well as the difficulty in verifying any data provided.

Professor Dina Siegel presented on “Asian Organized crime in the European Union”. She noted an increase in the number of police reports on Asian organised crime in the EU, as well as the presence of six major Chinese organised crime groups: 14K, the Wo-group, Sun Yee On, Red Sun, United Bamboo and Big Circle. These groups were engaged in human smuggling, human trafficking, extortion, drug production and trafficking, counterfeiting, cigarette smuggling, match-fixing and illegal trading in traditional medicine and endangered species. However, in looking at whether these activities were being committed by groups embedded in migrant communities or by overseas groups acting independently of the migrant communities, she also found considerable variance from one activity to next. In discussing these findings, discussants debated the meaning of the words “Asian organised

5 crime”, particularly when discussing groups operating in Europe. Furthermore, questions were raised about whether fear of outsiders on behalf of law enforcement officers was driving an overestimation of the presence of outside organised crime groups among the Asian diasporas in Europe and elsewhere.

Dr Paola Campana’s presentation gave an example of the kind of transplantation that might occur as in the case of the long established role of the Calabrian ‘Ndrangheta in Australia. He explored this group’s activities in Australia, especially its involvement in the fresh produce market and cannabis cultivation businesses. Drawing on Prof Varese’s work on the mobility of mafia and his own previous work, he distinguished between trading and governance as the principle characteristic of mafia-like groups. He briefly described the Italian Mafias’ activities in Asia drawing on 21 cities in the Asia-Pacific region. Thailand was noted as a haven for fugitives while China acted as a trading partner for the Neapolitan Camorra group’s involved in smuggling counterfeit goods into Europe.

Julie Ayling presented on “Responding to organised crime in Australia and Japan”. She noted that the major organised crime groups in Australia (outlaw motorcycle gangs [OMCGs]) and in Japan (the yakuza) were both involved in similar activities, from drugs and violence to blackmail and the infiltration of legitimate businesses. Their primary difference was that the OMCGs are social pariahs but in Japan the yakuza have metastasized into the economy and enjoy pseudo-celebrity status. This difference has affected enforcement responses, for while both countries have passed laws specifically targeting organised crime groups, in Australia these laws target groups directly, but in Japan they target facilitators and criminal activities. She notes that policy cannot be simply transplanted from one society to another, but that policy makers can look to other regions to see what has and has not worked there. Following this presentation, discussants generally debated whether outlawing OMCGs and the Yakuza would be appropriate and also if Australian-style anti-association laws would benefit Japan by disrupting yakuza structures, or whether these laws would force the yakuza underground and make regulating their activities more difficult.

A number of matters arose in discussion during the symposium that are briefly noted in point form as follows:

• whether a distinct ‘Asian’ form of organised crime was identified;

• the need for greater conceptual rigour when defining and discussing organised crime;

• whether the main role of “mafia-like” groups was governance or trading in illicit commodities and services;

• the combination of legal and social tools that might best counter the more harmful effects of organised crime on social and economic development ;

• the relative importance of corruption in the expansion of crime groups and in general the role of states or semi-state actors in the promotion of illicit markets and crime groups;

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• how particular cultures shape the legal and social response to criminal groups and organised crime, and;

• the role of social learning in the continuance of crime groups such as the HK triads.

Finally, this short summary of the presentations and discussion only reflects partially the matters raised and debated in both formal and informal sessions. The symposium concluded with a short meeting about the best means to further debate these and other issues that had been raised. There was also an intention to develop draft papers and presentations to article length papers with a view to publication in a journal special edition or anthology.

Abstracts

Organized Crime Groups and the Internet

Professor Peter Grabosky, Australian National University

The extent to which organized criminal use of the Internet poses a threat to national or international security depends upon two basic definitional issues: 1) what is security? and, 2) what is organized crime? This essay addresses these issues, and then proceeds to a discussion of situations in which security has been threatened, or is likely to be threatened, by organized cybercriminal activity. The increasing pervasiveness of digital technology makes its continuing exploitation for criminal purposes inevitable. Some of these may threaten security, but others not.

The essay argues that conventional definitions of organized crime are too narrow, and are stuck in the 20th century. They tend to be based on traditional terrestrial activities such as protection/extortion, violence, corruption, and the profit motive. These definitions tend to overlook the fact that the organization of criminal activity has changed markedly with the growth of digital technology. The essay notes seven examples of online criminal groups, whose activities and motives are quite diverse. These include the paedophile ring W0nderland, the ‘hactivist’ group Anonymous, and the piracy conspiracy called “Drink or Die.” The objectives of these three organizations were not financial, but rather entailed the sexual gratification of members, political protest, and notoriety within the piracy community, respectively.

Conventional conceptions of organized crime tend to overlook state involvement or complicity in criminal activity. This might line on a continuum from state ignorance of criminal activity at one extreme, to state incapacity to interdict, to state condoning criminal activity, tacit encouragement, loose cooperation, formal collaboration, and state monopoly.

Public/private criminal partnerships are by no means unique to the digital age. State engagement with criminal actors has included efforts by the US Central Intelligence Agency to enlist organized criminals in an attempt to assassinate President Fidel Castro in the early 1960s, the collaboration of the Green Gang with authorities of the French Concession in Shanghai during the 1920s and 1930s, and the use of criminals by the former South African

7 government to assist in circumventing economic sanctions and in neutralizing anti-Apartheid activists during the 1980s.

In recent years, states (or their proxies) have engaged in a variety of activities in cyberspace that appear to have violated the law—either their own domestic law or the law of some other state. The cyber attacks on Estonia in 2007 and against Georgia the following year appear at least to have been encouraged, if not orchestrated, by the Russian state. In 2013 cyber attacks against South Korean communications and computer systems were alleged to have been launched from North Korea. A significant program of cyber espionage apparently originating in China has been directed at the Dalai Lama’s organization and against government and industry sites in the United States. For its part, the United States reportedly engaged in cyber sabotage resulting in the destruction of centrifuges at the Iranian nuclear enrichment facility at Natanz. None of the alleged perpetrators have acknowledged responsibility for the activities in question.

The essay also cautions that perceptions of national security are not always objective. Fears may be unrealistic, or concerns over national security may be voiced cynically in order to enhance the powers and resources of state agencies. National security threats may also be invoked to limit individual liberties.

Not all organizations acting illegally in cyberspace may be regarded as threats to national or international security. Some activity is unquestionably annoying, offensive in the extreme, and/or harmful. There are online activities which, if writ large, might conceivably weaken the integrity and economy of states and thus come to be regarded as security threats. Online paedophilia, no matter how heinous or distasteful one might regard it, does not occur on a scale at which a nation’s economy or social fabric is damaged. Nor is it likely ever to do so. The software and entertainment industries in the United States have sought to make the case that information piracy costs the domestic economy millions of dollars in lost profits, and has a chilling effect on entrepreneurialism and creativity world-wide. However, the US economy is sufficiently diverse that its future strength will depend on other factors. Indeed, one could argue that piracy allows citizens of less developed countries to benefit from access to products that they would otherwise be unable to afford.

Theft of credit card and banking details, were it to occur on a larger scale, would certainly impede commercial activity, with corresponding harm to a state’s economy. For the time being, however, online fraud appears manageable. Technologies of information security continue to be refined, and tech savvy members of the public, at least in developing countries, are able to protect themselves.

As far as organizations are concerned, it appears that the greatest threats to national security are posed by states themselves, either singlehandedly or in collaboration with skilled amateurs, or sophisticated cybercriminals. With an increasing number of states around the world developing an offensive cyber warfare capability, this trend appears likely to continue.

Organized Financial Crime and Corruption and their control in Asia: current Issues and future prospects

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Professor Michael Levi, Cardiff University

This paper examines the definition of financial crime and international trends in online and off-line fraud and money laundering. It applies a routine activities model of criminal organisation to them, alongside other possible drivers of change (including corruption) in both crimes and their organisation. It reviews the extent to which corruption and other financial crimes can plausibly constitute threats to Asian and other states, and what the implications are of such threats for patterns of financial crime, including spill-over threats. It raises questions about whether financial crimes in Asia are merely delayed action replays of patterns observable in the countries of the Global North (or, indeed, the more economically advanced countries of Asia), or are likely to follow their own path, modified by issues of global interdependence in both financial services and regulatory controls. Finally, it reviews the extent to which anti organised/financial crime measures are likely to impact on the extent and organisation of financial crimes.

Definitions and forms of financial crime harms

Terminology both reflects and shapes intellectual and policy categories. It can be important to ensure that when we use the same term, it denotes the same or at least a similar thing. ‘Financial crime’ is normally not a legal but rather an administratively functional category, and has been growing in use in OECD countries, though in continental Europe and parts of Africa, ‘economic crime’ is more common and overlaps extensively.

‘Financial crime’ now includes

1. frauds of different types with different victims (from wealthy corporations and High Net Worth Individuals to the very poor and from very rich to very poor governments);

2. ‘market abuse’ such as insider dealing/trading (which covers a range from corrupt relationships between investors and insiders to giving talks about company prospects to some important analysts before releasing results to the general market);

3. money laundering (of all crimes, including domestic corruption and, increasingly, tax fraud4);

4. financing of terrorism (mostly since 2001) and (since 2008) of nuclear proliferation; and

5. transnational bribery (usually by corporations paying public officials in developing countries, but also in their own countries, whether wealthy or poor).

To the extent that most crimes for gain lead to concealment or transformation of some proceeds, it is arguable that all such crimes ipso facto become ‘financial crimes’ and thereby those who facilitate them and the movement of moneys from them are liable to increased

4 Though countries vary substantially in how they define ‘tax fraud’. Switzerland for example restricts it to active deception (e.g. falsification of data in tax submissions made to it), excluding omissions and non- reporting of tax obligations elsewhere. So if someone with a Swiss account does not need to file tax documents in Switzerland, they cannot commit tax fraud there and cannot normally be extradited for this. On the other hand, since 2008, there has been a great deal of international action on mutual cooperation in tax matters and in withholding tax arrangements, though these too are subject to sophisticated avoidance mechanisms. See de Willebois et al. (2012), Sharman (2011), Shaxson (2011) for good contemporary analyses.

9 risks of ‘criminalisation’, at least in principle. It may be useful to regard ‘financial crime’ – and its sub-sets ‘money laundering’ and ‘corruption’ - as a floating signifier, a moral category of illicit capitalism which contains whatever pressure group politics succeeds in placing therein, a necessary but not sufficient condition of which is the passage of criminal laws and regulatory processes meeting evolving Financial Action Task Force (FATF) criteria. For example, anti-money laundering legislation (AML) must henceforth cover both tax evasion and the financing of WMD proliferation (FATF, 2012). Collectively, other terms used to package these diverse activities include ‘threat finance’ (Levi, 2010) or ‘illicit finance’, chosen by HM Treasury in the UK.

In policing (and even often in academic) practice, ‘organised crime’ is distinguished often from elite corporate or individual crimes that are also well ‘organised’ but do not involve ‘the usual suspects’. This can lead to a narrowing of interest in what sorts of criminal activities are discussed by ‘organised crime’ specialists and policing units. It is not evident from the face of the document, but it is fascinating that the only frauds discussed in the TOCTA (2012) prepared for the UNODC are the counterfeiting of products in Asia that are exported to Europe and the USA, and the sale of counterfeit medicines from East Asia to SE Asia and Africa. These are not indeed important, but it perhaps illustrates the unconscious separate of white-collar from ‘organised’ crimes.

Concerns about ‘organized crime moving in on commerce’ are now new. They date from at least the 1950s in the US (Kossack, 1957; Levi, 2008a). However, there is a difference in scale nowadays, a factor that should not be overlooked when critiquing the newness of the phenomenon. We should not be surprised that the juxtaposition of technical education, social engineering skills and poor economic prospects should stimulate fraud. But in what senses does this constitute a threat and an ‘organized crime’ one? See further, research by Naim (2012), and Glenny (2007). It is worth bearing in mind that Madoff succeeded because he was not the Mafia or associated with any exotic criminal ‘names’. In short, one of the reasons we may legitimately be concerned about ‘organised crime’ is that it has not just the motivation but also the capacity to cause significant harm. Some large-scale fraudsters may not have started off with the intention of getting and staying rich legitimately, but they have the capacity to harm because of their legitimate façade. So Mafia/Triad type organised crime groups have ways of pressurising and seducing cooperation from law enforcement, licit business and politics; but they are not alone in this respect.

Trends in Financial Crimes

One of the frustrations of writing about financial crime trends is poor data availability (for reviews, see Levi, 2011). This is compounded when one has to move beyond data on the incidence and prevalence of different frauds and attribute them plausibly to particular sets of criminal actors, as is the case here. Data sources used here include international business crime surveys (mostly by the large consulting firms), payment card fraud data from the card schemes, academic and UN/NGO material, and criminal cases/media reports. There is nothing wrong with using provisional data provided that one is aware of and makes explicit to others the limitations thereof. It is worth emphasising that the distanciation of place of victimisation from place of offender residence is a key characteristic of most outsider financial crimes, especially those that do not require physical (offline) meeting between offender(s) and victim(s). This has implications both for national crime recording and for

10 policing/criminal justice processes, in principle (e.g. questions of legal jurisdiction and offence classification) and in practice (problematic reporting mechanisms, and the need for well-functioning mutual legal assistance). There will follow some discussion of volume and value trends in fraud and corruption in those countries for which data are available. This will include a review of the evidence from personal and commercial victimisation and attitude surveys in Asia conducted in recent years, and the implications thereof. The paper will consider the extent to which Asian trends are a delayed action replay of US and European trends, or whether the particular characteristics of some Asian societies are likely to create different trends.

A Model of Organised Frauds

Fraud levels and their organisation are affected by settings, with their rich and varied opportunities (reflecting patterns of business, consumer and investment activities), the abilities of would-be perpetrators to recognize and act upon those opportunities (e.g. the ‘crime scripts’ perspective), and their interactions with controls including law enforcement and formal regulation (touched only lightly upon here). Even in law enforcement circles (UNODC, 2012; WEF, 2012), the structure of groups is becoming less important than analyzing what different individuals and networks of full-time or part-time criminals need from the largely illicit and largely licit worlds in order to go about the business of fraud in their own country or, increasingly, elsewhere.

The dominant mode of thinking about serious crime for gain has been the ‘rational choice’ model. The crime triangle of motivation, opportunity, and capable guardians can be applied to many areas of crime, and it is here in human and technological changes to these parameters that one may search for an explanatory framework. The presence or absence of ‘crime networks’ known to and trusted by the willing offender makes a difference to ‘crime capacitation’: an issue often neglected in individualized explanations of involvement in crime. Choice of crime type might also be affected by age. The paper will map out changes brought about by ICT and other features of late modernity in Asian and Western societies.

Triads, Casinos and Juvenile Delinquency in Macau

T. Wing Lo, City University of Hong Kong, Sharon Ingrid Kwok, Australian National University, and Christopher Cheng, City University of Hong Kong

Despite the wealth of studies examining the risk factors of juvenile delinquency, few have examined the impact of triad associations. The present study investigates beyond the well- documented risk factors of juvenile delinquency, and explores the predictive power of triad influence in relation to the known factors, such as family, school, and peers. The study has two parts. Based on a survey of a representative sample of youths in Macau, the first part confirmed that young people’s associations with triad societies strongly predicted delinquency. In the second part, focus groups with youth social workers and an interview with a former VIP gaming room operator provided explanatory information on how young people were ‘triadized’ into the gaming and its associated industries.

The survey identified a causal pathway leading from a number of delinquent risk factors to association with triad societies and finally to juvenile delinquency. It was the first of its kind

11 exploring triad influence as a mediating factor. It obtained strong evidence that young people’s association with triad societies has strong effects on their delinquent behaviour. The effect of triad influence on delinquent behaviour was direct in itself and it was also mediating the effects of such risk factors as family conflict, poor school attachment, and susceptibility to negative peer pressure. Although statistically these mediating effects were only partial, the magnitude was strong and significant as reflected by the fact that a large proportion of the effects of these risk factors were attributable to triad influence. The fact that more than half of the total effects of these risk factors could be accounted for by the indirect effect mediated by triad influence is highly implicative. Moreover, the comparison between the 2002 and 2012 data confirms that triad influences on young people continue to last for one decade. The findings thus provide an answer to the question that triad impact on young people is tremendous and such impact is sustained over time, revealing that a triad subculture is likely to exist in Macau.

The qualitative study examined the potential mechanisms by which the triads may influence youth involvement in triad-related activities, thereby facilitating the process of triadization of young people in Macau. The data suggests that the youths are triadized through a quasi- legitimate opportunity structure, which contains three main components:

(1) There is a quasi-legitimate triad subculture consisting of both legitimate and illegitimate activities. Macau’s gaming industry has attracted triad societies into operating the “bate- ficha” system (which is legitimate), which is supported by its associated industries, such as loan-sharking and sex service (which is illegitimate), to meet clients’ specific needs. The situation can be explained by Felson’s (2006) concept of crime symbiosis. According to the law of Macau, triad societies are illegal organizations, but the triads are ‘symbiotic not only with other criminal activities, but also with fully legitimate activities or with marginal activities’ (Felson 2006:164). We term this as quasi-legitimate triad businesses in which legitimate and illegitimate activities are intertwined and mutually beneficial.

(2) Non-sensible and undisciplined use of violence is not tolerated in this triad subculture. Due to the legality status of Macau’s gaming industry, maintaining peace for money making, keeping visible violence at bay, and making any illegitimate activities less visible to the public and law enforcement are very important to the triads. Whenever disputes emerge, the triads prefer to smooth things out in truce meetings. Young people are not allowed to achieve ‘rep’ through violence. They are expected to be smart and make money by immoral wisdom and their impulsive behaviour has to be suppressed. Consequently, there is no room for violent gangs to flourish. The unacceptability of undisciplined violence is a common feature in criminal subculture (Cloward and Ohlin 1960). In Macau, the quasi-legitimate triad subculture also requires harmony in the criminal underworld.

(3) Within the quasi-legitimate triad subculture, an opportunity structure exists for smart and disciplined out-of-school youths to achieve success through a combination of legitimate, vice and wicked means. The employment is flexible and well-paid, and does not require any sound academic qualifications. As Leong (2002:92) contends, ‘the “bate-ficha” business requires no professional qualification and involves low technology, the few skills required are gambling skills, and perhaps communication skills so that they can persuade the gamblers to exchange more “dead” chips or stay in the game longer’. The survey study

12 found there is high correlation between triad influence and gambling and between delinquent behaviour and gambling. Young people under triad influence are likely to be experienced gamblers and thus become the best candidates for the “bate-ficha” business. Once they possess the necessary skill, what they require is only an opportunity to enter the business.

References Cloward, R.A. and Ohlin, L.E. (1960), Delinquency and opportunity. Glencoe: Free Press.

Felson, M. (2006), Crime and nature. London: Sage.

Leong, A.V.M. (2002), The ‘Bate-Ficha’ business and triads in Macau casinos. Law and Justice Journal, 2(1), 83 – 97.

The Heroin Retail Market in Kunming

Professor Ko-lin Chin, Rutgers University & Professor Sheldon Zhang, San Diego State University

In order to understand the social organization of street-level heroin sales, we hired former heroin user/sellers affiliated with a community-based rehabilitation centre to conduct interviews with active heroin dealers. Our data suggests that the heroin retail market in Kunming is very different from the American drug retail market. First of all, drug dealers in Kunming rarely sell drugs in open-air drug markets. Second, heroin retail in Kunming was not related to street gangs or organized crime. Third, drug-related violence was almost unheard of in Kunming, whether it was systemic, economic compulsive, or psychopharmacological. In sum, street-level retail of heroin in Kunming was carried out predominantly by heroin addicts who relied on drug sale to support their drug habits. Heroin retail in Kunming is fragmented, and there is no coordination among individual dealers.

Women and the Heroin Trade: A Niche Market Perspective

Sheldon X. Zhang, San Diego State University and Ko-lin Chin, Rutgers University

Introduction

The paucity of empirical data on female participation in drug trafficking or any other organized illicit enterprising activities is mostly due to the fact that women are traditionally and historically excluded from such activities. The low occurrence of women in traditional racketeering activities therefore leads to low research attention. A few recent studies recognized the active roles that women sometimes play in criminal organizations. For instance, research on Chinese human smuggling suggests that certain illicit markets may mitigate traditional barriers to women’s participation, namely, a totalitarian regime and the absence of open competition for market dominance. Similar market conditions are found in the heroin trade in China.

Women and Heroin Trade

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Based on a three-year field study and a survey of 297 incarcerated of female drug traffickers, we found that it was not uncommon for women to participate in the heroin trade in China. Women were found at many stages of the drug trade, from cross-border trafficking to street vending. It appears that transporting and selling illicit drugs require few special skills, thus making the trade accessible to just anyone. However, there are two general prerequisites for entry into this market—proper social connections (i.e., resources and opportunities) and sufficient entrepreneurial spirit. Both qualities must be present for any men or women to participate in the business, and neither alone is sufficient. Access to the source of illicit drugs provides the opportunity or entry point into the trade and the risk-taking spirit encourages one to venture into unconventional business activities or deviate from their expected gender roles.

First of all, because drug sources and client populations are hidden, one must be placed in a social network where existing connections either already exist or will emerge to facilitate the entry. Data from our prison survey appear to support this observation. Men were far more likely to enter the drug trade via their friends than women, suggesting drug trade opportunities are likely to be found among one’s social friends or acquaintances than his or her family members or relatives. Women often entered the trade through family members or relatives, and also cited need to provide for the family. These women were cognizant of the illicit nature of the enterprise and were desperate enough to deviate from their traditional roles and gendered expectations.

A Market without a Turf

Drug transportation and sales at the street level is a business with few discernible territorial boundaries in China. Unlike gambling and prostitution, where clients and business activities are tied to specific neighbourhoods, drug transportation and sales mostly involve transient and highly concealed transactions. Although we learned of a few neighbourhoods where there were frequent sightings of drug addicts and drug sales, the vast majority of drug transactions to our knowledge were carried out in untold street corners, nightclubs and parks. The clandestine nature of the business and the constant fear of law enforcement activities determine that the drug trade does not lend itself to well defined territories. In other words, drug trade is normally carried out through negotiations between the traffickers or vendors and their clients with few observers, thus limiting opportunities for outsiders to intervene. As a result, we found no evidence of open competition among traffickers—male or female—to control wholesale or distribution networks. Without a clearly-defined turf and with most transactions based on one-to-one interactions, the drug trade seems to render gendered barriers found in other forms of traditional illicit enterprises somewhat less salient.

Conclusion

It should be noted that drug trafficking and street vending are predominantly a male enterprise. Women’s entrée into the drug trade were much tied to their personal networks. Within the drug trade, we believe women were limited to lower level of trafficking and sales activities, but they were not blocked from entering the market in sizeable numbers.

Perhaps the most important feature of the drug trade in southern China is the absence of violence. Therefore a primary hurdle for women’s participation in this illicit enterprise is minimized. This obstacle appears to be mitigated in the Chinese context, where organized

14 crime, violence, or illicit drugs attract nothing but the harshest response from the justice system.

Cultural influences are also significant. Ideologies about the importance of economic participation for women may be more meaningful in the Chinese context, with the communist government advocating principles of gender egalitarianism. Female participation in the heroin trade or some other racketeering activities will likely increase as their usefulness becomes greater for partnerships and organizations with men. In a male-only or heavily male-dominated underworld, these women must prove their usefulness for entry as well as mobility within the crime networks.

Our study in China suggests that the market environment is as important for understanding gender stratification within illicit enterprises as it is for understanding the same features in the formal economy. It is our belief that women are in general playing a secondary role in this illicit enterprise and gender stratification was abundantly clear, judging from the differences in the weights of the drugs seized and the severity of sentences between men and women in our prison survey. Nonetheless, the nature of the enterprise does mitigate the obstacles that have traditionally excluded women from participation.

The Dark Side of Social Capital within the Drug Dealing Networks of Young User-Dealers in Hong Kong

Professor Wing Lo and Mr Eric So, City University of Hong Kong

In Hong Kong, triad societies such as Sun Yee On, Wo Shing Wo and 14K have a long history of running drug dealing business in the local Hong Kong market. Local triad bosses who engage under age youth to deliver, and trade in illicit drugs usually control street level drug dealing. In recent years, the number of young people involved in drug trafficking has multiplied. The aim of this study is to examine the trust, norms of reciprocity and network structure of these younger aged user-dealers’ group. Data are drawn from semi-structured interviews with 30 young drug user-dealers between January 2010 and February 2013. The study unravels the values and norms of the youthful user-dealers’ group. The group helps facilitate the young offenders in forming trust and reciprocity among the group. The result also reveals that ‘triadization’ process of youth gangs. The study also shows the cooperation in drug trafficking between triads of Hong Kong and Mainland China, which also appears to contribute to the increasing number of active young drug dealers in Hong Kong.

Market Transition, Extra-legal Protection and Mafia Transplantation: The Case of the Triads in China

Professor Federico Varese Professor of Criminology, University of Oxford

A common view among observers at the end of last century was that Hong Kong and Macau Triads were set to open outpost in China after the departure of the British. These views match considerations put forwards by several authors (such as Manuel Castells) suggesting

15 that mafia groups intentionally and rationally take advantage of emerging opportunities abroad and easily move there to exploit these opportunities.

In this paper I evaluate empirically to what extent this prediction is born out in the case of Hong Kong Triads migrating across the border to China. The paper is based on interviews and a data set of 'organized crime groups' based in China compiled by the author.

In the paper I show that members and bosses of foreign triads are present on the mainland, but have not yet emerged as a viable mafia supplying private protection. As in other cases I explore in my book Mafias on the Move (2011), mafiosi did not decide to migrate out of their own free will. Their presence in the new territory is the unintended consequence of police action in their country of origin, especially police repression in Taiwan. Once they found themselves on the mainland, they quickly realized that the new China offered many opportunities to invest some of their gangs’ funds, but they have so far failed to establish themselves as viable protectors for legal entrepreneurs. Some conditions for their success were present: a language and ancestry in common with the locals (Taiwanese is similar to the dialect of southern Fujian; some Hong Kong triads members originated from Guangdong region); the presence of many new immigrants from other parts of China who were underemployed or out of work; and the presence of new and booming markets, including illegal markets such as gambling and prostitution. Such a situation should have generated a demand for criminal protection and offered opportunities for mafiosi, local or foreign. In reality, though, the outcome was different because a powerful protector was already on the ground: corrupt fragments of the state apparatus.

Remarkably, the jargon word for the activities of the latter is protective umbrella, a clear indication that what officials offer goes beyond simple, one-off corruption services and encompasses long-term arrangements to take care of (and profit from) private entrepreneurs. This equilibrium is reminiscent of what happened in Russia in the 1990s. In the Russian case, some criminal gangs became powerful roofs for businesspeople, although official roofs played the biggest role in the market for informal, illegal private protection. The case of China indicates that few criminal groups have managed to take on the role of protective umbrellas. Corrupt elements of the state apparatus, such as the military, police, and the local administration, instead act as the protectors of legitimate businesspeople. As I have suggested elsewhere, it would be an uphill struggle for an incoming mafia to dislodge an existing local criminal protector, especially one with the organs of state power at its disposal.

Since the opening of the economy, illegal markets have also boomed in China: gambling, prostitution, and drug trafficking. For the most part, it seems that even in illegal markets, fragments of the state apparatus offer protection. This is especially evident in the protection of prostitution. Gambling gives rise to loan sharking and a demand to recoup debts incurred at the tables in Macau by Mainland Chinese. In such cases, Macau triads may team up with gangs on the mainland to trace the gamblers--or their family--and some of these gangs have then expanded their business into the collection of ordinary, business debts. If allowed to expand further, these gangs could develop into fully fledged mafia groups offering generalized protection services to whoever can pay. Since they enforce promises on behalf of foreign triads, in my view this represents a potential mechanism for long-distance

16 cooperation and the transplantation of foreign triads in China. Yet there is no strong evidence that such transplantation has taken place. Quite to the contrary, it appears that local authorities have been quick to outlaw debt collection agencies and have arrested those tied to triads. Have foreign triads been able to penetrate the lucrative drug trade? The short answer is, again, no.

This work raises some questions that cannot be fully answered at this stage and would require a separate study. It is nevertheless worth spelling them out. Who is allowed to acquire a protective umbrella? On the basis of the respondents’ suggestions, it appears that the protection industry is stratified. Small entrepreneurs are not large and profitable enough to be of interest, and therefore may be more likely to enlist the services of independent debt collection agencies when they enter into a dispute. Since the government has moved to outlaw legitimate debt collection agencies, it could in effect have pushed low-level businesspeople into the hands of now-criminalized and unregistered agencies.

A second issue that I have touched on is the relationship between the centre and periphery. To what extent can Beijing dictate to the provinces what to do in terms of illegal activities? There are several instances in which it appears that the centre retains a degree of control. When the latter decides to arrest gang leaders protected by officials, it bypasses the local police and simply descends on the city to round up the suspects. In order to avoid embarrassment during high-profile events such as the Olympic Games or the sixtieth- anniversary celebrations for the People’s Republic of China, Beijing appears to have been able to tell the periphery to stop smuggling operations, and enforce more strictly anti- prostitution and drug consumption rules. And yet the periphery can also “bribe” the centre. In order to obtain the go-ahead and funding for major public works, local cadres can entice national-level officials. Once the project is approved, local officials have plenty of opportunities to handpick the construction company and extract bribes. This system produces what the Chinese call “doufu-zha structures”. The equilibrium between Central government and cadres in the provinces appears precarious, and deserves a full study of its own. To the extent that criminal gangs in the periphery overpower local power holders, they could become the interlocutor of the centre, and China might well develop pockets where mafias are entrenched, like in Southern Italy, certain parts of Latin America, and the former Soviet Union. On the other hand, there is not yet evidence of such a development.

The Suppression of Black Societies in China: stability or reform?

Professor Roderic Broadhurst, Australian National University

Leadership changes and recent events in Chongqing and have re-focused the way the Chinese state responds to organized crime and corruption. The expulsion from the Chinese Communist Party and the National People’s Congress (removing immunity from prosecution) of politburo member and Chongqing party leader Bo Xi Li for serious disciplinary charges (initially associated with his wife’s Gu Kailai arrest and conviction of the murder of Neil Heywood) and the conviction of the former Chongqing police security bureau head Wang Li Jun on variety of charges, including abuse of power and “...bending the law for selfish ends” offer an extraordinary insight into the nature of crime control practices in Chongqing. Combined with the re-definition of organized crime, improved judicial oversight, procedural reforms and the re-assessment of ‘strike-hard’ style police campaigns are likely key

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developments. Corruption control long a focus of government and party concern will be tested in a situation where a focus on legality and social management as a means of addressing contradictions in a socialist market economy.

The recent changes in the criminal law (notably Article 294 defining organised crime and Article 395 on unexplained wealth) and new criminal procedure law (effective January 1 2013) that provided for respect for human rights as the guiding principle are outlined with the focus on how these changes address problems of organized crime. The procedure law included more broadly actions relating to OCGs, theoretically making prosecution easier, but relies on prosecutorial will and the adequacy of evidence gathering. The amendments to criminal procedure create a presumption that illegally obtained evidence (although not clear whether improperly obtained evidence falls under this presumption) could be excluded – see Articles 54, 58. In addition provisions for witness protection, compensation and assistance including those at risk because of testimony in OCG cases (Article 62) were provided along with measures for asset tracing and recovery in such cases. More controversially commercial secrets and crimes relating to national security, terrorism or high corruption not need to be conducted in open court, and access to legal representation severely limited (Arts 45, 83, 96).

The probable impact on practice and oversight is also discussed in the context of a brief overview of the forms of criminal groups in China. Revisions to the criminal law are described and the likely prospects of improved countermeasures are assessed in the context of the key struggle to contain corruption, the growing risks of “red-black” collusion and the transformation of organized crime at home and abroad. The author argues that the apparent realignment of law and order priorities offer an unprecedented opportunity for further changes needed to strengthen both law and anti-organised crime practices.

The 2011 revision of Article 294 which came into effect in January 2012 codifies the People’s Supreme Court, “Explanation of Questions Related to Judging Cases of Organizations with Character of Black Society” issued in 2000. The article defines the characteristics of an ‘organization of the character of a black society’ or of “gangland nature” as:

“(1) A relatively stable criminal organization is formed with a relatively large number of members, and there are specific organizers or leaders and basically fixed core members. (2) Economic interests are gained by organized illegal or criminal activities or other means, and it has certain financial strength to support its activities. (3) By violence, threat or other means, it commits organized illegal or criminal activities many times to do evil, bully and cruelly injure or kill people. (4) It dominates a certain area by committing illegal or criminal activities or taking advantage of the harbo8ring or connivance by the state functionaries, forming an illegal control or significant influence in a certain area or sector, which seriously disrupts the economic and social order.”5

5 Translation provided by Peking University Center for Legal Information: LawInfoChina at http://www.lawinfochina.com/.

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Article 294 holds leaders of ‘organizations of a gangland nature’ criminally responsible for actual offences committed (so vicarious liability is envisaged), and enhances their punishment including the forfeiture of property. The revision also specifically punishes overseas crime groups who recruit members in the PRC with a minimum of three years and a maximum of 10 years, and punishes for up to five years state functionaries “…who harbour an organization of a gangland nature or connive at such an organization’s illegal or criminal activities”. Article 295 was also amended to punish those who might instruct black society members in the techniques of crime so that even those who are not involved in an offence but may be connected through their teaching (qua leadership) of criminal conduct. Overall the approach applied to organized crime is reliant on deterrence and is reactive rather than preventative in focus. The definitions merge a particular form of organization (large and stable) with a variety of likely activities and thus may confuse matters of form with function and underestimate looser and more fluid networks. The need to demonstrate that the criminal group has an organizational structure and can enforce rules on its members, dominates an area or sector, uses violence and suborns officials will be a demanding task unless the criteria are applied in a versatile way. While the new definitions may offer a clearer idea of what is meant by organized crime the evidentiary burden to determine leadership of such a criminal organization is onerous. The limited capacity of some PSB units, especially with regard to covert operations, financial and specialist investigations and the absence of Hong Kong-style conspiracy laws (i.e. the anti- triad Societies Ordinance) will also hinder the suppression of black societies. The continued over-reliance of the PSB and courts on confessional evidence in the context of limited safeguards for suspects may also lead to ineffective targeting of organized crime activities and groups. Implementation of the new law may prove less helpful if police and prosecutors are also restrained by the absence of the witness protection programs envisaged by the criminal procedure law, inadequate forfeiture of property laws, and limited unexplained wealth provisions.

Extra-legal protection in China: State weakness, guanxi and the rise of mafias

Peng Wang, Kings College London

Chinese people tend to use guanxi—a Chinese form of social network—‘to make up for the lack of the rule of law and transparency in rules and regulations’. The coexistence of the legal system and the guanxi network does not necessarily result in a positive outcome, however. In other words, guanxi in contemporary China damages the performance of the legal system. The revival of private property and the establishment of a socialist market economy require post-Mao China to enact legal reform and create an effective legal system. How can people in a guanxi-based society protect private property rights and facilitate trade?

Using published materials and fieldwork data collected from two Chinese cities (Chongqing and Qufu), this paper incorporates the concept of guanxi—the Chinese variant of social capital—into the discussions of state weakness and the rise of extra-legal protection groups. Evidence from Chongqing demonstrates how guanxi distorts China’s legal system by facilitating the buying and selling of public offices and promoting the formation of guanxi networks between locally-based criminals and government officials. China’s weak legal framework encourages individuals and entrepreneurs to employ guanxi and extra-legal

19 protectors (e.g. underground police officers) to protect private property rights, facilitate transactions, and deal with government extortion.

To be specific, guanxi, as one of the most important governance structures, challenges China’s legal system and gives rise to extra-legal protection groups. The Chongqing crime crackdown, the most influential anti-crime campaign in the last decade, provides valuable materials to illustrate the corruption-facilitating roles of guanxi. When legal institutions are weak, individuals and entrepreneurs tend to employ guanxi and extra-legal protectors to cope with government officials’ extortion, solve disputes, and protect rights. Fieldwork data from Qufu emphasizes the importance of guanxi in facilitating transactions in illegal markets. In particular, when individuals and entrepreneurs choose to purchase illegal services, they need take account of the reputation of illegal enforcers in the guanxi network. Additionally, in order to obtain high-quality mafia services, purchasers must spend time, energy and money in developing and maintaining a close guanxi with unlawful enforcers.

This research contributes to three literatures. First, previous research examines the relationships between state failure and mafia emergence. Publications relating to the Sicilian Mafia, the Russian Mafia, Hong Kong triads, the Japanese Yakuza, the extra-legal protection in Bulgaria, mafia movements, prison gangs, and youth gangs set up a theory named by Federico Varese as ‘the property right theory of mafia emergence’. Mafias act as quasi- governmental institutions when the state fails to provide fair, equitable, and sufficient protection for the right-holders in the procedures concerning the enforcement of property rights. The existing research on mafia emergence has generally been limited to examining the substitutive relationship between the state and the mafia. This paper contributes to existing research by exploring the relationship between the three independent systems of order in the Chinese context: the legal system, guanxi and the mafia. In other words, it incorporates the concept of guanxi in the discussions of state weakness and the rise of mafias.

Second, alongside the growing interest in China’s economic and social transformation, the conception of guanxi has become a popular academic topic over recent decades. Past research mainly focuses on two aspects of guanxi: the cultural and the institutional dimensions. Cultural scholars view guanxi as a specific type of relationship or a unique strategic behaviour deeply rooted in Chinese culture. Institutional theorists define guanxi as a Chinese idiom of social capital and. This paper is based on institutional theories of guanxi. The relationship between guanxi and the legal system has been commonly described as substitutive or complementary, but the negative side of personal guanxi needs further examination. This paper provides an opportunity to examine how guanxi distorts and subverts the Chinese legal system; it also explores the new feature of guanxi that functions as extra-legal governance protecting corrupt transactions between government officials and locally-based criminals in contemporary China.

Third, past research examines multi-dimensional nature of Chinese organized crime in China and beyond. Three aspects have been emphasized. From the global perspective, human smuggling and drug trafficking have been thoroughly explored, and counterfeiting, sex trafficking and loan sharking have gained increased attention. From the regional perspective, cross-border crime between Mainland China, Hong Kong and Taiwan and the ‘mainlandisation’ of Hong Kong- and Taiwan-based criminal groups have been deeply

20 examined in recent years. From the national perspective, past research focuses on various aspects of Chinese organized crime, such as drug trafficking and distribution, prostitution, robbery, stolen children, cigarette counterfeiting, and the relationship between politics and organized crime. Criminal protection or quasi law enforcement, however, has received surprisingly little attention in discussions of organized crime in China. The author’s research complements the existing research by examining the involvement of criminal groups in the private protection business.

To sum up, guanxi in contemporary China is a double-edged sword. On the one hand, guanxi provides a complement to the formal institutional framework. On the other hand, the transaction cost advantage of guanxi-based governance stimulates individuals and government officials to employ guanxi networks to get things done, which undermines the legal system. When a basic socialist legal system with Chinese characteristics has been established, the negative effects of guanxi become more obvious. This paper suggests that guanxi has been closely associated with corruption, bribery, and organized crime, threatening the ruling status of the Chinese government and the rule of law. It is thus fundamentally important for China to provide clear formal rules governing the behaviour of law enforcers and government officials and to protect them from the demands of guanxi networks. The incorporation of guanxi theories in examining corruption and organized crime provides a new research perspective. To what extent guanxi negatively affects the performance of China’s socialist legal system and to what extent it safeguards organized crime groups and their illegal businesses are issues that deserve further research.

Responding to Organized Crime in Japan and Australia

Ms Julie Ayling, Australian National University

Both yakuza groups in Japan and outlaw motorcycle gangs (OMCGs) in Australia engage in serious organised crime. Both are highly visible and legal organizations, existing in a twilight zone somewhere between the “dark networks” and “bright networks” theorized by Raab and Milward (2003). Other similarities include hierarchical structures, the use of symbols for identification, a propensity for using both hard and soft violence, and an ambiguous social status. These and other commonalities suggest that there may be merit in considering the distinct responses of authorities to the groups of each country, with a view to seeing what, if any, lessons could be learnt or shared.

This paper focuses on recent legislative approaches to organised crime. Legislation is important because it defines the problem, frames the response and legitimates law enforcement actions that implement that response. Both criminal law measures and other supplementary legislative measures, particularly those that rely on administrative laws, are explored.

The paper also concentrates on significant criminal groups in each country. Although there is more to organised crime in Australia and Japan that simply the activities of outlaw motorcycle gangs and the yakuza respectively, legislative responses have largely been driven by the perception that it is these groups that pose the greatest of organized crime threats.

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In Australia, for example, long-term public violence by OMCGs has been of singular significance. One recent event, a particularly brutal murder at Sydney domestic airport in 2009 that occurred during a brawl between rival OMCGs, catalysed the successive reproduction by different state and territory jurisdictions of a specific model of legislation based on anti-terrorism laws. While this swathe of legislation purports to deal with organized crime in general, in fact it was introduced specifically and overtly to target OMCGs. It does this through providing for court-issued civil instruments designed to control the communications and associations between their members, together with potentially harsh criminal penalties for breach of those orders (including imprisonment for up to 5 years). Several legal challenges to the constitutionality of this legislation have stalled its implementation, so its effectiveness has not yet been tested.

Similarly, two recent significant pieces of organized crime legislation in Japan have been enacted to deal specifically with yakuza activities. The Act on Prevention of Unjust Acts by Boryokudan (hereafter the Anti-Yakuza Act), enacted in 1992, was designed primarily to tackle the problem of minbō (a form of extortion of ordinary members of the public that avoids the use of explicit intimidation). Because the Act proved ineffective when the yakuza responded to this legal development by corporatizing and engaging in more white collar forms of crime, such as corporate fraud and extortion and the manipulation of financial markets, a second wave of legislation, prefectural laws known as Organised Crime Exclusionary Ordinances, was passed between 2009 and 2011. These laws are aimed not at the yakuza themselves but at individuals and companies that do business with them or pay them off, and they work by prohibiting those relations and characterizing such persons as accomplices rather than as victims (Adelstein and Stucky 2012). Offenders are subject to public denunciation, resulting in a loss of ‘face’ and often a loss of business. Provision is also made for small fines and short periods of imprisonment.

In addition to these strategies, each country has also experimented with approaches based on using civil and administrative laws. Some of these are gentler than others. Australian authorities have sought to make life difficult for OMCG members with provisions relating to the issue and renewal of licences and permits that restrict their choice of occupation and of property ownership/ management. In addition they have used regulatory laws, such as those relating to planning, fire regulations and liquor licensing, to limit the use of OMCG clubhouses, as well as in some places strictly enforcing traffic laws against OMCG members. Japanese law has provided for the establishment of Centres for the Eradication of the Yakuza, where not only can yakuza victims find help to stand up to yakuza demands for payments or other benefits but also yakuza members can be given assistance to leave the organisation. Laws have also given citizens the right to ask the courts for injunctions to prevent the yakuza from using premises as gang headquarters, to demand compensation for damage sustained at the hands of the yakuza, and to sue yakuza bosses for the harmful actions of their subordinates. Such suits have proved popular among members of the public, spurred on by education campaigns concerning the harmfulness of yakuza activities.

The different levels and types of criminal activities undertaken by OMCGs and the yakuza suggest that currently different approaches are warranted in the two countries. However, placing different jurisdictions’ strategies for organized crime side by side does highlight potential future threats and has the ability to stimulate thinking about innovative designs for responding to those threats.

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How organised crime operates across countries: The case of Italian Mafias in Asia and Pacific

Dr. Paolo Campana, Department of Sociology and Nuffield College University of Oxford

This paper outlines a theoretical framework to assess organised crime activities across territories and their modus operandi. The framework is based on the distinction ‘governing’ vs. ‘trading’. Organised crime groups are suppliers of illegal market governance (Varese 2010; Schelling 1971). When expanding their operations abroad, Mafias may open outposts in the new territories where some of the members have resettled. Two distinct strategies may obtain: (a) functional diversification, when Mafias do not move or expand their core business (protection) outside their territory of origin but instead diversify their activities across territories (Campana 2011; 2013); b) transplantation, when Mafias move/expand their core business into the new territory (Varese 2011). In the first scenario outposts are set up to trade in both legal and illegal markets; in the second scenario outposts are providers of illegal governance.

The Big Picture: Italian Mafias’ activities in Asia The article scrutinises Italian Mafias’ activities in Asia relying on a unique data set of Mafia activities across the World. 21 cities in the Asia-Pacific region are included in the data set: 11 cities in Australia, 9 cities in China and 1 city in Thailand. A pattern of territorial specialisation emerges from the data. Thailand appears as a hide-out for fugitives while China is an important trading partner for the Neapolitan Camorra groups involved in smuggling counterfeit goods into Europe. Australia emerges as the most interesting case in the region given the lasting presence of Calabrian ‘Ndrangheta members on its territory.

The ‘Ndrangheta in Australia Extortion rackets within the Italian communities were rife during the inter-war period from late 1920s to 1940, i.e. the so-called ‘Black Hand’. Black Hand was not an organisation but rather a modus operandi. While we do not know when the first bona fide ‘Ndrangheta members set foot in Australia, there is evidence of their presence in the 1950s as part of a generalised migration from Southern Italy to Australia (by 1971, about 290,000 Italian immigrants were living in Australia, 17% of them from Calabria). In the Seventies, ‘Ndrangheta members became increasingly involved in the production and sale of drugs. In 1995, the final report of Operation Cerberus identified the cultivation and distribution of cannabis as the main activity of ‘Ndrangheta cells in Australia. In addition, they also noted an increasing involvement in amphetamines, cocaine and heroin. A closer scrutiny of ‘Ndrangheta operations in Australia reveals that they mostly fall within the diversification category, i.e. cells and individual members are mainly involved in trading as opposed to governing (e.g. there is no evidence of an ‘Ndrangheta monopoly over the cannabis market). Yet, there is at least one instance of protection racket run by the ‘Ndrangheta: the Queen Victoria Markets in Melbourne. The article identifies the local conditions as well as the supply factors conducive to the emergence of this protection racket, and to its persistence over time.

References

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Campana, P. (2011). Eavesdropping on the Mob: the functional diversification of Mafia activities across territories. European Journal of Criminology, 8(3), 213-228. Campana, P. (2013). Understanding Then Responding to Italian Organized Crime Operations across Territories. Policing. Schelling, T. C. (1971). What is the business of organized crime. J. Pub. L., 20, 71. Varese, F. (2011). Mafias on the move: How organized crime conquers new territories. Princeton University Press.

Asian Organized Crime in the European Union

Professor Dina Siegel, University of Utrecht

The article will show how Asian organized crime has entered the criminal area in a number of EU countries. It analyses how the activities of different Asian criminal groups are linked to migrant communities and which fields are concerned. They include extortion, human smuggling and trafficking and money laundering. In collaboration with other non-Asian criminal groups, Asian organized crime is also active in the production and trade of illegal drugs, match-fixing and counterfeiting of consumer goods. The general research question addressed in this note is: What is the extent and character of Asian organized crime in the European Union and what kind of threat do these groups pose to the European economy and European democracy?

Additional questions are: Which European countries are vulnerable to the activities of Asian organized crime groups? How are these groups embedded in local migrant communities and the local economy of the host countries? What is their modus operandi and how and where do they launder their criminal profits?

The article is based on research which took place 2010-2011 and applied the following methodology: content analysis of secondary data available from the extensive literature on Asian organized crime and from media reports and semi-structured interviews with experts from law enforcement and criminologists engaged in research on specific aspects of Asian organized crime. Theoretical explanations will be provided to these new developments of illegal and semi-illegal markets and to the attractiveness of the (illegal) business opportunities in Europe.

Asian organized crime is mainly associated with the historically romanticized Chinese triads and Japanese yakuza. Other Asian crime groups are less well known in Europe. However, rapid economic growth in many Asian countries, increasing numbers of migrants and advanced technological opportunities have resulted in new forms of organized crime, bringing these ‘unknown’ crime groups closer to Europe. Asian organized crime manifests itself today in almost all European countries and demands the attention of law enforcement agencies, policymakers and academic researchers.

This article includes two parts. The first one focuses on Asian criminal groups, their structure, size and links to immigrant communities. The second part includes an analysis of specific criminal activities in different European countries and their cooperation with non-Asian criminal networks. In Western Europe trafficking in illegal migrants and their exploitation in legal and illegal economy by Chinese and Vietnamese organized crime groups is facilitated

24 by the presence of large migrant communities. They are also among the most capable in managing the illicit commodities and illegal migration to the European Union. Particularly Chinese, Vietnamese, Pakistani and Turkish criminal groups are running smuggling and trafficking networks from their countries to the EU.

Proceeds of crime are mainly invested in real estate and businesses in the countries of origin. Regarding specific criminal activities the article will show, using examples from the media and literature that different Asian groups develop specialization in different criminal activities. Vietnamese organized crime are prominent in the cultivation of cannabis and cigarette smuggling, Pakistani and Afghan hawala bankers facilitate heroin smuggling and money laundering activities. Organized crime groups from China and Thailand are key producers and suppliers of counterfeit identity documents, fake ‘trademark’ goods and counterfeited clothes and medicines.

Although no specific policies were developed to combat Asian Organized Crime at the European level, European cooperation between law enforcement and researchers could be vital to the effort to prevent and combat this relatively new form of organized crime. The role of European institutions, especially Europol will be analysed.

Organised Crime and the Global Sex Industry

Ben Chapman-Schmidt, Australian National University

The global sex industry is a complex assemblage, incorporating the multidirectional cross- border movements of customers, sex workers, agents and capital as well as their intimate (and often illicit) transactions. This research project’s goal is to explore the structure of this industry, both in economic terms and in terms of the power relationships between the different actors who work within this industry, purchase its services or profit from its operations. By improving our understanding of the workings of this industry, I hope to enable more honest and effective conversation about issues ranging from human trafficking to migrants’ rights.

My primary research aim is to estimate the international financial flows involved with the sex industry, and how much of these funds are captured by criminal actors. I hypothesise that some elements of the international sex trade, such as human trafficking, have traditionally been over-estimated by advocacy groups. However, other elements, such as human smuggling and the financial investment into the sex industry by groups outside of Japan may well be underestimated, and we do not have a good understanding of where all the money is going. Moreover, answering this question requires an agreement on who is a ‘criminal’ and where we draw the line between ‘human trafficking’ and ‘human smuggling’. For the former, I am focusing on individuals with malicious intent, as opposed to economic migrants violating immigration and vice laws. Likewise, for the latter I am proposing that trafficking requires intent to harm, and that prostitution, when entered into without force or coercion, does not in and of itself constitute harm (Kempadoo, Sanghera, and Pattanaik 2005; Agustín 2006). On the other hand, overly restrictive immigration law can leave migrants, especially those already on the margins of the law, vulnerable to exploitation by criminal actors.

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I am using Tokyo as my primary research site on account of its size, location, and structural factors. As the world’s most populated metropolis it is a popular target for economic migration, especially given its proximity to less developed nations in East and Southeast Asia. There is also a well-studied organised crime presence in the form of the yakuza, the Japanese mafia (Kaplan and Dubro 2003; Hill 2003; Adelstein 2009). Finally, Tokyo has a highly developed sex industry, both concentrated in the Kabukichou red light district and diffused throughout the city in numerous smaller sites. In addition to Tokyo, I will also conduct research in source countries for migrant sex workers and human trafficking victims; these could include Thailand, the Philippines and the PRC.

My first source of information will be the available estimates of financial flows related to the international sex trade, including reports from IGOs (UN-GIFT, UNODC), NGOs and governments. However, these data sets are limited: government agencies with responsibility for a specific problem area may have an incentive to underreport data or may simply not have access to data themselves; advocacy groups have an ideological agenda that could influence their reporting and for other groups, budgetary problems could put pressure on them to exaggerate a problem in order to elicit funding (see Weitzer 2007).

Because of these uncertainties and the illicit nature of the transactions, actually following the money itself may be impossible. However, by speaking with sources close to the industry in Tokyo as well as in source countries for migrants such as the Philippines, it will be possible to sketch the broad contours of some of these transactions. These sources can include current sex works, human trafficking victims, brothel owners and managers, agents involved in moving woman across international borders, organised crime figures connected to the sex industry, police and other law enforcement, and NGOs such as the Polaris Project and the Wesley Foundation. It is possible that many of these individuals will prove either impossible to locate or unwilling to talk, given the sensitive nature of their work. I will also need to work through third-parties to gain access to certain sources (such as rescue NGOs in the case of human trafficking victims), and I will therefore need to take into account the biases of these gatekeepers. As such, I am casting as wide a net as possible so as to have sufficient sources to cross-validate this data.

With this data I will analyse the economics of this industry to explain how a demand for sexual services, an availability of cheap labour, the presence of actors specialising in illicit services and economies of scale all contribute to the functioning of the sex industry in Tokyo. I will also use criminological theories to explore how criminal networks spanning international borders assist in the functioning of this industry (Morselli 2010; Spapens 2010), as well as how the marginalisation and outsider status of immigrants leads to their involvement in ‘deviant’ activities (Becker 1963; Goode and Ben-Yehuda 2010), and how mafia groups become involved when groups falling outside the law need protection (Gambetta 1996; Varese 2001; Hill 2003). Finally, I will address feminist critiques related to the legitimacy of prostitution as sex work by exploring the role of agency for sex workers using a model of bounded rationality (Simmons and Lloyd 2010; Chin and Finckenauer 2012). Together, this data and these approaches should allow for a better understanding of the workings of the international sex industry.

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Reference Adelstein, Jake. 2009. Tokyo Vice: An American Reporter on the Police Beat in Japan. Knopf Doubleday Publishing Group.

Agustín, Laura. 2006. “The Disappearing of a Migration Category: Migrants Who Sell Sex.” Journal of Ethnic and Migration Studies 32 (1): 29–47. doi:10.1080/13691830500335325.

Becker, Howard S. 1963. Outsiders. Simon and Schuster.

Chin, Ko-lin, and James O. Finckenauer. 2012. Selling Sex Overseas: Chinese Women and the Realities of Prostitution and Global Sex Trafficking. NYU Press.

Gambetta, Diego. 1996. The Sicilian Mafia: The Business of Private Protection. Harvard University Press.

Goode, Erich, and Nachman Ben-Yehuda. 2010. Moral Panics: The Social Construction of Deviance. John Wiley & Sons.

Hill, Peter B. E. 2003. The Japanese Mafia: Yakuza, Law, and the State. Oxford University Press.

Kaplan, David E., and Alec Dubro. 2003. Yakuza: Japan’s Criminal Underworld. Robert Hale.

Kempadoo, Kamala, Jyoti Sanghera, and Bandana Pattanaik. 2005. Trafficking and Prostitution Reconsidered: New Perspectives on Migration, Sex Work, and Human Rights. Paradigm Publishers.

Morselli, Carlo. 2010. Inside Criminal Networks. Springer.

Simmons, Beth, and Paulette Lloyd. 2010. “Subjective Frames and Rational Choice: Transnational Crime and the Case of Human Trafficking”. Government Department, Harvard University. http://government.arts.cornell.edu/assets/psac/fa10/simmons_psac_sep10.pdf.

Spapens, Toine. 2010. “Macro Networks, Collectives, and Business Processes: An IntegratedmApproach to Organized Crime.” European Journal of Crime, Criminal Law and Criminal Justice 18 (2) (March 1): 185–215.

Varese, Federico. 2001. The Russian Mafia : Private Protection in a New Market Economy: Private Protection in a New Market Economy. Oxford University Press.

Weitzer, Ronald. 2007. “The Social Construction of Sex Trafficking: Ideology and Institutionalization of a Moral Crusade.” Politics & Society 35 (3) (September 1): 447–475.

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