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How to cite this thesis Surname, Initial(s). (2012). Title of the thesis or dissertation (Doctoral Thesis / Master’s Dissertation). Johannesburg: University of Johannesburg. Available from: http://hdl.handle.net/102000/0002 (Accessed: 22 August 2017). Transnational Organized Crime (TOC) and African Small Island Developing States (ASIDS): The Cases of Mauritius and Seychelles.

by

Mia Beaumont 200827542

Submitted in fulfilment of the requirements for the degree

Master’s in Politics and International Relations

in the

Department of Politics and International Relations

of the

Faculty of Humanities

at the

University of Johannesburg

supervised by

Professor Suzanne Graham

30 October 2018 iii ACKNOWLEDGEMENTS

I, Mia Beaumont, declare that this dissertation, is my own work and has not in its entirety or in part been previously submitted to another university and that all information sources used have been acknowledged in the text as well as in the bibliography. I am aware that plagiarism is an offence against the laws of the Republic of South Africa and the regulations of the University of Johannesburg.

I would like to thank Professor Suzanne Graham for her limitless guidance and support as a supervisor. Her expertise and knowledge in the field of International Political Economy (IPE), Transnational Organised Crime (TOC) and African Small Island Developing States (ASIDS) assisted me immensely in writing this dissertation. Furthermore, I would like to acknowledge the support provided by the Politics department and the assistance that they provide to students. Moreover, the support that the University of Johannesburg (UJ) provides (in many forms) to its students also needs to be acknowledged. I would also like to thank my husband Michael and my parents, Johan and Tania for the endless motivation that they provided. A good support-system is crucial when undertaking the task of writing a dissertation and I was very fortunate to have this in abundance.

iv ABSTRACT

African Small Island Developing States (ASIDS), and more specifically Mauritius and Seychelles, are receiving increased attention on international forums due to the economic advancements that they are making. Moreover, Mauritius and Seychelles were ranked 1st and 2nd on the 2017 Ibrahim Index for African Governance (IIAG). However, like all states in the world, these states are not exempt from the activities associated with the Illicit Global Economy (IGE), also known as Transnational Organized Crime (TOC). This dissertation aims to gage to what extent Mauritius and Seychelles are possibly impacted by money laundering, drug trafficking and maritime piracy and whether their typical Small Island Developing States (SIDS) characteristics could make them more susceptible to these crimes. This dissertation employs a dual analytical framework which consists of the features of TOC as discussed by Balaam and Dillman (2015) as well as the characteristics of SIDS/ (African Small Island Developing States (ASIDS)) as derived from available literature. In summary, this dissertation covers the following: Chapter 1 provides the objectives of the study as well as the research questions that the study aims to answer. Chapter 2 focuses on defining key concepts used throughout the study as well as on the features of TOC as discussed by Balaam and Dillman (2015), which forms the first part of the analytical framework. These will focus on globalisation, policies, consumers, states and corruption [all derived from Balaam and Dillman (2015)]. SIDS are also conceptualised, and their various unique characteristics are discussed. The most important characteristics are then categorised according to economics and finance; political; social and geographical characteristics. This framework is applied to the rest of the study to gage which of the typical SIDS characteristics Mauritius and Seychelles subscribe to and whether these characteristics could possibly make them more susceptible to TOC. Chapter 3 covers the history of TOC under the heading “Globalisation, a double-edged sword”. It focuses on the history of the three crimes under consideration for this study (money laundering, drug trafficking and maritime piracy). Ultimately, this chapter seeks to gage the possible impact that globalisation could possibly have had on the development of TOC through considering TOC from a historical perspective. The typical SIDS/ASIDS characteristics of Mauritius and Seychelles are discussed in Chapter 4 of this study. Chapter 5 will investigate to what extent money laundering; drug trafficking and maritime piracy possibly impacts Mauritius and Seychelles and whether their typical SIDS/ASIDS characteristics could possibly contribute to them being more susceptible to these crimes. It will also determine to what extent corruption potentially plays a role in enabling these crimes. The steps taken by the Mauritian and Seychellois states and non-state actors to combat these crimes will be discussed in Chapter 6 under the heading “the problem with supply-side policies” (Balaam and Dillman, 2016) as well as “the problem with coordination between states” (as stipulated by Balaam and Dillman) in the context of TOC in Mauritius and Seychelles. Chapter 7 is a conclusion of the study and will summarise the main findings of this study. This dissertation will gage whether the typical features of TOC (as defined by Balaam and Dillman, 2015), especially corruption being present in these states (although at a low level) and due to the typical SIDS/ASIDS characteristics, criminals are able to practise money laundering and drug trafficking in these states.

v TABLE OF CONTENTS

DECLARATION ...... ERROR! BOOKMARK NOT DEFINED.

ACKNOWLEDGEMENTS...... ERROR! BOOKMARK NOT DEFINED.

ABSTRACT ...... IERROR! BOOKMARK NOT DEFINED.

LIST OF FIGURES………...…………………………………………………………………...VIII

ACRONYMS AND ABBREVIATIONS ...... IERROR! BOOKMARK NOT DEFINED.

CHAPTER 1: ...... ERROR! BOOKMARK NOT DEFINED.

INTRODUCTION, METHODOLOGY AND STRUCTURE ...... 1 1.1 Introduction ...... 1 1.2 The objectives of the study ...... 3 1.3 Literature Review ...... 3 1.4 Research methodology ...... 5 1.5 Structure of the study ...... 7 CHAPTER 2: ...... 9 CONCEPTUAL AND ANALYTICAL FRAMEWORK ...... 9 2.1 Introduction ...... 9 2.2 TOC and IGE ...... 9 2.3 Money laundering ...... Error! Bookmark not defined. 2.4 Drug trafficking ...... Error! Bookmark not defined. 2.5 Maritime piracy ...... Error! Bookmark not defined. 2.6 Small states, SIDS and ASIDS ...... Error! Bookmark not defined. 2.7 Globalisation, the double-edged sword ...... 22 2.8 The problem with coordination between states ...... 24 2.9 Corruption as an enabler of TOC ...... 24 2.10 Conclusion and summary ...... 25 CHAPTER 3: ...... Error! Bookmark not defined. GLOBALISATION, THE DOUBLE-EDGED SWORD ...... Error! Bookmark not defined. 3.1 Introduction ...... Error! Bookmark not defined. 3.1.1. The development of TOC ...... Error! Bookmark not defined. 3.1.2. The development of the IGE ...... Error! Bookmark not defined. 3.2 A Western historical overview of TOC ...... Error! Bookmark not defined. 3.3 TOC in Africa and the Indian Ocean ...... 31 3.4 Money laundering ...... 33 3.5 Drug trafficking ...... 36

vi 3.6 Drug trafficking in Africa ...... Error! Bookmark not defined. 3.7 Maritime piracy ...... Error! Bookmark not defined. 3.8 Maritime piracy in the Indian Ocean ...... Error! Bookmark not defined. 3.9 Somali piracy ...... 40 3.10 Conclusion ...... 41 CHAPTER 4: ...... 42 THE TYPICAL SIDS/ASIDS CHARACTERISTICS OF MAURITIUS AND SEYCHELLES.…………………………………………………………………………………42 4.1 Introduction ...... 42 4.2 The political history of Mauritius ...... 43 4.3 The political history of Seychelles ...... Error! Bookmark not defined. 4.4 The economic history of Mauritius ...... Error! Bookmark not defined. 4.5 The economic history of Seychelles ...... 50 4.6 The characteristics of Mauritius and Seychelles as SIDS/ASIDS ...... 52 4.6.1 Mauritius and Seychelles: economic and financial characteristics...... 53 4.6.2 Mauritius and Seychelles: political characteristics ...... 54 4.6.3 Mauritius and Seychelles: geographical characteristics ...... Error! Bookmark not defined. 4.6.4 Mauritius and Seychelles: social characteristics... Error! Bookmark not defined. 4.7 Conclusion ...... Error! Bookmark not defined. CHAPTER 5: ...... 61 MONEY LAUNDERING, DRUG TRAFFICKING AND MARITIME PIRACY IN MAURITIUS AND SEYCHELLES ...... 61 5.1 Introduction ...... 61 5.2 The size and scope of money laundering in Mauritius and Seychelles ...... 61 5.2.1 The size and scope of money laundering in Mauritius ...... 62 5.2.2 The size and scope of money laundering in Seychelles ...... 64 5.3 Drug trafficking in Mauritius ...... 66 5.4 Drug trafficking in Seychelles ...... 68 5.5 Possible actors involved in the drug trade in Mauritius and Seychelles: the six degrees of separation ...... 70 5.6 Maritime piracy in Mauritius and Seychelles ...... 71 5.7 Possible actors involved in maritime piracy ...... 72 5.8 The possibility that Mauritius and Seychelles are impacted to a greater extent by TOC due to their typical SIDS/ASIDS characteristics ...... 73 5.9 Conclusion ...... Error! Bookmark not defined. CHAPTER 6: ...... Error! Bookmark not defined. THE UNINTENDED CONSEQUENCES OF SUPPLY-SIDE POLICIES ... Error! Bookmark not defined. 6.1 Introduction ...... Error! Bookmark not defined.

vii 6.2 Mauritius ...... Error! Bookmark not defined. 6.2.1 Action steps taken in Mauritius against money laundering .. Error! Bookmark not defined. 6.2.2 Legislation pertaining to money laundering ...... Error! Bookmark not defined. 6.3 Seychelles ...... 81 6.3.1 Action steps taken in Seychelles against money laundering ...... 81 6.3.2 Legislation enacted to combat money laundering in Seychelles ...... 82 6.4 Actions taken to combat drug trafficking in Mauritius ...... 83 6.4.1 Organisations and initiatives to combat drug trafficking ...... 84 6.4.2 NGOs combatting drug trafficking in Mauritius ...... 85 6.4.3 Legislation against drugs in Mauritius ...... 85 6.5 Actions taken against drug trafficking in Seychelles ...... 86 6.5.1 The National Drug Control Master Plan ...... 86 6.5.2 NGOs fighting drug trafficking in Seychelles ...... 87 6.5.3 Legislation against drugs in Seychelles ...... 87 6.6 Action steps taken against maritime piracy by Mauritius and Seychelles ...... Error! Bookmark not defined. 6.6.1 Legislation enacted in Mauritius in the fight against maritime piracy ...... Error! Bookmark not defined. 6.6.2 Legislation enacted in Seychelles to combat maritime piracy...... 90 6.6.3 NGOs fighting maritime piracy ...... 91 6.6.4 International and regional organisations fighting against maritime piracy ...... 91 6.7 The problem with coordination between states ...... 93 6.8 Conclusion ...... 94 CHAPTER 7: ...... 95 CONCLUSION AND RECOMMENDATIONS FOR FURTHER STUDIES ...... 95 7.1 The motivation for the study ...... 95 7.2 The analytical framework applied ...... 95 7.3 The objectives of the study ...... 96 7.4 The findings of the study ...... 96 7.5 Recommendations for further studies ...... 101

BIBLIOGRAPHY ...... 102

viii

LIST OF FIGURES Page

Figure 4.1 A Comparison of the Growth in Gross Domestic Product (GDP) and the Purchasing Power Parities “PPP (current international $)” between 1990 and 2017 in Mauritius and Seychelles………………………………………………………………………………52

Figure 4.2 Human Development Index – Mauritius and Seychelles……………………………….59

ix ACRONYMS AND ABBREVIATIONS

AMISOM African Union Mission to Somalia AA Alcooliques Anonymes (Alcoholics Anonymous) ADSU Anti-Drug and Smuggling Unit AGO Attorney General's Office AML Anti-money laundering AMLA Anti-Money Laundering Act 2008 AMLAA Anti-Money Laundering Amended Act 2011 AGOA African Growth and Opportunity Act ASIDS African Small Island Developing States ATS Amphetamine-type stimulants AU African Union BIS The Bank of International Settlements BOM Bank of Mauritius CBS Central Bank of Seychelles CEMLAWS Centre for Maritime Law and Security Africa CFT Combating the Financing of Terrorism CGPCS Contact Group on Piracy off the Coast of Somalia CMF Combined Maritime Forces COMESA Common Market for Eastern and Southern Africa CPI Corruption Perception Index CPS Centralised System of Preferences CSDP Common Security and Defence Policy CUT Collectif Urgence Toxida DDA Dangerous Drugs Act 1995 DURNS The Drug Utilisation Response Network Seychelles EFW Economic Freedom in the World Index EIC East India Company EPZs Export Processing Zones ESAAMLG Eastern and Southern Africa Anti-Money Laundering Group ESA-IO Eastern and Southern Africa-Indian Ocean region EU European Union EUCAP The EU Capacity Building Mission

x EU NAVFOR The European Naval Force FATF Financial Action Task Force FAIR Forum for African Investigative Reporters FAO Food and Agriculture Organisation FIAMLA Financial Intelligence and Anti-Money Laundering Act of 2002 FIU Financial Intelligence Unit FSA Financial Services Act 2007 FSA Financial Services Authority FSC Financial Services Commission GDP Gross Domestic Product GMCP IO Global Maritime Crime Programme's Indian Ocean sub-Programme GNI Gross National Income GSP Generalised Systems of Preferences GPS Global Positioning System GRC Global Response Centre HDI Human Development Index HRA High Risk Area HSBC Hong Kong and Shanghai Banking Corporation IBCs International Business Companies ICAC Independent Commission Against Corruption ICIJ International Consortium of Investigative Journalists ICLEI The International Council for Local Environmental Initiatives ICPA International Commission for the Prevention of Alcoholism and Drug Dependency ICT Information and Communications Technology IDUs Injection Drug Users IFFs Illicit financial flows IGE Illicit Global Economy IIAG Ibrahim Index of African Governance IMF International Monetary Fund IMO International Maritime Organisation IMPACS Implementation Agency for Crime and Security INTERPOL The International Criminal Police Organisation IOC Indian Ocean Commission IOR Indian Ocean Region KANCO Kenya AIDS Consortium

xi LDCs Least Developing Countries LDS Linyon Demokratik Seselwa MASE Program to Promote Regional Maritime Security MDGs Millennium Development Goals MFA Multifibre Arrangement MLI Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting MMM Mouvement Militant Mauricien (Mauritian Militant Movement) MSC Maritime Safety Commission MSM Mouvement Socialiste Mauricien (Militant Socialist Movement) NATO North Atlantic Treaty Organisation NATRESA National Agency for the Treatment and Rehabilitation of Substance Abusers NDEA National Drugs Enforcement Agency NDO National Drug Observatory NEP Needle Exchange Programme NGO Non-governmental Organisation Nice National Institute for Civic Education NIDU Non-injection drug users OECD Organization of Economic Cooperation and Development OFC Offshore financial centre PPP Purchasing Power Parities PILS Prévention Information et Lutte contre le Sida (Prevention Information Fight against AIDS) PMSD Parti Mauricien Social Démocrate (Mauritian Social Democrat Party) PSM Parti Socialiste Mauricien (Socialist Party of Mauritius) PWID People Who Inject Drugs REFLECS3 Regional Fusion and Law Enforcement Centre for Safety and Security at Sea RTM Rassemblement des Travaillistes Mauriciens (Mauritian Workers' Rally) SADC Southern African Development Community SARPCCO Southern African Police Chiefs Cooperation Organisation SDP Seychelles Democratic Party SIBA Seychelles International Business Authority SIDS Small Island Developing States SNP Seychelles National Party SPLA Sudan People's Liberation Army

xii SPPF Seychelles People's Progressive Front SPUP Seychelles People's United Party STRs Suspicious Transaction Reports TFG Transitional Federal Government TOC Transnational Organized Crime UK United Kingdom UKMTO United Kingdom Maritime Trade Operations UN United Nations UNCLOS United Nations Convention on the Law of the Sea UNDP United Nations Development Programme UNECA United Nations Economic Commission for Africa UNGASS United Nations General Assembly Special Session on Drugs UNODC United Nations Office on Drugs and Crime US United States WEF World Economic Forum WTO World Trade Organisation WWI World War I WWII World War II

1

CHAPTER 1 INTRODUCTION, METHODOLOGY AND STRUCTURE

1.1 Introduction

As the global economy expands, so too does the illicit global economy (IGE), also referred to as transnational criminal activity or transnational organized crime (TOC) (Andreas, 2015:782; Friman & Andreas, 1999:3). However, the exact size of the IGE is difficult to measure due to the secretive nature of the activities associated with it (Picard in Miklaucic and Brewer, 2013:37). What is clear is that the IGE is impacting states all over the world (World Economic Forum, 2015: 3). Some states are more resilient to the activities associated with the IGE while others are more vulnerable to it (Costa in UNODC, 2010a). It can therefore be argued that such vulnerable states fall “victim” to the IGE (Zeidler, 2011: ii). This point will be examined further, later in this dissertation, when the research question of whether the unique characteristics of Small Island Developing States (SIDS) might make them more vulnerable to TOC is explored.

There are many modern manifestations of TOC such as credit card fraud, “drugs and arms trafficking, traffic in human beings, smuggling of nuclear materials, illegal car trading and laundering of ill-gotten gains” (Fijnaut, 2000:121). There are other products that are also smuggled such as food, alcohol and tobacco (Fijnaut, 2000). In addition, TOC can take a corporate form, for instance tax evasion and “obtaining government subsidies by fraudulent means” (Fijnaut, 2000). TOC can also become a professional undertaking by illicit groups, involving, for example theft, fraud, kidnapping and piracy. Moreover, TOC can also take on a political form, such as genocide, terrorism, the evasion of United Nations (UN) sanctions by states, among other forms. All the above-mentioned manifestations of TOC go hand in hand with corrupt officials who accept bribes in order to allow criminal activity to go unnoticed (Fijnaut, 2000:122).

Andreas (2010) argues that SIDS, like other states, are to some extent impacted by activities associated with TOC (Andreas, 2010). Mauritius and Seychelles are both African Small Island Developing States (ASIDS) in the Indian Ocean. Considering these two statements, this study will consider TOC and ASIDS by focusing on two case studies: Mauritius and Seychelles. This will be done by applying a dual analytical framework consisting of first, the features of TOC as listed by

2 Balaam and Dillman (2015), which relate to globalisation1, consumers, policies, corruption and harmonisation of state policies and activities. The second part of the analytical framework will consist of the typical characteristics of SIDS/ASIDS, drawn from the literature, categorised as: economic and financial (Gross Domestic Product (GDP) and economic freedom); political (freedom in the world, governance, democracy, levels of corruption); geographical (isolation; location); and social (population figures and human development) characteristics.

As a further motivation for this study, the Mo Ibrahim Foundation (2017) ranks Mauritius number 1 and Seychelles number 2 on the 2017 Ibrahim Index of African Governance (IIAG) for overall governance. This would appear to indicate a success story for these states concerning legitimate and credible governance structures. However, according to the UN Office on Drugs and Crime (UNODC) (2013b), Mauritius and Seychelles are both to some extent impacted by the activities associated with TOC. For example, both states are being quoted as being complicit in illicit activities such as money laundering:

So, to understand why Mauritius is accused of being a tax haven in the first place, we must first take a look at the tax structure prevalent in Mauritius. The island has a corporation tax of 15%, but tax credits for global business companies mean an effective rate of 3%. There is no capital gains tax and no withholding tax on dividends. Seychelles is another example, where there is absolutely no tax on income or profits for international companies. There is no capital gains tax, and the government does not tax interest payments from abroad (Africa Money, 2017).

Moreover, Transparency International (2018) indicated that on the Corruption Perception Index 20172, which measures the perceived corruption in states on a global scale, Seychelles ranks number 36 with a score of 60/100 and Mauritius at 54 with a score of 50/100 (where 0 is highly corrupt and 100 is very clean).

In light of the high rating for governance of the two states by the Ibrahim Foundation and the Corruption Perception Index, these two ASIDS make interesting cases to study in terms of TOC. Due to the broad range of activities associated with TOC, this study will focus on the following illicit activities: money laundering, drug trafficking and maritime piracy.

1 “Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange” (BBC News, 2014:1). 2 This index ranks 180 countries and territories by their “perceived levels of public sector corruption according to experts and businesspeople” (Transparency International, 2018).

3 1.2 The objectives of the study

Questions that will be asked: Primary research questions will be:  Could the typical characteristics associated with ASIDS that Mauritius and Seychelles possibly make these states more vulnerable to TOC?  Are there overlaps between the features of TOC as described by Balaam and Dillman (2015) and the typical SIDS/ASIDS characteristics of Mauritius and Seychelles? Secondary research questions will be:  What is the definition of TOC and more specifically money laundering, drug trafficking and maritime piracy? What is the history and background of these crimes?  If taken as a given that all states are impacted by TOC, as stated above by the World Economic Forum (2015), then what, if any, is the magnitude and scope of money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles and who are the actors involved?  What steps have been taken by the respective states and non-state actors to prevent these illicit activities? The objectives of this study are:  To determine whether the typical characteristics of SIDS/ASIDS as derived from the literature possibly contribute to make Mauritius and Seychelles more susceptible to TOC.  To determine whether there are any overlaps between the features of TOC as mentioned by Balaam and Dillman (2015) and the typical SIDS/ASIDS characteristics derived from the literature.  To gauge the size and scope of money laundering, drug trafficking and maritime piracy (as examples of TOC) in Mauritius and Seychelles and to investigate which possible actors are involved in such processes.  To consider approaches that the governments of Mauritius and Seychelles have adopted in relation to money laundering, drug trafficking and maritime piracy.

1.3 Literature Review

This literature review focuses on concepts and factors that are key to understanding this study. The first two concepts that will be focused on are SIDS and ASIDS. Van Nieuwkerk (2004:40) and Baldacchino (2015:40) focus on small states and explain that state smallness is a subjective concept

4 based on how a state is perceived by the international society. However, this definition does not focus on SIDS but rather on small states in general.

The International Council for Local Environmental Initiatives (ICLEI) (2017) and Association of Caribbean States (2017) elaborate on the definition of SIDS: due to their physical size and isolation, SIDS have limited resources readily available. As a result, SIDS depend on international trade and coastal resources. They have a large coastline and limited fresh water resources. They are thus exposed to the difficulties brought about by climate change, sea-level rise, water shortages and other natural disasters such as floods (ICLEI, 2017). Although this source adequately conceptualises SIDS, it does not refer to the unique characteristics of SIDS/ASIDS - a concept that is crucial to this study.

This research question focuses on a specific group of SIDS associated with the African continent. Lopes (2013) and Graham and Graham (2016:37) explain that ASIDS account for six of the 52 SIDS globally. These are: Cape Verde, the Comoros, Guinea Bissau, Mauritius, São Tomé and Príncipe and Seychelles. These sources provide a good foundation for understanding the characteristics of SIDS. However, they do not focus on the relationship between the IGE and SIDS or ASIDS. Adam (2015) explains the relationship between SIDS and the IGE as follows: SIDS have a vulnerability to the activities associated with the IGE due to their “unique geographic character”. As they are surrounded by oceans, SIDS are isolated which makes it difficult for them to provide resistance to criminal activities coming from abroad.

For this study, it is important to have a thorough conceptualisation of the IGE. Friman and Andreas (1999:1), Andreas (2004; 2015) and the UNODC (2017a) offer a broad definition of the IGE as including the smuggling of drugs, migrants, animals, and toxic waste, and money laundering. It also focuses on the relationship between the state and the IGE. Andreas (2004) argues that the state either retreats, persists or reasserts itself in relation to the IGE. Furthermore, the IGE is not a recent phenomenon but rather “as old as the illicit economy itself or perhaps older” and that “the nature and methods have just developed over time” (Friman & Andreas, 1999:2). However, Balaam and Dillman (2015) explain that globalisation enables TOC through making states more interconnected; and through technological advancements. This point is crucial as it will form part of the analytical framework of this study in later chapters.

Costa (in UNODC, 2010a) contributes to the above definition that states have different levels of resilience towards the IGE. Zeidler (2011: ii) explores the relationship between the state and the IGE further by focusing on the part that the state plays as host, “facilitator” or victim of the IGE. According to UNODC (2005), Africa is still one of the continents with the greatest development challenges and this often goes hand in hand with TOC. The UNODC (2013b) offers an assessment of the threat that

5 TOC poses for East Africa and provides broad reasons why East Africa is susceptible to TOC, while also referring to Somali pirates. However, it only provides information up to mid-2013.

Money laundering is the first manifestation of TOC that will be considered in this study. The following sources provide background information on money laundering: Financial Action Task Force (FATF) (2017a) and Global Finance Integrity (2017). International Compliance Association (2017) explains that the financial sector is the most common channel used for money laundering due to: the nature of the services and products offered by the financial services industry (namely managing, controlling and possessing money and property belonging to others) means that it is vulnerable to abuse by money launderers (International Compliance Association, 2017).

Drug trafficking is the second manifestation of TOC that will be considered in this study. Drug trafficking can be defined as “a global illicit trade involving the cultivation, manufacture, distribution and sale of substances which are subject to drug prohibition laws” (UNODC, 2010b). The following sources provide information on drug trafficking in East Africa: United States (US) Embassy (2012); Athanase and Uranie (2016); Brewer (2016); Uranie (2016b); and Timesonline (2017).

The third and final manifestation of TOC that will be considered in this study is maritime piracy and more specifically Somali pirates as they are largely found in the Indian Ocean. According to the UNCLOS in United Nations (1982), the following acts constitute maritime piracy:

violence or detention, illegal acts, act of depredation committed for private ends by the passengers or crew of a ship or aircraft on high sea against another ship or aircraft, or against persons or property on this aircraft.

The following sources provide information on piracy in the Indian Ocean: Fernando (2011:1); Malcolm and Murday (2017); Flynn (2010); and Axe (2017).

Although Campling and Rosalie (2006) refer to social development in the Seychelles, particularly, many sources lump all small island states together and refer to broader commonalities that they may share. Therefore, although the above sources are important for this study as they provide background information for this study, further research is required to establish what the nature of the relationship is between ASIDS, specifically Mauritius and Seychelles, and TOC. This dissertation hopes to make a modest contribution to the existing literature by attempting to answer this question.

1.4 Research methodology

It is important to define what is meant by the term “impact” in this dissertation as it forms part of the research questions posed in this study. The definition presented by Moran and Browning (2018) has

6 been selected as suitable for the purposes of this study. Impact in this context means that has TOC has an “effect” on, or changes aspects of the “economy, society, culture, public policy or services, health, the environment or quality of life” it can also mean “directly change” or to “penetrate”. Measuring impact in the context of this dissertation is thus to measure an “outcome” (in this context measuring the outcome of TOC). Moreover, “influence” is a softer term for impact. (Moran & Browning, 2018:249). This conceptualisation of the word impact should thus be kept in mind when reading this dissertation.

The intention of this dissertation is to consider TOC (specifically money laundering, drug trafficking and maritime piracy) and ASIDS by examining two case studies of ASIDS, namely Mauritius and Seychelles. Desktop research will be conducted, and case study methodology will be applied. According to Soy (1997), case study research is ideal for studying a complex issue or problem. “It can extend experience or add strength to what is already known through previous research. Case studies emphasise detailed contextual analysis of a limited number of events or conditions and their relationships” (Soy, 1997). From the above definition of case study methodology, it becomes clear that this methodology is best suited to attempt to answer the research question at hand. The secretive nature of the TOC is noted as a limitation within this study, however, there is enough information in the public, academic, domain to develop a review of the situations in these two countries.

The analytical framework will be a dual framework in the sense that two aspects will be used in this dissertation as a theoretical framework: a selection of the features of TOC as described by Balaam and Dillman (2015) and the characteristics of SIDS/ASIDS as derived from the literature. This dual framework is outlined below and has been derived from the literature considered for this study. The seminal works upon which this framework is based include: Andreas (2015); Friman & Andreas (1999); and May (2017).

Throughout this study, the following dual analytical framework will be applied: first, the following features of TOC as derived from the work of Balaam and Dillman (2015) will be applied: “Globalisation, the double-edged sword”; “corruption hampers development” (however, for the purposes of this study this feature will be used in the analytical framework: as the impact of corruption); “the unintended consequences of supply-side policies”; and “the problem with coordination between states”.

The second analytical framework that will be applied are the most important characteristics of SIDS/ASIDS identified from the available literature on SIDS/ASIDS, which can be divided into the following categories: economic and financial (GDP and economic freedom); political (freedom in the

7 world, governance, democracy, levels of corruption); geographical (isolation, location); and social (population figures and human development). This framework was also adapted from McCormick (2010: 12-21) who outlines how important “the links between politics, economics, and society’ are in better understanding states. This next section will focus on the above points and provide context for the remaining part of the study.

In the second part of this dissertation, the following questions will be answered: What is the size and scope of money laundering, drug trafficking and maritime piracy in East Africa? To what extent do these crimes impact Mauritius and Seychelles and who are the actors involved? Is it due to the typical characteristics associated with SIDS/ASIDS that Mauritius and Seychelles are reportedly vulnerable to TOC? What steps have been taken by the respective states and non-state actors to prevent these illicit activities? Are there overlaps with the main features identified for TOC with the main characteristics of SIDS/ASIDS in Mauritius and Seychelles?

1.5 Structure of the study It is important to note that the two parts of the dual analytical framework (as explained above) will be applied in an integrated fashion and not as two separate frameworks. In Chapter 1 the motivation, methodology and structure of the study, as well as a brief literature review, was discussed. In Chapter 2, key concepts such as the IGE and TOC with a specific focus on money laundering, drug trafficking and maritime piracy will be discussed. SIDS and ASIDS with their unique characteristics will also be conceptualised in this chapter. The first feature of TOC as part of the dual analytical framework, ‘globalisation, a double-edged sword’ will be discussed in Chapter 3. This will be done through providing a history and background of TOC in the Indian Ocean with a focus on money laundering, drug trafficking and maritime piracy. In Chapter 4, the second part of the dual analytical framework will be used by applying the cases of Mauritius and Seychelles to the categories of the most important characteristics of SIDS/ASIDS as identified from the literature: economic and financial (GDP and economic freedom); political (freedom in the world, governance, democracy, levels of corruption); geographical (isolation; location); and social (population figures and human development).

The size and scope of money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles will be discussed in Chapter 5. Chapter 6 will focus on the unintended consequences of supply-side policies through outlining any action steps taken by the respective states and non-state actors to prevent these illicit activities, as well as any enacted legislation to curb these illicit activities. Chapter 6 will also focus on the problem of coordination between states, especially in terms of agreeing what is legal and illegal. The final chapter, Chapter 7, will determine whether the SIDS/ASIDS characteristics that Mauritius and Seychelles subscribe to make them more susceptible

8 to TOC. Finally, it will determine whether there are overlaps between the features of TOC and the characteristics of SIDS/ASIDS (as listed in the dual analytical framework). The study will then be concluded and suggestions for further research will be offered.

9 CHAPTER 2

CONCEPTUAL AND ANALYTICAL FRAMEWORK

2.1 Introduction

As explained in Chapter 1, the purpose of this research is to study TOC and ASIDS by focusing on two case studies, namely Mauritius and Seychelles. To conduct this study, important concepts need to be defined in this chapter. In this chapter TOC and the IGE will be conceptualised. Specific attention will be on money laundering, drug trafficking and maritime piracy as these crimes and ASIDS will form the focus of this study. The second part of this chapter will focus on conceptualising SIDS and ASIDS with their unique characteristics and challenges. In the third and final part of this chapter the importance and relevance of studying TOC in the context of SIDS and more specifically ASIDS will be explained.

2.2 TOC and IGE

As TOC involves many different elements it is important that the concept be unpacked. On a basic level, TOC is crime that occurs across borders in a planned fashion. As Andreas (2004) explains, “most ‘transnational organized crime’ involves some form of profit-driven smuggling across borders”. In addition, Bossard in Friman and Andreas, (1999:5) uses two distinguishing factors to define TOC: first, “a border must be crossed, either by the perpetrators, their victims, the goods and services being transacted, or the orders directing such transactions”. Second, “at least two states must recognise the activity as a criminal offence, either by treaty, Convention, or similar national laws” (Bossard in Friman & Andreas, 1999:5).

The Council of Europe’s Classification of Organized Crime in Edwards and Gill (2002:245) define TOC as:

The collaboration with more than two people; each with own appointed tasks; for prolonged or indefinite periods of time; using some form of discipline and control; suspected of the commission of serious criminal offence; operating on an international level; using violence or other means suitable for intimidation; using commercial or business-like structures; engaged in money laundering; exerting influence on politics, the media, public administration, judicial authorities or the economy; determined by the pursuit of profit and/or power.

Some authors differentiate between TOC and IGE, for example, Edwards and Gill (2002:245) state that the IGE is a category of TOC and needs to be more narrowly defined than TOC. There are specific requisites for an activity to be considered as part of IGE. First, countries involved in international trade need to label any suspected activity as illegal. Second, it involves actors in the private sector as well as state actors in the different processes, including finance, production, distribution and trade. It

10 can include money laundering and trafficking of many things such as drugs, humans, endangered species and weapons (Edwards & Gill, 2002). However, for this study, no distinction will be made between TOC and IGE; the two concepts will be used interchangeably. It is important to consider TOC from an African perspective as the focus of this study is on ASIDS. In 2008 an ‘African’ definition of TOC was adopted at the Southern African Police Chiefs Cooperation Organization (SARPCCO) meeting: “it is committed by two or more perpetrators, who are aware of each other’s existence and general role, and who are acting in concert”; “it is serious”; “it is committed repeatedly” and “the crimes are motivated by the pursuit of material and financial gain” (Hübschle, 2011:83).

Finally, Schneider (2009:1) summarises TOC with the following explanation:

Perfectly legitimate forms of demand can produce perfectly deviant forms of supply. Uneven global regulatory structures create arbitrage opportunities for deviant entrepreneurs. Pathways for legitimate globalization are always also pathways for deviant globalization. Once a deviant industry professionalizes, crackdowns merely promote innovation. States themselves undermine the distinction between legitimate and deviant economics. Unchecked, deviant entrepreneurs will overtake the legitimate economy. Deviant globalization presents an existential challenge to state legitimacy.

The work by different authors were considered as possible analytical frameworks for this study. A theory that was considered as a theoretical component for this study was the work done by Whitaker (2002) on defining TOC through six different aspects which will be explained below. The first aspect of TOC that is identified is “the bright side and the dark side” of TOC – this refers to the licit economy (the “bright side”) and the illicit economy (the “dark side”) (Whitaker, 2002). The second aspect is called “the twilight zone” which refers to the area between the “bright” and the “dark” where it is difficult for the state to practise law enforcement. It is in this space that transnational criminals tend to function (Whitaker, 2002).

The third aspect of TOC identified by Whitaker (2002) is “the Economy of Violence”, which refers to the notion that criminal organizations challenge state authority and manipulate financial markets through the “use of direct violence” (Whitaker, 2002). The fourth aspect is “the Spectre: A New “Crimintern’?” which refers to the notion that international criminal organisations would take over control of states that “undermine the global financial and commercial system” (Whitaker, 2002). The fifth aspect, “a New Global Leviathan?” refers to the state (especially in the US) playing an increasingly important role in combatting TOC (Whitaker, 2002). The sixth aspect “Taking sides?”, refers to “civil society” criticising globalisation and the expansion of the licit global economy and undermining of law enforcement officers while overlooking the impact of the illicit economy (Whitaker, 2002). Although this theory offers some valuable insights towards TOC, it was not applied

11 to this study due to the lack of a focus on other actors in TOC. For example, it did not consider consumers of illicit products and the role that they might play in enabling TOC.

The work by Andreas (2004) was also considered as an analytical framework for this study. Andreas (2003) characterises TOC as the “clandestine side of globalisation” and indicates that as much as globalisation has a positive side (such as global interconnectedness and the advancement of international trade) with its expansion so also do illicit activities expand (money laundering, drug trafficking etc.). Voicu (2012) defines TOC as a “sub-branch of economics” and a “source of development, subsistence and even escape” for citizens in underdeveloped countries. Both of these theories are useful in defining TOC but not as much as a theoretical framework for this study due to the limit focus of these theories on aspects of TOC.

Kleemans (in Paoli, 2014) discusses six different theoretical approaches for analysing TOC. Firstly. “the alien conspiracy theory” is discussed TOC being the “result of an alien conspiracy of outsiders that threatens open, democratic societies”. Secondly, “the bureaucracy model” which likens transnational criminals to “bureaucracies” due to the structured way in which they operate. Thirdly, the “illegal enterprise theory”, advocates for the idea that transnational criminals operate in the same “calculating” way as normal business people operate in “legal markets” (Kleemans in Paoli, 2014). These theories offer useful insights into TOC but is not encompassing of enough elements of TOC to warrant it being used as a theoretical framework for this study.

It is also important to consider Realist approaches to TOC as possible theoretical frameworks. Two theoretical approaches that consider TOC from a realist point of view as it focuses on the security aspects of TOC are Đorđević (2009) and Stoica (2016). Đorđević (2009) views TOC as a “security threat” while Stoica (2016) argues that “transnational organized crime will presumably lead to effective actions at international level only when its threat will reach a level considered inacceptable by powerful states”. However, these theories are limited to considering TOC from a security perspective and overlooks other crucial aspects of TOC.

The theoretical framework that was selected for this study is based on the work of Balaam and Dillman (2015) where they define TOC according to six characteristics. Balaam is an important author in the field of International Political Economy (IPE) and has been quoted extensively in academic work relating to multinational corporations (MNCs), liberalism and free trade. For example, Hacourt and Melluish (in Stephan and Power, 2012) apply the work done by Balaam where they consider the extent to which Africa has been impacted by Globalisation. Similarly, Dillman (2007) has written extensively on TOC, for example he defines TOC as the “shadow economy” and considers the impact of this economy on the state of “democracy, development and peace” in different states

12 (Dillman, 2007). Different authors have applied the theory supplied by Balaam and Dillman to their work. For example, Ray (2015) successfully applies the work done by Balaam and Dillman (2011) when considering TOC and China and India’s economic development and multinational corporations (MNCs). Elias (2001) uses Balaam and Dillman (1996) to discuss the liberal IPE perspective. Clarke (2016) applies Balaam and Veseth (2008) among other authors to describe the theory presented by Adam Smith on liberalism and capitalism. Sargent (2016) applies Balaam and Veseth (2008) to consider the role of MNCs. In addition, Bohman and Malmrot (2017) successfully apply the work of Balaam and Dillman in terms of considering global “free trade” and “liberal” trade perspectives.

The characteristics of TOC that Balaam and Dillman (2015:406-415) have identified pertain to: “consumers”, “globalisation”, “policies”, “war and natural resources”, “corruption” and “coordination between states”. This will be discussed below and utilised as part of the analytical framework of this dissertation.

The first characteristic that Balaam and Dillman (2015) refer to is the “six degrees of separation” which relates to the extent to which consumers are detached from an illegal product or service. Ultimately, there are six possible actors involved in the process of acquiring a product and at any point can illicit practices take place. The first degree (as part of the six degrees of separation) is where the financing of a product takes place; and second is the processing of the product. Third, the product gets shipped, and fourth, imported. It then (fifth) gets distributed and then (sixth) gets sold by retailers (Balaam & Dillman, 2015).

Throughout this chain of market interactions, the extent or “degree” to which the consumer is involved may vary (Balaam & Dillman, 2015:407). Moreover, the consumer can be completely unaware or completely aware of the extent they are involved in the process. For example, when a consumer buys wooden furniture from a local market the consumer might be unaware that the wood was illegally logged. On the other hand, a consumer might be aware that an item was stolen but buy it none the less. However, there are movements to “widen the degree of separation” between consumers and illegal market processes such as the “antisweatshop movement” due to some consumers not wanting to play any role in illicit market processes (Balaam & Dillman, 2015:407).

The second characteristic that Balaam and Dillman (2015) identified is “the unintended consequences of supply-side policies”. Supply-side policies refer to the notion that “increased production drives economic growth”. It also argues that if there is “deregulation” and “tax cuts” business owners can use the money saved for more capital and to hire more laborers and thus enables them to grow their businesses. In addition, “deregulation removes restrictions to growth and the costs associated

13 with complying” (Amadeo, 2018). Deregulation then enables companies to look for new avenues of expansion (Amadeo, 2018) (Galster, 1997).

Balaam and Dillman (2015) argue with this point that states tend to make legislation that focuses on the suppliers of illicit products rather than on the consumers. This is especially the case if the supplier is based in another state as it is easier to hold another state responsible for a TOC issue than to address it in your own state. “Supply-side policies” (Balaam & Dillman, 2015:408) are expensive with a low chance of success yet states tend to follow them. This has the unintended consequence of driving illicit activities more and more underground and thus making these illicit activities more difficult to detect. It drives up prices due to the risk involved and this ultimately encourages other criminals to get involved. Moreover, the more borders that are being protected at certain entry points, the more criminals will find alternative entry points that are less protected (Balaam & Dillman, 2015).

The next characteristic that Balaam and Dillman refer to is what they call “Globalisation, the double- edged sword” (Balaam & Dillman, 2015: 410). That is, globalisation has many positive consequences, such as more international trade opportunities and technological advancements. However, there are also negative consequences such as that regional integration weakens border control and that the opening of markets means that dirty money can flow more easily. Moreover, criminals can outwit law enforcement officials when it comes to using technology (Balaam & Dillman, 2015).

The fourth characteristic is “the problem with coordination between states” (Balaam & Dillman, 2015:411). Due to state sovereignty, coordinating policies is difficult. Some states (governments) also do not appreciate other states (governments) getting involved in the criminal issues that they are facing and/or do not want to get involved in solving the criminal issues of other states (governments). In some cases, states take advantage of the illicit activities of others by becoming havens for criminals to hide their illicit activities. This is what Ronen Palan calls “commercialisation of sovereignty” where states lease out trade rights to foreign individuals and businesses. A case in point is when states advertise that they are able to disguise dirty money. For example, some states offer banking secrecy and low or no taxes for foreign businesses through being tax havens or offshore financial centres (OFCs) 3 (Balaam & Dillman, 2015).

3 “The jurisdictions considered OFCs typically have several features in common. They are often islands, and they usually have small populations. They have strong geographical or cultural links to the investor and/or investee countries that they tend to serve, including special arrangements that enable foreign investment” (Mendelson & Rozas, 2017:3).

14 The fifth characteristic of TOC, according to Balaam & Dillman (2015), is “war and natural resources”. Since the end of the Cold War, criminals who have been trying to control the extraction and exportation of natural resources in a state can secure an income (Balaam & Dillman, 2015). However, this characteristic is not applicable to this study as Mauritius and Seychelles have not directly been impacted by war, and the elements of TOC that inform the focus of this dissertation are not linked to natural resources. Therefore, this feature of TOC will not form part of the analytical framework of this study. The final characteristic of TOC that is identified is “corruption hampers development”. This indicates that when officials are corrupt, they will not do much to prevent illicit activities if they are involved in any way. When a state is corrupt it often leads to indebtedness (as public money is stolen) and a loss of investment (Balaam & Dillman, 2015:414). Having outlined above the key features of TOC applicable to this study, it is now necessary to focus on the three examples of TOC referred to for the purposes of this study.

The next section will focus on money laundering as a manifestation of TOC.

2.3 Money laundering

Money laundering is the first manifestation of TOC that will be considered in the context of SIDS/ASIDS in this study. It is, therefore, important to have a clear understanding of what the concept entails. Madinger (2012) defines money laundering as the process to convert money obtained through illegitimate means into legitimate assets and ultimately concealing the original source(s) of the money. The goal is to make illegally earned money seem like it was earned legitimately.

Money laundering can also take the form of tax evasion - this is when money is earned in one country and placed in a bank or investment in another country. Ultimately, if the tax return is not declared, money laundering takes place (Hopton, 2007). According to Young (2013), this often takes place in OFCs as they strive to uphold client confidentiality while trying to adhere to global anti-money laundering standards. These states are often caught between upholding their leading offshore financial haven status and subscribing to global anti-money laundering (AML) standards by putting a stop to banking confidentiality (Young, 2013).

According to Unger and Busuioc (2007), as an industry money laundering is expanding, and a range of national, regional and international actors are involved in attempting to prevent this illegal practice. Examples of such international organisations are The Bank of International Settlements (BIS), the Organization for Economic Cooperation and Development (OECD) and FATF (which is the main anti-money laundering organisation globally) (Unger & Busuioc, 2007).

15 Banking secrecy can be defined as the use of monetary, financial or banking services to disguise the sources and destination of money made from illegal activities to diminish the chances of it being uncovered. In other words, banking secrecy is the device through which money laundering is implemented in the financial system (Masciandaro & Balakina, 2015). Banking secrecy is a big hindrance to uncovering money laundering as bank and client information is crucial to this process (Young, 2013). Ultimately, banking secrecy allows “criminals [to] continue to avoid confiscation and circumvent law enforcement efforts to trade profits when they launder criminally derived assets through offshore financial centres with strong banking confidentiality laws” (Young, 2013).

As with TOC in general, there are many multilateral and bilateral rules and agreements governing money laundering. It thus makes it easy for money launderers to find loopholes due to judicial arbitrage caused by too many rules and conflicting agreements (Unger & Busuioc, 2007). In addition, the process of confiscating laundered money is not easy; Young (2013) explains banks must first provide information on suspected clients so that illegal assets can be traced and spotted. Only then can laundered money be confiscated.

Criminals launder money to hide the conversion of property or the fact that they own property. The end goal is to break their association to the criminal offence and make the profits that they earned from the criminal activities seem to be from a legitimate source (Hopton, 2007). However, money launderers are constrained by legislation - especially those governing the world financial system. As Madinger (2012) explains, money launderers are always looking for flexibility in laws and customs. Only when their anonymity is guaranteed are they satisfied with the level of flexibility of a system (Madinger, 2012).

There are traditionally three stages of money laundering, according to Hopton (2007). The placement phase is the first phase, when the criminal funds are placed into the financial system directly or indirectly. The second phase is the layering process, where the criminal proceeds are separated from their origin through different layers of transactions. And finally, the integration phase is the third stage of money laundering where the money is placed back into the authentic economy as to appear to be from a valid source. However, the traditional three stages of money laundering can overlap, depending on the needs, resources and facilities of those involved as well as on the legal requirements of a monetary system (Hopton, 2007).

Like many other criminal groups, drug traffickers often make use of money laundering to hide the origin of their money (UNODC, 2017a). Therefore, drug trafficking, the second example of TOC referred to in this study, will be discussed in the next section.

16 2.4 Drug trafficking

Illegal drug trafficking, also referred to as the drug trade, is a part of TOC and is manifested in the global economy (Sherman, 2010:11). “Drug trafficking … refers to the illegal process through which Narcotics and other illegal drugs are produced, transported and sold” (Sherman, 2010:11). According to UNODC (2017b), there are not enough dependable statistics available to give an approximate figure of the income of transnational criminal organisations. “Forbes International attempted to compile a list, but the income of the wealthiest 10 groups (around $5 billion together) was highly skewed, ranging from $25 million to $2 billion per group” (UNODC, 2017b:11).

It is important to differentiate between legal and illegal drugs as the focus of this study will be on illegal drugs. Sherman (2010:11) explains the difference between legal and illegal drugs as follows: “drugs are chemical substances that can be used to make the body function differently. Drugs can be legal and used for medical purposes, or illegal and used for recreational or non-medical purposes”. Drug cartels run the global drug trade and make sure that the interests of the drug trade are safeguarded and they “make huge profits from this multi-billion-dollar industry” (Sherman, 2010:11). A drug cartel can take many forms, from “street gangs to traditional mafia groups to loosely affiliated individual dealers” as long as it is an organisation that “promotes, controls, or is significantly involved in drug trafficking” (Findlaw, 2017).

According to Sherman (2010), it is estimated that every country in the world is to a greater or lesser degree impacted by drug trafficking. Most drugs are grown in developing nations and are then transported to industrialised nations such as the US and European countries, where drug use is widespread (Sherman, 2010:11). As with many other forms of TOC, drug trafficking goes hand in hand with “criminal gangs and money laundering” (Organization of American States, 2017).

In areas where drug trafficking organisations and cartels operate, violence between rival groups is common. In some states, “the drug trafficking organisations are more powerful, better funded, and more heavily armed than the governments of the countries where they operate” (Sherman, 2010:11). Although law enforcement agencies attempt to uncover drug cartels, destroy drug plantations and confiscate drugs, drug cartels can bribe officials in some cases. Therefore, the drug trade continues to thrive and when one organisation is prosecuted, it usually gets replaced by another organisation (Sherman, 2010).

There is a large demand for drugs globally and in 2013, 246 million people used illicit drugs. Heroin, cocaine, marijuana and amphetamine-type stimulants (ATS) are the most commonly used illegal substances. Globally, the drug trade is one of the most lucrative industries and the profits made from

17 the illegal drug trade “are estimated to be around US$320 billion annually” (Organization of American States, 2017).

Drugs are often cultivated in poor, marginalised states (sometimes referred to as fragile states) with limited government control, weak infrastructure and considered as poor.4 For example, between 1998 and 2014, over 90 per cent of the world’s opium poppy was supplied by Afghanistan and Myanmar. In addition, the trafficking of cocaine usually takes place either from South America to North America or to Europe over the Caribbean or through Africa (Organization of American States, 2017:1).

To understand drug trafficking fully, it is important to examine the drug distribution process. The following steps explain the illicit drug manufacturing and distribution process: if the drug is plant- based, the first step is the farming of the plants that are used to make the drugs. The next step is processing, this is where the plants are converted into street drugs. (If the drug is not plant-based, chemicals are converted into drugs during this step). The next step is international smuggling whereby the drugs are transported via different means. The next link in the process are the wholesalers, who typically represent the drug cartels, and the retailers who ultimately sell to customers (Organization of American States, 2017).

The third and final manifestation of TOC that will be considered in the context of ASIDS in this study is maritime piracy.

2.5 Maritime piracy

Unlike drug traffickers, maritime pirates do not necessarily have to launder the money generated from taking hostages, as the ransom money paid to them is usually from legitimate sources. However, the ransom money is often used to enable other criminal activities (UNODC, 2013b). According to US Legal (2016:1), maritime piracy can be defined as:

any criminal acts of violence, detention, rape, or depredation committed for private ends by the crew or the passengers of a private ship or aircraft that is directed on the high seas against another ship, aircraft, or against persons or property on board a ship or aircraft. Piracy can also be committed against a ship, aircraft, persons, or property in a place outside the jurisdiction of any state.

It is important to distinguish between sea robbery and maritime piracy. Maritime pirates have more sophisticated operations and have “better equipment, arms and intelligence” than sea robbery (Dillon,

4 Fragile states can be defined “as those with either critically poor policies or poorly performing institutions, or both” (McGillivray, 2006:1). Moreover, fragile states “are failing, or at risk of failing, with respect to authority, comprehensive service entitlements or legitimacy” (Stewart & Brown, 2009:3).

18 2005). Criminals who participate in maritime piracy often are former fishermen and coastal dwellers who struggle to find work or make a profit through fishing and who then turn to maritime piracy (Gries & Redlin, 2014). According to the Economist (2013), known pirates were usually former clan leaders, farmers or soldiers in their younger lives.

Maritime piracy is one of the contemporary challenges of the maritime industry. This phenomenon impacts the maritime industry around the world negatively as maritime security is undermined. The Indian Ocean is regarded as a high-risk area in terms of maritime piracy (Randrianantenaina, 2013). The Centre for International Maritime Security (2012) conceptualises maritime security as the:

freedom from the risk of serious incursions against a nation’s sovereignty launched from the maritime domain, and from the risk of successful attack against a nation’s maritime interests.

To grasp the concept of maritime piracy fully, it is important that the enablers of maritime piracy be discussed. Maritime piracy is enabled by a variety of factors. According to the Implementation Agency for Crime and Security (IMPACS) (2013), the first factor is if the state in which the maritime piracy originates is considered as a weak or a failed state5. As a result, in failed states the maritime piracy operations are often more organized than in weak states, this is often because failed states do not enforce law against maritime pirates. For ransom money, failed states tend to make kidnappings a part of their business. However, ships and cargo are robbed and sold for profit in weak states as they have the required markets and transportation infrastructure for such operations (Gries & Redlin, 2014).

Institutional failures enable maritime piracy, this includes weak or ineffective international law and institutions, governance, bureaucracies, legal systems and political institutions. It also includes civil disorder and conflict as well as corruption. Moreover, demographic features such as the size of the country and the coastline, or external features such as desired shipping traffic, may also enable piracy (Gries & Redlin, 2014). It is clear that states that subscribe to these features tend to be more vulnerable to maritime piracy.

According to Gries and Redlin (2014), between 2003 and 2012 most of the piracy acts that were registered took place in the East African region, especially around Somalia, the Gulf of Aden, the Red Sea and South-East Asia. A total of 3,436 piracy incidents were recorded in this region.

5 Rotberg (2015) explains that a weak state is perceived by its citizens to deliver inadequately on public services, whereas a failed state fails completely to deliver on public services.

19 As with other elements of TOC most indications of the extent of the crime are mere estimates (Andreas, 2004). However, according to the Economist (2013), referencing the World Bank, the annual worth of piracy between 2005 and 2011 was US$18 billion. Although per hijacking the pirates make US$10,000, up to 86 per cent of the ransom money goes to their superiors (The Economist, 2013).

The first part of this chapter focused on TOC, the features as described by Balaam and Dillman (2015) and detailed descriptions of the three crimes that will form the focus of this study, namely money laundering, drug trafficking and maritime piracy. As this dissertation focuses on TOC and ASIDS, it is important to thoroughly conceptualise SIDS/ASIDS for the purposes of this dissertation, as it is in the context of these states that TOC will be considered in the next few chapters.

2.6 Small states, SIDS and ASIDS

This section will first define small states (as SIDS and ASIDS fall within the umbrella of this term) before moving on to describe the characteristics that make up SIDS and ASIDS. Finally, it will explain the significance of studying TOC in the context of ASIDS to have a better understanding of the relevance of this study.

States with a population of less than 1.5 million people are considered to be small states. Although they may differ geographically in terms of size and location, as well as in terms of levels of development, they have common challenges concerning their isolation and their smaller economies (World Bank, 2017d). In addition to these challenges, the Food and Agriculture Organisation (FAO) of the United Nations (2002) argues that small states have small economic markets and a narrow resource base for production. Moreover, small states are fragile and prone to disruption by natural disasters. They typically depend on a small range of primary product exports in foreign exchange. They also have generally limited local capital for product investment and their revenue base is commonly narrow. Agriculture constitutes the backbone of most small states, providing the main source of livelihood for the population and being one of the main export earners (FAO of the United Nations, 2002).

This study is concerned with a collection of small states, namely SIDS/ASIDS. Therefore, it is prudent that SIDS and ASIDS should be defined. At the 1994 Barbados Programme of Action, and again at the Mauritius Strategy in 2008, SIDS were consolidated as a group of 52 small countries and territories in the tropics and low-latitude sub-tropics. It is important to note that although most SIDS are surrounded by water, this is not the case for all SIDS (Kelman & West, 2009). As noted earlier in this study, due to their physical size and isolation, SIDS have limited resources readily available

20 (ICLEI, 2017). As a result, SIDS depend on international trade and coastal resources and have a large coastline and limited fresh water resources. They are thus exposed to the difficulties brought about by climate change, the rising sea-level, water shortages and other natural disasters such as floods (ICLEI, 2017). According to the UN (2014), SIDS have unique characteristics that could be weaknesses, especially, for example, when aiming to achieve sustainable development. These are “small size”, “isolation”, “climate change” and “sea-level rise” and “natural and environmental disasters” (United Nations, 2014:1).

SIDS have formed a relatively cohesive group to address environmental issues, including climate change in international forums (Kelman & West, 2009). According to the UN Economic Commission for Africa (UNECA) (2017), SIDS are insular and have geographical disparities (UNECA, 2017). SIDS are small geographically with small populations and have a small range of resources readily available which amounts to a greater dependence on trade (UNECA, 2017) (Kelman & West, 2009). Moreover, SIDS have limited watersheds and freshwater resources (UNECA, 2017) and the coastlines of SIDS are larger than the land area. This means that due to global warming and climate change, they are at great risk of “sea level rise” as well as floods and storm surges (ICLEI, 2017:1). SIDS are also physically isolated and often made up of archipelagos of tiny, isolated and poorly connected islands (ICLEI, 2017). Finally, for SIDS, electricity supply is often an issue (although Mauritius and Seychelles are generating renewable energy sources) (AFK Insider, 2014).

This research focuses on a specific group of SIDS associated with the African continent, namely ASIDS and in particular Mauritius and Seychelles, which are the strongest economies among the ASIDS (Seychelles News Agency, 2014). Comoros, Guinea Bissau, São Tomé and Príncipe are Least Developing Countries (LDCs)6 while Cabo Verde, Seychelles and Mauritius enjoy higher levels of development (United Nations Economic Commission for Africa, 2017).

Lewis-Bynoe (2014) argues that SIDS are impacted by the activities associated with TOC to varying degrees (Lewis-Bynoe, 2014:90). Adam (2015) explains that SIDS have a vulnerability to the activities associated with the IGE due to their “unique geographic character”. As they are surrounded by oceans, they are isolated, and they find it difficult to provide resistance to criminal activities from abroad. For SIDS, “non-military threats have mushroomed, and trespass of exclusive economic zones have all increased world-wide. The major threat has come from the drug trade, but the other threats

6 LDCs are defined by the United Nations as being low-income states that encounter structural challenges to sustainable development. Their levels of human assets are low, and they are highly vulnerable to economic and environmental disasters (United Nations, 2018).

21 remain pertinent” (Commonwealth Secretariat, 1997). It is, therefore, clear that SIDS are not exempt from the activities associated with TOC.

What distinguishes SIDS from other states are their unique characteristics that make them more vulnerable to these illicit activities. They are mostly surrounded by water and have no neighbouring state nearby, which means that they lack the human resources to effectively prevent TOC on their own. This makes them more vulnerable to TOC as the networks establish themselves in states that offer the least resistance (Lewis-Bynoe, 2014:90). According to the United Nations (2015a), the activities associated with TOC impacting SIDS include trafficking of humans, wildlife and drugs as well as maritime piracy and money laundering (United Nations, 2015a). However, there could be other crimes that were not mentioned.

UNODC (2014) agrees that the typical nature and characteristics of SIDS make them more vulnerable to TOC. For example, drug trafficking and smuggling usually takes place through isolated, coastal states. In addition, often the cultural and socio-economic characteristics of SIDS enable money laundering and corruption. According to UNODC (2014), “weak banking systems and the provision of offshore services in some small island states have made such islands a target for increased money laundering activity, further undermining economic stability”. Finally, if there is a lack of law enforcement capacity the extent of these issues is aggravated (McCusker in Lewis-Bynoe, 2014:90).

Jean-Paul Adam, in UN (2015b), adds to the above argument stating that the ocean space surrounding SIDS, which makes up 75 per cent of the planet, is governed weakly which enables TOC. In addition, a lack of maritime security in the Indian Ocean Region (IOR) aggravates the situation further. In accordance, SIDS experience maritime crimes first which make them a “bellwether” (Adam in United Nations, 2015b:1) in this respect. Moreover, in the IOR specifically, maritime crimes are not prosecuted on a regular enough basis as there is no uniformity among states in terms of prosecution measures against TOC. This issue is important since most of the world’s illegal traffic is conducted at sea (Adam in United Nations, 2015b).

SIDS have a high degree of openness to agricultural trade and a great dependence on the international trading system. The GDP of SIDS can be up to 50 per cent dependent on a single or few export commodities for a high percentage of their export earnings. They are also vulnerable to changes in world markets. As SIDS have small populations, economies of scale7 and labour specialisation are very difficult to attain (FAO of the United Nations, 2002). On the other hand, labour specialisation,

7 “Economies of scale are reductions in average costs attributable to production volume increases” (Reference for Business, 2017).

22 also known as division of labour, enables industries to produce on a global scale and increase productivity by assigning different tasks in the production process to specific labourers (Sarokin & Schulkin, 1993). Moreover, as SIDS face a high concentration of exports on few primary products from agriculture, forestry, fisheries and mining, they are prone to considerable fluctuations in output and prices (FAO of the United Nations, 2002).

The removal of exchange and capital controls has led to a growth in financial markets of SIDS. This growth is contributing to globalisation and affording opportunities for many countries to establish OFCs which offer a range of legitimate financial sectors. SIDS have taken hold of these opportunities to become OFCs. They provide a range of banking, insurance and business services in conditions of strict confidentiality. On the negative side, this opens the door for tax evasion and money laundering (Commonwealth Secretariat, 1997).

From the above discussion, the following key characteristics of SIDS/ASIDS have been selected to form part of the dual analytical framework of this study:

 Economic and financial (GDP and economic freedom)  Political (freedom in the world, governance, democracy, levels of corruption)  Geographical (isolation, location)  Social (population figures and human development)

The above characteristics of SIDS/ASIDS will form the second part of the dual analytical framework of this dissertation. The next section will consider the history of TOC with a focus on globalisation as a feature of TOC, as outlined by Balaam & Dillman (2015), as well as an enabler of TOC.

2.7 Globalisation, the double-edged sword

It is important to consider the history and development of TOC. This section aims to explore the theory Balaam and Dillman (2015) put forth, that globalisation is a “double-edged sword” through considering the history and development of TOC. As the heading of this chapter indicates, globalisation is a “double-edged sword” in the sense that the changes brought about by globalisation brings forth positive (licit) and negative (illicit) developments (Balaam & Dillman, 2015). It is important to note that TOC is not a new phenomenon and has existed for as long as international trade has existed (Andreas, 2004). However, as globalisation expanded through the advancement of technology, the methods, activities, and the speed of production of illicit products has evolved over the years. Moreover, the demand for illicit products and services has grown and the production and transportation methods thereof, have evolved. In addition, the scope, composition and operational

23 space of criminal and trafficking organisations has evolved, and legislation and law enforcement procedures have changed (Edwards & Gill, 2002: 245). Moreover, with globalisation, the developments in telecommunication, transportation and the Internet have made it easy to plan and execute crimes (Edwards & Gill, 2002:245). In addition, McCusker (2006) adds that throughout history criminals have used technological innovations to benefit their illicit practices. Ultimately, any person who has access to these advancements can become a criminal participating in the IGE (Andreas, 2004). This discussion supports the argument by Balaam and Dillman (2015) that globalisation enables TOC.

With this evolution of TOC and the expansion of globalisation, criminal networks today cannot be identified as a specific class of people who are likely to be criminals as was the case in the 1800s. Nor are contemporary transnational criminals part of a distinct “group of gangsters and racketeers who were Organized in gangs, syndicates and criminal organisations and followed big master criminals who functioned as powerful leaders of Organized crime” (Lebeya, 2012:27). Rather, criminal networks “have flattened out, dispersed, and become more network-oriented, making them more difficult to penetrate and dismantle” (Andreas, 2004:644). Examples of these modern-day criminal groups are drug trafficking networks and those involved in money laundering which will be discussed in detail later in this chapter. In addition, as states have strengthened law enforcement, illicit crime has become more cooperative and less hierarchical to avoid prosecution (Andreas, 2004).

According to Aggarwal (2014), the markets of TOC are mostly concentrated in developed states; however, the production, funding and management processes are mainly operated from developing countries (Aggarwal, 2014). With globalisation, especially after the Cold War ended in 1989, the IGE has grown exponentially. This gave rise to: “smugglers, warlords, guerrillas, terrorists, gangs, and bandits of all stripes” (Schneider, 2009). Due to the growth of IGE, criminals are becoming powerful actors in the economic and political landscapes of the states where they operate. This occurs as transnational criminal groups identify specific areas or zones in states for their criminal activities that are interconnected on a global level. These areas or zones are managed by local organisations (Schneider, 2009). It is, therefore, clear that there are different role players involved in TOC operating both on a local and international level.

The main points of this section can be summarised as follows: TOC has existed for many centuries although it has evolved with technological advancements brought about by globalisation (Andreas, 2004; Edwards & Gill, 2002). Furthermore, any person can be part of a criminal organisation and transnational criminals do not necessarily belong to distinct groups as they used to in the 1800s (Lebeya, 2012).

24 As a result, it is now important to consider the next feature of TOC as listed by Balaam and Dillman (2015:110), namely “the problem with coordination between states”.

2.8 The problem with coordination between states

With the rapid growth of TOC, it becomes clear that states around the world struggle to contain these illicit activities (May, 2017). The question arises, what constrains governments from curbing TOC? According to Aggarwal (2014), and referred to earlier in this chapter, different states have different conceptions of what is legal and illegal, and criminals often take advantage of this. Schneider (2009) adds to this point that one of the main enablers of TOC is that states determine what is legal and illegal within their jurisdictions, as well as to what extent the laws are enforced. Therefore, it is dependent on the involved state whether a crime can flourish or not. This leads to the global regulatory systems being irregular, which creates loopholes in these structures that enable TOC to flourish. (This will be illustrated when considering the role of the Somali state in enabling maritime piracy in Chapter 5 of this study).

Irregular global regulatory systems enable criminals to conduct their activities on a global level. Therefore, “states have had to increase border control and add extra layers on custom, immigration and trade clearances, inadvertently hindering the global trade process and legal human movement” (Aggarwal, 2014:1). The World Economic Forum (WEF) (2015) adds to the above statement by explaining that governments are constrained by resources to enforce the law but also by having to operate within their own borders. Because of the variation in different states’ legislation and priorities, they struggle to collaborate with other states.

Money laundering goes hand in hand with TOC as it is the process that criminals follow to hide the proceeds that they make through their illicit activities (Madinger, 2012). Identifying dirty money is part of the challenges facing states when trying to curb illicit activities. One of the main contributing factors to this being a challenge is the strict banking secrecy laws of some states (Young, 2013). This will be expanded on when applying the cases of Mauritius and Seychelles to this feature in Chapter 6 of this dissertation.

2.9 Corruption as an enabler of TOC

Balaam and Dillman (2015) indicate that corruption is an important feature of TOC. It is also an enabler of TOC, as corrupt bureaucrats tend to turn a blind eye to criminal activities (Fijnaut, 2000:122). There are three advantages that criminal networks have that enable them to conduct their illegal business. First, criminal networks make large profits from their illegal activities which enable them to grow their businesses. Second, due to the profits that criminal networks generate from these

25 illicit activities, they can expand their business and conduct additional illicit activities. Third, profits also enable them to offer bribes to law enforcement officials and to train their staff to be more sophisticated and better equipped than the law enforcement officials (Miklaucic & Brewer, 2013).

There is a lack of empirical data on the activities associated with the IGE due to the secretive nature of the activities and because available data is often only an estimate (Aggarwal, 2014). However, an estimate is useful in order to get an idea of the magnitude of TOC. “Illicit financial flows (IFFs) from developing and emerging economies kept pace at nearly US$1 trillion in 2014” (Global Financial Integrity, 2017:1). May (2017) adds that the activities associated with TOC bring huge profits to those who are involved.

Balaam and Dillman (2015) indicate that corruption hampers development. Bergernon (2013) agrees with this point by emphasising that TOC has a negative impact on the human security of developing states and according to Gómez and Gasper (2013), human security forms part of human development. The Commission for Human Security (in United Nations Trust Fund for Human Security, 2009:4), states that human security focuses on the protection of individual human beings within states. It focuses on protecting the systems (political, economic, cultural, social and environmental as well as military) that should give individuals a foundation for dignity, livelihood and survival. Therefore, Berganon (2013) argues that where TOC thrives, human security is undermined. The link between Mauritius and Seychelles and TOC, will be explored in Chapter 4 in relation to the Human Development Index (HDI) of the two ASIDS.

The economic development of developing states is undermined by TOC, as the UN lists TOC as a prime factor for states not reaching the Millennium Development Goals (MDGs) in 2005 and 2010 (The Global Initiative Against Transnational Organized Crime and Black-Market Watch, 2015). Moreover, in 2011 the World Development Report stated that for states, “conflict and Organized crime have the same detrimental effect on development, resulting in 20% less development performance” (The Global Initiative Against Transnational Organized Crime and Black-Market Watch, 2015). Accordingly, it is clear that corruption as a feature of TOC enables TOC to undermine development.

2.10 Conclusion and summary

This chapter defined important concepts that will be used throughout this study with a focus on TOC, the IGE, money laundering, drug trafficking, maritime piracy, small states, SIDS and ASIDS. It was also indicated that there are unique linkages between TOC and SIDS specifically due to the characteristics of SIDS that make them susceptible to TOC, for example, weak governance of ocean

26 spaces and a lack of maritime capacity in the Indian Ocean (Adam in United Nations, 2015b). Moreover, weak banking systems and provision of OFCs; the geographical location of SIDS; and poor law enforcement capacity of SIDS (Lewis-Bynoe, 2014) make these states susceptible to TOC. As a result, Chapter 5 of this study will investigate these characteristics in more detail by determining whether Mauritius and Seychelles subscribe to these characteristics and if they do, how criminals may take advantage of these characteristics in these states.

In terms of TOC, five of the six features of TOC as defined by Balaam and Dillman (2015:405-411) will be applied as the first part of the dual-analytical framework:

1. Globalisation, the double-edged sword 2. The six degrees of separation 3. The unintended consequences of supply-side policies 4. Corruption as an enabler of TOC 5. The problem with coordination between states

Globalisation, the double-edged sword, the problem with coordination between states and the impact of corruption have already been briefly discussed in this chapter. However, all five features will be discussed in detail when the case studies of Mauritius and Seychelles are applied to these features.

In terms of SIDS/ASIDS, the following analytical framework will be applied:

1. Economic and financial (GDP, economic freedom) 2. Political (freedom in the world, governance, democracy, levels of corruption) 3. Geographical (physical location, isolation) 4. Social (population figures and human development)

For the purpose of this study, this dual-analytical framework will be used, and the case studies of Mauritius and Seychelles will be applied to this framework in this dissertation.

It is necessary to provide context. Therefore, the next chapter will discuss the history of TOC in the Indian Ocean with a specific focus on money laundering, drug trafficking and maritime piracy.

27 CHAPTER 3

GLOBALISATION, THE DOUBLE-EDGED SWORD

3.1 Introduction

It is important to focus on globalisation in this chapter as the concept forms part of the theoretical framework of this study and as it is referred throughout this study. Although discussed briefly in Chapter 2 as part of the history of TOC, globalisation is a “double-edged sword” in the sense that it enables global licit and illicit activities. This is supported by the claim that TOC has developed with the expansion of globalisation (Balaam & Dillman, 2015). To have a thorough understanding of TOC, and more specifically money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles, the historical development of these crimes needs to be considered. This chapter will focus on the development of globalisation. It will then shift the focus to the history and development of TOC in a Western context, and then with reference to the African and Indian Ocean contexts. In addition, a specific focus will then be placed on the history and development of money laundering, drug trafficking and maritime piracy on a global scale as well as in the African and/or Indian Ocean contexts to speak to the outcomes of this study. The point made by Balaam and Dillan (2016), that globalisation enables TOC, will be explored throughout this chapter.

3.1.1. The development of globalisation

It is important to consider the development of globalisation in order to have a better understanding of when and how the illicit global economy emerged and expanded. Accordingly, the development of globalisation was driven by different factors and different phases of development can be identified in this regard. The first phase is called the “predevelopment phase” (Dreher, Gaston, & Martens, 2008). Two important events are argued to be pivotal in this phase: the founding of America is argued to be the birth of expansionism (1942) and the creation of the first transnational organisation in 1602, the Dutch United East India Company (VOC). At its pinnacle, the VOC was functioning around the globe with staff in most continents (Dreher, Gaston, & Martens, 2008).

In the late Industrial Revolution (around 1765), technology was a big driver of the development of globalisation especially in terms of transport (such as the invention of steam technology) and telecommunication (the invention of the electric telegraph) (Dreher, Gaston, & Martens, 2008). A further contribution made by technological advancements to the development of globalisation was in 1971 with the invention of the “microchip” (Dreher, Gaston, & Martens, 2008). This vastly improved the usability of computers and today it is central to the success of information and communications technology and “reduces distances in terms of time and space” (Dreher, Gaston, & Martens, 2008).

28 International trade was also a driving force behind the growth of globalisation. In 1913 the US and most European countries (except for Britain and the Netherlands that continued trade liberalisation practices) practised inward looking trade policies throughout the period 1870–1913. Free trade was, however, imposed on the rest of the world through imperialism. However, by the end of the 1800s the colonies also practised protectionism while focusing on industrialisation (Nayyar, 2006). However, in the 1900s an international economy was created through “international production, chains and networking” (Dreher, Gaston & Martens, 2008). Nayyar adds to this claim: “the second half of the twentieth century has witnessed a phenomenal expansion in international trade flows. World exports increased from $61bn in 1950 to $883bn in 1975 and $6338bn in 2000” (Nayyar, 2006).

The above discussion indicates that globalisation developed with the spread of imperialism, free trade as well as through technological advancements (Dreher, Gaston & Martens, 2008) (Nayyar, 2006). The next chapter will explore whether there are any correlations between the development of IGE and globalisation.

3.1.2. The development of the IGE

According to Berdal and Serrano (2002), the IGE emerged centuries ago and although modern day illicit trade activities might have new names, criminals have just modernised these historical processes. Harris (2009:306) agrees that illicit phenomena such as slavery which today takes the form of human trafficking emerged centuries ago; for example, it started in the 1600s in the US. In a more recent example, in 2014, the government of Bahrain began to prosecute potential labour law violations that rose to the level of human trafficking (US Department of State, 2017).

Tilly (in Andreas, 2010) likens state-making to organized crime as prospective leaders extorted money that they utilised to forcefully expand their territories. As a consequence, the state makers were legitimised as rulers through gaining status as kings and legal taxation replaced extortion. Opello (2016) cites an example of the above by referring to the Monarchic system that occurred in Europe in the 14th century, during the feudal age (Opello, 2016). In addition, Pomeranz and Topik (in Andreas, 2010) contribute that the European powers (including, for example, Spain and Great Britain) engaged in “land grabbing, slavery, looting, and dope peddling” in the states that they invaded from the 1400s onwards. This was to give them a comparative advantage in their economic development and trade (Pomeranz & Topik in Andreas, 2010:22).

29 As state makers did historically, contemporary drug lords are taking advantage of drug addicts, improving their production processes and expanding the areas in which they trade. (This is due to technological advancements and interconnectedness of states that was brought about by globalisation). Moreover, in modern corrupt states, public officials steal public funds just like European imperialists stole from the colonies and some states run their governments like criminal enterprises. Moreover, Israel’s annexation of Palestinian property can be likened to theft by maritime pirates and imperialists hundreds of years ago that was often state sponsored and approved (Andreas, 2010).

It was only in 1969 that the concept TOC entered the criminology lexicon and in the 1970s the concept of transnational actors was introduced, which led to scholars focusing their studies on the role of non- state actors in political decision-making (Felsen & Kalatzidis, 2005). This introduction offered a broad background of the development of TOC. The next section will consider the development of TOC from a Western perspective.

3.2 A Western historical overview of TOC

Most of the literature on TOC is focused in a Western context. Therefore, this section will focus on TOC in a Western context, before moving on to an Africa-specific context in the next section. Andreas (2010:39) explains that TOC originated in the 1600s and 1700s during the mercantilist period. As mercantilism brought about development in transoceanic commerce, it is viewed by some scholars as the first era of TOC. This is because the mercantilist trading system was very limiting to those participating in the IGE as there were heavy restrictions in terms of allowing imports in certain countries. London (2013) explains mercantilism as an economic system where states limited imports and maximised exports. Therefore, people started acquiring products and services through illegal means, such as through smuggling and corruption (Karras, 2010).

In some states, corruption and smuggling went hand in hand to an extent that it became institutionalised. In some instances, residents of port cities and towns supported the smugglers which made it difficult to convict smugglers in local courts as in Boston and New York when the US was still under colonial rule between 1607 and 1776. Moreover, conflicts over smuggling played a role in the lead-up to the War of Independence in 1775 (Beare, 2016). In Britain in the 1700s smugglers were called ‘free traders’ as they smuggled large scale contraband commerce across the English Channel. They openly and violently opposed authorities and had the support of local communities. In reaction to this Britain built up the coastguard force to curtail smuggling. Moreover, in the Atlantic Ocean, Europe exploited Spain’s American empire through smuggling, corruption and fraud. Ultimately,

30 Spain and Britain went to war in 1739 to attempt to end smuggling. However, it was ultimately free trade in the 1800s that ended the desire for smuggling (Andreas, 2010).

In the 1800s Britain played a conflicting role concerning TOC, that is, while it policed and prohibited the transatlantic slave trade; it aggressively promoted the East Asian opium trade. By the mid-1800s the Chinese banned the importation of opium and this led to the Opium Wars between China and Britain, which Britain won (to be discussed in more detail later in this chapter) (Andreas, 2010). Ultimately, Great Britain forced China to buy opium through the Opium Wars of 1839 to 1842 and 1856 to 1860 (Hanes and Sanello, 2002). No modern-day transnational criminal organisation has operated on the same level as the British East India Company in terms of international influence and impact (Andreas, 2010).

The shift from mercantilism to the liberal commerce system of the early 1800s led to reduced taxes and tariffs which decreased product prices and this in turn led to a major decline in smuggling (Varley, 2018). However, in the 1800s in the US during its early industrialisation period, intellectual piracy and illicit technology sales occurred regularly. Even though pirated copies of films and books were sold on the black market the US government did not do anything and the US Copyright Law of 1831 was silent on the issue of intellectual piracy until 1890 (Andreas, 2010). Moreover, in 1920 new weaponry that had been developed during World War Ι (WWI), fed the clandestine smuggling of firearms by former soldiers (Knepper, 2011).

The spread of opium into Europe was fuelled in the 1980s when Soviet troops brought opium back home after the war against the mujahidin in Afghanistan. “At first, small amounts were brought back by war veterans, but quickly the potential for making quick profits from the drug trade became clear, and criminal gangs took over” (Lewis, 2010). Moreover, in reaction to the spread of drugs in the 1970s and 1980s US Presidents Richard Nixon (in power from 1969-1974) and Ronald Reagan (1981- 1989) initiated the war on drugs, illegal immigrants, currency offences, fraud and terrorism (Felsen & Kalatzidis, 2005).

Before the 1990s governments thought that TOC was only conducted by criminal organisations such as the Colombian cartels, Chinese tongs, Hong Kong triads, Japanese yakuza, and eventually after 1989 the Russian mafia. However, with the advances in technology, especially in the 1990s, TOC grew tremendously. Global illicit trade was transformed, illustrated by networks of stateless traders of illicit goods and terrorist or religious movements that took centre stage. The 1990s transformed the face of TOC through changes on a political and economic front. Moreover, the advancement of technology and the easy access thereof to civilians also changed TOC. Thus, it could be argued that

31 it has become challenging for states to control trade and free market systems which motivate people to import and export, whether legal or not (Naim in Gross, 2005).

The market for illicit goods expanded through technological innovations, such as transport innovations and piracy of intellectual property using the Internet (Naim in Gross, 2005). Governments also played a role in expanding the market for illicit goods by deregulating economies and enabling foreigners to “visit, trade, and invest more freely” (Naim in Gross, 2005:2). In addition, the terrorist attacks on the Pentagon and the World Trade Centre in Washington in the US on 11 September 2001 unveiled the power that a stateless, international entity can have (Naim in Gross, 2005). In summary it is clear from Andreas (2010), Felsen and Kalatzidis (2005) and Knepper (2011) that the 1990s (Naim in Gross, 2005) introduced transnational criminal actors who were not necessarily connected to any states. From this discussion it is clear that globalisation changed the face of TOC from its historical roots to the way we know it today.

3.3 TOC in Africa and the Indian Ocean

Now that the history of TOC has been discussed using a Western standpoint, it is pivotal to shift attention to the history of TOC in an African context as this study is based on TOC and ASIDS. This is important as the nature of current African situations is linked to historical legacies created by Western, former colonial, powers. Shaw (2013) argues that the history of TOC is linked to the development of the African state and has been enabled by the relationships that Africa has formed economically with other states. Accordingly, the development of TOC can be divided up into three phases according to changes in the political, economic and social circumstances in Africa.

The 1950s marks the start of the first phase of the development of TOC in Africa when the decolonisation of African states was put in motion. The conditions for criminal networks were made ideal for growth and branching out across Africa (Shaw, 2013). This was due to African leaders not being adequately prepared by the colonialists “to transform African economies and political structures to bring about true autonomy and development” (Talton, 2011). Political and business elites emerged through the changes on the economic front and structural and contractual economies were created. These elites were often connected to criminal networks that involved them in the cocaine trafficking that was growing in Africa (Shaw, 2013). In addition, as globalisation started to expand, the 1980s offered opportunities for TOC to expand due to the freer economic markets. Moreover, as African states could not control international transactions, criminals were able to launder money with ease (Blum, 2016).

32 When globalisation was expanding further, in the late Cold War years, moving into the early 1990s, it marked the beginning of the second phase of the development of TOC in Africa. Conflicts in Central and West Africa brought forth armed groups that aligned with foreign networks to get funding for armed conflict operations (Shaw, 2013). For example, in the 1980s Cold War hostilities were practised by the former West Germany in Somalia when West German authorities gave large amounts of automatic small arms to Sudan and built an ammunition factory in Khartoum, Somalia. In reaction, East Germany supplied AK47s to the Sudan People’s Liberation Army (SPLA) through Ethiopia (Doki & Ahmad, 2014). In addition, increased economic integration took place as African states created economic links with the rest of the world. Ultimately, drug cartels used the opportunity to expand the drug trade into West Africa (Shaw, 2013).

The final phase of development of TOC in Africa occurred in 2000 with major developments in the Internet and cell phone technology brought about by globalisation. As a result, these technological advancements made it easier for international criminal networks to form relationships with criminals in African states. Ultimately, this enabled them to pursue their illicit activities more easily and more freely (Shaw, 2013).

As this study focuses on TOC in two ASIDS based in the IOR, it is important to give a specific focus to the development of TOC in this region. Reichel (2005) states that for as long as the IOR has historically been a hub for commercial trade, it has been susceptible to illicit trade. Indian Ocean trade has historically linked East Africa, Southern China, India, south-east Asia and Arabia. Between 600AD and 1450AD port cities created an ideal environment for trade which attracted merchants from all over the world. This led to maritime trade in the IOR growing exponentially. Merchants traded gold, slaves and ivory for pottery, glassware, and textiles from Persia, India and China (Rodrigues, 2010:1).

With the expansion of trade in the IOR, the slave trade emerged, and slaves were brought from Africa and taken to Europe via the Indian Ocean route (UNESCO, 2017). The African slave trade became significant to European labour needs with the creation of the “sugar industry in Brazil” (in the 1530s), and later in the British West Indies (in the 1600s), and the establishment “of the tobacco plantations of the Chesapeake” (1700s). The combination of African slaves, American farms and European assets was key to building those industries (Oldfield, 1998). Although the slave trade was internationally banned between 1750 and 1900, the slave trade continued illegally, and the coastal regions of Africa were important locations for the slave trade business. The communities of Indian Ocean Islands were formed through the relocations of the populations of Comoros, Madagascar, Mauritius, Reunion, and Seychelles (UNESCO, 2017).

33 Moreover, it can be argued that globalisation played a role in the expansion of TOC in the IOR. As Reichel (2005:380) contributes, the period during the Cold War was important for the development of TOC in East Africa. Eastern African countries developed trade networks in the IOR that connected them with central Africa, southern Africa, south-west and south-east Asia as well as the Middle East. Moreover, law enforcement in East African states got weaker during the Cold War which created more loopholes for criminal networks to expand in these states (Reichel, 2005:380). It can thus be argued that it is possible that globalisation enables TOC (Balaam & Dillman, 2015).

As this study focuses mainly on three manifestations of TOC, namely money laundering, drug trafficking and maritime piracy, the next section will focus on the history and development of the three crimes respectively.

3.4 Money laundering

It is debatable when the term money laundering originated as there are different ideas of when the term was coined. Moreover, money laundering is not a new phenomenon as it was first recorded in 2000 BC when Chinese merchants hid their wealth from the emperors to evade tax and to avoid their wealth being claimed by authorities (Morris-Cotterill, 2015). In addition, Naylor (2002:134) adds that “as long as there has been a need to hide a financial transfer, something like money laundering has occurred".

Tax evasion and money laundering, though in different forms as we know it today, has been taking place for as long as some form of tax system and government regulation of trade transactions have occurred. In addition, it is argued that one of the first recorded tax systems was under the Hummurabis dynasty in Babylonia (today known as Iraq) in 1792 BC. In addition, in medieval Europe merchants started hiding their financial transactions from the governments. For example, usury (which is the act of charging interest on a loan) was illegal during medieval times. As a result, money lenders had to find other ways of charging interest on loans without calling it interest. Some of the tactics employed were to give a false impression to the lender of what the exchange rate was and thus overcharge them on the repayment to make up for interest (Naylor, 2002).

Alternative options for asking hidden interest on loans were to add a “risk penalty" to the repayment or to charge a penalty for late payments. Finally, some money lenders would lend money to a “shell company” and then claim that it is taking profit from the company as repayment (even though there was no money made by the company). These techniques can be argued to be early forms of money laundering although the criminal aspect came in in terms of how the money was made instead of the techniques employed to disguise the money. Moreover, in this era the criminal was the person who

34 took the money home and not the “scribes and clerks who did the paperwork” (Naylor, 2002:135). However, eventually the church authorities realised that it was impossible to stop money lenders from asking interest on their money (Naylor, 2002).

In addition, privateers from Great Britain also laundered their gains from hijacked ships by not declaring the seized goods to the British authorities or by hiding the most valuable of the seized goods on islands, for example, and only declaring some of the goods to the authorities. Later when orienteering was banned these privateers operated as pirates and a few states in the Mediterranean allowed the pirates to set up shell companies to hide the profits that they made from hijacking ships (Towns, 2014).

In the late 1800s Great Britain legalised privateering again and thus there was no need for these privateers to launder money. In addition, this period was known for little government involvement in the economy which resulted in minimal regulation of trade and trade liberalisation. Thus, there was less of a need for money laundering and it was reduced to a great extent. There were also few restrictions on gambling, prostitution and the drug trade. All in all, there was no real law enforcement during this period (Naylor, 2002)

However, in the 1900s, WWI and World War II (WWII) required citizens of states involved in the wars to pay higher taxes and income tax. Moreover, it became a criminal offence to make money from illegal activities which again led to a need for money laundering so that criminals could hide the proceeds that they made from these activities. The use of tax havens increased after WWII globally with the IOR and Africa largely impacted in the 1980s (Naylor, 2002).

According to UN Peacekeeping (2004), during 1989 with the conclusion of the Cold War, money laundering started to expand around the world and to a large extent in Africa. This was especially due to technological advances which made it easier to take advantage of banking laws (Madinger, 2012). As a result, new forms of security threats including money laundering, human trafficking, drugs and cyber-crimes gained momentum due to technological advances in the 1990s (United Nations Peacekeeping, 2004:4). In addition, money laundering became very prominent in 1999 in the international media after it was alleged that US$15 billion originating from Russia was laundered through financial institutions in New York (Isaac, 2009).

With the expansion of globalisation, two new forms of money laundering emerged with the technological advances. First, in the 1990s credit card theft and fraud (also known as “smurfing”) emerged. Business Week (in Madinger, 2012) referred to money laundering as “the crime of the 1990s”. Moreover, since 2000 onwards the use of money mules (people who are tasked to transport

35 stolen goods or money but who are not necessarily aware that they are committing fraud) have been used to launder money through airports across borders (Moore, Clayton & Anderson, 2009). In addition, advances in technology leading to electronic payment has created a need for cyber money mules, who launder money through receiving “electronic payments to their bank account, forwarding them via instant payment transfer services such as Western Union or PayPal…” (Haigh, 2018).

Online gambling was identified as a method of money laundering in the US and therefore in 2005 legislation was enacted against accepting money from online gaming. However, in 2011 “indictments were unsealed in New York against the three largest internet poker sites doing business in the US (Poker Stars, Full Tilt Poker and Absolute Poker)” (Simser, 2013: 47).

History has shown that maritime piracy goes hand in hand with money laundering:

In 2010, at least 790 crew members were taken hostage and between $180 and $238 million was paid in ransom. Between 40 and 60 percent of that money is simply circulating within Somalia, having been spent on khat (a narcotic) and Toyota land cruisers (Ahmed in Simser, 2013:48).

Soccer is another avenue for money laundering, for example, in the early 2000s a French substandard soccer club “balanced their budget each year through financial infusions from the corporate holdings of a local businessman (he was illegally misusing corporate assets)” (FATF in Simser, 2013:49). The diamond trade is also very susceptible to money laundering as uncovered in 2003 by Global Witness, a non-governmental organisation (NGO), as diamonds are not only valuable, but also small and easy to move (Simser, 2013). The illegal diamond trade tends to originate from the Democratic Republic of the Congo, Sierra Leone and Angola as these are “diamond rich states” (Simser, 2013: 50). Ultimately:

the world-wide integration of financial systems and the freedom to move capital across international boundaries has made money laundering possible on an extensive basis, simply because it becomes difficult to trace assets and paper trails are easy to destroy (Nevin, 2000).

It is clear from the above section that globalisation has enabled the increase of money laundering. The history of money laundering in Africa is not well recorded. However, according to Goredema (2010) in Africa, it is likely that money laundering started with drug trafficking into Africa. Therefore, for the purposes of this dissertation, the history of drug trafficking in Africa can be seen as linked to the history of money laundering in Africa. This will be covered more in section 3.6 later in this chapter after drug trafficking is discussed in the next section.

36 3.5 Drug trafficking

The first recordings of drug use were in 3000 BC when ancient Egyptian medical writings recorded opium and hashish usage (Arak, 2002). In addition, according to Cilliers and Retief (2000), in 1000 BC in Rome drug traders sold drugs, including opium, to the communities for medicinal purposes. Although the drug trade was not illegal during this time, opium could also be used for poisoning and those found guilty of poisoning were prosecuted. Gradually the drug trade in Rome became very lucrative and expanded by way of contact with the Far East, Egypt, Arabia, North Africa and Spain (Cilliers & Retief, 2000).

According to UNODC (2008), the first recorded instance of the use of opium for recreational purposes was 3000 BC. In addition, Lee (2012) argues that in the 16th century in India opium was used and the Indian government instructed that opium be produced and exported to the rest of Asia. Moreover, in 1527 during the renaissance period, opium was reintroduced into Europe in an alcohol solution and in 1606, Queen Elizabeth commanded English trading ships to import Indian opium into Britain. Although a ban was placed on the importation of opium into China in 1729, this stimulated smuggling as the opium habit was growing in China which led to Dutch, Portuguese and British ships trading opium to China (UNODC, 2008b).

The East India Company (EIC) assumed control of the major opium producing areas of India. These areas operated under the British government and became the main mode of shipment of opium from India to China in 1793. However, in 1799 a ban was placed on the importation of opium into China by the Chinese Emperor Kla King. This ban was ineffective and led to corruption by officials and between 1839 and 1842, the first Opium War was fought between Britain and China. The total defeat of the Chinese forces resulted in the signing of the Treaty of Nanjing, which, in addition to the imposition of heavy financial reparations, ceded the island of Hong Kong to Britain. Opium itself remained officially illegal in China and was not discussed in the treaty (Lee, 2012) (UNODC, 2008b).

Between 1856 and 1860 the second Opium War between Britain and China commenced which the British won when the Chinese surrendered through the Treaty of Tientsin and opium trade was fully legalised. Accordingly, on 1 February 1909, the International Opium Commission convened at Shanghai in China. This commission was initiated by the US and it started the process of making a prohibitionist agenda a reality. The states that attended united behind the idea that opium needed to be restricted. However, due to the outbreak of WWI in 1914 this commission was pushed aside. As a result, a legal requirement was introduced by the League of Nations in 1931 for all states to record their drug consumption. When WWII ended in 1945, the UN took over international drugs control

37 from the League of Nations. In the 1960s recreational drug use boomed due to social changes such as the rise of the hippie culture (Lee, 2012).

The UN held the Vienna Convention in 1988 to attempt to control drug trafficking by lobbying states’ law enforcement agencies to work together and to make punitive measures for breaking anti-drug laws stronger. As a result, in March 2008, the Commission on Narcotic Drugs met in Vienna to begin the process of reviewing progress made towards the goals set at the UN Special Session on Drugs in 1998 (Lee, 2012). Accordingly, at the 2009 Political Declaration and Action Plan for the achievement of a significant reduction in or the elimination of the demand and supply of drugs, it was determined that a UN General Assembly Special Session on Drugs (UNGASS) was due to be held in 2019 (United Nations General Assembly, 2016).

However, due to the urgency of the matter, UN resolution determined that the global drug policy summit meeting should be held in 2016. At this summit, the members of UNGASS stated that:

the world drug problem continues to present challenges to the health, safety and well-being of all humanity, and we resolve to reinforce our national and international efforts and further increase international cooperation to face those challenges (United Nations General Assembly, 2016:3).

The latest figures on illegal drug use indicate that a “quarter of a billion people, or around 5 per cent of the adult population” used illegal drugs in 2015 (United Nations General Assembly, 2017:1). In addition, technological advances in the 21st century has led to Internet sales of drugs and new drug trafficking routes. For example, a new route trafficking heroin from Afghanistan to Europe through Iran and Turkey has been gaining importance in recent years (United Nations General Assembly, 2017) (Centre for Criminology, 2016).

3.6. Drug trafficking in Africa

As this study focuses on drug trafficking in two ASIDS it is important to consider the history of drug trafficking in an Africa-specific context. Moreover, as stated earlier, the history of drug trafficking in Africa is linked to the history of money laundering in the continent (Goredema, 2010). This is likely because drug trafficking created a need for money laundering in Africa.

The 1980s signalled the beginning of drug trafficking in Africa when recreational drugs were introduced on the continent (Biswas, 2003). Consequentially, drug abuse and consumption gained momentum and although it initially was produced locally, for example cannabis production in Lesotho (Carrier and Klantschnig, 2012), it can be argued that the international drug trade gained more popularity since the 1900s as new drugs were introduced into African states (Kumar, n.d). In addition, for the IOR, the conclusion of the Cold War resulted in drug trafficking becoming one of

38 the main organized criminal activities in the region (Biswas, 2003). As this was during the period when globalisation expanded, it can be argued that drug trafficking into Africa was aided by globalisation (Balaam & Dillman, 2015).

Drugs were trafficked to Africa via an inland route through Europe and a sea route through the Indian Ocean. However, in the 1990s laws were passed in Africa to control the spread of drugs (Kumar, n.d.). By the mid-1990s the drug trade in Africa had grown significantly (Biswas, 2003) and by 1995, Africa became a hub for international drug distribution and trade. This was especially so after Latin America, one of the largest global producers of recreational drugs, started distributing drugs to Africa as the US started practising stricter border controls. Since 1996 drugs were exported from Africa as well and Africa remains a transit hub for the international drug trade especially for drugs coming from Latin America, destined for Europe or Asia (Kumar, n.d.). In 2006 it was reported that 250 tonnes of cocaine were distributed from Latin America destined for West Africa. There is often a risk that it could be distributed from West to East Africa (Karapetyan, 2018). This could mean that ASIDS close to East Africa (such as Mauritius and Seychelles) could possibly be more exposed to drug trafficking as they are geographically close to East Africa.

3.7 Maritime piracy

As with money laundering and drug trafficking, maritime piracy should be considered with its historical background in mind to do a thorough study of the impact of TOC on ASIDS. A short timeline of the development of maritime piracy will be provided below. According to Kiger (2015), the earliest documented maritime pirates were the Lukkans in south-eastern Turkey in 1400-1200 BC as enemies of the Egyptian empire. In addition, in 1000-500 BC, the Cretans who raided cities such as Cydonia and Eleutherna were also considered as maritime pirates (Kiger, 2015).

In early Greek literature, more specifically the Homeric poems, written c.750-700 BC, the word ‘leisteres’ was used to describe pirates. They were warrior aristocrats who practised armed plundering on land and sea. In addition, in 800 BC when the Archaic period started, the Homeric Archaians also practised this behaviour. This raiding was referred to as maritime piracy as there was no broad consensus to legitimise it and it continued during the 4th century BC (Amirel, Müller & Amirell, 2014).

The Pamphylians and Cicilians transformed from regional opponents of Roman imperialism to maritime pirates, raiding Roman ships and shores between 509 and 27 BC (Amirel, Müller & Amirell, 2014). In addition, in 75 BC Julius Caesar was reportedly captured by maritime pirates in the eastern Mediterranean which led to the Roman Empire suppressing piracy through warfare. Ultimately,

39 maritime pirates were referred to by the Romans as Illyrians and “the common enemies of all peoples” (Amirel, Müller & Amirell, 2014). In 67 BC the war on maritime piracy was declared by the Roman general and Gnaeus Pompeius Magnus from Pompeii, who successfully rid the Mediterranean ocean of pirates (often without the use of violence). The suppression of pirates became part of Roman political policy in around 27 BC (Amirel, Müller & Amirell, 2014).

In 800-850 AD a campaign of merciless attacks on the British coast by a Scandinavian Viking band, also referred to as pirates, was actioned. In the late 1200s, a famous pirate in the English Channel, Eustace the Monk, was “hired by both the French and English kings to be a privateer against the other” (Kiger, 2015). According to Zapalac (2003), a privateer operation consisted of a captain, a crew and a ship that was operating under permission of a specific state. These privateers had permission in the form of licences to attack and plunder enemy ships and were protected against prosecution. In return, the privateers had to give a share of their profits to the state. Moreover, in the 15th century German privateers attacked the ports and ships of Denmark and Norway. Privateers were employed by Britain, France and the Netherlands in the 16th century (Zapalac, 2003).

In the 18th century, pirates threatened British and colonial ships and in the 19th century pirates in North Africa threatened ships on the Barbary coast. In addition, in the 1820s, the US Navy marines launched an attack on pirates; and piracy only started to decline in the 1830s (Kiger, 2015). However, piracy still made a few appearances in the 20th century. For example, close to south-east Asia a tanker collided with a container ship off the coast of Malaysia after the crew of the tanker were captured by pirates in 1992. Pirate attacks have continued into the 21st century, off the coast of Somalia. For example, in 2009 Somali pirates “used firearms and explosives to attack the Topaz, a Seychelles Coast Guard patrol vessel” (Keenan, 2014:34).

3.8 Maritime piracy in the Indian Ocean

As this study focuses on piracy and two ASIDS in the Indian Ocean, it is important that the historical roots of piracy in the Indian Ocean should receive a focus. This historical account of maritime piracy will focus on the period of imperialism in the Indian Ocean. Since the 1600s the ocean space became complicated as a strict adherence to geographic boundaries was created by states such as the United Kingdom (UK), the Netherlands, Portugal and Spain. There was a debate between Britain, the Netherlands, Portugal and Spain whether to make oceans open (mare liberum) or closed (mare clausum) to trade. However, since 1849 mare liberum prevailed in the Indian Ocean which made it possible for European expansion into the Indian Ocean (Seshan and Kumbhojkar, 2018).

40 According to Bose (2006), maritime piracy in the Indian Ocean started when the European imperialists met Indian seafarers in the Arabian Gulf stretching from Qatar Peninsula to Oman in the 1600s. Initially the Indian rulers of the Gulf did not try to exert dominion over parts of the ocean. However, when the Portuguese and the British started to demand “exclusive control over the seas and sought to regulate shipping” (Bose 2006:45), seafarers from the Gulf started to offer resistance. However, they only saw themselves as having sovereign rights over the Gulf in the late 1600s and 1700s (Bose, 2006). As a result, the European expansionists started labelling the Indian seafarers as maritime pirates. However, from the perspective of the Indian society, in the Gulf the Europeans were maritime pirates as they invaded Indian ships and plundered their property. Ultimately, these so- called Indian pirates from the Gulf made the process of expansion difficult for the European imperialists through the armed resistance that they presented. However, this just prolonged the process of expansionism and did not stop it from occurring as the history of expansionism illustrates (Bose, 2006).

3.9 Somali piracy

It is important to consider the historical background of Somali piracy for this study as Somali piracy impacts states in the Indian Ocean (where Mauritius and Seychelles are located) (Brown, 2008). According to Tharoor (2009), in 1991 the civil war in Somalia weakened the state and any form of legitimate governance. In addition, the lack of a functioning coastguard in Somalia has led to foreign vessels and fishing fleets illegally plundering the Somali coast. As a result, coastal Somalis were left impoverished and out of initial desperation, the Somali fishermen guarded the local fishing harbours, such as Haradhere, from foreign vessels that did not have permits to fish in Somali waters (Tharoor, 2009:1).

According to the UN (in Tharoor, 2009), draggers and ships from other states (such as Spain, Japan and South Korea) operated in the Somali coastal area without authorisation. According to Tharoor (2009:1), their cargo ships flew “flags of convenience from sea-faring friendly nations like Belize and Bahrain”. This enabled the ships to avoid being investigated by their local coastguards (Tharoor, 2009:1). According to “a flag of convenience ship is one that flies the flag of a country other than the country of ownership” (International Transport Workers’ Federation, 2016:1). Moreover, this tendency encouraged Somali pirates to seize these unauthorised draggers and ships and demand ransom money. As a norm, the perpetrators paid the ransom as they did not want to draw attention to their violation of international law. Consequentially, the more the pirates operated the bigger their tactical networks became and the more they desired to take bigger, more profitable ships for ransom (Tharoor, 2009).

41 Eventually the original cause of Somali pirates was forgotten, and piracy became a means of earning for many young men, many who were never fishermen before (Tharoor, 2009). In contrast, Ingiriis (2013) argues that Somali piracy emanated from young Somalians wanting to live better, more lavish lives through “acquiring otherwise unobtainable cash and goods” by hijacking ships, taking all the valuable items on board and demanding large ransoms for releasing the cargo (Ingiriis, 2013:240). Therefore, it is apparent that there are different perspectives on what has historically motivated young Somalians to become maritime pirates.

Globalisation, one of the key features of the TOC as stated in Chapter 2, has played a role in enabling contemporary maritime piracy. This is through the technological advancements that Somali pirates utilise in their day-to-day operations such as the Global Positioning System (GPS). As Ungerleider (2011:1) states: “Somali pirates are turning to increasingly sophisticated methods such as satellite phones, custom-made GPS systems, and even monitoring the Internet to hunt down targets”. Therefore, it is clear that maritime piracy is still a threat today in the Indian Ocean and states have to keep working together and learn from each other to keep the Somali pirates at bay (Rider, 2015). The impact of maritime piracy in Mauritius and Seychelles will be discussed in Chapter 5 of this dissertation.

3.10 Conclusion

This chapter gave an overview of the history and development of TOC on a global level, in Africa and in the Indian Ocean. This chapter also gave an overview of the history and development of money laundering, drug trafficking and maritime piracy globally and in an African and/or Indian Ocean context. From this chapter it is clear that the expansion of globalisation was important for the advancement of all three of the above-mentioned crimes especially due to advances in technology (specifically for money laundering and drug trafficking) and changes in the global political landscape. It is clear from this chapter that transnational crime is often motivated out of poverty and greed. Moreover, weak states and institutions; a lack of law enforcement; as well as a lack of uniformity in states’ approaches towards TOC enables criminals to conduct their illicit activities.

The next chapter will focus on the political and economic histories of Mauritius and Seychelles in order to establish how their political-economic contexts may play a role in any links to TOC. Furthermore, it will discuss the geographical, social, economic and political characteristics of Mauritius and Seychelles in order to determine whether these states subscribe to the typical SIDS/ASIDS characteristics and to determine how these characteristics relate to the features of TOC as discussed in Chapter 2 of this dissertation.

42 CHAPTER 4

THE TYPICAL SIDS/ASIDS CHARACTERISTICS OF MAURITIUS AND SEYCHELLES

4.1 Introduction Considering Mauritius and Seychelles in the context of these islands being SIDS or ASIDS is crucial to this study as it helps to answer the research question of whether the characteristics typical to SIDS/ASIDS possibly make these states more susceptible to TOC. Hence this will form the focus of this chapter. These SIDS/ASIDS characteristics can be identified by applying the analytical framework provided for analysing the characteristics of SIDS/ASIDS. The characteristics or categories identified were:

1. Economic and financial (GDP, economic freedom) 2. Political (freedom in the world, governance, democracy, levels of corruption) 3. Geographical (physical location, isolation) 4. Social (population figures and human development)

However, a historical overview of each of the states will first be done to provide context for the rest of the study. This will lay a foundation for the next chapter which will focus on whether the characteristics typical to SIDS/ASIDS that these states possess make them more vulnerable to TOC. This chapter will begin by discussing the histories of Mauritius and Seychelles from a political and economic perspective. This is important as the political make-up of states has a direct relationship with how governments organise the wealth of their countries (Drazen, 2000). It will then examine the two ASIDS in terms of their geographical and other characteristics.

Acemoglu and Robinson (2013) argue that political economists should consider the historical decisions made by political leaders as well as the context in which states operate, as historical events will give them a better understanding of the political economy of a state. Through globalisation, the illicit economy grows with the licit economy and for every technological advancement there is a licit and an illicit development (Whitaker, 2009; Balaam & Dillman, 2015). Therefore, it is important to consider the historical developments in Mauritius and Seychelles to have a full grasp of how TOC developed in these states. The historical developments in the two respective states will be considered as follows: in terms of the political histories of the states, the timeline under consideration is from the inhabitance of the islands (1500s in the case of Mauritius and 1700s in the case of Seychelles) up until 2017/2018. In terms of economic histories, the timeline under consideration is from the eras of European occupation to 2017.

43 4.2 The political history of Mauritius

Mauritius was uninhabited until 17 September 1598, when five Dutch ships reached the south-eastern part of Mauritius. As a result, the island was named Mauritius in honour of one of the Netherlands’ princes, Maurice of Nassau. In 1941 slaves were imported from Madagascar into Mauritius by the Netherland’s commanders with the purpose of harvesting sugar cane. Although Dutch settlers occupied Mauritius between 1638 and 1710, in 1715 the French took formal possession and were joined by their settlers in 1721. Upon governing the island in 1767, the French EIC called the Island Île de France. As such, slaves were supplied to the island from African countries such as Madagascar and Mozambique (Pitot, 2000). Although “The Slave Trade Act” in Britain started the process of the abolishment of slavery in 1807, by 1810 it was clear that the “local authorities” were not abiding by this legislation and slaves in Mauritius would have to remain in their roles on the sugar plantations. By 1815 there were 87 000 slaves in Mauritius (Roy, 2018).

In 1810 Britain captured the island during the Anglo-French War. In 1814, Mauritius along with its dependency islands, Seychelles and Rodrigues, were formally declared a British colony through the Treaty of Paris. When slavery was abolished in 1835, 68,616 slaves were recorded in Mauritius. In addition, more than 200,000 labourers from India were recruited between 1840 and 1870 to work on the sugar plantations. A small group of Chinese traders later moved to Mauritius and the population grew from 100,000 in 1835 to 371,000 by 1900 (Green, 2005:219).

In 1948 the Mauritius Letters Patent instituted a new constitution which allowed for voting rights for every adult with basic literacy. As a result, in 1948 the first general election was held, and the first legislative council was formed. The Labour Party won under the leadership of Guy Rozemont (Ramtohul, 2009: 70). In addition, in 1967 the Labour Party and two minority parties, the Muslim Action Committee and the Independent Forward Bloc won the general election. Internal self- government was introduced through a new constitution and on 12 March 1968, Mauritius became part of the Commonwealth after being cleared as an independent state (Green, 2005).

In the 1970s a group of Members of Parliament from the Labour Party formed a new party, called the Rassemblement des Travaillistes Mauriciens (RTM) (Kadima and Kassenally, 2006). The Labour Party leader, Navinchandra Ramgoolam became concerned about the increasing support for the Mouvement Militant Mauricien (MMM) led by Paul Bérenger. As a result, Ramgoolam called off the 1972 general election and declared a state of emergency (Commonwealth Secretariat, 2018). In 1976 during the general election, the Labour party retained their position through joining the Parti Mauricien Social Démocrate (PMSD) in a coalition (Kadima and Kasenally, 2006).

44 The MMM won all the elected seats in the National Assembly in alliance with the Labour breakaway group the Parti Socialiste Mauricien (PSM) in 1982, but it only lasted a year. In accordance, another political party was formed by Anerood Jugnauth (Navinchandra Ramgoolam’s son), the Mouvement Socialiste Mauricien (MSM). Jugnauth was the former MMM president. The MSM allied with the Labour party and the PMSD and won the 1983 elections, which made the MMM the main opposition party. However, in 1983, Jugnauth discharged ministers who were members of the Labour Party, which ultimately ended the coalition agreement and the government collapsed (Kadima and Kasenally, 2006).

A new coalition was formed between the MSM, PMSD and RTM which won the 1987 election with a majority. However, the coalition fell apart in 1988 when the PMSD broke away and the MMM replaced it in the alliance (Commonwealth Secretariat, 2018). In 1992 Mauritius became a republic which enabled the Prime Minister to be the head of government and the President to perform a ceremonial role (Washington Post, n.d.). The MMM’s Cassam Uteem was elected as the first President of Mauritius and he served as President until 2002 (BBC News, 2018:1). Between 1991 and 1993 the alliance between MSM and MMM remained strong until Paul Bérenger, MMM leader, caused a breakaway in the coalition through taking members of MMM to join the Labour Party (Kadima and Kassenally, 2006). During the 1995 elections the MMM/MLP coalition won, making Navinchandra Ramgoolam the Prime Minister. However, despite opposition from the MMM and the unions, privatisation policies were introduced (Commonwealth Secretariat, 2018).

In 1997, members of the MMM and Bérenger left the coalition and formed part of the opposition (Commonwealth Secretariat, 2018). The MLP remained the governing party with its alliance partners until 2000, when a coalition between Jugnauth's MSM and Paul Bérenger's MMM won the elections with 52.3 per cent of the vote (Worldmark Encyclopedia of Nations, 2007). In addition, in 2002 Uteem resigned as President and Karl Offmann succeeded him after being elected by parliament (Washington Post, n.d.)

In 2003 Bérenger became the leader of the coalition (Worldmark Encyclopedia of Nations, 2007). However, Navin Ramgoolam’s “Labor-led Social Alliance” (Washington Post, n.d.) won the elections in 2005 and he returned to the position of Prime Minister. In addition, Ramgoolam won the 2010 elections again with the MSM/MMM coalition. However, the MSM moved out of the coalition in 2011 due to corruption claims against their leader, Pravind Jugnauth, who was then arrested (BBC News, 2018). In 2012, President Anerood Jugnauth resigned as President as he allegedly wanted “to return to party politics and challenge the prime minister” (BBC News, 2018:2). Rajkeswur Purryag was then sworn in as President in July 2012 (Republic of Mauritius, 2012). Former President Aneroof

45 Jugnauth’s party, Alliance Lepep won the 2014 elections (BBC News, 2018:1). In 2015 Ameenah Gurib-Fakim was elected as the President by the Mauritian parliament. In March 2018 President Gurib-Fakim resigned due to an expenses scandal (BBC News, 2018:1) and the Vice President, Paramasivum Pillay Vyapoory became the acting President on 23 March 2018 (AFP, 2018).

In summary, Mauritius was first inhabited in the 1500s by the Dutch, and later it was controlled by the French until Britain seized control of the island in the 1800s. In the 1900s the road to democracy was paved for Mauritius and the first democratic elections were held. Since then, various political parties were formed with different stances on autonomy from Britain. The presidential and prime minister positions have been filled by leaders from different political parties in the last century and different coalitions have been formed (Green, 2005; Pitot, 2000; Kadima & Kassenally, 2006; Commonwealth Secretariat, 2018). This illustrates that Mauritius is not dominated by one single party but rather that it is a robust democracy.

This overview of the political history of Mauritius provides context when considering TOC in Mauritius on the point made earlier that political decision-making impacts economic decision-making (Drazen, 2000). Seychelles became a British colony during the same period as Mauritius. The next section will consider the history of Seychelles from firstly a political perspective and then from an economic perspective.

4.3 The political history of Seychelles

Until the 1600s Seychelles was uninhabited and was only used by the Malays, Arabs, Phoenicians and Portuguese as a layover point. Seychelles was also used in the 1600s and 1700s by pirates and privateers to set up the bases from which they operated. This could possibly explain why Seychelles has experienced maritime piracy incidents close to its borders in recent years. However, in 1741 the Governor of Île de France (Mauritius) sent Lazare Picault to visit the islands of Seychelles. In 1756 France claimed possession of the islands and 1770 marked the arrival of French settlers from Mauritius and their African slaves (Scarr, 1999).

Slaves were being introduced into Seychelles from 1770 and according to the available paperwork, by 1791 there were 487 slaves in Seychelles. Most of the slaves were imported from Madagascar and from across the African continent (Electoral Institute for Southern Africa, 2011). As previously stated, in 1814 Mauritius and Seychelles were surrendered to Britain through the Treaty of Paris (Commonwealth Secretariat, 2018). Seychelles was administered “as a dependency of the crown” (Electoral Institute for Southern Africa, 2011) from Mauritius until 1903. Although Seychelles served as a transit hub for African slaves, by the 19th century, the slave trade was banned by Britain and by

46 1834 slavery was abolished in its entirety (Benedict, 1980). On the East African coast, approximately 3,000 African slaves were removed from Arab slave traders between 1861 and 1874 and taken to Seychelles as plantation labourers. In addition, West African chiefs who resisted British control were also taken to Seychelles by the British. Chinese and Indian traders also settled in the Seychelles (Commonwealth Secretariat, 2018).

As was the case in Mauritius during colonialism, certain factions of the Seychellois society were also unhappy with British rule. In the case of Seychelles, the Association of Seychelles Taxpayers protested Britain’s control of the islands in the 1940s. In 1964 two political parties were established, the first, the Seychelles Democratic Party (SDP), under the leadership of James Mancham and the second, the Seychelles People’s United Party (SPUP) under the leadership of France Albert René. The SDP electioneered for continued British rule over Seychelles while the SPUP electioneered for liberation from British rule (Electoral Institute for Southern Africa, 2011).

In 1967 universal voting rights were introduced for elections of members of the national assembly. In 1970 the council became a 15-member legislative assembly and after the general elections the SDP held six seats and the SPUP held five. In1974, the SDP attained 52 per cent of the votes and the SPUP 47 per cent (Campling, Confiance and Purvis, 2011).

In 1976 the legislature voted for independence, and a new constitution was adopted which allowed for Seychelles to be recognised as a sovereign state within the Commonwealth. James Mancham became President while René became Prime Minister. Mancham and the SDP’s policies wanted the economic policies to be in line with that of the Westernised states and promote economic growth through tourism and offshore financial services. In contrast, René and the SPUP did not want the economy to be aligned with that of the West but rather wanted a non-aligned policy that was independent and controlled by the state (Campling, Confiance and Purvis, 2011).

In 1977 an armed coup was staged by the SPUP and under the leadership of René, Seychelles became a socialist state. The SPUP became the only political party and was renamed as the Seychelles People’s Progressive Front (SPPF). Most enterprises were state-owned as required by a socialist system. In 1981, 50 mercenaries (recruited in South Africa) threatened a military overthrow of the René government, by attempting to land at the Mahé airport. However, the mercenaries’ weapons were discovered, and they proceeded to hijack an Air India jet and escaped back to South Africa. However, five of the mercenaries were left behind in the Seychelles (Linscott, 2017).

Through the 1980s there was heightened opposition against government control of the economy and totalitarianism. Therefore, in 1990, the government was forced to weigh its options for change as the

47 opposition voiced their dissatisfaction in the media and other public platforms. Ultimately, the government passed legislation in December 1991 that enabled a multiparty democracy. Moreover, by 1992, eight political parties were registered, and a new constitution was written which allowed for fresh elections of the national leadership and legislature in 1993. René became the President of Seychelles by achieving 59 per cent of the votes while in the National Assembly the SPPF gained 27 of the 33 seats. However, in 1998 SPPF won 24 of the 25 National Assembly seats while René remained President with a 67 per cent majority and Wavel Ramkalawan (from the United Opposition party) became the opposition leader with 19 per cent of the vote (Commonwealth Secretariat, 2018).

In the 1998 elections the SPPF (under President René) won with the Seychelles National Party (SNP) as the opposition. In 2001 the SPPF candidate won the election through achieving 54 per cent of the votes which allowed René to stay on as President, while the opposition achieved 45 per cent of the votes (BBC News, 2018). Moreover, the SPPF also won the elections in 2002 with the SNP as the opposition. However, in 2004 President René resigned giving an opportunity to former Vice President James Michel to become President. Michel retained his position as President through the 2006 elections. The SPPF remained in power through the elections in 2007 and President Michel was re- elected in 2011 (BBC News, 2018). In 2015 President Michel retained his position as President through the elections. However, in October 2016, the Linyon Demokratik Seselwa (LDS) leader Danny Faure became President of the Republic of Seychelles (Statehouse, 2018:1). In 2018, at the time of writing this dissertation, Danny Faure was still the President of Seychelles (Statehouse, 2018).

In summary, Seychelles was first inhabited by the French until the British annexed the island. In addition, political independence in Seychelles was achieved over two decades after Mauritius. In addition, Seychelles was at one point a socialist state under President René, but this was later changed through creating a multiparty democracy and trade liberalisation. Although the leading parties in Seychelles are not made up of coalitions, as is the case in Mauritius; like the case of Mauritius, the history of Seychelles illustrates robust democratic practices (Campling, Confiance and Purvis, 2011; Commonwealth Secretariat, 2018; Economist Intelligence Unit, 2018; Linscott, 2017; Scarr, 1999). The next section will focus on the historical contexts of Mauritius and Seychelles from an economic perspective.

4.4 The economic history of Mauritius

During the period of European occupation (1638-1968) Mauritius focused its economy mainly on sugar production and was considered “an agrarian monocrop economy” (Kothari & Wilkinson, 2013: 94). As discussed in the section on the political history of Mauritius, slaves played an important role building the economy at this stage as they worked on the sugar plantations (Roy, 2018). However,

48 the sugar industry stagnated in the 1950s which led to job losses and ultimately led to public unrest (Kothari & Wilkinson, 2013). In addition, the famous Mauritian economist, James Meade, forecasted a gloomy economic outlook for Mauritius due to its susceptibilities to climate change, and price inflation and job scarcities outside the sugar sector in 1961. Therefore, the Meade Report was drawn up to outline an economic development framework for Mauritius (Zafar, 2016). The Meade Report’s main finding was that “Mauritius had to diversify from its over-dependence on sugar, and to industrialise in order to be able to cope with the pressing population and unemployment problems” (YeungLamKo, 1998:6). The Meade Report’s recommendations were wage restraints, agricultural diversification, changes in the structure of industries, foreign welfare assistance, financial support for the unemployed, a family planning system and emigration of labourers to other colonies under British control (Zafar, 2016; Subramanian and Roy, 2001:10).

On independence in 1968, Mauritius developed its economy from a “low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors” (Economy Watch, 2015). Exports in sugar, textiles and attire remain the focus of the economy combined with tourism, hospitality, property development, financial services, fish processing and information and communications technology (ICT) (Zafar, 2016; Economy Watch, 2015).

Since 1970 Mauritius has made major advances in terms of its economy:

efforts at economic diversification have been successful, allowing the country to move from sugar to textiles to a broader service economy. Mauritius’s reliance on trade-led development has helped the country achieve respectable levels of export performance (Zafar, 2016:91).

Furthermore, Mauritius relied on Export Processing Zones (EPZs) in the 1970s which boosted the economy further (Zafar, 2016). “Export processing zones (EPZs) are areas within developing countries that offer incentives and a barrier-free environment to promote economic growth by attracting foreign investment for export-oriented production” (Papadopoulos & Malhotra, 2007:1).

Mauritius focused its EPZs on clothing production and the Multifiber Arrangement (MFA) 8 which assured that Mauritius had preferential access to Western markets and lured East Asian businesses to invest in this industry. The performance of the EPZ, the development of a tourism industry and the recovery of the sugar cane price led to an economic recovery for Mauritius (Zafar, 2016). The EPZ

8 “The MFA was put in place in 1974 by developed countries to protect their own textile and garment industry to prevent a flood of exports from less developed countries (LDCs)” (Thakoor, n.d.:14).

49 became the Mauritian economy’s main driver of growth which ultimately led to Mauritius being regarded as a “middle income country” (Kothari & Wilkinson, 2013:96).

The textiles industry in Mauritius grew to the extent that Mauritius was developed from an economy based on agriculture as its main form of revenue with US$700 as a per capita income in 1970, to having a per capita income of roughly US$12,715 “and a human development index in 2007/2008 of 65 in 2005” (Kothari & Wilkinson, 2013:96). However, the MFA was removed in 2004 through a World Trade Organisation (WTO) agreement that stated that the MFA would be phased out between 1995 and 2004. This meant that importing quotas in the textiles industry would cease to exist and “importing countries are no longer able to discriminate between exporters” (World Trade Organisation, 2018:1). As a result, the textiles industry in Mauritius ceased to thrive to the extent that it did prior to the removal of the MFA (Kothari & Wilkinson, 2013:96; Economy Watch, 2015).

According to Kothari and Wilkinson (2013), in the 1980s Mauritius’ employment rate was very high, and wages increased. Moreover, in the early 1990s economic competition with other states in terms of exports put strain on the Mauritian economy which led to an attempt by the state to diversify the industrial base. Therefore, Mauritius took up membership in the Common Market for Eastern and Southern Africa (COMESA) to add “a new dimension to its export and investment promotion policies” (Kothari & Wilkinson, 2013:96) (COMESA, 2017). Meanwhile, in the COMESA region, Mauritius’ export value increased “from RS 11m in 1986 to approximately RS 1.5bn in 1996” (Bunwardee & Peedoly in Kothari & Wilkinson, 2013:96).

The World Bank, the United Nations Development Programme (UNDP) and the UN Industrial Development Programme assisted Mauritius to set in place mechanisms to upgrade the mode of production and ultimately the quality of products of firms. Several initiatives were implemented by the Mauritian state, for example, to lure investment, an ‘Informatics Park’ (Kothari & Wilkinson, 2013:96) was created with the latest telecommunication and satellite services. In addition, the ‘Pioneer Status Enterprises Scheme’ (Kothari & Wilkinson, 2013:96) was created to provide information and support to firms that were focused on technologically driven processes. Furthermore, investment in human capital was undertaken through initiatives such as the ‘Industrial and Vocational Training Board’ (Kothari & Wilkinson, 2013:96). Eventually, economic growth was enabled through “the service sectors, especially expanding financial services and tourism, but with substantial contributions also from other services sectors (ICT, real estate, and retail trade)” (World Bank, 2017b:1). This allowed the economy to grow at a stable pace and in 2016 the “GDP growth was 3.8%” (World Bank, 2017b:1).

50 Having outlined Mauritius’ economic context, the next section will provide an overview of the history of Seychelles from an economic perspective.

4.5 The economic history of Seychelles In the period of European occupation (between 1744 and 1976) the Seychellois economy focused on traditional crops such as the cultivation of copra (the palm of a coconut which is used to make coconut oil). However, due to population growth that led to increased local usage of the coconut; as well as the coconut beetle which decimated the coconut palm in the mid-1950s, these factors led to a decline in copra exports. Moreover, large income gaps were problematic as only a few families benefitted from the economic activities during the colonisation period. An increase in poverty and social unrest was created possibly brought about by a growing trade deficit, limited agricultural land, and failure by the state to grow the trade in fisheries. Although the state acted to develop the tourism industry to strengthen its economy, this only succeeded in the 1950s possibly due to a weak communications system (Kothari & Wilkinson, 2013).

When Seychelles became independent in 1976 its economy was developed to the extent that the state was regarded on a global scale as an upper-middle income state. This economic growth was stimulated by the tourism industry, tuna exports, as well as upgrades to hotels and other industries that attracted tourists and investment. In addition, the agriculture, fisheries and manufacturing industries were also developed (Economy Watch, 2015).

In 1970, only 1,622 tourists visited Seychelles; mostly via boat from Mombasa. However, a big turning point was in 1971 when an international airport was built which resulted in 78,852 tourists visiting Seychelles in 1979. Nevertheless, a global economic downturn, Cold War strains and “a failed mercenary coup in 1981” (Kothari & Wilkinson, 2013:97) negatively impacted Seychellois tourism. Only 4,728 tourists visited Seychelles in 1982 and this only recovered in 1989. Tourism growth generated significant income and combined with foreign income it exchange-funded the post- independence period. Accordingly, the government committed to social equity to transfer payments of around 5.5 per cent of the GDP to poor Seychellois (Kothari & Wilkinson, 2013). However, by 1993 after “20 years of tourist‐ led development and a sustained programme of transfer payments, poverty persisted at worrying levels” (Kothari & Wilkinson, 2013:97).

According to the World Bank (in Kothari & Wilkinson, 2013), in 1993, 20 per cent of Seychellois lived in poverty while seven per cent lived in absolute poverty. Payet (2007) adds that the Seychellois economy has proven to be vulnerable to warfare and terrorist attacks as tourism figures dropped during times of war (for example, the 1991-1992 Gulf War) or straight after terrorist attacks (for example, the 11 September 2001 attacks on the US). “The second Gulf War and the global threat of

51 the disease epidemics also caused short-term decline in visitor arrivals in Seychelles” (Payet, 2007:4). According to the World Health Organization (2004:8), one of these disease epidemics was cholera.

However, Seychelles benefitted from improved access to export markets since the late 1990s through the Africa Growth and Opportunity Act (AGOA), the Generalised Systems of Preferences (GSP), the Lomé and Contonou Conventions, membership of COMESA, the Southern Africa Development Community (SADC) and the Indian Ocean Committee. Moreover, “the financial assistance provided under the Lomé and Cotonou conventions of the European Union (EU) helped the growth of Seychelles’ tuna industry such that by 2000 it was contributing approximately $150m to national GDP” (Kothari & Wilkinson, 2013:98). Moreover, the tuna industry created employment for 1,300 Seychellois (Kothari & Wilkinson, 2013).

Seychelles made a request to the International Monetary Fund (IMF) for financial aid in 2008 as the state “depleted its foreign exchange reserves, Seychelles defaulted on interest payments due on a $230 million Eurobond” (Economy Watch, 2015:1). In 2009 the World Bank loaned US$9 million to assist Seychelles to re-establish its economic stability (BBC News, 2018:1). To turn the economic situation around, Seychelles sold certain state assets, liberalised the exchange rate and included layoffs in the public sector. By 2013 the IMF declared Seychelles “a market-based economy with full employment and a fiscal surplus” (Economy Watch, 2015). In addition, in 2018 Seychelles enabled its economic growth through establishing a protected marine area “as part of a national debt swap deal which could serve as a model for future conservation projects around the world” (BBC News, 2018:2).

It is clear from the above discussion that since their independence, Mauritius and Seychelles have managed to gain competitive advantages through aiming at a niche market with their development strategies of a series of products and services to be exported. Mauritius has invested in developing information and communication services and a seafood hub, while still relying on sugar production, tourism and garment sales. On the other hand, Seychelles’ economy focuses mainly on tourism and the tuna industry. In addition, both countries have taken steps towards creating OFCs (Aderibigbe, 2014). Per capita levels have risen in these countries despite inequality in economic and social terms rising with these new economic initiatives. However, both countries are still heavily dependent on foreign trade (Kothari & Wilkinson, 2013: 94).

52 It is important to consider the GDP growth and Purchasing Power Parities (PPP) 9 of Mauritius and Seychelles to get a holistic picture of economic growth in both states. In 1990 the GDP PPP in Mauritius was US$5 billion and grew to US$28 billion in 2017. In comparison, Seychelles’ GDP PPP was US$0.6 billion in 1990 and grew to US$2.8 billion in 2017. It is, therefore, clear that Mauritius has grown more in terms of GDP PPP than Seychelles between 1990 and 2017. Figure 4.1 illustrates the GDP PPP growth in both states.

Figure 4.1 A comparison of the growth in Gross Domestic Product (GDP) and the Purchasing power parities “PPP (current international $)” between 1990 and 2017 in Mauritius and Seychelles.

30 GDP PPP Growth in Billion $ 25

20

15

10

5

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mauritius GDP PPP growth in Billion $ Seychelles GDP PPP growth in Billion $

Source: Compiled by author from data retrieved from the World Bank (2018a:1).

With the political and economic history of Mauritius and Seychelles as a backdrop it is now necessary to consider the characteristics wholly unique to these SIDS/ASIDS.

4.6 The characteristics of Mauritius and Seychelles as SIDS/ASIDS

For this study it is important to consider the unique characteristics of Mauritius and Seychelles to answer the following research question: If Mauritius and Seychelles are found to be vulnerable to money laundering, drug trafficking, and maritime piracy, is it possibly intensified by the typical characteristics associated with SIDS/ASIDS? This is also important for laying the foundation for

9 “Purchasing power parities (PPPs) are the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries. In their simplest form, PPPs show the ratio of prices in national currencies of the same good or service in different countries” (OECD, 2018a).

53 answering the question of whether there are overlaps between the typical SIDS characteristics and the features of TOC to be discussed in Chapter 5. The economic and financial characteristics will be considered first in this chapter, followed by the political, geographical and social characteristics.

4.6.1 Mauritius and Seychelles: economic and financial characteristics

States that experience economic problems tend to experience more crime. “Such findings are consistent with criminal motivation theory 10, which suggests that economic stress causes an increase in criminal behaviour” (UNODC, 2012b:1). It is, therefore, important to consider Mauritius and Seychelles from an economic and financial perspective. According to McCormick (2010), GDP and the Economic Freedom in the World Index (EFW) are useful indicators of economic performance. Therefore, the performance of Mauritius and Seychelles in terms of GDP will now be considered. According to the World Bank (2017c), in 2016 Mauritius ranked 122nd on a global GDP scale with a GDP of US$12,168 while Seychelles ranked 178th with a GDP for 2016 of US$1,427.

In terms of the EFW Index, (determined by the Fraser Institute, 2018), ‘economic freedom’ is used to compare states on a global scale (Fraser Institute, 2018:1). This involves “personal choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others” (Fraser Institute, 2018:1). Therefore, the key function “of government in an economically free society” (Fraser Institute, 2018:1) is to ensure the security of individuals and their belongings. The EFW Index measures whether the policies and institutions of a state support minimalist state involvement limited to securing property rights and specific public goods. Ultimately, the market should regulate trade, and not the government (Fraser Institute, 2018).

Mauritius is ranked 7th in the EFW Index 2015 rating with a score of 8.04 out of 10 and for size of government Mauritius ranks 36th and scores 7.57 out of 10. In terms of the legal system and property rights Mauritius ranks 33rd with a rating of 6.47. In terms of sound money, it ranks 27th with a score of 9.59. For freedom to trade internationally it ranks 14th with a score of 8.36 and for regulation 21st with a score of 8.19 (Fraser Institute, 2018).

10 According to Toby (in Gavin & Hockey, 2010:391), “Criminal Motivation Theory” is explained as follows: individuals associate themselves with “reference groups” and they tend to adopt the “norms” and “behaviours” of these groups which ultimately becomes part of their frame of reference. When they commit criminal acts, they tend to do so in an attempt to fit in or to prove “loyalty” to the group and there is thus no “moral dilemma” attached to the criminal behaviour.

54 Overall Seychelles ranks 47th with a score of 7.42. In terms of government size Seychelles ranks 47th with a score of 7.19 and in terms of legal system and property rights, Seychelles ranks 67th with a score of 5.52. In terms of sound money Seychelles ranks 54th with a score of 9.33. Finally, Seychelles scores 52nd with a score of 7.67 for freedom to trade internationally and for regulation it ranks 57th with a score of 7.40 (Fraser Institute, 2018).

The Heritage Foundation’s “Index of Economic Freedom” 2019 scores states for economic freedom. “The Index of Economic Freedom focuses on four key aspects of the economic environment over which governments typically exercise policy control: Rule of law, Government size, Regulatory efficiency, and Market openness” (Heritage Foundation, 2019). States are scored between 0 and 100. States with scores between 100-80 are regarded as free; states with scores between 79.9-70 are regarded as mostly free; states with scores between 69.9-60 are regarded as “moderately free” and states with scores between 59.9-50 are regarded as “mostly unfree”. Mauritius is classified as “mostly free” and is ranked 25th with a score of 73.0, while Seychelles is classified as moderately free and ranked 87th with a score of 61.4 (Heritage Foundation, 2019).

From the above discussion both Mauritius and Seychelles are rated in the top 100 states globally in terms of economic freedom in all the various categories of the EFW Index as well as The Index of Economic Freedom. However, a strong economy does not guarantee that a state is free from TOC. As Fijnaut (2000) emphasises, if there are corrupt bureaucrats in a state, they are likely to allow criminals to get away with their activities. This is especially important since Transparency International (2018) does indicate that there is a degree of corruption in both states on the Corruption Perception Index (CPI) (2017).

4.6.2 Mauritius and Seychelles: political characteristics

Political characteristics measure the success of a government which is reflected in the structure and wealth of economies, as good governance produces a strong economy (McCormick, 2010). It is important to consider these factors in Mauritius and Seychelles as TOC tends to flourish in weak states. “Although it may affect strong states, conflict-affected and fragile states are especially vulnerable to the dynamics of TOC and may provide more favorable conditions for its development” (Miraglia, Ochoa & Briscoe, 2012:2). As mentioned earlier in this dissertation, a weak state is one that has a “weak capacity to carry out basic functions of governing a population and its territory and being unable to develop mutually constructive and reinforcing relations with society” (OECD 2011:21 in Miraglia, Ochoa & Briscoe, 2012:5).

55 To determine whether Mauritius and Seychelles have strong or weak states, the following rating systems as listed by McCormick will be utilised to compare the political success of Mauritius and Seychelles: “Freedom in the World Index; the World Bank’s Governance Indicators; Democracy Index; and the Corruption Perception Index” (McCormick, 2010:x).

The Freedom in the World Index of Freedom House (2018) is “a report produced annually focusing on political rights and civil liberties on a global level. A country can achieve a maximum score of 100” (Freedom House, 2018:1). Mauritius is ranked as free with a total score of 89 and Seychelles is ranked as partially free with a score of 71 (Freedom House, 2018). According to the 2017 Democracy Index, Mauritius ranks 16th out of 167 states with an overall score of 8.22 out of 10. It is therefore regarded as a “full democracy” which means that it scores 8 or higher out of 10 for each category (Economist Intelligence Unit, 2018:1). For pluralism and electoral process Mauritius scores 9.17; for functioning of government it scores 8.21; for political participation it scores 5.56; 8.75 for political culture; and 9.41 for civil liberties. There is no data for Seychelles (Economist Intelligence Unit, 2018).

According to the Worldwide Governance Indicators of the World Bank (2017c), in terms of voice and accountability, Mauritius scores 73.89 per cent and Seychelles scores 51.23 per cent. The following indicator: “voice and accountability” (World Bank, 2017c:2), illustrates the degree to which a state's residents are perceived to be able to partake in choosing the government and expressing themselves freely. It also refers to how free the media is and freedom of association. In terms of political stability, violence and terrorism, Mauritius scores 88.57 per cent and Seychelles 69.52 per cent. This indicator measures perceptions of the possibility of political instability, violence that is politically motivated, as well as terrorism (World Bank, 2017c).

In terms of government effectiveness, Mauritius scores 77.88 per cent and Seychelles 67.31 per cent. This indicator illustrates perspectives of the standard of public service, and the standard of policy formulated and implemented (World Bank, 2017c). In terms of regulatory quality Mauritius scores 82.21 per cent and Seychelles 44.71 per cent. Regulatory quality illustrates ideas of how capable the government is to aid growth of the private sector through creating and enforcing policies and laws (World Bank, 2017c).

The CPI of 2017 “ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and businesspeople” and uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean (Transparency International, 2017:1). As mentioned in Chapter 1, Mauritius ranks 54th out of 180 countries for clean government with a CPI score of 50 while Seychelles ranks 36th with a CPI score of 60 (Transparency International, 2017). As a result, it can be

56 stated that both states are competing well in terms of fighting corruption when considering the score on the CPI especially in comparison to the rest of Africa with only Botswana (with a score of 61) scoring better than Seychelles, Mauritius and Namibia (with a score of 51 scoring better than Mauritius) (Transparency International, 2017:1). The scores of Mauritius and Seychelles on the CPI make them interesting case studies for TOC studies as it would seem that states with moderate to low levels of perceived corruption should have low levels of TOC. However, this will be tested in Chapter 5 of this study.

An additional index that should be considered in terms of political performance is the Ibrahim Index 2017. The IIAG “is a tool that measures and monitors governance performance in African countries” (Mo Ibrahim Foundation, 2017:1). For overall governance, the Index ranks Mauritius 1st in Africa and Seychelles 2nd among African states measured. The Mo Ibrahim Index uses four distinct indicators to measure governance and a breakdown of Mauritius and Seychelles scores are provided accordingly. The indicators are: “safety and rule of law; participation and human rights; sustainable economic opportunity; and human development” (Mo Ibrahim Foundation, 2017:1).

In terms of “safety and rule of law” (Mo Ibrahim Foundation, 2017:1), which includes “rule of law, accountability, personal safety and national security” (Mo Ibrahim Foundation, 2017:1), Mauritius ranks 1st first with a score of 82.7 out of 100 and Seychelles ranks 5th with a score of 74.0. The second indicator considered is participation and human rights where Mauritius is ranked 2nd in Africa with a score of 77.5 and Seychelles is ranked 8th with a score of 9.5. The third indicator is sustainable economic opportunity which includes the business landscape, public administration, the rural segment and infrastructure. Here Mauritius is first scoring 79.4 and Seychelles is 5th scoring 65.0. The final indicator is Human Development which includes welfare, education and health. Seychelles is in second position with a score of 84.9 per cent and Mauritius is in first position scoring 86.1 per cent (Mo Ibrahim Foundation, 2017). It is clear from these statistics and rankings that Mauritius and Seychelles perform well in terms of political freedom, democracy and good governance which indicate that they are not considered to be weak states. However, Chapter 5 will determine to what extent TOC impacts these states.

Accordingly, the next section will consider the geographical characteristics of Mauritius and Seychelles.

57 4.6.3 Mauritius and Seychelles: geographical characteristics

The geographic position of a state is important to consider when studying a state in terms of TOC. This is because a state’s geographic position to crime centres can make it more susceptible to crime. For example, Algeria has been classified as a transit point for drugs “due to its geographic location and proximity to drug production centres…” (United Nations, 2010:1). On a geographic level, Mauritius is located approximately 804,672 kilometres east of Madagascar and 20 degrees south of the equator (Government of Mauritius, 2018). Seychelles is an archipelago of more than 90 islands with a total area of 277,129 square kilometres about 1,609,344 kilometres east of Mombasa and four degrees north of the equator (Government of Seychelles, 2000). Moreover, Mauritius and Seychelles are geographically remote which is a typical SIDS characteristic (World Bank, 2017d). It is imperative to consider the distance from Seychelles to Somalia, which is 1,502 kilometres (DistanceFromTo, 2018b) while Mauritius is 3,093 kilometres from Somalia (DistanceFromTo, 2018a). This is important as it could have a bearing on why Seychelles has historically experienced more maritime piracy attacks by Somalians than Mauritius has. Moreover, if Mauritius and Seychelles are found to be situated along a drug trafficking route, it could indicate why these states are impacted by drug trafficking. However, these points will be investigated in Chapter 5 of this study.

4.6.4 Mauritius and Seychelles: social characteristics

It is important to consider the social characteristics of Mauritius and Seychelles in order to determine whether these characteristics make them more susceptible to TOC. In terms of population size, both states have small populations. In 2017 Mauritius had a population of 1,264 million and Seychelles had a population of 95,843 (World Bank, 2018c). Human Development is a variable that needs to be considered when studying states from a social perspective as states with a low score on human security are more vulnerable to TOC and human security forms part of human development. This is especially important for the purposes of this study (which is to consider TOC and ASIDS) as TOC has an impact on the human development of a state. The General Assembly of the UN (2012:1) explains that transnational crime, especially illicit trade, impacts development in any state. In addition, social and economic development is influenced by an increase in TOC:

Drugs and crime undermine development by eroding social and human capital. This degrades quality of life and can force skilled workers to leave, while the direct impacts of victimisation, as well as fear of crime, may impede the development of those that remain. By limiting movement, crime impedes access to possible employment and educational opportunities, and it discourages the accumulation of assets (General Assembly of the United Nations, 2012:1).

58 Human development can be defined as “expanding the richness of human life, rather than simply the richness of the economy in which human beings live. It is an approach that is focused on creating fair opportunities and choices for all people” (UNDP, 2016a: 2). This includes directly enhancing human abilities, including the opportunity for health care, an acceptable standard of living and education. In addition, human development involves the state creating conditions for human development through providing citizens with the opportunity to participate in political and community life and creating the conditions for environmental sustainability, human security as well as gender equality (UNDP, 2016a: 2).

The HDI measures human development progress made in states. It focuses on the following elements of human development:

a long and healthy life (measured by life expectancy at birth) (UNDP,2016a:2); access to knowledge (which is measured by considering adults of 25 and older for the number of years of education they have undergone and the access of schooling and knowledge available to children at school- entry age), and a decent standard of living (measured by Gross National Income (GNI) per capita) (UNDP, 2016a: 2).

For the purposes of understanding the social characteristics of Mauritius and Seychelles, this study will consider the HDI of Mauritius and Seychelles. According to the available statistics from the World Bank (2017a), Mauritius had a 93 per cent adult literacy rate in 2015 and Seychelles had an adult literacy of 94 per cent in 2010. In addition, “Mauritius’ HDI value for 2015 is 0.781— which put the country in the high human development category— positioning it at 64 out of 188 countries and territories” (UNDP, 2016a:3). In comparison, Seychelles’ HDI is considered as high in comparison to other states. The HDI value for Seychelles in 2015 was 0.782 placing it 63rd of 188 states (UNDP, 2016b:2). Between 2000 and 2015, Mauritius and Seychelles both made advancements towards achieving their HDIs (see Figure 4.2.) (UNDP, 2016a).

Figure 4.2 Human Development Index – Mauritius and Seychelles.

59

Source: UNDP (2016a).

Mauritius’ and Seychelles’ 2015 HDI of 0.781 and 0.782 respectively “is above the average of 0.746 for countries in the high human development group and above the average of 0.523 for countries in Sub-Saharan Africa” (UNDP, 2016a:6). Seychelles ranks 63rd and Mauritius ranks 64th on the HDI. Life expectancy at birth is 74.6 in Mauritius and 73.3 in Seychelles. The expected years of schooling in Mauritius is 15.2 while the expected years of schooling in Seychelles is 14.1. However, the mean years of schooling in Mauritius is 9.1 and in Seychelles it is 9.4. In addition, the Gross National Income (GNI) is US$17,948 in Mauritius and US$23,886 in Seychelles (UNDP, 2016a; UNDP, 2016b).

From the above discussion, Mauritius and Seychelles have relatively high levels of human development. However, as proven in this chapter, this does not necessarily mean that they are not impacted by TOC. Consequently, it is important to investigate in the next chapter to what extent TOC, and more specifically money laundering, drug trafficking and maritime piracy exist in these states given the relatively high level of human development in these states.

4.7 Conclusion

This chapter focused on the historical characteristics of Mauritius and Seychelles. It also considered the characteristics of these states in terms of the following categories: economics and finance, politics, social and geographical. From the above discussion, it is clear that Mauritius and Seychelles have many commonalities in terms of their historical, economic and financial, political, social and geographical characteristics which make them interesting states to study in relation to TOC. They

60 also subscribe to some SIDS/ASIDS characteristics in terms of isolation, small populations and vulnerability to natural disasters and environmental shocks (World Bank, 2017d). However, despite their typical small state development challenges, Mauritius and Seychelles have advanced to be considered as the top performers in terms of governance in Africa (Mo Ibrahim Foundation, 2017).

Moreover, this chapter established that even though Mauritius and Seychelles are considered as top performers in terms of political, economic and social characteristics, it does not necessarily mean that they are shielded from the effects of TOC, due to the existence of corruption in these states (even though it is relatively low) (Transparency International, 2018). This is important when considering the point made by Fijnaut (2000), that corrupt bureaucrats are likely to turn a blind eye to criminal activities, which could be the case in Mauritius and Seychelles. Moreover, both states’ geographical position makes them vulnerable to TOC due to isolation and due to them being geographically close to Somalia (in terms of Somali piracy) and to East Africa (in terms of drug trafficking). It is therefore clear from this chapter that some of the SIDS/ASIDS characteristics explored in this chapter, such as isolation, geographical location and a small population size (to provide human capital for border security, etc) makes these states more susceptible to TOC mainly because their borders are not protected enough from criminal activities. They are also surrounded by water and isolated, which makes it very difficult to protect their borders. However, corruption (which is not unique to SIDS/ASIDS) also plays a role in making these states more susceptible to TOC.

This chapter discussed the historical, economic and financial, political, social and geographical characteristics of Mauritius and Seychelles, as well as the impact of corruption in terms of making these states more susceptible to TOC. Chapter 5 will focus on the size and scope of money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles as well as explore the possible actors involved in these activities through applying the “six degrees of separation” feature of TOC as part of the analytical framework of this study. Ultimately, it will then be determined whether there are overlaps between the TOC features listed in this study and the characteristics of Mauritius and Seychelles as SIDS/ASIDS.

61 CHAPTER 5

MONEY LAUNDERING, DRUG TRAFFICKING AND MARITIME PIRACY IN MAURITIUS AND SEYCHELLES

5.1 Introduction

In the previous chapter the economic and financial, political, geographical, and social characteristics of Mauritius and Seychelles as SIDS/ASIDS were discussed. It is important to now turn the attention to gauge the estimated extent to which Mauritius and Seychelles are impacted by TOC. The purpose of this chapter is to answer the following research questions as listed in Chapter 1 of this dissertation: to what extent does money laundering, drug trafficking and maritime piracy possibly impact on Mauritius and Seychelles and what is the possible size and scope of these crimes in the respective states? Against this backdrop, the possible size and scope of money laundering, drug trafficking and piracy in Mauritius and Seychelles as well as the actors involved will be explored in this chapter.

5.2 The size and scope of money laundering in Mauritius and Seychelles

As stated earlier in this dissertation, it needs to be gauged whether money laundering takes place in Mauritius and Seychelles due to the claims by some sources that small island states are tax havens (United Nations, 2015a:2). The US Department of State (2014) categorises states according to the perceived vulnerability of a state to money laundering. The first category is “Jurisdictions of Primary Concern” (US Department of State, 2014:1) which is also called “major money laundering countries” (US Department of State, 2014:1). Although Mauritius and Seychelles are not in this category, it is still important to consider this category to have a thorough understanding of this classification as well as to understand how these two states compare to other states in the world. The US Department of State (2014) includes in this category states with limited or no political will and/or limited or no law enforcement which leads to their financial institutions being prone to transactions of money derived from clandestine activities. Ultimately, it is the amount of money laundered in a state that puts them in this category (for example Zimbabwe, Somali, Guinea Bissau, Kenya and Nigeria are considered as “Jurisdictions of Primary Concern”) (US Department of State, 2014:1).

The other two categories are “Jurisdictions of Concern” (US Department of State, 2014) and “Other Jurisdictions Monitored” (US Department of State, 2014). Seychelles falls under the first category and Mauritius falls under the latter. States are classified under these categories according to the extent of the following: the size of proceeds of crime flowing through their financial systems; and their vulnerability to money laundering. States in the former category are considered to have larger amounts of proceeds flowing through their financial systems and are regarded as more vulnerable to

62 money laundering than the latter category (US Department of State, 2014). This section will aim to determine whether Mauritius and Seychelles do in fact subscribe to these characteristics. This will be done through first determining whether money laundering exists in these states and if so, examining the size and scope of money laundering in these states. It is important to keep in mind that due to the secretive nature of these activities, or the fact that some instances of TOC go unreported, available information may be limited and available numeric data may not be completely accurate. Therefore, numeric data used in studies of TOC should be considered as estimates of the extent of the crime (Pascual, 2017 :31).

5.2.1 The size and scope of money laundering in Mauritius

Mauritius is considered by some sources as an OFC (Hampton & Abbott, 1999) and the more its offshore financial services expand the bigger the possible prospects are for money laundering in the state (Etter-Phoya, 2018). Basel Governance (2018:1) ranks Mauritius in the moderate category in terms of the “risk” for money laundering. According to Etter-Phoya (2018), Mauritius’ continuous contribution to international “illicit financial flows” is reflected in the score of 72.35/100 “for financial secrecy in the Tax Justice Network’s Financial Secrecy Index 2018” (Etter-Phoya, 2018:1). Although Mauritius is busy implementing “double taxation agreements11” with African states, it did not enter into “Tax Information Exchange Agreements12” with any African states (Etter-Phoya, 2018:1). This means that African states are not required to share information on “suspicious” financial transactions with each other which, according to FAFT (2017b:1), could create loopholes for money laundering as states are required to share this information in order to prevent money laundering.

There has been further cases of alleged money laundering and tax avoidance in Mauritius. For example, “The Paradise Papers” which is the name given to the paperwork that exposed the “offshore law firm Appleby” of tax avoidance (Fitzgibbon, 2018:1), revealed that Mauritius was implicated in the tax avoidance saga as Appley made tax arrangements with Mauritius that allegedly opened the door to tax avoidance (Fitzgibbon, 2017). “The Panama Papers”, which refers to paperwork revealed in the public eye that exposed Mossack Fonseca law firm to possible tax evasion through setting up

11 Double taxation agreements apply when a company or organisation “is tax resident” in Mauritius as well as another country. Ultimately, the company will be taxed by “the state in which its place of effective management is situated” and be exempted of tax by the second state. This is to avoid a company or organisation having to pay tax in two states (Bouwer, 2015). 12 According to the Organization for Economic Cooperation and Development (OECD), Tax Information Exchange Agreements (TIEAs) are agreements between states “to promote international co-operation in tax matters through exchange of information” (OECD, 2018b) to avoid harmful tax practices such as a lack of transparency of the taxation process (OECD, 2018b).

63 shell companies in other states, also reveal that a Jersey company, “Heritage Oil and Gas Ltd” attempted to avoid tax by registering the company in Mauritius (Wilson, 2016:1).

Mauritius has attempted to implement tax reforms, but they have not been implemented as rapidly and thoroughly as they could have been (Etter-Phoya, 2018). In 2017 Mauritius signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). This was done to “stop tax avoidance by multinational companies through inserting anti-abuse measures in existing tax treaties without requiring renegotiation”. However, Mauritius did not sign new treaties with its preference countries as they were not included in this convention which makes it nearly impossible for the anti-tax abuse measures to succeed which enables illicit financial flows. It could be argued that Mauritius views remaining an international financial centre as more important than fighting against tax avoidance or information sharing with other African states (Etter-Phoya, 2018).

The government of Mauritius (2013:3) admits that there is a threat of money laundering in Mauritius. It states that although Mauritius works with AML organisations and provides adequate information on tax, criminals still try to manipulate the system and launder money in the island state (Government of Mauritius, 2013:11). In addition, there are many reported cases of money laundering in Mauritius. Moreover, instances of fraud have been reported in the Mauritian banking system (even though it is overseen by the BOM). For example, India has accused Mauritius of enabling an Indian computer services conglomerate to be involved in massive capital fraud through its offshore privileges in Mauritius (Bertelsmann Stiftung, 2009). In addition, 104 Suspicious Transactions Reports (STRs) and Disclosures were submitted to the Mauritius FIU in 2014 (Financial Intelligence Unit Republic of Mauritius, 2015).

In 2004 in Mauritius four cases of money-laundering were under prosecution (UNODC, 2004). In addition, the Asset Recovery Inter Agency Network Southern Africa (2015) reports that in 2013 the Mauritian police investigated an alleged Ponzi scheme involving a company called White Dot which lured investors with a return on investment three times higher than what was offered by other financial institutions. It was revealed that more than 500 million people were defrauded, and US$19,7 million were misappropriated. The money received through investments was paid into the different bank accounts of the company. The money was used “to pay dividends to investors and the remainder to buy property and vehicles in the name of the Directors” (Asset Recovery Inter Agency Network Southern Africa, 2015). In addition, in another case of money laundering, US$5,594,504 was recovered in Mauritius from a comparable Ponzi scheme case concerning Sunkai Co. Ltd in 2016 (Asset Recovery Inter-Agency Network Southern Africa, 2016).

64 5.2.2 The size and scope of money laundering in Seychelles

It can be argued that money laundering is also a problem in Seychelles and the government of Seychelles has on occasion agreed. According to the Seychelles Ministry of Finance, Trade and Economic Planning (2015), money laundering is increasingly detected in business transactions and there is a need for increased corporate governance monitoring and customer due diligence (Seychelles Ministry of Finance, Trade and Economic Planning, 2015). Moreover, Seychelles Finance Minister, Peter Larose, called on the IMF to assist in finding strategies to strengthen the Seychelles Financial Services Authority (FSA) (Seychelles Ministry of Finance, Trade and Economic Planning, 2018). The FSA is the body that regulates the offshore non-banking financial sector and has a duty to report suspicious transactions made by non-resident business companies (Bureau of International Narcotics and Law Enforcement Affairs, 2015). In addition, the Seychelles FIU conducts regular investigations and as a result the Seychelles Supreme Court has renounced and frozen “millions of dollars in criminal proceeds from offshore related crime” (Uranie, 2014).

Although the government of Seychelles is aware that money laundering activities are prone to go hand in hand with the offshore financial sector, the state has transformed itself into “an offshore financial and business centre that allows the registration of non-resident business companies” (Bureau of International Narcotics and Law Enforcement Affairs, 2015:1). Moreover, in November 2017 Seychelles was listed among the states who are tax havens according to the “Paradise Papers, which reveal[ed] the financial dealings of politicians, celebrities, corporate giants and business leaders” (BBC News, 2018:2). Moreover, the “Panama Papers” also indicated that Seychelles was one of the states implicated in the tax avoidance scheme by the Mossack Fonseca law firm (Pieters, 2017:1).

There are many reported cases of money laundering in Seychelles. For example, in 2014 the FIU reported that law enforcement officials investigated allegations that members of the previous Ukrainian government were laundering money through Seychelles’ offshore financial sector. In addition, it is alleged that Seychelles has been listed as an offshore jurisdiction that is associated with a company based in Britain that has assisted the former Ukrainian government to launder money (Uranie, 2014).

In addition, Uranie (2014) reports that two International Business Companies (IBCs) registered in Seychelles were reported to be affiliated with the former Ukrainian government. The FIU reported that these companies had very unclear corporate structures - some branches are based in London, Cyprus and other parts of the world. This is a clear indication that “the Seychelles IBCs are used to facilitate corruption and criminality” (Uranie, 2014:2).

65 Another example of money laundering in Seychelles is the money laundered by Malaysian businessman and financier Jho Low (Zhang, 2018). Low has laundered millions of US dollars and hid his beneficial ownership of an investment fund owned by the Malaysian Ministry of Finance by disguising the money in accounts of companies he created in Seychelles (Martini, 2017). He allegedly transferred money from their accounts to a joint account of a top-level US law firm. The money transferred was allegedly used to purchase extravagant properties. This included:

a mansion in Beverly Hills that was bought by a Nevada registered company using an attorney from the law firm as a signatory. The Nevada company is thought to be owned by another company registered in the Seychelles owned by Low and later transferred to the stepson of the Malaysian prime minister with the help of another US law firm (Martini, 2017).

French newspaper Le Monde has shared with the International Consortium of Investigative Journalists (ICIJ) information that 85 clients of the Hong Kong and Shanghai Banking Corporation (HSBC) private bank have traced back to Seychelles. “In total, they’ve transferred around USD506.4 million to or through HSBC Private Bank via 497 bank accounts” (Today in Seychelles, 2015). These clients have consulted with Zen Offshore, a company that sets up shell companies that are difficult to detect.

Shaer (2014) adds that people have created companies in Seychelles to disguise their identities as well as to make the profits that they have made through illegal means hard to trace. In 2010, for example, “the government of Kazakhstan issued an arrest warrant for Mukhtar Ablyazov, a banking tycoon who has been accused of using Seychellois companies as part of a scheme that plundered billions of dollars from Kazakhstan’s BTA Bank” (Shaer, 2014:3).

It was reported in 2011 that a branch of the Reserve Bank of Australia laundered money meant as bribe money for Nigerian officials through a shell company based in Seychelles. As a result, two criminals based in Israel were found guilty in 2012 for laundering money through a pharmacy in Seychelles. In reaction, a former member of the Seychelles legislature with vast experience in the local offshore business, Paul Chow, said “all kinds of unethical conduct go unpunished or simply brushed under the carpet — treated as business as usual. It is this swamp that everyone operates under” (quoted in Shaer, 2014:2). Chow argues that it is due to a lack of government oversight that shell companies are created for the sole purpose of money laundering. However, he added that: “most other offshore operatives on the island operate in an honest manner” (quoted in Shaer, 2014).

Seychelles was also exposed for money laundering by Al Jazeera.13 In November 2012 Al Jazeera produced a documentary exposing two companies that were based in Seychelles who were willing to do unlawful business (Uranie, 2014). According to Al Jazeera (2012), two journalists associated with

13 Al Jazeera is an independent news broadcaster based in Doha (AlJazeera, 2018:1).

66 the media giant posed as a Zimbabwean official and his lawyer who were out to hide the proceeds of their corrupt business in Seychelles. They met with specialists in the establishment of companies that make it easy to avoid being detected by international law enforcement agencies. They discovered that it is easy to launder money in Seychelles by setting up companies with anonymous ownership (Al Jazeera, 2012). However, the Office of the President of Seychelles said the claims made by the media company were “unfounded” (Amla & Uranie, 2014:2) but admits that there is still a lot of work to be done to completely rid Seychelles of money laundering (Amla & Uranie, 2014).

According to the International Compliance Association (2018), money laundering is used by individuals who make their proceeds through illegal methods. This means that any kind of criminal could be hiding their dirty money through money laundering in Mauritius and Seychelles. Goredema (2004:3) explains that drug traffickers also have to launder their money in order to avoid being detected by authorities. Harper (2009) adds that maritime piracy syndicates also launder the ransom money derived from hijackings. Moreover, King, Walker, and Gurulé (2018:115) argue that in addition to the criminals who want to hide their money, there are gatekeepers who have the ability to “provide or deny access to the legitimate financial system to those wishing to launder criminal proceeds” (King, Walker & Gurulé, 2018:115). Gatekeepers are often bribed into fulfilling such roles either by reward or punishment (King, Walker & Gurulé, 2018:115). This often involves “company formation agents, accountants, auditors and lawyers” (King, Walker & Gurulé, 2018:115). It is, therefore, clear that there could be various actors involved in money laundering.

From the above discussion it has been established that it seems probable that money laundering impacts Mauritius and Seychelles. It is possible that despite both states complying to the FATF (2016) recommendations, corrupt bureaucrats and bankers could be allowing these activities to flourish in these states as it has been proven that there is a degree of corruption in both states (Transparency International, 2018). For the purpose of this study, the next section will aim to determine whether drug trafficking impacts Mauritius and Seychelles, and if it does what the size and scope of this crime is in these states.

5.3 Drug trafficking in Mauritius

The size and scope of the drug trade in Mauritius is hard to determine as “we don’t know yet how deeply society has been cankered by this scourge, given the fundamentally covert nature of this activity” (Mauritius Times, 2017). However, what is clear is that Mauritius is a vulnerable target for drug traffickers due to the many air and sea routes that connect it to Europe, Australia, south-east Asia and Africa. Moreover, the lucrative tourist industry, the offshore banking industry and its duty-free

67 port area make Mauritius susceptible to drug trafficking (Mclea, 2010). Vivian (n.d.) agrees that Mauritius is strategically located in the Indian Ocean which makes it an ideal location for drug trafficking. To make matters worse, Mauritius lacks manpower in its coastguard to properly control its ports and other waterway entries. In addition, with the growth of global trade, containers are being shipped to Mauritius more regularly which makes it more difficult for authorities to identify illegal drug imports. Moreover, the “introduction of new synthetic drugs and lack of shared intelligence with other countries has crippled enforcement efforts” (Vivian, n.d.:2).

Drugs were traditionally trafficked to Mauritius and Seychelles from Afghanistan (Bruwer, 2016). However, the trafficking of heroin into Mauritius and now comes from different sources in Africa for example from Kenya and South Africa (Mclea, 2010). “In 2012 in Africa, the increasing use of heroin and drug injecting is also emerging as an alarming trend, particularly in Kenya, Libya, Mauritius, Seychelles and the United Republic of Tanzania” (UNODC, 2012e:18). The growing number of drug injectors can in part be ascribed to “the role that many African countries now play as trans-shipment routes in the global trafficking networks for heroin, cocaine, and other drugs” (Strathdee & Stockman, 2010: 100). Ultimately, the main drug used by both injection drug users (IDUs) and non-injection drug users (NIDUs) in Mauritius is heroin (Abdool, Sulliman & Dhannoo, 2006:86).

According to the Mauritius Police Force (2018), there are a variety of drugs trafficked and abused in Mauritius. The use of cannabis (also known as Gandia) is widespread across the island of Mauritius and is used by people across ages, races and income groups. It is locally produced due to the favourable weather conditions. In addition, dry hemp plant leaves are smoked (The Mauritius Police Force, 2018:2). Moreover, heroin, also known as Brown Sugar in Mauritius, has its main market in the urbanised areas. When heroin and cannabis are hard to come by, legal pharmaceutical products are abused in some cases (The Mauritius Police Force, 2018).

According to the UN World Drug Report 2010, Mauritius’ opiate use of 1.9 per cent makes it the African state with the highest prevalence of opiate use (Garcia, 2013). Although cannabis is the “only illicit drug that is locally cultivated in large quantities, primarily by small groups of individuals for local consumption and is not exported” (Garcia, 2013:1); in contrast, heroin and opium are largely imported but are still regarded to be ‘more affordable’ drugs. In addition, “access to Subutex, heroin, marijuana, along with other illegal drugs is well known and easy to the public” (Garcia, 2013:1). Mauritius is increasingly perceived as a stopover for the spreading of heroin, before it is shipped to Europe and the US, while Subutex is imported for consumption in Mauritius “with a small amount exported to other markets” (Vivian, n.d.).

68 In Mauritius, the number of persons arrested in connection with drug-related offences has increased from 1,504 in 2000 to 1,899 in 2010 (Garcia, 2013). Moreover, “in 2010 about 3 kilogrammes of heroin, 55 kgs of cannabis and 20,301 tablets of Subutex were seized by the police,” (quoted in Garcia, 2013:1). In addition, a woman reported her partner to the Mauritian police with a bag of six rolls of cannabis worth 25,000 Rupees in 2013 (Mungly, 2013).

The Mauritius police revealed in 2007 that 4,464 drug-related crimes were reported, and 4,217 cases were reported in 2008 (UNODC, 2008a). Drug-related crimes are:

all intentional acts that involve the cultivation; production; manufacture; extraction; preparation; offering for sale; distribution; purchase; sale; delivery on any terms whatsoever; brokerage; dispatch; dispatch in transit; transport; importation; exportation; possession or trafficking of internationally controlled drugs (UNODC, 2008a).

According to the UNODC (2006b) in 2003 in Mauritius, 592 people were treated for drug abuse. In 2008 in Mauritius in 38,770 cannabis plants were seized, 4,995,618 kilograms of marijuana were confiscated; 0,02377 kilograms of hashish were confiscated; 1,157,821 kilograms of heroin, and 24,443 units of other illicit opioids were confiscated. Moreover, in 2007 0,4 grams of cocaine and 54 units of ecstasy-type substances were confiscated (UNODC, 2012c). Finally, Soilihi (2018) states that Mauritius has the largest number of opiate users in Africa, East Africa has the highest number of opiate users of the African regions and in 2006 in Africa, the most IDUs were found in Mauritius (Abdool, Sulliman & Dhannoo, 2006: 108). From the above discussion it is clear that drug trafficking and drug abuse is an issue in Mauritius and that heroin, cocaine, ecstasy and cannabis-type drugs are prevalent in Mauritius. Accordingly, the next section will determine to what extent drug trafficking impacts Seychelles.

5.4 Drug trafficking in Seychelles

According to Magnan and Bonnelame (2017), the Seychelles presidency has admitted that drug trafficking is a problem in Seychelles. In 2004, 8 per cent of treated drug abusers were treated for cocaine abuse in Seychelles (UNODC, 2007). In 2005 in Seychelles, 65 people in total were treated for drug abuse and of this total, 55.4 per cent were cannabis users, 43.1 per cent were opiate users, and 1.5 per cent were ATS users. Moreover, 12 drug offences were reported in 2016 in Seychelles. In addition, around 35 tonnes of heroin are trafficked through Africa on an annual basis. It usually moves from Kenya to the Indian Ocean islands including Mauritius and Seychelles. Tanzania is speculated to be a centre for the distribution of cannabis, cocaine and heroin to Seychelles and Mauritius (UNODC, 2007).

Another case of exposed drug trafficking was in 2016 when the Seychelles Coastguard and the Seychelles National Drugs Enforcement Agency (NDEA) inspected an Iranian vessel that was

69 registered as a fishing vessel. However, upon inspection it was clear that it was not used for fishing purposes (Ernesta & Bonnelame, 2017). It was escorted to Port Victoria and contained the biggest quantity of drugs ever seized in Seychelles coastal waters. An estimated 150 kilograms worth of drugs, including heroin, were discovered (Uranie, 2016a). Ernesta and Bonnelame (2017) contribute that there were 11 Iranians on board the vessel and they were arrested and charged by the Seychelles courts with drug trafficking. However, eight of them were released due to insufficient evidence linking them to the crime. Although it was not established where the vessel originated from, it was speculated that the vessel was headed for Tanzania and that it came from a route often used for drug trafficking located close to Pakistan and Iran called the Makran Coast (Ernesta & Bonnelame, 2017).

According to the Seychelles Ministry for Sports, Youth and Culture (2016), the value of seized assets on the island that were bought with drug trafficking proceeds in the last few years amount to US$456,000. A recently suspected drug trafficker from Seychelles’ main island, Mahe, Hubert Alphonse, was arrested after a lifestyle audit. Although no drugs were found in his possession, he could not explain how his bank balance came to such a high amount and how he was able to afford the assets registered under his name. He was ultimately charged under the AML Act and the Proceeds of Criminal Activities Act. This investigation is one of eight other investigations that were underway in 2018 into suspected drug lords (Seychelles Ministry for Sports, Youth and Culture, 2016).

As such, “drug trafficking and drug use, particularly heroin, remain a major concern in the island nation” (Seychelles Ministry for Sports, Youth and Culture, 2016). For example, Seychelles’ Designated Minister and Minister for Local Government, Macsuzy Mondon, explained that by June 2018, Seychellois authorities had seized 5.63 kilograms of heroin. Moreover, in 2017 the main drugs confiscated were heroin and cannabis and only one case of cocaine confiscation was reported for the year by June 2017. The minister further stated that there is no proof that Seychelles “is producing dangerous drugs such as heroin, cocaine and ecstasy”. However, illicit drugs are trafficked through the airport and through the harbour, especially through marine activities (Laurence, 2018a:1).

In addition, the Seychelles Biological and Behavioural Surveillance of Heroin Users of 2017 (which is a report derived from a “respondent-driven” survey), indicated that “the number of heroin users in Seychelles from 15 years and above is around 4,800, which equals 5.6 percent of the population” (Laurence, 2018a:1). However, the minister said that it is difficult to know the precise figure of illicit drugs in Seychelles (Laurence, 2018a:1).

Accordingly, it is clear that drug trafficking is evident in both states. And as Laurence (2018a) explains, it is hard to know exact figures due to the secretive nature of drug-related activities. What

70 is important to note, is that corruption could be a reason why drugs are being allowed into these states as the International Drug Policy Consortium (2018) indicates that drugs are allowed into states due to “corruption in the police, airport security, customs and politicians” (International Drug Policy Consortium, 2018:1). It is once again clear that corruption is one of the main enablers of TOC.

The next section will consider the possible actors involved in the drug trade in Mauritius and Seychelles by applying the “six degrees of separation” (Balaam & Dillman, 2015:110) theory.

5.5 Possible actors involved in the drug trade in Mauritius and Seychelles: the six degrees of separation

Balaam and Dillman (2015:110) explain that the “six degrees of separation” as a feature of TOC refers to the degree to which the consumer of illicit products is removed from the illicit process that was followed to make a product, transport a natural product or acquire a service. Accordingly, this theory can be applied to the drug trade in Mauritius and Seychelles as there are multiple actors between the consumer and the illicit process of cultivating and trafficking illegal drugs. As Goredema (2004:3) explains, drug trafficking in Africa involves a range of actors as revealed through arrests and confiscations. This can include business directors, political officials and representatives, police and/or military representatives, the judiciary, religious leaders, traditional leaders and young people. According to the Mauritius Commission of Inquiry on Drugs, drug pushers have established processes that apparently include government officials in different departments (Mauritius Times, 2017). In addition, drug traffickers tend to build relationships with people with influence as to operate in a way that is under the radar and to avoid being caught. One such way is to conduct business through informal social networks (International Drug Policy Consortium, 2018).

There are also the more obvious actors involved in drug trafficking. This is first the traders who are paid the least. In addition, there are the manufacturers who make only enough for day-to-day living. The biggest profits are made through exports as the domestic markets are not big enough and the quantities sold are too low. The drug supplier usually deals with the exports and this usually requires money laundering as the trade is mainly conducted through cash transactions and the proceeds from this illicit activity need to be hidden. Ultimately, the biggest part of the profit of a drug sale goes to the supplier (Goredema, 2004:3).

It has been established from the above section that there are many actors involved in the drug trade that could ultimately shield the consumer from the illicit process that needs to be followed to traffic drugs into Mauritius and Seychelles as per the “six degrees of separation” theory of Balaam and

71 Dillman (2015). The next section will discuss to what extent maritime piracy impacts Mauritius and Seychelles.

5.6 Maritime piracy in Mauritius and Seychelles

It is important to determine to what extent maritime piracy is evident in Mauritius and Seychelles. UNODC statistics indicate that maritime piracy was an issue in 2014 and was taking place in relatively close proximity to the shores of Mauritius and Seychelles. This is evident as the pirates were sent to these islands for prosecution. By October 2014 in Seychelles the maritime piracy prosecution statistics were as follows: 14 pirates were on remand, 133 were tried, and 129 were convicted. Moreover, 96 were transferred to prisons and 22 remained in Seychelles prisons. In addition, in Mauritius 12 pirates were on remand by 2014 (UNODC, 2018).

Maritime piracy has had a significant influence on Seychelles in the past (World Bank, 2013: xiii). Kabukuru (2014) describes 2009 to 2013 as the period during which Somali pirates were most active in close proximity to the Seychelles islands. During this spike in Somali piracy, important sea routes close to Seychelles were closed and people were reluctant to fish in Seychelles waters for recreational and commercial purposes. Moreover, the UNODC (2012b) agrees that piracy has to an extent caused damage to the local economy and to local sources of revenue as it has discouraged fishing for commercial purposes. As a result, the tourism industry in Seychelles was also heavily affected which impacted Seychelles' economy. In the most severe cases Seychelles citizens were taken hostage by Somali pirates (World Bank, 2018b; The World Bank, 2013:33).

According to the Forum for African Investigative Reporters (FAIR) (in Hübschle, 2011), the Somali pirates function either from north-eastern or central Somalia. The Somali government does not try to curb the maritime piracy activities of some of its citizens but rather

the government of President Abdirahman Mohamed ‘Faroole’ in Puntland is said to be sharing in the pirates’ earnings which would make it a criminal state. Confirming this, the UN Monitoring Group estimates that over 30 percent of ransom payments were retained by Puntland government officials (Hübschle, 2011:82).

It is clear from the above statement that corruption hampers development as indicated in the analytical framework of this study.

According to The International Criminal Police Organization (Interpol) (2018), pirates have been increasingly focusing on hijacking vessels in the Indian Ocean.

Maritime piracy affects major shipping lanes and puts at risk the lives of seafarers and merchant seamen from all over the world, of whom hundreds are taken captive each year. Millions of dollars in ransom payments are paid to pirates (Interpol, 2018:1).

72 The World Bank (2013) states that as the ocean around the Horn of Africa is thought of as being very dangerous, the fishing industry has suffered. Moreover, in 2013 it was reported that “exports of fish products from piracy affected countries have declined by 28.5 per cent since 2006” (World Bank, 2013:1).

Although maritime piracy was impacting Seychelles until 2014 (UNODC, 2018), Securewest International (2016) argues that between 1 January to 31 October 2016, there were no piracy encounters recorded by Securewest International’s Global Response Centre (GRC), near Mauritius and Seychelles. Today, maritime piracy attacks in the IOR have declined and are occurring in closer proximity to Somalia. As a result, Maldives and Mauritius are no longer part of the UK Maritime Trade Operations (UKMTO) High Risk Area (HRA) since December 2015. However, Somali pirates have shifted their focus from hijacking commercial ships to hijacking dhows14 and fishing vessels and demanding ransom for release of the crew members (Securewest International, 2016).

Between 1 January and 31 October 2010 there were 76 incidents of piracy reported in the IOR. The nearest incident close to Mauritius was the hijacking of a fishing vessel on 7 October about 666 kilometres north-west of Mauritius. In Seychelles the nearest incident was approximately 46 kilometres north-west of Denis Island and involved the hijacking of two fishing vessels on 28 October. In 2011 there were 72 incidents of maritime piracy reported in the IOR. The closest incident to Mauritius occurred on 2 March, when a bulk carrier was approached about 111 kilometres south- east of Mauritius. Moreover, a pirate ship was observed about 222 kilometres north-west of Bird Island which is regarded as the closest incident to Seychelles. In 2012 there were 21 incidents of piracy in the IOR. However, none was close to Mauritius. In contrast, the closest piracy incident to Seychelles was an oncoming pirate ship about 444 kilometres east of Seychelles (Securewest International, 2016).

5.7 Possible actors involved in maritime piracy

Somali maritime pirates are not alone in their crimes and they have to share the proceeds that they make with other role players. “Confronting piracy is about preventing the foot soldiers going to sea, but we must also tackle the ringleaders, and investors who never leave dry land” (UNODC, 2012a:1). The ransoms to have hostages, ships and cargo released from pirate captivity are millions of US dollars. However, the pirates must share these ransoms with the other roleplayers involved

14 A dhow “was traditionally a wooden two-masted Arab sailing vessel used in trade across the Red Sea and the Indian Ocean. Made of wood, it commonly had slanting, triangular sails and a sharp upward bow at the front” (Deputato and Morlin-Yron, 2017).

73 (UNCTAD, 2014). An especially important role player is the leader or mastermind behind the maritime piracy operations. The money pirates receive as ransom for releasing ships and its cargo and or passengers, has to be shared with “their leaders and those who finance them” (Interpol, 2018:3). Profit is the main driving force behind the pirate attacks and therefore the largest parts of the profit needs to be laundered (Interpol, 2018:3). It could be possible that money is laundered through Mauritius and Seychelles banks among other tax havens, however, due to the secretive nature of the activities this is difficult to determine.

Other role players in Somali maritime piracy are the money kingpins, investors and beneficiaries who collect roughly 30-50 per cent of the ransom money collected. The pirates “typically receive a standard fee of US$30,000 to US$75,000 per ship, which only amounts to 1 per cent - 2.5 per cent of an average ransom payment” (Interpol, 2018:3). The local community also plays a role through providing “goods and services to pirates, including food, repair services and khat, which is a legal drug in Somalia” (World Bank, 2013:3). Moreover, a large sum of the proceeds, as much as US$300,000 per vessel, is paid to “government officials, businessmen, clans, militia and religious leaders as bribes” (World Bank, 2013:3) in Somalia. Crew members that are hired from specific clans or locations require higher salaries than local labourers. Pirates also get charged more for basic products and services than other residents (World Bank, 2018b). It is clear from the above discussion and the examples mentioned that Seychelles has been more impacted by maritime piracy than Mauritius (Securewest International, 2016). This could be due to Seychelles being geographically closer to Somalia than Mauritius and due to Seychelles historically being used by maritime pirates as a layover (Scarr, 1999).

5.8 The possibility that Mauritius and Seychelles are impacted to a greater extent by TOC due to their typical SIDS/ASIDS characteristics

What distinguish SIDS from other states are their unique characteristics and these do make them more vulnerable to TOC (Lewis-Bynoe 2014:90; UNODC, 2014). They are mostly surrounded by water and they lack the human resources to effectively prevent TOC on their own. TOC networks establish themselves in states that offer the least resistance (Lewis-Bynoe, 2014:90). For example, drug trafficking and smuggling usually take place through isolated, coastal states. In addition, often the cultural and socio-economic characteristics of SIDS enable money laundering and corruption. According to UNODC (2014), “weak banking systems and the provision of offshore services in some small island states have made such islands a target for increased money laundering activity, further undermining economic stability” (UNODC, 2014). Finally, if there is a lack of law enforcement capacity the extent of these issues is aggravated (McCusker in Lewis-Bynoe, 2014:90).

74 The first SIDS characteristic that both states subscribe to is isolation from other states (World Bank, 2017d) which means that they have no close neighbouring states to assist them to defend their borders from transnational criminals. Moreover, both states have small populations [according to the World Bank (2018c), in 2017 the population of Mauritius was 1,264,613 million and in Seychelles it was 95,843] which results in limited human capital (UN, 2002). This, according to ICLEI (2017), impacts on their ability to guard their coastal borders. Small states are fragile (FAO of the United Nations, 2002) and African fragile states can be a lucrative destination for transnational criminals to target for their illicit activities. In addition, transnational crime syndicates operating from South America and Europe tend to target fragile states in Africa as it is easy to access these states due to weak law enforcement and political instability (Mutume, 2007). Although Mauritius and Seychelles are not high on the Fragile States Index 2018: Mauritius is ranked as 151st and Seychelles ranks 125th on the Index (Fund for Peace, 2018) it could still be argued that due to typical island characteristics that make these states fragile, such as isolation and limited human resources to control borders, these states are more susceptible to TOC (UNODC, 2014). This makes them more vulnerable to TOC as the networks establish themselves in states that offer the least resistance (Lewis-Bynoe, 2014:90).

According to UNECA another typical SIDS characteristic that Mauritius and Seychelles share is a limited range of resources readily available which amounts to a greater dependence on trade (UNECA, 2017; Kelman & West, 2009). This could possibly explain why both states opted to become financial centres as they wanted to broaden their economic base. As the Commonwealth Secretariat (1997) explains, the removal of exchange and capital controls has led to a growth in financial markets of SIDS. This growth is contributing to globalisation and establishing opportunities for many countries to establish offshore centres which offer a range of legitimate financial sectors. SIDS have taken hold of these opportunities to become offshore financial centres. They provide a range of banking, insurance and business services in conditions of strict confidentiality. Ultimately, this opens the door for tax evasion and money laundering and transnational criminals make use of these opportunities (Commonwealth Secretariat,1997).

Adam (in United Nations, 2015b) explains that due to weak security of the ocean, and more specifically the IOR, close to SIDS, transnational criminals are able to conduct their illicit activities easily at sea. This is evident as illegal trafficking occurs mostly through sea routes (Adam in United Nations, 2015b). “Lawlessness and impunity were often the norm on the high seas, with prosecutions of international crimes at sea remaining uneven. A majority of the world’s illegal traffic was conducted at sea, whether it be people, drugs or weapons” (Adam in United Nations, 2015b:1).

75 In addition to the above-mentioned characteristics that make Mauritius and Seychelles susceptible to TOC, another typical SIDS characteristic that Mauritius and Seychelles subscribe to is that their coastlines are larger than their land area (ICLEI, 2017). Therefore, in the case of Mauritius for example, one of the main ways that drugs enter the state is through marine activities (Laurence, 2018a:1). As a result, there are many entry points for criminals into these states and as these states have limited human capital due to their small populations, they have a limited number of coastguard personnel to guard the coastal entry points. The US Library of Congress (in Hübschle, 2011) adds that if a state has unprotected borders and is geographically positioned “along international trafficking routes” it is more vulnerable to TOC (Hübschle, 2011:92). Ultimately, it can be argued that as Mauritius and Seychelles have so many entry points due to being surrounded by water and both states being situated along major trafficking routes, transnational criminals tend to target Mauritius and Seychelles.

Another factor that should be considered when considering Mauritius and Seychelles’ susceptibility to TOC is the extent to which corruption takes place in these states as transnational criminals tend to use corruption to penetrate a state with their illicit activities. Transnational criminals aim to make profit despite “government and law enforcement agencies seeking to close down or move into their business” (Hübschle, 2011:86). Consequently, transnational criminals target states that do not have adequate resources to combat TOC. Moreover, criminals use corruption “to circumvent customs and immigration controls, and ultimately to perpetuate the weakness of the state and maintain the territory as a safe haven” (quoted in Hübschle, 2011:86). On the CPI Seychelles scores 60 and Mauritius scores 50 (0 is very corrupt while 100 is very clean) and Seychelles ranks 36th and Mauritius ranks 54th of the states measured by the Index (Transparency International, 2018). Therefore, corruption does occur in these states which could be an indicator of why TOC, especially drug trafficking and money laundering, occur in these states.

5.9 Conclusion

This chapter discussed the size and scope of money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles and the possible actors involved. This discussion has made it clear that all three of these TOCs have or still do occur in and close to the jurisdiction of Mauritius and Seychelles. This chapter also mentioned statistics of the size and scope of money laundering, drug trafficking and maritime piracy in these two ASIDS. However, it needs to be considered that these statistics may not be a true reflection of these crimes due to the secretive nature of these crimes. This chapter also discussed the possible actors involved in these crimes and it became apparent that there are often more actors involved than one might suspect at first glance. The next chapter will focus on

76 the action steps taken and the legislation enacted by the respective states as well as mention some of the actors involved to combat money laundering, drug trafficking and maritime piracy.

77 CHAPTER 6

THE UNINTENDED CONSEQUENCES OF SUPPLY-SIDE POLICIES

6.1 Introduction

The previous chapter discussed the size and scope of money laundering, drug trafficking and maritime piracy in Mauritius and Seychelles and the possible actors involved. It was found that all three of these crimes have to some extent impacted on Mauritius and Seychelles. Accordingly, this chapter will focus on the response to these crimes from a state (and legislature), and non-state point of view in Mauritius and Seychelles. This is important to answer the research question relating to the action steps taken by the respective states to curb these illicit activities. Moreover, the feature of TOC as identified by Balaam and Dillman (2015) “the unintended consequences of supply-side policies” will be discussed in this chapter. This will be in light of the legislation implemented to combat these crimes as in most cases they are focused on the supply-side of TOC (instead of also focusing on the consumer-side of TOC), which has the undesirable result of criminals finding new and more discreet ways of conducting their criminal activities (Balaam and Dillman, 2015).

6.2 Mauritius

Initiatives have been enforced by Mauritius to strengthen its “anti-money laundering framework” (IMF, 2008:1). As the Mauritius International Financial Centre (2017:1) explains, “Mauritius remains a secure, trusted and transparent jurisdiction, which complies with the best international norms and practices, and has a policy of zero tolerance towards money-laundering and illicit financing”. Moreover, the FSC (2016) and Bankers Academy (2015) agree that noteworthy actions have been taken by Mauritian authorities to fight money laundering and the financing of terrorism (Financial Service Commission, 2016:2).

6.2.1 Action steps taken in Mauritius against money laundering

Mauritius works with the World Bank and the OECD to combat money laundering (Bertelsman Stiftung, 2009). In addition, in 2003 the functions of the FIU were refined and in 2004 the BOM was given greater responsibility. Moreover, the FSC was established based in Cybercity, Ebene, Mauritius; and the ICAC based in Moka, Mauritius was established to combat money laundering (International Monetary Fund, 2008).

Mauritius created a National Committee on AML to establish a platform between all the relevant authorities in the fight against money laundering and terrorist financing (International Monetary Fund, 2008). Moreover, Mauritius increased its budgetary expenditure on its judiciary to “Rs. 600 million to improve court infrastructure and allow the recruitment of 100 additional court personnel

78 (2015–16 budget) to fight the money laundering crime in Mauritius” (Jaunky, Ramesh & Cheeneebash, 2017:164).

Mauritius also holds membership in the Eastern and Southern Africa AML Group (ESAAMLG) and is dedicated to executing the FATF recommendations to combat money laundering (Financial Service Commission, 2016). Moreover, in 2000 Mauritius adopted the United Nations Minimum Performance Programme standards agreed at the Global Programme Against Money Laundering Plenary held in Cayman Islands in 2000 (Bank of Mauritius, 2005).

In 1988 Mauritius signed the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and ratified the recommendations of the convention by 2001 (Pacific Island Treaty Series, 2016; Klose, 2009). In addition, Mauritius is party to the UN Convention against TOC; UN Convention against Corruption; International Convention for the Suppression of the Financing of Terrorism (Anti-Money Laundering Forum, 2009). In accordance, Mauritius created organisations that deal specifically with money laundering which will be discussed in detail below.

The FIU of Mauritius plays a crucial role in connecting all the important stakeholders against money laundering. Moreover, the FIU has access to financial information enabling it to conduct financial investigations (Financial Intelligence Unit, 2014). The main function of FIU Mauritius “is to receive, collect and request information, process, analyse the information gathered and disseminate financial intelligence on cases suspected of money laundering and financing of activities related to terrorism” (Financial Intelligence Unit Republic of Mauritius, 2014:13). The FIU feeds its information from STRs that it receives from the BOM, the FSC, the Police, ICAC, the Mauritius Revenue Authority, the Enforcement Authority, anonymous tip-offs and international sources (Financial Intelligence Unit Republic of Mauritius, 2014:13).

ICAC is “the primary authority for the investigation and prosecution of corruption and money laundering cases” (International Monetary Fund, 2008:1). It is a national institution and was created through the Prevention of Corruption Act 2002 (POCA 2002). The main responsibility of ICAC is to “investigate corruption offences as well as any matter that may involve the laundering of money or suspicious transaction that is referred to it by the FIU” (International Monetary Fund, 2018). In addition, the Corruption Prevention and Education Division of ICAC monitors the work of national institutions and suggests actions for diminishing corruption within the institution. Moreover, it “provides education to the community about the dangers of corruption and to develop and retain the support of the public in the fight against corruption” (Anti-Money Laundering Forum, 2009:1).

79 The FSC is authorised by the Financial Services Act 2007 to regulate non-banking institutions such as “insurance providers, capital markets, leasing activities, global business companies, and private pensions" (Bankers Academy, 2015:1). The FSC supervises the international activities of financial institutions; establishes information sharing platforms in line with FATF standards and facilitates cooperation between financial organisations to combat money laundering (Financial Service Commission, 2016). The FSC urges financial institutions to implement AML procedures and if they fail to do so they run the risk of being penalised within the scope of the FSC (Anti-Money Laundering Forum, 2009).

The FSC shares a responsibility with the BOM to oversee the financial sector of Mauritius (IMF, 2008). In addition, the FSC “has the power to exchange information with public sector agencies, international organisations, foreign supervisory institutions or law enforcement agencies” (Financial Service Commission, 2016). The FSC regularly adapts its legal structure to comply with global requirements. Moreover, “the FSC also reviewed its Risk-Based Supervision Framework to ensure compliance of licensees with AML/CFT legislation” (Financial Service Commission, 2016:1).

The BOM is the “Central Bank of Mauritius" which generates guidelines for preventing money laundering and monitors the implementation of these guidelines. It also acts as the “financial regulator for banks, moneychangers, and foreign exchange dealers” (Bankers Academy, 2015:2). Furthermore, the BOM has the power to repeal the permits of banks and other financial institutions that do not adhere to AML guidelines (Bankers Academy, 2015).

6.2.2 Legislation pertaining to money laundering

When considering the legislation imposed against money laundering by Mauritius, it becomes apparent that although it has enacted various laws in its fight against money laundering Mauritius has a great focus on “supply-side policies” (Balaam & Dillman, 2015). The Mauritius International Financial Centre (2017:2) states: “as a credible Financial Centre, Mauritius has implemented stringent and sound legal frameworks”.

The Dangerous Drugs Act (DDA) of 1995 was the first law in Mauritius to make money laundering a crime - if it resulted from drug-related activities (International Monetary Fund, 2008). However, the Financial Intelligence and AML Act of 2002 (FIAMLA) (which replaced the Economic Crimes and AML Act of 2000) was the first legislation pertaining specifically to money laundering in Mauritius (International Monetary Fund, 2008).

Furthermore, in 2002 the Prevention of Corruption Act 2002 was created which speaks to “tracking down corruption and illicit transactions” (Mauritius International Financial Centre, 2017:1). This Act empowers ICAC to investigate suspicious cases for money laundering (Bank of Mauritius, 2005). In

80 addition, the “Financial Services Act 2007 and the Financial Intelligence and Anti-Money Laundering Act 2002”, were created to give the FSC the authority to fulfil its AML mandate (Financial Service Commission, 2016:1). Moreover, in 2003 the Mauritius Legislature adopted an AML (Miscellaneous Provisions) Act which amended “the institutional and regulatory framework which is obtained in Mauritius” concerning AML (Bankers Academy, 2015:2).

The Financial Services Act 2007 (FSA 2007) gives the FSC the role “as an independent regulator in the field of non-banking financial institutions and finance service providers” (Anti-Money Laundering Forum, 2009:2). In addition, the Financial Reporting Act 2004 gives authority to the Financial Reporting Council, the Mauritius Institute of Professional Accountants and the National Committee on Corporate Governance; to fulfil their functions in curbing money laundering activities (Anti-Money Laundering Forum, 2009).

The Banking Act 2004 “consolidates the laws relating to the business of banking and other financial institutions and to provide for related matters” (Anti-Money Laundering Forum, 2009:2). The BOM is authorised through this Act to repeal a bank's operating licence or make any amendments to these licences. In this way BOM can keep the operations of banks in line with AML requirements (Anti- Money Laundering Forum, 2009).

“The Mutual Assistance in Criminal and Related Matters Act 2003” assists the Mauritian authorities to deal with cases of money laundering as it provides for “mutual assistance between the Republic of Mauritius and a foreign State or an international criminal tribunal in relation to serious offences and to provide for related matters” (Anti-Money Laundering Forum, 2009:2). The BOM was established under the BOM Act 2004 which gives the Bank its “regulatory and supervisory functions, in line with changes brought in Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) legislative framework” (Anti-Money Laundering Forum, 2009).

It is clear from the above discussion that the statement made by the IMF (2008) that Mauritius has taken various action steps to combat money laundering on paper is true. However, as explained in Chapter 5, when considering Mauritius’ financial secrecy score of 72.35/100 in the Tax Justice Network’s Financial Secrecy Index 2018, it is possible to argue that Mauritius is still very vulnerable to illicit financial activities such as money laundering due to the financial secrecy that its financial institutions offer (Etter-Phoya, 2018). It could therefore be argued that Mauritius focuses too much on “supply-side policies (Balaam & Dillman, 2015) while it could be focusing more on addressing the internal causes to money laundering (such as the need to change banking secrecy laws etc.).

The next section will consider the action steps taken in Seychelles to combat money laundering.

81 6.3 Seychelles

6.3.1 Action steps taken in Seychelles against money laundering

Seychelles has also taken measures to combat money laundering. The Seychelles Ministry of Finance, Trade and Economic Planning (2016) argues that Seychelles has implemented “a robust national framework that focuses on money laundering as to ensure adequate information sharing and tax transparency” (Seychelles Ministry of Finance, Trade and Economic Planning, 2016). In November 2013 the Seychelles National Assembly approved amendments to some sections of the 1994 International Business Companies Act and included a new section to ensure that the law and offshore sector are in line with international standards and the recommendations of the OECD. Since 2008, when the FIU was established, the actions of offshore companies and accounts have been investigated more regularly (Amla & Uranie, 2014:1-2). Moreover, Seychelles is committed to the implementation of the FATF recommendations and conducted a National Risk Assessment to assess its current AML laws and guidelines for fighting money laundering to ensure that it is ready for the advancements in money laundering tactics (Central Bank of Seychelles, 2017).

The most important of the FATF recommendations15 for the purposes of this dissertation are as follows. Money laundering must be made a criminal offence and that suitable actions must be implemented to seize the profits generated from crime. Moreover, legislation that enables banking secrecy should not constrain actions to curb money laundering. In addition, financial institutions must implement procedures to avert money laundering and need to submit to authorities in cases where they have a suspicion of illegal activities taking place. In accordance, large financial payments need to be reported to the authorities; and international cooperation and mutual legal advice is crucial to combat money laundering and needs to be implemented among member states (FATF Recommendations 36-40) (UK Parliament, 2009:1).

As is the case in Mauritius, various organisations were created in Seychelles to combat money laundering and these will be discussed in the section below.

The Seychelles FIU was created by the government of Seychelles as part of the CBS with a main function to find solutions to possible loopholes for money laundering in the Seychelles financial sector. Moreover, it is tasked to change the perception that Seychelles is an “offshore financial centre for money laundering and other clandestine company practices” (Seychelles Nation, 2016:1). The main function of the FIU is to guard the Republic of Seychelles from criminals who want to launder money through Seychelles’ financial industry. “It does this by deterring and preventing the funding

15 A full list of the FAFT recommendations to prevent money laundering can be obtained in FAFT (2009).

82 of crime or laundering of proceeds through the financial services” (Seychelles Nation, 2016:2). It also assists international actors to regulate the global financial system by “exchanging information with foreign agencies investigating crimes which have links to Seychelles offshore companies or bank accounts” (Seychelles Nation, 2016:1). Furthermore, the FIU is mandated to ascertain that all financial institutions adhere to AML laws. Finally, “it acts as the central authority centre for receiving information on suspected money laundering transactions and is responsible for disseminating information to law enforcement and supervisory agencies for prosecution” (Anti-Money Laundering Forum, 2013:2).

The CBS advises “the Government on banking, monetary and financial matters, including the monetary implications of proposed fiscal, credit policies or operations of the Government; and to promote a sound financial system” (Central Bank of Seychelles, 2017:1). In addition, the Financial Institutions Act of 2004 authorises the CBS to regulate Foreign Exchange operations (FIU) (Central

Bank of Seychelles,2008). In addition, the CBS is responsible for overseeing “the implementation and adherence of legislation governing the operations of financial institutions, such as Banks and Bureau de Change” (Anti-Money Laundering Forum, 2013:2).

The AGO has the role of creating AML laws. Furthermore, it is mandated to institute “any legal action taken against those who are suspected of laundering money or financing terrorist actions” (Anti- Money Laundering Forum, 2013:3). Moreover, Seychelles holds membership in the Egmont Group, “which is an international group comprising of over 150 Financial Intelligence Units (FIUs) which works to promote international co-operation in Anti Money Laundering and Countering the Financing of Terrorism” (Central Bank of Seychelles, 2017).

The FSA is mandated to licence and regulate the financial sector and “is obligated to report suspicious transactions to the financial intelligence unit (FIU)” (US Department of State, 2015).

The Seychelles International Business Authority (SIBA) regulates the Seychelles International Trade Zone as well as foreign business activities and is required to declare suspicious transaction report STRs to the FIU. In addition, “SIBA licences registered agents, such as trust and corporate service providers, and ensures that licensees comply with due diligence requirements when registering new companies” (Anti-Money Laundering Forum, 2013:1).

6.3.2 Legislation enacted to combat money laundering in Seychelles

Seychelles has enacted various legislation to combat money laundering. The first is the AML Act which was enacted in 2008 to create the FIU as an autonomous body to investigate money laundering. In addition, the Proceeds of Crime Act was created to establish “for the first time in Seychelles a

83 lawful regime for the freezing and ultimate civil confiscation of the proceeds of crime by the courts” (Seychelles Nation, 2016:2).

The AML Act, 2006 “as amended by the Anti-Money Laundering (Amendment) Acts, 2008 and 2011 3 (the AML Act)” guides the FIU on implementing the legislation to adhere to global requirements for fighting money laundering (Seychelles Financial Intelligence Unit, 2015:1). In addition, the Act was created “to prevent, detect and combat the use by criminals of financial and non-financial institutions for the purpose of the laundering of criminal proceeds or the financing of terrorist acts, activities or groups” (Seychelles Financial Intelligence Unit, 2007:17). The purpose of the amendments to the Act was to “ensure that Seychelles is in line with international standards and best practice. It will better equip the regulators and law enforcement agencies in the fight against money laundering and terrorism financing” (Seychelles Financial Intelligence Unit, 2007:17). Finally, the AML Act 2008 (AMLA 2008) was amended by the AML Amendment Act 2011 (AMLAA 2011). In accordance, the FIU was created by the AMLA 2008 and the AMLAA 2011 strengthened the investigative mandate of the FIU (Anti-Money Laundering Forum, 2013:2).

It is clear from the above discussion on the policies enacted in Mauritius and Seychelles that these policies are very comprehensive. Yet criminals find ways to launder money in these states due to the strict banking secrecy laws in these states (Young, 2013). Ultimately, this illustrates that the legislation in Mauritius and Seychelles is not enough to curb money laundering from occurring in these states. Moreover, it is possible that where the laws do restrict criminals, they find loopholes in the system through corrupt behaviour (Fijnaut, 2000). This could also possibly reiterate the point that both states have focused too much on “supply-side policies” as argued by Balaam and Dillman (2015) and not focused enough on the problems created by the islands in terms of a desire to be offshore financial centres and have strict banking secrecy laws (Young, 2013).

The following section will focus on the action steps taken by Mauritius and Seychelles in the battle against illegal drug abuse and drug trafficking.

6.4 Actions taken to combat drug trafficking in Mauritius

As discussed earlier in this study, Mauritius experiences drug abuse and drug trafficking to some extent. It can be argued that Mauritius has focused to a great extent on “supply side policies” (Balaam & Dillman, 2015) of illicit drugs and to some extent not enough on the demand side on the island. Consequently, the government of Mauritius has reacted to try to prevent the drug problem and protect its borders from drug traffickers. As Affinnih (2002:265) explains, the issue of illegal drug abuse and drug trafficking “has forced African countries to develop their own drug control policies”. In addition, Mauritius is included in the list of sub-Saharan African states who had to adopt anti-drug

84 legislation. Moreover, Mauritius works with the African Union (AU) and is a signatory to the UN drug conventions16 (Affinnih, 2002:266).

Mauritius acknowledges that drug abuse is a problem in the country and that action steps are required to fight drug trafficking (Carrier and Klantschnig, 2012). As the Mauritian Prime Minister Pravind Jugnauth stated in the Mauritian Parliament in 2017: “we have adopted a zero-tolerance policy with regard to the relentless fight against drugs and drug trafficking which often give rise to corruption” (AllAfrica 2017:1).

According to Reddi (2018), since 1987 the Mauritian government and NGOs have been fighting against drug trafficking and drug abuse in Mauritius. One of the first government initiatives to combat drug trafficking and drug abuse in Mauritius was the National Institute for Civic Education (Nice), also known as the Nice Project launched in 2013. This initiative focused on “drug education” and was a platform for young people to share their views. However, the project was discontinued, and another drug educational project has not yet commenced.17 The current initiatives of the government are mainly focused on the “supply-side of drug consumption” such as new drug legislation enacted, drug treatment facilities erected, and policies created to combat drug abuse (Reddi, 2018:2).

In 1988 Mauritius signed and later ratified (2001) the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (also known as the Vienna Convention). Moreover, in 2003, Mauritius became party to the UN Convention against TOC also known as the Palermo Convention (Bank of Mauritius, 2005). Various organisations were created in Mauritius to combat drug trafficking as discussed below.

6.4.1 Organisations and initiatives to combat drug trafficking

One of the most important organisations that was created to deal with drug abuse in Mauritius is the National Agency for the Treatment and Rehabilitation of Substance Abusers (NATRESA). According to the Republic of Mauritius (2018:1), NATRESA’s role is to “coordinate and facilitate efforts at a national level towards the implementation of programme for the prevention of the substance abuse and the treatment and rehabilitation of substance abusers”. NATRESA’s main function is the treatment and rehabilitation of people who use drugs (StraConsult, 2015). Another government

16 The United Nations Drug Conventions are as follows: the first convention is the Single Convention on Narcotic Drugs of 1961 as amended by the 1972 Protocol. The second convention is the Convention on Psychotropic Substances of 1971. Finally, the third convention is the Convention against Illicit Trafficking in Narcotic Drugs and Psychotropic Substances of 1988 (UNODC, 2013a:3). 17 As far as it could be established through the research for this dissertation the reasons for discontinuing the Nice project were not made public.

85 initiative to curb drug abuse is the National Drug Observatory (NDO) which has the main functions “to monitor and assess the dangerous drug situation in the country” and to implement suitable tactics to curb drug abuse (AllAfrica, 2015:1).

The Anti-Drug Smuggling Unit (ADSU) has the responsibility of fighting drug trafficking in Mauritius (The Mauritius Police Force, 2018). In addition, ADSU is responsible for “island wide physical coverage to prevent and detect drug offences, whilst the entry points, i.e. the airport and seaport are given particular attention and vigilance” (The Mauritius Police Force, 2018:1). ADSU facilitates drug awareness campaigns to citizens of Mauritius, especially the youth in collaboration with NATRESA (The Mauritius Police Force, 2018:1). Moreover, in 2006 the Needle Exchange Programme (NEP) was created and officially adopted by the Mauritian government in 2008. It has the main objective “to provide people who inject drugs (PWID) with clean syringes so that they do not share needles between them and thus increasing the risk for HIV/AIDS and Hepatitis C transmission” (StraConsult, 2015:2).

6.4.2 NGOs combatting drug trafficking in Mauritius

There are many NGOs that play roles in combatting drug trafficking in Mauritius. The following NGOs are funded by NATRESA and assist with treating, and offering rehabilitation, to drug abusers: Dr. I. Goomany Centre for the Prevention and Treatment of Alcoholism and Drug Addiction; HELP De Addiction Centre; Sangram Sewa Sadan; S.O.S ALCOOL FEMMES ETOILE D'ESPERANCE, ALCOOLIQUES ANONYMES (AA); AL-ANON; GROUPE A DE CASSIS (National Agency for the Treatment & Rehabilitation of Substance Abusers (NATRESA), 2018). Moreover, Collectif Urgence Toxida (CUT) and Prévention Information et Lutte contre le Sida (PILS) are major players in the ‘Support Don’t Punish’ campaign which is a campaign to encourage governments to provide support to drug addicts and to not only resort to punishment (Support Don’t Punish, 2017:1). Another NGO is Groupe A de Cassis that combats drug abuse in Mauritius (Panapress, 2006:1).

6.4.3 Legislation against drugs in Mauritius

There are various laws enacted in Mauritius to combat drug trafficking and this section will provide a brief overview of these laws. Drug abuse in Mauritius became a cause of concern in the 1980s which compelled the government of Mauritius to set up an Anti-Drug Commission in 1986. This commission led to the creation of the DDA 1986 (later amended in 1995 and 2000). “The Act proposes a repressive approach against not only traffickers but also towards people using or found in possession of drugs, as well as drug paraphernalia which are articles used for the consumption of a

86 Dangerous Drug” (StraConsult, 2015:2). In addition, the Act enabled the creation of “the Anti-Drug and Smuggling Unit (ADSU)” which is mandated to curb illegal drug use in Mauritius (Mauritius Police Force, 2018). The legislation imposed by Mauritius could be argued to be more balanced towards the demand and supply-side, although more could still be done to prevent drug use on the island.

6.5 Actions taken against drug trafficking in Seychelles

Like Mauritius, Seychelles also experiences drug abuse and drug trafficking and, therefore, the Seychellois government has had to react to prevent the drug problem and protect Seychellois borders from drug traffickers. Mondon in Laurence (2018a) argues that the Seychelles Anti-Narcotics Bureau and its partners in the Indian Ocean are actively engaged to investigate and share information on the activities of dealers and traffickers (Laurence, 2018a). Seychelles is also included in the list of sub-Saharan African states who had to adopt anti-drug legislation. Moreover, Seychelles is a member of the AU and like Mauritius is a signatory to all UN Drug Conventions (Affinnih, 2002:266). According to the Drug and Alcohol Council (2015:8), “Seychelles has been able to make major inroads in terms of combating the use of illegal drugs since 2009”. First, in terms of policymaking, the link between injecting drug abuse and HIV/AIDS is acknowledged through the “National Policy on HIV and AIDS and STIs 2012 and the National Strategic Framework on the Prevention and Control of HIV and AIDS and STIs 2012-2016” (Drug and Alcohol Council, 2015:8). Seychelles has created initiatives to combat drug trafficking which will be discussed below.

6.5.1 The National Drug Control Master Plan

The government of Seychelles has implemented a plan to combat drug trafficking, focusing on the demand-side as well as the supply-side of illicit drugs: “this new National Drug Control Master Plan for the period of 2014 to 2018 shows the commitment, dedication and drive of the state to counteract the negative impact that drug use, misuse and abuse has in our society” (Drug and Alcohol Council, 2015:1). This plan focuses on educating young people about the dangers associated with drugs as they are easy targets for drug pushers. Furthermore, the plan focuses on destroying the networks of the supply-side of drugs and establishing strong supply reduction programmes to disrupt the illicit trade of drugs. “The National Drug Control Master Plan 2014-2018 also gives prominence to two other key issues – the rehabilitation and social reintegration of recovering drug addicts, with new centres having been opened in the last few years and more organisations showing interest in helping our youth regain their dignity and become productive citizens” (Drug and Alcohol Council, 2015:2). In addition to the initiatives discussed above, various organisations have been created to combat drug abuse and drug trafficking in Seychelles which will be discussed below.

87 The Social Renaissance Plan of Action, also called the Renaissance Sociale National Programme, is a platform for community engagement on “the smooth functioning of society” (Seychelles Nation, 2012:1). This Plan “also had a sub-committee looking at drug abuse, rehabilitation and harm reduction which allowed members and the public to voice their opinions about possible solutions to the drug problems in Seychelles” (World Health Organisation, 2015:8). In addition, the Agency for the Prevention of Drug Abuse and Rehabilitation focuses on combatting drug abuse as well as the social, economic and physical effects thereof (Seychelles Nation, 2017). Laurence (2018b) explains that the role of the agency is to conduct studies and surveys among the residents of Seychelles to determine the extent of the drug abuse problem and to create solutions accordingly. From this section it becomes apparent that Seychelles have attempted to address drug trafficking from both a demand and a supply-side.

6.5.2 NGOs fighting drug trafficking in Seychelles

There are different NGOs that play a role in fighting drug abuse in Seychelles. The Drug Utilisation Response Network Seychelles (DURNS) aims to assist IDUs, and to provide support to “advocates for harm reduction, policy makers, district opinion leaders and government officials” (Seychelles Nation, 2018:1). Moreover, it aims to “promote the health and defend the rights of people who use drugs” (Seychelles Nation, 2018:1). It also aims to communicate extensively regarding illegal drugs in Seychelles and to play a facilitating role to get all actors involved in the fight against drugs to work together. The work of DURNS is endorsed by the “Kenya AIDS Consortium (KANCO)” (Africa Times, 2018:1). In addition, in 2018 Seychelles attended their first drug “harm reduction conference with East African neighbours in February” (Africa Times, 2018).

In 2009 two NGOs were established in Seychelles. The first was Parents With Hope, whose members are parents of formerly drug addicted children. The second was established by the Seventh Day Adventist Church, the International Commission for the Prevention of Alcoholism and Drug Dependency (ICPA – Seychelles) which was tasked “to conduct prevention activities with children and youth and drug addicts” (Drug and Alcohol Council, 2015:2).

6.5.3 Legislation against drugs in Seychelles

In Seychelles the following Acts were enacted to deal with drug abuse and drug trafficking. First, the Misuse of Drugs Act of 1995 was enacted to provide a framework for drug offences as well as enforcement of this Act and the punishment of drug offences. In addition, the National Drugs Enforcement Agency Act of 2008 called for the creation of “an agency whose primary role is to

88 combat illicit drug trafficking” (Drug and Alcohol Council, 2015:14). This Act led to the creation of the National Drugs Enforcement Agency (Drug and Alcohol Council, 2015). Moreover, the Misuse of Drugs Act of 2016 was enacted to “provide for effective measures against abuse and diversion of controlled drugs and precursors; facilitate the investigation and prosecution of offences involving controlled drugs, in particular drug trafficking; promote the treatment education” (Seylii, 2018:1). According to the Office of the President of the Republic of Seychelles (2017:1), the President of Seychelles, Danny Faure expressed official support, in 2017, for “the Prevention of Drug Abuse and Rehabilitation Agency Act 2017, and consequential amendments to the Misuse of Drugs Act 2016”.

In terms of the legislation implemented by Mauritius and Seychelles in terms of drug trafficking, the focus was mainly on “supply-side policies” (Balaam and Dillman, 2015) (although there was some focus on the demand-side) and not enough focus on prevention tactics and policies. This could lead to criminals finding new, innovative ways to traffic drugs into these states while the demand for these products could possibly keep growing. The next section will discuss the action steps taken by Mauritius and Seychelles to curb maritime piracy in the IOR.

6.6. Action steps taken against maritime piracy by Mauritius and Seychelles

The argument by Balaam and Dillman (2015) of TOC flourishing due to a focus on “supply-side policies” is not applicable when it comes to the action steps by Mauritius and Seychelles. This is due to the need for Mauritius and Seychelles taking various action steps to fight maritime piracy in the Indian Ocean. This is due to it not originating from the islands but rather from Somalia and the problem is thus with the “supply-side” (Balaam & Dillman,2015). COMESA has commended Seychelles and Mauritius for their role in fighting piracy in the region (Amla, 2015). The actions taken by Mauritius and Seychelles were made possible through UNCLOS that gives all states the right to practise “universal jurisdiction over piracy” (Dubner & Otero, 2016:164). More specifically Article 100 requires piracy to be dealt with in the most thorough way through collaboration between states (Dubner & Otero, 2016:164). However, as there was a lack of “a clear definition of acts of piracy” (Dubner & Otero, 2016: 245) in the international framework and the fact that international law “did not require states to criminalize acts of piracy” (Dubner & Otero, 2016: 245), Mauritius and Seychelles took steps to prosecute pirates within their own borders (Beekarry, 2013).

Mauritius and Seychelles constructed extra-territorial courts and created legislation pertaining to maritime piracy in order to try Somali pirates within their courts (Dubner & Otero, 2016: 245). In accordance, Mauritius and Seychelles “have signed agreements with the EU and the UK to accept suspected pirates from Somalia for prosecution and trial” (Le Mauricien, 2014). The purpose of these

89 localised prosecutions is to “break the pirates’ business circle by providing a jurisdictional basis for their prosecution after apprehension at sea” (Crippa, 2012:2).

Mauritius and Seychelles also signed “post-trial transfer agreements providing for the transfer of convicted pirates back to Somalia after their prosecution and sentencing in regional states” (UNODC, 2012a:168). The reason was that it became apparent that sentenced pirates should “be afforded social rehabilitation opportunities through serving their sentences in their home countries” (UNODC, 2012a:168). Seychelles took the first step in signing transfer agreements in 2011 with Somaliland, the Transitional Federal Government (TFG), and Puntland, (UNODC, 2012d: 168-169) (Dubner & Otero, 2016:166-167). Similarly, Mauritius signed two post-trial transfer agreements in 2012 “both of which recognize the desirability of allowing foreign national prisoners to serve their sentences in their own countries” (UNODC, 2012a: 168-169).

As the tourism industry in Seychelles was severely impacted by the threat of maritime piracy in 2005, Seychelles proceeded to play a leadership role in combating maritime piracy off the coast of Somalia through involving its “defence forces, coast guards, police, prison department and the judiciary to combat piracy” (Rider, 2015:3). Moreover, Seychelles collaborated with other states and international organisations to “establish an information sharing and fusion centre” namely the Regional Fusion and Law Enforcement Centre for Safety and Security at Sea (REFLECS3) (Department of Foreign Affairs of the Republic of Seychelles, 2015).

The court systems of both Mauritius and Seychelles have been commended for their ability to handle the prosecution of suspected maritime pirates. As the Africa Center for Strategic Studies states: “The judiciary of the Seychelles is now among the most expert on earth when it comes to adjudicating piracy cases” (Africa Center For Strategic Studies, 2018). Similarly, Le Mauricien (2014:1) agrees that “Mauritian lawyers have more than ample expertise to deal with Somali piracy prosecutions”.

6.6.1 Legislation enacted in Mauritius in the fight against maritime piracy

Mauritius actioned a call by the UN Security Council to criminalise maritime piracy under its domestic laws, to prosecute suspected pirates and to imprison convicted pirates off the coast of Somalia in compliance with international human rights law (Dubner & Otero, 2016). Mauritius amended existing legislation concerning maritime piracy in order to “foster cooperation with foreign governments to tackle pirates and criminal cartels” (Crippa, 2012:2). Piracy is defined in Mauritian law in a similar way to the definition provided by UNCLOS. This means that two ships need to be involved, the attacker and the attacked and “a violent act committed for private aims on the high seas” (Sterio, 2012:109) needs to occur. In addition, a new Mauritian law includes “the offence of ‘maritime

90 attack’ to criminalise acts which fall short of the traditional definition of piracy because they may be committed in the Mauritian territorial waters” (Sterio, 2012:109).

Mauritius enacted piracy-specific legislation to address the challenges that could arise in the piracy prosecutions in its jurisdiction. The main feature of the Mauritian maritime piracy legislation is that it aligns domestic law with the international legal framework for the repression of maritime piracy. Therefore, “national legislation on piracy may provide for the exercise of universal jurisdiction regardless of the nationality of the suspected offender(s) or victim ship(s)/aircraft(s)” (Beekarry, 2013:3).

Mauritius also enacted legislation to deal specifically with maritime piracy which allows the courts to deal with the issues arising during piracy prosecutions well in advance thus increasing the chances of successful prosecutions. The following Acts pertain to money laundering in Mauritius: The Merchant Shipping Act 2007 which criminalised money laundering. Furthermore, The Mauritian Piracy and Maritime Violence Act 2011 “provides a framework for prosecuting persons suspected of having committed piracy and related offences” (Government Gazette of Mauritius, 2011:1). In addition, The Piracy Act of 2012 “criminalizes the offences of hijacking and destroying ships as well as endangering the safety of navigation. For each of these offences, the Piracy Act provides for a maximum term of imprisonment of 60 years” (Crippa, 2012:3). The Piracy Act allows for evidence to be displayed through video or in letter format in cases where the person is not able to attend the court proceedings. However, the court decides on a case by case basis whether these testimonies are legitimate (Crippa, 2012:2-3).

6.6.2 Legislation enacted in Seychelles to combat maritime piracy

In addition to the steps that Seychelles has taken to combat maritime piracy off the coast of Somalia, the state also enacted various legislation to guide the fight against piracy. For instance, the Legislature of Seychelles amended policy on maritime piracy to streamline the piracy prosecution system.

Under the revised Section 65(4) of the Seychelles Penal code, piracy is defined as follows: (a) Any illegal act of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or aircraft and directed- (i) on the high seas, against another ship or aircraft, or against persons or property on board such a ship or aircraft; (ii) against a ship or an aircraft or a person or property in a place, outside the jurisdiction of any State (Sterio, 2012:4).

As is the case in Mauritius, the above definition of piracy adopted in Seychelles is like that of UNCLOS. However, the definition is more inclusive as it includes “conspiracy to commit piracy” and specifies that “acts committed in the Seychelles’ maritime zone will amount to piracy” and defendants who had an intent to commit acts of piracy can be charged “with the same offence" (Sterio, 2012:2).

91 6.6.3 NGOs fighting maritime piracy

As stated in the research question, this chapter aims to determine which actors other than the governments of Mauritius and Seychelles are fighting maritime piracy off the coast of Somalia. NGOs play a role in combatting maritime piracy, for example One Earth One Future is an NGO with a vision to “bring peace through governance" (One Earth One Future, 2018:1). It runs a programme called Oceans Beyond Piracy which fights maritime piracy through various initiatives such as “developing public-private partnerships to promote long-term solutions at sea and ashore” and “promoting rule of law to sustainably deter maritime crime” (One Earth One Future, 2018:1) (Oceans Beyond Piracy, 2015). The Centre For Maritime Law and Security Africa (CEMLAWS) is another NGO combating maritime piracy off the coast of Somalia, and near the Seychelles, focusing on “ocean governance and maritime security in Africa" (Maritime Law and Security, 2016:1).

6.6.4 International and regional organisations fighting against maritime piracy

As maritime piracy off the coast of Somalia impacts multiple states, it cannot be curbed by Mauritius and Seychelles alone. Therefore, the international and regional organisations that attempt to guard the Indian Ocean from maritime piracy play an important role in this regard (Department of Foreign Affairs The Republic of Seychelles, 2015). This section will discuss some of these organisations and the role they play in combatting maritime piracy.

In Africa, the largest regional economic organisation is COMESA (Office of the United States Trade Representative, n.d.). COMESA has focused its efforts to assist the IOR “to disrupt the financial networks of pirate leaders and their financiers while also addressing the structural vulnerability factors and minimize the economic impact of piracy” (Common Market for Eastern and Southern Africa, 2017).

The AU has introduced its own guidelines for its members to fight maritime piracy. This includes: the African Maritime Transport Charter; the Maritime Transport Plan of Action; the Durban Resolution; and Africa's Integrated Maritime Strategy (Oceans Beyond Piracy, 2014:10). In addition, the AU is part of the Contact Group on Piracy off the Coast of Somalia (CGPCS); the Djibouti Code of Conduct, and the Regional Conferences on Piracy organized by the Eastern and Southern Africa- Indian Ocean Countries (Oceans Beyond Piracy, 2014:10). In addition, the AU and the UN collaborates to obstruct maritime piracy where it originates (on land) through the AU Mission in Somalia (AMISOM) (Oceans Beyond Piracy, 2014).

The UN has implemented various initiatives to combat maritime piracy originating from Somalia. The UN Office on Political Affairs for Somalia fosters dialogue with its member states and via regional and international cooperation provides solutions on how to combat maritime piracy. The

92 CGPCS is an initiative of this office as well as the Djibouti Code of Conduct and “the Regional Anti- Piracy Prosecutions Intelligence Co-ordination Centre recently established in the Seychelles” (Ki Moon, 2012:1).

UNODC coordinates the Global Maritime Crime Programme's Indian Ocean sub-Programme (GMCP IO). The GMCP IO collaborates with coastal states of the Indian Ocean to respond to the threat of maritime piracy. Furthermore, UNOCD ensures that the human rights of people who are imprisoned for acts of piracy are upheld and that they receive fair trials (UNODC, 2018). UNODC has also built a prison in Somalia specifically for convicted Somali pirates which is useful when housing convicted pirates transferred from Mauritius and Seychelles (UNODC,2012a:168-169). Moreover, UNODC funded the construction of the prison in Beau Bassin, Mauritius (Le Mauricien,2014).

The UN created a specialised agency to focus on the safety of ships called the International Maritime Organization (IMO). The IMO has a sub-committee called the Maritime Safety Committee (MSC) which “deals with all matters relating to the safety of shipping, as well as addressing maritime security issues and piracy and armed robbery against ships” (International Maritime Organisation, 2013:1).

The Indian Ocean Commission (IOC) is a regional organisation that deals with common problems that Indian Ocean states experience. The work of each member state within the IOC has contributed greatly to anti-piracy efforts overall with the establishment of the IOC Anti-Piracy Cell in the Seychelles, staffed by officers from IOC member states (Department of Foreign Affairs of The Republic of Seychelles, 2015).

The EU has provided funds for Mauritius to prosecute pirates within its borders and to Seychelles through the MASE (Program to Promote Regional Maritime Security) programme (Department of Foreign Affairs of The Republic of Seychelles, 2015). The MASE project is a “programme to Support Regional Maritimes Security (MASE) in the Eastern and Southern Africa – IOR (ESA-IO)” (FAO of United Nations, 2016).

The EU Naval Force (EU NAVFOR) functions in the Indian Ocean and in the coastal areas of Mauritius and Seychelles. The EU NAVFOR collaborates with the Combined Maritime Forces (CMF) to protect ships from maritime pirates (Combined Maritime Forces, 2018). The EU NAVFOR is an initiative by the EU to react with military force against Somali pirates in the Indian Ocean while the CMF “is a multinational naval partnership, which exists to promote security, stability and prosperity" (Combined Maritime Forces, 2018:1). In addition, “the Operation has been extended by the European Council until December 2018 and deters and disrupts piracy and armed robbery at sea” (NATO Allied Maritime Command, 2018;1). Moreover, EUCAP Somalia “is a civilian-led Common Security and Defence Policy (CSDP) mission, launched in July 2012, as part of the EU's

93 Comprehensive Approach to tackling insecurity in the Horn of Africa” (Defence Web, 2014:2), and it has established a regional office in Seychelles (Defence Web,2014).

The North Atlantic Treaty Organisation (NATO) was established on request of the UN to join the military movement against maritime piracy. Accordingly, NATO established “Operation Ocean Shield” as its “counter piracy mission in the Gulf of Aden and off the Horn of Africa” (NATO Allied Maritime Command, 2018:1). NATO continues to play an active role in fighting maritime piracy in the Indian Ocean (NATO Allied Maritime Command, 2018).

The UN Security Council created the CGPCS in 2008 “as a voluntary, ad hoc international forum to coordinate international efforts in the fight against piracy off the coast of Somalia in recognition of the growing impact of piracy on humanitarian aid, commercial shipping, and regional trade in the Horn of Africa” (Republic of Mauritius, 2018:1). In 2010 a Trust Fund was created by the UN Secretary-General to assist with covering the costs of prosecuting suspects of maritime piracy (Multi- Partner Trust Fund Office, 2018).

The UK captures suspected pirates and transfers them to Mauritius, Seychelles and Kenya for prosecution (Crippa, 2012). Moreover, from 2008 the Netherlands has been actively involved in combating Somali maritime piracy when it accompanied vessels of carrying food as part of The World Food Programme to Somalia to provide for their security. The Netherlands is also party to the NATO “operation Allied Protector and the EU operation Atalanta” (Advisory Council on International Affairs, 2010:68). Moreover, the Netherlands protects ships from maritime pirates, searches suspicious ships and captures suspected pirates (Advisory Council on International Affairs, 2010:68).

In terms of policy pertaining to maritime piracy, Mauritius and Seychelles have done very well to protect their ocean space from maritime pirates and to collaborate with other states in terms of arresting and prosecuting maritime pirates (FAO United Nations, 2016; Crippa, 2012). Therefore, the theory of “the problem with coordination between states” (Balaam & Dillman, 2015:110) is not applicable in this regard. The next section will consider to what extent that theory is applicable in Mauritius and Seychelles.

6.7 The problem with coordination between states

The final feature of TOC as identified by Balaam and Dillman (2015:110) that will be considered in this study is “the problem with coordination between states”. This relates to the idea that because states have different conceptions of what is legal and illegal and due to state sovereignty, states find it difficult to coordinate their actions and policies (Balaam & Dillman, 2015). Adam (in United Nations, 2015b) argues that in the IOR specifically, maritime crimes are not prosecuted on a regular enough basis as there is no uniformity among states in terms of prosecution measures against TOC.

94 This issue is important since most of the world’s illegal traffic is conducted at sea (Adam in United Nations, 2015b).

Friman and Andreas (1999) add to this argument by explaining that the state sets the parameters of IGE through the laws (including tax and trade laws) that it makes. Therefore, activities are seen to be part of the IGE only if it transgresses the laws made by a state. An example in this case is the strict banking secrecy laws that Mauritius and Seychelles have (Young, 2013). For states actively trying to fight money laundering in their own states, the strict banking secrecy laws of some states make it virtually impossible for them to do so. As there is no evidence that Mauritius and Seychelles are not cooperating with other states in terms of curbing drug trafficking, the theory will not be applied in the case of drug trafficking. However, in terms of combatting maritime piracy, Mauritius and Seychelles have taken leadership roles in leading the coordination efforts to combat this crime (Multi- Partner Trust Fund Office, 2018).

6.8 Conclusion

This chapter discussed the various action steps taken by Mauritius and Seychelles against money laundering, drug trafficking and maritime piracy by first considering the respective states’ approaches to these TOCs and then by considering the action steps by NGOs and finally by considering the legislation enacted to fight these crimes. Throughout this chapter it was gauged whether the theory by Balaam and Dillman (2015) that TOC flourishes where there is an over emphasis on “supply-side policies” tested. In terms of money laundering, it can be argued that Mauritius and Seychelles focus too much on “supply-side policies” (Balaam & Dillman, 2015) and that these states should start looking inward towards their desire to be offshore financial centres and the strict banking secrecy laws (Young, 2013) which could be the causes of money laundering in these states. In terms of drug trafficking, both states have attempted to implement both actions curbing both the supply and demand of drugs. However, it can be argued that more can be done to prevent drug abuse on the demand side. It can be stated that Mauritius and Seychelles have put in place numerous and varied measures to combat these crimes. However, these laws and action steps are not enough to completely rid Mauritius and Seychelles of TOC. In terms of fighting maritime piracy, it has been illustrated that both states play leadership roles in this regard and that “supply-side policies” necessary due to the problem stemming from Somalia and not from the islands themselves. It could be recommended that Mauritius and Seychelles need to continue to work with civil society and key international role players if they are to defeat criminals and win the war against these crimes.

95 CHAPTER 7

CONCLUSION AND RECOMMENDATIONS FOR FURTHER STUDIES

7.1. The motivation for the study

This study explored TOC and ASIDS with a specific focus on three types of TOC, namely, money laundering, drug trafficking and maritime piracy, and it investigated two cases of ASIDS, Mauritius and Seychelles. The motivation for this study was drawn from the study by Andreas (2004), “Illicit International Political Economy: The Clandestine side of Globalisation”. The study by Andreas illustrated that certain states can fall victim to the activities associated with TOC due to specific characteristics of those states. This led to the question of whether SIDS, with their unique physical, and other, characteristics are possibly more vulnerable to the effects of TOC than other states. The motivation for focusing on TOC in Mauritius and Seychelles is (as mentioned before) that these states were ranked 1st and 2nd on the Mo Ibrahim Index (Mo Ibrahim Foundation, 2017). This Index, as explained earlier in this study, measures the level of governance in states. This made Mauritius and Seychelles interesting case studies to consider in terms of TOC as a well-governed state should ideally not have high levels of corruption which often leads to TOC. However, when considering the CPI as of Mauritius and Seychelles (as elaborated on earlier in this study) as elaborated on by Transparency International (2018), it becomes clear that there is possibly a moderate degree of corruption in both states which could serve as an explanation of the existence of TOC these states. The selection of money laundering, drug trafficking and maritime piracy as case studies and manifestations of TOC to consider in this study in the contexts of Mauritius and Seychelles was based on evidence through a preliminary study that Mauritius and Seychelles are impacted by these crimes to some degree.

7.2. The analytical framework applied

A dual-analytical framework was applied throughout this dissertation, consisting of the TOC features as identified by Balaam and Dillman (2015), and the characteristics of SIDS/ASIDS as drawn from the SIDS/ASIDS literature. The cases of Mauritius and Seychelles were applied to this framework. The TOC features that were utilised in this study as part of the analytical framework were: the six degrees of separation (referring to the extent that consumers are removed from the criminal aspect of a product), the unintended consequences of supply-side policies, the double-edged sword of globalisation, the problem with coordination between states, corruption as an enabler of TOC. The

96 characteristics of SIDS/ASIDS that were applied throughout this study were categorised according to economic and financial, political, social and geographical characteristics.

7.3. The objectives of the study

The objectives of this study included defining important concepts such as TOC and SIDS/ASIDS. The study also considered the history and development of TOC and the three above-mentioned crimes. Furthermore, it aimed to provide historical context and background of the two states under consideration. Accordingly, this study aimed to verify to what extent these crimes impact these states by attempting to gauge a ‘guesstimate’ drawn from available data. Moreover, the aim was to see whether the characteristics of these states that are typical to those of SIDS/ASIDS make them more susceptible to these crimes. And finally, this study aimed to determine what action steps have been taken by state and non-state actors to curb these illicit activities.

7.4. The findings of the study

Chapter 1 provided the objectives as well as the research questions that the dissertation aimed to answer. These questions were: what is the definition of TOC and more specifically money laundering, drug trafficking and maritime piracy? What is the history and background of these crimes? To what extent do money laundering, drug trafficking and maritime piracy impact Mauritius and Seychelles? What is the size and scope thereof and who are the actors involved? Is it due to the typical characteristics associated with SIDS/ASIDS that Mauritius and Seychelles are reportedly vulnerable to TOC? What steps have been taken by the respective states and non-state actors to prevent or combat these illicit activities? Are there any overlaps between the two analytical frameworks that were applied? A literature review was also provided which covered some of the most important literature on TOC and SIDS/ASIDS. The research methodology that was used in this study, was case study methodology and desktop research.

Chapter 2 focused on defining key concepts used throughout the study, such as TOC and the IGE. The two concepts were used interchangeably throughout the study. The development of TOC; the causes and enablers of TOC; the size of the IGE; the role players in IGE; the impact of TOC on human security and economic development; as well as the challenges facing states when attempting to combat TOC; were discussed. Furthermore, the three crimes that this study focused on (money laundering, drug trafficking and maritime piracy) were conceptualised; and background information on these crimes was provided. Balaam and Dillman’s (2015) characteristics of TOC were discussed: globalisation, the double-edged sword; the problem with coordination between states; corruption; and the unintended consequences of supply-side policies. This formed the first part of the dual analytical

97 framework of the study. As a final part of this chapter, SIDS were conceptualised, and their various unique characteristics were discussed. These characteristics were categorised according to the following characteristics: economy/finance; political; social and geography. These characteristics formed the second part of the dual analytical framework of this study. This dual framework was used to determine whether the typical SIDS/ASIDS characteristics of Mauritius and Seychelles make them more susceptible to TOC and whether there are any overlaps between the two frameworks.

The history of TOC was covered in Chapter 3 with a focus on globalisation, by first giving a Western perspective on the history of TOC, and then narrowed the focus to consider the history of TOC in Africa and the IOR. The focus was then shifted to the history of the three crimes that formed the focus of this study (money laundering, drug trafficking and maritime piracy). It was illustrated in this chapter that TOC in Africa started later than it did in the Western world and was driven mainly through the expansion of international trade, decolonisation, the end of the Cold War and through advancements in technology with globalisation.

The typical SIDS/ASIDS characteristics of Mauritius and Seychelles were discussed in Chapter 4 of this study. The historical contexts of Mauritius and Seychelles were discussed from a political as well as an economic perspective. The economic and financial, political, geographical and social characteristics of the two states were also discussed. It was demonstrated that Mauritius and Seychelles have many commonalities with other SIDS; for example, isolation and small populations as well as susceptibility to environmental hazards.

Chapter 5 investigated to what extent money laundering, drug trafficking and maritime piracy impacts Mauritius and Seychelles. Furthermore, it was discussed who the possible actors are. It was then investigated whether Mauritius and Seychelles’ typical SIDS characteristics make them susceptible to the activities associated with TOC.

The steps taken by the Mauritian and Seychellois states and non-state actors to combat money laundering, drug trafficking and maritime piracy were discussed in Chapter 6. This was done through focusing on the various state organisations such as the FIUs in both states, as well as financial institutions such as the central banks of each state. The role of international actors such as the UN and regional actors were also discussed. Furthermore, the role played by various NGOs in the respective states was discussed in this chapter. Finally, the legislation enacted in both states was listed as part of the steps to prevent the three crimes in these states.

The main research question of this study will now be answered: whether the typical SIDS/ASIDS characteristics that Mauritius and Seychelles subscribe to, make them more susceptible to TOC.

98 It is important to reiterate that Mauritius is ranked number 1 and Seychelles number 2 on the 2017 Ibrahim Index for African Governance. Moreover, both states have high levels of human development which made them interesting case studies in terms of TOC. This is because it could be assumed that states with good governance should be able to resist TOC. However, due to the typical features of TOC (as defined by Balaam and Dillman, 2015), especially corruption being present in these states (although at a low level) and due to the typical SIDS/ASIDS characteristics, criminals are able to practise money laundering and drug trafficking in these states. However, in terms of maritime piracy, both states have been able to curb the activities of maritime pirates close to their jurisdictions and assisted with imprisonment and conviction of these pirates.

It is clear from this study that TOC is very secretive and that it is impacting states all around the world. However, the characteristics of a state are important in terms of which illicit crimes it is impacted by and to what extent it is impacted by these crimes. As discussed earlier in this study, Mauritius and Seychelles subscribe to the following typical characteristics of SIDS: in terms of economy and finance, they offer offshore financial services and banking secrecy. In terms of geographic location, they are isolated and thus more vulnerable to TOC. Politically, they have weak governance of ocean spaces, a lack of maritime security capacity in the IOR, issues with law enforcement in the IOR due to no legal uniformity on certain issues and a degree of corruption. Consequentially, these characteristics make these states more susceptible to TOC as they create opportunities for transnational criminals to push their illicit activities. In terms of law enforcement, both Mauritius and Seychelles have been playing important roles to prosecute and imprison maritime pirates as will be discussed below; although their legislation in terms of money laundering and drug trafficking is not sufficient to curb these activities within their borders.

In addition to the above, the study found that the typical characteristics of SIDS/ASIDS, come into play when explaining why Mauritius and Seychelles are susceptible to drug trafficking.

First, both states are surrounded by water and they have limited manpower for the coastguard in terms of monitoring and protecting all the entry points to the island. As such, Mauritius and Seychelles are impacte by drug trafficking as they are close to a drug trafficking route in the Indian Ocean and are thus used by drug traffickers as layover points or used as transit states for further distribution of the illicit drugs.

Although both states have taken steps in terms of implementing legislation against drug trafficking and receiving assistance from non-state actors to fight drug trafficking, illicit drugs still make their way into these states and they are unable to properly protect their borders. However, the solution is not only to protect the borders of Mauritius and Seychelles from drug traffickers, but also to find the

99 root causes of drug trafficking and to stop the problem at its source. The international community will have to work together to find solutions to the global drug problem in its totality. However, it seems that states in the IOR are focusing all their energy and resources on combatting maritime piracy and terrorism and therefore drug trafficking gets less attention (Laurence, 2018a:1).

Moreover, in terms of maritime piracy, Mauritius and Seychelles have been historically impacted due to their geographical proximity to Somalia. Seychelles has been more impacted due to it being positioned geographically closer to Somalia. However, in recent years Somali piracy has not imoacted Mauritius and Seychelles as there have not been any recent cases of maritime piracy reported close to these states. This can be attributed to the fact that both states have taken active measures to combat maritime piracy. Both states have successfully collaborated with the international community to protect their waters from Somali pirates and both states assist other states in capturing, imprisoning and prosecuting maritime pirates within their own borders.

Seychelles is currently playing a leadership role in the global community in leading the fight against maritime piracy in terms of its regulations and through building prisons specifically for captured maritime pirates. The way both states have dealt with the issue of maritime piracy is a good example of how international cooperation can diminish international crimes. However, the issues leading to Somali piracy are far from being resolved. For as long as Somalia’s failed state funds and supports maritime piracy and it forms part of the state’s economy, young Somalians will remain inspired to join the ranks of maritime pirates. Until a solution is found and implemented to address the root causes of Somali piracy, the threat of maritime piracy to Mauritius and Seychelles is far from over.

In terms of money laundering, the main characteristic typical of SIDS/ASIDS that can be identified in Mauritius and Seychelles is the limited resources that both states have.

Historically, both states had to rely on their limited agricultural products as their main exports. However, eventually both states realised that becoming OFCs would help them to strengthen their economies (in conjunction with other technological advancements). Ultimately, this led to these states being labelled as tax havens through their tax exemptions and strict banking secrecy laws. This opens the door to money laundering which is a crime connected with almost every other illicit activity, as all criminals get to a point when they need to hide their illicit profits from detection by authorities.

Although Mauritius and Seychelles have implemented legislation and many actors assist these states in fighting money laundering, the strict banking secrecy laws still create loopholes for criminals to launder their money in these states as discussed in this study. However, if money laundering is prevented it could put a stopper in the activities of transnational criminals. Ultimately, it is up to

100 Mauritius and Seychelles to decide whether it is more important to be attractive OFCs, to keep their economic growth levels high, or whether they can find alternative ways of attracting more investment and adhering fully to the FATF requirements while risking losing (possibly illicit) investment from foreign businesses and individuals. In conclusion, it is also up to states around the world to take stricter measures to ensure that their citizens do not use SIDS as havens to launder their money; by having stricter laws and oversight.

For the purpose of this study, it is important to consider the overlaps concerning the two frameworks that were applied in this study as a dual analytical framework. These were the features of TOC as discussed by Balaam and Dillman (2015) and the relevant economic and financial, political, geographical and social characteristics identified for this study from the available literature. First, in terms of geography, according to the UNODC “Africa may have become the continent most targeted by organized crime,” (UNODC in Mutume, 2007:2). This could explain why Mauritius and Seychelles as ASIDS are susceptible to TOC. Moreover, Mutume argues that Africa is the continent most susceptible “to money laundering and corruption activities, both of which are vital to the expansion of organized crime” (Mutume, 2007: 2). In addition, various African states function as “trans-shipment routes in the global trafficking networks for heroin, cocaine, and other drugs” (Strathdee & Stockman, 2010: 100).

From the above statement, an overlap exists between the corruption feature as listed by Balaam and Dillman (2015) and the SIDS characteristic of Mauritius and Seychelles that was applied to this study, namely geographical location.

Another overlap between a TOC feature and ASIDS characteristics is the fact that Mauritius and Seychelles are geographically isolated and unable to protect their borders fully due to lack of human resources, while due to lack of policy coordination with other states to protect their joint ocean space (which is one of the features of TOC listed in this study), Mauritius and Seychelles can find themselves vulnerable to TOC. Consequently, transnational criminals tend to target states that offer the least resistance with, for example, drug trafficking.

As a final overlap, the feature of the problem with coordination between states overlaps with a SIDS/ASIDS characteristic that was not listed in the section on the typical characteristics of SIDS/ASIDS but is still an important characteristic of many SIDS, namely banking secrecy. As explained previously in this study, banking secrecy makes coordination between states to curb money laundering virtually impossible.

The final section will make recommendations for further studies on topics related to this dissertation.

101 7.5 Recommendations for further studies

Although the research questions as set out in the introduction of this dissertation were answered, there is room for further study about SIDS and TOC. The following questions can be answered in further studies:

SIDS are vulnerable economically, environmentally and in terms of national security. What is currently being done by the international community to assist SIDS to deal with possible threats or current challenges in this regard?

What role are SIDS currently playing in international forums? To what extent are the issues that SIDS experience prioritised in international forums? Are discussions on SIDS’ issues at international forums turned into tangible actions? What more can be done to ensure that the issues faced by SIDS are prioritised by the international community? What can be done to end the global drug trade? And more specifically, what can be done to protect East Africa and the states in the Indian Ocean from being transit states for illicit drugs?

What can be done by the global community to address Somalia’s failed state status and to rebuild the economy of Somalia? What can be done by the international community to end maritime piracy originating from Somalia? What can be done to uplift young Somalians out of circumstances that would lead to them possibly becoming maritime pirates?

SIDS are known for being tax havens due to the banking secrecy and tax exemptions that some countries offer. It is possible that SIDS view this status as more important than complying with FATF requirements due to the financial gains of being considered a tax haven. How does this contribute to the spread of money laundering around the world?

What can the international community do to encourage SIDS to take stricter measures against money laundering? What can the international community do to prevent criminals from targeting SIDS to launder their money?

What other illicit activities, other than money laundering, drug trafficking and maritime piracy, are SIDS exposed to? Is it due to the typical characteristics associated with SIDS that SIDS are exposed to these illicit activities?

As pointed out in this dissertation, in the 1600s maritime pirates used the Seychelles as a layover point. Is there any connection to this historical phenomenon and the maritime piracy attacks that have happened close to the borders of Seychelles?

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