The Italian mafia, the fear and terror of entire generations, rarely gets its hands dirty these days.
Blackmail is no longer fashionable and murder is largely frowned upon by godfathers. Just 17 people were killed by organized crime in Italy in 2022, according to the latest official figures, up from more than 700 in 1991.
Instead, mobsters have moved aggressively into another world, with lower risk and certainly lower tones, that of financial crime.
Tax evasion and financial fraud
The shift to tax evasion and financial fraud is being fueled by billions of euros after COVID-19 that were designed to boost the economy but are proving to be a godsend for fraudsters.
The Meloni government last month revealed a €16 billion fraud linked to home improvement schemes. Prosecutors are also looking into possible massive misuse of a 200 billion European Union stimulus package.
Not all fraud is orchestrated by organized crime, but prosecutors suspect a large percentage is involved.
Cosa Nostra, Camorra and Dragetta
Sicily’s Cosa Nostra and Naples’ Camorra are Italy’s best-known mafia groups, but the Draghetta, based in the southern region of Calabria, is the country’s biggest organized crime group.
While maintaining tight control over the European cocaine trade, it has led the push towards financial crime over the past decade.
The European Public Prosecutor’s Office (EPPO) sounded the alarm in February, warning that the sheer scale of financial crimes across the bloc indicated the involvement of organized crime groups.
Almost a third of the EPPO’s 1,927 active cases in 2023 focused on Italy, where the estimated damage amounted to 7.38 billion euros out of a total of 19.3 billion across the bloc.
Prosecutors said the crimes often require the complicity of businessmen, who find new ways to evade taxes. The problem cost Italian state coffers around €83 billion in 2021.
In Italy, there is no social stigma for those who issue false invoices or tax evaders, as in Greece.
Although there is no official estimate of the extent of organized crime’s involvement in financial crimes in Italy, it is estimated to be billions of euros each year.
Penalties – caress
For criminal gangs the penalties are relatively light. Possession of just 50 grams of cocaine, you risk 20 years in prison. But if you issue false invoices to gain €500 million in fraudulent tax credits, you only face 18 months to six years in prison.
After a trial in 2011 of some 120 defendants accused of a range of traditional mafia crimes, not a single case has emerged protecting what was once a mainstay of criminal activity.
Tax frauds
The reason is that the government offers tempting tax breaks to start-ups, which can be used to offer highly competitive prices and then, by fraudulently declaring bankruptcy, can escape from debts and liabilities.
Court documents showed that international companies – including UPS Italia, German transport giant DB Schenker and supermarket chain Lidl – outsourced some logistics to cooperatives set up by Draghetta. The companies were fined.
The Inland Revenue revealed to parliament last July that bankrupt companies owe a total of €156 billion in unpaid taxes and pensions. That is about three times Italy’s annual corporate revenue, which last year was 51.75 billion euros, a significant portion of which is due to fraud, with possible links to organized crime.
Taking on seemingly successful companies and then liquidating them can also be profitable.
In a case in Milan, it showed how two Draghetta members invested in a Michelin-starred restaurant in 2014, promising to help the owner cover overdue taxes and rent on the property.
They didn’t. Instead, they ran up more debt and filed for bankruptcy—not once, but twice—owing the state about €1.8 million in unpaid taxes.
Statutes of limitations
Although those behind this scam have been convicted and jailed, investigators say many more offenders are getting away with it, in part because of laws that limit the time available to prosecute financial crimes.
The statutes of limitations are 6 years for tax evasion, 8 years for non-payment of VAT and 10 years for fraudulent bankruptcy. However, complex investigations can take several years and, even if a conviction is reached, there is often a lengthy appeals process.
Underscoring the problem, the Council of Europe said that in 2022 just 0.9% of prisoners in Italy were serving sentences for financial crimes – far lower than 7.1% in France and 9.8% in Germany.
And successive governments have failed to tighten the rules on financial crime, preferring instead to focus on reforms that will recover some of the money owed.
February’s budget decrees include the decriminalization of certain tax offences, which the opposition says legitimizes illegal behaviour.
“There is no amnesty and no favors for the wicked,” Meloni told parliament, defending the law. “This reform simply puts honest people in a position to pay.”
