Italy seeks to keep COVID-19 recovery money out of Mafia hands
It seemed like an excellent deal for an Italian company struggling because of the coronavirus.
The Milan-based web design company in June applied for a government-backed loan worth about $290,000 to help get through the pandemic-related economic downturn. The funds were released, but there was a significant problem: The company had not lost revenue; it had never generated any business.
The firm was apparently a money-laundering front for the Greco clan, a branch of the powerful ’Ndrangheta Mafia based in Calabria that controls most of the cocaine trafficking in Europe, according to authorities.
The owner of the company, which prosecutors did not publicly identify, was one of 27 suspects who had been monitored by anti-Mafia investigators for months — since before the pandemic hit — for alleged tax fraud and Mafia activity, Milan’s chief anti-Mafia prosecutor, Alessandra Dolci, said in an interview this week.
“They were naturally trying to profit from the recent measures taken by the government to finance the country’s economic and business system,” Dolci said in her office in Milan’s palatial courthouse.
Almost 40% of all businesses in Italy are at risk of going bankrupt because of the coronavirus crisis, according to a July report by the National Institute of Statistics. Starting in mid-March, the country went into a near-total lockdown for more than two months as it battled the coronavirus, which as of Friday had killed more than 35,000 people in Italy and more than 634,000 worldwide.
The Italian government has passed a number of stimulus bills in response to the crisis, including a 25-billion-euro package in March and a 55-billion-euro relief plan adopted July 16. This week, the European Commission approved a bloc-wide 750-billion-euro coronavirus recovery plan that will allocate 209 billion euros to Italy.
But with Italy’s notorious red tape, authorities say, the Mafia has been quick to intervene while the funds were waiting to be dispersed. In several southern towns, Mafia associates were seen handing out groceries, masks and cash loans to families in need.
This goodwill helps achieve the crime syndicates’ real goal: using the financial crisis to infiltrate the legitimate economy.
“The Mafia is always ready to intervene in moments of opportunity,” prosecutor Francesco Lo Voi of Palermo, Sicily, said during an online news conference. “These opportunities can also be created by an economic crisis.”
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Police this month executed search warrants that covered the homes and businesses of suspects throughout the country, from Lombardy and Veneto in the north to Sicily and Calabria in the south.
In Milan, authorities arrested eight people and froze assets worth 7.5 million euros, more than $8.5 million. The suspects stand accused of committing tax fraud and creating false invoices to obtain money allocated by the Italian government for businesses experiencing financial hardship because of the pandemic.
Other investigations are underway as organized crime groups attempt to take advantage of the pandemic, authorities say, by gaining access to government stimulus funds.
Police and prosecutors said they expected more arrests down the road.
In the northern region of Lombardy, the area hit hardest by the pandemic, masks and personal protective equipment were nearly impossible to find for most of March. Almost immediately, wiretaps picked up on ’Ndrangheta associates looking for stocks of masks and personal protective gear that they could sell for inflated prices, Dolci said.
The word “Mafia” is typically used as a catchall to describe four different organized crime groups that have been active in Italy since the late 19th century. The groups — which include the Sicilian Cosa Nostra and the Neapolitan Camorra — are organized differently but operate in much the same way, buying struggling cash-heavy businesses such as bars and restaurants, and using them to launder money from drug trafficking and other illegal activity.
They also extort legitimate businesses into serving as “hidden partners,” meaning the business works on behalf of the Mafia but hides its affiliation with organized crime. The Mafia-controlled business seems clean, but in fact its proceeds route back to the criminal enterprise.
Starting in about the 1950s and ’60s, Italy’s Mafias began to evolve beyond street-level criminal enterprises dedicated solely to black-market drugs, weapons and prostitution. They also began to position themselves as sophisticated white-collar criminals active in high-stakes industries such as construction, energy and waste management.
About 10 years ago, the Italian government introduced an “anti-Mafia certification” for businesses that apply for public contracts and funds. The local district office for the Ministry of the Interior performs an investigation to determine whether the company’s owners and close associates have ever been convicted of Mafia activity or “Mafia-adjacent” crimes, such as drug dealing, said Anna Sergi, a professor at the University of Essex who specializes in organized crime.
Normally the anti-Mafia certification is presented along with the rest of the application documentation, and the company’s proposal isn’t even considered without one.
But sometimes during emergencies — the pandemic qualifies — lawmakers allow a company to “self-certify” and assume the burden of declaring itself Mafia-free to access the funds more quickly. The government then follows up later with an investigation, and if the certification isn’t confirmed, the funds must be returned and the business can be prosecuted for fraud.
The problem, Sergi said, is that if thousands of businesses are self-certifying and the money gets allocated, it can be difficult to recover the funds.
“We are in this situation where if everyone testifies and gets the money allocated, it becomes really difficult to stop the progress,” Sergi said.
“If you discover at a later stage that there was Mafia involvement, how do you undo what you’ve already done?” she said.
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The latest coronavirus stimulus bill included a new safeguard to the self-certification process by imposing a penalty of up to six years’ jail time for anyone who lies on the self-declaration form. Before, the penalty depended on different variables outlined in the country’s anti-fraud statutes.
The more recent approach puts an extra burden on the judicial system because prosecutors have to prove that the suspect lied instead of making a mistake, Sergi said.
“What they should be doing is putting those resources toward facilitating the checks at the beginning,” she said. “So instead of having say four people work on it, have 10 people facilitate the certification, and perform the controls as they should be done.”
But with the country facing bankruptcy and in dire need of an injection of liquidity, there wasn’t any choice but to simplify the financing upfront and then step up control efforts after the funds were disbursed, Dolci said.
“It’s a delicate moment for the history of our country,” she said. “This financing is there because it goes to Italy’s survival.”
Sergi, Dolci and other analysts stressed that Mafia infiltration of coronavirus-related financial recovery efforts is not an “Italy problem” but said other governments weren’t dealing with the problem head-on.
Sergio Nazzaro, spokesman for the Italian Parliamentary Anti-Mafia Commission, said Mafia-style groups take in an estimated 100 billion euros a year — far too much to launder in Italy alone. Some European countries seemed to “be in denial” about how powerful the Mafia is outside Italy and how easily Mafia activity could derail economic recovery efforts in other countries, he said.
That’s in part because acknowledging the Mafia’s presence can be bad for business, he said.
For example, forming a shell company in Italy will automatically raise Mafia-related suspicions with the financial police, but forming a shell company in countries such as the Netherlands and Luxembourg won’t attract scrutiny.
If you’re the Mafia, “you’re going to move the money wherever there’s opportunity,” Nazzaro said.
He said the Mafia has survived for so long because it constantly evolves; as soon as lawmakers find a solution, organized crime finds a way around it. That means that cooperation among countries and among different agencies — finance ministries, police departments, even agriculture departments — will be crucial to stopping the Mafia.
“You’re not going to fight the Mafia with a gun; you’re going to fight it with intelligence and information,” he said.
Dolci agreed that the Mafia operates in a globalized world and said the problem required better international cooperation. The Mafia would no doubt try to access the European recovery funds, she said.
“We have to be better than ever, but we will,” she said as she gestured toward the July 14 arrest documents. “I have faith. After all, we got this one.”
Brancolini is a special correspondent.
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