Analyzing the World’s Most Powerful Parallel Business System

RUSSIAN MAFIYA

Learning Team – 1 A - Darshak S J - Madhuranath R - Tanmoy Dey - Vincent Bermejo

Asian Institute of Management MBA-2012 | Cohort-7

Asian Business Systems Final Report

ORIGIN

History, Culture, Uniqueness

BUSINESS SYSTEMS

Illegal & Legal Businesses

BUSINESS COMMERCE

Economic Impact

TRANSFORMATION New age crimes

FUTURE

Flow of Analysis

What are the cultural and historical factors that make the Russian Mafiya a unique system?

ORIGIN

Madhuranath R

TSARs + COMMUNISM + GULAGs RED MAFIYA

Suppression of people since Tsarist times; serfdoms thrive in Russia

1900s

Gulags create notorious yet loyal thieving brotherhoods – “Vory”

1920-1990

Lenin, Stalin, Khrushchev & Communism make people poorer

Communism & Organized Crime Vory organize into Bratva; offer protection, arms, drugs, prostitutes

1990 – till now

Mafia spreads globally; bigger; more organized; more businesses

Tracing the Roots

Uniqueness

RUSSIAN ITALIAN TRIADS COLUMBIAN

Org. Unit Brotherhood Family Clan Gang

Org. Structure Amorphous Hierarchical Hierarchical Hierarchical

Reach Global Europe /

America Asia / America South America /

Africa / Asia

Size 8,000 Bratva Few 1000s Very large Few 100s

Businesses

Arms Assassination

Drugs Extortion Gambling Protection

Prostitution Money

Laundering Cyber Crime

Assassination Extortion Gambling Protection

Prostitution

Assassination Drugs

Extortion Gambling Protection

Prostitution Money

Laundering

Assassination Arms Drugs

Gambling Prostitution

Control Centralized yet Dissipated

Centralized Centralized per Clan

Centralized per Gang

Critical Success Factors

Govt. support & military collusion

Loyalty to Brotherhood (Bratva)

Amorphous & Dispensable Bratva

Continuous Innovation in Business

Diversification & Legalization

What is the underlying business system framework that the Russian Mafiya operates in?

SYSTEM

Tanmoy Dey

Core Illegal Businesses • Online & Offline media. • Threats, damage to property & life. • Celebrities , glam shows & events, sports events.

• Fake ads, mail order bride catalogues, casual acquaintances. • Sexual exploitation, debt bondage, forced labor. • To Middle-East, SEA, West Europe

• Prime hubs- Israel, Ukraine, UK, Czech • $ 3000-5000 on each sale • Cheap service tariffs • Girls cannot escape, blackmailed

• Terrorist organization funding & Drug cartels. • 3 million regular takers, 2.1% of Russian youth population. • Prime overseas markets • UK, West Europe, US

• Supply to paramilitary groups , terrorist organizations and exchange to drug cartels. • Prime markets- Latin America, US, East Europe

• 7% of illicit world trade • Easy money from fake products. • Funded to terrorist organizations, triad gangs, mafia hubs. • Cohesive global network

Extortion

Drug Trafficking

Arms Trafficking

Prostitution

Human Trafficking

Counterfeit

Business System

Funds from illegal businesses used to fuel stakes and interests in legal businesses

Proceeds from stakes in legal holdings re-invested and laundered into illegal dealings.

Oil & Gas

Banking

Automotives

Electronics

Food & Agriculture

Information Technology

Counterfeit $ 120 billion

Human Trafficking $ 100 billion

Drug Trafficking $ 25 billion

Arms Trafficking $ 20 billion

Prostitution $ 25 billion

Extortion $ 6 billion

What is the economic size and impact of the Russian Mafiya?

COMMERCE

Vincent Bermejo

Economic Exposure The Economic Situation • 10% Territory (including old Russian States)

• 25% Economy (US$ 450B)

• 40% State-Owned Corporation (influence on policy making & justice system)

• 80% Banks (taken out of the EU’s white list)

• 90% SME’s (protection fees are cheaper compared to paying the government exorbitant tax rates)

The Economic Impact • Channeling billions of dollars out of the economy

• Bypassing legal procedures

• stealing tax revenues needed to sustain an economy

• robbing the country of aid

• discouraging foreign investors and domestic businesses from starting up

“If it was not for the mafia there would not be an economy. They are a major driving force behind what goes on in Russia.”

Criminal Syndicate Industry

BU

SIN

ESS

VEN

TUR

ES

ILL

EG

AL

L

EG

AL

GLOBAL LOCAL

MARKET REACH

VA

LUE –

CH

AIN

PR

OD

CU

TIO

N

DIS

TR

IBU

TIO

N

Red Mafiya

How did the Russian Mafiya evolve with the changing global environment?

EVOLUTION

Darshak S J

TRANSFORMATION 2009- FRAGMENTED 2012- ORGANIZED

• 2011 saw consolidation of individuals to form 6 potent groups. • Growth of internal market- C2C services. • Expansion of cybercrime in the international market. • Lack of proper cyber laws. • No jobs for Young IT Engineers. • Ease of entry and difficult to be caught. • Doubling of cybercrime in 2011 from 2010.

Digitalization of the Russian Crime

CYBER CRIME in $

$4.7 Billion Russian Speaking

Cyber Crime

Source: Ib report

Type Of Crime Revenue % of total

Online Fraud $ 940,000,000 41%

Spam $ 830,000,000 36%

Internal Market C2C $ 230,000,000 10%

DDoS Attacks $ 130,000,000 5.6%

Others $ 168,000,000 7.4%

The Binary Numbers Games’ Distribution

Low High

Measure of perceived damage to the organization

Online Banking

fraud

Malware

DDoS

Spam

Source: Ib report

Brand Attack

Fake SW

Internal Market Consulting

Fake Drugs

Online Piracy

What will be the future trajectory of the business system of Russian Mafiya?

FORECAST

Madhuranath R

ORGANIZATION PAKHAN

GODFATHER

SOVIETNIK

COUNCILOR

OBSHCHAK

BOOKMAKER

AVTORIYET

AUTHORITY

BOYEVIK

WARRIOR

KRISHAS

ROOF/COVER

TORPEDO

KILLER

BYKI

BULL

RUSSIAN MAFIYA

COERCIVE POWER

REWARD POWER

LEGITIMATE POWER

REFERENT POWER

EXPERT POWER

INFORMATION POWER

Bases of Social Power

Attraction

Resistance