Racketeering

Racketeering is a type of organized crime in which an enterprise is created, and many illegal activities are operated and executed under it, forming a racket of criminals. The enterprise plays the role of the facade to mislead authorities; therefore, criminals wire and collect all the illegal income in its name.

The first registered racketeering cases go back to the early 1920s and have been prevalent in the world since then. A person who takes part in such activities is referred to as a racketeer. As a result, the U.S. government introduced the RICO act to identify and tackle these crimes.

• Racketeering creates a false enterprise, sometimes a legal firm, to operate and execute illegal criminal activities like extortion, robbery, arson, murder, obscenity, and other forms of organized crimes.
• It is mostly defined as organized or white-collar crimes operated and ruled by certain mafias and people with high connections in authority.
• It is a common offense in the U.S., the U.K., and many parts of Europe, forming a syndicate of people performing illegal activities
• To stop such crimes, the U.S. government introduced the RICO Act in the 1970s, which till now, has identified and caught thousands of criminals working directly or indirectly with such firms.

Racketeering has been a major crime issue, especially in the U.S., U.K., and many parts of Europe.

Lucky Luciano, a Sicilian who immigrated to the United States in 1906, was an infamous Mafia regulator. He is widely considered the father of the modern organized crime. The criminal web originated in Sicily by families and later came to the U.S. Luciano brought together the young gangsters of New York City and executed older mob bosses. He thus began to take control of all the crime in the city. He was the first to start a racket that dealt with prostitution, murder, robbery, bootlegging, and extortion. Luciano organized the whole Mafia, and a criminal association started with five crime families and later became a syndicate. Authorities arrested Luciano in 1936 after some sex workers gave evidence against him. Luciano assisted the federal government from his jail cell during World War II. After his release and deportation to Italy, he later died there.

In current times, racketeering comprises managed and executed activities under the name of a false company or a firm. In such a way, all the charges go with the company name only, leaving its operators enough opportunity to clear their names. As a result, a person can more easily pass certain crimes to an enterprise’s name rather than facing the accusation themselves.

Criminals garnered a lot of benefits from organized crime, mostly related to lending and receiving illegal cash income. Later in the 1970s, the RICO (Racketeering Influenced and corrupt organizations) act changed the situation. RICO has helped the authorities capture more than thousands of criminals with racketeering charges.

Modern racketeering crimes include credit card frauds, data theft, and cybercrimes. They belong to the category of white-collar crimes.

Example #1

In the U.S., the justice department has issued subpoenas to several firms under racketeering charges of manipulative trading. This list has many well-known companies like Citron Research and Muddy Waters Research LLC. However, the prosecutors struggle to use a proper federal law to impose on these firms, while the RICO act still stands as the best viable option.

RICO is a popular instrument to combat bribery, money laundering, drug trafficking, etc. It is also common knowledge that prosecutors have built many RICO cases against several firms. This is because RICO will allow the government to investigate and charge these firms with criminal enterprise activities. There is also speculation of “short and distorted” schemes. Accordingly, it is an excellent racketeering example to understand how the law can accuse crimes at different levels on more than one firm.

Example #2

Another good racketeering example is the case of a well-known politician. The former South African President Jacob Zuma pleaded not guilty to corruption, racketeering, and money laundering from a 1999 arms deal. He was serving as a deputy president at that time.

In addition, Zuma had already faced a separate inquiry from 2009 to 2018. This was when had allegedly accepted 500,000 rands ($34,000) from a French arms company. Seemingly, he accepted the bribe every year to protect it from an investigation into a $2bn deal. Zuma’s defense team is opting for the recusal of state, declaring that he has “no title to prosecute.”

• The U.S. government introduced the RICO Act, or Racketeer Influenced and Corrupt Organizations Act (RICO), in the 1970s to combat organized crimes that come under racketeering.
• The act prohibits the illegal acquiring, operating, and receiving of uncalled income.
• It prohibits a series of crimes initiated under the name of an enterprise. It holds racketeering charges against any individual associated with such enterprises in the form of an employee, partner, or owner.
• Section 1963 of the RICO act defines it as a crime for any individual to be linked to an enterprise or use the income received from racketeering conspiracy or activities. It can also include a collection of unlawful debt and maintaining it in the interest of the illegal enterprise. The law also declares any person associated with such enterprises as a participant.
• The act is liable to find proof, evidence, or a visible pattern of illegal offenses to charge any entity or individual under the crime of racketeering.
• RICO includes many criminal offenses and explains such crimes in a thorough and detailed manner.
• A list of crimes falls under the RICO act under the umbrella of racketeering. They are embezzlement, murder, bribery, loan sharking, mail frauds, bankruptcy frauds, wire fraud, prostitution, drug violations, ransom, extortion, robbery, data and privacy theft, human trafficking, and obstruction of justice.
• RICO designs offenses, penalties, and punishments for those involved in racketeering. The maximum penalty is a fine of $25000 and 20 years of imprisonment.
• Apart from white-collar crimes, it works in civil action rights, permits private plaintiffs, and allows citizens to file lawsuits.
• Over the years, RICO has helped the U.S. government catch thousands of criminals indulged in a racketeering conspiracy.

This has been a guide to Racketeering & its meaning. Here we explain it along with examples, charges and the RICO Act. You can learn more about accounting from the articles below –

• Round Tripping
• Black Economy
• Whistleblower Policy