Organised Crime, Insider Information and Optimal Leniency

Abstract

When ‘low-rank’ criminals are offered to cooperate with justice in exchange of judicial leniency, their information generates ex post rents that may actually favour their bosses and increase the crime profitability. Hence, an optimal leniency policy must trade off the positive impact of helpful disclosure of insider information and the positive externality that these rents exert on the organisation's returns from crime. Due to this tension, the amnesty that minimises the probability of crime induces the Legislator to restrict the access to the programme, by excluding informants owning potentially useful knowledge. This result survives to a number of robustness checks.