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Racketeering

Updated on April 16, 2024
Article byPrakhar Gajendrakar
Reviewed byDheeraj Vaidya, CFA, FRM

Racketeering Meaning

Racketeering is a type of organized crime in which an enterprise is created, and many illegal activities are operated and executed under it, forming a racket of criminals. The enterprise plays the role of the facade to mislead authorities; therefore, criminals wire and collect all the illegal income in its name.

The first registered racketeering cases go back to the early 1920s and have been prevalent in the world since then. A person who takes part in such activities is referred to as a racketeer. As a result, the U.S. government introduced the RICO act to identify and tackle these crimes.

Key Takeaways

  • Racketeering creates a false enterprise, sometimes a legal firm, to operate and execute illegal criminal activities like extortion, robbery, arson, murder, obscenity, and other forms of organized crimes.
  • It is mostly defined as organized or white-collar crimes operated and ruled by certain mafias and people with high connections in authority.
  • It is a common offense in the U.S., the U.K., and many parts of Europe, forming a syndicate of people performing illegal activities
  • To stop such crimes, the U.S. government introduced the RICO Act in the 1970s, which till now, has identified and caught thousands of criminals working directly or indirectly with such firms.

Racketeering Explained

Racketeering Meaning

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Racketeering has been a major crime issue, especially in the U.S., U.K., and many parts of Europe.

Lucky Luciano, a Sicilian who immigrated to the United States in 1906, was an infamous Mafia regulator. He is widely considered the father of the modern organized crime. The criminal web originated in Sicily by families and later came to the U.S. Luciano brought together the young gangsters of New York City and executed older mob bosses. He thus began to take control of all the crime in the city. He was the first to start a racket that dealt with prostitution, murder, robbery, bootlegging, and extortion. Luciano organized the whole Mafia, and a criminal association started with five crime families and later became a syndicate. Authorities arrested Luciano in 1936 after some sex workers gave evidence against him. Luciano assisted the federal government from his jail cell during World War II. After his release and deportation to Italy, he later died there.

In current times, racketeering comprises managed and executed activities under the name of a false company or a firm. In such a way, all the charges go with the company name only, leaving its operators enough opportunity to clear their names. As a result, a person can more easily pass certain crimes to an enterprise’s name rather than facing the accusation themselves.

Criminals garnered a lot of benefits from organized crime, mostly related to lending and receiving illegal cash income. Later in the 1970s, the RICO (Racketeering Influenced and corrupt organizations) act changed the situation. RICO has helped the authorities capture more than thousands of criminals with racketeering charges.

Modern racketeering crimes include credit card frauds, data theft, and cybercrimes. They belong to the category of white-collar crimes.

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Examples

Example #1

In the U.S., the justice department has issued subpoenas to several firms under racketeering charges of manipulative trading. This list has many well-known companies like Citron Research and Muddy Waters Research LLC. However, the prosecutors struggle to use a proper federal law to impose on these firms, while the RICO act still stands as the best viable option.

RICO is a popular instrument to combat bribery, money launderingMoney LaunderingMoney laundering is a criminal act of legitimizing the money acquired through illegal or unethical means by disguising the origin of the crime.read more, drug trafficking, etc. It is also common knowledge that prosecutors have built many RICO cases against several firms. This is because RICO will allow the government to investigate and charge these firms with criminal enterprise activities. There is also speculation of “short and distorted” schemes. Accordingly, it is an excellent racketeering example to understand how the law can accuse crimes at different levels on more than one firm.

Example #2

Another good racketeering example is the case of a well-known politician. The former South African President Jacob Zuma pleaded not guilty to corruption, racketeering, and money laundering from a 1999 arms deal. He was serving as a deputy president at that time.

In addition, Zuma had already faced a separate inquiry from 2009 to 2018. This was when had allegedly accepted 500,000 rands ($34,000) from a French arms company. Seemingly, he accepted the bribe every year to protect it from an investigation into a $2bn deal. Zuma’s defense team is opting for the recusal of state, declaring that he has “no title to prosecute.”

RICO Act

Frequently Asked Questions (FAQs)

What does racketeering mean?

When a business or a company is run on false grounds or used as a facade to commit crimes and illegal activities alongside black money or criminally acquired income, such act is defined as racketeering. In the U.S., a Racketeer Influenced and Corrupt Organizations Act (RICO) was introduced in the 1970s to prohibit and monitor racketeering.

What qualifies the process of racketeering?

Many offensives, illegal and criminal activities qualify for racketeering, such as extortion, kidnapping, murder, obscenity, robbery, data theft, gambling, drugs, and arson. In addition, when done under the name of business operations or a company, all such activities constitute racketeering examples.

What is racketeering in the U.K.?

In the U.K., racketeering conspiracy or racketeering is defined as an organized crime system involving a false or a legal company that secretly participates in extortion, murder, ransom, robbery, and other criminal charges.

This has been a guide to Racketeering & its meaning. Here we explain it along with examples, charges and the RICO Act. You can learn more about accounting from the articles below –

Reader Interactions

Comments

  1. Karen Zwerneman says

    Thank you so much !

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