Fighting Organized Crime by Targeting their Revenue: Screening, Mafias and Public Funds

62 Pages Posted: 12 Dec 2018 Last revised: 17 Mar 2022

See all articles by Gianmarco Daniele

Gianmarco Daniele

University of Milan - Faculty of Law; Bocconi University

Gemma Dipoppa

Stanford University

Date Written: January 2, 2022

Abstract

Repressive policies to fight criminal organizations are often met with a violent response
from criminal groups. Are non-repressive strategies more effective? Targeting criminal revenues
can be a powerful tool if the threat of investigation is credible and if criminals are unable to
displace their activity to avoid controls. We study an Italian policy designed to tackle mafia
misappropriation of public funds by screening companies applying for subsidies over 150,000
Euros. Using all subsidies to firms co-financed by the European Union from 2008 to 2015, we find
that a group of firms starts self-selecting below the threshold immediately after its introduction.
Those firms are concentrated in mafia-affected cities, are lower performing, operate in typical
mafia sectors and have balance sheet indicators of money laundering. While avoiding violence,
non-repressive strategies might have different unintended consequences: criminal organizations
react with an immediate strategic displacement which reduces states’ capacity to detect them,
highlighting the importance of designing policies that anticipate the sophistication of criminal
organizations.

Suggested Citation

Daniele, Gianmarco and Dipoppa, Gemma, Fighting Organized Crime by Targeting their Revenue: Screening, Mafias and Public Funds (January 2, 2022). BAFFI CAREFIN Centre Research Paper No. 2018-98, Available at SSRN: https://ssrn.com/abstract=3299552 or http://dx.doi.org/10.2139/ssrn.3299552

Gianmarco Daniele (Contact Author)

University of Milan - Faculty of Law ( email )

Via Festa del Perdono, 7
20122 Milano
Italy

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

Gemma Dipoppa

Stanford University ( email )

Stanford, CA 94305
United States

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