Mon, Nov 23, 2015

The Return of Retail Theft to Organized Crime

For decades, the established U.S. organized crime groups, such as La Cosa Nostra or the major “mob” families of New York and Chicago, conducted truck hijackings.

These strong-armed attacks were conducted on drivers of trucks with containers holding expensive commercial goods, such as televisions and garments. The hijacked goods made their way onto the shelves of wholesalers and retailers throughout the United States and became one of the mob’s principal sources of criminal revenue. Eventually, these hijackings and other “rackets” significantly diminished or became extinct due to the mob’s expansion into the more lucrative drug world. Also, the families themselves largely retreated after major criminal prosecutions, such as those filed in the Southern District of New York.

Today, multiple phenomena are contributing to an equal if not greater amount of organizedretail fraud or theft than in the days of the sensational mob hijackings. However, today’s theft does not involve armed physical attacks on transporting conveyances, but rather organized rings engaged in international fraud, corruption and shipping schemes. Such rings are not run by the old Mafia dons, but by hardened criminals born out of other groups of immigrants.

The first phenomenon is the worldwide development of the open marketplace and, in particular, Latin American markets, which enjoy Free Trade Agreements and Trade Tariff Waivers with the United States. These agreements have helped countries such as Colombia and Mexico develop more productive manufacturing sectors and stronger economies, but have also had a dramatic effect on U.S. exports. The North-South shipment of stolen goods is enhanced by the volume of trade as well as the lack of tariffs to many Latin American countries, and the consequent dearth of inspections and export controls.

Today’s theft does not involve armed physical attacks on transporting conveyances, but rather organized rings engaged in transnational fraud, corruption and shipping schemes.

Moreover, there is a commercial incentive to ship those goods to Latin American markets: a PlayStation or LED television in many Latin American venues has far greater retail value than in the United States, due to a combination of high import fees and the relative unavailability of such goods in local markets. Indeed, foreign consumer goods in Latin American countries can cost up to three times more than the products cost in the United States. For example, according to Bloomberg Business, while the PlayStation 4 costs $400 in the U.S., the console costs the equivalent of approximately $1,700 in Brazil.

In February 2011, at the request of the National Retail Federation, the Department of Homeland Security (DHS)—which is responsible for the integrity of U.S. borders and the enforcement of export smuggling of contraband—established a pilot federal investigative task force based out of South Florida. That task force is responsible for the identification and prosecution of groups and individuals engaged in organized retail crime, with particular focus on those aimed at shipping stolen goods to Latin America for sale.

Observations made by Kroll as a result of recent investigations, consistent with information shared by law enforcement, clearly indicate that this latest trend in international crime involves organized groups and appears to be growing in volume. The leaders of these groups tend to have extensive criminal backgrounds and are often related to other Latin American immigrant groups. They believe they are relatively safe in managing these international fraud/theft schemes, as law enforcement has yet to react fully to the trend. Violators know the potential criminal penalties are far less severe than for other types of crimes, for example, narcotics trafficking.

Given the large profits involved, the likelihood is that this criminal trend will only grow in volume and geography until governments make it a priority to investigate, map out and prosecute the leaders of this type of organized crime, while enacting legislation to enhance the criminal penalties. Until retailers pool resources to investigate and work together more effectively with law enforcement to eliminate this organized crime phenomenon, international retail theft will continue to grow and flourish in enjoyment of near complete impunity.

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