Money laundering, food activities and mafia: evidences from the Italian provinces
| DOI | https://doi.org/10.1108/JMLC-08-2021-0085 |
| Published date | 17 September 2021 |
| Date | 17 September 2021 |
| Pages | 609-624 |
| Author | Maria Oliva |
Money laundering, food activities
and mafia: evidences from the
Italian provinces
Maria Oliva
Collegio Carlo Alberto, Torino, Italy
Abstract
Purpose –According to the INTERPOL definition, money laundering is: “any act or attempted act to
conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from
legitimate sources”. Along this line, the purpose of this paper is to investigate the link amongst money
laundering,mafia and food activities, in the Italianprovinces.
Design/methodology/approach –By using annual data over the period 2010 to 2018, the author
estimates balanced panel data using the instrumental variables approach. The analysisincludes both fixed
and random effects,as well as robustnesschecks.
Findings –The main findings of this paper reveal that, in most Italian provinces, money launderers are
deterred by the probability of being identified. In particular,the deterrent action of police and investigative
forces seems to be very effective. Moreover, the results of the empirical analysis show that mafia-type
organisationsand food activities are positivelycorrelated with money laundering.
Originality/value –This paper aims to provide a specific study on the link between apparently legal
activities (food and beverage) and money laundering; a link that has so far been analysed mainly on a
theoreticallevel. Moreover, it provides several insightsin terms of policy implications.
Keywords Money laundering, Organised crime, Law enforcement, Food activities, Mafia
Paper type Research paper
1. Introduction
Money laundering is one of the most complex crimes affectingthe global economic system.
Such a complexity is relevant to understanding the characteristics of this criminal
phenomenon: money laundering activities lead to other offences involving many different
sectors. The International Monetary Fund (IMF) estimated that the amount of the global
money laundering flows represents between 2% and 5% of global gross domestic product
($1.6 to $4tn per year) [1] in 2018.
The economics literaturedescribes money laundering as a process that develops in three
different stages (Starola,2012):
(1) Placement –the introduction of illegal proceeds into the financial system through
deposits, wire transfers or other means.
(2) Layering –in which criminals move such funds around the world to separate them
from their illegal source.
(3) Integration –when these funds re-enter the legal economic system through
investments in real estate, luxury assets or other businesses.
JEL classification –C26, K42
Money
laundering,
food activities
and mafia
609
Journalof Money Laundering
Control
Vol.25 No. 3, 2022
pp. 609-624
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2021-0085
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
Following these steps and according to Masciandaro (1993), we can define this crime
through two key characteristics, namely, illegality and concealment. Illegality refers to the
fact that money laundering entails the use of illegal proceeds and concealment is linked to
the operation of hiding the original source of that amount. To these goals, the organised
crime uses many different activities,to elude investigations and control by the police.
The aim of this paper is to investigate the link between money laundering and food and
beverage activities. This link clearly emerges from some recent police operations. For
example, the investigation called Babylonia involved the provinces of Rome, Naples, Milan
and Pescara and led to the arrest of 23 people who were laundering money from usuryand
extortion to buy restaurantsand pizza places. Moreover, this work intends to verify therole
of the mafia-type association in the development of money laundering. The analysis
considers the Italian provinces over the period 2010–2018, following both the economic
literature and using the econometricapproach.
Given its high heterogeneity in terms of economic, social and institutional characteristics [2],
Italy is a compelling case study. In this context, we attempt to answer the following research
questions:
RQ1. How do food activities and the presence of mafia-type associationsaffect this kind
of offence?
RQ2. Are the current policies to contrastmoney laundering effective?
With this aim, the intention is to give a new contribution to the economic literature on
money laundering, which is principally focussed on theoretical studies and the main
financial effectsof this crime.
2. Money laundering: contributions from the economic literature
According to Masciandaro (2007) that takes up Becker’s (1968) approach on crime, one can
choose various strategies to launderdirty money. Criminal groups can decide to invest it in
the legal or the illegal market, but they can alsosave or consume the cash proceeds. On this
basis, the core of this choice is the evaluation between costsand benefits. For example, each
criminal could be influenced by the probability of being incriminated and suffering the
punishment established by the law. This approach focusses on the degree of utility that is
tied to:
[...] the possibility of increasing the rate of penetration into legal sectors of the economy, through
the moment following investment (pollution) and the possibility of increasing the rate of mimicry
of the subjects and the criminal organisations in his/her complex mimicry [3](Masciandaro, 2007).
Indeed, the function of money launderingis to conceal the link to illegal proceeds. However,
to decrease the odds of gettingcaught, that income has to be cleaned up. The benefits are the
effects related to the use of these proceeds, whereas the cost refers to being discovered.
Following the analysis of Masciandaro (2007),we can identify the microeconomic causes of
money laundering. The aim is to transform a potential purchasing power into an effective
purchasing power. The scope of launderers is to cleanse the money raised from an illegal
activity by reusing and investing it in a legalmarket or another crime. The subjects of this
kind of operations are usually part of a criminal organisationthat resembles a real business,
whose corporate structure acts follow rational behaviours with the intention of obtaining
maximum profit. Masciandaro (2007) explained that the first phase of money laundering
consists in the accumulation of basic resources through a certain crime. At this point,
criminals must decide whether to use the obtained income for consumption; to invest it
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