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Mafia exploits Coronavirus situation to replace banks

With bureaucracy slowing favourable emergency loans to desperate businesses in Italy, the Mafia are only too happy to step in and provide an alternative to the country’s banks. Investigators are now concerned that some of these publicly guaranteed loans – when they do appear – will end up supporting Mafia-owned businesses.

11. May 2020
4 min

​Italy's government is currently attempting to inject no less than the equivalent of DKK 5.5 billion into the country's economy to help as many businesses as possible through the lockdown.

A large proportion of this comes in the form of publicly guaranteed bank loans which, like in other parts of Europe and USA, are [A1] delivered through private banks.

A combination of unclear rules, long-winded procedures and understaffed banks is, however, leaving small- and medium-sized enterprises afraid that the favourable – low-interest – emergency loans may be paid out too late.

"The banks are saying that we can get a regular loan instantly, but that we have to wait for any new publicly guaranteed loan," according to Luca Businaro, CEO of Novation Tech, a subsupplier to, among others, Ferrari and Bloomberg.

Talking to the news agency, Carlo Alberto Carnevale Maffe, professor of business strategy at Milan's Bocconi University, added that the banks are required to follow the standard procedures: "It normally takes a few weeks. But with only 30 percent of their workforce, it can take the banks months."

Mafia is 'Italy's largest bank'

When it comes to the Mafia, referred to as 'Italy's largest bank' by one NGO, paperwork and the waiting time are not the heart of the matter – and there is definitely no liquidity crisis.

In 2012, in the wake of the financial crisis, when the Italian banks were shutting the doors on (in particular) small business owners, a report by Sicily-based NGO SOS Impresa stated that "the Mafia are Italy's largest bank, with their DKK 485 billion of liquidity".

NGOs, experts and public authorities are warning that the Mafia are now, once again, exploiting times of crisis to cipher new custom away from the already crisis-stricken Italian banks, who are still clearing up the mess left by bad loans during the financial crisis.

Speaking to British newspaper The Independent, a Catholic NGO have reported how the Camorra in Naples are offering independent businesses loans at rates that are competitive with loans from banks to begin with, before hiking them up to 300 percent interest rates.

To those unable to pay, the Mafia then makes an offer that is hard to refuse, especially when you are on the verge of bankruptcy, says journalist Roberto Saviano, author of "Gomorrah

- Italy's Other Mafia," speaking to CNN:

"The organisation approaches a business in crisis and tells them that they won't buy the whole thing, but will give them cash for shares so that they become part of the business. That's what they do to everyone."

Potentially sharing in the assistance package

Although the quarantine has made it more difficult to distribute cocaine, according to Italy's Head of Police Franco Gabrielli, the Mafia have long had a hold on the trade of goods that are still available during the lockdown, such as food, medicine and medical equipment.

"They invest in funeral service and hospital laundry service businesses. Investing in cleaning companies is nothing new. They have also had some good courier companies and petrol stations in their portfolio in the past decade," explains Saviano.

"Once the state of emergency has finished, we may find that criminal organisations have infiltrated the economy by controlling businesses that had not previously been on their radar."

This may well turn out to be a highly lucrative business strategy at several levels – firstly, of course, because they have the option to launder even more money, and, secondly, as investigators fear, because it enables them to share in the enormous state assistance package, which, as mentioned above, consists of publicly guaranteed loans, but also other forms of assistance, such as exemption from tax, keeping businesses afloat during the lockdown.

'Investment' in the poor

The Mafia are not just using the Corona pandemic to buy into crisis-stricken businesses, however – but also to 'invest' in the poorest people in society,

by distributing food to families, who then become indebted and have to pay them back over time on a 'quid pro quo' basis, returning 'favours' such as transporting cocaine, sheltering criminals on the run from the authorities or voting for the right politician at the next election.

"We know that many people are suffering, but the state is there for them," according to Italy's Prime Minister Giuseppe Conte, whose government is distributing food vouchers worth a total DKK 3 billion to the poor. In addition, it has set up a fund worth the equivalent of DKK 32 billion, which the country's mayors are to use to alleviate the situation for the population, particularly in the south of Italy, and stop them seeking shelter with the Mafia.

This will not be enough to keep pace with Cosa Nostra, however, according to Leoluca Orlando, mayor of Sicily's largest city, Palermo. On website, he is urging the government in Rome to introduce a 'citizen's wage' for everyone as soon as possible, i.e. including for the not-insignificant proportion of the population who normally work on the black market – and who therefore typically do not have any social safety net in these kinds of situations.

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