Foreword
The Mafia today carries out its criminal activities through:
a. the primary accumulation of capital from illegal sources (criminal activities of all kinds, drug trafficking, frauds, smuggling etc.);
b. money-laundering;
c. investing laundered money in lawful activities.
Without going into the first phase of accumulating illegally gained capital, we will examine the second phase, namely the management of the excess liquidity accumulated over time and deposited in secret bank accounts or held in cash deposits with financial intermediaries, particularly the banks.
This second stage is characterised by the need to "launder" dirty money to make investments that are considered more appropriate and safer by the management of complex underworld organisations.
This new crime (money-laundering) has been developed by the institutions to keep pace with the "Mafia Incorporated" which is mainly involved in setting up structures to be used for money-laundering and reinvestment in lawful economic activities.
At the same time there has been a sharp boost in the Mafia's financial commitment towards internationalisation with an increasing interest in foreign markets, foreign operators and financial instruments.
In this respect investigations have shown very interesting realities:
- middlemen: a foreign financial institution undertakes to transfer money previously collected on behalf of people connected with the underworld from foreign banks and Italian banks. For the receiving banks these funds are perfectly straightforward transactions and do not require any particular control over the source of the money;
- fictitious transactions: debt and credit operations are simulated for non-existing export transactions, or they are transacted for different types and quantities of goods: this brings foreign capital into Italy (justified by the amount paid for goods allegedly exported). Conversely, in order to transfer currency abroad unlawfully, imports are simulated and the money transferred abroad is the alleged value of these imports. In reality, these amounts are used to pay for shipments of drugs or other goods;
- trustee deposits: someone deposits an amount of money in a current account with a bank. Acting in a trustee capacity, the bank places the amount in another trustee bank, as an inter-bank deposit; the latter bank undertakes to transfer an equal sum of money to third parties or to invest it for the benefit of the customer who paid in the money, while remaining anonymous. Only the inter-bank deposit (which is fully lawful) is reported in the bank's records, with no indication of the underlying trustee agreement through which the illegal funds are transferred;
- bank guarantees: a company connected with the underworld may have to make a payment without having the necessary cash available. In this case it requests a bank guarantee to give to other banks that are willing to advance the money to the applicant company on the basis of that guarantee. By this means, the entrepreneur is protected against any risk of the guarantor bank finding out anything certain or even indicative about the type of business he is involved in;
- generally speaking, all these investigations suffer from one limitation or constraint.
We only know about partial movements through the international channels of funds suspected of being unlawfully obtained. Only individual phases in the process are identified, while the process itself is becoming increasingly more complex. What begins as mere money-laundering leads to the accumulation of vast capital deposits, mostly in tax havens, to be subsequently split up and re-invested.
It is quite obvious therefore that money-laundering legislation is difficult to be implemented, this has recently emerged when the law ratifying the Strasbourg Convention based on the linkage between "money or securities" and "not unintentional crime" (art. 648-bis of the Criminal Code) was approved.
Over the past few years the Mafia has stepped up its already powerful financial accumulation process, so much so that many experts agree that the capital being produced by these enormous corporations, which are Mafia criminal corporations with a turnover of 70,000 billion a year, flow into the "grey money sea", a vast international financial ocean fuelled by flows of all kinds: money from speculation, dollars from drug trafficking from all kinds of different geographical areas, the proceeds of bribes and from mediating shady deals, including the international arms trade, etc.
The most typically financial aspect of the Mafia's dealings are the increasingly technologically sophisticated procedures used to move the money to be laundered and re-invested and the procedures used to find markets and financial instruments, particularly international instruments, of the very latest generation.
This being so, Cosa Nostra's priority has gradually been to set up or control financial intermediaries.
As a logical consequence of Mafia activity in this direction, the whole sector has been infiltrated and corrupted, particularly in two ways:
- attempts to control the banks, particularly small ones, both by placing "trusted persons" in and outside the banks or by involving vast sums of liquid cash;
- setting up an exorbitant number of financial institutions, mainly in Southern Italian areas, such as Sicily (particularly before the enactment of law no. 197/91), whose proliferation is not matched by any other parameters that indicate the financial flows involved, such as the amounts of bank loans or the number of inhabitants living locally, etc.
It should be pointed out that the term "financial" in this case refers to anomalous financial broking companies, not banks, of many different types: securities broking companies, investment fund managers, trustee companies, insurance companies, holding companies and merchant banks, factoring companies, leasing companies, property management, firms, etc.
All transactions occur within a highly sophisticated financial environment.
First of all the financial markets used for dealings and transactions are in all the countries known as "tax havens", whose legislation guarantees total anonymity and low taxes: every country has drawn up black lists, and all of them include countries such as Liechtenstein, Hong Kong, the Cayman Islands, virtually all the Dutch Antilles, the Bahamas, Panama, the Channel Islands, the Isle of Man, etc.
Once the money reaches these tax havens, it is channelled through transit and/or numbered accounts, in which money circulates with extreme rapidity through the computer system, so that liquid money is known in the business as "hot money".
These are markets or market segments with peculiar features that are not always identifiable with those officially known:
- the use of front companies and/or finance companies working in their own name, but on behalf of anonymous investors;
- non-institutional operators or providers;
- massive amounts of liquid capital are involved, whose origin is of no interest to anyone;
- there are no official control entities to ensure adequate transparency and information;
- that extremely anomalous financial instruments are used on these markets, such as endorsement credits, to which bank guarantees and letters of credit (PBGs and SLCs) can be attributed, which, on the official markets are generally linked to underlying commercial contracts.

Preliminary intelligence gathering
On the basis of what has been described above regarding the development of the Mafia, with particular reference to the financial management of the assets, our working group set up a preliminary intelligence-gathering plan to request information from the sources in the sector, most of this work cocentrated in the fields of anomalous financial broking.
The sources were asked to find out and identify the financial transactions in their operational sphere that might be defined as suspect, both objectively and subjectively. Specific parameters were drafted for this purpose:
- transactions involving large sums of money, with the opening of accounts in banks in the tax havens and grey money havens;
- the creation of off-shore front companies working in many countries;
- channelling funds through the banks and finance companies of several countries without any obvious reason;
- the involvement in negotiations of brokers or individuals not well-known in the financial intermediation field, whether banking or anomalous.
From the massive information gathered, a number of cases emerged that might be defined as suspicious, including the CANNIZZO case.
From the targeted information gathered on CANNIZZO, it transpired that:
- CANNIZZO, originally from Catania, had a vast amount of cash available, and used to be an assiduous investor on the Swiss, Austrian, Luxembourg, Monte Carlo and San Marino financial markets;
- his name never actually appeared on any of the paperwork for the operations he transacted;
- in Rome, he had set up his official address in a hotel together with a base from which he operated using telephone and fax for all his contacts abroad;
- he was a frequent traveller from Catania to Rome, Milan, Zurich, Lugano, Monte Carlo, Vienna, etc.
According to the official computerised archives which were immediately consulted, a completely different picture of this man emerged in contrast to the information that we had on him.
CANNIZZO appeared to be a man without property, without any income for the past ten years. He had previously had a job (working as a mechanic), and had been a market trader in garments.
His low level of schooling was in complete contrast with the high level of professional expertise demanded in the environment in which he was operating. This was quite evident, despite the fact that CANNIZZO insisted on people calling him "Doctor Cannizzo", claiming to have a university degree.

The intelligence Service deemed this information extremely useful for its operations, and worthy of being further developed in both intelligence-gathering and operational terms.
A specific intelligence programme was therefore set in motion to be implemented both as a strict intelligence operation by penetrating the environments in which CANNIZZO operated, and in operational terms by placing him under constant physical surveillance.
After about two months of activity, (April-May 1993) the specific, concordant information that had been gathered was used to write out a comprehensive intelligence report on the individual concerned, the people he met, the companies and banks he used - both in Italy and abroad - the main business dealings he was involved in, but above all the fact that there was no doubt that he was a member of the Catania Mafia belonging to the Nitto SANTAPAOLA family. This was the very first time that we discovered the exact amount of the vast sums of money that were being circulated by emissaries of the Mafia. In this specific case, CANNIZZO was handling over one billion dollars, which roughly coincided with what had been theoretically calculated as the value of the assets belonging to the Mafia family of which he was a member.
At this point, the intelligence gathered was given to GICO of the Rome Customs and Excise Police (Guardia di Finanza) for further investigation.
But at the same time a task force was set up, comprising officers of the judicial police, intelligence officers and officers from the Bank of Italy, to analyse the results of the investigations not only in order to unearth evidence to be used against him, but also to study the very complicated and sophisticated money-laundering system used by the Mafia (through CANNIZZO) of which all the details were gradually coming to light.
After studying the various transactions effected by CANNIZZO, it was possible to draw up a clear picture of the standard procedures used for each of his financial dealings. For they differed only in very minor details.

The money laundering system
The primary need of the Mafia group in question was obviously to be able to freely control the mass of money being accumulated so that it could be sent to countries for business investments, leaving a small amount in Italy to meet immediate liquidity requirements.
It was also vital to make sure that the names of any of the members of the organisation who were already known should never actually appear in any of the financial transactions for obvious reasons of security, and also to ensure that any judicial enquiry would not implicate the banks they were using, with which they had a relationship of great trust.
Accordingly, the Mafia organisation gives a "mandate" to their trusted member - with a clean criminal record - who remains anonymous and who is acquainted with the very latest international financial instruments and procedures, to manage the whole operation until the funds finally end up in "clean" bank accounts. Quite clearly this mandate includes the power to use the accounts in which the ill-gotten gains are deposited. To do this, the mandate becomes a special power of attorney in reality, because it is restricted to a few clearly identified transactions, mostly for the acquisition of international banking instruments of a predetermined value, to be effected within a very short space of time.
Their emissary also realised the need not to appear personally in these operations. So the first operation was to buy cheaply a company able to work on the international financial markets without raising suspicion (a fictitious front company can also be incorporated, represented by a front man. In the case we are discussing here, CANNIZZO resorted to the market firstly through a Panamanian company, and then through a Swiss company which he had bought up acting on the advice of a broking company in order to avoid giving rise to suspicion).
The emissary then made agreements with the securities broking firm which was well-known in the Swiss banking circles, and then with an individual broker in order to set up a joint venture which would immediately begin negotiating in accordance with the company objects, in order to find a finance company willing to subscribe to fictitious transactions using bank guarantees, obviously in exchange for a fee (as a front company). At the same time it set about finding the most appropriate financial instruments for its purposes. In this specific case, Prime Bank Guarantees (PBGs) were negotiated.
It should be pointed out that PBGs were guarantees issued by the commercial banks known as prime banks on unofficial rating lists drawn up by the American rating agencies. In practice, they were endorsement securities through which a prime bank undertakes to guarantee an obligation placing its economic weight and prestige behind it.
There is an unofficial market in such securities whose price is not the same as the face or nominal value, because the bank considers it a "below-the-line" credit which does not involve any cash movements, but is merely a pledge, and hence a bank risk. Generally speaking, the price varies from between 25 per cent and 85 per cent of the face value. Numerous factors are involved: the bank's rating, the solidity of the applicant's collateral, the reason for issuing the guarantee, etc. But these are only indicative and unofficial figures.
A prime bank may issue a letter of guarantee for a deposit on a personal account against guarantees issued by other banks against collateral, or after payment of a commission.
The specific task of finding a "front company" and establishing direct contact between it and the Mafia emissary, is left specifically to the brokers - usually an unscrupulous financier - who acts in a personal capacity. At the same time the financial broking company, generally an agency or branch of a merchant bank, begins operating on the market to acquire PBGs from companies or private investors, or it contacts a prime bank which is willing to issue the securities. Once the PBGs have been issued and a front company has been found, the operation can begin.
The front company officially asks the joint venture to buy the PBGs at a percentage of their face value (in our particular case the price was 86 per cent of the face value).
Meanwhile the emissary ensures that all the funds are paid into the account belonging to the front company to be able to simulate the purchase of securities, and then moves the dirty money into deposit accounts, subsequently organising bank-to-bank transfers through the "swift" computerised funds transfer system.
Generally speaking, in order to avoid controls and checks, several transfers are usually organised between different banks using the "swift" system, in a very rapid sequence (a matter of hours only).
Once the dirty money reaches its destination, the (simulated) contract is concluded for the bank guarantees, and while they are made out in the name of the front company they actually remain the property of the joint venture under an agreement annexed to the contract, and are therefore entirely at the disposal of the Mafia organisation.
Subsequently, the front company instructs the bank to which the funds have been transferred to make various payments, the orders for which have been issued in advance, always using the "swift" payment system.
An initial bank transfer is made to the front company controlled by the emissary using a numbered account held with another bank (which has never been involved in any of their previous transactions) of a substantial percentage of the full purchase price of the securities.
In CANNIZZO's case, this figure was between 52 per cent and 86 per cent of the face value of the PBGs.
The financial broking company (a merchant bank branch or agency) is then credited with the corresponding amount of the real purchase price of the bank guarantees, plus an agreed percentage by way of commission. In this particular case, it was 29 per cent of the 86 per cent of the face value of the securities.
A percentage by way of commission was also credited to the person acting as the broker (in this particular case 4 per cent) and to the front company (in this case 1 per cent).
This complex financial operation enables the criminal group that organises it to have "clean" money available to it to be used without any worries in more or less lawful investment operations.
Part of the "laundered" money in the CANNIZZO case was used for real estate and tourism/hotel investments in "peaceful" foreign countries through solid national companies that were well known locally. Another substantial portion was used for investments in casinos. CANNIZZO had made contacts with accountants in San Marino to buy real estate to be adapted for use as gambling establishments.
A minimum portion was brought back into Italy to meet the funding requirements of the underworld, either through simulated foreign financing operations for ailing Italian companies, or by transferring funds to accounts opened in safe banks in Italy by persons above suspicion. In this particular case, a current account had been opened with a branch of the Banca Popolare di Novara in Catania in the name of a housewife, to whom about 40 billion lire was to be paid.
The criminal organisation remained in control and possession of the bank guarantees acquired by the front company under the simulated purchase agreement.

The conclusion of the operation
As it was expected, the complex system to combat the incipient laundering activity which began in the early months of 1993 kept coming up against blank walls initially, due to the difficulty of finding safe evidence for prosecution purposes proving the origin of the funds managed by CANNIZZO as coming from primary unlawful activities.
As indicated in the introduction, one of the major operational constraints is connecting the crime with the management of the proceeds of that crime and the Mafia organisations obviously make quite sure that their activities are split into segments.
In this case the difficulty regarding the trial evidence was overcome thanks to the constant dedication of the investigators as well as the testimony of a number of collaborators who had turned State's witnesses, who confirmed the role of CANNIZZO in the Catania family, making it possible to find further unambiguous evidence of the illegal origin of the funds.
In March 1995, therefore, at the end of the first stage in the preliminary investigations, CANNIZZO was arrested by the magistrates. During the operations, a number of essential pieces of evidence regarding the crime (still being investigated) were acquired, and specific examples of joint criminal liability were established.