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Socio-economic Harms of Organized Crime

Organized crime activities can pose serious socio-economic harms that affect all regions of the country. These consequences may be direct and tangible, such as fraud or thefts, with effects that can be quantified in terms of monetary loss. Harms also encompass a range of intangible effects more difficult to quantify. For example, the loss of quality of life through victimization is difficult to measure or to compare objectively against a merchant’s loss of business due to counterfeit goods.

In this section, a selection of key issues are presented in order to highlight how organized crime directly and indirectly affects Canadians’ public safety, economic well being and sense of community.

Organized crime groups are capable of using violence, particularly involving illegal firearms, to promote and protect their criminal interests. In many instances, this violence is directed toward other criminal actors, but innocent victims are sometimes injured or killed. This violence can also be deliberately intended to intimidate or coerce individuals and communities, which is especially the case with many street gangs. In some communities, this public safety threat could be sustained over a period of time while in others this threat may be random and short term.

The illicit drug trade engenders more criminal activity than any other criminal market. Activities within this market have led to assaults, homicides and property crimes which are driven by violence between traffickers over control of territory, individuals seeking money to purchase drugs and from individuals under the influence of illicit drugs.  There are also a number of adverse health effects from illicit drug use including the spread of HIV/AIDS and other infectious diseases, drug addiction and prenatal developmental problems. Historically, illicit drug activity has contributed to a limited number of cases of corruption of public and private sector officials and professionals.

Marihuana grow operations pose a number of serious health and safety risks to those conducting the operations and to the surrounding community. A significant number of residential operations often use unsafe electrical diversions to steal electricity which strains power supplies and increases the prices for legitimate residences and businesses. Marihuana grow operations also often contain numerous fire hazards, including exposed live wires and volatile chemicals. Vapours from a variety of chemicals used to accelerate plant growth can also cause respiratory health problems. High levels of moulds and pollens can cause asthma, respiratory conditions and allergies in individuals who live or work in damaged residences, as well as to law enforcement, rescue workers and municipal officials. Competition between crime groups that engage in marihuana cultivation and the threat of crop theft continue to result in home invasions, assaults, homicides and booby trap-related injuries.

Methamphetamine is highly addictive and physically destructive to users. This drug can make users very aggressive, often resulting in violent behaviour. Although relatively easy to manufacture, the chemicals are highly toxic, corrosive and combustible during production. The drug can be produced in small amounts in kitchens or garages, while large amounts are manufactured in self-contained “laboratories.” Clandestine laboratory fires and explosions have occurred, causing serious public safety concerns. Chemical vapours from the manufacturing process can cause injury and death, as well as permeate the walls and carpets of buildings, making them uninhabitable. Additionally, discarded toxic chemicals can cause environmental damage and pose a threat to public health and safety. As a result, residences or businesses located near either the manufacturing or dumping sites can decline in property value.

In contrast to illicit drugs, the primary harm from financial crime is economic, both to individual Canadians and the financial business community. Economic harms from payment card fraud and mortgage fraud are experienced almost exclusively by the payment card industry and financial institutions such as banks, credit unions and mortgage insurers. In contrast, individuals and investors largely face the direct economic harms resulting from mass marketing schemes (e.g. telemarketing fraud) and securities fraud (e.g. stock manipulation), which could potentially involve the loss of one’s life savings. The Insurance Bureau of Canada states that insurance fraud continues to cost Canadians more than a billion dollars annually through insurance premiums, with $541.9 million annually in vehicle theft-related insurance costs.

Laundering and reinvestment of criminal proceeds in legitimate companies can undermine the legitimate economy. Money laundering typically involves the use of a range of financial services — deposit-taking institutions (e.g. banks), currency exchanges, securities traders, insurance companies and “shell” corporations — that can result in a chain reaction in which a number of institutions are subsequently affected, both domestically and internationally. As a result, specialized expertise is often necessary and individuals in key professions, such as lawyers, accountants and investment brokers, may knowingly or unknowingly assist the laundering process. Organized criminals are capable of manipulating financial systems and institutions, and corrupting some public and private sector officials to facilitate money laundering. This compromises the integrity of the financial institutions and results in loss of investor and public confidence.

A contraband market that illegally distributes a legal commodity, such as tobacco, often exists due to some degree of societal acceptance. However, these markets can significantly affect society, particularly through the loss of potential tax revenue. The business community is also affected as businesses that operate honestly are at a serious disadvantage in relation to those who illicitly sell contraband products at significantly lower prices. There are potentially major health concerns over the content and quality of contraband products, such as illegally manufactured alcohol, as serious health problems or death could result from its consumption. 

Counterfeit products directly undermine government tax revenue and profits of legitimate industries. Poorly made or defective counterfeits may also cause consumers to blame the manufacturers of genuine products. Some counterfeit products can cause serious health and safety risks due to incorrect or non-existent legal labelling or regulations. For example, internationally, organized crime is involved in producing and trafficking pharmaceutical drug products that may closely resemble legitimate drugs yet may contain inactive or incorrect ingredients, improper dosages, sub-potent or super-potent ingredients or be contaminated. Currently, there is little evidence regarding organized crime distributing counterfeit pharmaceuticals in Canada; however, various other counterfeit goods are in circulation across the country.

Individuals smuggled into Canada bypass immigration laws and processes, and may have serious criminal records, posing a potential threat to public safety. Alternatively, trafficked women are often forced into the sex trade to work off debts or fees (e.g. for being smuggled and for housing) typically in the tens of thousands of dollars. The victims suffer physical and mental abuse including sexual assault, torture, starvation, servitude and death threats. There can also be significant health and social effects on Canadian society as victims often acquire, and can transmit, sexually transmitted and infectious diseases while working in the sex trade.

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Criminal Markets

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