Organized corrupt network (OCN) in present-day Russia

Serguei Cheloukhine,
Ph.D., Professor,
Department of Law, Police Science and Criminal Justice, John Jay College of Criminal Justice,
City University of New York,
USA

Darkhan Aitmaganbetov,
Ph.D. Candidate, Senior Assistant to the Prosecutor General,
Republic of Kazakhstan

There was a perception that organized crime and corruption on the decline in Russia since Putin took power. Moreover, decline in Organized Crime (OC) group numbers, turf wars, murder for higher and improving small business function conditions created an image that OC and corruption are defeated. On the conceptual and empirical levels, the existing literature does not capture what we think is new and characterized crime, the state and the economy under Putin. We propose a new concept: Organized Corrupt Network (OCN). Most scholars studied crime and corruption is pre-Putin and decided either not to cover this period or simply failed to notice emergence of new phenomenon. Perhaps, there is another, objective factor. Since Putin acquired power, under pretext of “counter-espionage”, western scholars were forced out of Russia or never allowed to Russia; therefore, it was a phase without data collection.

Russia’s white collar and organized crime are complex system of social and economic relations for illegal profit extractions through a multifaceted of corrupt networks. Organizing such a network involves professional criminal organizations, or groups consolidated within the region (territory), working with a strict hierarchical structure and division of functions in the process of privatizing profit. These groups infiltrated legitimate business, state authorities, and law enforcement, using violence, corruption, and a monopoly on illegal goods and services to maintain its antisocial activities and obtain immunity from exposure in conspiracy. Criminal activity within the network has increasingly become instrumental in dividing and monopolizing both legal and illegal service markets, as a means of securing market share and higher profits.

In most cases, officials must join a network of shared services where no bribes are received or passed on. In such situations, the obligation to join a corruption network is accompanied with mercenary temptations: as a rule, compensation is a stake in the network profits. The corruption networks formed are both vertical and horizontal. The vertical relationships are informal, illegal interdependences between bureaucrats within one organization. The horizontal ones are between different agencies and other structures. These relationships are used for organized implementation of corrupt transactions that are aimed at: personal enrichment; allocation of budget funds in favor of a network; enhancement of the network’s illegal profit; or, receipt of competitive advantages by financial and commercial structures within the corrupt network to generate future earnings. Often, corruption network coordinates the activity of the organized criminal groups or even merge with them.

Structures of corrupt network include groups of government officials; commercial and financial structures that draw off received benefits, privileges and incomes; protection from the Ministry of Internal Affairs, FSB, Offices of Public Prosecutor, tax auditors and judges.

OCN can be defined throughout the following features:

– By activities of key individuals,

– Prominence in network determined by position, contacts, and skills,

– Personal loyalties more important than social identity,

– Network connections unite around one particular leader, and

– Low public profile—rarely known to anyone.

Based on personal observations, members of a family occupy the OCN top and mid-level key positions. This ‘family’ has high-ranking appointed members in the FSB, MVD, Federal Customs Service, Court, Central Bank and municipal administration in four different Russia’s districts. They have businesses, legal and illegal, run by either their relatives or organized crime group, or both. Customs chief officer, for example, controls all transactions in import-export operations and gives preferences in taxes. Huge number of luxury goods imported from European Union, Canada, and the USA registered as humanitarian goods and therefore recorded tax-free. After they are sold through organized crime run retails, profit, including customs tax margin, goes to OCN. Family members control all business transactions as well as protect the network from intrusion and potential legal investigation. Simply, such network has firsthand information on possible complains or inquires. Thus, through its member in the MVD migration services OCN controls illegal labor market, deportation and immigration. District judge makes court’s decision favorable to the network or its people charged for crime. The FSB officers assess potential threats and gather intelligence to protect all network members. The network’s member at the municipal and regional administration level is in charge for business registration, licenses and favorable for the network economic and financial conditions. District administration OCN’s member usually supervises the network’s position appointments, promotions and its expansion. The top-OCN leader controls all members’ actions and consults on their important decisions; he (mostly it is he) also maintains the OCN contacts with the federal political and law enforcement authorities.

Email: scheloukhine@jjay.cuny.edu; add-dms@mail.ru

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