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GIARDINELLO IS A pretty little town perched on the northwestern tip of Sicily, not far from Palermo. It has a population of about 2,000 and a fine 17th century church. But its real claim to fame is that one morning last November, police swooped on Giardinello to arrest four of the island’s leading gangsters who were hiding out in the town.

Officers arrested Salvatore Lo Piccolo, said to be the Sicilian Mafia’s new “boss of bosses” and successor to Bernardo Provenzano, who was arrested in April 2006. Lo Piccolo had been on the run for nearly 25 years. He was captured with his son, Sandro, and two other Cosa Nostra bosses. The Lo Piccolos were suspected of having interactions with the American Mafia as well, and the four were among Italy’s top 30 most wanted Mafia suspects.

The four were captured on the day Sicilians honor the Mafia’s victims. Interior Minister Giuliano Amato told the Italian media the arrests showed that the state is dismantling the Sicilian Mafia.

A report published by a business association just before the arrests came to a different conclusion, however. It said the crime syndicates have never been more powerful—or more profitable. Confesercenti, Italy’s small-business association, estimates that organized crime had aggregate revenues of €90 billion ($128 billion) in 2006, a sum equivalent to 7 percent of Italy’s GDP. Researchers found that these gangs took in about $106 billion in 2005.

Italy’s main crime syndicates—the Camorra in Calabria, the ’Ndragheta around Naples, and Sicily’s Cosa Nostra—have resisted efforts by successive governments, the police, and the courts to uproot them. In 1992, investigators unearthed a vast corruption web linking organized crime and the country’s main parties. Their discoveries triggered a crisis that led to the downfall of Italy’s postwar political system, and led to a “Clean Hands” campaign to eradicate corruption, influence peddling, and the Mafia once and for all.

Yet gangsters continue to thrive. Loan sharking is their most profitable racket, generating $43 billion a year, followed by about $19 billion in illegal construction, and racketeering with $14 billion, according to the report from Confesercenti.

In September 2007, Confesercenti launched a campaign against payment of the pizzo, or protection money, with the support of Italy's powerful business federation Confindustria. Businesses in the south, where organized crime has a strong foothold, supported the campaign at first, but their resolve petered out after they began receiving threats.

David Lea, an analyst at London-based Control Risks, tells Security Management, “the campaign against the pizzo took hold of public imagination, but it seems to have completely run out of steam after shopkeepers started to get threatening messages left on their shutters.”

According to Confesercenti’s report, the police say that major Italian companies and local subsidiaries of multinationals have given in to Mafia extortion to avoid reprisals against projects in the south.

The police and anti-Mafia magistrates may have become more determined, but the Confesercenti report notes that organized crime has responded by becoming more sophisticated, using front companies and complex money-laundering techniques. As a result, said the report, the line between legitimate business and criminal activity has become increasingly blurry.

Roger D. Warwick, CPP, and ASIS regional vice president for Italy, concurs with the report’s findings. “The money they are getting from extortion, from drugs, slavery, prostitution, and counterfeiting is being reinvested in northern Italy and in legitimate businesses,” says Warwick.

Organized crime also flourishes because of Italy’s antiquated and largely ineffective law enforcement and legal systems. A report issued last October by Fiba, the banking federation, said Italy suffered the highest number of bank robberies in Europe—1,565 assaults in the first half of 2007—because of a culture of impunity. Rates of detection, arrest, and incarceration are lower than elsewhere in Europe.

Over-regulation adds to the problem, driving small companies into the cashbased underground economy, where criminal gangs can victimize them more easily. It can take years for companies operating legally to get approval for an investment, says Warwick.

In addition, Italy’s old-fashioned business traditions can make it hard to distinguish criminal from legitimate deals. “Italian corporate culture is based on personal relationships, and a lot of legitimate transactions involve relationships,” explains Lea. “You won’t see this so much in the U.S. or the U.K., and the persistence of the Mafia is a reflection of this. It’s an enduring problem.”