Trending: Transitional Crime and Weekly Roundup
Transnational Crime: Taking The World By Storm With profits running high and risks staying moderately low, financial criminals delving in the realms of popular categories of transnational crime such as the trafficking of drugs, arms, and even humans have found their lines of business to be quite lucrative, over the past several years specifically. A recent report from the financial advisory group Global Financial Integrity (GFI) has found that “globally the business of transnational crime is valued at an average of $1.6 trillion to $2.2 trillion annually” (May, 2017). It is evident that making money is the main objective of transnational criminal groups, and for the most part they have succeeded in making a lot of it. The most unfortunate aspect of this trend is not necessarily that criminals are making a fortune through illicit activity however, but rather the impact transnational organized crime has on local and national governments, economies, and communities altogether, brought about through corruption and violence. Transnational organized crime involves the “planning and execution of illicit business ventures by groups or networks of individuals working in more than one country” (NIJ, 2007).
The article “The Business of Transnational Crime” cited in BSA News Now on Wednesday, April 12 th , 2017, examines the aforementioned GFI report, which looked primarily into the eleven highest-earning transnational criminal industries seen across the globe today. These eleven lines of business, ranked from greatest to least profitable, are as follows: counterfeiting, drug trafficking, illegal logging, human trafficking, illegal mining, IUU fishing, illegal wildlife trade, crude oil theft, small arms/light weapons trafficking, organ trafficking, and trafficking in cultural property. Of these elven, counterfeiting reigns supreme in average annual earnings, raking in between $923 billion to $1.13 trillion, with drug trafficking trailing slightly – bringing in a modest $426 billion to $652 billion annually (May, 2017).
At the other end of the spectrum, organ trafficking produced the lowest annual average – between $840 million and $1.7 billion. The sheer amount of funds and range of ventures through which billions of dollars are shifting hands demonstrates the magnitude of the problem, one that seems to be growing. What makes transnational criminal groups so effective is that a significant amount of these groups function as actual businesses – entities that provide actual material goods or services to individuals. Writer Channing May notes that “some of these groups are so well organized and well funded that they rival legitimate multinational corporations: they are the incorporation of transnational crime” (May, 2017). Another area of concern is that now after tasting success in one line of business, criminal organizations are expanding into other realms, further exacerbating the problem for law enforcement officials. Frequently used tactics by law enforcement to attempt to tackle criminal groups include pursuing the leaders of the groups, which has become ineffective given the tendency of today’s organizations to stray away from the layered leadership structures that have been seen in the past.
On the other hand, going after “low-level” group members, such as drug dealers at the street level to gain more information on higher ups, has also been relatively ineffective. It is clear that if these practices were to continue, transnational crime would too continue as a profitable business for criminal groups around the world. Vast changes are clearly needed at the international level to place more pressure on these groups. Doing so however would require extreme teamwork at the governmental, business, and general societal levels around the world. An increase in awareness on the scale of the issue is also vital to its success, as is the need for law enforcement agencies to take a stronger stance against organized crime taking place in their respective regions. The article offers policy recommendations for governments and regulatory bodies to help increase detection levels of transnational crime. Of these, revealing beneficial ownership structure is a solution that is being widely proposed in today’s AML sphere, specifically in luxury real estate purchases. Other recommendations include beginning to “flag financial and trade transactions involving individuals and corporations in “secrecy jurisdictions” as high-risk and require extra documentation”, and “scrutinize import and export invoices for signs of misinvoicing, which may indicate technical and/or physical smuggling” (May, 2017).
Writer Channing May sums up the topic perfectly by stating that “Transnational crime is greater than the products and people involved—it is a systemic problem” (May, 2017). Overall, it is fair to say that without the foundation of the organized criminal system being targeted, nor the adoption of stronger AML laws and greater levels of international cooperation, long-term results in the fight against transnational crime will not be had. Weekly Roundup Shell’s Alleged Role in Nigerian Oil Corruption Last week, Global RADAR’s weekly roundup covered the story of the former oil minister of Nigeria who was recently charged with money laundering and corruption stemming from a bribery scandal that took place prior to the 2015 Nigerian presidential election. This week, a new wrinkle was added to the case of Nigerian oil corruption, as the prominent oil and gas company Royal Dutch Shell Plc, commonly known as Shell, has come under fire for changing their previous stance regarding their role and overall knowledge of a deal made with the Nigerian government in 2011. In March, Nigeria’s anti-graft agency filed charges against Shell and the energy company Eni S.p.A., alleging that between them over $800 million was paid corruptly to former Nigerian oil minister Dan Etete, his partners, and his company, Malibu Oil & Gas Ltd in 2011 in order to acquire an oil field. Shell has denied the corruption claims, stating that “its joint purchase with Eni SpA of the license was ‘fully legal’ and it paid no money to Dan Etete or his company Malabu Oil and Gas Ltd.” (Katakey, 2017).
However, after the release of internal emails from the company, it is evident that staff members had knowledge of the risk involved with the deal – specifically that Nigerian government officials could pocket some of the funds. According to Yahoo Finance’s article on the subject, “Shell and Eni SpA’s joint purchase of Nigeria’s Oil Prospecting License 245 – estimated to hold about 9 billion barrels of crude – is being investigated in three countries” (Katakey, 2017). More Reforms Called for in China A report from Reuters this week has exposed yet another example of political corruption in China, and one with a rather extensive history. It has been revealed that China’s petition system – the administrative system used by the Chinese government for hearing complaints and grievances from citizens – has been swayed by bribes.
The system, which has been used for hundreds of years, has apparently been taken advantage of by numerous “top officials in Beijing, including the former vice chairman of the bureau, Xu Jie, who took bribes to make cases disappear” (Shepherd, 2017). It is believed that individuals use funds and other assets to bribe national officials so that cases that are raised through the petition system would not reach the central government for a final decision. Xu Jie received gifts and cash bribes worth a reported 5.5 million yuan ($796,900 USD), and was sentenced to prison for 13 years in 2015. Roughly six million petitions are submitted each year throughout China, leading many to believe that the structural problems of this operation, and the national administration in general, are depriving Chinese citizens of fair practice, as well as encouraging corruption altogether. Bitcoin’s Market Price Rise On April 11 th , the price of a single bitcoin grew to its highest level in three years, with a sole coin traded as high as $1,232 USD. This marked increase comes after news that Russian authorities may soon recognize the “world’s most popular digital currency as a legitimate financial instrument some time next year” (Adinolfi, 2017). The news comes as a significant surprise to those in the financial services sector, as Russian government had threatened jail time to any citizen using Bitcoin in the past. Another factor that contributed to the rise of Bitcoin price on the market was a Japanese law allowing large financial institutions (FI’s) to participate in the Bitcoin market coming to fruition at the beginning of April. A controversial software update that would have “expanded bitcoin’s ability to process transactions threatened to split bitcoin into two separate tokens”, but such expansion has gone by the wayside, another reason the price recently soared (Adinolfi, 2017). The value of the digital currency received a boost at the beginning of the year in what was regarded as a “perfect storm” that saw the election of Donald Trump, Brexit, and the ban of large rupee notes in India all occurring during the same general time period. Today, Bitcoin-centered startups continue to attract high-profile investors such as American Express, Goldman Sachs, and many others. With AML and Know Your Customer (KYC) regulations being updated around the world to meet the growing data and analytics trend, the future looks bright for Bitcoin technologies to change the way finances are handled across the globe.
Citations
- Adinolfi, Joseph. “Bitcoin Touches 3-week High as Russia Mulls Recognizing It as a Currency.” MarketWatch. N.p., 11 Apr. 2017.
- Web. Katakey, Rakteem. “Shell Knew Nigeria Ex-Minister’s Company Would Get Oil-Deal Cash.” Yahoo! News. Yahoo!, 11 Apr. 2017.
- Web. May, Channing. “The Business of Transnational Crime.” Global Financial Integrity. N.p., 12 Apr. 2017.
- Web. May, Channing. “Transnational Crime and the Developing World « Global Financial Integrity.” Global Financial Integrity. 27 Mar. 2017.
- Web. Shepherd, Christian. “Corruption at Top Rung of China’s Ancient Petition System Sparks Calls for Reform.” U.S. News. Reuters, 11 Apr. 2017.
- Web. “Transnational Organized Crime.” National Institute of Justice. 15 Nov. 2007. Web.