Did Organized Crime Save The Banking System?

The head of the United Nations Office on Drugs and Crime has made the claim that organized crime took advantage of the financial crisis last year to effectively launder their money–thereby preventing banks from collapsing.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.

Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.

“Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way.” Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.

Insofar as I can tell, the banking industry denies this claim. Of course, that’s what you’d expect whether the claim was true or false. It’ll be interesting to see if there’s any follow-up investigation to these allegations.

In the meantime, I’ll just sit back and enjoy the recipe books that the local banks have been putting out lately, recipes like this one:

“You see, you start out with a little bit of oil. Then you fry some garlic. Then you throw in some tomatoes, tomato paste, you fry it; ya make sure it doesn’t stick. You get it to a boil; you shove in all your sausage and your meatballs. And a little bit o’ wine. An’ a little bit o’ sugar, and that’s my trick.”

Sounds good to me.

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Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.


  1. UlyssesUnbound says:

    When I signed up for a checking account last month, the bank representative gave me a free set of pots and pans, with the message “We give these to you now as a favor. But someday in the future–and that day may never come–we may need you to repay that favor.”

    I thought it odd at the time…

  2. Herb says:

    Funny jokes, guys, but c’mon, aren’t they a bit out of date? I doubt the Italian mob was all that involved in this. Don’t think Goodfellas. Think Eastern Promises.

  3. Alex Knapp says:


    Perhaps. But who wants a recipe for borscht?

  4. JKB says:

    All organized crime is, is government for criminals. So government bailed out the banks? The only real difference here is that the organized crime lenders will make sure they get paid back since the money is owned by the bosses. Regular government will make sure it gets paid back as well but in a way that separates the money from its rightful owners and into the pockets of the bosses politicians.

  5. Herb says:

    Ha, not me! But I am kind of partial to ceviche…

  6. Drew says:

    Say what? How would it work?

    The mob transferred balances from Swiss accounts, or cash in mattresses, to US accounts? This wasn’t a deposit based bank run. But this could easily be traced.

    The bank needed reserves. And ultimately got equity.

    Don Corleone did a deal with Don Bush and Don Obama to buy the banks?

    Well, if they could save the Vatican………

  7. Drew says:

    Can’t ya just see it……

    “A man like Barzinni don’t need to be told how to inject bank reserves.”

    “You mean Tatallia.”

    “Tatallia’s a pimp. It wasn’t until tonight I knew it was Barzinni all along……”