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OECD Reviews of Risk Management Policies OECD REVIEWS OF RISK MANAGEMENT POLICIES Illicit Trade CONVERGING CRIMINAL NETWORKS OECD Reviews of Risk Management Policies Contents Chapter 1. Illicit trade: Convergence of criminal networks Chapter 2. Traf cking in persons: Trends and patterns Illicit Trade Chapter 3. Wildlife traf cking trends in sub-Saharan Africa CONVERGING CRIMINAL NETWORKS Chapter 4. Illicit trade in counterfeit medicines Chapter 5. A brief overview of illicit trade in tobacco products Chapter 6. The global illicit trade in illegal narcotics Chapter 7. The size, impacts and drivers of illicit trade in alcohol Chapter 8. Sport manipulation as economic crime Illicit Trade Trade Illicit CONVERGING CRIMINAL NETWORKS CRIMINAL CONVERGING Consult this publication on line at http://dx.doi.org/10.1787/9789264251847-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information. ISBN 978-92-64-25183-0 42 2016 04 1 P 9HSTCQE*cfbida+ OECD Reviews of Risk Management Policies Illicit Trade CONVERGING CRIMINAL NETWORKS This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2016), Illicit Trade: Converging Criminal Networks, OECD Reviews of Risk Management Policies, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264251847-en ISBN 978-92-64-25183-0 (print) ISBN 978-92-64-25184-7 (PDF) Series: OECD Reviews of Risk Management Policies ISSN 1993-4092 (print) ISSN 1993-4106 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Photo credits: Cover © timbossch - Fotolia.com; ©Volodymyr Krasyuk/Shutterstock.com. Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © OECD 2016 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. FOREWORD – 3 Foreword The global economy is increasingly interconnected. This presents greater opportunities for many citizens and businesses, but also for a range of illicit networks that foster criminal activities. Illicit trade creates an enormous capital flow from outside of the formal economy, not only resulting in loss of revenue for governments and industries, but also jeopardizing public health and security, and enriching criminals who have a vested interest in undermining the rule of law. This report provides an overview of 7 sectors of illicit trade, including trafficking in persons, wildlife and narcotics, as well as counterfeit medicines, tobacco and alcohol. It describes their negative impacts on the economy, society and the environment and maps trade routes that move illicit goods around the world, which reveals how the same routes are used to smuggle very different types of illegal goods and maximize illegal profits. This overview can provide governments with insight about the policies that work to reduce or deter illicit trade, and importantly, where work remains to address governance gaps. Governments are less flexible and agile than the networks that traffic contraband around the globe. Enforcement actions might stem one flow, but criminal entrepreneurs can quickly change their trade routes. Governments need to strengthen the capacities of law enforcement to share information across borders to keep pace with these changes, and they also need to take stock of the policies that inadvertently create business opportunities for criminals. A comprehensive approach to stemming illicit trade explores how to reduce consumer demand for prohibited and illicit goods. It is premised on the willingness of leaders to exercise their full power to levy sanctions with deterrent effect both on traffickers and their cohorts. The last point is crucial, because the current scale of illicit trade could be decimated through the vigorous implementation of anti-corruption laws, anti-money laundering regulations and asset recovery procedures. This report brings together knowledge from governments, international organisations, non-governmental organisations and industries whose bottom lines are affected by illicit trade through a unique stocktaking exercise. This multi-stakeholder approach has enabled a fuller understanding of the connections between different forms of illicit activities. In particular, this report draws from the collective expertise of a network of specialists from across countries and economies, the OECD Task Force on Countering Illicit Trade (TF-CIT). The TF-CIT is part of the OECD High Level Risk Forum (HLRF), which works with governments to better understand the full range of complex risks and threats posed to our global economies. ILLICIT TRADE: CONVERGING CRIMINAL NETWORKS © OECD 2016 4 – FOREWORD This multi-stakeholder initiative creates a foundation for future work as well as a shared understanding of the challenges presented by illicit trade. Going forward, the OECD will continue to address the “dark side” of globalisation, working with countries to design and implement policies needed to ensure clean trade and helping them to strengthen their enforcement practices. Rolf Alter Director, OECD Public Governance and Territorial Development Directorate ILLICIT TRADE: CONVERGING CRIMINAL NETWORKS © OECD 2016 PREFACE – 5 Preface The OECD Task Force on Countering Illicit Trade (TF-CIT) was established to advance the resilience of our economies and societies to the odious global threat: illicit trade perpetrated by criminal entrepreneurs and transnational illicit networks that enables the global illegal economy to thrive in the dark side of globalization. In too many places around the world, criminals have built their illicit empires on dirty money and laundered funds to infiltrate and corrupt government institutions. In this shadowy, illegal economy traffickers and narcotics kingpins act as CEOs and venture capitalists while they build their empires of destruction, jeopardizing public health, emaciating communities’ human capital, eroding our collective security, and destabilizing fragile governments. The breadth and scale of these illicit markets are vast; various international organizations estimate the scale of illicit trade is thriving with hundreds of billions of dollars in illicit commerce that includes trafficking in narcotics, persons, endangered wildlife, illegally- logged timber, counterfeit consumer goods and medications, hazardous and toxic waste, stolen antiquities and art, illicitly-traded cigarettes, and other illicitly-traded goods and commodities. The OECD TF-CIT focuses on evidence-based research and advanced analytics to assist policy-makers map and understand the market vulnerabilities exploited and created by illicit trade. Mapping the harms and impacts of illicit trade and the licit-illicit complex system will help us pinpoint large-scale disruptions to illicit markets and identify tools to reinforce the most vulnerable points of entry to the illegal economy. Quantitative metrics better inform policy makers, allowing them to drive criminal entrepreneurs out of business, reduce the incentives for communities to resort to illegal commercial activity, mitigate opportunities for organized crime to taint our financial system with their ill- gotten gains, and help governments sustain legitimate markets so that businesses that respect regulations can thrive. Pragmatic mapping tools will also be useful for policy- makers and law enforcement to not only engage in upstream and downstream coordinated mitigation and disruptions of the illicit trade, but also address gaps in surveillance and monitoring systems to develop more effective early detection and warning systems of the new harms and risks of illicit trade to the formal economy. The importance and timeliness of this OECD initiative reflects the growing threat posed by transnational organized crime and illicit networks, which has expanded in size, scope, and menace, destabilizing globalized economies and markets alike and created insecurity in communities around the world. As criminal entrepreneurs and transnational illicit networks hijack the technological, financial, and communications advances of globalization for illicit gains, they continue to present new harms to the governance and security of all nations. The proliferation of these threatening networks and the convergence of their
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