Methodological remarks and additional comments
The outcomes of the project “La economía ilícita en España” have been published in Spanish in Madrid on 2021 (Alianza Editorial). All the tables and the full text concerning methodological remarks and additional commentaries are freely accessible in: https://www.ucm.es/afsteinko/tablas-y-apuntes-metodologicos and https://www.ucm.es/afsteinko/calculos,-comentarios,-ejemplos-y-fuentes
This web page includes resumed commentaries and methodological remarks in English. It also includes chapters referring the financial sector and Spanish illegal economy, the laundering-sensitive occupations and aspect related with the concept of "criminal resources" and its quantitication.
The author would like to acknowledge any comments or questions addressed to asteinko@ucm.es
Index
A. Some general methodological issues
B. The sample used for scanning the Spanish illegal economy
B-bis.Methodology used for estimating the value of incriminated assets
C. Methodology used for making estimates of predicate crimes
C-1 Tax-crime money (€ 2.000mill)
C-2 Diverted money (€ 2.600mill)
C-3 Embezzled money (€ 23.000mill)
C-4 Crimes against land use planning (€ 13.000mill)
C-6 Scams greater than € 400 (€ 600mill)
C-7 Drug-trafficking (€ 4.500mill)
C-8 Robberies and thefts with a value grater than €400 (€ 2.000mill)
C-9 Tobacco smuggling (€ 1.000mill)
C-10 Trafficking in persons for sexual exploitation (€ 340mill)
C-11 Trafficking of weapons and explosives (€ 200mill)
C-12 ETA Extortion and kidnapping (€ 5mill)
E. Financial sector and Spanish illegal economy
Table 2 Use of financial institutions and predicate crimes
Table 3 Financial assets and predicate crimes
F. Laundering-sensitive occupations
Table 4 Laundering-sensitive occupations and predicate crimes
G. The size of the Spanish laundering market
H. Resources of Spanish economic criminals
Table 5 Resources, laundering-sensitive occupations and illicit assets
A. Some general methodological issues
(1) After several months interviewing money laundering “professionals and experts” following the methodology used by Suendorf (2001) in Germany, we obtained highly unsatisfactory outcomes: cliché-ridden answers based on impressions rather than in empirical knowledge, repetition of public statements and media narratives, and only a few senior researchers -as those linked to the Research Service of the Spanish Central Bank- adopting a critical distance to the hypothesis we wanted to contrast, including its “mythical numbers”a.s.f. However, the most important obstacle for making advances seemed to be the comprehension of the money laundering paradigm itself. It became clear that the research had be built up from the very basements using a sequential methodology. That lead us to the identification of the 12 main “profit-driven crimes” (Naylor 2003) in terms incriminated values after making a first, rough scan of the “proven facts” of 500 sentences with incriminated assets, with or without including laundering charges.
(2) Following the methodology developed by myself in the 1990ies as senior consultant of the public firm “Tecnología Grupo INI” partly based on Porter (1985) and on the usual techniques used by industrial sociologists for identifying critical value added hotspot for improving organisational and human resource management within big Spanish industrial corporations, we decomposed the predicate offences in comprehensive “operations” or “activities” trying to detect the criminologically most critical moments, and connecting them with the circulation processes itself. For example the obvious accumulation of cash in small bank notes by small drug dealers resulting from the technical imperatives of the selling of small drug quantities, or their comparatively low individual income leads to a much higher proportion of self-laundering through daily expenses than big dealers. This methodology turned to be rather similar to the “crime scripting” proposed by Cornish (1994). Our “crime scripting” consisted in reconstructing the sequences of main procedures used for generating the illicit assets. It permitted to detect the actors, scenarios, resources and techniques used for generating illegal values and for putting them in circulation. Economic data included in the “proven facts” were used for calculating average magnitudes of the crime money involved in each predicate crime after making an insight scripting of the most frequent “typologies” -for example of scam, embezzlement or tax-crime cases-. These magnitudes were contrasted in personal interviews with actors directly or indirectly related with the social and institutional scenarios of the crimes. The economic data appearing in the proven facts were dividing by duration of the plots -in number of years- for obtaining data on an annual bases. Most outcomes were grouped in white and blue-collar offences as most -mainly white collar- cases are multi offensive, often including tax-crime charges and different forms of fraud altering the quality of the factor “predicate crime”. On the other side, as an overwhelming part of blue-collar are drug-money cases, the sample of others like robberies or trafficking in persons for sexual exploitation or non authorised arms trafficking would be much too small.
(3) A particular effort was made for crime-scripting complex tax-crimes, embezzlement, diversion of subsidies, and big scams based on bank frauds and philatelic frauds, including its economic aspects. The most complex cases described in the sentences were the big tax-crimes and the embezzlement procedures, which had to be classified in different topologies for understanding its underlying logic, procedures and ways the illegal assets are generated and put into circulation. An exceptionally complex, but not representative case of diversion of subsidies, which was finally considered an embezzlement one -the ERE case- took also a big amount of time to be crime-scripted (see Fernández Steinko 2021c com 9). The crime scripting of the crimes against land use planning was particularly complex and long interviews with entrepreneurs, experts in the building and real estate sectors, town councillors and other insiders were necessary. But it was also very enlightening for understanding some aspects of the functioning of these sectors which have an oversized presence in Spanish economy economy, (only) partly due to the position Spanish real estate occupy within the international laundering flows. Some predicate offences had to be divided in different sub-groups such as the briberies, whose relative and absolute value highly depend upon the behaviours they pretend to provoke and the value of its economic and non economic proceeds -for example the economic proceeds of an embezzlement operation or the (non economic) proceeds of the forgery of a document-. The subgrouping of scams in financial scams, philatelic scams, commercial scams, sanitary scams, phishings a.s.f. was algo important. Although some of them are rather complex and have been meticulously described by journalists and academic scholars, the underlying logic, described in the Spanish Penal Code, is rather similar.
(4) The easiest predicate crimes to be scripted were the blue-collar ones. The scientific literature describing the drug dealing value added chains is abundant, and the value added chain of the trafficking of women for sexual exploitation could be reconstructed using monographic studies made by Spanish ONGs and the Spanish Guardia Civil, who has been doing an excellent job in this issue, but also using a big amount of press releases, some of which being partially contradicting. What we considered to be very difficult to estimate according to the “experts” interviewed in the first rounds, the non authorises arms trafficking, was rather easy to make thanks to the outstanding quality of the studies included in the annual Small Arms Survey, in the publications of the Stockholm International Peace Research Institute and the ongoing reports of United Nations on this issue. Our big data statistical series calculating mispricing of all more than 7.000 chapters of Spanish foreign trade, were a rather surprising and stimulating confirmation of the SAS data (Fernández Steinko 2018). The scripting of some offences as the trafficking of tobacco products and the money generated or used by ETA for terrorist purposes, had to be reconstructed using reliable and very competent publications which do exist in this issues.
(5) Almost all our economic estimates are conservative. Most circulation processes were reconstructed using a microeconomic approach but not only (see “Methodology used for making estimates of predicate crimes” in this web). That means that proven facts of Spanish judicial sentences and, to a lesser extend, journalistic analysis for completing details, social profiles and spaces involved, are the main source. When the value of certain assets as high-end cars, watches, pens or yachts were not explicitly mentioned in the sentences, estimations were made based on open market sources published in internet or after consulting experts, for example for estimating the value of individual race-horses (Fernández Steinko 2012b, table 2). The economic data included in the “proven facts” were contrasted with macroeconomic estimates and the calculation of dark figures when other data were not available (for example: for the estimate value of annual payed bribes see Fernández Steinko 2012b, table 5). Many interviews were made for exploring the official data published by the Spanish Central Bank (Banco de España) referring to the circulation of high denominations (€ 200 and € 500) which were essential for making a rough reconstruction of its legal, grey and/or black form or appearance.
B. The sample used for scanning the Spanish illegal economy
(1) A total of 500 sentences were studied 415 of then containing laundering charges, of which around 50% also including predicate offences, and the rest containing only predicate offences without laundering charges. All sentencing cases had taken place between 1995 and 2015, 1496 defendants with laundering charges were judged in national and provincial courts, of which 909 were found guilty and 486, that means 32%, were acquitted. Most of the 56 white collar laundering cases are multiple-offence crimes but mostly tax-crime offences (29), payment of bribes (23), embezzlement (12) and scams other than phishings (13). Around 90% of blue collar laundering cases (a total of 356) are drug dealing ones -52% cannabis, 35% cocaine and 9% heroine- the rest are big thefts and robberies, coercive prostitution and extortion. Corporate crimes were not included in the sample as the sentences are much too rare and complex for exploring them in a quantitative and qualitative point of view. Around 120 interviews with Spanish and not Spanish actors enduring an average of 20 minutes were made for exploring details, clarifying doubts and also for exploring details concerning some of the 45 consulted databases such as the official statistics on large denominations, available crime statistics, detailed statistics on public expenditure on local, regional and national level or data on real estate and building activities, desegregated local, regional and national expenses.
(2) Some actors directly involved in the commission of the predicate crimes as personally known medium and small ex-drug dealers, municipal clerks, trade unionists directly related with the organisation of training courses involved in diversion of EU subsidies, members of boards of directors of saving banks a.s.f. were interviewed in longer sessions for fine tuning crime-scripts and making quantitative estimations. Most of the interviewed were actors related to issues only indirectly related to the predicate crimes and the laundering scenarios as antique arms collectors, local politicians -mostly of the opposition parties-, entrepreneurs of the real estate sector, insiders or members of the board of directors of savings banks informed about real estate and embezzlement corruption cases. We did not obtain any authorisation for interviewing police officers confirming the distance existing between academic and enforcement spaces in Spain. The argument was that “police files and proceedings are always open and therefore secret”. No private bank directors or employees -some of them personally known- agreed to be interviewed in any possible way. Two financial consultancy firms responded positively, but did not give any substantial information but politely repeated the narrative we wanted to contrast. All data extracted from the “proven facts” -incriminated assets and products, money flows, firms involved in laundering activities, personal ties, geographic references etc.- were incorporated to an excel file for making basic mathematical calculations. Sociological, economic, personal, cultural and organisational data were translated -when possible- to quantitative indexes and scales for facilitating calculations. Following the UN classification methodology (ONDOC 2015) mutual exclusivity of delicts were assigned to one only category of the crime classification for minding overlaps. As this was not always possible in most economically most relevant cases, in which tax offences and frauds are often included in the same corruption or scam plots, we present the data grouping them in the meta-categories of white or blue collar crimes. The debate upon their definition and overlapping (Ponsaers 2002) was deliberately ignored for spaces reasons, although our data give some empirical insights.
B-bis.Methodology used for estimating the value of incriminated assets
(1) The calculation of the value of incriminated assets is a complex process. Nevertheless it is almost entirely based on the information contained in the proven facts or on information which can be easily derived from it. The complexity is inversely proportional to the quality of the drafting of the judges entrusted to make it, and to the economic information contained in the judgement itself, which is not always as it should be. The researches faces two difficulties: (a) the economic information is not always direct, but requires an estimate of the value of the incriminated assets; and (b) the need to differentiate between the stock of illicit wealth - for example, a car, a flat or the balance of a CC - and a flow of illicit wealth - for example, transfers made from one CC to another.
(2) When the information is direct, we have simply added up the value of the assets mentioned in the proven facts. When the value of the assets is not mentioned and we have had to make estimates ourselves, we have been using the following criteria:
- first of all we have used as a reference and as far as possible the value assigned to similar assets in other judgments;
- we have calculated the average prices of real estate and vehicles over the period studied on the basis of the information advertised on the websites "segundamano", "fotocasa", "idealista.com", "cochesnet" and "mundoanuncio" as well as their paper equivalents over the period 1998-2009. We have also taken into account, as far as possible, some regional differences in the valuation of the incriminated real estate, which can be very substantial;
- he value of the vessels not linked to transoceanic operations, whose size is substantially smaller than those used for transporting cannabis from North Africa to Spanish shores have been used for making estimations of those similar vessels used for similar purposes whose value is not included in the proven facts. The value of the (few) seized vessels capable of making transoceanic crossings has been obtained from commercial websites specialized in recreational vessels;
- the estimates of branded watches and trotting horses has been calculated on the basis of the average prices advertised on specialised websites. It is possible that the firs have been undervalued according to information we have been obtaining after;
- we have conducted some interviews with professional buyers and sellers of new and used motorbikes and recreational boats.
(3) The result of all this is the following valuation of the non-financial assets incriminated in the judgements:
- flats/apartments: €180,000;
- single-family houses: 350.000€,
- parking spaces/storage rooms: €30,000;
- commercial premises: €50,000,
- rural properties: €9,000/hectare;
- utility vehicles: €20,000;
- high-end cars and off-road vehicles: 50.000€;
- motorbikes: €4,000;
- motorcicles: €2,000;
- boat trailers: 2000€;
- quads: 7.000€;
- boats: 46.000€,
- watches (branded): 3.000€;
- race horses: 3.000€.
- water jet bikes: 10.000€;
- (vans: 30.000€.
(4) In case of doubt, we have chosen to estimate from above. Doubts often arise because: a.) the challenge is to calculate the average prices over a longer period of almost twenty years; b.) in many cases the defendants did not appropiate the full value of some expensive assets such as real estate, but have only paid for a part of them with illicit money (problem of the mixing of assets); c.) some seized assets, especially utility vehicles, were acquired second-hand, which means that the value of these assets is much lower than the value of the first-hand assets . d.) When the information is based on proven facts, the data are most concrete and reliable. This is not the case when a definitive judgement has not yet been handed down at the time of finishing our research. These cases we have had to rely on court records or, in some cases, to the press, the latter being a particularly unreliable source in which illicit assets tend to overestimate assets, often due to the confusion between stock and flow of illicit assets.
C. Methodology used for making estimates of predicate crimes
The following table resumes the main sources used for making the crime scripting of the predicates offences and for making economic estimations of the assets produced with them.
Table 1 Sources used for crime scripting and making economic estimates of Spanish profit driven crimes (1995-2005)
|
Predicate crimes |
production of assets and crime scripting(1) |
economic size(1) |
circulation of assets(1) |
|
large tax crimes |
|
|
|
|
diversión of subsidies |
|
|
|
|
embezzelment |
|
|
|
|
crimes ag. land use planning |
|
|
|
|
bribes |
|
|
|
|
scams |
|
|
|
|
drug-trafficking |
|
|
|
|
robberies and important thefs |
|
|
|
|
trafficking of tobacco products |
|
|
|
|
coercive prostitution |
|
|
|
|
unauthorised arms trafficking |
|
|
|
|
extortion and kidnapping |
|
|
|
(1) See the list of interviewed persons in Fernández Steinko (2021c)
C-1 Tax-crime money (€ 2.000mill)
(1) There are numerous studies aimed at calculating the dimensions of the so-called "informal economy" or undeclared economy, but at least in Spain, not even the first steps have been taken to calculate the annual value of criminal tax-conducts, that means the unpaid dues exceeding €120,000. What follows is a first attempt at calculation based on the information available on a number of variables that may make this possible.
(2) If the total amount of tax fraud in Spain represents slightly less than 23% of GDP, estimated at one trillion euros (average for the years 2007 to 2012) and assuming that the average tax burden is around 33% (José Antonio Peláez Martos puts it at 36%, which seems excessive to us), this would mean that the year-on-year average of unpaid taxes would amount to around € 75billion per year, a value that is added, year after year, to that generated by the tax crimes of previous years, and which circulates through the country's economy mixed with legal economic flows. In order to explore the phenomenon that interests us here, however, we have to divide this € 75billion into the part being equivalent to the unpaid quotas of less than €120,000 - the grey economy - and the part that is equivalent to the unpaid quotas of more than this amount - the black economy of fiscal origin - an amount for which no calculation has been made, not even an estimate to date, despite its high relevance for the Public Treasury.
(3) None of the studies on tax evasion currently available venture any hypothesis on the proportions that might be kept between grey money and black money of tax origin, a data that does exist in the records of the Tax Agency but which are subject to strict anonymity. The Tax Agency's (TA, Spanish: AT) data do not take into account the income and therefore the social background of the fraudsters, which makes it difficult to try to calculate them. According to the TA, there are 170,000 families - 0.8 per cent of Spanish households- who have an average accumulated declared wealth of more than one million euros, not including the value of their respective main residences, nor that of their hidden wealth in offshore jurisdictions (Expansión 20/5/2010, El Mundo 10/9/2014). However, only 0.04% of all taxpayers declared in 2009 to have an income of more than 600,000 euros per year, an implausible disproportion that points to the hidden nature of a very significant part of their wealth both inside and outside Spain. Holders of this kind of income have many possibilities to hide their real income by hiring tax advisors (see laundering-sensitive occupations in table 4). Nevertheless the most important part of the tax frauds are linked to their business activity, which allows them to use the infrastructures of the organisations they work for or in or co-own, to declare a significant part of their regular and luxury consumption as business expenses: high-end cars or private trips declared as business expenses in order to be able to deduct them etc.: a significant part of corporate tax evasion originates here.
(4) How to calculate the value of major tax evasion? The Spanish tax authorities distinguish between three groups of taxpayers who are sensitive to tax evasion (ATb vv.aa): (I) the self-employed who contribute as individuals, (II) companies with less than €6 million in annual revenue and (III) the 25,000 "large companies" with revenues above that amount.
- Group I generates 9% of total tax evasion - the sum of its grey and black part - which is equivalent to €6.3 billion per year. This includes both the traditional self-employed (plumbers, owners of family-run micro-businesses, small traders, etc.) and also the self-employed who joined the construction sector en masse from the 1990s onwards: some 600,000 at the peak of the housing bubble, many of whom saw their income and newly achieved social status collapse with the 2008 crisis. Also included are professionals and technicians without salaried employees who do not contribute through companies and pay personal income tax on their activity, not few of them also linked to the brick trade, such as architects, engineers or technical engineers. There are around three million taxpayers, of whom 1.5 million are in direct assessment, 0.5 million in objective assessment and around 200,000 are engaged in agricultural activities - the so-called agricultural self-employed. These figures roughly coincide with the number of people registered in the Social Security self-employed workers' scheme (Interview A-4; the list of interviewees can be found in Fernández Steinko 2021c). The average fraud per contributor in this group amounts to just over €2,000, although total fraud is very unevenly distributed between many small fraudsters, fewer medium-sized fraudsters and few large fraudsters, who are the ones we are interested in here
- The second group - 1.2 million companies with less than €6 million in annual revenue - is equivalent to "small companies" and accounts for 17% of total fraud, with each fraudster averaging around €10,000 per year. This second group of "small companies" also includes professional practices with an annual turnover of less than €6 million: dentists, architects, notaries, engineers, tax consultants, etc. registered as companies.
- The third group are the 25,000 large companies with an annual turnover of more than 6 million euros. They account for 74% of total fraud, which means that each fraudster is worth just over €2 million on average per year. This group also includes large professional firms with a turnover of more than €6 million.
(5) With this material, and pending more systematic investigations, we can make some initial not entirely unreasonable calculations of the value represented by the criminally incriminating amounts out of the €75,000m that make up the total tax fraud in Spain which represents the sum of its grey part and its black part - as well as its distribution between different groups of fraudsters. In the group of "natural persons" (group I) this possibility is more remote: let us assume - these are estimates that are easily accurate with the incorporation of unpublished data but which are in the hands of the Treasury - that 0.5% of the 3 million taxpayers in group I are major fraudsters - some 15,000 people - for an average amount of €150,000 a year, which would add up to €2,300m in unpaid contributions. Let us suppose that 5% of the 1.2 million contributors in Group II - 60,000 people - are fraudsters for an average amount of €200,000, which would add up to €12,000 million in unpaid contributions. And let us also assume that 15% of the 25,000 "large companies" - 3,800 contributors - fail to pay €1.5m each on average each year, a rather low estimate considering the resources available to this group of fraudsters given their direct link to business activity and their particular economic capacity to hire professionals highly specialised in concealing assets of all kinds. The latter figure is reasonably consistent with the data of the 4,770 biggest defaulters in the country published by the Ministry of Finance, who have failed to pay €3.2m on average and a median of €1.7m over several years, totalling €15.7bn in defrauded dues (El Mundo 23/12/2015 and 1/7/2016). All this would translate into €5,700m in terms of annual tax dues defrauded by group III which, added to the above, would give a total figure of criminally incriminating tax fraud of around €20,000m, of which not more than 10% would be recovered annually by the Treasury.
C-2 Diverted money (€ 2.600mill)
(1) The basis economic amount of all subsidies which can be diverted is covered by Art. 47 and 48 (Current transfers to private companies, families and non-profit institutions) as well as Art. 77 and 78 (Capital transfers to private companies, families and non-profit institutions) paid by the State, the Autonomous Regions and the Autonomous Regions. We do not include here the deviations that affect transfers between public bodies (Art. 40 to 46 and 70 to 76) as these fall more under the category of embezzlement of public funds and, in any case, would require a monographic study that includes the phenomenon of “wasted money", a highly imprecise term without a clear criminal expression (Romero et al 2018). Our estimates are provisional and mostly based on interviews A-17 and D-5 (see Fernández Steinko 2021b, table 3 and Fernández Steinko 2021c, com. 15)
C-3 Embezzled money (€ 24.000mill)
(1) Despite the fact that all available rough estimates suggest very considerable economic amounts generated by embezzlement activities, there is no attempt to systematically calculate these amounts according to the reality of the Spanish case, nor that of other comparable countries, with the exception of some aggregate studies signed by the European Commission, whose data have been mistakingly extrapolated to Spain in an aggregate form (Fernández Steinko 2021c, com. 16)
(2)The chapters likely to be embezzled are I (personnel expenditure), II (purchase of goods and services) and IV (investments). Table 4 (in Fernández Steinko 2021b) shows that public expenditure in these three chapters amounted to €160.9 billion in 2013 for the three levels of government. We do not find it acceptable to add up the value of these three chapters - or "items" - and then apply the same single percentage of embezzlement. The estimates of the percentages of each of the expenditure items at each of the levels of administration - State, Autonomous Communities and Local Corporations - is a first, almost approximate, attempt. This has been done on the basis of 15 interviews with people linked to the courts of audit, municipal secretaries and other actors (interviews A-10,14,15, 17,18,19,20,21,22 and 23, E-13, I-18 as well as P-8 and P-13).
(3) We consider our attempt to be much more accurate than that of the European Union. To calculate the misappropriation, the authors start from "the sum of the aggregates P2 (intermediate consumption), P51 (Gross fixed capital formation) and D6311_D63121_D63131PAY (social transfers in kind related to expenditure on products supplied to households via market producers, payable) for S.13 (general government sector) of table 2 ("main aggregates of general government") of the ESA95 transmission programme" (cit. in: Procuremente Indicators 2011, Brussels, 5 December 2012. Downloaded at: http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/public-procurement-indicators-2011_en.pdf). An estimated misappropriation rate of 24% is then applied to the sum of all chapters. The result is the figure of almost €50,000m that appears in various documents and press reports for the case of Spain (for example Cinco Días 10/2/2015 citing a study by the National Securities Market Commission - CNMV 2015). The particularised study of the different chapters and levels of the administration shows that the percentages of diversion of subsidies and transfers are, in any case, lower than those of embezzlement, as it is more difficult to divert subsidies than to impute cost overruns in public procurement, as we have said. All our interviewees insisted, moreover, that the possibilities of embezzlement are very different depending on the chapter of expenditure. The percentages proposed here are the result of several rounds of estimation among our interviewees, but are by no means a definitive estimate. See also Strombon (1998).
C-4 Crimes against land use planning (€ 13.000mill)
(1) Urban planning offences do not only affect public real estate, but most of it. What follows is a (first) attempt to estimate their approximate economic dimensions.In order to be able to estimate the value of embezzled publicly owned real estate, some preliminary questions must be taken into account.
- Unlike embezzled movable assets, whose value remains relatively constant over time, the monetary value of real estate has increased significantly between 1997 and 2008. This growth has facilitated its embezzlement, as it has increased illicit profit expectations without, apparently, affecting public assets, as it is understood that the latter would also benefit from such increases.
- The changing nature of the value of these assets makes it difficult to calculate. Local councils are obliged to keep an up-to-date account of the value of the public property they own, but most local and regional authorities do not comply with this obligation, nor is there a central database in which all the available data is recorded. This situation, which does not seem to occur in the same way in other countries and which some of our interviewees consider "completely incomprehensible", has led to a proliferation of private appraisal companies that could incur in conflicts of interest when collecting data, since many of them are linked to financial institutions and their arbitrary appraisals have been at the origin of the over-indebtedness of many owners and businessmen, with serious economic consequences for the country (see Fernández Steinko 2021c com 14).
- On the other hand, the lack of precise information on the economic value of embezzled real estate assets discourages their criminalisation, which is reflected in the short statute of limitations periods for these conducts in Spain, which amount to no more than a maximum of 3 years (see Fernández Steinko 2021b table 9).
- In addition, municipal cadastres are updated only every seven to eight years, i.e. much more slowly than the real estate price index, which means that the values declared by those very few municipalities that have at least taken an inventory of their real estate assets hardly ever correspond to their current market value either. The result is, on the one hand, a decrease in the apparent - but not the real - value of public real estate assets lost to citizens and, on the other hand, an increase in the profits made by criminals due to the increase in the difference between the price of the assets acquired by them and the price at which they are sold on the market. The former slows down the social criminalisation of these conducts, the latter increases their economic incentives.
(2) Most of the judgments concerning the embezzlement of the economically quantifiable part of publicly owned real estate - public plots of land sold to private individuals below their value, requalified in such a way that the community receives for them an amount equivalent to their below-market value, etc. - are limited to listing and describing the plots of land affected by this type of crime without giving any economic data or making any estimations so that the embezzled non moveable values caused by the offenders to the community rests unknown. Part of this value, probably the most important, is simply impossible to quantify because of its intangible nature or because it is not subjected to the action of the market. Another reason is that in the absence of reliable official data, it becomes extremely costly for prosecutors' offices to calculate such a figure on their own. There are exceptions. In the Pretoria case we can read, for example: "The amounts resulting from the rectification (of the value of the AFS real estate assets) in the main operations studied (Badalona, Pallaresa and Niesma cases) and which were not paid into the municipal coffers were €13. 000,000 (Pallaresa case), 1,377,000, 4,000,000 and 12,377,000 (San Andres de Llavaneras and 14,000,000 (Badalona case)" (DP 222/06).
(3) We also know that as a result of the Majestic case, the town council of Casares (Málaga) suffered a capital loss amounting to 20% of the value of the successive re-qualified properties, equivalent to €130,000, a value that was gained by the real estate company, in which members of the town council participated, and which was dedicated to creating laundering opportunities for non-residents through real estate investments on the Costa del Sol. To this amount were added 220.000€ in concept of acquired uses that the town hall also lost (AP MA 278/2017). But this kind of information does not appear frequently in the judgments and what prevails are rather simple descriptions of the affected plots without a calculation of their value and, therefore, of the economic damage made to the communities.
(4)Another reason making it difficult to quantify this group of misappropriated values in a country with more than half a million square kilometres and an exceptional historical, cultural, scenic, botanical and zoological wealth, is that value of this wealth is impossible to translate into economic figures. We have seen that their status as "dead assets" or assets located outside the market explains why their value soars at the moment when they are legally unprotected (Fernández Steinko 2021a chapter 5). When the legal dis-protection is consummated, there is an almost always irreversible destruction of their initial intangible value leading to a rapid decline in their market value. The best views, the most environmentally valuable spaces or the most undeveloped places are the most sought-after precisely because they have previously remained outside the market, a differential value that disappears as the landscape itself, the historical environment itself, the privileged position of a block of flats or the urban coherence itself is liquidated. This leads to decreasing profits depending upon the proximity or distance to the initial acquisition of the illegally unprotected real estate asset, which is always extremely lucrative but also risky as it entail the payment of bribes or other criminal acts.
(5) Historical and landscape values are more qualitative and intangible than quantitative, more immaterial than material. They have been accumulated over hundreds of thousands of years of natural history and hundreds of years of social and cultural history and, in most cases, are definitively destroyed when they lose their legal protection. However, the consequences are not only aesthetic, environmental and cultural, but also very tangible and have economical consequences. The accumulation of traffic problems, the disfigurement of cities, the increase in the density of buildings that saturate urban infrastructures, the loss of tourist and cultural interest that reduces the attractiveness of the locality for possible visitors, etc. also have tangible costs for the municipalities and their populations. In short: it is impossible to quantify this part of the misappropriated public heritage, which undoubtedly represents the largest part by far. However, let us make a first attempt to do so, even if only in a rough and approximate way. How much public real estate assets do Spanish citizens as a whole lose every year as a result of these criminal practices, at least that part of it that can be calculated within this research project?
(6) We are probably not far off the mark if we consider that the value of publicly owned real estate assets in small and medium-sized towns represents 10% of total real estate assets, somewhat less - for example 8% - if we take into account all municipalities (interviews P-8 and A-22). The aggregate value of all Spanish real estate assets amounted to €2.3 trillion before the real estate bubble took off (1997) and ten years later, when it burst, to €8.4 trillion, three and a half times more (Naredo et al. 2008: 116): this is the "wealth effect" that the Bank of Spain spoke of in order not to consider the sharp increase in indebtedness of Spanish households and companies during that period as a cause for concern. The real capital gains accumulated over these ten years by all the country's real estate assets - public and private - therefore amounted to almost €6.2 trillion, some €620,000 million per year. Eight per cent of this amount - just under €500 billion, or around €50 billion per year - would correspond to the capital gains accrued by publicly owned real estate assets whose use was illegally altered. A part of this €50 billion has reverted to the public coffers themselves due to the sale of land and buildings to private actors at market prices, which allowed them to generate physical and social infrastructures and provide services to citizens. But another fraction of these capital gains have not ended up in the municipal coffers but in private pockets.
(7) Documented cases describe public property losses in percentages ranging from 100% to 3,000% of the market value of the real estate affected. For example, the mayor of Sant Pere de Tornelló agreed to sell a municipally-owned plot of land for €300,000 and then proceeded to requalify it, which multiplied its value by 30 in just a few months, causing a 3000% loss of assets for the public coffers. The municipality of Rivas Vacíamadrid, with serious liquidity problems, sold a public plot of land valued at €22m for just half its market value in order to make cash in the short term, generating a 50% loss for its citizens. Arganda’s council sold a publicly owned plot of land for €77m in exchange for a bribe of €12m, a plot of land that the buying company was able to sell shortly afterwards for almost three times as much, thus the council lost 300% of its market value.Those in charge of the executive of the Region of Murcia sold plots of land of high environmental value for €25 per square metre in an area where similar plots had been sold for €105, which amounts to a loss of 300% etc. (Cullel case in Santamaría y Arribas 2014: 464, interview I-18, AN 20/2018c, El País 12/10/2012, as well as El País 28/2/2015 respectively.
(8) All these cases allow us to affirm that, taking into account the lack of real information that local councils have about the value of their own assets, it is highly probable that at least half of the capital gains accumulated between 1997 and 2007 have not been passed on to the public coffers, which would add up to an annual loss of public real estate assets of around €25,000m over the period in question. Many of these practices may be irregular or fall somewhere in between crime, misdemeanour and mismanagement, but not criminal cases in a country with a legal and judicial system that treats such practices so laxly. Therefore, if we assume that only half of these assets have a strictly criminal origin, this would give us a figure, more minimum than maximum, of around €13,000m per year.
(9) This would be the value of the embezzled public real estate assets, a value to which must be added all that which is impossible to quantify in aggregate, either due to a lack of data or due to its intangible nature. Even taking into account the rapid prescription of crimes against urban planning in Spain, the value of real estate assets acquired through illicit practices in Spain and circulating in the country -or being laundered- either in the form of cash or real estate, would amount to a minimum of €60 billion, a figure equivalent to 1% of all real estate assets in the hands of Spanish families by 2015, a percentage that would be higher if the prescription period would be extended. This is a very high figure that can be used to pay many bribes, to improve the profit and loss accounts of many companies of the real estate sector, to illegally finance many parties and all kinds of non-profit organisations, to win the loyalty of many voters and to increase the wealth of many families who, without participating directly in the crime, benefit from a wave of prosperity born of this type of criminal activity (see Fernández Steinko 2021a chapter 5)
(10) These figures explain to a large extent the conversion of Spanish real estate assets into a "financial hot spot" in the international economic landscape. Partly thanks to them, the country managed to generate economic growth rates above the European average. But of a type of growth that is highly consuming or even destructive of non-renewable resources - land, culture and nature - and tends to be criminogenic. Although it is difficult to quantify the intangible part of this heritage, which should be added to the above figures if it were possible to add apples and oranges, this cost is nonetheless real, especially for the generations to come. In reality, the figure seems to fall short when one travels through some of the country's towns and cities, where urban patterns have been violently modified over the decades - and not only in the years of the real estate boom - without any aesthetics, sustainability or urban rationality (for a geography of these behaviours see Fernández Steinko (2021a chapter 19) as well as Pellicer (2014) and Jerez Darías et al (2012)
(1) The estimates of the bribes payed for “procuring papers”, for “causing the authority to look the other way “and for “financing political parties” - are based on documented cases to which we have applied a black figure estimate of 80% for the first two and 90% for the latter. The black figure represents the amount which is not known to us, but which we can estimate from what we do know. For the two main forms of embezzlement -embezzlement of movable assets and embezzlement of real estate assets or “crimes against land use planning” (see Fernández Steinko 2021b tables 3 and 4) we have applied an estimate average bribe of 3%, but only to 70% of all amounts diverted/misappropriated, as it is not unreasonable to think that in 30% of the cases no monetary bribe payment was involved, although this should be studied with more detail. The payment of bribes is much less frequent in subsidy diversion schemes, which is why we reduce the total value of the subsidies likely to have been diverted after payment of a 3% bribe. To the resulting €820m a sum should be added equivalent to the bribes payed in custom areas which are particularly critical and should be studied in a monographic effort. We come up therefore to a minimal approximate amount of €900m payed without including those payed in kind (see also Fernández Steinko 2021b, tables 18 and 19).
C-6 Scams greater than € 400 (€ 600mill)
(1) Unlike in most corruption cases, scams always generate specific victims, which means that, in principle, reporting is much more frequent and the black number tends to be much smaller. However, this does not happen as often as one might think, as many victims prefer not to report out of embarrassment, because they think they will never recover what they have lost, or because they believe they themselves could be charged for collaborating with the fraudsters in creating irregular situations. The following is an estimate of the economic value generated annually by scams in Spain based on available data.
(2) The annual sum of the assets incriminated in all the 115 judgments of our sample is €66m, about €28m per year including the AAN case 17/2/2106. If we take into account that the tendency to report larger scams is higher than the reporting of more modest scams, we can assume that the €28m per year for the scams in the sample represents about one third of the total number of such acts that go unreported, so that the sum of all actual cases could amount to about €80m per year.
(3) As we have seen, known computer frauds - some 120,000 a year including Catalonia and the Basque Country - are under-represented in the sample given their extraordinary growth since 2012, so they should be analysed separately. The best known cases are the economically most important ones, which are the ones that tend to be reported earlier, as we have pointed out. However, the most numerous are by far the least important ones, which feed the black figure in a higher percentage than those. If we estimate average amounts for computer fraud at around €1,500 - much less makes them unattractive, much more makes them more risky as victims are more alert -; if we calculate that cases over €400 represent 33% of the total, and that the black figure could be around another 30%, the resulting amount would be around €72m per year. This would be the amount produced by some 100,000 Spanish computer fraudsters every year, mostly going to other countries, and leaving some seven and a half million euros in commissions for the Spanish-based computer racketeers.
(4) We finally have the banking and philatelic scams that the country has known since the late 1980s. They add up to €400m a year, although only a very small part of this amount reaches circulation, as the rest is volatilised with the collapse of the financial pyramids: around €100m at most. Adding up all the modalities, and being conservative, all amounts would add up to a figure close to €600m, of which only a little more than half - about €300m - would actually end up circulating from one hand to another in predatory acts. It is possible that the real figure is closer to €1 billion, but we prefer to leave it at that, pending more systematic rather than intuitive data.
C-7 Drug-trafficking (€ 4.500mill)
(1) The Spanish economy is one of the most affected by drug trafficking within the OECD area. The country is between the world's first and fourth largest consumer of most drugs in terms of market value and the second or third largest consumer of cocaine after the United States, a position it shares for some years with the United Kingdom, although new European champions in terms of consumption per thousand inhabitants have recently emerged, such as the Czech Republic. Moreover, due to its geographical location and historical links with some producer countries, it is a gateway for two of the most widely consumed substances in the European Union - cocaine and cannabis resin - which explains why Spanish police are behind half of all illicit drug seizures in Europe. Seizures are politically sensitive data and are not always handled transparently. If governments would provide complete data on the quantities actually seized, it would be easier to know the quantities of drugs used to pay informants or for other not always confessable destinations, a reality that affects the way police forces work around the world and explains the acceptance of the famous 10% "golden rule" (interviews PE-2, O-1 and O-2).
(2) Around 2000, some 2.5 tons of heroin, 32 tons of cocaine, 182 tons of cannabis and 15 million synthetic pills were consumed annually in Spain (Fuentes González 2001: see table 7). If we take into account that between 2000 and 2009 consumption increased by 50% and then began to fall after that year, coinciding with the economic crisis, we can estimate a volume of consumption for the peak year of 2009 of some 3.8 tons of heroin, 48 tons of cocaine, 273 tons of cannabis and some 23 million synthetic pills. These figures are equivalent to 0.7% of the world's apparent heroin use in 2008, 4% of the world's potential cocaine production in 2008 according to UN estimates, as well as 10% of all cannabis consumed in Europe, a percentage roughly equivalent to Spain's GDP over the whole of Europe (calculated from UNODC data (several years) and Reuter and Trautman eds (2009).
(3) Designer drugs are very cheap, generate smaller surpluses and account for a much smaller share of the overall market. Cannabis is the most consumed drug after the legal drugs alcohol and tabac, but not in value. In value terms, cocaine dominates the market with 66% of the total, far ahead of heroin, which accounts for only 5%. It should also be borne in mind that an increasing share of cannabis consumption is no longer coming from imports, but from domestic production and self-consumption. Self-consumption of cannabis is not criminalised in Spain, although it is not decriminalised either, whatever that may mean. Year after year, the market for imported cannabis is thus decreasing by an amount equivalent to the sum of the market value of the quantities destined for self-consumption and the value of those produced in Spain and destined for the domestic and international market.
(4) Cannabis use can be divided into hashish or cannabis resin use (about 80 per cent of the total: 218 tons) and marijuana use (20 per cent of the total: 55 tons). Virtually all hashish is imported - 95 per cent from Morocco - and is purchased entirely on the market, 35 per cent of the 55 tons of marijuana consumed in Spain - 19 tons - are self-consumption with a strong upward trend, an increase that is at the expense of hashish imports from Morocco (interview I-19 and El País 17/9/2014). If this were true, the retail cannabis market would not add up to the amount indicated, but somewhat less - some 254 tons - while the rest of the consumption would originate from the self-production of cannabis, mostly in the form of marijuana.
(5) The basic economic unit for calculating the value of the illicit drug market is street prices per pure gram. These have remained relatively stable since 2000 in nominal terms, although they have since fallen in real terms despite rising consumption (EMCDDA/MSSSI 2012). "Real' means, in this case, not discounting for inflation but holding their purity constant. The average retail price of a gram of heroin and cocaine on the streets of major Spanish cities is around €60 and that of cannabis - the average value of hashish and imported marijuana - is €5, although the market value of marijuana grown in Spain is no more than €2.5 per gram. As these prices are relatively stable, fluctuations between supply and demand are reflected in the purity indices rather than in the final street prices, which we have to keep constant in order to be able to proceed with the calculations. Multiplying these quantities by the street price per gram, the quantities consumed translate into some €4.32 billion, which represents the retail market value of the three main illicit drugs in Spain. Rounded off, this would be €230m for heroin, €2.88 billion for cocaine and €1.27 billion for cannabis (see Table 7). This €4.3 billion is the sum of the partial added values generated in each of the six stages or links in the production and distribution chain of the three drugs previously analysed (see Fernández Steinko 2021c, com. 25 to 27) and is equivalent to 100% of the value of the Spanish street retail market. To this amount should be added €150m, which is equivalent to the wholesale export market, bringing the total figure for the drugs market in Spain to around €4,500m.
C-8 Robberies and thefts with a value grater than €400 (€ 2.000mill)
(1)Robberies and thefts are at the heart of "predatory crimes" (T. Naylor). The value of the assets affected is the sum of the individual values of the reported cases, which is of course a fraction of the real ones. Every year between 40,000 and 80,000 people in Spain are convicted of burglary and theft, as well as another 2,000 for car theft, but only when the value of the stolen property exceeds 400€ is it considered a criminal offence, although all thefts, even those below that amount, are felonies, as they always involve violence (§§ 234 to 237, 238 to 242, 244 and 252 of the Penal Code of 2007).
(2) The stolen value declared by the victims tends to be higher than the actual value due to the desire to collect the maximum insurance compensation, but the value of all stolen objects is lower than the actual value, as only a part of the stolen objects is reported, so that the two figures could be reasonably balanced, although perhaps with a tendency to overestimate. Robberies and thefts above this value are divided into (1) thefts (about 700,000 reports), (2) robberies with violence against persons or things (400,000 reports in 2016) and (3) vehicle thefts (about 40,000 stolen vehicles). The Spanish police no longer publish the value of the objects stolen, but we know that in 1981 it amounted to €2.63 billion, equivalent to 0.6% of the GDP of that year, a percentage very close to that calculated for the United States for the year 1974. In real terms this figure would be equivalent today to €10,000 million due to accumulated inflation of 370%. This figure is unrealistic, as everything suggests that the value of what is stolen today in relation to GDP is lower than it was in 1981. The data available today are the following.
(3) The value of shoplifting in 2015 amounted to around €5 billion, although most of it - around €4 billion - is below €400, so that only €1 billion would be the result of criminal conduct.To this should be added the value of thefts and burglaries perpetrated in private homes which is generally much higher. The average value of burglary and residential burglary claims, most of them "burglaries", is about €1,100, which is the average amount paid out by insurers as compensation for residential burglaries, a figure very similar to that obtained empirically by US researchers for the Washington area. No more than 20% of that value - some €250m - would be liquid or near-liquid valuables - cash, jewellery, diamonds, watches - while the remainder - according to UK police research for the UK - would be non liquid valuables such as consumer electronics, clothing, etc. If some 320,000 such cases are reported each year, we are looking at a maximum stolen value of €400m, a realistic figure considering that most of these are reported to the police.
(4) In Spain, where 9% of the European population is concentrated, just under 50,000 vehicles are stolen every year, three times more than twenty years ago, with a downward trend. This figure represents 7% of the total number of vehicles stolen in the European Union, which makes it possible to state that, unlike a few decades ago, the proportion of this type of theft in the European is lower today than in the past. In general, it is estimated that the sale value of stolen objects is between 20% to 30% of their market value, although in the case of vehicles this can be as high as 50% for high-end vehicles. Unlike in other countries such as Germany, where the majority of stolen vehicles belong to this category, this is not the case in Spain, where the mid-range is predominant among stolen vehicles.
(5) This means that, at a high estimate, the average sale value of stolen cars could amount to around €10,000 per unit on the Spanish second-hand market. It is unlikely, however, that stolen vehicles can be sold at this price in Spain given the enormous supply of second-hand vehicles offered for that amount with legal papers included, so that their sale can only be really lucrative if it takes place outside Spain, even if their export generates additional costs for the thieves. The fact that their sale is more lucrative outside than inside Spain does not necessarily mean that the selling prices of stolen cars are much higher than those paid for them in Spain. The difference is that the same prices, and the profits reaped, are more modest for the purchasing power in Spain than in the destination countries, mostly developing countries, where €10,000 represents significant sums. Wherever they are sold, the total value of stolen vehicles on the Spanish second-hand market could amount to not much more than €500m per year. From this amount we have to discount the vehicles recovered by the police, which amount to a minimum of 50%, leaving us with around €350m/year of illicit transactions. Some of the vehicles recovered by the police have already been sold to third parties, which means that their value has already passed into the hands of the thieves and that the predatory transfer of assets from the victims to the criminals has already taken place, which means that the figure is close to €400m. If this amount is added to the €1 billion of burglary and shoplifting, and the approximately €400 million stolen from private homes and banks, it gives a figure of around €2 billion of illicit assets in circulation from burglary and theft.
(6) It is not easy to compare this figure with those available for other countries such as the UK, as police statistics are, once again, unclear about the methodology used, as well as the legal criteria used to count the affected values. According to the British police, the value of all the objects stolen in this country in terms of values declared by the victims, amounted to some 1.9 billion euros (1993) for England and Wales, two territories with a combined population of 56 million people, 20% more than Spain. The figures therefore seem comparable, although it is doubtful that they are entirely so due to the methodological problems mentioned above.
C-9 Tobacco smuggling (€ 1.000mill)
(1) The most comprehensive and reliable studies are those conducted every year since 2006 by the consultancy firm KPMG for the RUSI Institute (Project Sun), covering the territory of the European Union, Switzerland and Norway (KPMG 2018). Although this institute is co-financed by the tobacco industry, the methodology applied is rigorous and reliable, and includes the use of a large number of public and private sources, as well as the annual analysis of a very significant number of cigarette butts collected throughout the European Union, Switzerland and Norway, which in 2017 amounted to half a million units. The most valuable aspect of the report is precisely the fact that of the 35 pages of the final study, 33 are devoted exclusively to presenting the methodology applied and discussing its limitations.
(2) According to this study, the average amount of contraband tobacco consumed in the countries analysed was 8.8% in 2017, the lowest percentage since 2008. This decrease coincides with the sharp fall in tobacco consumption in general and with a significant increase in taxes, although the countries with the highest taxes compared to their neighbouring countries are those where smuggling is indeed highest for reasons of profitability: 35% in Ireland and 29% in the UK. More important has been the increase of counterfeit tobacco brands in the European Union and therefore not subject to official health controls: almost 9% between 2016 and 2017 alone. All this has led to a loss of tax revenue of €10 billion for all the countries analysed (year 2017)
(3) In Spain, more than 30,000 cigarette butts were collected and analysed from 58 peninsular cities based on population weighting. The sample does not include the Canary Islands, the Balearic Islands, Ceuta and Melilla, four places with above-average illicit tobacco consumption, so the estimates obtained are likely to be underestimates. From the count of this sample, the consultancy firm Ipsos, subcontracted by KPMG to carry out the study in Spain, calculated the percentage of counterfeit and contraband tobacco between 8.4% in 2011 and 9.4% in 2018 with a peak of 12.5% in 2014, which puts the average for this period at 10.1%, perhaps one or two tenths more taking into account the aforementioned regions that have not been included in the study, and several points less if we extend the time series further back KPMG (2018: 40). The percentage would be much higher in some areas of Andalusia close to Gibraltar, where it is close to 60% of all tobacco consumed in some years, but much lower in most regions of the country.
(4) There is no evidence showing a significant increase in contraband tobacco consumption in Spain between 2011 and 2018, although there is a clear relationship between rising unemployment and contraband tobacco consumption (Savona dir. 2014: 62). In no case can it be said that this increase has been "dramatic", as many Spanish media have been claiming, undoubtedly influenced by the narrative and perhaps also by the generous financial support of tobacco companies that do not hesitate to invest significant amounts in generating a certain state of opinion, in short, in investments aimed at obtaining symbolic resources (see "Investments in symbolic resources" in chapter 16). If we take into account that tobacco consumption has been declining steadily in Spain since at least 2002 due to various factors ranging from anti-smoking campaigns to the consequences of the crisis on employment, we can conclude two things: (a) that despite the increase in the tax burden, there has not been a noticeable increase in the percentage of smuggled tobacco as a proportion of all tobacco consumed in Spain and (b) that everything points to the fact that the absolute volume of smuggled tobacco in Spain has not increased, at least not the part destined for Spanish end consumers. Quite the contrary: it has been decreasing in recent years.
(5) Spanish figures are very close to the world average according to WHO data, and also to the average for European Union countries, Switzerland and Norway. However, tobacco smuggling in Spain is much lower than in countries such as Switzerland, France and, above all, the United Kingdom and Ireland, where the price per packet is considerably higher than in Spain. These data, collected by KPMG-Ipsos, are consistent with those of Professor Fernández Díaz who has calculated smuggled tobacco at 10% of total consumption (year 2012) in Spain applying his own methodology, as well as with the estimates of the Spanish Customs, which point to 9% of total consumption of PPT that same year (El País 30/10/2016, Fernández Díaz 2013 and MPD n.d.: 3 respectively). Such data are, however, manifestly inconsistent with those published by the tobacco company Altadis, which estimated them at an average of 39.5% for the years 2014 and 2015, a percentage almost 400% higher than that made by the Swiss consultancy (Altadis press release 26/8/2016): we already pointed out the reasons (Fernández Steinko 2021c com 27).
C-10 Trafficking in persons for sexual exploitation (€ 340mill)
(1) In order to make a fairly consistent calculation of the value chain of sexual exploitation, it is necessary to specify three magnitudes: (a) the value of the expenses that recruiters/smugglers have to advance to move women from their places of origin to the - usually more developed - countries where they are going to be sexually exploited. This value is equivalent to the real debt incurred by the women and normally assumed by the traffickers; (b) the annual net surplus that the women can generate from their sex work (see Fernández Steinko 2021a chap 10).
- (A) The value of the expenses that recruiters/smugglers have to advance
(2) The expenses advanced by the recruiters/smugglers include travel expenses, bribes paid to obtain papers, money advanced to women in order to convince them, as well as the costs of their maintenance before they start working as sex workers. We know that bribes paid for the processing of immigration permits or to the Guardia Civil/Mossos de Escuadra to facilitate illegal immigration are modest: in Spain: about €1,000 per immigrant (e.g. AP A 57/2011 and AP M 11/2002: see also "Purpose of the bribes and amounts paid" in ch. 5, as well as comment 18). In addition to these amounts, there are other amounts to pay informants, collaborators etc., all below this figure. In Russia, it was possible to obtain an illegal passport certifying a minor's majority for no more than 600€, a considerable sum for an average citizen of this country, but not very much for a citizen of a Western country (Poulin 2004: 89). Passers interviewed in British prisons stated that the total cost of bringing a person from Romania to the UK was about €1,800, about €4,000 from Latin America, but more than €55,000 from China and only slightly less from sub-Saharan Africa (Levi 2012: 611). With the exception of flights from Africa and the Far East, international flights are relatively cheap and transfers by boat or bus do not exceed a couple of thousand euros per person.
- (B) The annual net surplus that the women can generate from their sex work
(3) Women have to repay both the real debt and also the fictitious debt with the returns from their sex work. In Spain, the following average annual return per woman could be realistic, calculated from Xunta de Galicia 2004, Neira (2012), DP (2012) and CIMTM (2002), as well as from the explorations carried out by INE technicians in order to calculate expenditure on prostitution in Spain (El País 7/6/2014).
(4) In the years of the real estate boom, the number of daily services per woman not subjected to an exploitative relationship was around 8, according to sex entrepreneurs interviewed, while in more recent "normal" times it is 4, so the average figure could be around 5 services per day. If we start from an average of €40 per sexual service x 5 services per day x 20 days per month x 12 months per year - we get an average gross return per woman per year of around €48,000, which is somewhat higher among Latin American women but probably lower among African women (FMP 2008: 210). In situations of extreme exploitation this figure can be doubled, although not for long. Applied to 7,000 women this amount translates into around €340m per year, which would be the figure for the gross illicit income generated by sexual exploitation in Spain. This amount also increases and decreases depending on factors such as the nationality of the women, crisis situations or the evolution of mass tourism and the construction sector. It is equivalent to just under 10% of all spending by Spanish households on prostitution services according to INE data, which means that out of every 10 euros spent by a Spanish citizen on prostitution services, almost 1 euro would end up feeding coercive prostitution. This figure is reasonably compatible with Paola Monzini's calculations for Italy, although it probably reflects either a certain underestimation of the number of women subjected to sexual exploitation or an overestimation of the total number of women in full-time prostitution in Spain: only monographic research would allow this figure to be refined.
(5) These figures may be considerably higher in particularly prosperous premises, periods and areas with a large number of clients, but it may also be considerably lower in more remote areas or a depressed market for sexual services as was the case after the economic crisis of 2008. In all these cases, yields are well below those of some macro brothels located along the motorways on the border with France and Portugal, as well as on other major logistical routes frequented by a daily army of trucks and whose activity is much more important, but not very representative (see, for example, http://www.youtube.com/watch?v=hkxBqfpxp1U&feature=em-hot-vrecs). In one of the largest macro brothels in Europe eradicated in La Junquera, the girls declared on camera about 70 sexual services per week, double our average (La Sexta 20/8/2013). This figure, which is undoubtedly newsworthy, is, if true, clearly exceptional and cannot serve as a basis for general calculations. We also know that in some parts of the Netherlands some women have to generate €1,000 per day under coercive conditions, which is equivalent to about €240,000 per year - (Levi and Soudijn 2020: 14) although we do not know how representative this figure is (see more estimates referring this this predicate crime in Fernández Steinko 2021c, com. 29 and 30)
C-11 Trafficking of weapons and explosives (€ 200mill)
(1) Despite the existence of several independent research institutes that monitor arms markets, the methodological difficulties that arise when it comes to studying them are still very great given the great opacity of many governments and the characteristics of the sector itself. Despite the fact that many producer countries are reasonably transparent when it comes to making public their exports, the licences granted and refused, as well as the countries of destination, it is still very difficult to quantify the unauthorised or illicit part of this market. The Spanish market for unauthorised arms - both light and heavy - must in any case be the sum of two particular markets: (A) that of the market for arms of all types produced in Spain that leave for third countries, mostly undergoing legal metamorphosis; and (B) that of the value added each year to the existing stock of unauthorised light weapons, which has a much lower value.
(2) The Small Arms Survey team based at the University of Geneva - SAS - has calculated, using complex methodologies, that the global trade in small arms and light weapons, including their ammunition, amounts to $8.5 billion per year, 54 per cent of which is accounted for by ammunition and accessories alone. This figure does not include two central items for which researchers have been unable to find any reliable data: parts and components for guided missiles, and components and accessories for small arms ammunition, both of which are widely used in the wars in Afghanistan, Iraq and Syria, for example. If the figures for these two groups of weapons were added together, the total value of the market would, according to SAS researchers, amount to around €10 billion, perhaps a little more. Governments are very reluctant to provide truthful information on the volume of ammunition exports, as this is indicative of their actual involvement in regional conflicts, which often contrasts with their official public positions.
(3) While the export of small arms is dominated by a few producers - 15 countries account for 83 per cent of all exports - authorised and especially unauthorised imports are much more spread out and change rapidly depending on the conflict map. Most of the value of undeclared small arms belongs to the subcategory of "small arms and light weapons systems of war", which are the most widely used in armed conflicts and where the bulk of the world's illicit market is concentrated. The unauthorised part of this market is estimated at $3.2 billion, but if we add the $1.5 billion equivalent to the two items mentioned above, which are among the most opaque - parts and components of guided missiles and components and accessories of small arms ammunition - the undeclared trade in this group of weapons would reach $4.7 billion a year SAS (2012: 242ff). Estimates of the percentage of undeclared trade in this category of arms globally out of the total trade are 38%, although this is an average for all countries, including both the most and least opaque ones.
(4) In Spain there are 180 companies manufacturing arms systems and munitions, although we only have data on turnover and employment for around 50 of them (CDEP vv.aa.). The average annual budget of the Spanish Ministry of Defence (years 2000-2017) amounts to €8,000m and the average annual value of authorised Spanish exports of all types of armaments (years 2004-2013) is around €1,500m. Only 11% of these exports - €170m - are small arms and light weapons, two thirds of which are ammunition in the broad sense - ammunition and components, bombs, torpedoes, missiles, etc. -. The remainder is heavy weapons/weapon systems, so that the ratio between the latter and SALW is, as we have already seen, 1:9 in favour of the latter (CDEP vv.aa. and AT 2009). Bearing in mind that the sector's transparency indices in Spain are "average" - 14.25 out of 25 points in 2005 and 16 points out of 25 in 2013 (SAS several years) - and using the average global percentages calculated by the researchers on the unauthorised part of this market - 38% of the total market - we can conclude that the contribution of the 180 Spanish manufacturers to the unauthorised international trade in small arms and light weapons would amount to some 104 million euros per year.
(5) This figure can be contrasted by using our own calculations based on the apparent falsification of declared data on the foreign trade of small arms and light weapons by Spanish manufacturers. Exporters of this group of weapons (tariff nomenclature codes 9301 to 9306) declared exports worth 72€ per year. However, prices per kilo declared between 1993 and 2008 were 330% lower than the average of this value in all European countries. Although discrepancies in foreign statistics may be due to technical reasons, misreporting is particularly widespread in this sector and the technological variable is rather unimportant, so this figure should not be the result of statistical problems (Javorsek 2016: 11). These percentages are equivalent to the under-invoicing of Spanish exporters of this group of arms, a figure reasonably consistent with the previous one although more accurate than the previous one, especially if we discount the reasonable percentage of errors and omissions.n Spain we are aware of 180 defence product manufacturing companies in varying percentages of their total production, although we only have data on turnover and employment for around 50 (CDEP vv.aa.). The average annual budget of the Spanish Ministry of Defence (years 2000-2017) amounts to €8,000m and the average annual value of authorised Spanish exports of all types of armaments (years 2004-2013) is around €1,500m. Only 11% of these exports - €170m - are small arms and light weapons, two thirds of which are ammunition in the broad sense - ammunition and components, bombs, torpedoes, missiles, etc. -. The remainder is heavy weapons/weapon systems, so that the ratio between the latter and SALW is, as we have already seen, 1:9 in favour of the latter (CDEP vv.aa. and AT 2009). Bearing in mind that the sector's transparency indices in Spain are "average" - 14.25 out of 25 points in 2005 and 16 points out of 25 in 2013 (SAS vv.aa.) - and using the average global percentages calculated by the researchers on the unauthorised part of this market - 38% of the total market - we can conclude that the contribution of the 180 Spanish manufacturers to the unauthorised international trade in small arms and light weapons would amount to some 104 million euros per year.
(6) To this figure should be added the equivalent figure for weapons systems exported without authorisation or which do not reach their declared end users because they are diverted along the way. Given its size and the strong governmental controls, it does not seem realistic to estimate the annual value of this market at more than 5%, which manages to evade official controls, either at the point of origin, i.e. at Spanish customs, or at some point during international transport. Bearing in mind that the value of exported weapons systems amounts to some €1.3 billion, we are left with an amount of some €66 million which, added to the above, would give us a Spanish participation in the unauthorised trade of all types of arms of some €190 million per year. Most of this value falls into the hands of intermediaries who obtain their margin from buying and selling to third countries, preferably to regions and countries in conflict, which is where a large part of the world market is to be found. But an important part of it - certainly that which affects the clandestine markets for weapons systems - is not carried out entirely without the knowledge of governments, in this case either the Spanish government or the governments that acquire them.
(7) The figure for domestic markets for clandestine arms, virtually all of which are small arms and light weapons, is much more modest. There is a sufficiently large number of unauthorised weapons in circulation in Spain to cope with the demand from common crime, so there is little need to import them from abroad. The homicide rate in Spain is comparatively low and the armed actions of ETA, which for years was a major purchaser of such weapons although mostly manufactured outside Spain, have ended. Drug trafficking is also an important demander of arms, although not all of it, but only the medium and large distributors of heroin and, to a lesser extent, cocaine, whose participants are frequently seized with firearms, most of the time without having been used (see Table 6). All in all: the size of the small firearms market fed by drug traffickers should not be very important considering their small presence in cannabis distribution and a number of large and medium-sized drug distributors that should not exceed a few thousand (for Canada see Desroches 2005).
(8) However, the number of undeclared weapons circulating in Spain is anything but negligible. According to data from the Guardia Civil, there are some 3.5 million firearms registered in the hands of civilians, 90% of which are for sport (Público 7/12/2010). However, "it is estimated" - the press does not give the sources of how the calculation was made - that some 300,000 unregistered firearms are clandestinely circulating in the country, of which 50,000 are stolen and more than 90% are antique, many used in the Spanish War (interview I-16). This arsenal not only feeds the illegal economy, but also the relatively important world of collecting. Many weapons such as the Astra pistols, which have their origins in the Republican army, had been kept by the combatants and have been passed down to their descendants or sold at some point to third parties. Many of them are still operational, as well-preserved firearms can have a very long service life and can therefore continue to serve their purpose for many years after they were manufactured. In fact, a fraction of the SALW market is dual-use: they are collectors' weapons but are occasionally used for criminal purposes. Not a few armed robberies are carried out with these kinds of antique weapons, among other reasons because in Spain the most frequent purpose of the assailants is to intimidate rather than to use them: easy shooting of the kind we know in the United States and other American countries is not part of the Spanish criminal tradition (see also table 13).
(9) If the undeclared arsenal amounts to 300,000 weapons and the average unit value is no more than €500 given the age of many of them (El Mundo 28/3/2017), the total value of the clandestine arsenals or stocks cannot be much more than €150m. Assuming that 5% of this stockpile changes hands every year, a very high percentage, as part of the stock of undeclared weapons is not sold, but "rented", which reduces its turnover. However, if we consider this percentage to be good, we would be looking at around €8 million, which would be the annual value of the internal market for unauthorised small arms in Spain, of those that change hands every year. This market is undergoing some changes with the appearance of clients linked to Islamist armed groups, so that it has probably increased somewhat in recent years, but it is very unlikely that the real figures will exceed these. If we add the three together - clandestine export small arms, clandestine export weapons systems and the domestic small arms market - we arrive at an undeclared arms market in Spain worth - more than a maximum than a minimum - of around €200m, a value to which we should add another undetermined value equivalent to that of ammunition.
(10) The data on intercepted arms reinforces our estimates. The largest cache ever intercepted in Spain included 9,000 Cetme rifles, 500 long arms such as sub-machine guns, rifles and shotguns, more than 400 pistols and revolvers, 300 machine guns, and more than 400 howitzers and grenades. All but half a hundred of these were inoperable weapons supposedly destined for collectors, but "easily reactivated", as reactivation is a large part of the business. If we value each of the 10,000 units intercepted - not counting ammunition - at an average retail value of €600, we are left with a total value of €6m. The size of the cache and the type of business of the arrested gunsmith show that this value was not put on the market in a single year, but was spread over an indeterminate number of years, generating annual sales of not much more than €1.5m: a figure consistent with the one we have just calculated (Operation Portu). On the other hand, in 2012, a cache of undeclared small arms was intercepted that was considered "very important" but with a total value of no more than €400,000. Two years later, 'one of the largest stockpiles of weapons in Spain' was intercepted, including a log book on entries and exits. It consisted of 148 firearms whose value was estimated by the police at around €600,000: about €4,000 per unit, a value that seems to us to be very high. During the years of ETA's armed activity, the quantity and quality of the caches intercepted was greater: there were more assault rifles and submachine guns, as well as much larger quantities of ammunition, but their value hardly ever exceeded €1 million. Finally, in 2014, 15 people were arrested in Valencia for arms trafficking. But the arsenal comprised no more than eight pistols, two revolvers, a flare gun, a submachine gun, three hunting shotguns, two pellet rifles and 3,927 cartridges of different calibres (El Mundo 28/3/2017, El Periódico 21/2/2012, Público 25/7/2014, El País 16/9/1985 and Europa Press 29/5/2014 respectively).
C-12 ETA Extortion and kidnapping (€ 5mill)
(1) Extortion and kidnapping (§§ 163ff. and 243 of the PC) are genuinely predatory activities. In Spain, they have never generated significant amounts of crime although, by the nature of these conducts, they have had a considerable impact on society and its political system. The reason is that the country, its citizens, its economy and also its political system, have been intimidated for almost half a century by the armed actions of the ETA organisation. Other organisations such as GRAPO and FRAP tried to follow in their footsteps, but with too short-lived a success to be taken into account in this analysis. Extortion can only function in a lasting way by exercising control over a relatively small territory, and this is only possible by creating highly organised structures capable of disputing the state's monopoly on the use of violence. The active, but above all passive, collaboration of part of the population is also necessary to create and maintain the infrastructures required for these actions to achieve the desired objectives and to be sustained over time. Such collaboration requires either an exchange of favours, such as collaboration in exchange for individual security or increased income, or, as in the case of politically motivated organisations, that part of the population shares the objectives of the extortionists and kidnappers.
(2) Despite the difficulties involved in the economic study of a criminal phenomenon such as this, the meticulous work coordinated by Josu Ugarte Gastaminza (2018) based on the reconstruction of the known facts and the study of the documentation seized from the ETA organisation - Sokoa notebooks, Bidart papers, documentation seized from the leader Santi Potros, etc. - allows us to know with some precision its forms of financing, the crimes committed to make it possible, as well as the evolution of its economic strategies over time. All actions aimed at financing an organisation of this type are criminal, but here we are going to concentrate on the two most economically important blue-collar ones: extortion and kidnapping. The analysis refers to the years in which ETA developed its armed activity, i.e. the period between 1967, the year in which the first robberies took place and with which the first attack was financed a year later, and 2011, when it announced the cessation of its armed activity. In reality, the period to be studied should have lasted until 2018, the year in which its leaders decided to definitively dissolve the organisation because, although at that time it had not committed any attacks for eight years, it continued to generate expenses to maintain its already scarce leaders, as well as to maintain a minimum infrastructure to channel these expenses.
(3) Of the three main sources of ETA funding based on the commission of criminal offences, it is the economic dimension of extortion that is the most difficult to know exactly. For two reasons. Firstly because, unlike the robberies and kidnappings, which sooner or later came to light due to complaints from their victims, many of those extorted never reported the facts. Secondly, the line between voluntary economic collaboration and the obligation to do so under direct or indirect threat is more blurred than one might think. As with any system of extortion, the one we are analysing here also required the creation of an atmosphere of fear and intimidation among a part of Basque society and Spanish society in general, as this is the only way for it to become an efficient and lasting mechanism for collecting money. To create this atmosphere it was necessary to commit at least 16 murders, send thousands of threatening letters and organise punitive kidnappings aimed at warning the whole of Spanish society of the tragic consequences of refusing to comply with ETA's demands or to denounce the extortionists.
(4) Towards the mid-1960s, ETA began to theorise the need to extort money from Basque and Navarrese businessmen. At the beginning of the following decade, a split in ETA's military front came up with the so-called "revolutionary tax", a euphemism for extorting money from businessmen and professionals which was adopted shortly afterwards by ETAp-m, ETAm and the “Autonomous Commands”. The robberies were economically insufficient and excessively unstable and insecure, and the new strategies, inspired by that of the Uruguayan Tupamaros, required a more important and stable source of financing. In 1970, the "Los Cabras" group launched the new system by sending the first letters to employers demanding payment of a "modest sum" of around 250€ for each worker they had hired, warning that, in the event of non-payment, the organisation "would be forced to take real reprisals". The initiative was unsuccessful, the Cabras were disbanded and most of their members who were not arrested ended up joining ETApm.
(5) For its part, around 1975 ETAmp began to send letters to businessmen and in the first half of the 1980s extortion, facilitated by the lack of collaboration from the French government and the situation of political transition, experienced its golden years. These years were also the "years of lead" for the rest of Basque society, to the point that the ETA members themselves were surprised by their success in raising funds in this way. In 1983, the record number of attacks directly related to extortion was reached with a total of 22. The weakness of the state and the lack of collaboration from the French government generated a generalised fear among the extorted businessmen and a greater willingness to pay the so-called revolutionary tax. The ease of collection was such that there was a lack of control and confusion about the real authorship of the letters sent. Various ETA factions, but also groups with no political intentions whatsoever, began to send extortion notices to businessmen in order to make a profit, a situation that led to the reactivation of kidnappings as a way of financing ETA and its related groups. ETA's objective was to regain its monopoly on extortion, but also to improve the economic returns obtained through kidnapping.
(6) From that moment on, extortion became more profitable and became more directly controlled by ETAmp, thus gaining access to a relatively stable source of funding and sufficient resources, not only to acquire weapons, pay for the maintenance of its members and the logistics of attacks, but also to finance its civilian environment, the so-called Basque National Liberation Movement (MLNV). The fact that the nascent democratic state was unable, in those years, to protect all those extorted considerably reduced the cost of these practices and boosted the organisation's net income. Thanks to the collaboration and silence of a considerable part of Basque society, as described by Fernando Aramburu in his novel "Patria", the creation of a climate of fear and generalised intimidation reduced the need to send threatening letters and facilitated the negotiation of the conditions for handing over the money in France.
(7) The cost of the extortion system increased simnifically in the second half of the 1980s due to France's increased collaboration with the Spanish government, which began to make it more difficult to collect the amounts demanded, as well as the risk of arrest, which reduced the capacity of pressure exerted by the ETA members on the extorted. The gradual weakening of the financial flow translated into a reduction of civilian activities and of the armed struggle itself, pushing the organisation to try to improve its financing by other means. To this end, it intensified economic kidnappings - among them the so-called "express kidnappings" (see below) -, created an internal collection system based on the organisation of cells active in Spain and exclusively for economic purposes, extended extortion to companies not located in the Basque Country and Navarre, explored the professionalisation and bureaucratisation of the procedures used to capture and collect funds, and made payment conditions more flexible with instalment payment systems. But not only that, as from then on it also included the victims' relatives in the system of threats, as well as other groups such as sportsmen, cooks or even sympathisers of the nationalist left itself or the Mondragón cooperative group. The intended objective was to improve its funding in order to be able to maintain its political agenda, but the result was quite the opposite: an increase in the political, economic and also symbolic cost of extortion, as well as a significant loss of support - active and passive - received until then.
(8) ETA tried to respond to this situation by reactivating non-economic kidnappings, those aimed exclusively at improving the organisation's deteriorated image, such as the prolonged kidnapping of prison officer Ortega Lara in 1996. But this strategy did not yield the expected results either, which led ETA to launch a new wave of attacks against companies and businessmen in 2000 that lasted for several years, including the president of the Guipuzcoa employers' association, whose assassination was so intimidating that ETA managed to temporarily improve the flow of income from extortion. The total known income obtained until 1986 through this crime amounts to some 21.5m€ 2006 accumulated mostly in the years 1985 and 1986, an average of 2.6m€ 2006 per year for the period 1980-1986 which can be considered the golden age of ETA's life. In the 1990s extortion revenues did not exceed €500,000 per year due to the difficulties created by the collaboration between the French and Spanish governments. Between 2001 and 2010 the organisation only managed to obtain €900,000 - €90,000 per year - through this procedure despite the increase in attacks at the beginning of this decade and the increase in kidnappings a few years earlier. To do so, it had to extort money from almost 10,000 people, preferably businessmen and liberal professionals. The progressive inability to finance itself explains the increase in arrests and no doubt in part also the declaration of the definitive truce in 2011. If we put together all the information we have on the income generated by these practices between 1980 and 2010 over the three time periods for which we have data, we can conclude that the average year-on-year income from extortion amounted to around €1m, although it was distributed very unevenly over these twenty years.
(9) ETA's first kidnapping took place in 1971. It was the industrialist Félix Huarte from Navarre, who generated €5m for the organisation in 1973, a significant amount for the time that facilitated the creation of stable organisational support structures, as well as a broad political network to support its objectives. In 1976, the Komando Bereziak, which developed uncoordinated practices with the rest of the organisation, kidnapped an industrialist from Berriz, obtaining €1.7m in 2006. That same year it tried to do the same with an industrialist close to the PNV and with a member of the Neguri high bourgeoisie linked to the Franco regime: both kidnappings ended with the death of the kidnap victims and a strong political division within ETA. But although they did not generate any direct income for the organisation, they increased the fear of many businessmen and their willingness to pay, thus achieving their goal.
(10) The increase in ETA's activity in the crucial transition years has much to do with the ease with which it was able to improve its funding as a result of the fear generated by these first-time kidnappings that ended in assassinations. The periods of peak revenues from kidnappings are the early 1980s when ETA - and here above all ETAm - could still count on the lack of cooperation from the French government. These successes pushed the organisation to raise the amounts demanded. The French - Spanish government's collaboration led to a drop in extortion income, which led to an intensification of kidnappings in the second half of the 1980s, and the same happened ten years later when ETA had to make a new effort to compensate for the alarming drop in extortion income. In reality, extortion and kidnapping are closely related, for although the latter generate considerable rapid revenue in average amounts of €400,000 in 2006 per kidnapping, they involve a considerable logistical and organisational challenge, and their main objective is to provoke fear and intimidation that facilitates the regular and discreet payment of the amounts demanded from the victims of extortion.
(11) The increase in the efficiency and profitability of predatory operations based on kidnapping comes at a high political cost, as the whole of society becomes a witness to the deprivation of liberty of an innocent person. During the dictatorial period and in the early years of the transition, this cost was relatively small given the limited legitimacy of the public authorities, but it increased as the democratic regime was consolidated, creating a growing conflict between the economic logic, aimed at keeping the organisation and its political and trade union environment operational, and the political support that was increasingly weakened with each new kidnapping likely to improve the organisation's financing. This unresolvable contradiction led to ETA's growing isolation from Basque society, and resulted in increasingly direct and militant opposition from civil society to both its political aims and, of course, its methods. Not all the kidnappings were aimed at collecting money but, through them, ETA tried to accumulate political capital. The kidnappings of Ortega Lara and Miguel Ángel Blanco, for example, had this aim, more specifically the attempt to force the Madrid government to accept a negotiation that included improving the situation of the prisoners in order to gain more active support from their families. But the result of this strategy was not what was expected, and the political cost of the kidnappings grew inexorably, leading to a spiral of isolation that increased with the rising costs of police repression and the need to support more and more prisoners financially in order to maintain their loyalty to the cause. This impasse, born of the contradiction between economic and political logic, forced ETA to drastically reduce its economic commitments to the Gestoras pro-amnesty, to declare a definitive truce and to dissolve the organisation itself.
(12) The number of businessmen, managers and professionals kidnapped, both for financial and non-financial purposes, amounts to 55, for a total of 1,800 days of deprivation of liberty of the kidnapped, one of whom - Cosme Declaux - remained in captivity for no less than eight months. Of these, four were killed, five were released by the police, thirteen were released by their captors after being shot in the legs, and the rest - 33 in total - were released after payment of the sums demanded, some 400,000 euros in 2006 on average. In the documents seized from ETA, the amounts paid by the kidnappers are listed. According to this documentation, the organisation managed to collect directly through the kidnappings some 104 million euros in 2006, equivalent to an average of 4.3 million euros per year. If we add this to the annual €1m obtained through extortion, we arrive at an average annual income of €5.3m between 1980 and 2010, which would be the value of the illicit assets generated through extortion and kidnapping. This is an insignificant amount in relation to the country's GDP, but with serious political, social and also economic consequences, as it had a not insignificant effect on investments, caused the loss of business opportunities and, above all, deprived the Basque Country of part of its valuable human capital, as Pablo Díaz Morlán has shown.
(13) The total known income obtained up to 1986 through extortion amounts to some 21.5m€ (value of 2006) accumulated mostly in the years 1985 and 1986. Than means an average of 2.6m€ per year for the period 1980-1986 which can be considered the golden age of ETA's long life. But in the 1990s, extortion revenues no longer exceeded €500,000 per year due to difficulties arising from the collaboration between the French and Spanish governments. Between 2001 and 2010 the organisation only managed to obtain 900,000 euros - 90,000 euros per year - through this procedure despite the increase in attacks at the beginning of this decade and the increase in kidnappings a few years earlier. In total, the organisation extorted almost 10,000 people, preferably businessmen and liberal professionals, and its growing financing problems, together with its political isolation, explain the increase in arrests and the very declaration of the definitive truce in 2011 (Domínguez Iribarren 2018: 128ff).
E. Financial sector and Spanish illegal economy
(1) Law enforcement agencies and public agency assume that money laundering tends to be particularly sophisticated also in the field of finances and that it poses serious risk to the stability of the financial sector (Duyne 1994, Bardin et al 2023). Which is the role played by the Spanish financial sector within the circulation of crime assets? We have seen that the presence of directors and employees of financial institutions in the white-collar cases is three times more important than in blue-collar ones (see Table 3). Table 6 illustrates that financial institutions play a key role affecting both, white and blue-collar money. Nevertheless there are some differences which should be taken into account.
Table 2 Use of financial institutions and predicate crimes
|
|
Spanish banks |
Savings banks/credit union |
Non-Spanish banks |
Money transfer and exchange firms |
|
% of all cases (n=411) |
40 %(1) |
34 % |
23 % |
3 % |
|
% of estimated assets |
48 % |
9 % |
40 % |
4 % |
|
estimated values per individual case |
1,3mill€ |
0,18mill€ |
1,9mill€ |
0,3mill€ |
|
White-collar cases (n=55) |
50 % |
39 % |
37 % |
11 % |
|
Blue-collar cases (n=356) |
28 % |
32 % |
11 % |
7 % |
Source: Spanish court cases
(1)Percentage of all laundering cases
(2) In 55% of all documented cases at least one financial institution -wether a Spanish bank, a savings bank/credit union, a foreign bank branch located within or outside Spanish territory, or a money transfer and exchange firm- is mentioned. Spanish banks are most misused by launderers (40% of all cases) followed by the saving banks and credit unions (34%) and by the non Spanish banks (23%). This should not be a surprise due to the high density of branches belonging to the first two groups of financial institutions. However the amount of values affected is rather different, mainly if the assets per case are to be considered. Big and very big, mostly white collar offenders clearly prefer Spanish and non-Spanish banks which attract most liquidity in absolute terms and also in terms of assets per case. One of the mayor Spanish banks -BBVA- was the most chosen by launderers in terms of affected assets (51mill€) and the financial services of the first Spanish savings bank -La Caixa- were the most missused in terms of number of cases (a total of 56: see all data in Fernández Steinko 2001b, table 19-C). As can be seen in table 6, the average amount of assets per individual case flowing through Spanish and foreign banks is seven and ten times higher respectively than those circulating through savings banks and credit unions. Nevertheless, the assets laundered per case by Spanish banks and savings banks are comparatively modes (1 million€ and 200.000€ per case respectively), reflecting its misuse by mostly big drug importers and distributer. The big, laundered -mostly white-colour money- has been flowing through the Swiss banks, namely through UBS with a total of 48,7mill€ estimated assets attracted (€ 6million per individual case or client) and the old private banking institution Banco Gotardo attracting 38,5mill€ (€ 12,9million per individual case or client) ). Deutsche Bank, involved in several laundering scandals and consequential speculative operations leading to the banking crisis of 2007/2008, also belongs to the most chosen by big profit-driven criminals for laundering their assets (27,3 million€ and almost 2 mill€ per case). Most of them are related with big tax crimes and, in a much lesser extend, embezzlement and/with the payment of bribes for facilitating the embezzlement itself.
(3) Branch directors and employees of Spanish savings banks and credit unions are mostly recruited from the local labour markets. They have a more direct relation with their clients and also a more personal and less anonymous understanding of the financial business. This has two consequences going in opposite directions: on one side they can be more easily won by local criminals for laundering initiatives, mainly if the assets take its origin in embezzlement and corruption cases against land use planning, two practices which, combined with the payment of bribes, were less criminalised during the decade of the building boom (1997-2007) although they generated even greater amounts of cash than blue collar cases (see Fernández Steinko 2002b Table 11). But on the other side branch directors and employees of saving banks and credit unions know their clients better making suspicious reports easier, specially when drug deals seem to be behind the money. Big, foreign drug importers mostly use foreign bank branches placed in not Spanish jurisdictions for moving assets to the drug producing or/and exporting countries (Fernández Steinko forthcoming), while the big and medium distributors having residence in Spain most often use local saving bank branches rather than Spanish and non-Spanish banks laundering far smaller amounts per individual case but dispersed among many cases. Most of Spanish saving banks went bankrupt during the 2008 crisis due to its exposure to the real estate sector, but there are some evidences that before disappearing they were more committed to money laundering compliance than the Spanish and non Spanish private banks (Fernández Steinko 2021a: chapter 16). Big white-collar criminals clearly prefer the modern, more anonymous, “professionalized” and international banking system as their laundering practices are more sophisticated, cosmopolite and very often concealed with and interwoven within legal corporate activities.
(4) The transformation of illicit values in financial products has been considered a disturbing, exogenous influence of a financial system considered to tend naturally against equilibrium, often ignoring the endemic, structural causes of some of the most important financial crisis (Bardin et al 2023). There is no doubt that a part of the previously transformed illegal values participate in the global financial markets. In 15% of judged Spanish cases -rather more in white (24%) than blue-collar ones (14%)- there is al least one documented financial asset which have been acquired with illicit money representing around 7% of all illegal values, a percentage being lower than the financial investment made by an average Spanish family amounting to 12,6% of its total household wealth (Bover 2004).
Table 3 Financial assets and predicate crimes
|
|
At least one financial product(1) |
More risky products (business shares, equities, capital increases and investment funds)(2) |
More conservative products (insurance policies, fix-term deposits, pension funds, government securities and philatelic investments)(2) |
|
white-collar cases (n=55) |
24 % |
16 % |
2 % |
|
blue-collar cases (n=356) |
14 % |
8 % |
4 % |
|
TOTAL (n=415) |
15 % |
9%(2) |
4%(2) |
Source: Spanish court cases
(1)Percentage of cases in which financial products have been acquired with crime money
(2) Some cases do not specify the type of financial product
(5) The financial products acquired with black money can be divided in two groups depending upon its level of risk and, consequently, its profitably. As to be seen in table 7, (more) risky financial products such as shares, equities, capital increases within already existing firms and private investment funds are twice as extended among white-collar cases than blue-collar ones (16% versus 8%). On the contrary, the acquisition of less risky or “more conservative” products, such as insurance policies, fix-term deposits, pension funds, government securities and philatelic investments, are more frequent among blue-collar cases but less frequent in general (average of 4%). This is coherent with the social profile and the overall resources both groups of criminals had available before committing their economic crimes. According to their higher social and economic status, white collar offenders do not have to commit crimes for assuring their retirement and can afford to have a less conservative financial culture. The conservative financial culture is ideally represented in Spain by philatelic investments, which is rather extended in the rural areas and within the Catholic Church despite the big pyramidal philatelic scams which have been taking place on and over again in the 1960ies. A very few white collar criminals acquire this type of financial product and only in those cases, in which they were involved in philatelic scams themselves. Almost all economically most relevant financial products -mostly investment funds and to a lesser extend business shares- are white-collar ones and, more specifically, tax-crime cases (see full data in Fernández Steinko 2001b, table 17).
F. Laundering-sensitive occupations
(1) Laundering-sensitive occupations such as accounting advisories, branch directors or employees, financial institutions or political party members, are those whose skills, briefings or organisational and legal positions facilitate laundering operations. Its identification is important for defining possible laundering hotspots and for fine tuning anti-laundering measures. The operations involve can be market based -as the payment of specialised accounting services- or not, as when a legal entrepreneur participates in a laundering scheme of drug money produced by his own drug-dealing father.
Table 4 Laundering-sensitive occupations and predicate crimes
|
|
Legal entrepreneurs (excep. real estate and financial sectors) |
Tax and accounting advisors |
Lawyers |
Legal entrepreneurs and other professionals of real estate |
Directors and employees of financial institutions |
Party members |
Mayors and councillors |
Technical staff within municipalities |
Owners and employees of money change offices |
|
white-collar cases (n=55) |
53 % |
67 %(1) |
13 % |
24 % |
13 % |
33 % |
29 % |
16 % |
0 |
|
blue-collar cases (n=356) |
10 % |
9 % |
6 % |
4 % |
4 % |
0 |
0 |
0 |
3 % |
|
TOTAL (n=411) |
15 % |
11 % |
7 % |
6 % |
5 % |
4 % |
4 % |
2 % |
2 % |
Source: Spanish court cases
(1) Percentage of all white or blue-collar cases with laundering charges in which at least one person with the mentioned occupation has been charged.
(2) The most frequent laundering-sensitive occupation in Spanish laundering plots are the legal entrepreneurs. Even without considering the real estate and building sector whose entrepreneurs are accounted separately, they are present in 15% of all cases and up to 20% if we add both groups. The differences between white and blue-collar are substantial as between five and six times more legal entrepreneurs participate in white-collar plots. These differences are even more important among tax and accounting advisors: 67% versus 9% of blue-collar cases, that means over seven times more. In fact the private tax and accounting advisors offices should be considered a hotspot in the Spanish -mainly white collar- laundering scene, being much less so in the drug blue collar one. The presence of lawyers is much less important than often considered (Levi and Reuter 2006), although the differences between white and blue-collar are, in this case, minimal. The Spanish real estate sector plays a particularly important role in the circulation of all kind of illicit money generated in the rest of the wold as we will be demonstrating in a forthcoming publication. But the prominence of legal entrepreneurs of this specific sector within the circulation of white-collar money of Spanish origin is also unique (24% of all cases), clearly more important than the engagement of directors and employees of the financial sector (13%). In many cases the same legal corporate infrastructure of the real estate and building sector are used for producing illicit assets and making them circulate. In fact, almost 40% of registered Spanish firms being charged with corruption and/or laundering activities during the studied period belong to this economic sector (Fernández Steinko 2001a, table 21). Differences between white and blue-collar are not as significant referring to the participation of directors and employees of financial institutions in the plots, although owners and employees of money change offices only appear in blue-collar ones (3% of the total). The presence of political party members (33% of all cases) and elected mayors and councillors (29%) is highly significant, but only related with white-collar. That means, that if there is a risk of criminal infiltration of the Spanish political system by money laundering activities, it clearly comes from this last group of offenders as judges did not find a single proven case during this period (1995 to 2010) of politicians with laundering charges being judged. As Spain is a mayor gross importer and also a mayor consumer or cocaine and cannabis, this fact appoint to the resilience of the Spanish political and institutional system to its infiltration with drug money.
(3) This is certainly not the case of corruption money -mainly related with land-use planning and embezzlement- which has not only heavily affected the Spanish political system, but also its -mostly local- institutional spaces, as in 29% of white-collar cases mayors or councillors have been charged. But not only. In 16% of all cases at least one member of the technical staff working within municipalities with or without pubic servant status -architects, quantity surveyors, environmental technicians, legal and financial advisors etc.- are involved in laundering activities as their skills, briefings and signatures are needed for putting into place embezzlement and land-use corruption plots.
G. The size of the Spanish laundering markets
(1) The annual value of the laundering markets is not equivalent to the illegal values, but to the sum of all fees and charges payed for moving, concealing and/or transforming a certain fraction of them. This fraction equals the value of all illegal assets produced every year with predicate crimes minus the value of those illegal produced this year but evaporating, as it happens with pyramidal -financial or philatelic- scams; minus the self laundered real estate assets, financial products, works of art etc.; minus the self laundered daily -normal and conspicuous- expenses; minus the annually regularised assets due to prescriptions and tax amnesties.
(2) The value of payed fees are not as extraordinary as pretended, as laundering is cheap and increasingly so. The highest fees we know about are those payed for informal international compensation systems, for the purchase of false identities and for the movement of cash. When the volume of laundered assets grows -as it happens with (big) tax-fraud money- relative prices diminish, when the money to be laundered diminishes or is very modes, prices raise or make a fix amount (Fernández Steinko 2021b tables 25, 26). These rather low prizes result, in the first place, from the predominance of competition over financial cooperation between jurisdictions and the intense individual use of internet services, both generating a flourishing anonymous market for cheap concealment, movement and transformation services (Sharman 2010). A second reason explaining the low prices is the abundance of pensioners, unemployed and low income immigrants willing to “rent” their identity, to move cash or to integrate it in the financial system for modest amounts of money, in Spain sometimes just a couple of hundred euros. The third reason results from the specific way tax-money circulates. Tax-criminals are the main users of market based laundering services such as tax advice and wealth management (see table 2). As the social stigmatisation of tax crime is low and its limits with legal tax and financial advice blur, there is a great offer of this kind of services causing a reduction of fees and tariffs. As tax bases and defrauded fees always circulate together, they triple the volume of the laundering of tax money reducing the cost per processed euro.
(3) The Spanish illicit economy puts every year 68.000mill€ into circulation. A part of this wealth is being self laundered directly through daily consumption which should be broken down in “normal” and “conspicuous” consumptions as very good whines, delicatessen, fuel or fancy clothing. Depending upon the predicate crime involved the proportions of illegal values transformed this way vary considerably going from 80% of the value obtained for the robberies and big thefts to 5% of the tax-crime of the upper group of tax-criminals, who only transform a very marginal part or their unpaid taxes in daily expenses. This gives an average of 20% or 13.600mill€ of illicit values directly transformed in regular consumption (see Fernández Steinko 2001b Table 15).
(4) We have seen that 11% of assets are proved to be entirely market-base laundered and 6% are proved to be entirely self-laundered, while the rest -83%- are self-and market-based laundered (Fernández Steinko 2024 Table 5). It is not possible to establish the proportion between both using the information of the “proven facts”. But if these same proportions between market-based and non market based laundering -roughly 2 to 1- empirically confirmed are applied to the mentioned 83%, and we incorporate our 20% of entirely self laundered through daly consumption, we have a proportion of roughly 45% self laundered and 55% market-based laundered assets.
(5) If we apply these figures to our global estimates of € 68.000mill we can conclude that every year almost € 31.000million are being self laundered and around € 37.000million are market-based laundered. Considering an average fee of 6% for all kinds of laundering services (see Fernández Steinko Table 26) the annual value of Spanish laundering markets would amount to around € 1.900million equivalent to 0,15% of the Spanish GDP of 2018.
H. Resources of Spanish economic criminals
(1)The information concerning resources facilitates the assessment of the real capacity of criminals to erode the integrity and stability of the social, economic and institutional order. In real life, individual offenders and criminal networks can only inflict a certain amount of damage depending upon the real access -individually and/or as a more or less organised group- they had to five different groups of resources before committing their crimes.
(2) The relevant groups of resources are:
- (A) The economic ones, that means the average legal income of offenders participating in the same criminal plot and the stock value of their legal asset. Depending on the economic resources available, criminals can increase the value of their criminal investments: they can hire more and better professional launderers, pay higher bribes, create more sophisticated companies and business groups to carry out linked operations in order to safely take illicit assets out of the country in significant amounts, or they can also invest larger amounts in cocaine import operations which, although more economically risky, are also more lucrative due to the effect of economies of scale.
- (B) The “social resources” equivalent to the social contacts and networks available to offenders. They include both non-ascriptive ties - friendships, professional and political relationships, employment relationships - and non-ascriptive ties, i.e. the whole web of kinship ties that extend the extent and reach of social networks. Family networks are particularly important for social life in Mediterranean countries.
- (C) The “cultural and informational assets” based on formal and informal qualifications, professions and skills. They include the access to all kinds of knowledge that can be used to commit crimes. This information can be often only accessed when a minimum of social resources are available - for example, relations with politically influential people - although such information can also be accumulated through formal studies - for example, in law, business management or accounting - which provide essential knowledge for many white-collar and, in some cases, blue-collar activities. This group of resources also includes all those related to criminal logistics: knowledge of the most permeable ports and airports, of corrupt or potentially corrupt officials, etc
- (D) The “political resources”, than means their formal or informal belonging to political parties and to all kind of institutions giving access to political power on a national, regional and/or local level. They are particularly relevant as they include the capacity to take decisions that affect to third parties due to the offender's membership to decision-making spaces such as parties, local, autonomous or national governments, but also bit companies whose decisions affect central, autonomous and local governments. The presidents of the central government, of autonomous communities or of important localities, as well as the middle and senior leaders of political parties have greater amounts of these kinds of resources than those actors without any political, party or business ties: this also increases the criminal capacities of the former with respect to the latter.
- (E) The “symbolic resources” or “symbolic capital” (Bourdieu 1999) which can be used for building up of a public image and narrative about the -legal and illegal- practices of the offenders such as the access and/or propriety of traditional or new social media, the investments in charities, sport clubs and similar activities. The produce mechanisms of social criminalisation and include the ability of offenders to construct, deconstruct or maintain a public image favourable to their person and behaviours, to their way of seeing the world or to their attempt to legitimise or minimise their criminal charge. Like all the rest, symbolic resources can be accumulated and generated with economic resources, in this case through investments in media, funding cultural or sporting activities that benefit the community, or co-opting journalists and reporters willing to generate narratives for the benefit of offenders.
(3) Each defendant contributes a certain amount of resources to the scheme and “proven facts” give plenty information on this issue. They can be scored on a scale from 0 to 8 for each defendant. The score of the plots is equivalent to the average of the individual score of each of their members. Based on this average score, five types or groups of plots can be defined, ranging from those with "very few" resources (0 to 1 point) to those whose members have, on average, "very high" resources (7 to 8 points)
Table 5 Resources, laundering-sensitive occupations and illicit assets
|
|
aggregate resources |
Illicit assets per case |
|
white-collar cases (n=41) |
6 |
€ 20,8m |
|
blue-collar cases (n=155) |
3,2 |
€ 3,3m |
Source: Fernández Steinko 2021b
(4) As can be seen in table 5, the participants of white-collar plots have almost double as resources as the blue-collar ones (6 to 3,2). The can transform them in producing 6,3 times more illegal income per case than the blue-collar ones (€ 20,8 mill to € 3,3 mill), and also for also for making the circulate the assets in a much more effective way as it takes an average of almost a three time longer period to dismantle the white-collar plots than the blue-collar ones (6,9 versus 2,4 years) and a median of a four times longer period (4 versus 1 year) (Fernández Steinko 2004 Table 3).
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