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Russian Criminal Groups (RCGs)
Русские/Российскые Преступные Группы (РПГы) In Oz
AUSTRAC, October 2011
Ethan S. Burger, Senior Lecturer
Centre for Transnational Crime Prevention
University of Wollongong – Faculty of Law
ethansb@uow.edu.au

? Economic Relevance:
– Australia and Russia compete for export markets
(coal, oil and gas, iron ore, gold, alumina, nickel &
wheat).
? National Security Concerns:
- Financial Crime; - Illegal Weapons Exports; and
- Cyber Crime; - other Transnational Crime.
2
Should Australians Be Concerned
about Developments in Russia?

The Risk of Being Too Clever By a Half
? Putin announces that he will seek the
Russian Presidency again in 2012.
? The inseparability of government, law
enforcement and organized crime.
? Is it necessarily true that ‘the past is the
present, it’s the future too.’?
? Is Russia a country, a state, or something
like the English East Indies Company (the
corporate model)?
3

According to the US Gov’t
? “Russian spies use senior mafia bosses to carry
out criminal operations such as arms
trafficking.”
? [Russian state bodies] “operate as de facto
protection rackets for criminal networks.”
? “Rampant bribery acts like a parallel tax system
for the personal enrichment of state officials.”
? “Prime Minister Putin [has apparently] been
amassing illicit proceeds from his time in
office.”
4

Conceptual Framework
- When do anecdotes about criminal groups and criminal
activity become “data”?
- ROC groups based in and controlled from abroad
engaged in commercial/business activity in Australia) (e.g.
money laundering and “cherry picking” – the later with
foreign policy goals.
- ROC groups (cells) involved in traditional organized crime:
(cybercrime/industrial espionage, financial fraud, human
trafficking, narcotics, illegal weapons exports.
5

Some Context
? In December 1991, the USSR disintegrates. Angry, idle former
soldiers and industrial workers contribute to a dramatic increase in
economic and violent crime.
? Large numbers of prisoners were suddenly released from
penitentiaries. Annually 100,000 individuals presently “graduate”
from crime school to re-enter Russian society.
? Existing institutions collapsed, most people were not prepared for
the disappearance of the Soviet life style. Contemporary Russian
youth were attracted to opportunities to make money quickly as
societal ethics. What do these people do when they move
abroad?
? Those with the “right” contacts, ties to foreign business entities
and foreign language skills were the most successful in their
endeavors.
6

Largest Russian Companies (FT 500 List)
? Gazprom, Global Rank 33, energy.
? Rosneft,Global Rank 62, energy,
? Sberbank, Global Rank 86, banking.
? Lukoil, Global Rank 140, energy.
? Surgetneftegaz, Global Rank 174, energy.
? Norilsk Nickel, Global Rank 207, metals.
? VYB Bank, Global Rank 263, banking
? Novolipetsk, Global Rank 383, metals.
? Novotek, Global Rank 394, energy.
? Mobile Telesystems, Global Rank 470, telecom.
? Vimpelcom, Global Rank 493, telecom.
QUERY: Nationality of entity vs. beneficial owners;
Shills and subsidiaries.
Data collection – how reliable?
7
http://media.ft.com/cms/66ce3362-68b9-11df-96f1-00144feab49a.pdf (July 2010)

The Myth of the Russian Mafia
(мафия)
? Some “specialists” viewed RCGs either through the prism of
organized crime models or as a new manifestation of a
“national security” threat.
? In Russia, the term “mafiya” [мафия] is used in every day
language to refer to the members of the country’s
ruling/business elite (previously, it meant Communist party
officials). Also used for criminal groups is “Bratva” [Братва] --
slang for "brotherhood“.
? In 1993, the Russian Ministry for Internal Affairs (MVD)
estimated there were 5,000 RCGs in the country the
membership of which was believed to be approximately
100,000. Their members largely operated locally, although
some engaged in int’l financial crimes and killings abroad.
? March 2010, a story appearing in the journal “Nasha Versiya”
stated that there were approximately 300,000 RCG members
operating abroad – although others put the figure at closer to
500,000. Query: who is doing the counting and whom is being
counted? 8

FBI TEN MOST WANTED FUGITIVE
9

RCGs in Australia
? Oleg Deripaska seeks larger stake in Australian the bauxite business
customers (17 April 2010, Weekend Australian (Finance).
? The Federal Police says the majority of cyber crime committed in Australia is
driven by Russian organized crime gang. For example, Cyber attacks of
Multibet website and cyber extortion via Telstra's Alice Springs network (17
August 2009, ABC Transcript and (9 September 2009, ABC Premium News).
? Money laundering through real estate apparently on Gold Coast (22 April
2008, The Australian), as well as Sydney and Melbourne (Professor James
Finckenaur, formerly with US DoJ’s Nat’l Institute of Justice).
? Of the 200 large Australian and New Zealand organizations surveyed, 43%
ranked cyber risks as their greatest worry, ahead of traditional crimes,
terrorism and natural disasters combined. (25 February 2008, Canberra
Times).
? Credit card fraud traced to Russian mobsters is on the rise (9 September
2007, The Sunday Mail).
? Fed: The Russian mafia is Australia’s biggest security threat (22 November
2000, AAP General News (Australia)). Is there too much hype?
10

Organized Crime & the Financial Sector
? In 2008, bank specialists estimated that there were only about 300 “real
banks” out of a total of 1,200 licensed banks. Most “little more than
treasuries for big businessmen or entities engaged in criminal activity
such as money laundering” (e.g. Bank of New York’s local partners).
Some “banks” engage in loan-sharking.
? Major changes in commodities is often attributable to Russian gaming in
the futures market – again another opportunity for criminal banks.
? The vast majority of Russian entities with leasing licenses are actually
not involved in legitimate commercial activity suggesting they are fronts
for money laundering operations.
11

RCG Transactional & Corporate Character
- RCGs included as members many professionals (e.g. accountants, bankers,
computer specialists and lawyers). Individuals with intelligence backgrounds
or had the skills necessary to work abroad often in collaboration with foreign
criminal groups were highly valued.
- Australian law enforcement, intelligence and regulatory activity are “under-
resources” (e.g. -- who is watching the shills for Gazprom, Lukoil, Norilsk
Nickel, Rusal, and Severstal? What is RusMining?
- What threats are posed to Australia from “Sovereign Wealth Funds (China,
Russia)?
- Can due diligence by the Austrac (Anti-Money Laundering and Counter-
Terrorist Financing Act of 2006) & the Australian Foreign Investment
Research Board (Foreign Acquisition and Takeover Act 1975) be relied
upon? Why does Russia want to join the Asian Pacific Group on Money
Laundering?
?
12

Colonize by Purchase Rather than
Conquest
13

International Legal Framework
? United Nations Convention against Transnational Organized Crime
and its Protocols;
? Protocol to Prevent, Suppress and Punish Trafficking in Persons,
Especially Women and Children, supplementing the United Nations
Convention against Transnational Organized Crime;
? Protocol against the Smuggling of Migrants by Land, Air and Sea,
supplementing the United Nations Convention against Transnational
Organized Crime; and
? Protocol against the Illicit Manufacturing and Trafficking in Firearms,
Their Parts and Components and Ammunition, supplementing the
United Nations Convention against Transnational Organized Crime.
14

Cooperation in Law Enforcement
- Russia & Australia episodically cooperate in the
area of law enforcement. Both have legal
attaches attached to their embassies in the
other’s country and both are members of FATF
and Interpol. Zero sum game atmosphere.
- Notably, the two countries do NOT have either an
extradition treaty or MLAT, and will not recognize
the other’s judicial decisions.
- Contrast – 129 countries have one or the other:
http://www.ema.gov.au/www/agd/agd.nsf/Page/E
xtraditionandmutualassistance_Relationshipwithot
hercountries_Alphabeticalcountrylist. 15

Cybercrime
(the Australian, 29 March 2011)
The global treaty to fight cybercrime is doomed to fail, says Eugene
Kaspersky, chief executive of Russian-based IT security vendor
Kaspersky Lab. The Gillard government is currently assessing whether
to join the Council of Europe Convention on Cybercrime, with public
consultations having just closed. While the government plans to give
police new powers to order the collection of real-time network traffic data
and to rapidly secure evidence held on computer systems, it has stopped
short of agreeing to allow realtime interception on behalf of foreign
powers. It will, however, amend telecommunications intercept laws to
permit the collection of ‘‘prospective data’’ for foreign law enforcement
purposes where the nation has made a mutual assistance request
approved by the attorney-general.
? 7 of 10 top spammers based in Russia.
16

UNODC Pilot Study:
Potentially Useful Typologies ?
? Rigid hierarchy – single boss with strong internal discipline
within several divisions.
? Devolved hierarchy – regional structures, each with its own
hierarchy and degree of autonomy.
? Hierarchical conglomerate – a loose or umbrella association
of otherwise separate organized criminal groups.
? Core criminal group – a horizontal structure of core individuals
who describe themselves as working for the same
organization.
? Organized criminal networks – individuals engaged in criminal
activity in shifting alliances, not necessarily affiliated with any
crime group, but according to skills they possess to carry out
the illicit activity.
http://www.unodc.org/pdf/crime/publications/Pilot_survey.pdf

While in Russia . . . Or operating in
Australia.
? Work together without showing a profit.
? Keep double books.
? Share profits through payouts.
? Respect the informal order.
? Make and keep friends (be entrepreneurial).
? Avoid formal institutions resolve conflict through
intermediaries.
? See Professor Alena Ledebeva’s “How Russia Really Works.
18

Definitions Are Critical (Part 1 of 2)
? (a) “Organized criminal group” shall mean a structured
group of three or more persons, existing for a period of
time and acting in concert with the aim of committing one
or more serious crimes or offences established in
accordance with this Convention, in order to obtain,
directly or indirectly, a financial or other material benefit;
? (b) “Serious crime” shall mean conduct constituting an
offence punishable by a maximum deprivation of liberty of
at least four years or a more serious penalty;
? (c) “Structured group” shall mean a group that is not
randomly formed for the immediate commission of an
offence and that does not need to have formally defined
roles for its members, continuity of its membership or a
developed structure;
? (d) “Property” shall mean assets of every kind, whether
corporeal or incorporeal, movable or immovable, tangible
or intangible, and legal documents or instruments
evidencing title to, or interest in, such assets; 19

Definitions Are Critical (Part 2 of 2)
? (e) “Proceeds of crime” shall mean any property derived from
or obtained, directly or indirectly, through the commission of
an offence;
? (f) “Freezing” or “seizure” shall mean temporarily prohibiting
the transfer, conversion, disposition or movement of property
or temporarily assuming custody or control of property on the
basis of an order issued by a court or other competent
authority;
? (g) ”Confiscation”, which includes forfeiture where applicable,
shall mean the permanent deprivation of property by order of
a court or other competent authority; and
? (h) Predicate offence” shall mean any offence as a result of
which proceeds have been generated that may become the
subject of an offence as defined in article 6 of this Convention.
20

Gazprom’s International Web
? Use of non-transparent “trading” and “financial leasing”
companies organized in Austria, Cyprus, Lichtenstein, Russia,
Switzerland, Ukraine and elsewhere.
? Involvement of middlemen linked to organized crime (e.g.,
Massimo Ciancimio, Dmitro Firtash, Igor Fisherman [ties to
Semion Mogilevich], shady business people (e.g. Dariga
Nazerbayeva, Bruno Graneli, Howard Wilson) and politicians
(e.g. Silvio Berlesconi, Leonid Kuchma, Romano Prodi, Vladimir
Putin, Gerhard Schr?der) from Russia, Ukraine, Kazakhstan
Hungary, Israel, Italy and Germany, as well as the Russian
Government and its officials/favorites.
? Dealings with RosUkrEnergo, ARosgas, Centrex, CEEGAG,
Itera. ETG, MDM, Raiffeisen Investments, EniNeftegaz (buyer
of Yukos’ assets then sold to Gazpromneft), Gazprombank,
Gazpromexport, etc., involving BILLIONS OF DOLLARS ! ! !
? How closely is the law enforcement and intelligence
communities monitoring this situation? Gazprom spreads its
tentacles. The liquid natural gas (LNG) market is next. 21

Rosoboronexport and Russian
Weapons Sales
? According to its Federal Military-Technical Cooperation
Service, Russia expects to export $9 billion worth of
arms and military hardware to foreign clients in 2010.
? Largest purchasers seem to be Algeria, China India,
Libya, Malaysia, Syria, Venezuela, and Viet Nam.
? Transhipments through 3rd-party countries like Belarus
and other mechanisms to avoid reporting to U.N.
Registry for Conventional Arms .
? “Private” military exporters (e.g. Victor Bout (former
Soviet GRU officer – both Taliban & U.S. before arrest in
Thailand) and private military forces (PMFs) – e.g.
Gorandel Trading Limited.
22

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2011 -- AUSTRAC Presentation on Russian OCGs

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2011 -- AUSTRAC Presentation on Russian OCGs