The loan shark market thrives in the midst of crime and money laundering

  • Shqip
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  • Hidden behind contracts for the recognition of old debts, the sale and purchase of shares or real estate, the illegal usury market is channeling dirty money to banks as legal. Experts believe that there is data that prove that “profits” are being used by criminal groups, creating a “parallel economy”.

    Author: Bleona Metushi

    A debt taken from a friend in the form of usury risked leading a 31-year-old from the city of Tirana to the financial abyss. After 2 years filled with high interest payments, the young man decided to denounce the “usury shark”.

    “I pawned my Audemars de Piguet watch, which cost 2,000 euros, and my fiancé’s car”, – the 31-year-old confessed to the investigators about the last usury he had paid, before making the denunciation. It all started in 2016, when he borrowed 2,300 euros from a friend.

    “I have returned the amount I borrowed from him several times, I have even paid amounts several times larger than what I owed”, – concludes the young man’s confession, disclosed by INA MEDIA through investigative materials.

    In 2020, two years after the report, the Court of Tirana sentenced the “friend” of the 31-year-old with a fine of 100,000 ALL for practicing financial activity without a license.

    The phenomenon widely known in everyday slang as “usury” or “loan sharking” is experiencing an unusual flourishing. A dozen court decisions that INA MEDIA has the possibility to examine, show that the usury market has spread throughout the country, while experts associate it mainly with crime bosses and money laundering, but there are also cases when it is seen as an opportunity for quick profit.

    With staggering interest rates of up to 20% per week, loan sharks serve as a veritable theft scheme for real estate or businesses through fictitious purchase or donation contracts.

    “The main cases, which we have discovered, are related to exponents of organized crime, who, in addition to this activity, are also filed for criminal activities of various natures. However, this work is also carried out by special, unorganized persons or individuals, with greed to increase their money and assets”, – admits the head of Economic Crime in the State Police, Lutfi Minxhozi.

    Lutfi Minxhozi, Director of Economic Crime at the State Police

    The security expert, Fatjon Softa, also raises the concern that these criminal groups, which operate by giving usury to create grounds for the legalization of wealth.

    “Mafia clans use the economic and structural conditions of our country to penetrate the Albanian business structure and to systematize their illegal businesses. By doing so, they create a “parallel economy” halfway between legal and illegal, the so-called “gray zone”, – Softa explains to INA MEDIA.

    The flourishing of loan sharking

    The flourishing of usury is helped by the difficult terrain in which the Albanian economy is moving. As a result, those businesses, which do not find legal ways to obtain loans from banks due to strict criteria, turn to the illegal activity of usury.

    Organized crime has moved in this direction and the security expert, Fatjon Softa, is convinced that usury, like extortion, is part of a wider scheme that criminal organizations implement to gain economic advantages or to gain power through violence. and intimidation.

    “An essential difference between these two crimes is the objective: extortion works better and more effectively in territories with high economic vitality, compared to usury, which on the contrary thrives in conditions of a crisis and economic difficulties”, explains Fatjon Softa.

    “Crime is actually able to identify the needs of people and businesses, offering financing to those who are denied help from legal credit channels,” he added.

    The data of the State Police, provided by INA MEDIA through requests for information, show an increasing trend of referrals to the prosecutor’s office during 4 years. In 2019, the police say that they discovered 39 cases of money lending with usury across the country, with 64 perpetrators, among whom 29 were arrested. In 2020, the number of detected cases is 49, with 56 perpetrators. In 2021, 54 cases have been discovered, with 60 perpetrators, and 2022 seems to have the highest curve. Until the month of September, 49 cases were discovered and 66 perpetrators were referred.

    On the other hand, official data from district prosecutor’s offices show that the number of proceedings compared to police referrals is much lower. During 2022, out of 49 referred cases, only 12 were registered as proceedings, with 5 defendants. Since 2019 and following, the prosecutor’s office has registered every year from 17 to 22 cases of investigations into issues related to usury, while the referrals have been much higher.

    Fatjon Softa, Security Expert

    For Lutfi Minxhozi, the main problem in cracking down on this activity is the lack of referrals to the police and the prosecutor’s office.

    “Both parties enter into an agreement between themselves, both the party that gives money with usury and the party that receives it”, – says Minxhozi, who explains that the reported cases are those that turn into threats and threats due to the lack of repayment debt.

    Although the State Police believes that the increase in discovered cases does not indicate the spread of the phenomenon, the data of the Bank of Albania show that the trend of informal debt, cash in hand, has also increased.

    Surveys conducted throughout 2019 with over 2,000 families, showed that in 43% of cases they had received credit through first hand debt, outside the banking system. In 2020, the survey was conducted with over 1,000 families and in about 46% of cases, borrowing was declared in the form of cash. Meanwhile, in 2021, half of the over 1,000 surveyed families declared that they had taken on debt and had received it in the form of cash, in 51% of cases.

    Although not all the credit taken outside the banking system is in the form of usury, it creates ground for this phenomenon to be increased. For the economy expert, Pano Soko, over 90% of informal debt is money received through usury or in similar forms.

    Pano Soko, Economy Expert

    “Currently speaking, over 90% of the effective debt, which is given outside the formal lending system, is in the form of usury or in forms very similar to it”, – explains Soko.

    “In many cases, the debt that we see in asset declarations, income declarations of the type “I borrowed x thousand euros from my brother and bought two apartments”, is fictitious, it was not actually received. Therefore, apart from this, if we refer to the real debt, given outside the system, with cash in hand, over 90% of it is usury or a form similar to usury”, Soko further explains.

    Economic Crime in the State Police already has a map of the cities, where the illegal activity of usury is more problematic. Shkodra tops the list, followed by Tirana, Fieri and Lezha.

    The economic expert, Zef Preçi, looks at this phenomenon with concern, which, according to him, has several reasons that is gaining ground.

    “World economic crisis and its impact on the Albanian economy, the difficulty of obtaining legal loans in commercial banks, the ambiguity of fiscal policies and the indirect promotion of the expansion of the criminalization of the economy through the announcement of the so-called “fiscal amnesty” of assets, as well as criminal, are among the main motives of this situation”, – argues Preçi.

    Zef Preçi, Economy Expert

    “The debt is 175,000 euros, without interest. Now, 65 have been taken in Luxembourg, I took them with my own hands. I gave Tani 65,000 euros and 100,000 euros in cash, without interest. Usury is 40,000 euros”, – this is one of the many conversations, recorded by the Prosecutor’s Office of Shkodra, in an attempt to dismantle a network that gave out money with usury in this city and that INA MEDIA revealed through investigative documents.

    The denunciation was made by the well-known businessman in Shkodër, Paulin Radovani, who could not withstand the pressure that was put on him, because his sons had taken money with usury. The data provided by the Shkodra Prosecutor’s Office for this file show that the monetary values were given with very high interest, ranging from 3%-20% per week, and in case of non-payment through donation or fictitious purchase contracts, they took possession of property and businesses.

    High interest rates, according to Fatjon Softa, are used in order for the person who took out a loan to not be able to repay it.

    “The interest rate becomes just one of the many tools that crime uses to appropriate businesses and to enter the legal market, penetrating the business structure”, – says Softa.

    Through the figures confessed by Paulin Radovani himself, but also intercepted in the investigations of the prosecutor’s office, the monetary value of cash circulated in the form of usury, only through Radovani’s children, amounts to nearly 1 million euros, a figure that increases with the return percentage.

    INA MEDIA learned that 2 of the people investigated in this file were sentenced with a plea agreement, then choosing the measure of punishment themselves. For 6 other defendants, no conclusion has yet been reached since the start of the investigation in March 2019.

    In the materials available to INA MEDIA, the Police and the Prosecutor’s Office of Shkodra say that the persons involved in this activity have been and are being booked for other crimes as well.

    “They were involved in several other criminal events in terms of crimes against the person, such as wounding with firearms, threats, self-judgment in coercing people into receiving large amounts of money, forcing them in the event of non-return of the amounts of money given, to pledge assets, such as shops, apartments, vehicles”, – is emphasized in the investigative material.

    In a significant part of the cases, the phenomenon of usury is inseparable from other criminal activities of the individuals who practice it. Through this form, it is also tracked by the police. However, the categorization as a criminal misdemeanor leads to very low penalties even for individuals or persons who have a past and involvement in criminal activity.

    “When this phenomenon is practiced by criminal groups, the structures responsible for the most serious criminal offenses also pursue other, lighter offenses. Exercising financial activity without a license is bordering on a criminal misdemeanor,” says the head of the Economic Crime Directorate.

    Usury through notary

    The State Police arrested the Kosovar citizen, Qerim Krasniqi, on the suspicion that he had defrauded a businessman who operated in the field of hotels in Tirana. When the case went to court, it was discovered that in addition to the fraud of receiving an amount with the promise of investments in crypto-currencies, money with interest was also given. Before the court, Krasniqi admitted that the amount received was 70,000 euros, but due to the interest, the contract was signed outside the office for 160,000 euros.

    The notarial contracts were found to have been used as a means to legalize the money and properties acquired from usury, even in the voluminous file in Shkodër. Dozens of notarial contracts, signed with persons who did not exist or were living abroad, but also with the real identities of the beneficiaries, were found to be fictitious and made in violation by the notaries.

    The vice-president of the National Chamber of Notaries, Fatmir Laçej, admits to INA MEDIA that the cases, when usurers seek to notarize debts, have recently increased. However, he adds that they have always existed in our society and notaries do not have much to do in these cases.

    “It’s a pretty big problem lately. There are many cases. They mainly come as declarations for recognition of a debt or loan”, says Laçej, who adds that the notary cannot reject them, but has the obligation to remind them of the law.

    Fatmir Laçej, Vice President of the Chamber of Notaries

    “The notary has the obligation to ask the parties that everything is formal, to suggest that they do the transaction in the bank, and that the amount should not contain a percentage”, he explains.

    The Law on “Prevention of Money Laundering and Financing of Terrorism” obliges notaries, in cases where the amounts are large, to inform the Directorate of Money Laundering.

    Contracts for recognition of debt were more frequent, at the time when lotteries and bets were open. “They always came in the afternoon, declared low values and made several such declarations at different notaries, so that the monetary value did not exceed 1 million new lek, so the notary does not declare it as physical money in the Directorate of Prevention of Money Laundering”. – explains Elona Saliaj, notary.

    For Saliaj, a by-law that emphasizes the importance of care that notaries must show in such cases is necessary.

    Elona Saliaj, Public Notary

    Saliaj explains that contracts are mainly made camouflaged for recognition of debt or return of old debt. According to her, a distinction should be made between “debt” between family members or friends and those given for criminal reasons.

    “During the trial, the real reason for giving these values may come out. They may be interest-bearing, fraudulent, with a high penalty, or made for the purpose of benefiting from an asset in their name, which at a market price is higher than the obligation they have to the person they lend to. This happens if the borrower is insolvent or vulnerable,” she explains.

    Judicial processes are an indicator that notarial contracts for recognition, granting and repayment of debt also hide usury.

    “People go to court and demand, not only the principal, but also the interests, which are nothing but interest determined in their minds and in the agreements outside the office”, – alludes the vice president of the Chamber of Notaries.

    Money laundering

    Contracts for the recognition and repayment of old debts or the sale and purchase of real estate, cars, the acquisition of shares in companies, channels dirty money to banks as legal. The head of Economic Crime in the State Police, Lutfi Minxhozi, admits to INA MEDIA that usury can also produce other crimes against life, but the most worrying is money laundering.

    “The origin of this money is dubious and closely related to the activity of persons or groups of persons, who exercise the activity of usury. This constitutes a suspicion in itself and an indication for the initiation of investigations”, – explains Minxhozi, who says that in 9 months they have referred 29 cases, where an investigation was requested for money laundering based on the criminal offense of practicing financial activity without a license.

    According to him, the cases that have been investigated have shown that this money originates from traffic, from gambling, but also from other criminal activities.

    Plowing dirty money and injecting it into the market is the main problem even for economic experts.

    “The main source of income, which is used for usury, is money that comes from informal and often criminal activities. This is a very big problem, because through usury, dirty money can be kept in circulation and multiplied, which is used to produce even more dirty money”, Soko insists.

    According to him, financial institutions have nothing in hand to limit this phenomenon, since banks cannot be exposed to more than a certain level of risk, either in the procedure or at the time of granting loans.

    “The only ones who can do something to stop the phenomenon are the police and the prosecutor’s office. Banks and financial institutions cannot do anything”, – explains the economic expert.

    Loan sharks copy the loan market

    Two citizens in Tirana, connected to the usury market, as people who have received money with interest, say that the behavior of people who give usury is different in relation to those who receive it.

    “People who have guarantees get better treatment. If you have a property, which you leave as a guarantee, the weekly percentage is also lower and the waiting tolerance is longer”, – says the young man, close to 35, under conditions of anonymity. He was involved in a gambling and money laundering scheme and it took him at least 6 years to get out of the scheme.

    “The day you have the installment, they call you. People who do not provide guarantees and are involved because of gambling, receive higher percentages and, if the date passes, it goes up to 500 euros a day”, he continues.

    An entrepreneur in the field of construction also confessed that for several years he had been connected to several people from Laçi, from whom he received usurious money for the management of the business.

    “In these years, 400 thousand euros were only the interest paid”, he tells INA MEDIA and adds that the percentage was up to 7%.

    Usury in the field of construction does no longer happen in isolated cases. For the notary Fatmir Laçej, even though notarial contracts are rarely used in this sector due to the staggering amounts, the phenomenon is well known.

    “Cases, when they are included in construction enterprises, have been happening, but little recorded by notaries, since it is a matter of not small numbers. Usually, the agreement is made between each other and the payment is made in kind, with construction area”, he explains.

    But, a number of citizens go towards usury because of the facilities in time.

    “Usury recipients in most cases are poor people, but also people who need money, as they live beyond their financial means. They have ambitions to catch big money, gamblers or drug users”, – says Lutfi Minxhozi.

    Facilitation in the exchange of money is seen as a “trap” that is increasingly directing citizens towards cash, with interest.

    “You get a usury loan in an hour, for a loan you need at least 3-4 days minimum. You receive a usury loan simply by recognition, without the need to present evidence of collateral, income analysis, collateral support, etc.; you get a usury loan, even if you have received 3, 4 or 5 other usury loans or whether or not you have been correct in repaying them to other usurers”, – argues Pano Soko.

    According to him, the usury phenomenon is related to the “panoramic picture of underdeveloped countries” or poor countries, with a low cultural level and financial emancipation, but with a high level of informality and weak, law-enforcement institutions.

    “This is the background, where these phenomena find fertile ground to grow”, – he concludes.

    Ky shkrim është pjesë e projektit që mbështetet financiarisht nga Zyra e Mardhënieve me Publikun e Ambasadës së SH.B.A. në Tiranë. Opinionet, gjetjet, konkluzionet dhe rekomandimet e shprehura janë te autor-it/ve dhe nuk përfaqesojnë domosdoshmërisht ato të Departamentit të Shtetit. / This article is part of a project that is financially supported by the Public Relations Office of the US Embassy in Tirana. The opinions, findings, conclusions, and recommendations expressed are those of the author(s) and do not necessarily represent those of the Department of State.