About this event
Organized crime groups (OCGs) invest substantial sums in legal economic activities worldwide. Evidence on these investments is limited due to data scarcity. We introduce a model differentiating contaminated (OCG benefits from connecting legal firm to illegal activities increasing the risk of detection) and pure investment (legal firm and OCG's illegal activities remain separate). The model clarifies how to distinguish these motives in the data and delivers predictions which we test using highly confidential records from the Bank of Italy's Financial Intelligence Unit. Among infiltrated firms, we distinguish born clean (that are later infiltrated) from born infiltrated. In born clean firms, infiltration is associated with a change in the sources of finance and increased liquidity, but no changes in operational outcomes, consistent with a pure investment motive. Born infiltrated firms, instead, present traits consistent with the contaminated motive. As born clean firms attract more OCG capital, our results suggest OCGs mainly use legal firms to invest in assets and acquire valuable connections.
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This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.
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