Here's where the EU is growing fast.

Crime gangs look to clean up as Europe’s black market balloons

The financial crisis has fuelled a huge expansion of organised crime in Europe with 3,600 criminal syndicates now active across the continent, profiting even from such prosaic products as household detergents, the head of Europol has warned.

Rob Wainwright, director of the EU’s crime-fighting agency, said Europe’s black market in counterfeit foodstuffs, pharmaceuticals and machine parts doubled to a value of about €2bn in the early years of the recession.

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The groups are profiting from an increased demand for cheap goods and finding ways to cash in on EU member states’ attempts to boost tax revenues, he told the Financial Times. In particular, a new breed of cyber criminals in Russia, Ukraine and other parts of eastern Europe are carrying outincreasingly sophisticated online attacks on financial services groups.

“[Organised criminals] are operating in multiple criminal sectors, in multiple jurisdictions, they’re highly international in their nature,” Mr Wainwright said. “Some have 60 or more nationalities among their membership. So these are themselves multinational companies”.

While the trade in counterfeit luxury goods such as Gucci handbags and high-end champagnes was thriving even before the financial crisis, Europol noticed a boom in illegal sales of a wide range of products, including fake aircraft engine parts, as the recession took hold.

Declining spending power increases social tolerance for the black market economy, the Europol director said. “We’ve certainly seen an increase in the size of the black market, in the amount, the different types, the volumes of counterfeit products that are on the market.”

According to Europol’s statistics, substandard products triggering health and safety hazards – such as medicines and food – accounted for 28.6 per cent of all seized falsified goods in 2011, up from 14.5 per cent previously.

When asked whether crimes such as these were hampering the EU’s economic recovery, Mr Wainwright said: “Yes, I think the short answer to that is yes . . . there is a deliberate exploitation of our global economic conditions to serve the illegal economy.”

Other recessionary crime trends identified by Europol include an increasing willingness by companies to cut costs by using illegal labour, which has led to breaches of minimum wage guidelines and fuelled people-trafficking networks in more extreme cases.

Criminals are even making gains from governments’ attempts to recover from the crisis: the decision by some member states to raise VAT has spurred a growth in fraudulent VAT claims which used to be concentrated on electrical products to a much wider range of goods over a bigger range of EU countries.

In the UK, for instance, the VAT rate increased in early 2011 from 17.5 per cent to 20 per cent, making any fake claim on this tax instantly more profitable. VAT fraud is now estimated to be worth €100bn a year across Europe.

“[Organised crime] is having a particularly negative effect on government’s attempts to recover from the economic recession by draining away these resources in taxpayer’s revenue,” Mr Wainwright said.