On 26th June 1999, The Centre for Criminology held its first seminar on Organized Crime and the 21st Century. The purpose of the seminar was to bring together practitioners, researchers and other interested parties to discuss the trends and potential directions in organized crime in the HKSAR and neighboring areas as we move into the next millineum. A number of experts presented their research findings and practical knowledge about organized crime trends in Hong Kong, Macau, China and Russia. The seminar concluded with a panel discussion on the overall patterns and the legal issues of addressing organized crime. These proceedings include the presentations of each of the speakers.
I would like to acknowledge several people who contributed to making the seminar a success including Mr. David Hodson who was the co-organizer of the seminar and co-editor of the proceedings. Special thanks also to those who helped with the administration of the seminar: Mr. Lau Wing Yat, Davy; Chong Wai Kei, Simon; Kwok Suk Wai, Francisca; Chuek Siu Man, Maggie; and George, Omana. Teresa Mora provided editorial assistance. The Centre for Criminology also appreciated the co-sponsorship of SPACE, University of Hong Kong.
The Centre for Criminology will continue to publish proceedings from some of its seminars. I hope you will find this one and future ones to be of interest.
Karen A. Joe Laidler
Research Fellow of the Centre for Criminology
Sponsored by The Centre for Criminology & SPACE,
The University of Hong Kong
HKU-SPACE Admiralty Learning Centre
3/F, Room S6 Admiralty Centre
Harcourt Road, Hong Kong
Saturday, 26th June 1999
9:15-9:30 Introductory Remarks
Honourable Justice K. Bokhary, Court of Final Appeal, HKSAR
9:30-10:05 Organized Crime in Hong Kong
Mr. Ip Pau Fuk, Peter. Chief Inspector, Hong Kong Police
10:05-10:40 The Role of Corruption in Organized Crime in Hong Kong
Mr. Gilbert Chan, Assistant Director of Operations, Hong Kong Independent Commission on Corruption.
10:40-11:00 Gambling and Organized Crime in Macau
Ms. Leong Veng Mei, Candy. Sociology Department, University of Hong Kong
11:00-11:10 Short Break
11:10-11:45 Organized Crime in China
Dr. Chu Yiu-Kong. Visiting Assistant Professor, Sociology Department, University of Hong Kong.
11:45-12:20 Organized Crime in Russia
Dr. William Chambliss, Professor, Sociology Department, George Washington University, Washington, D.C.
12:20-1:00 Panel Discussion and Questions
Mr. Mike Blanchflower, Deputy Principle Government Council, Department of Justice, HKSAR
Preface / Foreword
Mr. David Hodson, Director of Centre for Criminology, University of Hong Kong and Former Assistant Commissioner of Hong Kong Police.
1:00-1:10 Closing Remarks
Dealing effectively with crime is probably as complex as it is important. We now have the means of co-ordinating and developing the multi-disciplinary efforts that are required to deal with crime. Situated in the University of Hong Kong's Faculty of Social Sciences, the Centre for Criminology is, as I think you will agree well placed to perform this vital task of co-ordination. It is with great satisfaction that I find myself this morning by no means confined to talking about what the Centre proposes to do. Rather, I am able through the efforts of others ( let it be acknowledged ), to speak also about what the Centre has already done and is proposing to do. One of those things is this seminar. But the privilege of introducing the distinguished speakers and the interesting agenda is one which I will not claim because the documents speak for themselves as do the reputation of the speakers and the obvious vital importance of the subject. I also understand that some of the others will perform this task of introduction.
For my own part, I will speak more generally and you will be happy to hear, briefly. The Centre is indeed fortunate to have secured Mr. David Hodson's services as the first Honorary Director. He is a well respected and well known figure in Hong Kong, having served the community in the capacity of an Assistant Commissioner of Police and he has also served in other capacities. The Centre has appointed six Honorary Fellows, and in alphabetical order, they are Dr. Philip Beh, Dr. Roderic Broadhurst, Dr. Fu Wah Ling, Dr. Sheilla Hamilton, Dr. Karen Joe-Laidler, and Dr. Harold Traver. Among them all, they obviously constitute a formidable multi-disciplinary gathering of experience and enthusiasm. Dr. Beh is a forensic pathologist. Dr. Fu is a Visiting Professor at the University of Hong Kong with the School of Law, and Dr. Hamilton is a Forensic Scientist. Rod, Karen and Harold, who I have the honour of being on first name terms with, are with the Faculty of Social Sciences in which the Centre has found its home. They should know how very grateful I am to them for the help, guidance, and encouragement they have given me since I was first asked in September last year to become involved in the proposal for establishing a Centre for Criminology. In this vein, I should acknowledge on the Centre's behalf, the support of the University's Council, and the help and support of Professor Wong Siu Lun the Pro-Vice Chancellor and Professor Cecilia Chan, the Dean of the Faculty for Social Sciences, who so kindly helped in providing the Centre with a home. Already the Centre has several research efforts underway. These include:
1. - 'Past, present and future trends in the abuse of Ice in Hong Kong'.
2. - 'Alcohol, Domestic Violence and Cultures of Conflict Resolution in Hong Kong'.
3. - 'The Development of a Criminal Justice Statistics Book'.
4. - 'Homicides in Hong Kong'.
5. - 'A Training Session on Death Investigations in Cambodia'.
These are the works that have already been done. These are titles which
demonstrate the great range and relevance of the research in hand. One
should never underestimate the difficulties which may lie in the Centre's
path but I have every confidence that this necessary and, let us face it,
bold initiative will succeed. It remains only for me to bid you welcome
and to thank you.
Mr. IP, aged 54, is a Chief Inspector with the Hong Kong Police Force. He is currently attached to the Criminal Intelligence Bureau in charge of the Research Unit, which is tasked with the monitoring of all Triad related matters. He also oversees the training and functioning of the Triad expert cadre in the Force.
Mr. IP has over 33 years of police experience, 27 of which were spent in the criminal investigation field. Having begun training as a Triad expert in 1984, Mr. IP is now the leading Triad expert in the Hong Kong Police Force. During the past thirteen years, Mr. IP has on over 50 occasions, been called upon to give expert evidence on Triad related matters at various levels of the court in Hong Kong. Mr. IP is an internationally renowned Triad expert. He has been invited on several occasions to testify in the Crown Courts in the United Kingdom as well as in the courts in San Francisco, U.S.A. On all these occasions, his evidence has been accepted in the courts.
Apart from conducting research on the subject of the Triads, Mr. IP also regularly involves himself in the debriefing of Triad personalities, thus gaining first hand information on the activities of these secret societies.
Between 1989 and 1994 Mr. IP trained over seventy one officers of the Hong Kong Police Force to become Triad experts. He also frequently provides talk and training sessions to overseas law enforcement officers.
Mr. IP is now in his final year for his Master of Philosophy Degree in Sociolinguistics specializing in Triad language at the University of Hong Kong. Together with his university lecturers, they have written an article on "The Speech-act offence: Claiming and Professing Membership of a Trim Society in Hong Kong" which was published in the July 1996 edition of 'Language & Communication'.
Mr. IP is married with three children. He enjoys outdoor activities and is the Chairman of the Police Adventure Club in Hong Kong.
ORGANIZED CRIME IN HONG KONG
Mr. Ip Pau Fuk, Peter, Chief Inspector, Hong Kong Police
Triads are secret societies and are declared unlawful under the Laws of Hong Kong. The history of Triad Societies goes back to 1674 when secret societies were formed for patriotic reasons to overthrow the Manchurians. With the passage of time, they turned into criminal groups. The word 'Triad' is an English designation for the sacred symbol of the societies, a triangle enclosing a secret sign derived from the Chinese character HUNG. The resulting symbol represents the triangular union of heaven, earth and man. The character Hung can also be translated into the English word RED. The first secret societies or 'Triads' were known as the HUNG MUN (Hung Association) or Hung Sect. These secret societies have also been known as the Heaven and Earth Association or Sam Hop Wui and, more commonly, the Black Society Association or Hak She Wui. This latter term is now generally used to describe all Triads, and represents the public feeling that Triads are sinister and evil rather than a mystic brotherhood.
As a result of distortion and of exaggerated reporting by the media as well as sensational stories featured in movies, there are many myths about what Triads are and how they operate in Hong Kong.
Organization of Triads
The traditional structure of a Triad Society is very well organized. When they first formed 300 years ago, it was for political motives with the ultimate aim of overthrowing the government of the time. In modern terms, they can be described as guerrillas or terrorists. The present day structure of Triad Society is a more simplified version of that which formerly existed and this modified version is now common to the majority of the societies today. The three principal officials in a Triad Society are the Chairman , Treasurer and the individual group leaders.
Today's Triad office bearers will normally all be of the 'Red Pole' (426) rank, other ranks of office bearer status having fallen into disuse. The Chairman is often elected at an annual or bi-annual meeting and may be any office bearer of '426' rank or above. Usually the most influential office bearer with the largest group of followers or the most wealthy, will be successful. The Treasurer will also be elected at the same meeting and can also be an office bearer. This position is often of equal importance to that of the Chairman. In most Triad societies, the Chairman and Treasurer are also the same person.
At present, there are over 50 known Triad societies in Hong Kong, of which 15 to 20 of them regularly come to the attention of the Police by their involvement in crime. This of course does not mean that the remaining societies whose names do not surface frequently are inactive, but possibly only that their activities go unreported for a variety of reasons. The clandestine nature of the Triad movement precludes an accurate assessment of the total number of Triad members and society membership ranges in size by considerable degrees.
Triad societies are in fact a collection of loose-knit groups or gangs rather than a monolithic criminal organization, such as the Mafia and Boryokudan whose power is diffused from a central core through an organized chain of command. The table below gives a comparison between the Triads and the Mafia.
A Comparison, Between Triads and Other Organized
|Collection of loose-knit group (gangs)||A monolithic criminal organization|
|Independent power base||Power diffused from a central core|
|Horizontal organization||Rigid chain of command|
|Chairperson - limited influence, honorary post||Chairperson - the Godfather|
|Full autonomy||Central leadership|
|Profit belongs to individual gangs||Profit goes to organization|
|Disputes settled through negotiations||Disputes adjudicated by core leadership and fights|
|Made up of criminal fraternities||A criminal enterprise|
Despite the fact that today's Triad members do not belong to one gigantic organization, some of them however, continue to use Triad jargon, rank structure etc. This convinces a new recruit that he has indeed joined an awesome elite and this is used to instill fear into members of the public.
Triad groups are horizontal organizations, a network of criminals who co-operate in criminal activities based on personal introductions and mutual interests. Triad leaders do not usually direct or become directly involved in the criminal activities of their gang members, nor do they dictate to their members what criminal activities they should or should not get involved in. However, there is some difficulty in separating reality from the media myth.
The best description about Triads was illustrated by the testimony of a Hong Kong villain before a US Congressional Hearing on Asian Organized Crime. He said:
It is not unusual for the different Triad groups, both in Hong Kong and overseas, to work together where there is a specific opportunity to make money. However, it is important to understand that there is no international Triad network or centralized control over cross-border Triad activities. Triad membership is merely a 'lubricant' which facilitates personal contacts and co-operation between different Triad groups or individuals.
Romanticized legends and the patriotic aims of old secret societies in ancient China are far removed from the present day realities in Hong Kong. Triads are cowardly thugs who prey on the weak, the innocent and the foolish. By using the reputation of the old-style Triad societies and by spreading the myth of one invisible, indivisible and all powerful organization, Triad gangs know that they can instill fear into their victims. This reduces the chance of resistance, avid retaliation and terrifies them into silence.
Triad recruitment of students remains a problem, however, there is no indication of an organized Triad campaign to enter schools for recruitment, and most recruitment of students probably occurs outside schools. In recent years, the more sophisticated Triad members, referred to as second-generation Triads, have received their higher education paid for by monies generated through illegal means. Such persons are now involved in white-collar crimes.
Street Gangs, Youth Gangs and The Triads
Triads most often come to police attention at the lower levels of their activities where their involvement in criminal activity is primarily through youth and street gangs. Youth gang members are of school age, between 12 and 18 years old. They are influenced by their elders and join gangs as a form of identity. They are basically juvenile delinquents who bully other kids and are a nuisance to their neighborhood. Some of them will leave their gang as they change school, move home or take up employment, but others will, after joining a Triad society, eventually graduate into a street gang and then pursue a life of crime.
Street gang members are slightly older, normally aged between 18 and 25. The majority will become members of a Triad society. Some have regular jobs but others are unemployed. The leaders of these gangs will often be Triad office-bearers and their activities will be more organized and directed towards street-level crime and extortion of various kinds in their own territory. These gangs, due to the nature of their activities, are more inclined to use violence to enforce their demands and to fight other rival gangs. A few of the more successful street gang leaders, as they accumulate more assets, will either start their own syndicate or join an existing one, thus graduating into the upper levels of organized crime activity.
The major difference between a youth gang and a street gang is that the former does not lay claims to any territory whereas the latter normally asserts control over a certain area, e.g. a street block, a park or a housing block.
Triad gang activities are mainly territorial and fall into one or more of the following categories:
(a) Extortion and protection racketeering of shops, small businesses, hawkers, construction sites, car valet services, and places of public entertainment such as bars, billiard halls etc
(b) Monopolizing control of non-franchised public transport routes
(c) Monopolizing control of decoration companies
(d) Street-level dangerous drug trafficking
(e) Illegal gambling, such as casino operations
(f) Prostitution and Pornography
Whilst the range of criminal activity sounds awesome, an analysis of all detected crime in Hong Kong indicates that only about 5% to 10% of all detected crime is connected with Triads. This includes gang fights arising from inter-gang conflicts, intimidation, serious assaults etc. One unfortunate development however, is that in recent years, Triads have gained access to firearms and are prepared to use them to settle disputes, which was rarely the case a few years ago.
Organized crime in Hong Kong
At the highest level of criminal activity, some organized crime syndicates have Triad members in their ranks. Others do not, or if they do, Triad membership is merely incidental and is not a qualification for being accepted by the syndicate. There is a commonly held misconception that the illegal drug trade in Hong Kong and in other countries that involve Hong Kong Chinese, is monopolized by Hong Kong Triads. This makes sensational news but is simply not true. Triad membership is not a prerequisite for joining a drug syndicate; it is experience, expertise, coronets or money that counts. Whilst it may be true that many drug traffickers have Triad connections, Triad membership itself does not organize crime syndicates that specialize in such activities as loan sharking, smuggling, credit card fraud and counterfeiting. Therefore, it should not be assumed that when a 14K Triad member is arrested for a drug offense that it is the work of the 14K Triad Society.
Organized crime activities in Hong Kong follow the same pattern as in many other countries. Syndicates will endeavor to become involved in commercial activities that are ostensibly legal. This activity is used as a front to disguise contacts and wealth and can be very profitable if free market forces can be manipulated by using fear or favor in an unacceptable manner. These criminal organizations also attempt to create an environment which is favorable for their activities. They may wish to give themselves an aura of respectability by mixing with credible social figures or by receiving endorsement, sometimes unknowingly, from government officials.
Illegal acts committed by members of an organized crime syndicate will be perpetrated normally through the use of deception, fear and violence. The persons actually committing acts of violence will usually be on the lower rungs of the ladder. They may well be prosecuted. But those who ordered the acts are so far removed as to make prosecution using normal procedures very difficult.
Hong Kong has two main legislative weapons to tackle Triad members and organized crime personalities, namely the Societies Ordinance, which is aimed at the individuals themselves and second the Organized & Serious Crimes Ordinance which is designed to combat what these personalities actually do.
The Societies Ordinance
Under the Societies Ordinance, which was enacted in 1949 with subsequent amendments, all Triad societies are deemed to be unlawful societies in Hong Kong. The ordinance includes a series of criminal offences relating to Triad memberships, recruitment and activities. Any person convicted of professing or claiming to be an office bearer or managing or assisting in the management of a Triad society is liable to a maximum fine of HK$1 million and to imprisonment for 15 years. Membership of a Triad society is itself an offence and upon conviction, may be fined from HK$ 100,000 to HK$250,000 and to imprisonment for 3 to 7 years.
The Organized and Serious Crimes Ordinance
The Organized and Serious Crimes Ordinance was enacted in Hong Kong in October 1994, targeting in particular those powerful, previously untouchable, criminal masterminds of organized crime syndicates. The main provisions of the Ordinance were:
(a) to provide the Police with special investigative powers which would enable them to more effectively obtain evidence against criminals involved in persistent offences such as extortion, to trace the victims of organized crime and to identify the financial resources of the syndicates involved.
(b) to provide heavier custodial sentences for organized crime activities.
(c) to empower the Courts and confiscate the proceeds of the participants
in organized crime.
Ms. Leong is currently completing her M. Phil. Thesis research on gambling in Macau with the Sociology Department at Hong Kong University. She holds a Bachelor's Degree in Social Sciences from the University of Macau.
GAMBLING AND ORGANIZED CRIME IN MACAU
Ms. Leong Veng Mei, Candy, Sociology Department, University of Hong Kong
Macau has a total area of 23.5 square kilometers consisting of the Macau Peninsula, Taipa Island and Coloane Island. The total population in 1998 was about 400,000. The Portuguese came to Macau as early as 1535 mainly for trading purposes. Like Hong Kong, Macau has a colonial past. It became a colony of Portugal in 1887 and will be handed over to China on 20th December 1999, to become a 'special economic region'.
Under the rule of Portugal, gambling was legalized in Macau, converting it into a casino state in Asia. Macau became known as the "Monte Carlo of the Orient". Since 1988, more than 30% of the government's public revenue and expenditure have been derived from gambling taxes (Table 1). In fact, Macau has built the government around the gambling industry. (Zendaian, 1993). In the period before the handover to China, the popularity of Macau has grown and crime problems have attracted a lot of attention in recent years.
The gambling industry yields big profits and so there are loopholes for loan sharking, prostitution and other kinds of organized crime. Over the last decade, the crime rate in Macau has increased from 4,717 in 1987 to 8,576 in 1996, an increase of more than 80% (Table 2). Triads have committed most of the violent crimes, such as bombing, arson and murder. These Triads are in one way or the other connected to the casinos, especially the "BATER FICHA" business. The "BATER FICHA" business is the business of rolling cash and dead chips, which will be discussed in more detail later on.
My research examines two aspects of gambling and crime. One is the macro aspect in which I will analyse the legislation governing the gambling industry and compare it with the reality as it exists in Macau today, examining the permissive aspect of the regulatory laws. I will apply critical theories and Marxism to this study. The second, is the micro aspect, here I will analyze how the change in casino ownership affects the evolution of the "BATER FICHA" business. With poor management in the new ownership system, the Triads are able to monopolize the "BATER FICHA" business by using intimidation and violence. I will try to apply Gambetta's theory in explaining the Triad's involvement in the "BATER FICHA" business. Moreover, weak law enforcement and corruption are linked to this problem. The methodologies used are mainly interviews and secondary analysis.
MICRO ASPECTS OF GAMBLING AND CRIME IN MACAU
Centralized Ownership of Casinos
The history of gambling in Macau goes back as early as 1875. However, gambling was not legalized until 1937. Only in 1962, the government had granted Honourable Dr. Stanley Ho, Director of the Sociedade De Turisimo E Diversoes De Macau (STDM), with the monopoly rights to all kinds of gambling activities including casino gambling, horse racing, dog racing, mahjong and baigepiao. The STDM has modernized casinos and has brought in some Western games such as roulette and baccarat. Since then, gambling has developed from a recreational to a fully integrated service industry with many "products". Today, the STDM is the largest commercial employer in Macau providing jobs for more than 10,000 people.
Since 1962, the Company has been granted an exclusive gambling franchise in Macau which was extended in 1986 for another 15 years to 2001. The Company has nine casinos and has contributed to some important infrastructure projects (e.g. the international airport, deep-water port, the new Macau-Taipa bridge and reclamation and development projects in Praia Grande Bay).
The gambling industry is a complex semi-recreational service industry. It operates 24 hours a day and is open to the public. Different kinds of people such as professional gamblers, racketeers, loan sharks and extortionists get into the casinos. Generating considerable amounts of cash in and out the casinos, they are attractive targets for organized crime.
The government has franchised the STDM. In return, the STDM has to pay taxes and subsidize its infrastructures so the Police Force will provide protection to the casinos. There are officers from the Gambling Authority (the FISCAL) and officers from the INVESTIGADOR DA POLICIA JUDICIARIA to make sure that the business runs smoothly and maintains order inside the casinos. In addition to security provided by the government, the STDM has its own security guards as well. If there are extortionists and dishonest consumers found in the casinos, the STDM and the Gambling Authority have the right to blacklist them so that they will be prohibited from entering any casinos for a certain period of time. (Interview with a Macau police officer, 23 Jan 1999)
With so much security provided by the government and the STDM, one might think that it is quite difficult for the Triads to survive in the casino business. However, when a consumer has lost all his money, he might want to borrow some money to win back what he has lost. This practice generates the loan sharking business in the casinos. From the point of view of the casinos, if there is no loan sharking, consumers cannot easily borrow and gamble again and so the casinos' profit will be affected. Thus, the STDM simply lets the loan sharks run their business inside the casinos as long as they do not disturb the order inside. As we know, loan sharking generates a lot of easy and quick money and the collection of debts often involves violence, therefore the loan sharking business is usually run or supported by Triads. That is the reason why the Triads have existed in the casinos for a long time, in fact, since the establishment of the STDM. (Interview with a Macau police officer, 23 Jan 1999)
Although there are loan sharks inside the casinos, the STDM is able to maintain order inside because the ownership of the casinos is centralized. Even though the loan sharks are allowed to run their business inside the casinos, they will be blacklisted and prohibited from entering the casinos if they disturb the customers and therefore disturb order inside. Since most of the loan sharks earn their living in the casinos, they will try their best to avoid making trouble. Furthermore, since ownership is centralized, their power inside the casinos is limited, even if some Triad members have made a lot of profit or gained capital. In fact, for the most part loan sharking makes only a small profit at this time.
Up to this point, it seems that the centralization of ownership of casinos is a good way of running this business since it is easy to manage and to maintain order inside casinos. However, too much centralization and monopolization means that there would be less incentive for the STDM to improve their services in order to attract more consumers. Besides, when business becomes too large, the administrative process becomes time consuming and as a result, resources are wasted. Moreover, with increasing competition, in the form of new casinos opening in nearby areas or with the competition of floating casinos in nearby sea areas, consumers may be attracted to the new casinos that may provide better services.
In order to reduce their administrative costs and attract more consumers, the STDM decided to change their way of doing business and they started to contract out gambling rooms in 1984. With these contracts, the "BATER FICHA" business was established in the individual gambling rooms.
Franchise of Gambling Rooms & The Bater Ficha Business
The STDM contracted out their first gambling room in Hotel Lisboa in 1984. Although the gambling room was rented, the property right of the gambling room still belonged to the STDM. The STDM provided dealers and other forms of assistance to the gambling rooms. But the owner still had to take care of the administrative costs, profits and losses ( Interview with a "BATER FICHA" account owner, 23 Jan 1999 ).
The contract between the STDM and the gambling room operator was not standardized, it depended on the relationship between the operator and Stanley Ho or other high rank employers of the STDM.
The structure of the "BATER FICHA" business is just like a pyramid. After the gambling room operator enters a contract with the STDM, he has to buy a certain amount of dead chips from them, say 4 million per month. Since that is a great amount of dead chips, the gambling room operator has to find more customers through the establishment of the "BATER FICHA" business. The gambling room operator will invite people with an interest to run the "BATER FICHA" business and also invest a large amount of capital to open an account with his gambling room. This person is often called the middleman or the account owner. He will get a commission for the amount of dead chips rolled for cash chips. Each man's power is limited and usually the account owner will then invite or employ his friends or "brothers" to run the "BATER FICHA" business. This means that his friends or "brothers" work as sales agents and will get commissions from the account owner. They will then approach the customers and ask them to exchange the cash chips for the dead chips, they are often called the "BATER FICHA" guys or Chip Rollers. When their operations become more profitable, each of them will have their own branch and continue to build up their territory.
Although it is possible for the big customers to open an account with the gambling room directly, it is often difficult in practice. The gambling room operator usually wants to build his own "BATER FICHA" business with the account owners who are his friends or brothers and therefore can keep control over them more easily. The operator will give lots of reasons, such as the gambling stake is not enough or that the customers have to open an account for a longer period of time, in order to discourage customers to open a direct account . Since most of the customers are not long term gamblers and they don't want to keep their money on hold, they generally choose the services of the chip rollers. In addition, they will also get more benefits from the chip rollers. Chip rollers are able to provide customers with jetfoil tickets, discounted or free hotel rooms and will company the customers to gamble or travel in Macau. No matter whether the customer wins or loses, the customer can pay the chip rollers by cheque, thus tourists or gamblers from overseas do not need to carry huge amounts of cash with them. Sometimes chip rollers will exchange dead chips with the customers at a discount. At present, there are no legal norms or regulations governing this "BATER FICHA" business so it lies within a gray area under the casino regulations.
In fact, the practice of contracting out gambling rooms and the establishment of the "BATER FICHA" business has benefited the STDM. The STDM gets a more permanent income from these gambling rooms as the owners have to pay the rent and buy a certain amount of dead chips per month. Besides, the STDM can reduce their administrative costs and increase the amount of their customers since through the "BATER FICHA" business, the operators also work as sales agents.
The Bater Ficha Business and the Triads
The criterion of becoming a gambling room owner, is that the owner must have huge amounts of capital. The owner has to buy approximately 4 million dollars of dead chips per month with the STDM and he has to pay rent on each gambling table inside his room. In addition, the owner of the gambling room must have a good relationship with high rank officers of the STDM. Since this business involves a large amount of capital, trust must be built between the gambling room owners and the STDM. (Interview with a "BATER FICHA" account owner, 23d January 1999)
Since the contracting out of the first gambling room in 1984, the number has expanded to more than 40 rented gambling rooms today. Most of the owners are wealthy businessmen but some of them may have earned their money from past illegal businesses. However, they are not necessarily Triad members themselves. Usually, Triad members who are active in casinos do not have enough capital to invest in gambling rooms, but there are a few exceptions. (Interview with a "BATER FICHA" account owner, 234 January 1999)
Besides providing company, free jetfoil tickets, free meals and free accommodation for their customers, some chip rollers will also lend money to their customers. Their customers come from all social classes and some may even have a Triad background. Therefore, the chip rollers need to have strong backing to collect on their debts. Thus, the Triads provide this protection service to them. Since the "BATER FICHA" business lies in the gray area of the gambling regulations, it is difficult for those involved in the "BATER FICHA" business to seek official protection. Furthermore, some chip rollers also work as loan sharks, an illegal activity in Macau, so it is ridiculous for the rollers to seek official protection. Another function of the chip rollers is to protect their own customers from the so called "hang outs". The "hang outs" are people who beg the gamblers for tips when the gamblers have won a game. If the "hang outs" are unsuccessful in obtaining tips from the gamblers, they may use violence or threats against the gamblers. Thus, it is very difficult for the chip rollers to protect their customers if they do not have the Triads to support them. (Interview with a chip roller, 22nd January 1999)
Since the numbers of their customers has a direct effect on their income, there is fierce competition between the different "BATER FICHA" teams as well as between the chip rollers themselves. If they do not have the Triad's support including the use of violence, they could hardly survive in this business. In addition, even their own customers can be stolen by their competitors. If they cannot resolve the problem of competition between themselves, how can they manage to survive in such a fluctuating market? Thus, Triads intervene and stabilize the market, they play the role of 'trade union' and they use violence to ensure the benefits for their members.
The Police and the Triads
The Gambling Authority is the only government department that has the right to directly monitor the casinos. There are more than a hundred FISCAL, who are responsible in monitoring order in the casinos and to make sure that business runs smoothly. They also have the right to blacklist unwelcome people and prohibit them from entering any of the nine casinos. Before the contracting out of gambling rooms, there were loan sharks in the casinos. Since they were not very powerful, the FISCAL let them make a living in the casinos with the provision that they did not disturb public order.
Since Macau is a colony of Portugal, Macau's legislature is modeled on the Portuguese legislature. The Police Force is divided into three departments, of which the INVESTIGADOR DA POLICIA JUDICIARIA specializes in investigations on organized crime. Although the law enforcement agencies are not united, in the past, they did have the power to control the Triads, mainly because the Triads were less powerful before the decentralization of casino ownership. If one Triad society caused trouble, the police was able to suppress that society.
There is now a shift in power between the Triads and the police. The Triads have become the master. The law enforcement agencies do not have the power to suppress violence and some of the police officers even become the targets of the Triads. The most shocking incident was on 1st of May 1998, when the car of the director ( Antonio Francisco Marques Baptista ) of the INVESTIGADOR DA POLICIA JUDICIARIA was bombed. He was lucky because he was not in his car at that time. ( Translated from the Macao Daily News, 2nd May 1998 ).
Since higher rank officials may have deals with some of the Triads, lower rank officers will not take action if they do not receive any orders from their boss, otherwise, lower rank officers may get into trouble. (Translated from the Next Magazine, 23rd May 1997) Under this working situation and with political uncertainty, the morale of the police force is affected.
Theoretical and Policy Implications
Gambetta (1993) offers a unique economic theory to explain the role of private protection provided by the Sicilian Mafia. Gambetta disagrees with the thinking that the Sicilian Mafia are international entrepreneurs (Arlacchi) or extortionists (Schelting), he believes that they are protectors providing protection to buyers and sellers in an "inscrutable market".
Gambetta (1993) also disagrees with the claim that the Sicilian Mafia is highly centralized or disorganized. He believes that the organization within the family is military and hierarchical and that the different Mafia families are connected in the form of loose cartels. There are about 100 such families in Sicily. There is a commission connecting the Mafia families in each province except Messina and Siracusa. The functions of the commission are to enforce rules, to discipline the members and to take care of the replacement of the boss. One has to go through secret ceremonies and rituals before becoming a member of the Mafia family so as to protect their trademark.
Gambetta argues that on the issue of whether Mafia provides extortion or protection, this depends on the variable of time; that is the duration of protection time. For a long term contract, organized crime provides protection for the business. On the other hand, organized crime provides extortion for short term contract business. He states that the Mafia chooses to provide protection in small territories, therefore monopolizing all business transactions. As a protector, they have to know what is happening in their own territory.
The services that the Mafia provides include protection against extortion and competition as well as dispute settlement. They also provide services in the area of debt collection. They sometimes help to maintain public order in their territory. Gambetta and Reuter (1995) state that those industries which have low product differentiation, low barriers to entry, low technology, unskilled labor, inelastic demand for products and a large number of small firms and unionization are more likely to turn to the Mafia for help. This move serves to protect themselves against competitors and to form controlled cartels. Illegal enterprises are most vulnerable to Mafia protection because they cannot seek official protection.
The Macau casino business has gone from the first contracting out of gambling rooms to the establishment of the "BATER FICHA". However, those who run the "BATER FICHA" are not employers of the STDM, which means that they are not protected by the STDM. Besides, the "BATER FICHA" business lies in a gray area where there is no legal regulation governing its operation. Again, those who are in this business cannot get adequate protection from the Police Force. In this unscrupulous market, there is demand for private protection against new competitors and a demand for dispute settlement. The "BATER FICHA" teams then turn to Triad societies such as the 14K, the Shui Fong and the Big Circle Boys for private protection, mainly because of these societies' established reputation. The Triads function as a "trade union" in this market and are willing to use violence to protect their members. Thus the Triads have become more involved in the "BATER FICHA" business, resulting in the three Triad societies sharing the markets and forming themselves into a kind of cartel so as to prevent newcomers into the market.
Cartels easily break up when one of the Triad societies or a leader of the factions becomes so wealthy and powerful that he wants to invade others' territory. This is what happened in Macau, as one of the leaders of the 14K, nicknamed broken tooth, became so powerful that he wanted to invade the territory of the Shui Fong, resulting in a battle between the Triads. As a result of this, the cartels have fallen apart. The STDM and the Gambling Authority have not set up the new rules of game and that together with weak law enforcement, means that the Triads have become more powerful. The problem of violence continues and the economy has become unstable. If this problem persists, it will affect the handover on the 20th December 1999 and the policies afterwards.
We have seen that the reason that Triads have become more powerful,
is due to the failure of casino management in the "BATER FICHA" business.
Since the Gambling Franchise is only granted to the STDM until 2001, the
STDM has no incentive to set the new rules of game. Instead, they are more
concerned with the short-term goal of making as much profit as possible
before 2001. In addition, the Triads see that the market for private protection
is only short-term, so they are moving increasingly into extortion. In
order to solve these problems, it is necessary for the Central Government
to decide the future of the Gambling Franchise. Since Macau is built around
the gambling industry, it will not help much if we only consider anti-Triad
policies. The best and the immediate thing to do, is to set new rules of
game in the "BATER FICHA" business and in the gambling industry as a whole.
Our next speaker is Dr. Chu. He received his Phd in the UK and since then, has returned to Hong Kong. He is currently finishing a book on triads and business. He will publish it with Routledge Press. He guest lectures in China, Taiwan and various places in Europe, including UK, Belgium and the Dutch police forces.
ORGANIZED CRIME IN CHINA
Dr. Chu Yiu-Kong, Visiting Assistant Professor, Sociology Department, University of Hong Kong
I think it's time for us to move from HK and Macau, to China. Yes actually today is very good for me to travel around the world and later William will give us the presentation about Europe. I am sure that most of you have been to China, is that right? At least you've been to Shenzhen for shopping or having a massage. We are talking about legal and informal ones. What do you feel about China? I don't mean I need a massage. Do you feel safe when you are in China? No? Do you have a sense of disquiet? If you ask Chinese citizens, they have got the same feeling, ' law and order are not very good and crime problems are getting more serious.' But I would like to remind you, if you asked Chinese people, let's say in the 1980s or up to 1990, ( not now to 1998) about organized crime, Chinese people would have told you that they do not know anything about organized crime. They had no idea about drugs, prostitution, gambling or loan sharking, the Triads or the Mafia or even gangs. Why? Because they did not have much direct experience with organized crime before that time. So organized crime is very new to China, they have just got this concept recently.
Actually in 1993, when I was in China, I attended an international conference on organized crime. A lot of police officers came and asked me, "What is organized crime?" "What are Hong Kong triads?" They wanted to learn more, because now they have this problem.
During Mao Tse Tung's era, there was no organized crime problem, I mean before the 1980s, because society was largely controlled by the Communist party. Actually in 1964, China officially announced that they had no problem with sexually transmitted diseases. This means that they had no problem with prostitution. Also, they said they had no drug addiction problems. It also meant that they had no drug related problems. Why? Because under Mao's rule, people in the cities were put in a 'dan wai' ( work unit ) and in the rural areas, they were put in communes. So you just stayed there and you could not move freely, unless you got permission, everything was supplied by the 'dan wai' or the commune. Money was not important. If you wanted to buy something, you needed to have coupons. If you wanted to go to some other unit, you had to ask your superior's permission. So if you wanted to commit a crime, you had no chance to do it. Even if you did, it would be hard for you to escape, because you were under the control of your 'dan wai' or commune.
The Communist party was in control of government and had a strong belief in society as a great civil society and during the Cultural Revolution, even the family system was destroyed. So it was very hard for organized crime or any crime to develop. In this case, because crime was not taken seriously, and there was actually, very little of it in communist China, the police force was not professional at all. I can tell you that before 1992, the police force in China, had 1.2 million police officers with no ranking system. They had no superintendent, inspector or any of these things. So you can see that they were not professional and they didn't need a professional force.
Now we come to 'Den Xiao Ping'. Things changed in 1978 when Deng came to power and implemented his reforms. If you go to China now and go out onto the streets you will find a lot of interesting things. On a street advertising poster, it advertises medical services for treating sexually transmitted diseases. It means that now, they have this problem. Why ? Why has organized crime been revived in 'Deng's' China? Or why after 1978 ? The reason is because Deng implemented dramatic reforms changing the economy from a planned economy to a market economy. It means that now China has a lot more money and you can go and buy goods. Money is getting more and more important. People can go around without restrictions. And they can communicate with other people. Also, the amount of private properties is increasing and a lot of Chinese and foreign investors come to China. I mean, there is the relaxation of social control. That's why criminals have appeared there. I can give you some indicators. China has a population of 1.2 billion. Do you know how many people are eligible to vote? Do you know how many? I think it's about 100 million. And most of those come from Middle China provinces, they want to get to coastal provinces because there are a lot of factories over there. Like the shoe factories in Dung Kwun.
A lot of workers who come from other provinces in China have now moved to the Guang dong area, and the situation is quite bad. Actually not too many people can get a job, so if people run out of money, they stay in that area and are stationed there. The development of organized crime in the area in the last ten years, can be roughly divided into three categories. The first is in the 1980s, when most crime is localized. The second is starting from 1985, when there is more inter-provincial crime. Criminals are now moving around to commit crimes. The third is from 1990 to the present where more inter-regional and transnational crime criminals are also involved in Hong Kong, Macau and China or overseas communities.
Some examples of localized organized crime in the early 1980s are the 'lau man' in China, well in Western society they are similar to bandits. Actually they are called street gangs in HK or in Western society they are thought of as a group of young people that create public disorders, eat in restaurants without paying as well as other such things.
If some families have connections to local government officials or police, they become powerful and become local tyrants, the so called 'ngo ba'. They run underground casinos, loan-sharking businesses and victimize local people. Also, they have bandit gangs in rural China. Actually most of those are farmers and peasants, they find it hard to get rich, so they go to the railway or the road seeking opportunities.
In the case of inter-provincial organized crime, in the last 10 years it has become a very large criminal organization in China as they move around the country. After committing such crimes as stealing money or obtaining stolen properties, they then move on to other provinces. In China they call these groups the mobile criminal gangs, or the 'lau shu fan tsui'. Furthermore, I think it is very interesting that they are now robbing drivers. Why? I don't know whether you have observed that taxis in China are different from that of Hong Kong. They have a so called 'anti-violence' net installed in the taxis. They also have a sign mentioning that the front seat is for children and women only. If you are a man, you cannot sit in the front. Why? Because there are a lot of robberies. Why? You can ask, there are also taxi robberies in Hong Kong, although the number is not very large and the robbers are only interested in stealing money from the taxi drivers. But in China, they kill the taxi driver. That is because they are not only interested in the money, but they are also interested in the car. They will kill you and then steal your car and get big money for it. If they don't kill you, you could report them to the police and they will be in trouble. So we find that in many cases, taxi drivers are killed, especially when they drive nice, brand new taxis.
In the last ten years, a lot of highways have been built in China. One of them is the one from Shenzhen to Canton and another one is from Shenzhen to Santau. A lot of lorries and coaches have been robbed by criminal gangs on these highways. They use all means to stop you and then they rob you clean. And so something interesting is happening here. Some of the coaches from Shenzhen to Canton, have been robbed frequently, so now if you take the coach and if you are a resident of Shenzhen, when you sit down, the staff will come and take down your Will ! And then just in case something happens, they will check against their records for you. So you can see that the situation is getting worse.
The abduction of women. Would you like to know why they abduct women? For prostitution? Wrong! Marriage. They abduct women and then sell them to local farmers. Why do farmers or peasants want to buy wives? Maybe not enough women, but we have got a lot of women in Shenzhen! The first thing is that if you want to get a wife through the formal channels, you would have to pay HKD $8000. But if you bought one through the black market, it would only cost you HKD $3000. The second thing, is that even if you wanted to get a wife through the formal channels, in some places in China there is no electricity, no water, and the girls now want to go to big cities, like Hong Kong and Shenzhen. They don't want to go to rural areas and be a farmer's wife. So if you want to get a wife, it's hard to get one through the formal channels. In some rural areas, there are rich old men, bachelors, they call them 'kwan tsuen'. So in their middle age, they make a decision to save money to buy girls from the outside through human smugglers. So I mean, who are the victims? The smugglers will abduct the girls, mainly at the railway stations. Because most of the girls who would like to get a job in the city, are from rural areas, they hang around the railway stations waiting for jobs such as factory work. The smugglers abduct them by telling them that they can get them jobs in factories and then they transport them to rural areas and sell them. But you can ask, why don't they escape? The point is that the victims, most of them from rural areas, have left their home town for the first time in their life. They are usually sold in a very remote area. The girl doesn't know where she is, she has no money, and she doesn't know how to manage. We say that this is a very evil business, right? But in some cases, when the girls get married, their husbands do not treat them badly. Maybe some of them are treated very nicely, so they just settle down there. That's the problem. Some police officers go and question the girls and ask them if they want to leave. They say, no, I don't want to leave, because I have got a husband and also sons or daughters as well. Is this a crime or a business and market problem?
Prostitutes. The Chinese government in the past always avoided this problem. But in 1977, 1978, they officially admitted that they had a problem with prostitution. The figure is 420,000. But I think the actual figure is three or four million. I don't know if any of the gentlemen here have visited... Actually I was just there, to do some observations... They have girls from different provinces, they have even got girls from Vietnam. I can tell you, you cannot get any hair cut inside, because they have got no scissors. If you like the girl, you can buy her out and do what you want. It's some sort of human market.
Then there are the nightclubs or karaokes. If you go to these clubs or karaokes, outside there is usually a large group of pretty girls waiting around, if you get inside, you can ask the leader, 'mamasan', or the 'mother' for one of the girls. Our question here is that, are they forced into prostitution or is it voluntary on their part? What do you think? Voluntary? I agree. The thing to know is that there is an oversupply of girls. There are too many girls who want to get rich through this business. The other thing to know is that the pimp ( the Triads call him the middle-chicken ) is not well regarded. If prostitutes are controlled by a pimp, it suggests that the girls are forced into this business. The Chinese Government severely punish pimps. Why? In Hong Kong, they'd say, so I live off the prostitutes, so what? Are you going to put me in jail? That's it. But in China, if you are on the organizing side of this business, especially if you are forcing the girls into prostitution, you will be seriously penalized. The reason is that you are insulting their socialist ideology. That is you are exploiting pure working class girls. That's why in the past, there were very few so-called chick-heads who would enter this sort of business and all did so on a voluntary basis. However, in the last two years, I have found out about some of the organizers of this business, especially the ones that export the girls to Hong Kong, Taiwan, or South East Asia. But still, it's a very sensitive issue in China.
The sad situation here, is the issue of Hong Kong pornography, right? Maybe you have read about it before. But I would like to ask you, especially the gentlemen here, have you had a chance to read the pornography produced in China? No? I am an expert in this field. In Hong Kong, if you produce pornography you can put me in jail, it's not a big deal. In China, it is very hard for printing companies to get licenses. The other thing is, that if the Government ever found out that you were producing pornography, there would be a very heavy penalty. But also in China, there is a big market, a lot of men, you know, want to read pornography. Where can they get it? All or most of them come from Hong Kong. That's why, when you finish reading your pornographic material, don't waste it. There is a large second hand market in China. In Sham Shui Po, some people use containers to collect all second hand pornography and they ship it back to China to sell them. In China, if you buy pornography, that's fine, there is no problem. Even if you sell it second hand from HK, you would usually ask a kid in Shenzhen, they have a lot of pornography there, to sell it on your behalf. If the police question him, he would just say, I am only a kid. So there is a black market in second hand pornography in China. But still, there is no locally produced pornography in China.
So the third case is inter-regional and trans-national crime. I am running out of time, so I will just note other trends such as vehicle crime. In HK in the period between 1990-1991, we had a serious problem with motor vehicle crime. Actually, the thieves were very professional. If your car was stolen, in a few hours time, it would be in China. This was a very professional and serious crime. Also in 1990 up to 1991, HK suffered a lot from armed robberies, especially gold shops. This was a joint venture where HK criminals arranged for criminals from China to come over the border to HK, commit the robbery and then go back to China. So I would like to think that this is a joint venture. We always blame the mainland Chinese saying that they are bad, they come to HK to rob us, but we have to understand that without the HK criminal who organized these matters, how could they manage it on their own? This is a joint out venture.
Drug-trafficking. This is the golden triangle, the triangle between Burma, Thailand and Laos. Traditionally, the drug trafficker went to northern Thailand, instead of Bangkok to obtain heroin, and then ship it back to HK for local use or as a point to ship it out. This was the traditional way. But in the last ten years, we've found that half of the heroin now is up to the 70s or 80s. They go back to Yuennan or GuangXi and then from Yuennan, we call it Asia Miami, just like the drugs from South America to North America and then from Yuennan to Guangdong. Then Hong Kong smugglers come to buy it Guangdong where it goes anywhere, sometimes, to Shani. Recently, drug traffickers have come to use indirect routes, maybe they'll go to Lan Chow and then come to Shan Hi and Guangdong. I want to say here, that HK played a significant role in drug trafficking before, right? But now, if a Hong Kong criminal wants to make money from drugs, they have to go to China, make a connection and then get the drugs.
I'll show you something. This is Yuennan, Burma and this is Laos. In some of the small towns near Burma, a lot of Chinese are not interested in farming. They just want to smuggle drugs. So now you will find that some people are very rich near the border and live in very big houses. OK? That's because they are involved in drug trafficking.
China used to be a drug free country but now it's a drug consuming country. China now officially admits that it's a drug consuming country. But even now, some police officers have told me that in Mongolia and in Xin Jiang, some farmers are starting to plant marijuana, but it is still not in very large quantities. China also deals in soft drugs such as amphetamines as there are the raw materials for production in China. So some Hong Kong and Taiwanese criminals, arrange for soft drugs namely amphetamines to be made in China. Actually, China now, in a sense is a drug producing country.
Time is limited and in conclusion, I just want to say that many people
say that Hong Kong Triads moved into the West before 1997, but in my opinion
they have concentrated on the Chinese market. In China they can make money,
that is if they don't get arrested. How does the Chinese government deal
with organized crime? Just one way: killing. Criminologists and police
have told me that the Government has to keep killing more and more criminals.
Actually the people wanted the government to do it. My conclusion is that
is it a crime problem or a social problem or a market problem? If it's
just a crime problem, especially soft crime, then this is a social inequality
problem, a black market problem, so we should then take other measures.
But anyway, I agree that we should do something for police modernization
in China as if they can develop a professional police force, I think that
would help them to deal with organized crime. My presentation should stop
The distinguished Dr. William Chambliss, is Professor of Sociology at George Washington University in Washington D.C. He is an internationally renowned scholar on organized crime, sociology of law and politics and crime, and has written numerous articles and books in this area. His most recent book, Power Politics and Crime was released in 1999.
ORGANIZED CRIME IN RUSSIA
Dr. William Chambliss, Professor, Sociology Department, George Washington University, Washington, D.C.
Thank you very much for inviting me to come here to speak today. I have had a number of fortunate opportunities over the years to study organized crime in a number of different places including Nigeria, Zambia, Sweden and of course the United States and there are some very interesting differences between these different countries. I think it is a mistake if we always think organized crime means the same thing, because in terms of understanding and controlling it, it is imperative to realize there are very important differences.
In Nigeria, for example, when I was studying organized crime and economic crime, I went to the head of the Customs Department. I told him what I was interested in and what I wanted to find out about. He said the first thing you have to realize about Customs in Nigeria is that the Department is corrupt from the top to the bottom. Now he was referring to himself as the top of Customs, and shortly after that incident, I was invited to have dinner at the Governor's House of Western Nigeria. After dinner, he opened a trunk and it was brimming with Nigerian money and he said, if you want to exchange money just come to me and I will give you a very good deal. Now the significance of that is, Nigeria is a country where organized crime and Government are indistinguishable. They are, in fact, the same thing. The Government was and is organized crime.
I went to Zambia 10 years later to do the same study. The first thing I discovered was that Zambia was illegally exporting all kinds of goods, and the major person involved in organizing that, was the wife of the great socialist leader Kenneth Kaunda. I had actually gone to Zambia, partly because I wanted to study organized crime in a socialist country. I did not come from a socialist country so I'd never had that opportunity. It was the same in Zambia as it was in Nigeria. That is, the government and the people who participated in organized crime were indistinguishable. The managers and the organizers were government officials. Some of the people in the actual operations were government officials some were not government officials. So Zambia and Nigeria represented, what I would call, a case where government and criminal activities with respect to what we think of as organized crime, meaning, gambling, smuggling, money laundering, drug dealing, and things of this type, were integrated with governmental activities.
Now I went to Sweden. In Sweden, it was an entirely different story and as nearly as I could tell also in Norway and Denmark but I did not study them as extensively as I did Sweden. It was clear in Sweden that organized crime and the government were hostile to one another. There were some corrupt government officials, but these were rare and they were clearly operating on very dangerous grounds. They had very little protection and would not only be exposed and punished, but humiliated if they were found as being corrupt. The corruption of Swedish officials tended to be corruption of the flesh, the prosecuting attorney of Stockholm, for example, was madly in love with a prostitute and would go to see her. Those involved in the organized crime activities of drugs and gambling used that as a wedge to try to get him to co-operate which he certainly did. It was however, a very different system because you have what I would call in this case, a hostile relationship between organized criminal activities and government.
And then we come to the United States where there is yet a third type of relationship with crime, it is what the young scholar earlier called a symbiotic relationship. Symbiosis is defined as a relationship where two different types co-operate so that the survival of each is enhanced. In the United States, the corruption of government officials and government agencies is ubiquitous. It is widespread and it is everywhere. But it tends to be a corruption that grows out of a symbiotic relationship between organized crime that provides illegal goods and services and the government. They share certain mutual interests. The prosecutor, for example, at the local state and federal levels, in the United States is appointed or elected, and keeps his or her job on the basis of how many convictions he/she is able to get. Now it is very simple logic that the number of convictions they can get, depends upon the prosecutors co-operating with organized crime. So they arrest a major drug dealer and they say to the drug dealer give us fifty of your minions, the people down at the bottom and we will let you go or we will give you a lesser sentence. Or, they arrest the people down at the bottom and, they say, give us someone important. But the ones at the bottom cannot do that. If they can it is someone who is not really an important player.
The prosecution enters into a symbiotic relationship with organized criminals, and one that is pervasive. In order to run the daily affairs of a city, the mayor, the Governor and the police must in fact co-operate with organized crime. American cities depend on tourism to a large extent, for their economy. Restaurants and hotels depend upon tourism for their survival. They depend on the income from conventions, of which the numbers are mostly male. Groups of men arrive in numbers of ten, twenty, thirty and fifty thousand. When they arrive, they are looking for certain facilities and services, good restaurants for sure, and nice hotels rooms as well as prostitution, gambling and drugs. Now a police department that systematically enforces the law against these illegal activities in Seattle, for example, will destroy business that is associated with Conventions. Those Conventions will go to Dallas or they will go to Los Angeles. The restaurateurs in Seattle will complain that their businesses are being ruined. In turn, the Police the Mayor and the Prosecutor are placed in the position of having to tolerate a certain amount of organized crime activities for the economic purposes of the city or State.
In order to rationalize their position, the law has to give organized crime activity a certain kind of license. Now one of the worst things that can happen for organized crime, and some of you were mentioning them earlier today, is competition. When the 14K gang and the Wo Hop To gang compete, people die, and that is not good for the city, that is not good for the police. It is very bad when people start fighting, it is not good for the business of organized crime. So the government actually licenses some organized crime groups and does not license others. This works very effectively because then what happens is that I have given a license to the 14K group to deal with drugs resulting in what is essentially a monopoly to deal with drugs. If another group interferes with them, the 14K calls me, the head of the Police Department, and says that these groups are interfering with my business and I go and arrest those groups for interfering with the 14K group. Now I look good because I have made 50 drug dealer arrests and the newspaper says that we have broken a major drug gang. In America, it also helps if they happen to be Italian, Chinese or Japanese because that fits the stereotype of who is involved in organized crime. I then look good as the Police Chief, if I have arrested all these guys. But what I have really done, is eliminated the competition of the gang to whom I have given a license to operate their business. Now that works very well too, because then if there is any trouble I go to these people and I say now you give me some of your dispensable people. I get my required numbers in arrests, so all of this emphasizes our symbiotic relationship.
So you have these three types of relationship between Governments and organized crime. You have the symbiotic type which is characterized by the United States. You have the hostile type which is characterized by Sweden and you have the integrated type where organized crime and government operate as one, which is characterized by Nigeria and Zambia.
Another extremely important point of differentiation of organized crime groups, is how they recruit their membership. I am not speaking of where they get new members, rather I mean how did they get started and what kinds of groups enter into organized crime activity. Now the United States is a microcosm of this issue. We have very clearly seen the transition of immigrant groups into the urban areas of America. Furthermore the changes in the ethnic membership of organized crime has diversified to include, the Irish, the Jews, the Italians and now the African-Americans. These groups are the new immigrant groups and they are also the poorest groups. These are the groups involved in organized crime. They are largely uneducated, unsophisticated, but they are also very cunning who use violence to control both the people who work with them and those who work against them. In Sweden, organized crime groups tend to be uneducated but local. In Nigeria they tend to be government people and therefore mostly educated and well schooled and fairly sophisticated. They are very much inclined not to use violence unless it becomes necessary.
You have these different dimensions and then you have a third critically important dimension that has to do with what some of you earlier mentioned about the transnational national aspect. It is very interesting to see China moving from local to regional and now to international organized crime. The United States is clearly transnational. Nigeria and Zambia are clearly local. They are clearly not involved in transnational crime except perhaps as a transshipment place for drugs coming from Russia or Latin-America and then going out to Europe. But as far as organized crime being involved in transnational operations and the setting up of operations internationally, this is not the case in Nigeria and Zambia. In contrast, the United States is very much involved in transnational crime.
But not all these models take us to Russia and what has happened in Russia since the 1990s. Russia combines elements of all the organized crime models discussed. In Russia, organized crime and government are indistinguishable from each other. In addition, Russia's organized crime is transnational to an unprecedented degree. Because government and organized crime are drawn from the same pool of people, it is run by an elite, containing the most sophisticated, educated, and talented people in society.
In Russia organized crime is not controlled by immigrant groups. The Chechyans were formerly prominent in organized crime when Russia had a planned society and a planned economy. Now, they are relatively insignificant in the Russian organized crime scene because it has been take over by former KGB agents as well as former military officers and government officials. The role of these agents and officials in organized crime cannot be underestimated. The skills that they are bringing to the world of organized crime are unprecedented. To understand Russia, you have to think back to the era of the planned economy. What were the prevalent ways that people could obtain illegal goods and services? Like the Chinese, they were a 'document society'. That is to get a dacha on the coast, you could not use money, rather you had to have documents. To travel from Moscow to Leningrad, you had to have a document and in order to go overseas you also had to have a document. What developed, was a group of highly skilled gangs probably no more than 300 in member, who were extremely professional in counterfeiting trading and selling documents. When Russia became a market economy, these skillful gangs used the document trade to control the entry and exit of Russians from the country. With the sudden break-up of the Soviet Union, another highly exploited policy was the use of protection. The use of protection is a characteristic trait of organized crime groups everywhere. In the case of Russia, planned economy protection consisted of such cases as helping a factory to doctor its documents and to protect it from being inspected by Federal officials.
After the break-up of the planned economy, protection became a matter of a pay-off system in order to keep doing business. With the break up of the planned economy the cost of producing goods now shifted to individual entrepreneurs and the tax rate was extremely high. The corporation producing goods would now lie about how many goods they were producing. What this did, was to open up opportunities for protection rackets. Organized crime groups ( after 1990 they grew quickly from about 300 to over 5000) operating in Russia, would go into the factories and discover that the owners were only reporting on 10% of say the vodka they were actually producing. They were taxed at 80% of their profit but they were only reporting 10% of their production. So for protection, the organized crime groups moved in and said we will not let them come and inspect you if you give us 50% of your profit, which is 30% better than if the government came and inspected them. But who were the people who went to the company and did this? They were the tax collectors. They were the people who were collecting the tax and this system permeated throughout Russia. In addition to this, the Russian Government was incapable of controlling the resources that were in Russia. It is estimated that in the past 10 years the gold supply in Russia has gone from one of the largest in the world to near zero, without the government selling any of it or getting any tax on it.
American organized crime entrepreneurs moved into Russia to join with Russian organized crime groups. They aimed to exploit the resources of Russia, to export oil illegally for the market, as well as to bring out gold, silver, plutonium and other abundant resources. Now we are talking about organized crime providing items that had previously not been a major source of profit for them. In addition to these items, weaponry and its raw materials had become a major source of profit as well as control by these organized crime groups. At present uranium is being sent out of Russia by organized crime groups in co-operation with American and Italian organized crime groups and is exchanged for drugs. Plutonium capable of making nuclear weapons as well as all kinds of weapons including guns, and aircraft, are all being exported. Suddenly, we have in the world, organized crime groups that are more powerful in providing weaponry and resources for making weapons and raw materials than most governments in the world, and this situation is out of control.
In the United States, Russian crime groups have moved in to take over the organized crime scene that has up to now largely been dominated by other ethnic groups. They have managed to do this because of their better organizational capabilities, co-operating with them rather than fighting against them. They have also successfully taken over the white slavery trade, transshipping women for prostitution across borders. The women are offered jobs as waitresses or as models only to find that they are forced into prostitution when they arrive. Stolen property, weaponry, drugs, Russian organized crime groups have become increasingly involved in all of these activities.
The situation now, is that the lower level jobs are occupied by local crime groups with the Russians occupying the higher echelons. For years, the American police establishment portrayed organized crime as controlled by the MAFIA, the international organization that dominated organized crime activities throughout the world and in the United States. This picture was a total myth that served to increase the budgets of American law enforcement agencies. It fanned the flames of racism including anti-Semitism, anti-Italianism and all kind of ethnically charged emotions in the United States. In fact, there existed and still do to some extent, thousands of organized crime groups, mostly run by people who are relatively ignorant and who did not know how to run organizations. They competed against each other and ran, in comparison to today, small 'mom and pop' operations. Ironically, what is happening today, is that for the first time, we see potentially the creation of that kind of organized crime group that the America law enforcement community has said existed for the last 20 years.
Now we are seeing the emergence of a highly sophisticated organized crime group that is not hesitant to use violence. Previously crime groups were reluctant to use violence because in the symbiotic relationship between organized crime and law enforcement, it was understood that the use of violence had certain conditions. From the point of view of law enforcement, we cannot have you use violence gratuitously, you must use it sparingly and you must only use it against one another. If you have to kill someone in your organization that is your business but it you kill a policeman, a citizen or a professor who is investigating organized crime God help you!
Russian organized crime however, does not operate from this basis. They are operating on the basis of international freedom from prosecution. They are operating on the basis that they can function in the global economy without fear of local prosecution. Their willingness to use violence is far greater than the willingness of organized crime groups in Western countries to use violence. They have not hesitated, for example to murder American businessmen working in Moscow. It was unheard of, for organized crime groups in New York or Chicago to murder a businessman. If American crime groups had murdered a businessman in a comparable situation to that in Moscow, their symbiotic relationship with the government would not be enforceable.
Russian organized crime groups did not hesitate to murder a reporter who was researching a story on the Russian military. He exposed the story of the Russian military who, before leaving East Germany, sold weapons to organized crime groups. Subsequently the reporter was murdered and the general who was in charge of selling those weapons was promoted.
Mark Rich is one of the world's richest and most corrupt businessmen wanted in the United States but for some reason we cannot seem to put him in jail. But we do know where he is, unlike some of the people you were talking about --- we know exactly were he is, he is in Switzerland. Mark Rich sold oil illegally which he obtained from all over the world. He sold the oil during the South Africa boycott. He is also involved in the exportation of resources out of Russia and works hand in glove with organized crime in all of these different operations.
Mark Rich's known involvement in these kinds of enterprises has enhanced his power, not limited it. These operations are exactly the kind of threat to democracy that the law enforcement agencies have attributed to the Italian Mafia, but the reality has never compared to the model.
The kind of relationship that these organized crime groups have to the
Government, is critical for understanding such issues as where they will
operate and how they will operate. There is no question that Russian organized
crime groups will expand throughout the world and will attempt to obtain
a strong hold in Hong Kong and China, as well as in every other place.
These groups are not tied to any particular country and they are not tied
to agreements in any country. They are independent groups that dominate
organized crime activity without providing the types of benefits that may
have been provided before. They make their own choices as to where they
will invest their profits. They are in a position to use massive amounts
of capital to make or break economies throughout the world. This is a serious
international threat to our contemporary economic system. They will have
however, unless something is done to stop them, acquire on a scale that
we have never seen amassed by criminal groups before. Whether or not anything
will be done about it, will depend on the realization that we are no longer
dealing with organized crime in the traditional sense. The triads, the
Mafioso, the Cosa Roston, the organized crime groups in Sweden cover the
organized crime in Nigeria and Zambia. These are trivial compared with
what is now going on as a consequence of the movement to a market economy
Mr. Mike Blanchflower, Deputy Principle Government Council, Department of Justice, HKSAR
Mr. David Hodson, Director of Centre for Criminology, University of Hong Kong and Former Assistant Commissioner of Hong Kong Police
Mr. David Hodson
Before opening up the discussion, perhaps I can highlight a few interesting points that the speakers have made. Starting if I may, with Gilbert, your example of organized criminal activity in the cigarette smuggling organization, I think may dramatically reflect the link between organized crime and corruption. I think that organized crime can not exist without corruption.
Another interesting point is that where does legitimate business cease to be legitimate and become organized crime? And there of course he made the point that violence and fear are central.
And moving on to Macau, the phrase that he started up with in which was later re-emphasised by Dr Chambler, is that the symbiosis of police and Triads has been disturbed. The point there that I found interesting was how changes in the way of the running of a legitimate business has produced so many opportunities for crime, the way that the gambling business in Macau has changed things there. Since we in Hong Kong live in a rapidly changing part of the world, we will have to watch very carefully as to what is happening here and how changes here could produce opportunities for crime.
And of course you suggested, or, raised the issue of effective regulations, that government regulations or the absence of regulations may well act on the business and may well therefore add on to criminal activity. Remember Dr Chu, he mentioned organized crime in China. He said that the concept of organized crime in China is new and is not clearly understood. I wonder how many people here in Hong Kong actually clearly understand this concept. I must admit it was something that worried me a lot I was aware that I didn't understand it. He mentioned how the consequence of having greater personal freedom in a country which ceases to be as authoritative as it was in the past produces tremendous opportunities for crime that the country may not be able to deal with.
We talked about the international aspect of crime. Where do you draw the line between organized crime and unethical business, organized crime, secret societies, and religious cults. I found it very interesting when you were mentioning some of the sensitivities of the Chinese Government and how this has affected pornography. I hadn't realized that the sensitivity regarding publications led to the creation of this business opportunity here in Hong Kong. He said that the solution to organized crime or serious criminal offences in China is seen to be the death penalty. Funny, that's what the Triads do, but of course what they are doing, are killing our prosecution witnesses. Are the authorities in China doing the same? I look upon many defendants as the guy with the 'hands on' connection with crime, more in terms of the asset, a valuable asset, who could become a very good prosecution witness. You do not want to kill him.
Professor William Chambliss gave a very interesting climax of the presentation by dealing with relationships. The relationship between organized crime and governments, different modes and models of crime, the relationship between crime and competition, the relationship between crime and ethnic groups. The very scary crime model is that in Russia and again the transnational, or the international aspects of crime emerge; he mentioned international freedom from prosecution. I trust that those of you who are going to ask some questions about the international aspect of crime might direct your questions to Mike Blanchflower. He deals with trying to overcome some of these problems, trying to make sure that people are not actually free from prosecution internationally.
Perhaps I can introduce to you Mr. Blanchflower, and perhaps I can embarrass him a bit... In my opinion, Mike perhaps knows more about organized crime, than most of us. He was very much the moving force behind the Organized and Serious Crime Ordinance, and getting that through at the particular time it was coming up, wasn't an easy task at all. Now he is dealing with mutual legal assistance, trying to get the system over international borders. And I think the relevance of that is very important. So we are very delighted to have him here.
Mr. Mike Blanchflower
I am sorry that I didn't have the benefit of hearing the presentation
of what organized crime is in this century. I thought it might be useful
just to talk to you about what Hong Kong has done in relation to organized
crime and what we've learnt, because I think that what Hong Kong has done
could be useful to other countries in the region. Basically, in the Organized
Serious Crime Ordinance, I thank Big Spender for that ordinance because
if it wasn't for the Big Spender and the criminal activities conducted
by him in the late 80's, we would not have the Organized and Serious Crime
Ordinance. So what happened was this: some of you may recall that back
in 1989, there was the Kai Tak robbery. I think that drew people's attention
for the first time to the magnitude and sophistication of an organized
crime group carrying out a major crime. And later on, you may recall in
the early 90s, down at Central, there were some gun battles and jewelry
robberies, and in Mong Kok, there was the case of the jewelry robbers of
Yip Kai Foon and Big Spender with AK 47 rifles. About a year later they
committed several goldsmith robberies. And that was the climate that existed
in Hong Kong at the time, so from about 1988 to 1989, the Department of
Justice and Security Branch became concerned and they went to see what
could be done. The immediate response by the officials was to look at the
US and what the US had, if we could import that to Hong Kong, that was
good. Everybody can recall the RICO statute. Bearing in mind that the US
had been regarded, I think it's about 20 years ago, as the best in resources
against crime, it was thought, 'let's import that, because if that is what
the US has, and if Hong Kong has it, then we can solve the organized crime
problem'. And so we studied results, as we had people coming over from
the States. Then in 1991 the Security Branch held discussions on the Organized
Crime Bill. The Organized Crime Bill contain conditions on prosecution
but it also created offenses relating to being a member of an organized
crime group. What it demonstrated, was that it was too new, too different
for Hong Kong at the time. After the overwhelming negative response of
the Organized Crime Bill, the administrators took on the positive response,
in general to restraining crime. The Administration in March 1992, the
then attorney general, had collected a response and came up with different
legislation. For about three months, we drafted the Organized and Serious
Crime Bill on the run, we were drafting it literally on the run as we were
reading it. And what came through was the message that when we talk to
the police in the Organized Crime Bureau, we didn't need to come up with
new offences, what we really needed was a better means of investigating.
We already had a large catalogue of offences that we could address. These
were being carried out by organized crime bodies but we could not investigate
them. In one part we look at the issue of compelling people to provide
information to the police under order, the conditional order. The suspects
could be compelled in the interview by the police to provide information.
Secondly there was a segment on confiscation, then we had a money laundry
offence, and then there was a general feeling that the sentence for serious
crime was too low. So there was a segment called 'enhance sentencing'.
So now I had about four different parts, we introduced it in July 1992
and for two years the legislative committee examined it. And I think the
lesson that I have learnt when it passed in July 1994 was that it was essentially
passed intact. I think what happens, is that when you have legislation
that you can support in principle, the politicians will accept it. What
you need is public support, and there was tremendous support at the time
for doing something about organized crime. That was one lesson. Second
thing that we've learnt is that, do something that is possible, don't do
anything dramatic or too new, try and work on something that is possible,
perhaps borrow it from another jurisdiction. If you do something that is
too new, too different, you won't get support. And you must bear in mind
that at the time when there was a call, shouldn't we introduce the authorizations
to intercept telecommunications? Well, we did study the law at the time,
but just bear in mind that in the period of 1992 to 1994, there was the
factor of the Handover in July 1997, therefore it was a very politically
charged time because it was an uncertain time. If you give too much power
to the law enforcement authorities, how will they be post 1997? So it was
really a matter of doing what we could, resource-wise, and doing what was
possible politically, as they say. If we hadn't had the support from the
grassroots level, the district level, I am sure that the average politician
wouldn't have been so supportive of the bill. It was enacted in 1994. The
next lesson that I have learnt, is that with something new, it takes time.
It takes time for police to get used to the new investigative powers of
restraint, and money laundering offences. It took time for the prosecutors.
It's coming, it's been used, more in the restraint field, money laundering
offences etc; but you must realize that when you bring a new law into operation,
it's not like turning on a light switch, there was a good five years and
still it's a learning process. And all during this time, personnel change.
People that developed some experience in it moved on to other positions.
So if you are going to bring in new laws in the future, it takes significant
time before they are realised. We don't have visible serious crime as in
1989, but I am sure we will have organized crime. They would have gone
on to different fields. They will come back stronger and they will come
back loudly. So what do we do in the future? I think in the future, if
law enforcement wishes to better tackle organized crime, it would appear
to need some form of judicial authorization in interception communications.
Its effectiveness has been proven in many Western countries and we see
countries that we never thought would bring in interception, like Japan
and Germany that are now introducing it. Those countries that have seen
some sort of judicial authorization for interception, have seen that it
is a way to better the investigation. Secondly, if you are going to bring
in newer laws for organized crime, I believe you are going to have the
climate of public support. We were able to do it in the 1992 to 1994 period,
but I think we are not going to see significant new laws, until we again
see a rash of criminal activities in the future. So there is something
for the public to focus their mind on, to tell their legislators that they
want something done about it. It's got to come from the grassroots level.
And lastly, I would think that in the mean time, where we have to focus
our attention on, is, I think a better way of addressing the problem of
organized crime officials. That's a way of enhancing the intelligence sharing
amongst police force, not just within Hong Kong, but internationally. There
has to be better development between Russia and other Asian countries.
Intelligence is far more important than waiting for the crime to be committed
or to be committed again. In trying to catch up in the investigative process,
I think that if law enforcement in Hong Kong could be addressed, I would
be thinking of developing the context for the better exchange of Intelligence.
And then following on with that, once you have the intelligence, there
is the problem of obtaining evidence for prosecution in organized crime.
We are doing that. We have one mutual legal system arrangement in place,
there are also a number under negotiation but still we could provide mutual
legal assistance and make requests of countries for which we do not have
arrangements with. But I think again the administration of law enforcement
and the Department of Justice has to look at better and more efficient
ways we can enact the law.