Transnational Crime and theDeveloping World

Channing May

March
2017
Dev Kar andJosephTransnational Crime										11Spanjers

June 2016

Global Financial Integrity

Transnational Crime and the Developing
World
Channing May
March 2017

Copyright © 2017 by Global Financial Integrity®. Some rights reserved.
This report is published under a Creative Commons Attribution license (CC BY).
For more information on the license, visit: http://creativecommons.org.
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registered trademarks of Global Financial Integrity.

Global Financial Integrity

Global Financial Integrity is pleased to present here its analysis of Transnational Crime and theDeveloping World. This follows a similarly named report we produced in 2011, which received
considerable attention around the world. Unfortunately, transnational crime in multiple categories
continues to grow in every region.
The international community has been aggressively combatting drug trafficking for more than 40 years,
yet supplies of drugs are undiminished and prices have not risen. Often utilizing the same channels,
human trafficking for forced labor and sexual exploitation has exploded. Counterfeiting and pirating ofpharmaceuticals, consumables, luxury goods, and intellectual property is the biggest single transnational
criminal activity, likely exceeding US$1 trillion in retail value.
Illegal logging, mining, fishing, wildlife trade, oil theft, and trafficking in cultural property withdraw
hundreds of billions of dollars of resources from developing countries. The illegal organ trade preys upon
the poor, while arms trafficking protects the criminals.
The global community is failing in efforts to curtail transnational crime. Why? Largely because law
enforcement is focused on the materials and manifestations of the crimes rather than on the money thecrimes generate.
Take just one aspect of the transnational crimes analyzed in the following pages—drug trafficking—as
an example. The United Nations Office of Drugs and Crime estimates that globally 40 percent of cocaine
and heroin are interdicted somewhere between production and consumption, but less than one percent
of drug money is ever recovered. The United States Drug Enforcement Administration and similarorganizations across the globe concentrate heavily on seizing drug products and expend far fewer
resources on tracking and blocking drug money. The truth is, drug traffickers can afford to lose not just
40 percent but 60 or 80 percent or even more of their product if they can keep more than 99 percent of
the revenues.
The fight against transnational crime needs to be redirected to combatting the money the crimes
generate. This means shutting down the global shadow financial system that facilitates the moving andsecreting of illicitly generated funds. The good news is, none of this is technically difficult. It is a matterof political will.
Our great appreciation is extended to Channing May and Christine Clough for this thoughtful andcomprehensive analysis of transnational crime, one of the most serious issues we must address in the
21st century.
Raymond Baker
President
Global Financial Integrity
March 27, 2017								Transnational Crime and the Developing World iii

Global Financial Integrityiv

Contents
Glossary..................................................................................................................................................... ix
Executive Summary................................................................................................................................... xi
I. Introduction............................................................................................................................................ 1
II. Drug Trafficking..................................................................................................................................... 3
III. Trafficking of Small Arms and Light Weapons...................................................................................... 13
IV. Human Trafficking................................................................................................................................. 21
V. Illegal Organ Trade................................................................................................................................. 29
VI. The Illicit Trade in Cultural Property..................................................................................................... 35
VII. Counterfeiting and Piracy................................................................................................................... 43
VIII. Illegal Wildlife Trade........................................................................................................................... 53
IX. Illegal, Unreported, Unregulated Fishing............................................................................................. 61
X. Illegal Logging...................................................................................................................................... 69
XI. Illegal Mining....................................................................................................................................... 75
XII. Crude Oil Theft................................................................................................................................... 83
XIII. Policy Recommendations.................................................................................................................. 93
XIV. Conclusion........................................................................................................................................ 99
Appendix: Methodology........................................................................................................................... 101
Bibliography............................................................................................................................................. 117
About....................................................................................................................................................... 147

								Transnational Crime and the Developing Worldv

Tables and Figures in the Report
Table X1. The Retail Value of Transnational Crime...................................................................... xi
Table A. Inflation Adjusted Value of Global Drug Market, 2014 (US$)............................................... 3
Table B. Price vs. Distance: Colombian Cocaine (US$, street wholesale).................................. 5
Box 1. Brief History of Drug Trafficking in Mexico...................................................................... 10
Table C. Composition of Illicit Arms Trade.................................................................................. 13
Table D. The Average of an AK-47 Around the World (US$)....................................................... 14
Table E. Price vs. Distance: The Weapon’s Route....................................................................... 15
Table F. Seizure by Location, 2013.................................................................................................. 17
Figure I. Estimated Annual Profits from Human Trafficking by Region (US$ billion)................... 21
Figure II. Profits and Victims........................................................................................................ 22
Table G. Human Smuggling vs. Human Trafficking..................................................................... 23
Table H. Regional Trends in Laundering the Proceeds of Human Trafficking.............................. 25
Table I. Retail Prices of Organs (US$).......................................................................................... 29
Table J. Kidney Transplants: Vendors vs. Recipients.................................................................. 30
Table K. Prices Paid to Kidney Vendors Around the World......................................................... 30
Table L. Participants in the Illegal Organ Trade........................................................................... 31
Table M. Notable Art Heists......................................................................................................... 36
Figure III. Trade-Based Money Laundering Scheme................................................................... 40
Table N. Trade in Counterfeit and Pirated Goods, 2013 (US$).................................................... 43
Table O. Trade in Digitally Pirated Goods, 2015 (US$)................................................................ 43
Table P. Top Counterfeited Items and Brands............................................................................. 46
Box 2. Pharmaceutical Crime...................................................................................................... 47
Figure IV. Terrorist Financing and Counterfeiting......................................................................... 49
Table Q. Sample Retail Market Prices (US)..................................................................................... 54
Table R. Poacher vs. Consumer Prices (US$)............................................................................. 55
Table S. Illegal Wildlife Markets................................................................................................... 55
Box 3. Superstition vs. Reality: The Case of Ivory and Rhino Horn............................................ 56
Table T. What is IUU Fishing?...................................................................................................... 61
Table U. Flags of Convenience.................................................................................................... 64
Figure V. Trade Misinvoicing to Launder Illegally-Caught Fish.................................................... 65
Table V. Value Chain for Peruvian Mahogany, per cubic meter (US$)......................................... 69
Table W. Value Chain for West African Rosewood, per 10-ton container (US$)......................... 70
Figure VI. Division of Value: US$140/m3 of Russian timber......................................................... 70
Figure VII. Mining Spectrum........................................................................................................ 75
Table Y. Annual Value of Illegal Gold Mining in Latin America (US$ millions)............................. 76
Figure VIII. Illegal Mining, Trade Misinvoicing, and Tax Fraud.................................................... 81
Table Z. Crude Oil Theft Volume and Value (US$)...................................................................... 83
Box 4. Oil and War...................................................................................................................... 86
Figure IX. Pipelines and Drug Trafficking Organization Territory, 2015........................................... 87
Figure X. Cocaine and Crude..................................................................................................... 88
Table AA. The Retail Value of Transnational Crime..................................................................... 99
Appendix Table A. Global Drug Market Values by Rate of Inflation (US$).................................. 101
Appendix Table B. Global Drug Market Value by Percent of GDP (current US$)....................... 102
Appendix Table C. Global Drug Submarket Values by GDP Growth (US$)................................ 102
Appendix Table D. The Average Cost of an AK-47 Around the World (US$).............................. 103

Global Financial IntegrityviAppendix Table E. Estimated Value of the Illegal Organ Trade................................................... 104
Appendix Table F. Prices Paid to Kidney Vendors Around the World......................................... 104
Appendix Table G. Price Range of Liver Transplants (US$)........................................................ 105
Appendix Table H. Price Range of Heart Transplants (US$)....................................................... 106
Appendix Table I. Price Range of Lung Transplants (US$)......................................................... 107
Appendix Table J. Price Range of Pancreas Transplants (US$)................................................ 107
Appendix Table K. Kidney Transplants: Vendors vs. Recipients (US$)....................................... 108
Appendix Table L. Prices Paid to Kidney Vendors Around the World......................................... 108
Appendix Table M. Notable Art Heists........................................................................................ 110
Appendix Table N. Global Illegal Wildlife Trade Values (US$)..................................................... 111
Appendix Table O. Sample Retail Market Prices (US$)................................................................. 112
Appendix Table P. Source vs. Market Country Prices (US$)....................................................... 113
Appendix Table Q. Summary of Regional Estimates of Illegal Fishing, Averaged Over 2000-		
2003............................................................................................................................................ 114
Appendix Table R. Estimated Illegal Catch Volume, 2011-2014................................................ 115

								Transnational Crime and the Developing World vii

Global Financial Integrityviii

Glossary
ACT

Anti-Counterfeiting Tool

AML

Anti-money laundering

ATS

Amphetamine-type stimulants

Avg.

Average

BACRIM

Bandas criminals (criminal gangs)

BPD

Barrels per day

CAR

Central African Republic

CFT

Combatting the financing of terrorism

CIS

Commonwealth of Independent States

CITES

Convention on International Trade in Endangered Species of Wild Fauna and Flora

DTO

Drug trafficking organization

EEZ

Exclusive economic zone

ELN

Ejército de Liberación Nacional (National Liberation Army)

ETA

Euskadi Ta Askatasuna (Basque Country and Freedom)

EU

European Union

EUC

End-user certificate

FAO

Food and Agriculture Organization of the United Nations

FARC

Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces ofColombia)

FATF

Financial Action Task ForceFBI

Federal Bureau of Investigation

FDLR

Forces démocratiques pour la libération du Rwanda (Democratic Forces for the
Liberation of Rwanda)

FIU

Financial intelligence unit

FOC

Flag of convenience

FSI

Financial Secrecy Index

GDP

Gross domestic product

GFI

Global Financial Integrity

GLEI

Global legal entity identifierHIV

Human immunodeficiency virus

HS

Harmonized system

ILO

International Labor Organization

IMO

International Maritime Organization

IPIntellectual property

IPM

Interface Public-Members

IRA

Irish Republican Army

ISIL

Islamic State of Iraq and the Levant (also referred to as ISIS, IS, and Daesh)

IUU

Illegal, unreported, and unregulatedkg

Kilogram

Lao PDR

Lao People’s Democratic Republic

LGBT

Lesbian, gay, bisexual, and transgender							

Transnational Crime and the Developing World

ix

LRA

Lord’s Resistance Armym

Cubic meter

MDMA

3,4-methylenedioxymethamphetamine

MSB

Money service business

No.

NumberNPS

New psychoactive substances

OCG

Organized crime group

OECD

Organisation for Economic Co-Operation and Development

RUF

Revolutionary United Front

SALW

Small arms and light weapons

SARS

South African Revenue Service

SMS

Short message service

t

Ton

TBML

Trade-based money laundering

TJN

Tax Justice Network

TOC

Transnational organized crimeUN

United Nations

UNEP

United Nations Environment Programme

UNITAUnião Nacional para a Independência Total de Angola (National Union for the Total
Independence of Angola)

UNODC

United Nations Office on Drugs and Crime

US

United States

US$

United States dollars

UVI

Unique vessel identifier

VAT

Value-added tax

WCO

World Customs Organization

3

Global Financial IntegrityxExecutive Summary
Overview

Transnational crime is a business, and business is very good. Money is the primary motivation forthese illegal activities. The revenues generated from the 11 crimes covered in this report—estimatedto range between US$1.6 trillion and $2.2 trillion per year—not only line the pockets of theperpetrators but also finance violence, corruption, and other abuses. These crimes undermine local
and national economies, destroy the environment, and jeopardize the health and wellbeing of the
public. Transnational crime will continue to grow until the paradigm of high profits and low risks
is challenged. This report calls on governments, experts, the private sector, and civil society
groups to seek to address the global shadow financial system by promoting greater financialtransparency.

Table X1. The Retail Value of Transnational Crime
Transnational Crime
Drug Trafficking
Small Arms & Light Weapons Trafficking
Human Trafficking
Organ Trafficking
Trafficking in Cultural Property
Counterfeiting
Illegal Wildlife TradeIUU Fishing
Illegal Logging
Illegal Mining
Crude Oil Theft
Total

Estimated Annual Value (US$)$426 billion to $652 billion$1.7 billion to $3.5 billion$150.2 billion$840 million to $1.7 billion$1.2 billion to $1.6 billion$923 billion to $1.13 trillion$5 billion to $23 billion$15.5 billion to $36.4 billion$52 billion to $157 billion$12 billion to $48 billion$5.2 billion to $11.9 billion$1.6 trillion to $2.2 trillion

Drug Trafficking

The global drug trafficking market was worth US$426 billion to $652 billion in 2014. It represents
about one-third of the total retail value of the transnational crimes studied here. Cannabis was
responsible for the largest share of drug trafficking, followed in order by cocaine, opiates, andamphetamine-type stimulants (ATS). ATS and cannabis are produced all over the world, while theproduction of cocaine and opiates is concentrated in South America and Afghanistan, respectively.
Drug trafficking organizations (DTOs), organized crime groups (OCGs), guerrilla groups, and terrorist
organizations are all involved in drug trafficking. OCGs in West Africa have increased their control of the
drug market in the region, and the volume of heroin trafficked from Afghanistan through East Africa isescalating, stoking consumption.

Arms Trafficking

The trafficking of small arms and light weapons (SALW) is one of the least profitable transnational
crimes studied in this report, but it is also one of the most consequential for human security indeveloping countries. This market was worth US$1.7 billion to $3.5 billion in 2014, which represents
10 to 20 percent of the legal arms trade. Three main factors drive prices: an area’s level of conflict,political unrest, and political tension; the distance over which the items are smuggled; and, the levels of
enforcement traffickers must overcome. Internet-based trafficking represents a growing challenge
to combatting SALW smuggling. Decommissioned weapons that had been sold and then illegally
reactivated were used in several recent terrorist attacks in Western Europe and represent another
trending threat of arms trafficking.

							

Transnational Crime and the Developing Worldxi

Human Trafficking

Human trafficking, for labor and for sex, is one of the fastest-growing transnational organizedcrime markets. Twenty-one million men, women, and children around the world are currently
thought to be victims of human trafficking, which the International Labor Organization estimates
generates US$150.2 billion in profits each year. The Asia-Pacific region is responsible for US$51.8
billion of this market, with around 11.7 million victims. Developed Economies and the European Union is
responsible for another third of the market value with US$46.9 billion, even though there are “only” 1.5
million victims, one-eighth as many as the Asia-Pacific region. Human trafficking is playing a growingrole in terrorist and insurgent activities and groups, and the spread of the internet has provided
traffickers with additional, far-reaching means to reach both victims and victimizers.

Illegal Organ Trade

Organ trafficking conservatively generates approximately US$840 million to $1.7 billion annually fromaround 12,000 illegal transplants. This estimate comprises the “sales” of the top five organs: kidney,
liver, heart, lung, and pancreas. Kidneys are the most common for legal and illegal transplants and are
the least expensive on the black market, because they can come from living donors. Brokers/scouts
operate within sophisticated and specialized networks to recruit the vendors, the recipients, and thenecessary medical professionals in traditional models of organ trafficking. In many cases the donor
participates willingly, whereas there are further scenarios where they are pressured or forced into thetransaction. Organ traffickers coerce migrants and refugees to sell kidneys to pay for passage toEurope, among others.

Cultural Property

The global annual revenue generated from the illicit trade in cultural property is estimated at
approximately US$1.2 billion to $1.6 billion. This criminal market covers a range of illegal activities,
including the theft of cultural property from museums, the illicit excavation and looting of archaeologicalsites, and the use of faked or forged documentation to enable both illegal import and export as well as
illicit transfers in ownership. Estimates of ISIL’s profits from the illicit antiquities trade cover a wide range,from several million dollars to a few billion each year. China is one of the fastest growing art markets,
legal and illegal, fueled in part by capital flight.

Counterfeit and Pirated Goods

The trade in counterfeit and pirated goods is the most valuable illicit trade examined in this reportat US$923 billion to $1.13 trillion annually. An estimated two-thirds to three-quarters of counterfeit
and pirated goods come from China. Counterfeit pharmaceuticals represent 10 to 30 percent ofavailable drugs in developing countries. Worldwide these illicit goods are estimated to be worth between
US$70 billion to $200 billion annually, which represents up to 25 percent of the total counterfeit market.
Hazardous counterfeit food and useless and/or toxic counterfeit medicines endanger the health andsafety of the public. For organized crime groups, counterfeiting provides an ideal avenue for laundering
the profits of other transnational organized crime as well as financing other crimes.

Illegal Wildlife Trade

Estimates place the annual retail value of the illegal wildlife trade between US$5 billion and $23 billion.
Ivory and rhino horn are two of the biggest components of the market value and receive the most publicattention, yet the pangolin is actually the most trafficked animal in the world. Per kilo, the retailrevenues for ivory or rhino horn can be equal to or greater than the equivalent amount of cocaine
or heroin, yet the legal penalties are considerably more lenient. The illegal wildlife trade relies on a
sophisticated global supply chain, run by well-funded organized crime groups. In developing countries
wildlife trafficking robs local communities of much-needed revenue streams and has deleterious impacts
on the environment, security, and rule of law, and little of the profit goes into the domestic economy.

Global Financial IntegrityxiiIllegal, Unreported, and Unregulated (IUU) Fishing

Annual illegal and unreported marine fishing generates US$15.5 billion to $36.4 billion in illicit profits;of that, the majority is generated off the coasts of developing countries. This estimate is conservative
as it does not include unregulated fishing as well as any IUU fishing in inland fishing areas. It has major
environmental, societal, and security impacts in developing countries, particularly in areas where
the local economy and the local diet depend on fishing. Firms that participate in IUU fishing havebeen linked to other crimes such as the smuggling of migrants and the trafficking of drugs andpersons. The primary business model uses “flags of convenience,” whereby jurisdictions like Panama
provide vessel registration for anyone in the world and typically exercise minimal oversight of thevessels, including not requiring or verifying the true, ultimate owner.

Illegal Logging

Illegal logging is estimated to be valued at US$52 billion to $157 billion dollars per year; this makes it themost profitable natural resource crime. Illegally-procured timber accounts for 10 to 30 percent of thetotal global trade in timber products, however this crime principally occurs in Southeast Asia, Central
Africa, and South America, where an estimated 50 to 90 percent of timber from these regions is
acquired illegally. Illegal logging in conflict zones often contributes to financing and fueling violence.
Groups that engage in illegal logging continue to use trade misinvoicing and anonymous shellcompanies to evade logging restrictions and avoid scrutiny. China is the primary destination forthe majority of illegally-sourced timber.

Illegal Mining

A 2016 United Nations Environment Programme and INTERPOL assessment estimates that the illegal
extraction and trade in minerals is worth US$12 billion to $48 billion annually. Illegal mining is largely
confined to developing countries. Experts estimate that illegal gold mining in nine Latin Americancountries is worth approximately US$7 billion each year. Conflict diamonds are generally thought torepresent less than one percent of global production, however illicitly mined diamonds are estimatedto account for 20 percent of worldwide production and were worth approximately US$2.74 billion in
2015. The exploitation of natural resources is a lucrative source of financing for organized crime groups,
terrorist organizations, and insurgent groups.

Crude Oil Theft

Crude oil theft is estimated to be worth at least US$5.2 billion to US$11.9 billion annually as of 2015.
However, this only includes data from six countries: Colombia, Indonesia, Mexico, Syria, Russia, andNigeria, all of which have high levels of theft as well as available statistics. Nigeria has in recent years
been the epicenter of worldwide crude oil theft. Crude oil theft in Syria currently represents thevast majority of the country’s total oil production due to the ISIL’s control of principal oil fields. The
volumes of crude oil stolen in Mexico and Colombia each day are very small, but the participationof violent DTOs in oil theft in Mexico, and its use in cocaine production in Colombia, renders this amore serious issue.

Policy Recommendations

Greater financial transparency has the potential to simultaneously curtail every transnational
crime in every part of the world. The networks involved in these illicit markets are akin to major global
corporations, and they need access to finance and banking in order to be profitable and continue
operating. Countries need to require that corporations registering and doing business within theirborders declare the name(s) of the entity’s true, ultimate beneficial owner(s). Customs and central bankauthorities should flag financial and trade transactions involving individuals and corporations in “secrecy
jurisdictions” as high-risk and require extra documentation to try to ensure there is no illegal activity
involved. Customs officers should scrutinize import and export invoices for signs of misinvoicing,which may indicate technical and/or physical smuggling. Customs agencies can use world market
price databases such as GFTradeTM to estimate the risk of misinvoicing for the declared values andinvestigate suspicious transactions. Government agencies and departments in each country also need								Transnational Crime and the Developing Worldxiii

to share more information on the illicit markets and actors that exist within their borders. Sharing thisdata and this knowledge will help to avoid gaps, bolster investigations into possible abuses, and support
stronger enforcement of the country’s laws. Criminals cannot afford to face this level of risk of theirmoney or goods being detected.

Methodology

The basis of the value estimates in this report is a compilation of numerous datasets and pricestatistics from governments, non-governmental bodies, law enforcement, and other experts. Each illicit
market chapter briefly notes the methodology and data sources used for those goods, and a detailed
description of certain methodologies, as well as tables with all of the data and sources used, areprovided in the Appendix. Most of the estimates the report highlights are ranges rather than a single
figure, because there is less precision in data pertaining to activities that are trying to stay hidden, suchas transnational crime.

Global Financial Integrityxiv

I. Introduction
The aim of this report is to provide an overview of 11 different transnational crimes and their overlapping
trends and systems: the trafficking of drugs, arms, humans, human organs, and cultural property;
counterfeiting; illegal wildlife crime; illegal fishing; illegal logging; illegal mining; and crude oil theft. Eachchapter focuses on a different crime, exploring the value of the transnational market, its dynamics, how it
impacts developing countries, and recent developments in how it operates.
Transnational Crime and the Developing World is an update to Global Financial Integrity’s 2011
report Transnational Crime in the Developing World, which was written by Jeremy Haken. The sametransnational crimes are covered in this report as in the 2011 report. All transnational crime hassignificant impacts on individuals, communities, and countries, and future reports may be expanded toinclude other major transnational crimes, such as cybercrime, illegal waste, and smuggling.
Any discussion of value, whether of entire markets or individual goods, is largely based on estimation.
Much of the knowledge about these crimes comes from interdictions and seizures—the instances whentransparency pierces the clandestine nature of the markets. These incidences represent only a small
percentage of the total trade, but provide valuable intelligence that can inform policy. The illicit nature ofthese markets means that participants have an interest in keeping market operations opaque, limiting
the amount and quality of data.
The point of considering estimated ranges of values is to illustrate that the magnitude of the funds
generated by transnational crime are significant and have major impacts on the economic, social,political, and environmental stability of all countries. The negative effects of a given criminal market—
whether it is worth US$50 billion or US$150 billion—remain predominately unchanged and require thesame policy responses and coordination.
The transnational crimes examined in this report are frequently committed by organized crime groups(OCGs). For some, the mention of OCGs or organized crime brings to mind the mafia and films like The
Godfather: glamorous, hierarchically-structured criminal organizations aligned along family and/or ethniclines with codes of honor. These stereotypes represent a portion of organized crime, but they do not
represent all OCGs. The United Nations Convention against Transnational Organized Crime defines an
OCG as “a structured group of three or more persons, existing for a period of time and acting in concert
with the aim of committing one or more serious crimes or offences… in order to obtain, directly or
indirectly, a financial or other material benefit.”1
Transnational OCGs are, at their core, businesses: they are overwhelmingly motivated by financial
gain and seek out opportunities that offer high profits and low risks/costs. For both legal and illegal
enterprises, financial management is critical to the success of the business. Criminals not only derivefinancial benefit from illicit revenues, they use the proceeds to sustain operations and to fund further
criminal activity, all of which is a threat to individual nations and the international community.
OCGs as well as terrorist and insurgent organizations are often highly adaptive to changes andopportunities. They exploit crises such as natural disasters, social upheavals, and civil wars for the
trafficking of illicit goods, including humans, organs, arms, and cultural property, all of which compounds
the impacts of the situation. These groups are quick to adopt new technology, for example moving
operations online or using anonymous digital currency, that enables them to maximize profits as well as
stay ahead of law enforcement.
The report proceeds with 11 chapters on different transnational crimes, a section on recommended
policy responses, a conclusion covering the main themes and takeaways, and an appendix with
United Nations Office on Drugs and Crime, “United Nations Convention against Transnational Organized Crime and the Protocols Thereto” (NewYork: United Nations, 2004), 5, http://www.unodc.org/documents/treaties/UNTOC/Publications/TOC%20Convention/TOCebook-e.pdf. Emphasis
added1							

Transnational Crime and the Developing World1methodologies and additional sources. The cumulative analysis will demonstrate that the dynamics,
organizations, and impacts cut across and link seemingly disparate crimes with each other. Government
and enforcement bodies in every country will benefit from applying this big-picture perspective to newand existing efforts to combat transnational organized crime.

Global Financial Integrity2II. Drug Trafficking
A. Overview

The United Nations Office on Drugs and Crime (UNODC) defines drug trafficking as the “cultivation,
manufacture, distribution, and sale of substances which are subject to drug prohibition laws.”2 Drugtrafficking is the quintessential transnational crime, as no country is left untouched by its multifarious
grip, from production and processing operations to distribution and consumption activities.
Drug trafficking has a destabilizing effect on all countries involved, regardless of whether they are asource, processing, transit, and/or market country. The burden placed by violence, public health threats,
and economic distortions threatens the ability of developing countries to devote meaningful resources todomestic resource mobilization.

B. Value

Drug trafficking is the second most lucrative illicit market measured in this report, representing morethan one-third of the total value of the transnational crimes studied. However, any discussion of the
global market value of drug trafficking, as well as any other illicit market, must begin by emphasizing thedifficulty in determining the market’s worth.
The principal difficulty arises from the fact that operations and transactions are covert. As a result,most available data come from seizures—the limited instances where clarity pierces the market—which
typically represent only a small percentage of actual drug trafficking. In addition, there is not a universally
agreed upon definition of drug trafficking; thus, countries may measure the activity differently, making
what data are available difficult to compare across nations and regions.
The global market value of drug trafficking is derived from retail sales of the four main categories ofillicit drugs: cannabis, cocaine, opiates, and amphetamine-type stimulants (ATS). This report estimatesthat the global market in drug trafficking was worth US$426 billion to $652 billion in 2014.3 Table
A provides a summary of the global market values for all drug trafficking as well as the four major
submarkets.

Table A. Global Drug Market Annual Values (US$)
MarketValue
Cannabis$183 billion to $287 billion
Cocaine$94 billion to $143 billion
Opiates$75 billion to $132 billionATS$74 billion to $90 billion
Global Total$426 billion to $652 billion
Two methods were used to arrive at these market values, one working forward and the other backward.4
Both methods use simple economic techniques and do not take into account market factors such aschanges in demand and supply. Working forward, the rate of inflation was applied to the last submarket
estimates produced by the UNODC, the sum of which provided the updated global market value.5
Working backward, the value of the global illicit drug market to world gross domestic product (GDP) wasused. The UNODC estimated that the global drug market was worth US$320 billion in 2003, equivalent“Drug Trafficking,” United Nations Office on Drugs and Crime, accessed October 14, 2016, https://www.unodc.org/unodc/en/drug-trafficking/.
The year 2014 was used because it is the most recent year with complete data.
4
See Appendix, Section A for detailed methodology.
5
ATS: $63.4 billion (2006); cannabis: $141.9 billion (2003); cocaine: $85 billion (2009); and opiates: $68 billion (2009).
2
3							

Transnational Crime and the Developing World3

to approximately 0.8 percent of global GDP.6 Assuming that the global market still represents the same
percentage of global GDP, the illicit global drug market would be worth US$651 billion in 2014.7 The
individual submarket values were determined by assuming that these markets grew at the same rate as
the global market.
The total global drug market value is conservative because it does not include the value of new
psychoactive substances (NPS). NPS refers to drugs that were not included (i.e., controlled) in the 1961
Single Convention on Narcotic Drugs or the 1971 Convention on Psychotropic Substances because they
were not traditionally abused or were not in existence at that time. The recognition and classification of
NPS is relatively new in comparison to the other drug submarkets, and thus there is little solid data on
global market prices.
The value of a particular submarket is largely dependent on both consumption trends as well as drug
prices. High levels of consumption typically generate a high market value, yet high retail drug prices
and low consumption levels can produce similar results to markets with modest prices and highconsumption.8
Cannabis represents the largest submarket, worth approximately US$183 billion to $287 billion in2014, or roughly 43 to 44 percent of the global market. This is because cannabis is by far the mostwidely cultivated, distributed, and consumed drug worldwide. Cannabis is a relatively inexpensive drug
compared to cocaine and opiates, therefore the high value of its market is due to the large number ofconsumers. In 2014, it was estimated that 182.5 million people, or 2.5 percent of worldwide population,
consumed cannabis.9
Cocaine and opiates are similar in both the value of the market as well as the number of global
consumers. The submarkets are worth US$94 billion to $143 billion and US$75 billion to $132 billion,
respectively, and have approximately 17 to 18 million users.10 ATS represent the smallest portion of the
global drug market, worth around US$74 billion to $90 billion. There are approximately 55 million global
ATS users,11 which is greater than cocaine and opiate users combined, yet synthetic drugs are typicallyless expensive than cocaine or opiates.
The more factors of production—land, labor, and capital—that are needed to produce a drug, the greater
the production costs, increasing the price of a drug. Large amounts of land are needed to cultivate
coca and poppy plants, however cultivation is limited to certain geographic areas, which restricts thequantity of plants that can be cultivated and supplied, all of which increases price. The cultivation andprocessing of coca leaves and poppy flowers are also labor and capital intensive. Agriculture in generalis labor intensive, and illicit agriculture typically requires additional labor, such as security, as well as
capital expenses, such as bribes. Multiple steps, chiefly chemical manipulation, are required to process
the plants to their consumable form, and the supplies as well as technical expertise increase production
costs.
Though cannabis cultivation is also labor intensive, the plant can be cultivated virtually anywhere in theworld, indoors and outdoors, and its production can be scaled up or down to desired levels. Cannabis
can therefore be produced much closer to consumer markets, reducing transaction costs that are
incurred when transporting the product to market. Indoor cultivation requires greater fixed capitalrequirements (e.g., lighting and hydroponic equipment), raising production costs, yet cultivation can be
The UNODC 2005 World Drug Report states that the global illicit drug market is worth 0.9 percent of global GDP at the retail level, however updated
GDP figures from the World Bank show it to actually be 0.83 percent. United Nations Office on Drugs and Crime, World Drug Report 2005 (Vienna:
United Nations Office on Drugs and Crime, 2005), 127, http://www.unodc.org/pdf/WDR_2005/volume_1_web.pdf.
7
The value of the global illicit drug market in 2014 (US$651 billion) based on the rate of growth does not match the total value shown in Table A due torounding of the individual submarket values. See Appendix, Section A for additional information.
8
Organization of American States, The Drug Problem in the Americas: Studies; The Economics of Drug Trafficking (Washington, DC: Organization ofAmerican States, 2013), 7, http://www.cicad.oas.org/drogas/elinforme/informeDrogas2013/laEconomicaNarcotrafico_ENG.pdf.
9United Nations Office on Drugs and Crime, World Drug Report 2016 (Vienna: United Nations Office on Drugs and Crime, 2016), 43, https://www.
unodc.org/wdr2016/.
10
Ibid., 26, 35.
11
Ibid., 52.
6

Global Financial Integrity4done throughout the year, increasing yields (i.e., supply). There is much less labor and capital required
to process cannabis after it has matured because cannabis is principally consumed in its natural state;chemical manipulation is not required like it is for cocaine and heroin.12
The manufacture of ATS is generally not labor or time intensive, can be done on a small to large scale
and in relatively any location, and chemicals (i.e., precursors, reagents, and solvents) are not particularly
expensive and can often be substituted. A certain level of specialized knowledge and equipment isneeded for industrial-scale manufacturing, however the knowledge needed for small-scale “home brew”
production can often be distilled from the internet.
The value of a unit of drugs increases as it proceeds from production to market due in part to two
important factors: risk and retail. The risk of interdiction increases the further drugs must travel (and themore borders they must cross) to reach consumer markets. Higher levels of risk increase transaction
costs, such as the need to use more sophisticated concealment methods or pay additional bribes, andtraffickers pass these costs on to consumers. As shown in Table B, the wholesale price of a kilogram ofcocaine increases dramatically as it moves from the production site in the interior of Colombia, along
trafficking routes in Central America and Mexico, and arrives in market destinations.13 Australia, which isboth isolated and far from production countries, unsurprisingly has the highest prices.

Table B. Price vs. Distance: Colombian Cocaine (US$, street wholesale)Price Increase from
LocationPrice (per kg)
Production Site
Colombian interior (production site)$2,200.
Colombian ports$5,500-$7,000
150%-218%
Central America$10,000
355%
Southern Mexico$12,000
445%
Northern Mexico$16,000627%
United States$24,000-$27,000
991%-1,127%
Europe$53,000-$55,000
2,309%-2,400%
Australia$200,000
8991%
Seizures made at or near the consumer market therefore have a much greater negative impact on
criminal profits than similar seizures made closer to the production level. For example, a drug trafficking
organization (DTO) would lose US$500,000 if 50 kilos of cocaine were seized by law enforcement inCentral America (Table B), yet if the same amount was seized in the United States the group would
suffer US$1.2 million to $1.35 million in losses because of the additional resources it had invested intransporting the commodity between Central America and the United States.
Drug prices also increase when they are “broken down” for sale—that is when they move from wholesale
to retail quantities. Wholesale prices are lower than retail prices because the trafficker is purchasing/selling in bulk quantities and is typically just transporting the goods. At the retail level, dealers raise
prices not only to improve their profit margins but to cover increased transaction costs, such as labor,
logistics, and storage, since the drugs are sold to consumers in smaller quantities (e.g., a gram insteadof a kilogram), requiring greater effort from the retailer on a per unit basis.
The price increase at the retail level is notable because, with the exception of cannabis, the purity ofdrugs is frequently diluted, sometimes significantly, as they move from wholesale to retail. Diluting drugs
increases the volume of drugs that can be sold, which further boosts profits. Experts estimate that twothirds of total drug revenues are earned at the retail level.14

Cannabis is primarily consumed as herb/bud or hash, however some extraction methods used to produce wax and oil do use solvents
Scott Stewart, “Mexico’s Cartels and the Economics of Cocaine,” Stratfor, January 3, 2013, https://www.stratfor.com/weekly/mexicos-cartels-andeconomics-cocaine.
14
Organization of American States, Drug Problem in the Americas, 5.
1213							

Transnational Crime and the Developing World5

C. Dynamics

There are overall trends that define the global drug market, as well as unique elements for individual
submarkets. Cocaine and heroin are produced from plants that grow in geographically-limited areas,
thereby restricting supply and contributing to higher prices; certain countries and/or routes cater tospecific markets. Since cannabis, ATS, and NPS can be produced nearly anywhere, most production isintended for local or regional markets, reducing transaction costs and resulting in lower prices.

i. Amphetamine-Type Stimulants and New Psychoactive Substances

ATS and NPS differ from cannabis, cocaine, and opiates in that the vast majority are synthetic,
manufactured from chemicals, instead of plant-based. The ATS group of drugs refers to amphetamine,
methamphetamine, and other stimulants including MDMA, whereas NPS have a much wider range ofimpacts as they are typically designed to reproduce the effects of traditional illegal or controlled drugs.
ATS and NPS present different, and sometimes greater, challenges to law enforcement compared toplant-based drugs. Although ATS and NPS, as synthetic drugs, can be produced around the world,
production thrives in countries that have porous borders and/or weak controls on precursor chemicals.
China’s booming chemical and pharmaceutical industries are currently the primary sources of precursor
chemicals, enabled by feeble regulations and inadequate monitoring. Organized crime groups (OCGs) in
China divert legally exported shipments of precursor chemicals to illegal end users, often in Mexico andCentral America, involved in the manufacture of methamphetamine.15 There have been instances when
Chinese OCGs have been compensated with other illicit goods, such as illegally-mined minerals from
Mexico and poached abalone from South Africa, in order to obtain precursors.16
The production of synthetic drugs also benefits from the ability to substitute different precursor
chemicals as well as manufacturing processes. Enterprising groups have even taken to producing
precursors from so-called “pre-precursors” when strong controls have limited access to supplies.
Synthetic drugs can also be manufactured much more quickly than plant-based drugs because they are
not reliant on, inter alia, growing cycles. Likewise, traditional supply-side interdiction efforts, particularly
crop monitoring and aerial spraying, cannot be used, which makes detection and disruption moredifficult.
Synthetic drugs can be clandestinely manufactured anywhere and in any size, from small scale “kitchenlabs” to sophisticated industrial-scale laboratories.17 Much of the knowledge needed for small scale
manufacture can be gleaned from the internet or local contacts, whereas large scale production,
particularly of NPS, often requires the outsourcing of chemical expertise. Many labs are capable ofbeing constructed and dismantled quickly, allowing traffickers to easily move locations in response toincreased law enforcement action.

ii. Cannabis

Cannabis is by far the largest drug market, both in consumption and value generated. Two-thirds ofcountries reported cannabis cultivation between 2009 and 2014.18 Unlike coca bush and poppies, it
is more difficult to determine levels of cultivation because cannabis can be grown both indoors andoutdoors. Cannabis is also unique in that, as opposed to the vast majority of other drugs, it is common
for cannabis to be cultivated on a small scale for personal consumption.
As cannabis is grown in many countries, it is unnecessary to traffic it across great distances. Thus, it isprimarily cultivated for consumption in domestic and regional markets.19 For instance, the United States
Sean O’Connor, “Meth Precursor Chemicals from China: Implications for the United States,” Staff Research Report (Washington, DC: U.S.-China
Economic and Security Review Commission, July 18, 2016), 5, http://origin.www.uscc.gov/sites/default/files/Research/Staff%20Report_PrecursorChemicalReport%20071816_0.pdf.
16
Keegan Hamilton, “The Golden Age of Drug Trafficking: How Meth, Cocaine, and Heroin Move Around the World,” VICE News, April 25, 2016,
https://news.vice.com/article/drug-trafficking-meth-cocaine-heroin-global-drug-smuggling.
17
United Nations Office on Drugs and Crime, World Drug Report 2016, 52.
18
Ibid., 43.
19
United Nations Office on Drugs and Crime, World Drug Report 2011 (Vienna: United Nations Office on Drugs and Crime, 2011), 189, http://www.
unodc.org/documents/data-and-analysis/WDR2011/World_Drug_Report_2011_ebook.pdf.
15

Global Financial Integrity

6market is primarily supplied domestically or with cannabis smuggled from Mexico or Canada. Cannabis
resin, commonly referred to as hashish or hash, is principally consumed in Europe, the Middle East andNorth Africa. Like cannabis herb, though, it is produced and smuggled regionally: Morocco primarily
supplies the North African and European markets, while Afghanistan and Lebanon supply neighboring
countries in their region.20

iii. Cocaine

The overwhelming majority of coca plant cultivation, from which cocaine is produced, occurs in three
countries: Colombia, Peru, and Bolivia. Bolivia has the lowest levels of coca cultivation, and Colombia
and Peru have alternated as the top producer country. Internal disruptions to cultivation and production
in one country, such as the aggressive eradication efforts under Plan Colombia which began circa 2000,
have typically triggered operations to increase in another country (e.g., Peru), essentially propelling the
problem from one country to another rather than curtailing it in absolute terms.
Latin American DTOs have diversified into other lucrative criminal ventures, particularly illegal mining,further challenging government efforts to combating their activities and financing. Illegal mining has
proven to be extremely profitable for DTOs in Colombia and Peru, equaling or surpassing the revenues
from cocaine trafficking as well as providing a solid way to launder drug money. Peruvian DTOs earn anestimated US$1 billion to $1.5 billion each year from drug trafficking, however illegal mining in Peru is
worth approximately US$2.6 billion annually.21 Compared to drug trafficking, illegal mining grants greater
revenues and lower risks of interdiction and/or punishment. Diversification also provides DTOs as well
as farmers and other source-country participants with an alternative income source during periods ofgovernment crackdown on drug trafficking.22

iv. Opiates

Of the roughly 50 countries in which opium is illicitly cultivated, Afghanistan is responsible forapproximately 70 percent of the world’s opium production.23 The largest amount of opiates leave
Afghanistan along the Balkan route, which stretches from Afghanistan through Iran, Turkey andSoutheastern Europe to markets in Western and Central Europe. This heroin trade has an estimatedmonetary value of US$28 billion each year.24
The southern route runs from Afghanistan through Iran or Pakistan to the Arabian Sea. From there,
shipments travel primarily to the Gulf countries, Africa, and South Asia but may be forwarded to otherdestinations. Although the largest volume of opiates travel by the Balkan route, the opiates traffickedby the southern route end up in the greatest number of markets. The northern route, running fromAfghanistan through/to neighboring states and the Commonwealth of Independent States (CIS), supplies
the fewest markets.
Most of the remaining opium production comes from the Golden Triangle (Myanmar, Lao PDR, andThailand) and Latin America. Porous borders in the Golden Triangle allow opiates, as well as other drugs
and illegal goods, to easily reach East and Southeast Asia as well as Oceania. In Latin America, Mexico
and Colombia produce the largest amounts of opiates and typically supply for regional markets in theAmericas. Mexican DTOs and farmers have increased the cultivation of poppies, in some instances
replacing cannabis, in order to capitalize on the growing demand for opiates in the United States.25
United Nations Office on Drugs and Crime, World Drug Report 2016, 44.
Livia Wagner, Organized Crime and Illegally Mined Gold in Latin America (Geneva: Global Initiative against Transnational Organized Crime, 2016),
7–8, http://globalinitiative.net/wp-content/uploads/2016/03/TGIATOC-OC-and-Illegally-Mined-Gold-in-Latin-America-Report-1718-digital.pdf.
22
Hamilton, “The Golden Age of Drug Trafficking.”
23
United Nations Office on Drugs and Crime, World Drug Report 2016, 27.
24
United Nations Office on Drugs and Crime, Drug Money: The Illicit Proceeds of Opiates Trafficked on the Balkan Route (Vienna: United Nations Office on Drugs and Crime, 2015), 41, http://www.unodc.org/documents/data-and-analysis/Studies/IFF_report_2015_final_web.pdf.
25
Many illegal users of prescription opiates turn to heroin when pills are no longer available or their addiction becomes too expensive. Sanjay Gupta,“Unintended Consequences: Why Painkiller Addicts Turn to Heroin,” CNN, June 2, 2016, http://www.cnn.com/2014/08/29/health/gupta-unintendedconsequences/index.html; Keegan Hamilton, “How America’s Legal Weed Is Changing the Black Market and Influencing Mexican Cartels,” VICE
News, August 25, 2015, https://news.vice.com/article/how-americas-legal-weed-is-changing-the-black-market-and-influencing-mexican-cartels.
20
21							

Transnational Crime and the Developing World7

D. Developing Countries

Drug trafficking has some of the greatest impacts on security and development of all transnational
crimes. DTOs frequently use violence to maintain control of their markets and production, andgovernments are compelled to spend greater resources on law enforcement in order to address these
attacks on domestic stability, directing funding away from sustainable development. Governments also
lose large amounts of tax and customs revenues due to trade-based money laundering (TBML) schemesthat likewise threaten the competitiveness of legitimate businesses.
DTOs, and indeed all OCGs, flourish in fragile areas. Governance is weak enough that organizations canoperate relatively unencumbered, yet just strong enough to prevent the state from completely failing, theresulting mass unrest and conflict from which would make it difficult to conduct business, legal or illegal.
Development, in particular improvements to governance, rule of law, delivery of social services, andemployment, undermines the strength of DTOs. They thus have a strong interest in keeping countries
destabilized with weak institutions, as it reduces transaction costs and increases profits.
Drug trafficking engenders some of the highest levels of violence for all transnational crimes. The
groups involved in drug trafficking, from small OCGs and major DTOs to guerrilla groups and terrorist
organizations, use violence to maintain and/or obtain control of territory and markets in order to secure
profits, seriously threatening public safety. The fragmentation of and intensive infighting among Mexican
DTOs over control of trafficking routes as well as conflict between DTOs and the government have beensignificant drivers of instability within the country, resulting in a substantial number of casualties.26 In
a nine-month period (January through September 2011), nearly 13,000 homicides were attributable todrug-related violence, equivalent to more than 48 homicides each day.27
Violence destabilizes a country, forcing the government to divert additional resources to law
enforcement, reducing the funding available for other public services. Countries that are unable toeffectively combat drug trafficking jeopardize their ability to make meaningful, lasting improvements totheir country’s development. Unorganized, ineffective, and/or selective law enforcement can actually
increase instability by creating power vacuums that incite greater competition.
Government crackdowns on drug consumption and trafficking sometimes also lead to major humanrights abuses. Philippine President Rodrigo Duterte has launched a full-blown war on drugs in the
country, fomenting a wave of extrajudicial killings by government agents as well as vigilantes. As oflate January 2017, more than 7,000 people had been killed—a greater number by vigilantes than state
forces—since Duterte’s term began on June 30, 2016.28
Like many other illicit trades, such as wildlife and antiquities trafficking, the majority of citizens in drug
source countries receive little economic benefit and often bear the brunt of the trade’s negative impacts.
In Afghanistan, the cultivation, production, and distribution of opiates is an extremely valuable industry,
representing nearly one-eighth of the country’s GDP in 2014, however very little of the revenues remain
within the country.29 For example, poppy farmers in Afghanistan receive less than one percent of thetotal revenues generated from the heroin produced there and trafficked to the United Kingdom.30 A2012 report found that only 2.6 percent of the final retail value of cocaine produced in Colombia actually
stays in country, while the remaining 97.4 percent are “reaped by criminal syndicates, and laundered bybanks, in first-world consuming countries.”31 For developing countries with large production markets,particularly for heroin and cocaine, drug-related activities can threaten the economy by crowding out
legal economic activities when individuals opt for illicit employment because it offers better income than
Jason M. Breslow, “The Staggering Death Toll of Mexico’s Drug War,” FRONTLINE, July 27, 2015, http://www.pbs.org/wgbh/frontline/article/thestaggering-death-toll-of-mexicos-drug-war/.
27“Mexico Drug War Fast Facts,” CNN, December 19, 2016, http://www.cnn.com/2013/09/02/world/americas/mexico-drug-war-fast-facts/index.html.
28
Phelim Kine, “Deadly Milestone in Philippines’ Abusive ‘Drug War,’” Human Rights Watch, January 24, 2017, https://www.hrw.org/news/2017/01/24/
deadly-milestone-philippines-abusive-drug-war.
29
United Nations Office on Drugs and Crime, Drug Money, 9.
30Organization of American States, Drug Problem in the Americas, 22.
31
Ed Vulliamy, “Western Banks ‘Reaping Billions from Colombian Cocaine Trade,’” The Guardian, June 2, 2012, https://www.theguardian.com/
world/2012/jun/02/western-banks-colombian-cocaine-trade.
26

Global Financial Integrity8legitimate work.
Money laundering is one of the most important components of transnational crime, and the launderingof drug proceeds, particularly through trade-based schemes, has negative effects on economies. TBML
can serve as an informal value transfer system that allows DTOs to repatriate drug proceeds through thetrade of goods rather than movement of money. For example, a Colombian DTO will use drug proceeds(in US dollars) to purchase goods, such as electronics, toys or appliances, in the United States, which
are then exported to Colombia. Once in Colombia, the imported goods are sold (in Colombian pesos)
and the DTO recoups its proceeds. According to TBML specialist John Cassara, DTOs may sell thesegoods at a deep discount in order to hasten the return of their money, yet this distorts market prices,
creating unfair competition by undercutting legitimate businesses.32
The large volume of dirty money moving through TBML schemes can cause governments to losesignificant tax and customs revenues. Governments collect fewer tax revenues when goods areintentionally sold below market value, and the underinvoicing of imports likewise results in lost
customs duties.33 The budgets of developing countries are often heavily dependent on the ability of thegovernment to collect taxes and customs duties, and tax fraud seriously undermines the government’s
ability to fulfill its obligations.

E. Recent Developments

Africa’s role as a transit point for drug trafficking has been a major contributor to the growth in both drug
production and consumption on the continent over the last decade. Increased drug trafficking will further
destabilize already fragile countries and threaten public health in the region. In addition, global drug
production is moving from fields to laboratories and distribution is moving to the internet.
West Africa—most notably Nigeria, Guinea-Bissau, Sierra Leone, Mali, Guinea, Ghana, and Senegal—
became a hotspot for drug trafficking in the mid-2000s, in particular serving as a transshipment point forcocaine trafficking between South America and Europe. Nigerian OCGs, following a similar trajectory to
Mexican DTOs (see Box 1), originally provided logistical support in West Africa to South American DTOs.
These groups provided cocaine as payment for the Nigerians’ services, and the Nigerian groups began
to purchase cocaine themselves directly from South American DTOs, both of which allowed the Nigerian
OCGs to transition from smugglers to wholesalers.34 Drug trafficking has played a role in destabilizing
certain countries in West Africa, and the increased revenues earned by OCGs from realizing a larger
share of the market threaten to do even greater damage.35

John A. Cassara, Trade-Based Money Laundering: The Next Frontier in Money-Laundering Enforcement (Hoboken, NJ: John Wiley & Sons, 2016),
39.
33
U.S. Department of the Treasury, National Money Laundering Risk Assessment 2015 (Washington, DC: U.S. Department of the Treasury, 2015),
29, https://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/National%20Money%20Laundering%20Risk%20Assessment%20%E2%80%93%2006-12-2015.pdf.
34
Hamilton, “The Golden Age of Drug Trafficking”; United Nations Office on Drugs and Crime, Transnational Organized Crime in West Africa: A Threat
Assessment (Vienna: United Nations Office on Drugs and Crime, 2013), 10–11, http://www.unodc.org/documents/data-and-analysis/tocta/West_Africa_TOCTA_2013_EN.pdf.
35Aïssata Maïga and Elizabeth Tompkins, “West Africa’s New Drug of Choice: The Rise of Methamphetamine” (Stockholm: Institute for Security andDevelopment Policy, June 12, 2014), 1–2, https://www.files.ethz.ch/isn/184910/2014-maiga-tompkins-west-africas-new-drug-of-choice.pdf; United
Nations Office on Drugs and Crime, World Drug Report 2010 (Vienna: United Nations Office on Drugs and Crime, 2010), 242, 244, https://www.
unodc.org/documents/wdr/WDR_2010/World_Drug_Report_2010_lo-res.pdf; Lansana Gberie, “Crime, Violence, and Politics: Drug Trafficking andCounternarcotics Policies in Mali and Guinea” (Washington, DC: The Brookings Institution, 2016), 2–3, https://www.brookings.edu/wp-content/uploads/2016/07/Gberie-Mali-and-Guinea-final.pdf; West Africa Commission on Drugs, Not Just in Transit: Drugs, the State and Society in West Africa(Geneva: West Africa Commission on Drugs, 2014), 9, 20, 23, http://www.wacommissionondrugs.org/WACD_report_June_2014_english.pdf; DavinO’Regan and Peter Thompson, Advancing Stability and Reconciliation in Guinea-Bissau: Lessons from Africa’s Narco-State, ACSS Special Report No.
2 (Washington, DC: Africa Center for Strategic Studies, 2013), 4, 18, 21, 32, http://africacenter.org/wp-content/uploads/2016/06/ASR02EN-Advancing-Stability-and-Reconciliation-in-Guinea-Bissau-Lessons-from-Africa%E2%80%99s-First-Narco-State.pdf.
32							

Transnational Crime and the Developing World

9Box 1. A Brief History of Drug Trafficking in Mexico
Beginning in the 1970s, cocaine from South America entered the United States principally throughFlorida via the Caribbean. Intensified interdiction along the Caribbean route pushed cocaine smuggling
to the Central American-Mexican land corridor. While Mexican DTOs were originally paid cash for eachkilo they smuggled, Colombian traffickers began to pay them in cocaine. This transition “realigned thepower dynamics along the narcotics supply chain in the Americas, because it allowed the Mexicans tostop serving as logistical middlemen and invest in their own drugs instead.”36
With greater leverage, Mexican DTOs have overtaken most trafficking activities down to cocaine processing. For DTOs, a greater role may increase risk, but it also brings greater rewards. Mexican DTOs
have diversified their businesses, broadening their trades in heroin and cannabis as well as establishing a significant market for ATS production.
Nigerian OCGs have expanded into the production of synthetic drugs, principally methamphetamine.
The manufacture and export of methamphetamine in West Africa has been successful in large partdue to weak chemical and pharmaceutical controls, porous borders, and experienced OCGs withestablished routes, as well as weak rule of law and governments limited by insufficient technical andfinancial support.37 Nigerian OCGs have in fact received help from Mexican DTOs: in March 2016,
Nigerian authorities arrested four Mexican nationals who were allegedly serving as consultants in theestablishment of a large-scale methamphetamine lab in Delta state that was capable of producing up to
four tons each week.38 The majority of the methamphetamine is destined for high-value markets in Eastand Southeast Asia, but enough is remaining in the region to stoke increased domestic consumption,
endangering public health.39
East Africa, particularly Tanzania and Kenya, is an established transit point for Afghan heroin traveling
via the southern route from Pakistan and Iran to European markets. Heroin was traditionally transported
along air routes, but the number of maritime shipments has greatly expanded beginning around 2010,
allowing larger consignments to be smuggled.40 In November 2014, two seizures off the coast of Kenya
totaled over 700 kilograms, signaling the high volume of drugs that are being moved along this route.41
The transit of drugs through countries and/or regions can nurture the growth of domestic consumer
markets. Heroin is frequently abused through intravenous injection, which can contribute to the spreadof blood-borne infections. The UNODC estimates that as of 2013 more than half (55 percent) of African
opiate users are located in East Africa, which has the second highest rate of HIV prevalence in theworld.42 This large increase in heroin trafficking is a worrisome development for East Africa as it presents
a serious threat to public health in the region as well as the continent.
Another development in the global illegal drug market is that the overall use of synthetic NPS has greatly
increased over the last decade, in part a result of the ease of manufacture and accessibility. There is anever-growing range of NPS due to frequent modifications to chemical designs by manufacturers whoseek to circumvent legal restrictions. Authorities have detected more than 380 new substances in thelast five years, with 100 alone in 2015.43 When manufacturers invent NPS faster than legislators canregulate them, these so-called “legal highs” technically remain lawful substances and, as such, are often
Patrick Radden Keefe, “Cocaine Incorporated,” The New York Times, June 15, 2012, http://www.nytimes.com/2012/06/17/magazine/how-a-mexican-drug-cartel-makes-its-billions.html.
37
United Nations Office on Drugs and Crime, Transnational Organized Crime in West Africa, 20; United Nations Office on Drugs and Crime, World
Drug Report 2013 (Vienna: United Nations Office on Drugs and Crime, 2013), 23, http://www.unodc.org/wdr2013/.
38
Quenton King, “Four Mexicans Arrested in Meth ‘Super Lab’ Bust in Nigeria,” InSight Crime, March 16, 2016, http://www.insightcrime.org/newsbriefs/four-mexicans-arrested-in-meth-super-lab-bust-nigeria.
39
United Nations Office on Drugs and Crime, Transnational Organized Crime in West Africa, 23.
40
United Nations Office on Drugs and Crime, The Afghan Opiate Trade and Africa: A Baseline Assessment (Vienna: United Nations Office on Drugs
and Crime, 2016), 22, https://www.unodc.org/documents/data-and-analysis/Afghanistan/Afghan_Opiate_trade_Africa_2016_web.pdf.
41“The Smack Track,” The Economist, January 17, 2015, http://www.economist.com/news/middle-east-and-africa/21639560-east-african-states-arebeing-undermined-heroin-smuggling-smack-track.
42
United Nations Office on Drugs and Crime, Afghan Opiate Trade and Africa, 21, 44.
43European Monitoring Centre for Drugs and Drug Addiction and Europol, EU Drug Markets Report 2016: In-Depth Analysis (Luxembourg: European
Union, 2016), 141, http://www.emcdda.europa.eu/publications/eu-drug-markets/2016/online.
36

Global Financial Integrity

10easily accessible, with some being sold in corner shops and online.44
Internet-meditated drug trafficking is quickly growing in popularity, providing vendors and consumers a
new way to connect. The majority of online sales occur in cryptomarkets on the dark web, such as the
Silk Road, Agora, and Evolution, which offer participants a strong level of anonymity in a sales platform
similar to Amazon. Most participants are in developed countries, and transaction sizes typically suggest
personal consumption rather than wholesale distribution.45 The online trade still represents a small
portion of total global drug sales, however the market’s value is rapidly expanding, increasing by morethan 900 percent between 2012 and 2015 to reach US$150 million to $180 million.46

F. Summary

Drug trafficking is the second most valuable transnational crime, generating revenues of US$426 billion
to $652 billion each year. Cannabis is the largest submarket, representing 43 to 44 percent of total
market value; ATS is the smallest submarket, yet the growing popularity of synthetic drugs, particularly
NPS, is likely to increase the market share in the future as consumers look to “legal highs” to satisfy theirdemands.
Drug trafficking generates a considerable amount of violence, eroding domestic stability and compelling
governments to devote greater financial resources to security. Narcotics undermine public health andcommerce, and challenge a country’s ability to commit meaningful resources to its growth. Recent
developments have seen the illegal drug markets expand in Africa and online in the West, adding evengreater value to the global trade.

United Nations Office on Drugs and Crime, World Drug Report 2013, 61–62; Keith Humphreys, “How Powerful Synthetic Drugs Will Upend Drug
Markets Globally,” Washington Post, December 2, 2014, https://www.washingtonpost.com/news/wonk/wp/2014/12/02/how-powerful-syntheticdrugs-will-upend-drug-markets-globally/; European Monitoring Centre for Drugs and Drug Addiction and Europol, 2016 EU Drug Markets Report,
142.
45
United Nations Office on Drugs and Crime, World Drug Report 2016, 25.
46“Shedding Light on the Dark Web,” The Economist, July 16, 2016, http://www.economist.com/news/international/21702176-drug-trade-movingstreet-online-cryptomarkets-forced-compete?cid1=cust/ednew/n/bl/n/20160714n/owned/n/n/nwl/n/n/NA/n.
44							

Transnational Crime and the Developing World

11

Global Financial Integrity

12III. Trafficking of Small Arms and Light Weapons
A. Overview

Of all illicit trades, the trafficking of small arms and light weapons (SALW) has one of the most direct anddamaging impacts on security and development. SALW trafficking is often estimated to be one of themost profitable illicit trades, however it is one of the least valuable transnational crimes examined in thisreport. Arms trafficking is the illicit transfer of SALW, their parts, accessories, and ammunition acrossinternational borders.47 Table C provides a description of the different components of the illicit arms
trade.48

Table C. Composition of the Illicit Arms Trade
MarketSmall Arms

Light Weapons

Parts andComponents

Accessories

Ammunition

Description

Small arms are weapons for individual use. This category includes revolvers and self-loading
pistols; rifles and carbines; shotguns; sub-machine guns; and light machine guns.
Most light weapons require a small team for operation. This category includes heavymachine guns; mortar systems of calibers of 120mm or less; hand-held, under-barrel, andautomatic grenade launcher; hand grenades; portable rocket launchers; landmines; andimprovised explosive devices.
Parts and components refer to any elements or replacement elements “specifically designed
for a firearm and essential to its operation.” Examples include the barrel; frame or receiver;
slide or cylinder; and bolt or breech block.
An accessory is “an item that physically attaches to the weapon and increases its
effectiveness or usefulness but, generally speaking, is not essential for the basic, intended
use of the weapon.” Examples of accessories include sights; aiming lasers; night vision
devices; laser rangefinders; and fire controls systems.
Ammunition is the “complete round or its components…used in a firearm.” Examples
include bullets or projectiles; cartridge cases; primers; and propellant powder.

Sources: Matt Schroeder; Janis Grzybowski, Nicholas Marsh, and Matt Schroeder; United Nations

Weapons are durable goods, providing longevity to the harm they can inflict; they typically circulate
through a region, moving from conflict to conflict. A great deal of arms trafficking is accomplishedthrough small-scale transfers, which is difficult to stop because of the volume of transfers rather than thesize of the individual transactions.

B. Value

The opacity of the legal arms trade makes it difficult to determine the value of its market. Countries
voluntarily report their trade data to the United Nations (UN) Comtrade database, however somegovernment reporting may be incomplete if the country has undertaken clandestine arms transfers.
Accordingly, while UN Comtrade data shows the global legal arms trade was worth US$17.3 billion in2014, this value is likely understated.49
A large amount of the illicit arms trade takes place domestically, however this report focuses only on the transnational trafficking of SALW. This
report also does not address state-sanctioned illicit transfers.
48
Matt Schroeder, “Dribs and Drabs: The Mechanics of Small Arms Trafficking from the United States” (Geneva: Small Arms Survey, 2016), 2, 13,
http://www.smallarmssurvey.org/fileadmin/docs/G-Issue-briefs/SAS-IB17-Mechanics-of-trafficking.pdf; Janis Grzybowski, Nicholas Marsh, and Matt
Schroeder, “Piece by Piece: Authorized Transfers of Parts and Accessories,” in Small Arms Survey 2012: Moving Targets (Geneva: Small Arms Survey,2012), 245, http://www.smallarmssurvey.org/fileadmin/docs/A-Yearbook/2012/eng/Small-Arms-Survey-2012-Chapter-08-EN.pdf; United Nations,“Protocol against the Illicit Manufacturing of and Trafficking of Firearms, Their Parts and Components and Ammunition, Supplementing the United
Nations Convention against Organized Crime,” Pub. L. No. A/RES/55/255 (2001), 2–3.
49
See Appendix, Section B for methodology. “UN Comtrade Database,” United Nations, accessed January 30, 2017, https://comtrade.un.org/data/.
47							

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13

Arms trafficking is estimated to represent 10 to 20 percent of the legal arms trade,50 therefore thetrafficking of SALW, parts and components, accessories, and ammunition in 2014 is conservatively
estimated to be worth US$1.7 billion to $3.5 billion. Since the value of the legal arms trade is likely
underestimated, as noted above, it is probable that the illegal arms trade is likewise undervalued.
The Kalashnikov family of assault rifles, to which the AK-47 belongs, is one of the most universally
popular weapons, particularly in conflict zones, due to its relatively indestructible nature and ease of
production. Table D displays the variety of prices around the world as well as the difference in pricebetween industry-produced and craft-made AK-47s.51 In Pakistan, a country particularly known for its
craft arms industry, a legitimate AK-47 was sold on average for US$1,205 in 2011-2012, while the samemodel craft weapon was priced at only US$148, a difference of more than 700 percent.52

Table D. The Average Cost of an AK-47 Around the World (US$)
Country
Price
Country
Afghanistan$600-$1,500 Online (Dark Web)
Belgium$1,135 Pakistan (2011-2012)
India$1,087-$9,058 Pakistan, craft (2011-2012)
Iraq (Kurdistan)$700 Somalia (2011)
Lebanaon (2011-2012)$1,606 Somalia (2013)
Mexico (at the Northern border)$1,200-$1,600 Syria (2011)
Mexico (at the Southern border)$2,000-$4,000 Syria (2012)
Nigeria$1,292-$2,067 Yemen

Price$2,800-$3,600$1,205
$148
$350
$750
$1,200$2,100$1,396

Sources: See Appendix, Section B for sources.

There are many determinants that affect a weapon’s price, some related to the market environment andothers to the weapon itself. In addition to the condition of the weapon and market supply, there are atleast four other factors that appear to have a relatively consistent and universal impact on price. First,
political instability is one of the strongest drivers of both sale volumes and prices. The greater the levelof conflict, civil unrest, and/or political tensions—in country or in the region—the greater the demand forarms. With high demand, weapons command higher prices, often regardless of supply.
Second, the price of a weapon generally increases the further it is smuggled. Transaction costs acquiredby the trafficker, including concealment and transportation, are reflected in the price the buyer pays.
The risk of detection/interdiction ordinarily increases according to the distance it must travel to market,
particularly when crossing borders. For example, the price of a handgun that is trafficked from the UnitedStates to Canada increases as much as 560 percent just by crossing the border, and it increases another100 to 150 percent between the border and its destination in Toronto; the price of an AK-47 moving fromthe United States through Mexico follows a similar pattern (Table E).53
Jana Arsovska, “Introduction: Illicit Firearms Market in Europe and Beyond,” European Journal on Criminal Policy and Research 20, no. 3 (2014):
296, doi:http://link.springer.com/article/10.1007/s10610-014-9254-6; David Todd Kinsella, “The Illicit Arms Trade: A Social Network Analysis,” Political
Science Faculty Publications and Presentations (Portland, Oregon: Portland State University, 2008), 1, http://pdxscholar.library.pdx.edu/cgi/viewcontent.cgi?article=1011&context=polisci_fac; Matt Schroeder and Guy Lamb, “The Illicit Arms Trade in Africa: A Global Enterprise,” African Analyst
Quarterly, no. 1 (Third Quarter 2006): 69.
51
Craft-made typically refers to weapons that are copied from industry-made models and are manufactured through small-scale production outsideof official channels.
52
Nicolas Florquin, “Price Watch: Arms and Ammunition at Illicit Markets,” in Small Arms Survey 2013: Everyday Dangers (Geneva: Small Arms Survey, 2013), 257, http://www.smallarmssurvey.org/fileadmin/docs/A-Yearbook/2013/en/Small-Arms-Survey-2013-Chapter-11-EN.pdf.
53 David Bruser and Jayme Poisson, “Star Investigation: How One U.S. Gun Broker Moved Firearms across the Border,” Toronto Star, April 18, 2013,https://www.thestar.com/news/investigations/2013/04/18/star_investigation_how_one_us_gun_broker_moved_firearms_across_the_border.html;
Rich Smith, “AK-47 Rifle Price Drops; Is This Gun a Good Investment?,” San Antonio Express-News, November 29, 2014, http://www.mysanantonio.
com/business/fool/article/AK-47-Rifle-Price-Drops-Is-This-Gun-a-Good-5924215.php; Eric L. Olson, “A Shared Responsibility: Counternarcotics andCitizen Security in the Americas,” S. Hrg. 112-57, Committee on Foreign Relations (2011), 55, https://www.gpo.gov/fdsys/pkg/CHRG-112shrg67800/
pdf/CHRG-112shrg67800.pdf.
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Table E. Price vs. Distance: The Weapon’s Route
WeaponLocation A
Price A
Location B
Price B
AK-47
United States$500 U.S.-Mexico Border $1,200-$1,600
Handgun United States$150
Windsor, Ontario$800-$1,000

Location C
Price CSouthern Mexico $2,000-$4,000
Toronto, Ontario≥$2,000

Sources: David Bruser and Jayme Poisson; Rich Smith; Eric L. Olson

Third, higher levels of governance and enforcement also affect the risks a trafficker faces, increasing theprice; the reverse is also true. Research by the Small Arms Survey found a strong positive correlation
between weapon prices and a country’s level of governance: higher levels of effective governanceand enforcement capability increase arms prices, since the trafficker confronts a greater chance ofinterdiction.54 Conversely, prices for illicit arms tend to be lower in countries with porous borders, which
are an indication of ineffective governance.55 Porous borders reduce transaction costs for traffickers andallow a greater volume of weapons to enter the country, increasing supply.
Finally, local perceptions of quality can vary from market to market. Locals may perceive one country’s
make to be better than another’s; for example, a Russian-made Kalashnikov may be seen as better
than a Bulgarian or Chinese copy.56 Perception is an important price determinant in many illicit markets.
Although rhino horn is proven to have absolutely minimal medicinal effects, an urban myth circulating in
Vietnam—that a former politician was cured of cancer after consuming rhino horn—has had a massive
impact on public perception, driving up demand as well as price in the country and igniting a wave of
poaching continents away.57

C. Dynamics

Arms trafficking is conducted around the world, from the sale of a single handgun to large consignments
and everything in between. Like art theft, popular culture has distorted the dynamics of arms trafficking,suggesting the trade to be made up of large-scale transactions brokered by so-called “merchants ofdeath.” Sophisticated transnational illicit arms brokers with well-connected networks do exist, but they
are only one conduit through which arms are trafficked.
Illegal arms brokers, such as Viktor Bout and Leonid Minin, frequently cater to governments as well as
rebel groups, and therefore customarily move large consignments.58 They provide a layer of anonymity
and protection between buyer and seller, and are particularly responsible on the secondary market
for connecting legal supplies to buyers by illegal means (i.e., illicit transfers).59 Often operating on anintercontinental scale, their use of the global shadow financial system to mask their identity and activities
facilitates their global sales.60
However, a good percentage of arms trafficking is accomplished through numerous small-scaletransfers, known as the ‘ant trade,’ by individuals and loosely-affiliated networks.61 As these are small
sales, it is likely that most are in cash, since complex corporate structures are not needed for simple
transactions. There is no one model, or even several models, employed by arms traffickers. Considerable
differences exist between traffickers, from the types of weapons and methods of concealment to volume
and sophistication.62
Philip Killicoat, “What Price the Kalashnikov? The Economics of Small Arms,” in Small Arms Survey 2007: Guns and the City (Geneva: Small Arms
Survey, 2007), 266, http://www.smallarmssurvey.org/fileadmin/docs/A-Yearbook/2007/en/full/Small-Arms-Survey-2007-Chapter-08-EN.pdf.
55
Ibid., 266–67.
56
Florquin, “Price Watch: Arms and Ammunition at Illicit Markets,” 258.
57
Jonathan Watts, “‘Cure for Cancer’ Rumour Killed off Vietnam’s Rhinos,” The Guardian, November 25, 2011, https://www.theguardian.com/environment/2011/nov/25/cure-cancer-rhino-horn-vietnam.
58
Nicholas Schmidle, “Disarming Viktor Bout,” The New Yorker, March 5, 2012, http://www.newyorker.com/magazine/2012/03/05/disarmingviktor-bout; Alain Lallemand, “Drugs, Diamonds and Deadly Cargoes,” Center for Public Integrity, November 18, 2002, https://www.publicintegrity.
org/2002/11/18/5697/drugs-diamonds-and-deadly-cargoes.
59
Gisela Bichler and Aili Malm, “Small Arms, Big Guns: A Dynamic Model of Illicit Market Opportunity,” Global Crime 14, no. 2–3 (2013): 262.
60
Stefanie Ostfeld, “Why UN Arms Negotiations Must Include Talk of Ending Corporate Secrecy,” Al Jazeera, March 28, 2013, http://www.aljazeera.
com/indepth/opinion/2013/03/201332811291117590.html.
61
Stimson Center, Beyond the Merchants of Death - The Mechanics of Arms Trafficking (Washington, DC, 2016), https://www.youtube.com/
watch?v=m1TmaJHIAa8.
62
Ibid.
54

							

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There are two methods of arms manufacturing: industrial and craft. Industrial manufacturing is performedby companies on a large scale and produces a high quality product. Craft production commonly involves
fabrication of weapons by hand in limited quantities. Craft weapons are ordinarily much cheaper than theindustry-made equivalents. Ghana, Pakistan, Peru, and the Philippines are some of the countries known
for their craft arms industries, however most craft weapons remain within the domestic market.
The majority of trafficked weapons are manufactured and sold in the legal (white) market, and later enter
the illicit trade through the gray or black market. The gray market involves legal acquisition but illicit
distribution, most frequently through the misrepresentation of the end user. This is often accomplishedby using straw purchasers for small-scale acquisition or with the falsification of end-user certificates(EUCs),63 with or without bribery, for large international consignments. Forged EUCs and the broker’s (orstraw purchaser’s) services add additional costs to gray-market transactions, typically raising final retailprices above legal market values.
One source of grey-market arms has been the stockpiles of weapons left over from the dissolution of theSoviet Union. Weapons in Russia, Ukraine, and Bulgaria have played a particularly large role in illicit arms
trade in Africa.64 Arms traffickers like Bout would legally purchase these weapons but would then illegally
divert them to a different end-user, regularly in contravention of UN sanctions. For example, Bout used
forged EUCs showing arms shipments from Bulgaria were destined for Togo, yet the arms were actually
delivered to UNITA rebels in Angola.65
A variation of legal arms diversion is the illegal reactivation of decommissioned firearms. Deactivatedor decommissioned firearms are modified to prevent them from firing ammunition. When a weapon isdeactivated improperly, though, it can be reactivated by someone with the appropriate skills, restoring its
capability for live fire. Some of the weapons used in the January 2015 attack at the Paris headquartersof the satirical newspaper Charlie Hebdo were from Slovakia and had been decommissioned but later
restored to full functionality.66
Weapons acquired through the black market are both illegally acquired and sold. In arms trafficking,this commonly occurs through thefts from legally-held stocks, particularly government caches. Arms
are either stolen outright or sold by corrupt officials. Black-market transactions occur primarily at theregional level or lower. As durable goods, arms are often recirculated regionally, generally keeping prices
lower compared to extra-regional acquisition.
Thefts from government stockpiles commonly occur in countries where corruption is high and/or
governance weak; thefts are also more frequent during or soon after conflict or unrest. There has beena high level of military-criminal diversion in Latin America, from stockpiles as well as through falsified
EUCs.67 In the Middle East, some Iraqi soldiers have sold U.S.-supplied weapons on the black market,
some of which have ended up in the hands of Syrian rebel groups.68 Weapons also end up in the wrong
hands when they are seized from government forces during combat.
Arms traffickers typically use the same smuggling routes as those used for migrants or other illegal
goods. Seizure data from both the World Customs Organization (WCO) and the United Nations Office
Straw purchasers buy a firearm(s) at the request of a different individual (the final end user), often because the end user is unable to purchase theweapon lawfully. The majority of governments require the use of end-user certificates, or EUCs, in international arms transfers to certify that the listed
buyer is the final recipient and will not transfer or sell the goods to another party.
64
David Kinsella, “Illicit Arms Transfers to Africa and the Prominence of the Former Soviet Bloc: A Social Network Analysis,” Crime, Law and Social
Change 62, no. 5 (2014): 538, doi:http://dx.doi.org.proxyau.wrlc.org/10.1007/s10611-014-9531-9.
65
Schmidle, “Disarming Viktor Bout.”
66
Naina Bajekal and Vivienne Walt, “How Europe’s Terrorists Get Their Guns,” TIME, December 7, 2015, http://time.com/how-europes-terrorists-gettheir-guns/.
67
Michael Lohmuller, “Video Exposes Southern Cone Illicit Gun Trade,” InSight Crime, September 21, 2015, http://www.insightcrime.org/news-briefs/
video-exposes-southern-cone-illicit-gun-trade; Michael Lohmuller, “Attempted Thefts from Uruguay Military Arsenal Raise Concerns,” InSight Crime,
April 27, 2016, http://www.insightcrime.org/news-briefs/attempted-thefts-uruguay-weapons-stockpile-raise-concern; Mimi Yagoub, “Dominican Military Accused of Trafficking Arms from US Suppliers,” InSight Crime, January 28, 2016, http://www.insightcrime.org/news-briefs/dominican-militaryaccused-of-trafficking-arms-from-us-suppliers; David Gagne, “Tracing the Evolution of Military-Criminal Networks in Guatemala, El Salvador,” InSight
Crime, January 8, 2016, http://www.insightcrime.org/news-analysis/tracing-evolution-military-criminal-networks-in-guatemala-el-salvador.
68
Elias Groll, “Where the Insurgent Groups of the World Get Their Weapons,” Foreign Policy, June 1, 2015, https://foreignpolicy.com/2015/06/01/
where-the-insurgent-groups-of-the-world-get-their-weapons/.
63

Global Financial Integrity16

on Drugs and Crime (UNODC) show that illicit arms were more frequently smuggled over land than by
air, sea, or mail.69 This complements evidence that shows arms trafficking principally occurs amongneighboring countries or within a region.
As shown in Table F, while the greatest number of weapons were seized at land boundaries (655,858),
seizures at seaports had by far the greatest weapons per case volume, with an average of 1,367
weapons per seizure.70

Table F. Seizures by Location, 2013
Seizure Location

No. of Cases

Land boundary
SeaportInlandAirportMail center
Rail
River
Unknown
Total

1,317
352
1,362
1,154
688
22
5
2
4,902

Avg. No. of Items perCase
655,858498
481,297
1,367
160,018
118
137,287
110
10,629
15
4,238
193
29
6
3
2
1,439,359
294

Quantity (Items)

Source: Aaron Karp, Nicholas Marsh, and Giorgio Ravagli

Traffickers moving arms by freight or mail use various techniques for concealing their identity as well as
the illicit cargo. This includes adopting fictitious or intermediary addresses and employing misinvoicing
schemes, such as misidentifying the arms as objects of similar shape and density (e.g., metal tools or
toy parts), as well as underinvoicing shipments.71
Some illicit weapons transactions involve the exchange of goods instead of money. Criminals exchange
for what their market demands; illicit weapons are most often exchanged for drugs. In conflict zones,
other illicit goods are traded or sold for arms, which exacerbates insecurity and prolongs the violence.
Examples include conflict diamonds during the Sierra Leone Civil War (1991-2002),72 conflict minerals
in eastern Democratic Republic of the Congo since independence (1960 to present),73 looted antiquities
during the Syrian Civil War (2011-present),74 and poached ivory by the Lord’s Resistance Army (active
1987-present).75

D. Developing Countries

Arms trafficking directly undermines development by eroding security. Conflict and insecurity drive
displacement and humanitarian crises, delaying human progress. Arms trafficking, as well as illicit
financial flows, stolen assets, and organized crime, are recognized as such serious impediments todevelopment that Target 16.4 of the Sustainable Development Goals calls on countries to significantly
reduce all of them by 2030.76
Aaron Karp, Nicholas Marsh, and Giorgio Ravagli, UNODC Study on Firearms 2015 (Vienna: United Nations Office on Drugs and Crime, 2015), 7,
55, https://www.unodc.org/documents/firearms-protocol/UNODC_Study_on_Firearms_WEB.pdf.
70Ibid., 7. Items include SALW, their parts and components, and ammunition.
71
Schroeder, “Dribs and Drabs: The Mechanics of Small Arms Trafficking from the United States,” 11.
72
Floreana Miesen, “Blood Diamonds Fuelled Sierra Leone’s Civil War,” D+C | Development and Cooperation, May 21, 2012, https://www.dandc.eu/
en/article/blood-diamonds-fuelled-sierra-leones-civil-war.
73“Global Minerals, Arms Smuggling Networks Fuel DR Congo Conflict – UN Report,” UN News Centre, December 7, 2009, http://www.un.org/apps/
news/story.asp?NewsID=33173#.V-kjxCErLIU.
74
Aryn Baker, “Syria’s Looted Past: How Ancient Artifacts Are Being Traded for Guns,” Time, September 12, 2012, http://world.time.com/2012/09/12/
syrias-looted-past-how-ancient-artifacts-are-being-traded-for-guns/.
75
Ledio Cakaj, Tusk Wars: Inside the LRA and the Bloody Business of Ivory (Washington, DC: The Enough Project, 2015), p25, footnote 85, http://enoughproject.org/reports/tusk-wars-inside-lra-and-bloody-business-ivory.
76“Sustainable Development Knowledge Platform: Goal 16,” United Nations, accessed September 25, 2016, https://sustainabledevelopment.un.org/
69							

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More than half a million people die on average each year from armed violence, and while armed violenceoccurs in every country, low- and middle-income countries suffer a disproportionate level comparedto the developed world.77 Besides the enormous human cost, armed violence diverts funding awayfrom development and damages infrastructure and industries. Governments are forced to spend larger
portions of GDP on law enforcement and the military rather than on the delivery of social services. They
may also have difficulty in providing services if some areas of the country are rendered inaccessible due
to violence. In addition, insecurity is a strong driver of capital flight and inhibitor of domestic resource
mobilization.
Instability in a country or region, such as civil war or political unrest, increases the demand for arms.
Strained situations can become even more volatile when communities or countries are inundated inweapons. The fragile sectarian climate of Lebanon, which has festered since the 1960s, has been
inflamed by the Syrian Civil War spilling over into the country; the porous border means that arms (andpeople) are flowing easily between the two countries.78
As mentioned earlier, local demand is normally satisfied by regional arms supply, keeping transaction
costs low. In unstable regions, weapons are typically recirculated from conflict to conflict. Even in postconflict environments, excess weapons “keep prices low and contribute to the risk of conflict throughout
the region for some time after the conflict has ended.”79

E. Recent Developments

Arms trafficking through online sales and purchases has grown with the development and spread of theinternet. Arms that are illegally sold to foreign buyers can be difficult to detect as the weapons and/or
components are frequently disassembled and mailed separately. A small amount of arms trafficking is
conducted on the dark web, but the bulk of online sales are through marketplaces on the surface web.80
Internet-based trafficking is ideal because it provides a good level of anonymity, is often unregulated,
and is difficult for authorities to control. In the United States, traffickers will purchase arms from online
dealers or classified ads, have them delivered to an intermediary address, then repackage the weapons
and illegally export them via post.81 This trend of online sales is not limited to the West; developing
countries, such as Libya and Yemen, also have healthy social media-based trades.82
Several terrorist attacks in Europe in 2015 and 2016 involved small arms, including reactivatedweapons. In the November 2015 Paris attacks, terrorists using assault weapons were responsible forthe overwhelming majority of those killed or injured.83 One Slovak company in particular, AFG Security,
was linked to reactivated weapons used in the Charlie Hebdo and kosher supermarket attacks in
January 2015 and the Thalys train attack in August 2015.84 In the attacks, deactivated guns were legallypurchased from AFG by intermediaries and then transported to Belgium, where they were restored to fullfunctionality.85 The July 2016 shooting at the Olympia shopping center in Munich involved the use of a
sdg16.
77
Luigi De Martino, “Reducing Armed Violence, Enabling Development” (Geneva: Small Arms Survey, July 2012), 1, http://www.smallarmssurvey.org/
fileadmin/docs/H-Research_Notes/SAS-Research-Note-19.pdf.
78
VICE News, Lebanon’s Illegal Arms Dealers (VICE News, 2014), https://www.youtube.com/watch?v=XxumsOQMxLE; Josh Wood, “Syria’s Unrest
Felt by Military in Lebanon,” The New York Times, February 15, 2012, International edition, http://www.nytimes.com/2012/02/16/world/middleeast/
syrias-unrest-felt-by-military-in-lebanon.html.
79
Killicoat, “What Price the Kalashnikov?,” 258.
80
Jessica Hullinger, “Do People Really Buy Guns On The Dark Web?,” Fast Company, January 7, 2016, https://www.fastcompany.com/3055187/dopeople-really-buy-guns-on-the-dark-web.
81
Schroeder, “Dribs and Drabs: The Mechanics of Small Arms Trafficking from the United States,” 4.
82
Saeed Al Batati, “Yemenis Trade in Weapons on Facebook,” Gulf News, April 4, 2014, http://gulfnews.com/news/gulf/yemen/yemenis-trade-inweapons-on-facebook-1.1312724; N.R. Jenzen-Jones and Graeme Rice, “The Online Trade in Light Weapons in Libya” (Geneva: Small Arms Survey,2016), 1, http://www.smallarmssurvey.org/fileadmin/docs/R-SANA/SANA-Dispatch6-Online-trade.pdf.
83“Paris Attacks: What Happened on the Night,” BBC News, December 9, 2015, http://www.bbc.com/news/world-europe-34818994.
84
Georgi Kantchev et al., “Slovakian Shop Is Eyed as Source of Guns in Prior Terror Attacks,” Wall Street Journal, November 27, 2015, http://www.
wsj.com/articles/slovakia-shop-believed-to-be-source-of-guns-in-two-french-terror-attacks-1448629216.
85
Until July 2015, Slovakia had ambiguous requirements for deactivation as well as loose regulations for the sale of decommissioned weapons.
Slovak law previously allowed those deactivating weapons to install several pins, also referred to as plugs, into the gun’s barrel to prevent it fromfiring lethal ammunition, however gun experts were able to restore functionality by changing the barrel. In addition, deactivated weapons did not need
to be registered. Ibid.; Roman Cuprik, “Slovakia Was a Gun Shop for Terrorists, Crooks,” The Slovak Spectator, August 3, 2016, http://spectator.sme.
sk/c/20229910/slovakia-was-a-gun-shop-for-terrorists-crooks.html.

Global Financial Integrity18reactivated handgun that had been sold as a prop weapon.86
The European Single Market harmonizes legislation to allow for the free movement of people, goods,
capital, and services throughout the European Union (EU), however the lack of unified gun control
laws has left the EU vulnerable to arms trafficking. Countries with lower threshold requirements forthe sale/purchase of arms as well as weapon deactivation serve as an easy entry point. The European
Commission proposed legislation in December 2016 to strengthen and harmonize EU rules on firearms,
including the regulation of deactivated firearms.87 Cooperation will be extremely important in order tocurtail the illegal arms trade and keep weapons out of the hands of criminals and terrorists.

F. Summary

At an estimated US$1.7 billion to $3.5 billion in 2014, the value of SALW trafficking is not among
the highest examined in this report, but the human cost is exorbitant. Arms trafficking has always
empowered organized crime groups and insurgencies and fueled civil wars, and in recent years traffickedarms are increasingly being used in terrorist attacks around the world.
Small arms and light weapons may not pack the same punch as heavy weaponry, yet the sheer volume
being trafficked, their durable nature, and their universal availability causes havoc on a much greater
scale. Following the money is a key technique for combatting any illicit trade, however there are gaps
in the understanding of arms trafficking transactions. Further research into financial flows related tothe illicit arms trade is necessary to better understand, and therefore fight, arms trafficking. This isparticularly important with the growing role the internet and social media are playing in SALW trafficking
over the globe.

“Munich Shootings: What We Know about the Olympia Shopping Centre Attack,” BBC News, July 24, 2016, http://www.bbc.com/news/worldeurope-36879067.
87“Firearms: Agreement on Commission Proposal to Increase Citizens’ Security,” European Commission, December 20, 2016, http://europa.eu/rapid/
press-release_IP-16-4464_en.htm.
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Global Financial Integrity

20IV. Human Trafficking
A. Overview

Human trafficking is one of the fastest-growing transnational organized crime (TOC) markets and has thegreatest direct impact on individuals. For all the brutality and ruined lives it brings, human trafficking is
motivated by profit maximization: exploiting vulnerable people for labor or sex for money.88 Strong profits
and weak penalties have attracted a wide variety of illicit actors, from organized crime groups (OCGs) toterrorist organizations, operating both domestically and transnationally.
Human trafficking refers to the “recruitment, transportation, harboring or receipt of persons, by meansof coercion, abduction, deception or abuse of power or a vulnerability, for the purpose of exploitation,”with exploitation including, at a minimum, “sexual exploitation, forced labor, slavery or slavery-likepractices.”89 An estimated 21 million men, women, and children around the world are victims of humantrafficking.90

B. Value

Human trafficking is an extremely profitable business. The International Labor Organization (ILO)
estimates that human trafficking generates US$150.2 billion in profits each year.91 As shown in
Figure I, two regions—Asia-Pacific and Developed Economies and the European Union (EU)92 —areeach responsible for approximately one-third of the global profits, US$51.8 billion and US$46.9 billion
respectively, while the four remaining regions are responsible for the final third. There are approximately
11.7 million victims in the Asia-Pacific region, nearly eight times greater than Developed Economies andthe EU (1.5 million), yet the average annual profit per victim in the former is US$5,000 whereas the latter
is US$34,800.93

Figure I. Estimated Annual Profits from Human Trafficking by Region (US$ billion)
60
50
13.8
40

20.5

6.3
30
20

0.2
31.7

1.0

10
0

Asia-Paciﬁc

3.6

3.9
0.5

10.4

8.9

La6n America andthe Caribbean

AfricaForced Sexual Exploita6on

0.3

0.6
7.5

0.1
0.4

Middle East

Forced Domes6c Labor

26.5

14.3
Central andSouth-eastern
Europe and CIS

Developed
Economies andEUForced Non-Domes6c Labor

Source: International Labor Organization
Siddharth Kara, “Supply and Demand: Human Trafficking in the Global Economy,” Harvard International Review 33, no. 2 (2011): 66.
United Nations, Protocol to Prevent, Suppress and Punish Trafficking in Persons Especially Women and Children, Supplementing the United Nations
Convention against Transnational Organized Crime, 1953, http://www.ohchr.org/EN/ProfessionalInterest/Pages/ProtocolTraffickingInPersons.aspx.
90
International Labor Organization, Profits and Poverty: The Economics of Forced Labour (Geneva: International Labor Organization, 2014), 17, http://
www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/publication/wcms_243391.pdf.
91
Ibid., 13.
92
All developed and developing economies of the European Union plus all other developed countries in the world.
93
International Labour Organization, Profits and Poverty, 14, 17.
8889							

Transnational Crime and the Developing World21

According to ILO statistics, the greatest annual profits come from forced sexual exploitation (US$99
billion), with an average annual profit of US$21,800 per victim.94 The sex “industry” is illicit itself, so
prices, and thus profits, are elevated due to the risk, even though there are three times fewer victims (4.5
million) than forced labor (Figure II).95 There is a particularly strong demand for prostitution, the principal
form of sexual exploitation.

Figure II. Profits and Victims
Es*mated Annual Proﬁts from Human Traﬃcking by
Sector (US$ billions)†

Es*mated Number of Traﬃcking Vic*ms by Sector
2,200,000
Forced Sexual Exploita*on

4,500,000

51.2
Forced Labor Exploita*on

99.0
State-imposed Forced Labor

14,200,000

Source: International Labor Organization† Excludes state-imposed forced labor.
*Includes both domestic and non-domestic labor.

Forced labor exploitation affects the greatest number of victims (14.2 million, 68 percent), yet generates
less profits (US$51.2 billion) than sexual exploitation.96 There are many more industries involved (e.g.,construction, mining, and agriculture), hence there are a larger number of victims exploited. The averageannual profit per victim is US$2,300 from domestic labor and US$2,500 to $4,800 from non-domestic
labor.97 State-imposed forced labor represents less than 11 percent (2.2 million) of all human trafficking,including acts such as forced prison labor and military and paramilitary labor exploitation (excluding
compulsory service laws).98

C. Dynamics

There are an estimated 21 million victims of human trafficking around the world, exploited by individuals,
groups, and businesses for sexual or labor purposes.99 Sexual exploitation most often refers toprostitution but can also include pornography. Labor exploitation typically involves low- or unskilled jobs
in industries such as agriculture, forestry, fishing, construction, mining, and manufacturing. Domestic
work is a subset of labor, representing approximately 24 percent of all labor exploitation and generating
the lowest level of profit.100
Trafficking in persons exploits some of the most vulnerable populations and communities, such as thepoor, young, homeless, uneducated, unemployed, and marginalized, as well as illegal migrants andothers in crisis situations. Examples of high-risk human trafficking situations include the 2004 Indian
Ocean earthquake and tsunami, the 2010 Haiti earthquake, the Syrian Civil War, and the ongoingsectarian conflict in the Central African Republic. These crises displace victims from their families,
homes, and communities, as well as disrupt government services and security, which can leave themeconomically, socially, and physically vulnerable. Marginalized communities, such as indigenous groups,
the lesbian, gay, bisexual and transgender (LGBT) community, religious minorities, and low social classes
face greater risks in countries where discrimination and isolation reduce social and state protection.
Ibid., 13, 16.
Ibid., 17.
Ibid., 13, 17.
97
Domestic labor refers to labor performed in a household, not the country in which the labor is performed (i.e., in the victim’s home country). Ibid.,
16.
98
Ibid., 17.
99
Ibid.
100
Ibid., 13, 18.
94
95
96

Global Financial Integrity

22

Human trafficking and human smuggling both involve the movement of people, yet there are majordifferences regarding transnationality, purpose, consent, and victimization (Table G).101 Human trafficking
involves the involuntary exploitation of a person and does not require the crossing of international
borders. Human smuggling is the voluntary transportation of a person across an international border.
Migrants may be exploited, but that is not the primary purpose of the activity.

Table G. Human Smuggling vs. Human Trafficking
Criteria
Human Smuggling
Human Trafficking
Transnationality
Required
Not Required
PurposeTransporation
Exploitation
Consent
Voluntary
Involuntary
Victimization
Country/Border
PersonSource: Financial Action Task Force; Christopher Johnson

Illegal migrants, particularly those who turn to smugglers, are more susceptible to exploitation. Similar
to organ trafficking, human smuggling can turn into trafficking if the smuggler coerces or forces
undocumented migrants into labor or sex work in order to pay for the smuggler’s services.102 Illegal
migrants are vulnerable because their status makes them less likely to seek help from authorities or toknow from whom to solicit aid; they may not even speak the local language or be aware of their rights.
In Southeast Asia, individuals regularly go from being smuggled for employment to trafficked for labor
exploitation, particularly in the Thai and Indonesian fishing industries. Smugglers here frequently act
more as brokers, arranging employment and transportation for migrants, many of whom are from
Myanmar.103 In addition to the omission of contracts and opacity surrounding employment terms andconditions, brokers will charge “recruitment” fees that individuals must work off.104 Fishing operations
that use slave labor have a high incidence of illegal, unreported, and unregulated (IUU) fishing, both ofwhich are tainting global supply chains.105
Recruiters typically employ deception in order to exploit individuals, such as lying about the nature of
the work. Women and girls are subjected to sex trafficking in illegal mining and logging camps, often
being fraudulently recruited to work as cooks in the camps but then coerced or forced into prostitution
or sexual slavery.106 Another common method used throughout the world is debt bondage—using loans,
cash advances, extreme interest rates, and/or excessive fees to trap victims into continued servitude.
These debts are acquired or inherited, and it is not uncommon for more than one generation of afamily to be engaged in forced labor. Their labor goes towards paying off the initial debt, so victims are
generally not able to afford basic expenses like food, water, shelter, and medicine; their “employers” or
the traffickers provide these at exorbitant prices, tacking on the cost and continually growing the debt.107
The individuals and businesses that engage in debt bondage receive financial benefits far greater than
the initial amount that they loan.
Financial Action Task Force, Money Laundering Risks Arising from Trafficking in Human Beings and Smuggling of Migrants (Paris: Financial Action
Task Force, 2011), 12, http://www.fatf-gafi.org/media/fatf/documents/reports/Trafficking%20in%20Human%20Beings%20and%20Smuggling%20
of%20Migrants.pdf; Christopher Johnson, “Combating Human Trafficking” (Homeland Security Investigations, 2015), http://wcaml.llobe.com/wpcontent/uploads/2015/02/Combatting-Human-Trafficking.pdf.
102
Clare Ribando Seelke, “Trafficking in Persons in Latin America and the Caribbean” (Washington, DC: Congressional Research Service, 2015), 6,
https://www.fas.org/sgp/crs/row/RL33200.pdf.
103
United Nations Office on Drugs and Crime, Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment (Vienna: United Nations Office on Drugs and Crime, 2013), 9, 11, https://www.unodc.org/documents/data-and-analysis/Studies/TOCTA_EAP_web.pdf.
104
International Organization for Migration, Trafficking of Fishermen in Thailand (Geneva: International Organization for Migration, 2011), 19, https://publications.iom.int/system/files/pdf/traffickingoffishermenthailand.pdf.
105
Valerie Farabee, “Pirate Fishing, Slavery and Third Party Risk,” White Paper, Expert Talk (Washington, DC: Thomson Reuters, 2016), https://risk.
thomsonreuters.com/content/dam/openweb/documents/pdf/risk/white-paper/pirate-fishing-slavery-and-third-party-risk-white-paper.pdf.
106
Julia M. Urrunaga et al., The Laundering Machine: How Fraud and Corruption in Peru’s Concession System Are Destroying the Future of Its Forests(Washington, DC: Environmental Investigation Agency, 2012), 16, http://www.eia-international.org/wp-content/uploads/The-Laundering-Machine.pdf;
U.S. Department of State, Trafficking in Persons Report 2016 (Washington, DC: U.S. Department of State, 2016), 65, http://www.state.gov/documents/organization/258876.pdf.
107
U.S. Department of State, Trafficking in Persons Report 2015 (Washington, DC: U.S. Department of State, 2015), 126, http://www.state.gov/documents/organization/245365.pdf.
101							

Transnational Crime and the Developing World23

No country, developed or developing, is immune from cross-border human trafficking. In countries withweak governance, porous borders facilitate many types of trafficking, as goods, people, and money canmove relatively undetected and unencumbered. OCGs also exploit countries with open borders designed
to facilitate the legal movement of money and persons, especially in regional economic communities.
Free movement within the EU, afforded by the Schengen Agreement, allows OCGs engaged in humantrafficking to easily conduct business between countries, yet law enforcement operations are stillhindered by state borders. Europol estimates that during 2013 and 2014, 71 percent of identified victims
and 70 percent of suspected traffickers were EU nationals.108
Traffickers range from individuals, such as the victim’s relatives, community members, independent
brokers, and businessmen, to local gangs and sophisticated domestic and international groups.
These different actors participate in a variety of roles, including recruiters, transporters, managers, andbuyers, and collaborate on a situational basis. The groups and networks are frequently based on family,community, and/or ethnic ties.
Sex trafficking occurs everywhere, however urban areas, popular tourist destinations, and large events(e.g., World Cup, Olympics) generally experience higher rates.109 OCGs are directly and indirectly
involved in sex trafficking: owning brothels earns direct income, and taxing prostitutes and/or pimps
who operate in their territory provides indirect revenue streams. Both direct and indirect participation intrafficking provides criminals with high profits and low risks.110 It is difficult for law enforcement to identify
traffickers and victims due to the underground nature of the crime; some individuals who are trafficked
may not understand that they are victims, or are isolated and controlled by traffickers, reducing the
likelihood of them seeking help.111
Many OCGs involved in human trafficking are engaged in other criminal activities as well, sometimes
even using trafficking victims to perpetrate these crimes. In Europe, OCGs are most often involvedin fraud, such as tax, social benefits, and identity, but also drug and arms trafficking and humansmuggling.112 For groups also engaged in drug trafficking, victims can serve as ideal drug mules since
they are already coerced, inexpensive, and considered disposable. Some OCGs force children to engage
in criminal activity, as children typically receive much more lenient punishment, if any, if caught by law
enforcement.113
Human trafficking operates along basic economic principles. With few barriers to entry, there are a
multitude of suppliers (traffickers) offering differentiated products (trafficking victims) to meet the demand(employers) for cheap labor.114 Many people stand to gain from human trafficking, from recruiters andtransporters to brokers and money launderers, yet it is the individuals and businesses that exploit forcedlabor by underpaying or not paying workers that profit the most.115 These individuals and businesses
utilize cheap labor as a “cost-effective” means of supplying goods and services.
Human trafficking, particularly for sexual exploitation, is a cash-intensive criminal enterprise. As such,money laundering schemes often revolve around cash couriers, money service businesses (MSBs),
cash-intensive businesses, and structuring—intentionally organizing a cash transaction (e.g., breaking
Europol, “Situation Report: Trafficking in Human Beings in the EU” (The Hague: Europol, 2016), 9, https://ec.europa.eu/anti-trafficking/sites/antitrafficking/files/situational_report_trafficking_in_human_beings-_europol.pdf.
109
Ribando Seelke, “Trafficking in Persons in Latin America,” 1.
110Organization for Security and Co-operation in Europe, Leveraging Anti-Money Laundering Regimes to Combat Trafficking in Human Beings (Vienna:
Organization for Security and Co-operation in Europe, 2014), 13, http://www.osce.org/secretariat/121125?download=true.
111
Isolation includes the physical deprivation of liberty, or, if trafficked internationally, the inability to speak a foreign language. Traffickers use threatsof violence, drugs, illegal migrant status, and control of passports, among other tactics, to intimidate victims
112
Europol, “The THB Financial Business Model: Assessing the Current State of Knowledge” (The Hague: Europol, 2015), 9, https://ec.europa.eu/antitrafficking/sites/antitrafficking/files/europol_financial_business_model.pdf.
113
Europol, “Child Trafficking for Exploitation in Forced Criminal Activities and Forced Begging” (The Hague: Europol, October 2014), 2, https://
ec.europa.eu/anti-trafficking/sites/antitrafficking/files/child_trafficking_for_exploitation_in_forced_criminal_activities.pdf; U.S. Department of State,
Trafficking in Persons Report 2016, 72, 99; David Gagne, “Organized Crime Profits from Modern Slavery in Latin America,” InSight Crime, June 3,
2016, http://www.insightcrime.org/news-analysis/how-organized-crime-profits-off-modern-slavery-in-latin-america.
114
Elizabeth M. Wheaton, Edward J. Schauer, and Thomas V. Galli, “Economics of Human Trafficking,” International Migration 48, no. 4 (August 2010):
118, doi:10.1111/j.1468-2435.2009.00592.x.
115
International Labour Organization, Profits and Poverty, 9.
108

Global Financial Integrity24

up deposits) to avoid currency reporting requirements.116 Traffickers regularly send multiple individuals,
sometimes their victims, to structure transactions, a technique known as smurfing; this allows OCGs
to mask the true beneficial owners. Money transmitters are useful in repatriating proceeds to source
countries, with funds being sent by victims to families back home or by the groups to finance othercriminal activities.

Table H. Regional Trends in Laundering the Proceeds of Human Trafficking
RegionCommon Money Laundering Schemes
AfricaInformal banking, cash couriers, real estate
Americas
Casinos, wire transfers, trade-based money laundering
Asia
Informal value transfer systems
EuropeCash-intensive businesses, real estate, high-value goods
Source: Organization for Security and Co-operation in Europe

Established OCGs engaged in multiple forms of TOC may employ more sophisticated or complex money
laundering schemes, such as fictitious or fraudulent loans, the buyout of existing businesses to serve
as front companies, and the use of offshore companies to purchase real estate.117 These groups may
already own or use legal cash-intensive front businesses, often in the entertainment, food, retail andtrade sectors, which allow them to comingle licit and illicit proceeds.118 Front companies in the hospitality
industry provide OCGs both a legal and public business from which to operate, particularly for sex
trafficking, and facilitates the laundering of proceeds. Companies engaged in cross-border trade alsouse misinvoicing to launder and repatriate their illicit proceeds.

D. Developing Countries

Human trafficking has serious security and economic impacts on individuals, communities, andcountries. Trafficking in persons is a growing transnational crime, increasing the revenues for OCGs andterrorist groups, and combating it is stretching the resources of developing countries. Countries also losemuch-needed remittances, human capital, and tax revenues as a result of trafficking and forced labor.
The criminal activity and corruption associated with human trafficking undermine domestic stability
and rule of law.119 All countries—source, transit, and destination—experience a drain on resources due
to money spent on combatting human trafficking, particularly through criminal justice (e.g., law andimmigration enforcement) as well as victims assistance.
When victims are trafficked internationally, source countries lose human resources without acorresponding increase in remittances. Regular and irregular migration constitute a loss of humancapital for source countries,120 however migrants receive relatively fair wages and typically send a
portion of their earnings back to their home countries. Remittance flows are critical for developing
countries’ economies and have an important impact on human welfare and development. In 2015, formal
remittances to developing countries were worth US$430 billion, more than three times greater than theamount received in official development assistance (US$131.6 billion) that same year.121
Victims of human trafficking receive little or no income, thereby significantly reducing any remittances
they may send home. When trafficking victims are paid a wage, the remittances to their home country
are typically much lower than regular or irregular migrants who are not exploited. A study of sex

Organization for Security and Co-operation in Europe, Leveraging Anti-Money Laundering Regimes, 14.
Financial Action Task Force, Money Laundering Risks, 33–34.
Europol, “THB Financial Business Model,” 7–8.
119
United Nations Office on Drugs and Crime, An Introduction to Human Trafficking: Vulnerability, Impact and Action (Vienna: United Nations Office on
Drugs and Crime, 2008), 94, http://www.unodc.org/documents/human-trafficking/An_Introduction_to_Human_Trafficking_-_Background_Paper.pdf.
120
Irregular migration takes place outside of regulatory norms (e.g., undocumented, working on a tourist visa) but is voluntary, unlike transnational
human trafficking and forced labor.
121“Remittances to Developing Countries Edge Up Slightly in 2015,” World Bank, April 13, 2016, http://www.worldbank.org/en/news/pressrelease/2016/04/13/remittances-to-developing-countries-edge-up-slightly-in-2015; “Development Aid Rises Again in 2015, Spending on Refugees
Doubles,” Organisation for Economic Co-Operation and Development, April 13, 2016, http://www.oecd.org/dac/development-aid-rises-again-in2015-spending-on-refugees-doubles.htm
116
117
118

							

Transnational Crime and the Developing World25

trafficking from Bulgaria to Western Europe found that, despite other promises, prostitutes often
received only 10 to 30 percent of their earnings, generally after they had covered any expenses such asaccommodation, transportation, or protection.122
Countries in which victims are exploited also experience serious economic impacts due to tax revenue
loss and distorted market competition. Businesses that use forced labor likely engage in tax evasion by
not paying payroll taxes, thereby reducing government revenues.123 These businesses also distort themarket by creating unfair competition for legitimate businesses. Forced labor greatly reduces input andproduction costs, allowing companies to charge lower prices, which undercuts companies that adhere tofair labor practices.124
The greatest impacts of human trafficking are felt by the victims. Trafficking subjects victims to a myriadof human rights abuses including the deprivation of liberty and the violation of the right to fair wages
and security of person. Victims of sexual exploitation regularly face social consequences such as
stigmatization when they return home. Human trafficking harms families and communities as well. In
some countries, such as India, whole families can be trapped by debt bondage, as individuals are forced
to assume the debts taken on by their parents and grandparents.
Political, economic, environmental, and social crises as well as armed conflict exacerbate pre-existing
conditions that already leave individuals and populations vulnerable to human trafficking. The economic
impacts can force individuals to seek alternative income sources, overlooking possible risks to theirsafety and freedom, while reallocated government services reduce social protections for citizens.125 The
heightened insecurity and weaker rule of law allow OCGs and terrorist organizations to operate relatively
unencumbered.

E. Recent Developments

Trafficking in persons is frequently associated with OCGs, but terrorist and insurgent groups also play aserious role. These groups use labor and sexual exploitation as a tactic to acquire fighters and funding
as well as to subjugate opponents. The spread of the internet has provided traffickers with additional,
far-reaching means to reach both potential victims and victimizers.
Human trafficking is playing a growing role in terrorist and insurgent activities and groups. Unlike humantrafficking operations run by OCGs, which are primarily motived by financial gain, terrorist organizations
also use human trafficking as an operational tool. According to Louise Shelley, founder and director of
the Terrorism, Transnational Crime and Corruption Center (TraCCC), terrorist groups engage in humantrafficking to increase the number of fighters, to repress and weaken their enemies, and for financial
gain.126
The Islamic State of Iraq and the Levant (ISIL) has been involved in the trafficking of women andchildren, primarily from minority groups, to serve as sex slaves for its fighters. With prices for female
slaves as low as US$13 to $25, it is likely that this trafficking is serving a greater role in rewarding andboosting the morale of their fighters as well as enemy suppression than as a major source of financing
for the group.127 Groups including ISIL, the Lord’s Resistance Army (LRA), and the Revolutionary United
Front (RUF) also have used human trafficking to directly acquire child soldiers, frequently by forcible
recruitment.128 Boko Haram has forced kidnapped girls and women to become wives for their fighters,
Georgi Petrunov, “Managing Money Acquired from Human Trafficking: Case Study of Sex Trafficking from Bulgaria to Western Europe,” Trends in
Organized Crime 14, no. 2/3 (June 2011): 173, doi:10.1007/s12117-011-9127-z.
123
United Nations Office on Drugs and Crime, Introduction to Human Trafficking, 94.
124International Labour Organization, Profits and Poverty, 12.
125
U.S. Department of State, Trafficking in Persons Report 2016, 32.
126
Louise I. Shelley, “ISIS, Boko Haram, and the Growing Role of Human Trafficking in 21st Century Terrorism,” The Daily Beast, December 26, 2014,
http://www.thedailybeast.com/articles/2014/12/26/isis-boko-haram-and-the-growing-role-of-human-trafficking-in-21st-century-terrorism.html.
127
Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (Paris: Financial Action Task Force,2015), 13, http://www.fatf-gafi.org/media/fatf/documents/reports/Financing-of-the-terrorist-organisation-ISIL.pdf; Shelley, “ISIS, Boko Harm, and theGrowing Role.”
128“History of the War: 1986 to Now,” Invisible Children, accessed January 9, 2017, http://invisiblechildren.com/challenge/history/; “Sierra Leone
Rebels Forcefully Recruit Child Soldiers,” Human Rights Watch, May 31, 2000, https://www.hrw.org/news/2000/05/31/sierra-leone-rebels-forcefully122

Global Financial Integrity

26and it has used some others as suicide bombers.129
As seen in other TOC markets, the internet has enabled human trafficking OCGs to expand theirbusiness and improve recruitment, transportation, control, and exploitation in their operations. Traffickers
use social media and deceptive online advertisements to recruit individuals for both sex and labor
trafficking.130 The internet has also provided additional advantages for sexual exploitation. OCGs have
expanded sex trafficking from the real world to cyber space, such as pornography, and are able to reacha greater number of clients through online advertisements and solicitation.131 In addition, the internet
offers less exposure for criminals, as they operate in relative anonymity from almost anywhere in theworld.

F. Summary

Human trafficking is one of the most profitable illicit markets studied in this report, generating more than
US$150 billion in profits each year. While most victims are trafficked for labor exploitation, trafficking forsexual exploitation generates the greatest profits. With 21 million victims, trafficking of persons also has
the greatest impact on human rights and security, especially in developing countries.
Traffickers exploit vulnerable populations through the use of deception, coercion, and force. Labor andsexual exploitation cause developing countries to lose human capital, remittances, and tax revenues,
creating obstacles to development. Trafficking also drives insecurity because the proceeds are used
to support OCGs and terror and insurgent groups. In recent years, terrorist and insurgent groups havebeen engaging in human trafficking to finance operations, recruit and/or reward fighters, and demoralize
opponents. The internet has also been providing traffickers with greater access to (potential) victims andvictimizers, allowing them to expand their business.

recruit-child-soldiers; Salam Khoder, “Iraq’s Child Soldiers: ‘What Happened to Our Boys?,’” Al Jazeera, June 8, 2016, http://www.aljazeera.com/
news/2016/05/iraq-child-soldiers-happened-boys-160523122213988.html.
129“They Were Freed from Boko Haram’s Rape Camps. But Their Nightmare Isn’t Over.,” Washington Post, April 3, 2016, https://www.washingtonpost.com/world/africa/they-were-freed-from-boko-harams-rape-camps-but-their-nightmare-isnt-over/2016/04/03/dbf2aab0-e54f-11e5-a9ce681055c7a05f_story.html; Dionne Searcey, “Boko Haram Turns Female Captives Into Terrorists,” The New York Times, April 7, 2016, https://www.
nytimes.com/2016/04/08/world/africa/boko-haram-suicide-bombers.html.
130
U.S. Department of State, Trafficking in Persons Report 2016, 75, 99, 121, 144, 218, 229, 273, 398.
131
Ibid., 10, 26, 172, 199, 306–7, 318.

							

Transnational Crime and the Developing World

27

Global Financial Integrity28

V. Illegal Organ Trade
A. Overview

The illegal organ trade is not one of the most lucrative transnational crimes, yet there are serious impacts
on human security. Also referred to as organ trafficking or trafficking in persons for the removal oforgans, the trade primarily involves the movement of people rather than harvested organs. With a severe
shortage of legally-sourced organs around the world, organs have become a commodity to be bought
and sold illicitly. The illegal organ trade has serious consequences for individuals and communities
around the world.
Desperation and greed drive the illegal organ trade. Both recipient and vendor are desperate: therecipient may be facing certain death unless they get a transplant; the vendor is seeking to alleviate
debt and/or escape poverty.132 Although both are breaking the law, neither fits the image of a typicalcriminal.133 It is the brokers and scouts, however, who truly embody “man’s inhumanity to man” instriving to profit from the suffering of others.134

B. Value

Even though only a fraction of all organ transplants rely on organs that have been illicitly acquired,
the revenues from the illicit trade are significant. The illegal organ trade conservatively generates
approximately US$840 million to $1.7 billion annually. This estimate comprises the “sales” of the top
five organs: kidney, liver, heart, lung, and pancreas. Table I provides the typical price range recipients pay
for these organs.

Table I. Retail Prices of Organs (US$)
No. Illegal Transplants
Organ(per year)
Kidney
7,995
Liver
2,615
Heart
654
Lung
469
Pancreas233
Total
11,966

Price Range$50,000 to $120,000$99,000 to $145,000$130,000 to $290,000$150,000 to $290,000$110,000 to $140,000$840 million to $1.7 billion

Transplants source: Global Observatory on Donation and Transplantation
See Appendix, Section C for a list of sources for retail prices.

It is estimated that up to 10 percent of all transplants rely on organs that have been illicitly acquired.
In 2014, around 120,000 organ transplants were performed throughout the world, suggesting thatapproximately 12,000 transplantations were performed illegally that year.135 Two-thirds of these illegaltransplants were kidney transplants, followed by liver, heart, lung, and pancreas transplants, respectively.
Using the 10 percent model generates a conservative estimate that nearly 8,000 illegal kidneytransplants were performed in 2014. Research by Organs Watch estimates that at least 10,000 kidneys
are sold every year, so the 8,000 figure in our report may well be understated.136
Kidneys are the most commonly transplanted organs, legally and illegally, because donors are able
to give up one kidney without considerable impacts to their health. Living donors increase the supply
The use of the term “vendor” does not necessarily indicate that the individual gave the organ willingly or without coercion, and/or that they werecompensated.
133
Commercial organ transplantation is illegal in every country with the exception of Iran, although the country places certain restrictions on sales/purchases.
134
Ric Esther Bienstock, Tales from the Organ Trade, Documentary (HBO, 2013).
135
Global Observatory on Donation and Transplantation, “Organ Donation and Transplantation Activities 2014” (Madrid: Organización Nacional deTrasplantes, April 2016), http://www.transplant-observatory.org/data-reports-2014/.
136
Scheper-Hughes, “Perpetual Scars,” 15.
132							

Transnational Crime and the Developing World29

of available organs, thus lowering the price paid by recipients and received by donors. For the liver,heart, lung, and pancreas, partial organ transplants from living donors are possible, but whole-organtransplants require deceased donors. Prices for these organs are almost double since they can be much
more difficult to acquire.

Table J. Kidney Transplants: Vendors vs. Recipients
VendorLocation ofTransplant
China
Costa Rica
KosovoPeru
Singapore
South Africa
South Africa

From
China
Costa Rice
Moldova
Peru
Indonesia
IsraelBrazil, Romania

United States

IsraelRecipient
Received$5,000$18,500$12,000$7,000$18,700$20,000$6,000MarkupFrom
IsraelIsraelCanadaMexicoSingapore
IsraelIsraelPaid$100,000$175,000$120,000$125,000$237,000$120,000$120,000

1,900%
846%
900%
1,686%
1,166%
500%
1,900%$10,000 Israel, U.S.

$120,000

1,100%

Sources: See Appendix, Section C for list of sources.

There is a significant disparity between the fee the vendor receives and the amount the recipient
pays. As seen in Table J, vendors frequently receive on average less than 10 percent of the recipient’s
payment, with the majority going to intermediaries. A scheme involving Netcare hospitals in South Africa
originally used vendors from Israel, who were paid US$20,000 for their kidneys, but the brokers later
switched to vendors from Brazil and Romania who were willing to accept US$6,000.137

Table K. Prices Paid to Kidney Vendors Around the World
Vendor Country
Price Low
Price High
Vendor Country
Bangladesh$2,000$3,000 Lebanon
Belarus$8,000$10,000 Moldova
Brazil$3,000$10,000 Nepal
Cambodia$3,000 Nicaragua
China$3,500$15,000 Pakistan
Colombia$1,000$3,000 Peru
Costa Rica
$5,500$6,000 Philippines
Egypt$2,000 Romania
India$1,000$6,000 Syria
Indonesia$5,000$23,000 Turkey
Iraq$1,000 United States
Israel$10,000$25,000 Viet Nam
Japan$16,000 Yemen
Jordan$500$5,000Price Low
$3,000$2,500$200$1,300$5,000$1,000$2,700$7,500$20,000$5,000Price High
$7,000$3,000$900$5,000$2,100$12,000$2,500$6,000$3,000$10,000$30,000$2,400$7,000Source: See Appendix, Section C for a list of sources.

The prices paid to vendors vary significantly and are strongly related to their nationality as well as where
the transplantation is performed. Table K shows variation in prices that vendors are paid around theworld. Vendors from developed countries almost always receive more than vendors from developing
countries, regardless of the organ. For example, the median payment received by vendors from137

Swingler, “The Dark World of Internet Kidney Trafficking.”

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developed countries is US$20,000, whereas vendors in developing countries receive US$3,000 for thesale of their kidney, a difference of more than 500 percent.

C. Dynamics

Much of the focus of the illegal organ trade is placed on the vendor and recipient, but there are a varietyof actors that play important roles in perpetrating this crime. A vendor, recipient, and transplant team, as
well as various individuals from the public and private sectors are involved in every transaction; brokers
are also involved in some instances. Table L describes the principal participants involved in the illegalorgan trade.

Table L. Participants in the Illegal Organ Trade
Vendor

The individual from whom an organ is harvested. Vendors are customarily from developing
countries and are poor and uneducated.

Recipient

The individual who purchases an organ/undergoes transplantation. Recipients are typically
middle- and high-income individuals from developed countries or high-income individuals
from developing countries.

Broker/Scout

The individual who recruits the vendor, recipient, and/or medical professionals. They often
operate in small, specialized syndicates that are well organized and well funded, withestablished networks for recruitment and transplantation. They are not necessarily involved inevery transaction, particularly those where the recipient recruits their own vendor.

Transplant teams

The surgeon(s), nephrologist(s), anesthesiologist(s), nurse(s), etc. involved in determining
whether the vendor and recipient are a medical match as well as performing the actual
transplantation.

The other actors, including medical services, such as hospitals, transplant centers, andlaboratories, where the transplantation and associated procedures are performed; medical
Public and private
tourism agencies, some of which coordinate transplant tourism; airlines; law enforcement;
sector services
and translators. The participation of some of these actors (e.g., airlines or insurancecompanies) does not mean that they are aware of the illegal activity.
The dynamics of the illicit organ trade follow basic economics, with both vendors and recipients being
price takers. Brokers are able to profit off the desperation of vendors and recipients by engaging inarbitrage; they pay vendors a pittance in comparison to the large fees they charge recipients. They
earn the largest share of the profit and face little risk of detection.138 Brokers and scouts, by creatingcompetition among donors, are able to increase their profits as vendors are willing to accept less moneyin order to be chosen.
There are four principal models of organ trafficking. The traditional kidney brokerage model sees thebroker recruit the vendor, recipient, and surgeon. The emerging model for kidney transplants sees therecipient recruit the vendor themselves.139 Recipient and vendor frequently connect online, throughsocial media and transplant blog sites, but on the dark web as well. The recipient can often find willingtransplant surgeons by going through agencies or medical centers that cater to medical tourism. Thesebusinesses usually connect patients with medical professionals in foreign countries for legal procedures,such as plastic surgery or dental work, however some agencies also facilitate illegal transplantations.
Mirroring tactics used in human trafficking, some brokers or recruiters have lured individuals with thepromise of work abroad, only to be forced to sell a kidney upon arrival to their destination. A variation ofthis sees a creditor, such as a landlord or smuggler, coerce an individual into selling a kidney in order toMichael Bos, Trafficking in Human Organs (Brussels: Policy Department, Directorate-General for External Policies, European Parliament, 2015), 25,
http://www.europarl.europa.eu/RegData/etudes/STUD/2015/549055/EXPO_STU(2015)549055_EN.pdf.
139
Campbell Fraser, “Human Organ Trafficking: Understanding the Changing Role of Social Media and Dark Web Technologies 2010-2015” (Presentation, George Mason University, Fairfax, Virginia, January 21, 2016).
138							

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settle a debt. The creditor, essentially acting as a recruiter, usually receives a finder’s fee from the broker
that is greater than what the vendor actually owes them (e.g., a debtor sells their kidney for US$3,000,
and repays the US$300 owed to the creditor, but the creditor also receives a US$500 fee for recruiting
the debtor/vendor).140
There are also instances where an individual is killed for their organs. China previously had a policy offorced organ donation from executed prisoners, harvesting organs via a reverse-matching scheme;141
the country largely moved toward ending this practice in 2015.142 Minority groups, particularly those thatare persecuted, are liable to be targeted due to their social status. The Special Investigative Task Force,assembled by the European Union to investigate crimes committed during the Kosovo War (1998-1999),
found compelling evidence that ethnic minorities were killed for organ trafficking on a limited scale,having been authorized by senior officials from the Kosovo Liberation Army.143 Killing for the purpose oforgan extraction happens on a limited scale in comparison to the number of vendors who choose, withor without coercion, to sell an organ.
Conflict zones are ideal for recruitment, as refugees and internally-displaced persons are more
vulnerable and desperate. Like other offenses such as human trafficking and sexual assault, organ
trafficking compounds the devastation and suffering of those living in refugee camps. These individuals,
with limited employment options and having left most of their possessions behind, feel compelled to sellan organ in order to try to support themselves and their family.

D. Developing Countries

Compared to other illicit trades, organ trafficking has a much greater impact at the personal andcommunity level than it does on the economy or security of a country. The vast majority of vendors arefrom developing countries and are poor, uneducated, and desperate. For many, their kidney is their
only valuable possession. Most seek a quick payment to alleviate an immediate debt, others to raisethemselves out of poverty. Some end up with chronic health complications. Few are better off.
For vendors, selling an organ can have negative health and financial consequences. Would-be vendors
typically have little to no formal education, and brokers and scouts are able to convince them that sellinga kidney is a safe, advantageous transaction. The brokers downplay the risk of future complications—sometimes even doctors tell potential vendors that their kidney will grow back.144 Serious post-operativecomplications, such as infection, chronic pain, fatigue, and impaired function of the remaining kidney,are common.
These complications, besides the obvious impact on the vendor’s health, sometimes actually drive avendor deeper into debt. Vendors are typically employed in manual labor and are unable to return towork, sometimes permanently, after the operation. Some vendors are forced to use their fee, or evenborrow money, to pay for medicine and follow up care.145 What seemed like a step out of poverty has
frequently left vendors in a worse position than before the surgery.
Selling an organ provides quick cash, but the money rarely has a long-lasting benefit to the vendor or thecommunity. Previous vendors often recruit their family, friends, and neighbors to earn extra income. If asignificant number of individuals in a village choose to sell an organ, their inability to work saps humanresources from the community. Ultimately, these communities will be left behind, unable to advance atthe same rate as other communities, and the consequences can extend across multiple generations.
Ibid.
Reverse-matching of prisoners to recipients involves executing a prisoner based on the need and compatibility of a specific pre-selected
recipient(s), rather than executing a prisoner and then finding a recipient(s) who is compatible.
142
Vivekanand Jha, “Reforms in Organ Donation in China: Still to Be Executed?,” Hepatobiliary Surgery and Nutrition 4, no. 2 (2015): 139,
doi:10.3978/j.issn.2304-3881.2015.03.02; Fraser, “Human Organ Trafficking.”
143
Clint Williamson, “Statement of the Chief Prosecutor of the Special Investigative Task Force,” Special Investigative Task Force, July 29, 2014,
http://video.consilium.europa.eu/en/embed/474bd27f-2151-40fa-be5e-dc2d63b01700.
144
Ulrike Putz, “Lebanese Black Market: Syrian Refugees Sell Organs to Survive,” Spiegel Online, November 12, 2013, http://www.spiegel.de/international/world/organ-trade-thrives-among-desperate-syrian-refugees-in-lebanon-a-933228.html; Babson College, “The Price of Life: Responding to the
Global Black Market in Illicit Organs,” (Webinar, Initiative on Human Trafficking and Modern Slavery, June 17, 2015).
145
The Cruelest Cut - Pakistan’s Kidney Mafia, 2007, https://www.youtube.com/watch?v=vi7A_jK64qc.
140
141

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E. Recent Developments

The considerable upsurge in migration from Africa and the Middle East has put more people at risk of
exploitation. There are reports of organ trafficking merging with human smuggling in Africa. Migrants
heading to Israel via Egypt or through North Africa to Europe are targeted by smugglers for organ
trafficking. Smugglers taking migrants across the Mediterranean have coerced migrants into sellinga kidney in order to cover their travel costs. Some smugglers are allegedly selling migrants to organ
traffickers, however independent observers have yet to verify these reports.146
Brokers have wasted no time in targeting the Syrian refugees in the Middle East. The refugees arereportedly being compelled to sell a kidney, to earn money to build a new life within the region or to pay
for their and/or their family’s passage to Europe.147 Syrian officials estimate that between 18,000 and
20,000 Syrians have sold an organ, chiefly kidneys, since the beginning of the country’s civil war.148
At the time of writing there are speculations about the Islamic State of Iraq and the Levant’s (ISIL)
participation in organ harvesting, but no concrete evidence has come to light.149 According to a fatwa
released in January 2015, ISIL does sanction the harvesting of organs from captured “apostates” togive to “Muslims in need.”150 If ISIL is engaged in organ trafficking, it is unlikely that this is providing asignificant source of funding, especially in comparison to the money they are estimated to be gettingfrom extortion and oil theft, among other crimes.

F. Summary

Illicitly acquired organs are only involved in up to 10 percent of all transplants, but organ trafficking
generates US$840 million to $1.7 billion annually. The vast majority of vendors are from developing
countries and are poor, uneducated, and desperate, while recipients are generally middle- to highincome individuals from developed countries. But they are united in their desperation to improve theirlives. It is typically the broker that benefits the most, paying a pittance to the vendor while charging therecipient an exorbitant fee.
The illicit organ trade compounds the devastation of poverty and conflict. For many vendors, selling anorgan appears to be a simple, quick solution to financial troubles, but a good number suffer from postoperative complications that push them deeper into debt. With a lot of individuals from the same village
choosing to sell an organ, human resources can be sapped from communities, causing damage that
can take generations to heal. The economic, social, and political upheavals that have occurred overthe last decade have increased the number of individuals, particularly migrants, who are vulnerable toexploitation through the illegal organ trade.

McKenna, “Migrants Who Cannot Pay Are Being Sold for Organs, Smuggler Tells Italian Authorities”; Barbie Latza Nadeau, “Italy’s Gruesome Migrant Organ Transplant Murders,” The Daily Beast, July 6, 2016, http://www.thedailybeast.com/articles/2016/07/06/italy-s-gruesome-migrant-organtransplant-murders.html.
147
Fraser, “Human Organ Trafficking”; Putz, “Lebanese Black Market.”
148
Ahmad Haj Hamdo, “The Underbelly of Syria’s War: A Thriving Trade in Human Organs,” UPI, May 12, 2016, http://www.upi.com/Top_News/WorldNews/2016/05/12/The-underbelly-of-Syrias-war-a-thriving-trade-in-human-organs/5301462896201/.
149
Ray Sanchez, “United Nations Investigates Claim of ISIS Organ Theft,” CNN, February 19, 2015, http://www.cnn.com/2015/02/18/middleeast/isisorgan-harvesting-claim/index.html; Fraser, “Human Organ Trafficking.”
150
Warren Strobel, Jonathan Landay, and Phil Stewart, “Exclusive: Islamic State Sanctioned Organ Harvesting in Document Taken in U.S. Raid,”
Reuters, December 25, 2015, http://www.reuters.com/article/us-usa-islamic-state-documents-idUSKBN0U805R20151225.
146							

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VI. The Illicit Trade in Cultural Property
A. Overview

The illicit trade of cultural property is a far more corrupt and impactful crime than it appears.151 It covers
a wide range of activities, from the theft of artwork from museums and the illicit excavation and lootingof archaeological sites, to the trafficking of cultural property during armed conflict and the use of fakedor forged documentation to enable both import and export as well as transfers in ownership.152 The
demand typically comes from developed countries, and in the case of antiquities trafficking, the supply
often comes from developing countries.
Major art heists grab the headlines, yet it is the volume of smaller, modest thefts that actually makeup the majority of the illicit art market. The looting of antiquities presents the greatest challenge incombatting art crime, because it is difficult to detect artifacts plucked from obscurity. Ingrained secrecy,lack of oversight, and the use of the global shadow financial system have allowed the illicit art andantiquities market to thrive in the shadow of the licit market.153

B. Value

According to Robert Wittman, former Federal Bureau of Investigation (FBI) Special Agent and founder ofthe Bureau’s National Art Crime Team, fraud is the major component of art crime, accounting for up to
80 percent of the illicit art market, which is estimated to be worth US$6 billion to $8 billion annually.154
Assuming that fraud also constitutes 80 percent of the value of global art crime, the global annual
revenue generated from the illicit trade in cultural property is estimated at approximately US$1.2
billion to $1.6 billion.
The extent of global art theft and antiquities trafficking is likely underestimated due to many thefts being
unnoticed or unreported. Those individuals and institutions who do not perform regular audits of theircollection may not even realize when an item has gone missing.155 Bonnie Magness-Gardiner, managerof the FBI’s Art Theft Program, notes that the artwork “could be in a storage facility, or in the basementof someone’s house, and it can often be years before anyone notices it’s gone.”156 Additionally, police
often do not distinguish between the theft of art and antiquities and other more common property
crimes, which makes it difficult to parse instances of art theft from official data.
The market for stolen art is comprised mostly of moderately priced, lesser-known pieces, which attractless scrutiny.157 The theft of artwork by distinguished artists such as Rembrandt and Picasso only
periodically inflates the value of the illicit art market, as is seen in Table M.

UNESCO defines cultural property as any property which, for either religious or secular grounds, is defined by a state, society, or people as “beingof importance for archaeology, prehistory, history, literature, art or science.” This includes items found through archaeological excavations, historicalmonuments, rare collections of flora and fauna, antiquities more than one hundred years old, and items of artistic interest such as paintings, sculptures, and engravings. See UNESCO, “Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership ofCultural Property” (1970), 4.
152“Fighting Illicit Traffic,” International Council of Museums, accessed March 29, 2016, http://icom.museum/programmes/fighting-illicit-traffic/. For
the purpose of this report, fraud, forgery and vandalism are not included in the definition of the illicit trade in cultural property.
153
The illicit art and antiquities markets are defined as the markets for stolen art and looted/trafficked antiquities, respectively, for the purposes of thisreport.
154
John Powers, “Fakes, Forgeries and Dirty Deals: Global Fight against Amorphous Art Fraud,” Association of Certified Fraud Examiners, February
2016, http://www.acfe.com/article.aspx?id=4294991131; Kris Hollington, “After Drugs and Guns, Art Theft Is the Biggest Criminal Enterprise in theWorld,” Newsweek, July 22, 2014, http://www.newsweek.com/2014/07/18/after-drugs-and-guns-art-theft-biggest-criminal-enterprise-world-260386.
html.
155
“Stolen Items Difficult to Trace, Chance of Recovery Slim,” The Buffalo News (New York), July 24, 2015.
156
James Tarmy, “What Happens to Stolen Art After a Heist?,” Bloomberg.com, June 15, 2015, http://www.bloomberg.com/news/articles/2015-06-15/what-happens-to-stolen-art-after-a-heist-.
157
Anthony Amore, Interview by the author, March 1, 2016; Ilana Ozernoy, “The Art of the Heist,” U.S. News & World Report, October 10, 2005.
151							

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Table M. Notable Art Heists
Year
Artwork Stolen

Location

Estimated Value

1911

Mona Lisa by da Vinci

The Louvre
Paris, France

1990

13 pieces including Storm on the Sea ofGalilee by Rembrandt and The Concert
by Vermeer

Isabella Stewart Gardner Museum
Boston, Massachusetts, United States$500 million

1991

20 paintings including Sunflower and
The Potato Eaters by van Gogh

The Van Gogh Museum
Amsterdam, Netherlands$500 million

2008

4 paintings including Poppies near
Vetheuil by Monet and Boy in a Red
Waistcoat by CézanneFoundation E.G. Bührle
Zurich, Switzerland$163 million

2010

5 pieces including Le Pigeon aux petispois by Picasso and La Pastorale byMatisseMusée d'Art Moderne de la Ville de Paris
Paris, France$123 million

2004

The Scream (1910) and Madonna by
Munch

1994

The Scream (1893) by Munch

2002

Two pieces by van Gogh including
View of the Sea at Scheveningen

2007

Three pieces including Maya and Her
Private residence
Doll and Portrait of Jacqueline by Picasso Paris, France

2010

Poppy Flowers by van Gogh

2007

The Munch Museum
Oslo, Norway
National Gallery
Oslo, Norway
The Van Gogh Museum
Amsterdam, Netherlands

Mohamed Mahmoud Khalil Museum
Cairo, Egypt
Portrait of Suzanne Bloch by Picasso and São Paulo Museum of Art
O Lavrador de Café by Portinari
São Paulo, Brazil$794 million$121 million$100 million$100 million$68 million$55 million$55 million

2003

Madonna of the Yarnwinder by da Vinci

Drumlanrig Castle
Dumfriesshire, Scotland

1985

140 Maya, Aztec, Zapotec, and Miztec
artifacts, including jade and gold pieces

National Museum of Anthropology
Mexico City, Mexico>$27 million

2012

7 pieces including Tête d'Arlequin by
Picasso and Femme devant une fenêtre
ouverte by Gauguin

Kunsthal Museum
Rotterdam, Netherlands$24 million

2005

Reclining Figure, a 2-ton bronze
sculpture by Moore

Henry Moore Foundation
Much Hadham, England$5.3 million$47 to $79 million

Sources: See Appendix, seciton D for a list of sources.

There are several aspects of the licit fine art and antiquities market, particularly value and pricing, thatmake it favorable for money laundering. Economist Nouriel Roubini aptly stated: “While art looks as
if it is all about beauty, as a business it is full of shady stuff.”158 First, the legal art market generates
billions of dollars in sales every year—US$63.8 billion in 2015.159 The high value means that spurious
Henry Lydiate, “Regulating the Art Industry,” Artquest, 2015
The European Fine Art Foundation, “U.S. Art Market Reports Highest Ever Level of Sales While Overall Global Market Values Fall” (Press Release,
Helvoirt, Netherlands, March 2, 2016), https://www.tefaf.com/getattachment/Press/Press-releases/US-Art-market-reports-highest-ever-level-of-saleswhile-overall-global-market-values-fall.pdf?lang=en-US.
158
159

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or illicit transactions can get buried in the large volume of legal transactions. This is compounded by
the fact that more than half of transactions are conducted as private sales, which make them relatively
untraceable.
Second, unlike other high-value goods such as gold, there are no established world market prices formost cultural property. In addition, prices are subjective; some pieces may have intrinsic value to certain
buyers, making them willing to pay more. The Financial Action Task Force (FATF) notes that customs
agencies have greater difficulty in recognizing over- and under-invoicing when it involves complex goods
with “highly ‘speculative’ values.”160
Third, there is an overall absence of transparency or regulation of the art market. The market operates
without the safeguards required of other high-value, high-risk markets and industries, such as realestate, insurance, casinos, and dealers of precious stones and metals. Of 212 surveyed countries andjurisdictions, only 35 had anti-money laundering and combatting the financing of terrorism rules (AML/
CFT) on customer due diligence that specifically included dealers in art and/or antiquities.161 The vast
majority of countries also do not regulate the sale of art, unlike the sale of other high-value items such asreal estate and automobiles. There is no transaction record, no reporting to authorities, and no recordedtransfer of title. Kris Hollington makes a strong argument against the practice: “We wouldn’t buy a housewithout a deed, yet people do this with art worth millions of dollars all the time.”162
Finally, the art market is global, and the majority of pieces are easily portable. Similar to diamonds orgold, it can be much easier to transport and transfer artwork than the equivalent value in hard currency.
Art and antiquities also can serve as an alternative currency and be exchanged for other illicit goods
such as arms or drugs. This is not to say that the majority of the global art market, or even a robustminority, operates illicitly; nonetheless, opacity provides an environment for crime to flourish.

C. Dynamics

With movies such as Ocean’s Twelve, Entrapment, and The Thomas Crowne Affair, Hollywood andpopular culture have promoted the idea that art theft is a glamorous, highly organized act perpetrated
by sophisticated career criminals. This fanciful narrative represents only a sliver of actual thefts; the truthis that art theft is quite mundane. The idea of a professional art thief is a fallacy according to Anthony
Amore, director of security at the Isabella Stewart Gardner Museum in Boston.163 While some criminals
may collaborate and demonstrate some level of organization in planning and commission, it is likely that
extremely few “art theft” groups could be classified as transnational organized crime groups.
For thieves, therefore, the actual “art” of art theft is the ability to profit from the crime.164 Opportunistic
actors, often common criminals and petty thieves, see the theft of cultural property as an easy score—a
low risk, high reward situation. “What [thieves] don’t understand,” says Wittman, “is that the value of art
is dependent on three things: authenticity, provenance—the history of the art—and legal title.”165 Thieves
focus on the authenticity of a piece and the notoriety of its artist, envisioning a huge payday; they fail torealize that once stolen, and thus with no legal title, the piece has largely become worthless.
Despite very bad odds, if a thief is successful in stealing a well-known piece, there are three primaryways to profit from the theft. First, thieves can attempt to sell the painting, but even if they are successful
they are likely to receive only 5 to 10 percent of the painting’s legitimate value.166 Second, thieves may
Financial Action Task Force, Trade Based Money Laundering (Paris, France: Financial Action Task Force, June 23, 2006), 5, http://www.fatf-gafi.
org/media/fatf/documents/reports/Trade%20Based%20Money%20Laundering.pdf.
161
U.S. Department of State, Money Laundering and Financial Crimes Country Database: June 2015 (Washington, DC: Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State, 2015), http://www.state.gov/documents/organization/239329.pdf.
162
Hollington, “After Drugs and Guns, Art Theft Is the Biggest Criminal Enterprise in the World.”
163
Amore, Interview by the author.
164
Ozernoy, “The Art of the Heist.”
165
Jordan Weissmann, “Have You Ever Tried to Sell a Stolen Painting?,” The Atlantic, October 16, 2012, http://www.theatlantic.com/business/archive/2012/10/have-you-ever-tried-to-sell-a-stolen-painting/263682/.
166
Tarmy, “What Happens to Stolen Art After a Heist?”; Tim Murphy, “The Biggest Unsolved Art Heist—and the Detective Who Came Close to Cracking It,” Mental Floss, March 17, 2015, http://mentalfloss.com/us/go/53527; Colleen Curry, “The Most Valuable Works of Stolen Art No One Can Find,”
ABC News, April 14, 2012, http://abcnews.go.com/US/worlds-valuable-missing-works-art/story?id=16131807; Ed Caesar, “What Is the Value ofStolen Art?,” The New York Times, November 13, 2013, http://www.nytimes.com/2013/11/17/magazine/what-is-the-value-of-stolen-art.html.
160							

Transnational Crime and the Developing World37

opt to use the painting as collateral for a loan or exchange it for drugs, albeit still at a fraction of its true
value.167 Finally, the most profitable option is typically to return the stolen property for a “finder’s fee,”essentially ransom for the painting.
Art theft is frequently a crime of opportunity, and it is smaller thefts, particularly those worth several
thousand dollars or less and from private residences, which make up the majority of the goods in theillicit art market. These pieces attract less scrutiny and are thus easier to sell. In addition, because thepieces come with modest price tags, it is unlikely that provenance will be requested and/or verified.
Compared to art theft, the looting and trafficking of antiquities are especially challenging for states tocombat due to issues of ownership and identification. Most governments argue that cultural property
and antiquities, particularly those in situ, are property of the state; overall, this claim has been acceptedby the international community since the early 20th century.168 However, it is difficult to assert ownershipover objects whose existence is unknown, which is frequently the issue with unearthed antiquities.
In many countries there are often disparities between the degree to which regulations on exports ofcultural objects are enacted and enforced on the one hand, and the strength of regulations on importson the other. It is common for a country to have much more stringent restrictions on the exportation ofcultural property, such as requiring permits, than it does on importation. Exporters presumably face agreater burden of proof in establishing the legality (i.e., legal title and acquisition) of a cultural object,
whereas upon importation the onus shifts to customs to prove that the item was acquired illegally.169
These differences can often lead to a form of trade misinvoicing where an exporter will intentionallyconceal the nature of the object(s) being shipped on the export invoice, but describe it accurately on theimport invoice.170 The misinvoicing is motivated primarily by the need to conceal the illicit nature of thegoods rather than the “traditional” motives of tax evasion and/or capital flight.
Looters are positioned at the bottom of the antiquities trafficking network. Like poachers and other lowlevel participants, looters reportedly receive only around one percent of the final sales price of a looted
antiquity, even though they have the greatest amount of exposure.171 Most of the profit goes to the
middlemen.
Looters are supported by smuggler networks that have the connections to move illicit antiquities out of
the source country and into the market country. Conflict and political unrest are good for smugglers as
their skills are in high demand, and they will move anything that is profitable—be it cigarettes, antiquities,
arms, or stolen goods. The network of smugglers along the Syrian, Lebanese, and Turkish borders has
been able to take advantage of the Syrian Civil War by purchasing looted antiquities cheaply from armed
groups and then selling weapons to them for high prices.172
The global shadow financial system, particularly anonymous shell companies, increases the opacity of
Courtney Willis, “The 50 Greatest Art Heists of All Time: The Russborough House Is Robbed Again, in Six Minutes,” Complex, June 19, 2013,
http://www.complex.com/style/2013/06/the-biggest-art-heists-of-all-time/the-russborough-house-is-robbed-again-in-six-minu; Donna Yates, “Museo
Nacional de Antropología Theft,” Trafficking Culture, August 8, 2012, http://traffickingculture.org/encyclopedia/case-studies/museo-nacional-deantropologia-theft/; “Stolen Renoir Recovered,” BBC, April 6, 2001, http://news.bbc.co.uk/2/hi/entertainment/1263808.stm.
168
Prior to the mid-20th century, when archaeology was still developing as a serious academic discipline, the issue of the ownership of antiquities
was not widely considered and the concept of protecting cultural heritage was uncommon. Items of national historical significance were bought
and sold through questionable agreements, archaeologists often kept the artifacts they unearthed, and foreign occupiers took liberties with looting. See Liz Alderman, “Greece Rules Out Suing British Museum Over Elgin Marbles,” The New York Times, May 14, 2015, http://www.nytimes.
com/2015/05/15/world/europe/greece-british-museum-elgin-marbles.html; Tony Waters, “Why Is Queen Nefertiti’s Bust in Berlin, and Not Egypt?,”
Ethnography.com, July 3, 2015, http://www.ethnography.com/2015/07/why-is-queen-nefertitis-bust-in-berlin-and-not-egypt/; Terril Yue Jones, “TwoBronze Animal Heads, Stolen 153 Years Ago, Returned to China,” Reuters, June 28, 2013, http://www.reuters.com/article/us-china-sculptures-idUSBRE95R0HW20130628.
169
Stefan Gruber, “The Fight Against the Illicit Trade in Asian Cultural Artefacts: Connecting International Agreements, Regional Co-Operation, and Domestic Strategies,” Asian Journal of International Law 3, no. 2 (July 2013): 346, doi:http://dx.doi.org.proxyau.wrlc.org/10.1017/
S2044251313000052.
170
Raymond Fisman and Shang-Jin Wei, “The Smuggling of Art, and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques,” NBER Working Paper Series (Cambridge, MA: National Bureau of Economic Research, 2007), 2–3, http://www.nber.org/papers/w13446.
171
Jessica Dietzler, “On ‘Organized Crime’ in the Illicit Antiquities Trade: Moving beyond the Definitional Debate,” Trends in Organized Crime 16, no. 3(2013): 330–31, doi:http://dx.doi.org.proxyau.wrlc.org/10.1007/s12117-012-9182-0.
172
Aryn Baker, “Syria’s Looted Past: How Ancient Artifacts Are Being Traded for Guns,” Time, September 12, 2012, http://world.time.com/2012/09/12/
syrias-looted-past-how-ancient-artifacts-are-being-traded-for-guns/.
167

Global Financial Integrity38trafficking transactions, providing traffickers with anonymity and security. Beginning in the 1960s andcontinuing for nearly four decades, infamous Italian antiquities trafficker Giacomo Medici used multiple
anonymous shell companies, in addition to the companies with which he was openly associated, tolaunder stolen and/or looted antiquities. One of the ways this worked in practice is he would consign
an item to Sotheby’s in London with his Swiss-based front company, Editions Services, and then hewould buy the item back with his anonymous shell company, Arts Franc.173 Medici’s laundering operation
served to create a (false) provenance, or ownership history, for trafficked antiquities, as the reputable
auction house sale gave future buyers the impression that the items were obtained legitimately.174
Art dealers have also used anonymous shell companies to increase prices, both in the market itself as
well as for specific pieces. Until his arrest in 1997 and conviction in 2004, Medici used his laundering
operation to manipulate the market by driving up prices during bidding, augmenting market values.175
Anonymous shell companies are also used for more than just insulating buyer from seller. Middlemen
can use an anonymous shell company to purchase artwork, then reinvoice it for an inflated amount
before selling it on to clients.

D. Developing Countries

The illicit trade in cultural property has long been seen as a victimless crime, and some authorities havethus treated it with greater leniency. Compared to drugs or arms, antiquities trafficking does not cause
the same level of damage, yet it still directly harms communities and countries.
As a finite resource, cultural property provides a strong connection to a country’s culture and identity,
and its theft strips a nation of its heritage. Besides the notable exceptions of Greece and Italy, themajority of looted antiquities are sourced from developing countries, whereas demand markets are
frequently in developed countries. The looting and trafficking of antiquities is in essence then a transfer
of both cultural and financial resources from developing to developed countries.
The illicit trade in cultural property also has a negative impact on economic development. Archaeologicalsites are popular tourist destinations, but looting and destruction strips income derived from travel andtourism as well as reduces job opportunities. This is particularly damaging when archaeological sites lie
within conflict zones. Prior to 2011, Syria earned 12 percent of its national income from tourism, however
the destruction inflicted on archaeological sites around the country will likely reduce the impact tourism
can have on future post-conflict economic development.176

E. Recent Developments

For some, the best use of cultural property lies in its ability to store and transport value. One of thefastest growing art markets is China, where legal sales generated US$11.8 billion in 2015.177 Besides aburgeoning art market, China also has strict currency controls that allow citizens to send no more than
US$50,000 out of the country each year. In order to evade these controls, wealthy Chinese use trade
misinvoicing schemes involving the purchase of high-value goods, particularly art and real estate, tomove money out of the country. As shown in Figure III, a Chinese buyer will purchase a piece of art in aforeign country, for example the United States, at an inflated price. The dealer, after subtracting the true
value of the artwork, transfers the remaining funds to the buyer’s offshore account.178

Peter Watson and Cecilia Todeschini, The Medici Conspiracy: The Illicit Journey of Looted Antiquities, from Italy’s Tomb Raiders to the World’s
Greatest Museums (New York: Public Affairs, 2007), 136–40.
174
Ibid., 141.
175
Ibid., 137–42.
176
Baker, “Syria’s Looted Past.”
177
Eileen Kinsella, “What Does TEFAF 2016 Art Market Report Tell Us About the Global Art Trade?,” Artnet News, March 9, 2016, https://news.artnet.
com/market/tefaf-2016-art-market-report-443615.
178
Sophia Yan, “Chinese Snap up Fine Art for Use in Laundering Schemes,” CNN Money, February 21, 2014, http://money.cnn.com/2014/02/20/
news/economy/china-art-laundering/index.html.
173							

Transnational Crime and the Developing World

39

Figure III. Trade-Based Money Laundering Scheme

Although terrorist and insurgent organizations have used the trafficking of antiquities as a source offinancing in the past, the Islamic State of Iraq and the Levant (ISIL) differs in the professionalization of its
operations in this market. It has established an “Antiquities Division” within its pseudo-government andgains both active and passive income from the antiquities trade. ISIL earns passive income from selling
excavation permits and from taxing the sale of antiquities. Its active income comes from the direct saleof antiquities acquired from its own excavations, thefts from museums, and confiscations from existingowners.179
A February 2015 FATF report notes that there are more than 4,500 archaeological sites under ISIL
control, and that “90 percent of [Syria’s] cultural artefacts are located in war torn areas, which has
allowed for large scale looting.”180 There is much more evidence on ISIL’s destruction of cultural property
than the penetration of ISIL-looted antiquities into international trade.181 Estimates of ISIL’s revenues
from the illicit antiquities trade range widely, from several million to a few billion dollars each year.182 Thisis less than what ISIL earns from oil theft, however there is a significantly lower risk of coalition airstrikes
targeting archaeological sites in comparison to oilfields.
A third key development has been the growth of “artnapping”—the theft of artwork for the express
purpose of ransoming it.183 The release of stolen cultural property in return for payment typicallyinvolves a third party who contacts the owner or insurer informing them that, for a “finder’s fee,” thestolen property can be returned. According to Belgian art expert Jacques Lust, artnapping is increasing
in frequency, although the public may be unaware as negotiations are, unsurprisingly, kept quiet.184
Yaya J. Fanusie and Alexander Joffe, Monumental Fight: Countering the Islamic State’s Antiquities Trafficking (Washington, D.C.: Center on Sanctions & Illicit Finance, 2015), 9.
180
Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (Paris: Financial Action Task Force,2015), 17, http://www.fatf-gafi.org/media/fatf/documents/reports/Financing-of-the-terrorist-organisation-ISIL.pdf.
181
Judith H. Dobrzynski, “Antiquities and ISIS: Something Doesn’t Add Up,” Real Clear Arts, January 10, 2016, https://www.artsjournal.com/realcleararts/2016/01/antiquities-and-isis-something-doesnt-add-up.html; Ben Taub, “The Real Value of the ISIS Antiquities Trade,” The New Yorker,
December 4, 2015, http://www.newyorker.com/news/news-desk/the-real-value-of-the-isis-antiquities-trade.
182
Andrew Keller, “Documenting ISIL’s Antiquities Trafficking: The Looting and Destruction of Iraqi and Syrian Cultural Heritage; What We Know and
What Can Be Done” (Remarks, New York, NY, September 29, 2015), http://www.state.gov/e/eb/rls/rm/2015/247610.htm; Vitaly Churkin, “Letter
Dated 31 March 2016 from the Permanent Representative of the Russian Federation to the United Nations Addressed to the President of the Security
Council,” United Nations, March 31, 2016, http://www.un.org/ga/search/view_doc.asp?symbol=S/2016/298; Steven Lee Myers and Nicholas Kulish,“‘Broken System’ Allows ISIS to Profit From Looted Antiquities,” The New York Times, January 9, 2016, https://www.nytimes.com/2016/01/10/world/
europe/iraq-syria-antiquities-islamic-state.html.
183
Paal Uvaag Espeland, “Skeptisk Til Å Forhandle Med Toska,” Dagbladet Nyheter, August 22, 2006, http://www.dagbladet.no/nyheter/2006/08/22/474557.html; Hili Perlson, “Robbers Ask Van Buuren Museum for Ransom,” Artnet News, April 21, 2015, https://news.artnet.com/
art-world/robbers-ransom-van-buuren-museum-289788; Egmont R Koch and Nina Svensson, “How the Tate Found Its Turners,” BBC, November
8, 2005, http://news.bbc.co.uk/2/hi/programmes/this_world/4414120.stm; “L’Artnapping Ou L’art de Kidnapper Des Oeuvres D’art Contre Rançon,”RTBF.be, March 18, 2014, https://www.rtbf.be/info/societe/detail_l-artnapping-le-kidnapping-d-uvres-d-art?id=8225604.
184
Paul Black, “Artnapping: Should Museums Pay The Ransom Or Lose The Art?,” Artlyst London, April 22, 2015, http://www.artlyst.com/articles/
artnapping-should-museums-pay-the-ransom-or-lose-the-art.
179

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40

Paying ransom demands, as well as the advertising of rewards, raises ethical questions similar to those
provoked by traditional kidnapping for ransom schemes.

F. Summary

The illicit trade in cultural property represents 20 percent of all art crime and generates an estimated
US$1.2 billion to $1.6 billion in illicit revenues each year. Museum heists and the thefts of masterpieces
grab the headlines, but these pieces are actually extremely difficult to sell once stolen. Rather, the valueof the illicit art market is found in the theft of moderately priced, lesser-known pieces that attract far lessscrutiny. Looted antiquities are often undiscovered, and therefore unrecorded, making it much easier totraffic and sell compared to stolen artwork.
For criminals, cultural property can serve as an ideal portable commodity: it has subjective pricing, it can
act as financing or collateral, the market is unregulated, and its innocuous nature makes it relatively easy
to conceal and transport. In addition, opacity pervades the art and antiquities markets, contributing toa culture of secrecy and a pervasive deficiency of outside scrutiny. The global shadow financial systemenables criminals to purchase licit and illicit cultural property anonymously and to use trade misinvoicing
to both evade taxes as well as launder money. Criminals as well as terrorists have capitalized on theability to use cultural property as a vehicle for quick financing, including the Syrian Civil War and thepractice of ransoming high-value pieces.

							

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41

Global Financial Integrity

42VII. Counterfeit and Pirated Goods
A. Overview

The trade in counterfeit and pirated goods, which includes the theft of intellectual property (IP), is themost profitable illicit trade examined in this report. Combatting counterfeiting and piracy is not simply
about protecting corporate profits; it has direct implications on global health, safety, and security as wellas economic growth.
Counterfeit and pirated products, as well as packaging, are tangible goods that violate a trademark,design rights, and/or patent (counterfeit), or a copyright (piracy), whereas digital piracy involves
intangible goods.185 IP theft, in one form or another, is essentially found in every country. The counterfeit
and pirated goods market is largely responsive to the same dynamics of the trade in legal goods—ifthere is a strong demand for a product, it is likely to be counterfeited or pirated.

B. Value

Besides being one of the fastest growing illicit markets, counterfeiting and piracy is also the mostvaluable. The global trade in counterfeit and pirated goods is estimated to generate between
US$923 billion to $1.13 trillion annually, which includes cross-border trade, domestic trade, and digitalpiracy.186
A 2017 study by Frontier Economics provides the most recent and comprehensive assessment of
the global trade in counterfeit and pirated products (Table N). The international trade in counterfeit
and pirated products was the most valuable, worth an estimated US$461 billion in 2013, followed bycounterfeit and pirated goods that were produced and consumed domestically, valued at US$249 billion
to $456 billion.187

Table N. Trade in Counterfeit and Pirated Goods, 2013 (US$)
Component
Value
International trade in counterfeit and pirated goods$461 billion
Domestic trade in counterfeit and pirated goods$249 billion to $456 billion
Total$710 billion to $917 billion
Source: Frontier Economics

The same study also analyzed the global value of digitally pirated goods—specifically film, music, andsoftware—in 2015, estimating these three forms of digital piracy to be worth US$213 billion (Table O).188
Digital film piracy is the most valuable at US$160 billion, whereas digitally pirated music and software
are worth US$29 billion and US$24 billion, respectively.

Table O. Trade in Digitally Pirated Goods, 2015 (US$)
Component
Value
Film
$160 billionMusic$29 billion
Software$24 billion
Total$213 billion
Source: Frontier Economics
185
Organisation for Economic Co-operation and Development and European Union Intellectual Property Office, Trade in Counterfeit and Pirated
Goods: Mapping the Economic Impact (Paris: OECD Publishing Office, 2016), 16, http://www.oecd.org/gov/risk/trade-in-counterfeit-and-piratedgoods-9789264252653-en.htm.
186
Frontier Economics, The Economic Impacts of Counterfeiting and Piracy (London: Frontier Economics, 2017), 57, http://www.inta.org/Communications/Documents/2017_Frontier_Report.pdf.
187
Ibid., 14, 20.
188
Ibid., 38.

							

Transnational Crime and the Developing World

43

Just as human trafficking runs on the demand for cheap labor, so does counterfeiting thrive on the
global demand for cheap goods. Low production costs for counterfeit goods result in higher profits
for criminals, but it also means that goods are often substandard and could therefore be potentiallyhazardous. The World Customs Organization (WCO) points out that when already affordable foodstuffs
and beverages, such as energy drinks, olive oil, and cookies, are counterfeited, the quality of theingredients are likely to be extremely low so that the criminals can make a profit.189
The global trade in counterfeit pharmaceuticals is one of the largest components of total counterfeit
trade. Estimates have placed the value of the worldwide counterfeit pharmaceuticals trade between
US$70 billion to $200 billion annually.190 This represents up to 25 percent of the total counterfeit market.
The market for counterfeit electronics is also high, valued at US$169 billion each year.191 Illicit tobacco
products are some of the most frequently seized items by law enforcement, and the total illicit trade isworth US$40 billion annually.192 Of the total trade in illicit tobacco products, approximately 13 percent isrepresented by illegal and counterfeit items, worth roughly US$5.2 billion each year.193

C. Dynamics

The magnitude of counterfeit and pirated products is significant: from the “traditional” handbags,
watches, and movies, to cigarettes, computers, laundry detergent, and olive oil. Criminals will counterfeit
or pirate almost any product as long there is profit to be made. The availability and variety of counterfeit
and pirated goods varies from country to country, with much dependent on ease of supply chain
infiltration (primary, or legal, market), consumer demand (primary and secondary, or black, market), andstate enforcement of IP laws.
Counterfeit and pirated goods are destined for two principal markets: primary and secondary. The
primary market involves the intentional deceit of the final consumer, while consumers knowingly
participate in the secondary market.194 On the primary market, counterfeit goods compete head-on withlegitimate goods. The products appear to be genuine and are priced similarly to or lower than the typicalretail prices, therefore consumers are unaware that they are purchasing a counterfeit or pirated item.
Goods sold on the secondary market are purchased by consumers who are aware that the items are notlegitimate, for example, purchasing a Louis Vuitton handbag or Rolex watch on the street. The items are
generally priced well below retail value, however criminals still make a strong profit.
Counterfeit and pirated goods are often produced in middle-income countries, which typically lackstrong IP legislation and enforcement, a characteristic of low-income countries, but have the resources
and capacity to produce a variety of goods like high-income countries.195 China, Hong Kong, and India
are the top provenance countries of IP seizures, and while this does not necessarily indicate that the
seized items were produced in those countries, China and India are known for their large counterfeit andpiracy industries.196
China is a global leader in manufacturing, and likewise plays a prominent role in the manufacture ofcounterfeit and pirated goods. It is estimated that between two-thirds and three-quarters of counterfeit
World Customs Organization, Illicit Trade Report 2014 (Brussels: World Customs Organization, 2015), 65, http://www.wcoomd.org/en/media/newsroom/2015/december/~/media/6FDFF08E365E49D49C0B6DC375C492B5.ashx.
190
Brian D. Finlay, Counterfeit Drugs and National Security (Washington, DC: Stimson Center, 2011), 1, http://www.stimson.org/sites/default/files/
file-attachments/Full_-_Counterfeit_Drugs_and_National_Security_1.pdf; Counterfeit Goods, Crime Inc. (CNBC, 2010), http://www.hulu.com/
watch/390535; John Irish, “Customs Group to Fight $200 Bln Bogus Drug Industry,” Reuters, June 10, 2010, http://www.reuters.com/article/uscustoms-drugs-idUSTRE65961U20100610; NetNames, The Risks of the Online Counterfeit Economy (London: NetNames, 2016), 3, https://www.
netnames.com/assets/shared/whitepaper/pdf/The-Online-Counterfeit-Economy-web-FINAL.pdf.
191
NetNames, The Risks of the Online Counterfeit Economy, 3.
192“Illicit Trade in Tobacco Products,” Euromonitor International, November 2016, http://www.euromonitor.com/illicit-trade-in-tobacco-products/report.
193
Euromonitor International, Tobacco: Illicit Trade in Tobacco Products (London: Euromonitor International, 2012), 3, http://www.portal.euromonitor.com.proxyau.wrlc.org/Portal/Handlers/accessPDF.ashx/Illicit_Trade_in_Tobacco_Products_2012.pdf?c=75\PDF\&f=F-247068-24705475.
pdf&saveAsName=Illicit_Trade_in_Tobacco_Products_2012&code=%2bOTwIjtdFosprU24%2bvDpOCly%2f%2bY%3d.
194
Organisation for Economic Co-operation and Development and European Union Intellectual Property Office, Trade in Counterfeit and Pirated
Goods, 21.
195
Ibid., 63.
196
Ibid., 51; World Customs Organization, Illicit Trade Report 2014, 66.
189

Global Financial Integrity

44and pirated goods come from China.197 The Chinese government has taken steps to crack down on
counterfeiting, however it is still far from meeting the demands of affected companies and countries.
Counterfeiting is essentially an industry in itself in China, and there are hundreds of thousands of people
employed in the trade. A serious effort by the Chinese government to significantly curtail counterfeiting
could lead to a huge increase in unemployment and a major impact on the economy.
Counterfeit and pirated goods are not just financial crimes; they also pose significant health and safety
risks to the public. Pharmaceutical counterfeiting is an opportunistic crime, and weak regulation in somecountries has made it easier for illicit actors to insert the counterfeits into the supply chain (See the Box
2. Pharmaceutical Crime). This is why counterfeits are showing up in both formal and informal settings:
hospitals, pharmacies, as well as street vendors. It is estimated that counterfeits represent 10 to 30
percent of available pharmaceuticals in developing countries, compared to approximately one percent inmost developed countries.198
Food counterfeiting, also known as food fraud or food crime, is more prevalent than consumers would
believe, impacting both their pocketbooks and their health. Extra virgin olive oil is one of the mostwidely counterfeited food items;199 criminals sell lesser-quality olive oil in its place, adulterate it withother refined vegetable oils, or mislabel from where it comes. Up to 50 percent of olive oil in Italy may
be fraudulent, a figure which increases to 75 to 80 percent in the United States.200 Meat can also be
adulterated: in 2013, a food scandal rocked Europe when horsemeat was found in beef and beef
products in seven different countries.201
Counterfeiting is not just limited to the product; another aspect of the counterfeit industry is packaging.
Some counterfeit manufacturers put great effort into production and packaging in order to facilitate
market penetration and directly compete with legitimate products. Companies are employing
increasingly stronger product security, but criminals keep pace with these changes. Criminals havepurchased fake safety certificates, security features, logos, packaging, and have even gone so far as toset up fake stores to sell illicit products.202
As mentioned earlier in the chapter, the production of counterfeit and pirated goods closely follows thedemand of equivalent goods in the legal market. Thus, if there is a strong demand for an item or brandin the legal market, criminals will follow with illegal copies. Table P shows the top counterfeited items (A.)
and brands (B.) as indicated by global seizures.203

United Nations Office on Drugs and Crime, Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment (Vienna: United Nations Office on Drugs and Crime, 2013), 123, https://www.unodc.org/documents/data-and-analysis/Studies/TOCTA_EAP_web.pdf; Geoff D’Eon and
Jay Dahl, Counterfeit Culture, Doc Zone (CBC, 2013), http://www.cbc.ca/doczone/counterfeit-culture.
198“The Illicit Trafficking of Counterfeit Goods and Transnational Organized Crime” (United Nations Office on Drugs and Crime, 2013), https://www.
unodc.org/documents/counterfeit/FocusSheet/Counterfeit_focussheet_EN_HIRES.pdf.
199
Extra virgin olive oil is produced solely by mechanical means (i.e., pressing), and has not been refined by any means involving chemicals or heat.
200“Don’t Fall Victim to Olive Oil Fraud,” accessed December 21, 2016, http://www.cbsnews.com/news/60-minutes-overtime-how-to-buy-olive-oil/;
Erik Sherman, “That Olive Oil You’re Cooking With? It’s Probably Fake,” Time, May 12, 2016, http://time.com/money/4326354/fake-olive-oil-foodfraud/.
201
Felicity Lawrence, “Horsemeat Scandal: The Essential Guide,” The Guardian, February 15, 2013, https://www.theguardian.com/uk/2013/feb/15/
horsemeat-scandal-the-essential-guide.
202
Loretta Chao and Sue Feng, “Fake Apple Store Clerk Speaks Out,” Wall Street Journal, July 21, 2011, http://blogs.wsj.com/chinarealtime/2011/07/21/china-fake-apple-store-clerk-speaks-out/.
203
Items and brands are listed in no particular order. World Customs Organization, Illicit Trade Report 2014, 62-63.
197							

Transnational Crime and the Developing World45

Table P. Top Counterfeited Items and Brands
Items (A.)
Consumer Electronics
Clothing and Footwear
Computers and Accessories
Cosmetics, Perfume, and Toiletries
Electronic Appliances
Foodstuff and Beverages
Games and Toys
Household Goods
Luxury Goods
Mobile Phones and Accessories
Pharmaceutical Products
Textiles Other Than Clothing
Transportation and Spare Parts

Brands (B.)
AdidasAngry Birds
Apple
BIC
Calvin Klein
ChanelCialisD&G
Duracell
Elite
Faskit
FIFA
Gucci

ICOS
Louis Vuitton
MAC Cosmetics
Michael Kors
Nike
Otterbox
Rainbow Loom
Ray BanRock
Rolex
Samsung
ViagraWalt Disney

Source: World Customs Organization

The global supply chain allows counterfeiters to split production, assembly, and packaging among
multiple countries in order to stay ahead of law enforcement.204 In addition, counterfeiters use complex
shipment routes to “launder” counterfeit and pirated goods, obfuscating the country of production,
which makes it more difficult for authorities to investigate and shut down counterfeiting operations.205
It is much easier to penetrate the legal market when there are weak supply chains. The United States
has a huge, lucrative legal pharmaceutical market and would therefore be an ideal market to exploit.
Yet, strong supply chain regulation and low corruption make it difficult to insert counterfeits into theprimary market, so most counterfeits are sold on the secondary market. Prices for pharmaceuticals arecheaper in most parts of Africa and Asia compared to the United States, so there is a lower profit margin,
however the rate of counterfeit penetration in the primary market is substantially higher, due in large partto weak oversight and corruption.
Like the “ant-trade” in arms trafficking, a large volume of counterfeit and pirated goods are distributed
via the post.206 These shipments are commonly linked to purchases by individual customers and/or
online purchases, which support evidence that, like many other illicit trades, counterfeiters have taken
advantage of e-commerce to reach a much larger and more global consumer market. Although there
are a greater number of shipments sent through the post, a greater volume of goods per shipment are
moved through containerized cargo, signaling the presence of organized networks.207“Stamping It out,” The Economist, April 23, 2016, http://www.economist.com/news/international/21697218-china-grew-richer-and-more-innovative-people-assumed-it-would-counterfeit-less-think?zid=317&ah=8a47fc455a44945580198768fad0fa41.
205
Organisation for Economic Co-operation and Development and European Union Intellectual Property Office, Trade in Counterfeit and Pirated
Goods, 61.
206
Ibid., 55–56; World Customs Organization, Illicit Trade Report 2014, 69.
207
United Nations Office on Drugs and Crime, TOC in East Asia and the Pacific, 126.
204

Global Financial Integrity46

Box 2. Pharmaceutical Crime
Counterfeit pharmaceuticals are particularly dangerous and pose a greater risk to consumer health andsafety. The term refers to pharmaceuticals that have been deliberately and fraudulently mislabeled withrespect to identity and/or source. There are several reasons why a drug would be considered counterfeit:
its chemical content and potency are modified so that it contains little to no active ingredient; any drug,
regardless of the chemical content, which has packaging that misrepresents the manufacturer; or, it
could be an authentic product but the expiration dates have been altered.
Counterfeit pharmaceutical markets differ greatly between developed and developing countries. Whilemost licit pharmaceutical sales occur in developed countries, which would suggest a greater opportunity
for penetration, counterfeits usually only make up about one percent of all pharmaceuticals.208 The mostcommonly counterfeited pharmaceuticals in developed countries are so-called “lifestyle drugs” such as
Viagra, slimming pills, or steroids; these drugs are usually purchased through online pharmacies andshipped directly to the consumer.209
China and India are the leading producers of counterfeit drugs, and there are two primary actors who
produce counterfeit pharmaceuticals: unlicensed manufacturers and licensed manufacturers that
produce both legitimate and counterfeit pharmaceuticals. In India, unlicensed manufacturers typicallyoperate out of “small cottage factories,” whereas in China counterfeits are often manufactured by“chemical companies that are not licensed to produce pharmaceuticals.”210
More insidious are the licensed manufacturers that produce both legitimate and counterfeit drugs. An
undercover investigation in India found that many of these manufacturers are ready to fill consignments
placed by unscrupulous entrepreneurs, accepting “shopping lists” of the desired counterfeit brands
and levels of potency and also offering the packaging to go along with them.211 Because licensed
manufacturers are already connected to the legitimate supply chain, they are well positioned to connect
these clients to wholesalers and distributers.
Table X. Top 15 Seized Pharmaceutical Products by Volume, 2014
1.

Analgesics (painkillers)

9.

Vitamins

2.

Anti-inflammatory treatments

10.

Condoms

3.

Tuberculosis treatments

11.

Cough/bronchitis treatments

4.

Erectile dysfunction treatments

12.

Cancer treatments

5.

Antibiotics

13.

Antihistamines/anti-allergies treatments

6.

Inhibitors (gastro)

14.

Ulcer treatments

7.

Veterinary treatments

15.

Psychiatric disorders treatments

8.

Antimalarials
Source: World Customs Organization, Illicit Trade Report 2014, 66.

Well-known organized crime groups (OCGs), such as the Camorra, ‘Ndrangheta, and Chinese Triads, havelong been connected to counterfeiting and piracy, supplied by both domestic and international production.
The Camorra’s control of certain legal commercial activities has allowed it to easily insert counterfeit andpirated goods into the legal market.212 The immense profits and weak penalties have attracted greater
participation by OCGs and terrorist organizations since the mid-2000s. It is estimated that Italian OCGs
involved in food fraud, dubbed the “Agromafia,” earn US$16 billion annually from this market alone. 213“Drug Safety and Availability - Counterfeit Drugs Questions and Answers,” U.S. Food and Drug Administration, April 27, 2016, http://www.fda.gov/
Drugs/DrugSafety/ucm169898.htm.
209
United Nations Office on Drugs and Crime, The Globalization of Crime: A Transnational Organized Crime Threat Assessment (Vienna: United Nations Office on Drugs and Crime, 2010), 184, https://www.unodc.org/documents/data-and-analysis/tocta/TOCTA_Report_2010_low_res.pdf.
210Ibid., 187.
211
Deadly Trade: The Global Traffic in Counterfeit Drugs (New York: Films Media Group, 2008), http://films.com/title/39622.
212
Business Action to Stop Counterfeiting and Piracy (BASCAP), Confiscation of the Proceeds of IP Crime: A Modern Tool for Deterring Counterfeiting
and Piracy (Paris: International Chamber of Commerce; United Nations Interregional Crime and Justice Research Institute, http://www.iccwbo.org/
advocacy-codes-and-rules/bascap/library/publications-by-year/), 10.
213
Agromafia, 60 Minutes (CBS, 2016), http://www.cbsnews.com/news/60-minutes-agromafia-food-fraud/.
208							

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47

For OCGs, counterfeiting provides an ideal avenue for laundering the profits of other transnational organizedcrime as well as financing other crimes. The penetration and sale of counterfeit and pirated goods in thelegitimate supply chain is a money laundering scheme in itself, as the illicit funds used to produce thegoods are laundered by their sale.214 OCGs involved in other illicit markets will also reinvest the proceedsfrom counterfeiting into other criminal ventures, such as drug trafficking.215
According to the United Nations Office on Drugs and Crime, the primary roles in this market are brokers andlogisticians, who “invest the money, coordinate production and transport, unload the merchandise, andreap the rewards.”216 Counterfeiting has exploded in part due to the incorporation of industrial production
logistics. No longer is counterfeiting and piracy conducted as a cottage industry, rather production isachieved through greater access to technology, allowing OCGs and other criminal actors to achieve
economies of scale.217

D. Developing Countries

Counterfeiting and piracy have deep impacts on the economy, security, and welfare of developing
countries. Counterfeit goods cost governments and legitimate businesses revenues while providing OCGs
and terrorist groups with financing. In addition, they impact the health and safety of the general public.
For developing countries, one of the biggest impacts of counterfeit and pirated goods is lost tax revenue. In
international trade, counterfeit goods are often under-invoiced or smuggled (undeclared) when imported,causing governments to lose beneficial excise and value added tax. Domestically, countries lose sales tax
when goods are sold below fair market value or if they are sold on the black market. Kenya’s counterfeit
goods market is worth approximately US$900 million annually, which robs the government of US$84
million to $490 million in tax revenues.218
Another issue for developing countries is job loss, as counterfeit production can push out legitimate
suppliers. Counterfeit and pirated goods are frequently priced lower than genuine products, which cancause legitimate companies to lose business. Companies whose products compete against counterfeits
may be forced to let employees go or even close in response to lost business. In addition, insufficient
protection of intellectual property rights deters innovation, as counterfeiting reduces the ability for investors
to recoup money spent on research and development.219
The proceeds from the sale of counterfeit and pirated items provide financing to OCGs as well as
terrorist groups. Organizations such as the Basque separatist group Euskadi Ta Askatasuna (ETA) havebeen involved since at least the 1970s, whereas the involvement of Al-Qaeda and the Irish Republican
Army (IRA) began in the 1990s. Al-Qaeda propaganda has actually instructed militants to engage in the
counterfeit trade to generate greater funding.220 Figure IV shows a list of terrorist organizations and someof the counterfeit and pirated products they have traded in order to raise financing.221“Illicit Trafficking of Counterfeit Goods.”
Business Action to Stop Counterfeiting and Piracy (BASCAP), Confiscation of the Proceeds of IP Crime,13.
United Nations Office on Drugs and Crime, TOC in East Asia and the Pacific, 126.
217
Union des fabricants, Counterfeiting & Terrorism (Paris: Union des fabricants, 2016), 8, http://www.unifab.com/wp-content/uploads/2016/06/
Rapport-A-Terrorisme-2015_GB_22.pdf.
218
Louise I. Shelley, “The Diverse Facilitators of Counterfeiting: A Regional Perspective,” Journal of International Affairs 66, no. 1 (2012): 23.
219
Frontier Economics, The Economic Impacts of Counterfeiting and Piracy, 40.
220
Union des fabricants, Counterfeiting & Terrorism, 14.
221
Ibid., 12–18.
214
215
216

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Figure IV. Terrorist Financing and Counterfeiting
Al-Qaeda

Hamas

D Company

IRA

ETA

ISIL†

FARC‡

Lashkar-e-Taibe† Islamic State of Iraq and the Levant‡ Fuerzas Armadas Revolucionarias de Colombia
Source: Union de fabricantsCounterfeit and pirated goods have a direct impact on the welfare of developing countries byendangering the health and safety of the public. Counterfeits are produced illegally, usually with thecheapest materials available in order to increase profit margins; they are therefore very unlikely to
be manufactured to regulated standards, increasing the probability of product failure. Saudi Arabia’s
customs department, Saudi Customs, estimates that approximately 50 percent of domestic roadaccidents are attributable to counterfeit vehicle parts.222 Counterfeit tobacco typically has carcinogens
such as tar and carbon monoxide outside legal levels and may contain toxic substances, including“human feces, dead flies, mold, and insect eggs.” 223
All forms of pharmaceuticals, from painkillers to vaccines, are counterfeited for markets in developing
countries, particularly those in Southeast Asia and Africa. Average market penetration of counterfeits
is 30 percent but increases to more than 60 percent for antimalarials in some countries.224 In Angola
in 2012, a shipment of loudspeakers from China contained 1.4 million packets of counterfeit malaria
drugs; this is equivalent to the number of doses needed to treat more than half of the country’s malaria
cases each year.225 Fake antimalarials not only cause adverse side effects but have directly resulted in
the deaths of some of the people who took them. Counterfeit pharmaceuticals are estimated to kill one
million people annually.226
Counterfeit medicines also contribute to public health crises. Reduced or missing levels of active
ingredients in anti-infective medicines and combination drug therapies can lead to microbial resistanceand more virulent strains in addition to failing to treat the disease, thereby helping it to continue to
INTERPOL, Against Organized Crime: INTERPOL Trafficking and Counterfeiting Casebook 2014 (Lyon: INTERPOL, 2014), 66, http://www.interpol.
int/Crime-areas/Trafficking-in-illicit-goods-and-counterfeiting/Trafficking-in-illicit-goods-and-counterfeiting.
223“Counterfeit Cigarettes Contain Disturbing Toxic Substances,” ICC Fraud Net, accessed December 1, 2016, https://icc-ccs.org/home/news/85news/360-counterfeit-cigarettes-contain-disturbing-toxic-substances.
224
Jocelyne Sambira, “Counterfeit Drugs Raise Africa’s Temperature,” Africa Renewal Online, May 2013, http://www.un.org/africarenewal/magazine/
may-2013/counterfeit-drugs-raise-africa%E2%80%99s-temperature; “Fake Medicines and Malaria,” Fight the Fakes, September 8, 2014, http://fightthefakes.org/resources/fake-medicines-and-malaria/.
225“Fake Medicines and Malaria.”
226
Kristina Lybecker, “Illicit Trade in Counterfeit Medicines,” in Illicit Trade: Converging Criminal Networks (Paris: OECD Publishing, 2015), 93, http://dx.doi.org/10.1787/9789264251847-en.
222							

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spread.227 Developing countries that are already challenged with combatting high rates of infectious
diseases, such as malaria, tuberculosis, and HIV, face even greater difficulties when common regimens
fail to treat new strains. In addition, counterfeit pharmaceuticals, when provided unwittingly bygovernments, undermine the public’s confidence in health systems.

E. Recent Developments

For terrorist groups, as well as OCGs, the profits from IP theft can be equal to or greater than drugtrafficking, but draw far less enforcement and result in significantly more lenient penalties. Terrorist
organizations have taken a more active role in counterfeiting by organizing production and distribution.228
Groups as well as lone actors and small cells are involved, because the sale of counterfeits tend toprovide quick financing with relatively little buy-in cost.229
Financing for the Charlie Hebdo attack in Paris in January 2015 was achieved in part throughcounterfeiting. The Kouachi brothers received funding from their sale of counterfeit products, particularly
footwear and clothing, which they purchased from China.230 The Molenbeek neighborhood of Brussels—labeled a “breeding ground” for terrorism because of its links to several terrorist attacks and supply of
foreign fighters in Syria—is also challenged by counterfeiting as well as drugs and arms trafficking.231
Despite the seriousness of counterfeit pharmaceutical crime and its potential to impact global health,there are no international agreements to address this illicit trade like there are for other crimes in thisreport. The closest is the regional 2010 Council of Europe Medicrime Convention, which criminalizes
the manufacture and distribution of counterfeit medicine. INTERPOL notes that most countries do
not even have legislation that addresses pharmaceutical crime but instead treat it as a category ofintellectual property crime or illegal narcotics crime.232 For countries that do have strong legislation andlegal remedies to prevent and punish IP theft, the value of these measures is reduced if there are weak
enforcement and/or penalties, posing little deterrent to counterfeiters and traffickers.233
Some organizations have introduced technology that allows for the verification and monitoring ofproducts in an attempt to protect legitimate businesses as well as consumers. The organization
TechTrace introduced the Anti-Counterfeiting Tool (ACT), which provides a platform for stakeholders—brands, consumers, governments, and others—to monitor cases involving the illicit trade in counterfeit
goods.234 The WCO has developed a similar product called Interface Public-Members (IPM) thatconnects customs agents to rights holders, aiding the detection of counterfeit goods in real time.235
Another group, Sproxil, has harnessed the worldwide popularity of mobile phones to combat
counterfeiting by embedding scratch-off SMS verification codes in products, from agricultural goods topharmaceuticals, that consumers can use to check if the item they are purchasing is genuine.236

Ibid., 94.
Union des fabricants, Counterfeiting & Terrorism, 8.
229
Financial Action Task Force, Emerging Terrorist Financing Risks (Paris: Financial Action Task Force, October 2015), 10, http://www.fatf-gafi.org/
media/fatf/documents/reports/Emerging-Terrorist-Financing-Risks.pdf.
230
Union des fabricants, Counterfeiting & Terrorism, 16.
231
Ibid., 17; Aaron Williams et al., “How Two Brussels Neighborhoods Became ‘a Breeding Ground’ for Terror,” Washington Post, April 1, 2016, https://www.washingtonpost.com/graphics/world/brussels-molenbeek-demographics/; Selina Sykes, “Molenbeek: Inside Belgium’s Seething City of Jihad
Where ISIS Are Heroes,” Express.co.uk, November 25, 2015, http://www.express.co.uk/news/world/620763/Molenbeek-Paris-terror-attacks-BelgiumISIS-jihadis-Europe; Roger Cohen, “The Islamic State of Molenbeek,” The New York Times, April 11, 2016, http://www.nytimes.com/2016/04/12/
opinion/the-islamic-state-of-molenbeek.html.
232
Pharmaceutical Crime Sub-Directorate, Pharmaceutical Crime and Organized Criminal Groups (Lyon: Interpol, 2014), 16.
233
Organisation for Economic Co-operation and Development and European Union Intellectual Property Office, Trade in Counterfeit and Pirated
Goods, 25.
234“Anti-Counterfeiting Tool (ACT),” TechTrace, accessed January 11, 2017, http://www.anti-counterfeiting-tool.com/.
235“The WCO Tool in the Fight Against Counterfeiting” (World Customs Organization, 2015), http://www.wcoipm.org/__resources/userfiles/file/IPMBrochure.pdf.
236“Sproxil Defender,” Sproxil, accessed December 23, 2016, https://www.sproxil.com/defender/.
227
228

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F. Summary

With an estimated US$923 billion to $1.13 trillion in annual revenues, the market for counterfeit andpirated goods is the largest covered in this report. Counterfeiting and piracy have often been seen
as victimless crimes, yet there are many potential hazards. Some consumers may willingly purchasecounterfeit goods, while many are deceived to their potential detriment.
The effects of counterfeiting extend beyond just financial losses to rights holders: there are impacts tothe economy, security, and welfare of developing countries. Counterfeiting costs developing countries
valuable tax revenues and threatens the health and safety of the public while serving as a solid sourceof financing for criminals and terrorists. Criminal and terrorist organizations as well as multilateral
institutions and business have paid attention to the growth of counterfeiting and piracy, however
legislative responses have been slow to produce.

							

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Global Financial Integrity

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VIII. Illegal Wildlife Trade
A. Overview

The illegal wildlife trade refers to crimes involving live wildlife, wildlife products, or their derivatives, both
flora and fauna. While ivory and rhino horn dominate the headlines, the illegal wildlife trade is much more
complex, involving a multitude of species and a variety of markets and drivers.
This trade has had a disastrous impact on species conservation. High prices and low enforcement risk
have lured a legion of participants, from subsistence poachers to transnational criminal networks andarmed rebel groups, eager to satisfy and profit from a growing demand. Per kilo, the retail revenues forivory or rhino horn can be equal to or greater than the equivalent amount of cocaine or heroin, yet thelegal penalties are considerably more lenient.

B. Value

The ugliness of poaching profits on the beauty of nature, and this trade is lucrative. Estimates place theannual value of the illegal wildlife trade between US$5 billion and $23 billion.237 Two of the biggest
components of the market value are the trades in ivory and rhino horn.
Rhino horn has always been sought for its (spurious) health benefits,238 particularly as a cure for cancer
but also as a hangover remedy.239 Recently, however, there has been a growing trend of conspicuous
consumption in Vietnam whereby the affluent (or those trying to appear so) consume rhino horn just toflaunt their status and wealth.240 With prices averaging US$27,000 to $65,000 per kilo, it is one of themost expensive animal products available, and the high price has fueled aggressive poaching.241 At
least 1,342 rhinos were poached in Africa in 2015, representing a retail value of between US$91 million
and $698 million.242 In South Africa alone, more than 4,500 rhinos were killed from 2011 through 2015,
flooding the retail market with approximately US$304 million to $2.3 billion worth of rhino horn.243
At the peak of the elephant poaching epidemic between 2010 and 2012, Wittemyer et al. estimate thatnearly 100,000 African elephants were killed for their ivory, or roughly 33,000 per year.244 Despite declines
in poaching beginning in 2013, elephants are still being killed at an alarming rate. According to the Born
Free Foundation, around 24,000 elephants were killed in 2015.245 This represents approximately 240
tons of new ivory entering the market, with a total retail value of approximately US$240 million to $720
Data from more than a dozen sources were combined to create this estimate. See the Appendix, Section E for a complete list of sources.
The horn of a rhinoceros is composed of keratin, the same type of protein that makes up hair and fingernails, which has been shown in medical
studies to have negligible healing properties. See Ruth Becker, “Medical Claims for Rhino Horn: You’re Better on an Aspirin or Biting Your Nails,”
Africa Check, September 22, 2012, https://africacheck.org/reports/medical-claims-for-rhino-horn-youre-better-on-an-aspirin-or-biting-your-nails/.
239
Gwynn Guilford, “Why Does a Rhino Horn Cost $300,000? Because Vietnam Thinks It Cures Cancer and Hangovers,” The Atlantic, May 15, 2013,
http://www.theatlantic.com/business/archive/2013/05/why-does-a-rhino-horn-cost-300-000-because-vietnam-thinks-it-cures-cancer-and-hangovers/275881/.
240
Marile van Heerden, “The Illicit Rhino Horn Trade: A South African Perspective” (Presentation, International Association of Prosecutors 17th Annual
Conference and General Meeting, Bangkok, October 29, 2012), http://www.iap-association.org/Conferences/Annual-Conferences/17th-Annual-Conference-and-General-Meeting,-Bangko/WS1D_speech_Marile_van_Heerden_AC17.aspx.
241
The Poachers Pipeline: Dealers, Diplomats & The Illegal Horn Trade, Al Jazeera Investigates (Al Jazeera, 2016), https://www.youtube.com/
watch?v=JMguWY99q6s; Bradley Anderson and Johan Jooste, “Wildlife Poaching: Africa’s Surging Trafficking Threat” (Washington, DC: Africa Center for Strategic Studies, May 2014), 1, http://africacenter.org/wp-content/uploads/2015/12/ACSS-Africa-Security-Brief-No.-28-EN.pdf.
242
Average weight for both front and rear horns is between 2.5 and 8 kilograms, at an average retail price of US$27,000 to $65,000 per kg. Julian Rademeyer, Tipping Point: Transnational Organised Crime and the “War” on Poaching (Geneva: Global Initiative against Transnational Organized Crime,2016), 3, http://globalinitiative.net/wp-content/uploads/2016/07/Global-Initiative-Tipping-Point-Part1-July-2016.pdf; Ed Stoddard, “Legalising Rhino
Horn, Ivory Trade in Focus,” Reuters, April 26, 2012, http://www.reuters.com/article/ozatp-africa-money-idAFJOE83P03N20120426; The Poachers
Pipeline: Dealers, Diplomats & The Illegal Horn Trade.
243
At least 4,510 rhinos were poached from the beginning of 2011 through the end of 2015; assuming an average weight for both front and rear horns
between 2.5 and 8 kilograms, at an average retail price of between US$27,000 and $65,000. The Poachers Pipeline: Dealers, Diplomats & The Illegal
Horn Trade; Stoddard, “Legalising Rhino Horn, Ivory;” “Update on Rhino Poaching Statistics (17 January 2014 Update),” Department of Environmental Affairs, South Africa, January 17, 2014, https://www.environment.gov.za/mediarelease/rhinopoaching_statistics_17jan2014; “Minister Edna
Molewa Highlights Progress in the War against Poaching and Plans for 2015,” Department of Environmental Affairs, South Africa, January 22, 2015,
https://www.environment.gov.za/mediarelease/molewa_waragainstpoaching2015; “Minister Edna Molewa Highlights Progress in the Fight against
Rhino Poaching,” Department of Environmental Affairs, South Africa, January 21, 2016, https://www.environment.gov.za/mediarelease/molewa_highlightsprogress_againstrhinopoaching.
244
George Wittemyer et al., “Illegal Killing for Ivory Drives Global Decline in African Elephants,” Proceedings of the National Academy of Sciences 111,
no. 36 (2014): 13119, doi:10.1073/pnas.1403984111.
245“24,000 Elephants Poached for Ivory in 2015,” Born Free Foundation, accessed August 9, 2016, http://www.bornfree.org.uk/index.php?id=34&tx_
ttnews%5Btt_news%5D=1979&cHash=ff6dc8a80ad85ea74af7213540ad6b8d.
237
238							

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million.246
While its products are not as valuable as rhino horn and ivory, the pangolin is actually the most traffickedanimal in the world. Approximately 100,000 pangolins are poached each year, targeted for their meatand scales. Like rhino horn, pangolin scales are composed of keratin and are wrongly believed tohave healing properties. The average retail value for raw scales can range from US$316 to $2,500 per
kilogram, depending on the market.247 According to Professor Ray Jansen, Co-Chair of the African
Pangolin Working Group, the illegal trade in pangolin scales is worth an estimated US$46 million
annually.248
Like narcotics, most wildlife products, show strong price inelasticity, and this strong demand emboldens
suppliers. Coupled with the perceived luxury of these items, such as tiger pelts and shark fin soup,higher prices can attract consumers looking to display their upwardly mobile status. High prices also
attract new participants to the supply side who are willing to accept the risks in order to access thegrowing rewards. Table Q provides a sampling of prices for different live animals and wildlife parts fromaround the world.

Product

Live

Table Q. Sample Retail Market Prices (US$)
Item
African grey parrot
Slow loris
Baby elephant (Thailand)
GorillaRaw bear bile extract (per gram)
Whole pangolin (restaurant in Viet Nam)
Tiger bone glu (per kilogram, Hanoi)
Shahtoosh shawl (each, international market)

Price$2,000$5,000$7,000$400,000$19$1,750$10,000$20,000

Sources: See Appendix, Section E for a list of sources.

Similar to other types of trafficking, such as drugs or antiquities, the value of a particular wildlife
commodity, be it a wild parrot or ivory or bear bile, increases exponentially as it makes its way fromsource to market. Table R shows a comparison of the amount the poacher receives and the animal/
product’s final retail price.

Approximately 10kg of ivory per elephant at an average market country price of US$1,000 to $3,000 per kilogram. United Nations Office on Drugs
and Crime, World Wildlife Crime Report (New York: United Nations Office on Drugs and Crime, 2016), 42, https://www.unodc.org/documents/dataand-analysis/wildlife/World_Wildlife_Crime_Report_2016_final.pdf; Patterson Clark and Darryl Fears, “The Horn and Ivory Trade,” Washington Post,
August 10, 2014, https://www.washingtonpost.com/apps/g/page/national/the-horn-and-ivory-trade/1163/; Agence France-Presse, “Price of Ivory in
China Triples,” The Guardian, July 3, 2014, https://www.theguardian.com/environment/2014/jul/03/price-ivory-china-triples-elephant; Anderson and
Jooste, “Wildlife Poaching: Africa’s Surging Trafficking Threat”.
247
Alec Russell, “Rhino Poaching: Inside the Brutal Trade,” Financial Times, October 2, 2015, http://www.ft.com/cms/s/2/f71d53ea-67b3-11e5-97d01456a776a4f5.html?ftcamp=traffic/social_promo/annotation/YouTube/article/auddev; John D. Sutter, “The Most Trafficked Mammal You’ve NeverHeard Of,” CNN, April 2014, http://www.cnn.com/interactive/2014/04/opinion/sutter-change-the-list-pangolin-trafficking/index.html; United Nations
Office on Drugs and Crime, World Wildlife Crime Report, 68; Jani Actman, “Four Tons of ‘Plastic’ Discovered to Be Smuggled Pangolin Scales,”National Geographic News, June 26, 2016, http://news.nationalgeographic.com/2016/06/pangolin-scales-smuggling-hong-kong/; Neeraj Santoshi,“How China Turned India into a Hub for Poaching of Endangered Mammal Pangolin,” Hindustan Times, February 28, 2017, http://www.hindustantimes.com/india-news/how-china-turned-india-into-a-hub-for-poaching-of-endangered-mammal-pangolin/story-Lk3XhBIPuTvKrlBTQbPmAL.html.
248
Financial Times, Big Game, Big Money: Illegal Wildlife Trade, 2015, https://www.youtube.com/watch?v=lzYrtRkGcuo.
246

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ProductLive

Table R. Poacher vs. Consumer Prices (US$)
What theCommodity
Poacher Receives
Macaw$2 to $20
Chimpanzee$50
Falcon$500
Pangolin meat (per kilogram)$22.50Bear gall bladder (whole)$100 to $150
Tiger pelt
$1,500What theConsumer Pays
$600 to $10,000$20,000$50,000 to $100,000$250 to $350
$5,000 to $10,000$16,000

Rate of Markup (%)
29,900% to 49,900%
39,900%9,900% to 19,900%
1,011% to 1,456%
4,900% to 6,567%
967%

Sources: See Appendix, Section E for a list of sources.

The structure of the illicit supply chain has the intermediaries and retailers in market countries receiving
the greatest compensation; little profit remains in the source countries. Following the profit trail is key toidentifying and disrupting trafficking networks, particularly the senior individuals responsible for financing
and orchestrating the network’s operations.

C. Dynamics

Most actors in the illicit supply chain are involved for financial gain, whereas consumers are motivated bya variety of reasons, from the desire to own a luxury status symbol or an exotic pet to the mistaken belief
that consuming certain wildlife products will provide medicinal benefits. The top markets for the illegal
wildlife trade are exotic pets, food, traditional medicine, fashion, and status goods. Certain species
and products can have multiple purposes—for example, rhino horn is consumed both for its perceived
medicinal properties as well as a status symbol, or they can be desired for separate uses, such as
pythons, which are sought for both the exotic pet and fashion trades.

Table S. Illegal Wildlife Markets
Exotic Pet

Rare and/or unusual wild species that are not commonly kept as pets.
boa constrictor, iguana, frog, parrot, falcon, slow loris, chimpanzee, spider, scorpion, caracal

Food

Some species are hunted solely for subsistence (i.e., bushmeat), whereas others are hunted
because their meat is considered a delicacy.
bushmeat: elephants, primates, spotted deer, turtles
delicacy: shark fins, sturgeon (caviar), pangolin, tiger bone (wine), glass eel, abalone

Traditional Medicine Wildlife, their parts, and products which are sought due to assumed healing properties.
rhino horn, totoaba bladder, bear bile, tiger bone, pangolin scales, ginseng, seahorses
Fashion and Décor

Skins, pelts, and furs that are desired for fashion items such as purses, shoes, and coats, aswell as exotic woods used for furniture or art.
skins of snakes and alligators, tortoise shell, tiger pelt, rosewood, ebony

Status Good

Goods that serve as status symbols, allowing the owner to display their wealth; they often
have long-standing cultural significance.
ivory, rhino horn, and the pelts, teeth, and claws of big cats and bears							

Transnational Crime and the Developing World55

Box 3. Superstition vs. Reality: The Case of Ivory and Rhino Horn
The surge in the poaching of elephants and rhinos is driven by the intersection of old beliefs and new
trends. Ivory and rhino horn have long been seen as symbols of status and wealth in many societies
in East and Southeast Asia, and rhino horn in particular is (incorrectly) believed to have healing
properties. With the recent growth in the middle- and high-income classes in Asia, there are now many
more individuals seeking to conspicuously display their status than there were ten years ago.
The poaching of African elephants and rhinoceroses accelerated sharply beginning around 2008. Whilerates for elephants peaked in 2011-2012 and have relatively plateaued (albeit still at unsustainablelevels), the rates for rhinoceroses are still quite high. The poaching trends have mirrored the equally
dramatic surge in demand and the subsequent rise in prices for ivory and rhino horn. In South Africa,
which has by far the largest rhino populations on the continent, 13 rhinos were poached in 2007 while
1,175 were poached in 2015, an increase of more than 8,900 percent.12
Historically, the prices for ivory and rhinoceros horn were based on “practical” uses, such as piano
keys, however skyrocketing prices have reached a point where the value is now tied more to cultural
significance.13 With prices either holding steady or increasing (and with no end in sight), these
items have gained a sort of investment value for collectors, akin to the purchase of artwork or realestate. The whims of consumers and collectors are quickly driving these important species towards
extinction.
The illegal wildlife trade relies on a sophisticated global supply chain. The planning, collection, andsmuggling of large quantities of wildlife and wildlife products demonstrate a high degree of coordinationthat is indicative of well-funded organized crime groups (OCGs). Criminal networks may finance thepoaching (e.g., providing weapons or money for weapons) so as to fill orders, but typically they do nottake part in the actual hunting. The active participation of these networks usually begins after the animalhas been poached, when brokers and middlemen purchase and/or collect the goods, assemble caches,smuggle them to transit and exit points, and launder the money.251
The international freight transport stage(s), be it by air, sea, or land, is one of the most vulnerable points
in the illicit supply chain. Criminal networks often set up anonymous shell companies to consign andreceive cargo, masking the true (i.e., beneficial) ownership of the shipment.252 The lack of beneficial
ownership information allows participants to act in secrecy and lowers the risk of detection by law
enforcement. In regards to the actual shipments, large volume consignments of wildlife products are
typically hidden among cover materials, often common bulk goods, such as cashews, soya, and timber.
There have been instances where illegal wildlife products have been concealed in freight shipmentsof tires that, as part of trade-based money laundering schemes, are being returned by consignees inAfrican countries to China as “defective.”253

D. Developing Countries

Wildlife is a natural resource, and the illegal wildlife trade is siphoning this living capital away from theenvironment and community and into the pockets of criminal networks and armed groups. Although
the overwhelming majority of poached wildlife comes from developing countries, both developed anddeveloping countries are responsible for the demand.
As natural resources, wildlife and wildlife products are no different from gold, diamonds, timber, or oil.
The illegal wildlife trade is “a giant illicit resource transfer” which has profound micro and macro level
impacts.254 At the micro level, wildlife trafficking robs local communities of much-need revenue streams.
“Poaching Statistics,” Save the Rhino, 2016, https://www.savetherhino.org/rhino_info/poaching_statistics.
United Nations Office on Drugs and Crime, World Wildlife Crime Report, 41.
Anderson and Jooste, “Wildlife Poaching,” 3.
252
Varun Vira, Thomas Ewing, and Jackson Miller, Out of Africa: Mapping the Global Trade in Illicit Elephant Ivory (Washington, DC: C4ADS, 2014),
14–17, https://static1.squarespace.com/static/566ef8b4d8af107232d5358a/t/56af83ee1f40390e88337743/1454343151910/Out+of+Africa.pdf.
253
John A. Cassara, Trade-Based Money Laundering: The Next Frontier in Money-Laundering Enforcement (Hoboken, NJ: John Wiley & Sons, 2016),
85.
254
Varun Vira and Thomas Ewing, Ivory’s Curse: The Militarization & Professionalization of Poaching in Africa (Washington, DC: C4ADS, 2014), 11,
249
250
251

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Community-based ecotourism is a powerful tool that can benefit both economic development andconservation. From the jungles of the Amazon to the African savannas, tourists flock to view indigenous
flora and fauna, yet poachers are continuing to divest wildlife from local ecosystems. While one elephant
may yield up to US$21,000 in ivory, of which a meager portion goes to the poacher, the David Sheldrick
Wildlife Trust estimates that the same elephant would generate US$1.6 million in tourism over its
lifetime.255
At the macro level, the illegal wildlife trade has deleterious impacts on the environment, security, andrule of law. Poaching has serious negative repercussions on species conservation as well as the on thehealth of the ecosystem, especially with the removal of keystone species.256 In regards to security andrule of law, the profits from the illegal wildlife trade finance violence, instability, and corruption. Whilesome have called ivory the new conflict resource, it has actually been used by both state and non-state
actors in Africa to fund and sustain conflict since the 1970s and 1980s.257
Today ivory is a favored bush currency of armed rebel and militia groups, most notably the Séléka
(Central African Republic (CAR)), Janjaweed Militia (Sudan), and the Lord’s Resistance Army (CAR,
Democratic Republic of the Congo, South Sudan, and Uganda), all of which are actively involved inpoaching. As of the end of 2015, the sectarian conflict between the Séléka and the Anti-balaka in the
CAR has resulted in the deaths of thousands and produced approximately 456,000 refugees and another
447,000 internally displaced persons.258 Some Karen rebel groups in Myanmar, including the Democratic
Karen Buddhist Army and New Mon State Party, have also used poaching as an ancillary source offunding for operations.259
Wildlife trafficking and corruption have a symbiotic relationship: corruption enables all aspects of theillegal trade, from poaching to the final sale, and part of the profits from the trade are recycled backinto bribes for corrupt officials. Small-scale smuggling—an ivory bangle, shahtoosh shawl, or a few
juvenile turtles—may involve some small bribery. It is the large-scale movement of consignments that
demonstrates a much more institutionalized level of corruption, from the individual customs agent or
wildlife ranger, to the upper echelons of government. Tanzania’s former Natural Resources and Tourism
Minister Lazaro Nyalandu alleged in 2013 that grand corruption in the Tanzanian government—fromparliamentarians and the army to the Tanzanian Port Authority and Immigration Services Department—
made it very difficult to fight ivory trafficking.260 Indeed, two of Tanzania’s ports, Dar es Salaam andZanzibar, along with Mombasa in Kenya, are major ivory export hubs on the continent.

E. Recent Developments

Criminal networks are increasingly involved in the illegal wildlife trade in countries around the world,most often at the middle to higher levels. Opportunistic and indiscriminate, OCGs have taken notice ofthe profit to be made from the illegal wildlife trade. These groups, with their established trafficking routes
and sophisticated networks, have been able to coordinate large consignments of wildlife and wildlife
products. While some ivory still trickles to market piece by piece in passengers’ luggage, trafficking
networks have increasingly put together large shipments: in 2013, almost 42 tons of ivory were seizedfrom at least 18 shipments, mirroring the size of some shipments of drugs and arms.261
https://static1.squarespace.com/static/566ef8b4d8af107232d5358a/t/571a2d5459827ebe07596a71/1461333351821/Ivory%27s+Curse.pdf.
255
David Sheldrick Wildlife Trust, Dead or Alive? Valuing an Elephant (Surrey, UK: The David Sheldrick Wildlife Trust, 2015), http://iworry.org/wp-content/uploads/2013/09/Dead-or-Alive-Final-LR.pdf.
256
According to the National Geographic Society, a keystone species is “a plant or animal that plays a unique and crucial role in the way an ecosystem functions. Without keystone species, the ecosystem would be dramatically different or cease to exist altogether.” “Keystone Species,” National
Geographic Society, January 21, 2011, http://nationalgeographic.org/encyclopedia/keystone-species/.
257
Vira and Ewing, Ivory’s Curse, 8.
258
Human Rights Watch, “Central African Republic,” in World Report 2016 (New York: Seven Stories Press, 2016), 163, https://www.hrw.org/sites/
default/files/world_report_download/wr2016_web.pdf.
259
Adam H. Oswell, The Big Cat Trade in Myanmar and Thailand (Petaling Jaya, Malaysia: TRAFFIC Southeast Asia; World Wildlife Fund, 2010), 17,
http://d2ouvy59p0dg6k.cloudfront.net/downloads/traffic_species_mammals61_1.pdf.
260
Florence Majani, “Corrupt Officials Ensure the Battle against Poaching Remains Futile,” The M&G Online, August 8, 2013, http://mg.co.za/
article/2013-08-08-00-corrupt-officials-ensure-the-battle-against-poaching-remains-futile/.
261
Jackson Miller, Varun Vira, and Mary Utermohlen, Species of Crime: Typologies & Risk Metrics for Wildlife Trafficking (Washington, DC: C4ADS,2015), 6, http://static1.squarespace.com/static/566ef8b4d8af107232d5358a/t/56af8242cf80a1474b572b85/1454342724100/Species+of+Crime.pdf.

							

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The illegal wildlife trade often flows through the same corridors used for other types of trafficking, suchas drugs, arms, and humans. Criminal organizations that control trafficking routes tax other smugglers
for use of these routes; wildlife traffickers pay a fee and are able to use an established route, lowering
the risk of detection and seizure, while drug traffickers gain extra income. There have been someinstances where traffickers have even used animals or animal products to conceal drug shipments.262 In
a particularly notorious incident that occurred in 1993, United States Drug Enforcement Administration
agents at Miami International Airport came across 223 boa constrictors containing approximately 36.3kg(80lb) of packaged cocaine. This cocaine would have had an estimated retail value (i.e., street value) of
more than US$3.1 million at the time.263
The involvement of transnational criminal organizations has also increased the financing of poaching.
Financiers are responsible for the operation of the poaching network, and C4ADS, a non-profit security
and conflict analysis organization, explains that while they may never come into contact with the
product, their “political and social capital is critical.”264 According to Marshall Jones, senior conservation
advisor at the Smithsonian Conservation Biology Institute, those who finance the trade are reaping thegreatest financial rewards, and they may also be involved in other illicit trades such as drugs, arms, andhuman trafficking.265 For example, Chinese organized criminal syndicates engaged in drug smuggling
and human trafficking have become involved in the illicit abalone trade in South Africa, bartering drug
precursors with local gangs and compensating abalone divers with drugs.266
Two important steps were taken at the end of 2016 to combat the poaching of pangolins and elephants.
At the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) 17th
meeting of the Conference of the Parties in September-October 2016, member countries approved aban on the worldwide trade of pangolins. The species has been relatively overlooked by policymakers,
despite being the most widely trafficked animal in the world, so this ban is an important step in bringing
attention to the pangolin’s plight. It is important to note that CITES bans only apply to international trade,and therefore individual countries must take the lead in effectively administering both the CITES ban andnational anti-wildlife trafficking legislation.
In comparison to pangolins, the dire situation of elephants has been widely recognized, yet theinternational community has struggled to fight the poaching of elephants. Despite CITES bans, thepresence of legal domestic ivory markets has played an important part in fueling the demand for ivory.
In a major advance, China, the world’s largest ivory market, announced in December 2016 a ban on all
domestic trade in ivory to be fully implemented within one year. This follows a similar move by the UnitedStates in June 2016 to institute a virtually complete ban on ivory trade. Shuttering domestic markets is a
critical step in fighting elephant poaching.

F. Summary

The illegal wildlife trade has always existed, but the depths of the market have grown dramatically overthe last 10-15 years. Surging demand and skyrocketing retail prices have opened the floodgates for a
trade with an estimated retail value of US$5 billion to $23 billion annually.
Like the trafficking of antiquities, the seriousness of wildlife trafficking was widely overlooked by most
governments until various armed groups and criminal organizations, lured by the huge profits and low
risk, became increasingly involved in the trade. The participation of these groups has transformed what
Victoria Rossi, “Colombia Police Rescued Over 46,000 Illegally Trafficked Animals in 2012,” InSight Crime, September 4, 2012, http://www.insightcrime.org/news-briefs/colombia-46000-illegally-trafficked-animals-2012.
263
Lisa Ocker, “Agents Intercept 223 Live Snakes Stuffed With Drugs,” SunSentinel, July 3, 1993, http://articles.sun-sentinel.com/1993-07-03/
news/9301220086_1_snakes-customs-and-dea-smugglers; “10.5. Cocaine and Heroin Prices in Western Europe and United States, 1990-2014”(United Nations Office on Drugs and Crime, 2016), https://www.unodc.org/wdr2016/en/maps-and-graphs.html. 36,300 grams at US$86/g =US$3,121,800.
264
Vira, Ewing, and Miller, Out of Africa, 28.
265
World Wildlife Fund, It’s Dead Serious, vol. 1, 5 vols., Stop Wildlife Crime: The Series, 2013, https://www.youtube.com/watch?v=Ss58fP7qxEA&list=PL0WSjIIFKH_g1qkGzdk4wb-_G0BkvABY-.
266
Kimon De Greef and Serge Raemaekers, South Africa’s Illicit Abalone Trade: An Updated Overview and Knowledge Gap Analysis (Cambridge, UK:
TRAFFIC International, 2014), 6, http://static1.1.sqspcdn.com/static/f/157301/25583011/1414148973007/W-TRAPS-Abalone-report.pdf?token=HrJH
FoZ2hgfs6p7wc613rb7V9gI%3D.
262

Global Financial Integrity58was traditionally seen as a conservation issue into a matter of national and international security.
Wildlife trafficking is facilitated by corruption, apathy, ignorance, and weak legislation and enforcement.
With no decline in sight, countries around the world must work to reduce the ease and profitability of the
trade.

							

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Global Financial Integrity60

IX. Illegal, Unreported, and Unregulated Fishing
A. Overview

Illegal, unreported, and unregulated (IUU) fishing is a serious issue that impacts not only conservation
but development and security as well. Fishing is a major industry around the world, and even a small
level of IUU fishing can generate billions of dollars in illicit profits. With an estimated 90 percent of theworld’s fisheries classified as fully exploited or overexploited, legal and sustainable fishing operations are
critical to maintain the integrity of global fishery resources.267
IUU fishing covers a variety of fishing activities, such as fishing in contravention to a State’s laws, using
illegal gear, and misreporting catch volumes. Table T provides a summary of the Food and Agriculture
Organization (FAO) of the United Nations’ definition of IUU fishing.268

Table T. What is IUU Fishing?
Component

Description

Illegal“Fishing activities that are i) conducted by national or foreign vessels in waters under
the jurisdiction of a State, without the permission of that State, or in contravention of its
laws and regulations; ii) conducted by vessels flying the flag of States that are parties toa relevant regional fisheries management organization but operate in contravention of
the conservation and management measures adopted by that organization and by which
the States are bound, or relevant provisions of the applicable international law; or iii)
in violation of national laws or international obligations, including those undertaken bycooperating States to a relevant regional fisheries management organization.”

Unreported“Fishing activities i) which have not been reported, or have been misreported, to therelevant national authority, in contravention of national laws and regulations; or ii)
undertaken in the area of competence of a relevant regional fisheries management
organization which have not been reported or have been misreported, in contravention of
the reporting procedures of that organization.”

Unregulated“Fishing activities i) in the area of application of a relevant regional fisheries management
organization that are conducted by vessels without nationality, or by those flying theflag of a State not party to that organization, or by a fishing entity, in a manner that is
not consistent with or contravenes the conservation and management measures of thatorganization; or ii) in areas or for fish stocks in relation to which there are no applicableconservation or management measures and where such fishing activities are conductedin a manner inconsistent with State responsibilities for the conservation of living marine
resources under international law.”

Source: Food and Agriculture Organization

Food and Agriculture Organization of the United Nation, The State of World Fisheries and Aquaculture 2016: Contributing to Food Security andNutrition for All (Rome: Food and Agriculture Organization of the United Nations, 2016), 38, http://www.fao.org/3/a-i5555e.pdf. According to the FAO,
“31.4 percent of assessed fish stocks were estimated as fished at a biologically unsustainable level and therefore overfished. Of all the stocks assessed in 2013, 58.1 percent were fully fished and 10.5 percent underfished.”
268“International Plan of Action to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing,” Food and Agriculture Organization of theUnited Nations, 2001, http://www.fao.org/docrep/003/y1224e/y1224e00.HTM.
267							

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B. Value

Like all transnational crime, IUU fishing is motivated by profits. In 2014, legal world capture fisheries
production (i.e., wild ocean-caught) was worth US$109.2 billion.269 Contracting supply and rising prices
have led to an increase in IUU fishing.270
Annual illegal and unreported marine fishing generates US$15.5 billion to $36.4 billion in illicit
profits.271 This estimate is conservative as it does not take into account unregulated fishing as well as
any IUU fishing in inland fishing areas. Illegal and unreported fishing represents approximately 14 to 33
percent of the global marine capture value.
Developing countries were responsible for 82.7 percent of the total international trade in fisherycommodities in 2014.272 Assuming that percentage is the same for developing countries’ share of illicit
proceeds, US$12.8 billion to $30.2 billion was generated by illegal and unreported marine fishing indeveloping countries in 2014. This is a serious loss for developing countries, some of which rely heavily
on fishing for exports, livelihoods, and food.
Illegal and unreported fishing represents on average approximately 15 to 35 percent of total fisheries
production volume, which equated to 12 million to 28 million tons of fish.273 The rate is actually muchhigher in hard-hit regions such as West Africa, where it is estimated that 37 to 40 percent of the catch isillegal.274 Much of the illegal fishing there is performed by foreign vessels, so both the resources and therevenues leave the region.
Species that are targeted for illegal fishing often have high market values. Examples include tuna,
Patagonian toothfish, crab, shrimp, and abalone. Patagonian toothfish, more commonly known as
Chilean sea bass, are so lucrative that they are nicknamed “white gold.”275 This species usually has alegal-market value of more than US$10,000 per ton, while other highly sought species like tunas andlobsters average US$2,320 and US$9,000 per ton, respectively.276

C. Dynamics

The act of fishing illegally is relatively uncomplicated, however the business of illegal fishing is generally
well-organized and sophisticated. IUU fishing operations employ complex business structures andexploit legal regimes to engage in this illicit business, avoiding scrutiny and accountability. Firms thatparticipate in IUU fishing have been linked to other crimes such as human trafficking.
There are a variety of actors involved in IUU fishing, from individual operators and small enterprises tomultinational companies and organized criminal syndicates. Some of the most damaging illegal fishingis conducted by seemingly legitimate enterprises, often fleets of corporate trawlers, which engage in
harmful and unlawful fishing practices in order to maximize profits by dodging regulations.277 The veneerof legitimacy makes it difficult to detect the underlying illegal activity.
Food and Agriculture Organization of the United Nations, Fishery and Aquaculture Statistics: 2014 FAO Yearbook (Rome: Food and Agriculture
Organization of the United Nations, 2016), 7, 50, http://www.fao.org/3/a-i5716t.pdf. Marine capture production 81,549,353 tons x $1,339/ton.
270
Johan Bergenas and Ariella Knight, “How Illegal Fishing Threatens Development and Security,” World Politics Review, January 30, 2015, http://
www.worldpoliticsreview.com/articles/14973/how-illegal-fishing-threatens-development-and-security.
271
This estimate was arrived at by following the methodology set out by Agnew et al. in their 2009 study “Estimating the Worldwide Extent of Illegal
Fishing” and using updated world marine capture production volumes and values from the FAO. See Appendix, Section F for complete methodology. David J. Agnew et al., “Estimating the Worldwide Extent of Illegal Fishing,” PLoS ONE 4, no. 2 (2009): e4570, doi:10.1371/journal.pone.0004570;
Food and Agriculture Organization of the United Nations, 2014 FAO Yearbook, 8, 50.
272
Food and Agriculture Organization of the United Nations, 2014 FAO Yearbook, 43. This does represent both world capture and aquaculture production.
273
See Appendix, Section F for methodology.
274“The Problem of Illegal Fishing in West Africa,” Stop Illegal Fishing, accessed September 12, 2016, http://stopillegalfishing.com/wp-content/
uploads/2016/02/10016_WATF_ENGLISH_WEB_FINAL-1.jpg; Maíra Martini, Illegal, Unreported and Unregulated Fishing and Corruption, U4 Expert
Answer (Bergen, Norway: U4 Anti-Corruption Resource Center, 2013), 2, http://www.u4.no/publications/illegal-unreported-and-unregulated-fishingand-corruption/.
275
Alexandra Clare, “The Quest to Combat the Illegal Fishing of ‘White Gold’ in the Southern Ocean,” Australian Journal of Maritime and Ocean Affairs
2, no. 3 (2010): 69.
276
L. Griggs and G. Lugten, “Veil over the Nets (Unravelling Corporate Liability for IUU Fishing Offences),” Marine Policy 31, no. 2 (2007): 161,
doi:10.1016/j.marpol.2006.05.015; Food and Agriculture Organization of the United Nations, 2014 FAO Yearbook, 49.
277
Don Liddick, “The Dimensions of a Transnational Crime Problem: The Case of IUU Fishing,” Trends in Organized Crime 17, no. 4 (2014): 297,
doi:http://dx.doi.org.proxyau.wrlc.org/10.1007/s12117-014-9228-6.
269

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IUU fishing particularly flourishes in regions with poor governance, conflict, and/or corruption. These
countries typically do not have the political will and/or resources necessary to effectively prevent andcombat IUU fishing. A prime example is the explosion of illegal activities, including IUU fishing andillegal waste dumping, which occurred in Somalia after the overthrow of the Barre government in 1991.
With the collapse of the state, many services that were previously provided by the government broke
down, including the coast guard. Industrial fishing fleets from Europe and Asia swarmed to the country’s
territorial waters, known as exclusive economic zones (EEZ), to fish.278 Even in 2006, the High Seas Task
Force estimated that some 700 foreign vessels were engaged in IUU fishing in Somalia’s EEZ,279 with
their operations valued at approximately US$90 million to $100 million annually.280
Flags of convenience (FOCs) are a maritime legal regime that allows a vessel to be registered outside thecountry of ownership. The flag state (i.e., the country in which the vessel is registered) has legal authority
over the vessels under its flag and is responsible for enforcing national regulations. Many countries
that offer FOCs are also considered tax havens or share similar characteristics, such as the lack of adiversified economy as well as legal regimes that are organized to attract foreign capital.
Countries that “specialize” in offering FOCs principally do so to collect revenues from fees, services,and taxes. They routinely do not have the ability and/or desire to exercise adequate control over vessels
flying their flag, particularly those operating in distant waters. Panama has the largest ship registry in theworld, with approximately 8,600 registered vessels as of 2014, and earns roughly US$500 million a year
in fees, services, and/or taxes from the FOC “industry;” this is more than twice the number of vessels
registered in China (3,700) and the United States (3,400) combined, two countries which do not offer
FOCs.281 Panama is also notable for its use as a tax haven and secrecy jurisdiction, as evidenced by the2016 International Consortium of Investigative Journalists’ release of the Panama Papers, a leak of morethan 11.5 million financial and legal documents from the Panamanian law firm Mossack Fonseca.
The International Transport Workers’ Federation, as seen in Table U, has declared 33 countries andterritories as offering FOCs;282 of these, 23 are developing countries. With other more urgent issues toaddress, developing countries are willing to accept the licensing and registration fees but are frequently
unable to fulfill their responsibilities and obligations.

The OECD defines an EEZ as a zone extending 200 nautical miles from a country’s coastline in which the country “assumes jurisdiction over the
exploration and exploitation of marine resources.” “Exclusive Economic Zone (EEZ) Definition,” OECD Glossary of Statistical Terms, 2003, https://stats.oecd.org/glossary/detail.asp?ID=884; Abdi Ismail Samatar, Mark Lindberg, and Basil Mahayni, “The Dialectics of Piracy in Somalia: The Rich
Versus the Poor,” Third World Quarterly 31, no. 8 (2010): 1385, doi:10.1080/01436597.2010.538238.
279
High Seas Task Force, Closing the Net: Stopping Illegal Fishing on the High Seas (London: Governments of Australia, Canada, Chile, Namibia, New
Zealand, and the United Kingdom, WWF, IUCN and the Earth Institute at Columbia University, 2006), 81, http://www.imcsnet.org/imcs/docs/hstf_final_report.pdf.
280
Marine Resources Assessment Group, Review of Impacts of Illegal, Unreported and Unregulated Fishing on Developing Countries (London: Marine
Resources Assement Group, Ltd., 2005), 6, http://www.imcsnet.org/imcs/docs/iuu_fishing_synthesis_report_mrag.pdf.
281
Aliyya Swaby, “Why So Many Shipowners Find Panama’s Flag Convenient,” BBC News, August 5, 2014, http://www.bbc.com/news/world-latinamerica-28558480.
282“Flags of Convenience: Avoiding the Rules by Flying a Convenient Flag,” International Transport Workers’ Federation, accessed September 12,
2016, http://www.itfglobal.org/en/transport-sectors/seafarers/in-focus/flags-of-convenience-campaign/. Flag icons from: http://www.iconarchive.
com, Nuno Tavares and Denelson83 at Wikimedia Commons.
278							

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63

Table U. Flags of Convenience
Antigua and Barbuda

Equatorial Guinea

Marshall Islands

BahamasFaroe Islands

Mauritius

Barbados

Georgia

Moldova

BelizeGibraltar

Mongolia

BermudaHonduras

MyanmarBolivia

Jamaica

PanamaCambodia

Korea, Dem. People’s RepublicSão Tomé and Príncipe

Cayman Islands

LebanonSt. Vincent and the Grenadines

Comoros

Liberia

Sri Lanka

Curaçao

MadeiraTonga

CyprusMalta

Vanuatu

Although legal, the use of FOCs is a major enabling factor because it often allows vessel owners to
avoid accountability. This is the same issue presented by anonymous shell companies, as the absenceof transparency allows beneficial owners to avoid identification and accountability. Countries that offer
FOCs typically have much less stringent maritime regulations and are “either incapable of, or deficientat, monitoring their vessels.”283 Three of the countries listed above—Bolivia, Moldova and Mongolia—arelandlocked. In addition, vessel owners employ FOCs in order to take advantage of minimal fees and low
or no taxes.
The use of anonymous shell companies not only conceals beneficial ownership but allows organizations
to reinvoice catches, obfuscating their illegal origin.284 As shown in Figure V, Shell Company A operates
the IUU fishing vessel, which sells its catch to Shell Company B. This company reinvoices the catch to
make it appear that the fish are legally caught, essentially laundering the catch. The fish are then resold
to a fish dealer with “legal” documentation; the dealer may or may not be aware that the fish werecaught illegally.

283
284

Griggs and Lugten, “Veil over the Nets,” 160.
Clare, “Quest to Combat Illegal Fishing,” 72.

Global Financial Integrity

64Figure V. Trade Misinvoicing to Launder Illegally-Caught Fish285

Illegal fishing operations also employ reinvoicing to engage in fraud, such as mislabeling the species
to charge higher prices or misstating where the fish were caught in order to meet regulations or legal
standards. In a 2011 misinvoicing scheme that occurred in the Gulf of Mexico, both individuals andcompanies would fraudulently label Vietnamese catfish as more valuable species, such as grouper. By
doing so, they were able to evade a U.S. import tariff on Vietnamese catfish, equal to US$9.3 million inthis case, as well as sell the (mislabeled) catfish at a higher market price.286
These complex and opaque multinational corporate structures also make it extremely difficult for
authorities to investigate and prosecute those involved in the illegal operations. Owners of IUU fishingvessels also employ tactics such as concealing ship markings, not flying a country flag, or disabling
required tracking devices, in order to avoid detection.
There are also established links between the fishing industry, human security, and transnationalorganized crime, particularly trafficking in persons, smuggling of migrants, and drug trafficking.
Trafficking for the purpose of forced labor “in furtherance of both sea- and shore-based operations” isfrequent; it is a global problem, but West Africa and South and Southeast Asia are particular hotspots.287
Trafficking of children in the fishing industry is commonplace in these regions, as is physical abuse,forced labor, and debt bondage.
The fishing industry is vulnerable to such human rights abuses because, unlike merchant vessels, there
are no international regulations or port state control measures that govern on-board living and working
conditions.288 With fishing stocks depleted in many parts of the world, fishing vessels must travelmuch further away from shore to fish and can remain there for long periods of time. Crews in thesecircumstances are more susceptible to abuse as they are isolated from aid and unable to escape.

D. Developing Countries

Illegal fishing is a global phenomenon, however it is particularly concentrated in developing countries
as they are responsible for 82.7 percent of the total international trade in fishery commodities.289 Illegal
fishing operations regularly target port states with weak monitoring and enforcement because they canLongline tuna boat graphic: Kim Kraeer and Lucy Van Essen-Fishman, Integration and Application Network, University of Maryland Center for Environmental Science, http://ian.umces.edu/imagelibrary/displayimage-112-5574.html; Fish market photo: Skitter Photo, Freepik, http://www.freepik.
com/free-photo/fresh-fish-market_757225.htm#term=fish market&page=1&position=17.
286
Russell F. Smith III, “Legislative Hearing on H.R. 69, to Strengthen Enforcement Mechanisms to Stop Illegal, Unreported, and Unregulated Fishing,”
Serial No. 113-66, Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs, Committee on Natural Resources (2014), 20, https://www.gpo.
gov/fdsys/pkg/CHRG-113hhrg87535/pdf/CHRG-113hhrg87535.pdf.
287
United Nations Office on Drugs and Crime, Transnational Organized Crime in the Fishing Industry (Vienna: United Nations Office on Drugs andCrime, 2011), 25, https://www.unodc.org/documents/human-trafficking/Issue_Paper_-_TOC_in_the_Fishing_Industry.pdf.
288
The International Maritime Organization defines port state control as “the inspection of foreign ships in national ports to verify that the conditionof the ship and its equipment comply with the requirements of international regulations and that the ship is manned and operated in compliance withthese rules.” See “Port State Control,” International Maritime Organization, accessed January 13, 2017, http://www.imo.org/en/ourwork/msas/pages/
portstatecontrol.aspx; INTERPOL, “Study on Fisheries Crime in the West African Coastal Region” (Lyon: INTERPOL, September 2014), 27.
289
Food and Agriculture Organization of the United Nations, 2014 FAO Yearbook, 43.
285							

Transnational Crime and the Developing World65

operate with relative impunity. Developing countries, which often lack the resources, rule of law, and/or
political will to sufficiently monitor and enforce fishing regulations, bear the greatest burden, frequently
economic, of illegal fishing due to their reliance on the fishing industry.
Developing countries are at risk to IUU fishing because they are usually ill-equipped to sufficiently
monitor and control fishing in their EEZ. Even legal fishing that is not adequately tracked and managed
can lead to overexploitation or depletion of fish stocks.290 Illegal fishing compounds these problems as
the additional fishing, besides the actual depletion of fish stocks, is further unaccounted for, impairing
fisheries management.
IUU fishing has major environmental, societal, and economic impacts, all of which are connected. The
global demand for fish is strong and has been steadily increasing for decades. Some fishing operations
are willing to engage in IUU fishing in order to profit from this demand. Yet this only produces short-term
gains, as these practices result in unsustainable levels of fishing, destroying ecosystems and pushingfisheries towards collapse.
At the societal level, IUU fishing can threaten food security and endanger the livelihoods of communities
dependent on the fishing industry.291 Coastal communities often rely on fish as a protein source for theirdiets, typically sourcing the fish themselves or purchasing it from fishermen in the community. Artisanal
fishers cannot compete with illegal industrial fishing trawlers and get squeezed out of the market. In
Sierra Leone, illegal operators not only deplete resources but are also known to harass local fishermen
and destroy their nets and gear.292
These same communities frequently depend on the fishing industry for employment as well. Morethan 500 million people in the developing world directly or indirectly rely on the fishing industry for
employment.293 Reductions in fishing stocks due to IUU fishing have a strong impact on the livelihoodsof those employed by the legal fishing sector. Many IUU vessels are part of distant water fleets. In the
Gulf of Guinea, for example, foreign fleets mainly come from China, Taiwan, Russia, South Korea, Spain,
France, and Thailand.294 When fisheries become overexploited from unsustainable and illegal fishingpractices, foreign vessels can move on to other fishing areas. Local communities, however, are left tobear the consequences.
At the country level, illegal fishing can also cost governments tax revenue. According to the OECD, thethree primary ways that fishing operators commit tax fraud are by “disguising the origin of fish, underdeclaring the size of a catch and incorrectly describing the species or products caught or sold.”295 As
mentioned earlier, a fraudulent trade misinvoicing scheme executed in the Gulf of Mexico amounted toapproximately US$9.3 million in evaded tariffs.296 This defrauds consumers and deprives developing
country governments of important tax revenue.
The net-export fishery revenues for developing countries totaled US$42 billion in 2014, which is higher
than the combined value of other major agricultural goods.297 Fishing is a very important industry formany developing countries, and trade misinvoicing such as the above can have a significant negative
impact. Sustainable development of the fisheries sector in developing countries can help to improvestandards of living, but only if the countries are able to mobilize domestic resources.
The FAO defines overexploitation as the fishery being “exploited… above a level which is believed to be sustainable in the long term, with nopotential for further expansion and a higher risk to stock depletion/collapse,” while depletion refers to catches that are “well below historical levels,
irrespective of the amount of fishing effort exerted.” See “General Situation of World Fish Stocks” (Food and Agriculture Organization of the United
Nations), accessed September 13, 2016, http://www.fao.org/newsroom/common/ecg/1000505/en/stocks.pdf.
291
Liddick, “Dimensions of a Transnational Crime,” 292.
292
“Hunting Pirate Fishermen on the High Seas,” Al Jazeera, 2015, http://aljazeera.com/piratefishing.
293
Organisation for Economic Co-Operation and Development, Evading the Net: Tax Crimes in the Fisheries Sector (Paris: Organisation for Economic
Co-Operation and Development, 2013), 11, http://www.oecd.org/ctp/crime/evading-the-net-tax-crime-fisheries-sector.pdf.
294“The Problem of Illegal Fishing in West Africa.”
295
Organisation for Economic Co-Operation and Development, Evading the Net, 26.
296
Smith III, Legislative Hearing on H.R. 69, to Strengthen Enforcement Mechanisms to Stop Illegal, Unreported, and Unregulated Fishing, 20.
297
Food and Agriculture Organization of the United Nation, The State of World Fisheries and Aquaculture 2016: Contributing to Food Security andNutrition for All, 7.
290

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E. Recent Developments

The fishing industry is experiencing a push for transparency similar to that seen in finance andextractives. Advocates are working to institute a global record of fishing vessels. According to theEnvironmental Justice Foundation, the adoption of a global record “with consistent and validated vessel,
company and owner information, underpinned by an International Maritime Organization (IMO) number
as a unique vessel identifier (UVI), is a practical, feasible and cost-effective step to combat illegal,
unreported and unregulated (IUU) fishing by driving transparency and traceability throughout the seafood
supply chain.”298
Currently, only non-fishing commercial vessels are required by the IMO to be registered with the vessel
numbering scheme. Coupled with the ability to easily change a vessel’s name, call sign, ownership,and registration, the lack of UVIs and a global record of fishing vessels enable IUU fishing operations toevade accountability. The Pew Charitable Trusts explains that regional management organizations andflag states “could take a significant step toward preventing fraud, ensuring the safety and security offishing operations, and promoting fairness for law-abiding commercial fishermen and vessel owners” byrequiring fishing vessels to obtain an IMO number.299 This initiative is similar to the international effort toestablish a universal system of global legal entity identifiers for companies, or GLEIs, which are unique
20-digit alphanumeric codes registered to individual entities that can be used to identify entities acrossjurisdictions. If adopted and mandated for companies globally, it would allow for the instant and precise
identification of parties to financial transactions, increasing transparency and reducing risks.

F. Summary

Illegal and unreported fishing is a profitable activity, generating US$15.5 billion to $36.5 billion
annually. IUU fishing operations are enabled by unique aspects of the fishing industry, such as flags ofconvenience and the lack of unique vessel identifiers, as well as tools of the global shadow financial
system, particularly anonymous shell companies and trade misinvoicing.
Like other environmental crimes, IUU fishing, long seen as a conservation problem, actually has deep
impacts on development and security. IUU fishing is particularly concentrated in developing countries;
the depletion of fish stocks has major repercussions on communities’ food and job security as well as
the governments’ ability to mobilize domestic resources. The use of UVIs for fishing vessels will bringgreater transparency and accountability to the fishing industry, curtailing IUU fishing.

“Bringing Fishing Vessels out of the Shadows: The Urgent Need for a Global Record of Fishing Vessels and a Unique Vessel Identifier” (Environmental Justice Foundation; FishWise, 2013), http://fishwise.org/images/pdfs/out_of_the_shadows_ejf_fishwise.pdf.
299“Why Fishing Vessels Need Mandatory, Unique Identification Numbes” (The Pew Charitable Trusts, June 2013), http://www.pewtrusts.org/~/media/
assets/2013/06/05/iuuiattcuniquevehicleidentificationbrief.pdf.
298							

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67

Global Financial Integrity

68

X. Illegal Logging
A. Overview

Illegal logging is a lucrative and destructive crime, yet authorities have allowed it to flourish relatively
unchecked due to its perceived innocuous nature. It causes harm not just to the environment but tohuman security and economic development as well. The revenues provide very little long-term benefit
to loggers and indigenous communities but serve as valuable financing for violent groups. With thelivelihoods of 1.6 billion people around the world dependent on forests, illegal logging is not a victimlesscrime.300
The tropical forests of Southeast Asia, the Amazon basin, and Central Africa are at the heart of the illegal
timber trade. Illegal logging, like illegal fishing and illegal mining, divests developing countries of muchneeded revenues and jeopardizes sustainable development initiatives. Groups that engage in illegal
logging have developed new schemes involving anonymous shell companies and fraudulent agricultural
plantations to evade logging restrictions and avoid scrutiny.

B. Value

Illegal logging is the most profitable natural resource crime, outpacing wildlife trafficking, illegal fishing,illegal mining, and crude oil theft. Illegally-procured timber accounts for 10 to 30 percent of the total
global trade in timber products,301 and this figure jumps to 50 to 90 percent for some tropical woodcountries.302 The global forestry products trade was worth US$522 billion in 2014, thus illegal logging isestimated to be valued at US$52 billion to $157 billion dollars per year.303
Little of the profit from illegal logging accrues to those engaged in harvesting the timber, while the largest
sums are earned by those who finance the operation. In Table V on Peruvian mahogany, the loggers
or the indigenous community that agrees to the logging earn US$70 per cubic meter (m3), whereas theheadman or patrón sees the greatest return, earning US$626 for the same piece of timber that theypurchased for US$155, an increase of more than 300 percent.304 By the time the wood reaches theimporter, the price has increased by 5,200 percent from what was paid to the loggers and/or indigenous
community.

Table V. Value Chain for Peruvian Mahogany, per cubic meter (US$)
Participant

Amount Receives% Increase from
Original Purcase
Price

$70
$155
$626
$1,251$1,804$3,710.
121%
794%
1,687%
2,477%
5,200%

Loggers/Indigenous Community
Merchant/Lender/Habilitador
Headman/Patrón
Sawmill
Exporter
Importer
Source: Julia M. Urrunaga et al.

Global Witness, On Dangerous Ground: The Killing and Criminalization of Land and Environmental Defenders Worldwide (London: Global Witness,2016), 18, http://www.illegal-logging.info/sites/files/chlogging/On_Dangerous_Ground_GlobalWitness.pdf.
301
Christian Nellemann and INTERPOL Environmental Crime Programme, eds., Green Carbon, Black Trade: Illegal Logging, Tax Fraud and Launderingin the World’s Tropical Forests, A Rapid Response Assessment (Arendal, Norway: United Nations Environment Programme; GRID-Arendal, 2012), 6,
http://www.unep.org/pdf/RRAlogging_english_scr.pdf.
302
Christian Nellemann et al., eds., The Environmental Crime Crisis, A Rapid Response Assessment (Oslo: United Nations Environment Programme,2014), 8, http://www.unep.org/unea/docs/RRAcrimecrisis.pdf.
303
Food and Agriculture Organization of the United Nations, FAO Yearbook of Forest Products 2014, FAO Forestry Series No. 49 (Rome: Food andAgriculture Organization of the United Nations, 2016), 226.
304
Julia M. Urrunaga et al., The Laundering Machine: How Fraud and Corruption in Peru’s Concession System Are Destroying the Future of Its Forests(Washington, DC: Environmental Investigation Agency, 2012), 19, http://www.eia-international.org/wp-content/uploads/The-Laundering-Machine.pdf.
300							

Transnational Crime and the Developing World

69

The high demand for rosewood, a protected species, in Asian markets has led to the growth of an
illicit market for this good. It is the middleman, or financier, who earns the most from the sale ofillegally harvested rosewood from West Africa (Table W), receiving revenues 19,000 to 28,000 percent
greaterthan what they pay to the logger.305

Table W. Value Chain for West African Rosewood, per 10-ton container (US$)
Transation
Value
Logger to Middleman$17 to $34
Middleman to Exporter$4,900 to $6,550
Exporter to Chinese Company$9,800 to $11,500
Source: Christian Nellemann et al.

Law enforcement and government officials can earn income (i.e., bribes) along the entire supply chain,
reducing the incentive to intervene in illegal logging operations. As shown in Figure VI, nearly 20 percentof the proceeds from a typical transaction per cubic meter of Russian timber at the Russia-China bordergoes toward bribes.306

Figure VI. Division of Value: US$140/m3 of Russian timber
Chinese wholesaler$10
Illegal loggers, bodyguards,
and truckers

$9
$3

Fuel
$5
Forest leaser
Timber depot operators$10

Bribe to environmental
inspector$5

Bribe to forestry officials
Bribe to regional
administrators

$70

$5

$23

Bribe to customs officals
Source: Vanda Felbab-Brown

The illicit charcoal trade is a valuable component of illegal logging, particularly for criminals, as well
as militia and terrorist groups in Africa.307 Exports of illicit charcoal from Somalia alone are worth
approximately US$360 million to $384 million annually, and the Democratic Forces for the Liberation of
Rwanda (FDLR) earns an estimated US$35 million each year from the trade in Rwanda.308 Groups suchas Al-Shabaab and the FDLR earn both passive (taxation) and active (sale) income from illicit charcoal.
Christian Nellemann et al., The Rise of Environmental Crime: A Growing Threat to Natural Resources, Peace, Development and Security, A UNEPINTERPOL Rapid Response Assessment (Oslo: United Nations Environment Programme; RHIPTO Rapid Response-Norwegian Center for Global
Analyses, 2016), 55, http://unep.org/documents/itw/environmental_crimes.pdf.
306
Vanda Felbab-Brown, Not As Easy As Falling Off a Log: The Illegal Logging Trade in the Asia-Pacific Region and Possible Mitigation Strategies,
Working Paper No. 5 (Washington, DC: Brookings Institution, 2011), 17, https://www.brookings.edu/wp-content/uploads/2016/06/03_illegal_logging_felbabbrown.pdf.
307
The production of charcoal typically involves the clearcutting of trees that are then burned in a low-oxygen environment, resulting in pieces that arenearly pure carbon. See Brandon Blackburn-Dwyer, “Charcoal: A Boom for Africa That May Be Killing It,” Global Citizen, June 27, 2016, https://www.
globalcitizen.org/en/content/charcoal-africa-power-good-bad/.
308
Nellemann et al., Environmental Crimes Crisis, 81; Holly Dranginis, The Mafia in the Park: A Charcoal Syndicate Is Threatening Virunga, Africa’s
Oldest National Park (Washington, DC: Enough Project, 2016), 5, http://www.enoughproject.org/files/report_MafiaInThePark_Dranginis_Enough_June2016.pdf.
305

Global Financial Integrity70

C. Dynamics

Illegal logging, like other transnational organized crime, typically occurs in permissive environments thatare enabled by corruption and ineffective enforcement. The illegal and legal timber trades are frequently
intertwined, making it difficult to detect illegal activity. Like the vast exclusive economic zones in illegal
fishing, the remote locations and immense size of many forested areas also makes it very difficult for
authorities to effectively monitor logging concessions and prevent illegal logging. Geographically, illegal
logging principally occurs in Southeast Asia, Central Africa, and South America; an estimated 50 to 90
percent of timber from these regions is acquired through illegal practices.
Criminals engage in illegal logging in a multitude of available ways, ranging from harvesting protected
species and logging outside concessions, to logging in conflict zones and establishing fictitious
plantations. The majority of schemes involve deceit and/or bribery. Some of the most common methods
used in illegal logging include:309
•
•
•
•
•
•
•
•
•
•
•

Logging in protected areas
Logging of protected species
Logging without permits
Logging in conflict zones
Logging in excess of permit or concession quotas
Logging with forged or reused permits
Obtaining permits through bribes
Establishing or expanding plantations
Agricultural expansion by small-scale farmers
Cattle ranching and soy production
Widening road corridors, mining, or other felling

Illegal logging uses similar techniques to trade misinvoicing to disguise the quantity, quality, value, ororigin in order to launder the timber. For example, logging operations may over-invoice legal timber
quantities in order to introduce illegal timber for transport, but then under-invoice official sale amounts
in order to be able to harvest more without scrutiny.310 Illicit actors also mirror methods employed tolaunder illegally caught fish. When transported by ship, a load of illegal timber from Country A may
be traded on paper multiple times, often with the use of anonymous shell companies. By the time theshipment arrives in Country B, the timber is owned by a company from Country C, disguising both thetimber’s origins as well as the beneficial owner.311
According to the United Nations Office on Drugs and Crime, “formal business enterprises operating
through fraudulent methods” are responsible for the majority of illegal logging.312 These businesses
engage in illegal logging in an attempt to circumvent or mitigate the costs associated with acquiring legal
permits and concessions in order to improve profit margins. In Brazil, there is evidence that criminals
have hacked government computer systems to illegally acquire logging-related permits.313 By avoiding
the costs related to legal operations, illegal logging operations have lower production costs and are thus
able to undercut the prices of legitimate competitors.
Extensive bureaucracy is a unique driver of illegal logging in Russia.314 Otherwise legitimate logging
operations may engage in illegal logging, such as logging without a permit, to circumvent cumbersome
application processes and exorbitant fees. The result is that up to 50 percent of logging in the vast
forests of the Russian Far East is illegal.315
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 29–37.
Ibid., 47.
Ibid.
312
United Nations Office on Drugs and Crime, Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment (Vienna: United Nations Office on Drugs and Crime, 2013), 89, https://www.unodc.org/documents/data-and-analysis/Studies/TOCTA_EAP_web.pdf.
313
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 41.
314
Tanya Wyatt, “The Russian Far East’s Illegal Timber Trade: An Organized Crime?,” Crime, Law and Social Change 61, no. 1 (February 2014): 21,
doi:http://link.springer.com/article/10.1007/s10611-013-9461-y.
315
Ibid., 20, 23.
309
310
311

							

Transnational Crime and the Developing World

71

China is the leading importer and exporter of timber in the world as well as a major processing center;
it is also the primary destination for the majority of illegally-sourced timber exports.316 The country
still lacks legislation that prohibits the import of timber derived from illegal logging.317 Six of the top
10 countries from which China imports timber—Russia, Thailand, Indonesia, Viet Nam, Lao PDR, andPapua New Guinea—have a very high risk for illegal logging.318 The Environmental Investigation Agency
estimates that approximately 10 percent of China’s unfinished wood product imports are illegal timber.319
Illegal logging is an attractive criminal enterprise because it involves little risk of interdiction andpunishment. Although timber and arms both have legal and illegal markets, shipments of timber draw
much less scrutiny from authorities than do arms. The transaction costs for illegal timber are therefore
typically less that other criminal markets because timber is a relatively innocuous commodity.
Criminals use fraudulent documentation, such as invoices and permits, to facilitate the laundering andsmuggling of illegal timber, a tactic also seen in the trafficking of arms and cultural property. Most illicit
timber can be laundered without difficulty, but easily identifiable protected species such as rosewood
may require additional obfuscation. Ninety-two tons of illegally harvested rosewood, some from
Honduras, were transported to Mexico, where it was then shipped to Hong Kong, misinvoiced as scrap
rubber from Guatemala.320

D. Developing Countries

There are serious environmental impacts from illegal logging as well as considerable negative
externalities on the economies and security of developing countries. Illegal logging threatens timber
supplies and is a significant driver of deforestation and habitat destruction. The practice also deprives
communities and developing economies of indispensable revenues while financing violent groups.
Illegal logging occurs at unsustainable levels, severely depleting timber supplies and threatening
biodiversity and species conservation through habitat destruction and the exposure of wildlife topoaching. In addition, the rampant deforestation of the planet is a significant cause of man-made carbon
emissions. Approximately 12 to 15 percent of greenhouse gas emissions stem from forest loss, whichis greater than the entire transportation sector worldwide.321 Forests are extremely important sourcesof food, goods, and employment for rural communities in developing countries, thus the environmental
impacts of illegal logging can have direct impacts on the well-being of communities.
Illegal logging and deforestation have been tied to drug trafficking in many cocaine-producing countries.
In Colombia, hundreds of thousands of hectares have been illegally logged in order to clear land for cocacultivation; trees are also felled in cocaine production and transit countries to make room for landing
strips.322 In addition, organized crime groups (OCGs) have laundered drug money by financing timber
extraction.323
Illegal logging robs developing country governments around the world collectively of at least US$10
China imported US$22.8 billion and exported US$14.5 billion in lumber in 2014. Trade data based on Harmonized System (HS) Classification 07
for HS commodity code 44 in 2014. “UN Comtrade Database,” United Nations, accessed January 30, 2017, https://comtrade.un.org/data/; United
Nations Office on Drugs and Crime, TOC in East Asia and the Pacific, 96.
317
Laura Wellesley, “Trade in Illegal Timber: The Response in China,” A Chatham House Assessment (London: Chatham House, December 2014), 8,
https://indicators.chathamhouse.org/sites/files/reports/CHHJ2361_China_Logging_Research_Paper_FINAL.pdf.
318“UN Comtrade Database.”
319
Environmental Investigation Agency, Appetite for Destruction: China’s Trade in Illegal Timber (London: Environmental Investigation Agency, 2012),
7, https://eia-international.org/wp-content/uploads/EIA-Appetite-for-Destruction-lo-res.pdf.
320
Kyra Gurney, “Hong Kong Seizes Record Shipment of Honduran Wood,” InSight Crime, December 18, 2014, http://www.insightcrime.org/newsbriefs/hong-kong-seizes-record-shipment-of-honduran-wood.
321
According to Global Witness, forests absorb and store significant amounts of carbon dioxide, and “when forests are destroyed or degraded, they
releases large amounts of this carbon back into the atmosphere as carbon dioxide.” See Global Witness, Forest Carbon, Cash & Crime: The Risk of
Criminal Engagement in REDD+ (London: Global Witness, 2011), 3, https://www.globalwitness.org/en/reports/forest-carbon-cash-crime/.
322
Edward Fox, “Colombia Seizes 450 Tons of Illegal Timber,” InSight Crime, July 19, 2012, http://www.insightcrime.org/news-briefs/colombia-seizes450-tons-of-illegal-timber; Matt McGrath, “Drug Trafficking Is Speeding Deforestation in Central America,” BBC News, January 30, 2014, http://www.
bbc.com/news/science-environment-25960481.
323
Quenton King, “Drug Traffickers Laundered $250 Million in 2015: Peru Official,” InSight Crime, April 28, 2016, http://www.insightcrime.org/newsbriefs/drug-traffickers-laundered-250-million-in-2015-peru-official; Brian Clark Howard, “Drug Trafficking Poses Surprising Threats to Rain Forests,
Scientists Find,” National Geographic News, January 30, 2014, http://news.nationalgeographic.com/news/2014/01/140130-drug-trafficking-deforestation-central-america-environment-policy-reform/.
316

Global Financial Integrity72billion in revenues and taxes annually.324 In addition to tax evasion, illegal logging is connected to whitecollar crimes, including fraud related to carbon trading and “eco-certified schemes.”325 Russia, likemany countries, allows for deferred payment of export duties. Illicit enterprises in Russia will registera temporary anonymous shell company and bank account with tax authorities and establish export
contracts. After the timber shipments, legally or illegally sourced, are exported, the company either
closes or goes bankrupt, leaving outstanding taxes and duties unpaid.326
Local communities may or may not receive income from illegal logging. Even if compensation isreceived, since the logging is not sustainable, neither are the revenues. Indigenous groups generally
receive a fraction of the revenues for allowing illegal logging on their land compared to what they
could earn from equitable, legal logging operations. Many illegal loggers provide no compensation to
indigenous communities, illegally logging tribal lands without permission. In Brazil, the destruction ofland is further compounded when illegal loggers set wildfires to the area they have cleared in order tocover up their theft.327
Some illicit operators expel local communities from their land instead of paying concessions in orderto more easily access and exploit the natural resources.328 Displacement is more common in remoteareas where populations have less protection or recourse. Forests and forest products are an extremely
important source of income for many people around the world. Of those individuals who survive on lessthan a dollar a day, over 90 percent rely on forest products to earn a living.329
Illegal logging has serious consequences on human security, from trafficking in human beings to its use
as a source for financing conflict. There are direct links between illegal logging and labor exploitation.
The International Labor Organization estimates that illegal logging in the Peruvian Amazon engages
approximately 33,000 people, primarily from indigenous groups, in forced labor.330 This is due in part tothe country’s habilitación system of granting logging concessions that places loggers in situations similar
to debt peonage, which can trap them in debt.331
Like drug trafficking, militias, armed groups, and terrorist organizations are actively and passively
involved in illegal logging. Illegal logging in conflict zones often contributes to financing arms purchases.
Militia and terrorist groups in African countries with ongoing conflicts earn an estimated US$111 million
to $289 million each year in passive and active income from the illegal and unregulated charcoal trade.332

E. Recent Developments

Illegal logging operators are honing and developing new methods involving “plantations” to avoid
scrutiny. In particular, individuals and companies are using anonymous shell companies to invest in
timber and agricultural plantations, often palm oil, as a cover to evade logging moratoriums and otherlaws. These “plantations” never progress to actual agricultural production, because clearing the land
(i.e., logging) is the ultimate goal rather than a necessary pre-production step.333
In Indonesia, these fictitious plantations are sometimes established with the assistance of government
subsidies, compounding the amount of fraud perpetrated against the government.334 It is estimated that
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 13.
Nellemann et al., Rise of Environmental Crime, 65.
326
Wyatt, “The Russian Far East’s Illegal Timber Trade,” 25.
327
Scott Wallace, “Illegal Loggers Wage War on Indigenous People in Brazil,” National Geographic News, January 21, 2016, http://news.nationalgeographic.com/2016/01/160120-brazil-illegal-logging-indigenous-people-Amazon-Basin-Awa-ibama/.
328
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 29; Jeff Abbott, “Indigenous Community Wins Land
Rights Victory in Guatemala After 200 Years of Struggle,” Upside Down World, August 6, 2015, http://upsidedownworld.org/archives/guatemala/indigenous-community-wins-land-rights-victory-in-guatemala-after-200-years-of-struggle/; Bonnie Jo Mount, “Amazon Residents Resort to Militias toKeep out Illegal Loggers,” Washington Post, October 6, 2015, http://www.washingtonpost.com/sf/world/2015/10/06/loggers/.
329
Global Witness, Forest Carbon, Cash & Crime, 3.
330
Fellipe Abreu, “Inside Peru’s Illegal Logging Industry,” InSight Crime, July 31, 2014, http://www.insightcrime.org/news-analysis/inside-perus-illegallogging-industry.
331
Urrunaga et al., Laundering Machine, 13.
332
Nellemann et al., Environmental Crimes Crisis, 8.
333
Ibid., 63.
334
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 48.
324
325							

Transnational Crime and the Developing World73

one-half to two-thirds of all industrial timber plantations in Indonesia are covers for illegal operations.335
An alternative that is growing in popularity is the use of fictitious (i.e., a plantation that exists only on
paper) or even real timber plantations to launder illegally harvested timber from other sources anddeclare it as a product of the plantation.336 Criminals over-report the harvesting levels of the plantations,allowing them to easily introduce the illegal timber into the legal supply. These new methods do a goodjob of masking illegal logging activities, making it much more difficult for authorities to detect and halt
illicit operations.

F. Summary

Illegal logging is a serious transnational organized crime that is damaging to the land and the people.
With an annual value of US$52 billion to $157 billion, illegal logging is one of the most lucrativetransnational organized crimes. Typically, few of the profits trickle down to the communities—they remainin poverty while only a handful benefit.
Illegal logging robs governments around the world of significant tax income from trade as well as permits
and concessions. The involvement of OCGs, militias, and terrorist organizations leads to serious impacts
on human security and domestic stability.
The forestry industry cannot contribute to sustainable development if logging is not conducted in asustainable manner. The quick profits participants receive translate not into long-term benefits, but
environmental damage that lasts generations.

335
336

Nellemann et al., Rise of Environmental Crime, 65.
Nellemann and INTERPOL Environmental Crime Programme, Green Carbon, Black Trade, 45.

Global Financial Integrity

74

XI. Illegal Mining
A. Overview

Mineral wealth is found around the world, but the problem of illegal mining is largely confined todeveloping countries. The high value of many of the illegally mined minerals has attracted a varietyof participants, still it is typically the small-scale miners that face the greatest risk yet receive thesmallest profits. Illegal mining has serious environmental, economic, and security impacts on the global
community.
A discussion of illegal mining must first address its definition. Following a strict sense, illegal mining is
any mining conducted without a title and/or license that does not meet national regulations. However
there remains a large grey area with a variety of activities that fall on the scale of illegal mining, frominformal mining to criminal mining. Figure VII depicts the mining spectrum and provides examples oflegal, informal, and criminal mining.

Figure VII. Mining Spectrum
Illegal Mining•

Legal Mining
Title holder, be it anindividual or company,
meets all obligations,e.g., obtaining
licenses, paying
royalties•••

Informal Mining
Mining adhering tocustomary, but not national,
law
License not required; miner
must register, but doesn’t
Mining with landholder’spermission but without
official permit••

Criminal Mining
Mining consudctedby OCGs and armed
groupsTrespass and mining
at open or abandonedsites

As shown above, legal mining is mining that is done in full compliance with national laws. Informal
mining, while illegal in the sense that it does not fully comply with domestic laws and/or regulations,is not necessarily criminal. Informal mining often refers to community-based artisanal and smallscale mining that adheres to customary law.337 Miners may extract minerals on community land orwith the permission of landholders, yet they do not obtain the permits and/or licenses required by thegovernment.

B. Value

There are important gaps in the research on the global value of illegal mining. This is due in largepart to the ambiguity concerning what constitutes illegal mining as well as a narrow concentration on
certain minerals and regions. The most recent figure comes from a 2016 United Nations Environment
Programme (UNEP) and INTERPOL assessment that estimated the illegal extraction and trade inminerals to be worth US$12 billion to $48 billion annually.338 This is equivalent to roughly one to four
percent of global industry trade, which highlights the fact that even a small percentage of illicit activity
can still generate significant revenues.339
Kgothatso Nhlengetwa, “Why It Doesn’t Make Sense That All Informal Mining Is Deemed Illegal,” The Conversation, April 12, 2016, http://theconversation.com/why-it-doesnt-make-sense-that-all-informal-mining-is-deemed-illegal-57237.
338
Christian Nellemann et al., The Rise of Environmental Crime: A Growing Threat to Natural Resources, Peace, Development and Security, A UNEPINTERPOL Rapid Response Assessment (Oslo: United Nations Environment Programme; RHIPTO Rapid Response-Norwegian Center for Global
Analyses, 2016), 20, http://unep.org/documents/itw/environmental_crimes.pdf.
339
Ibid.
337

							

Transnational Crime and the Developing World75

A greater amount of research has been done on the value of illegal mining at a country and at a minerallevel. The surge of illegal mining that began in Latin America circa 2002 has received strong attention.
Illegal gold mining in nine Latin American countries is worth approximately US$7 billion each year (Table
Y).340 Colombia and Peru have the largest amount of illegal gold mining in terms of value (US$2 billion
and US$2.6 billion, respectively), and Venezuela and Colombia suffer the highest rate of illegal gold
mining (86 to 91 percent and 80 percent of all gold mining, respectively). Mexico has the lowest rate ofillegal gold mining, at nine percent, yet that is still worth approximately US$500 million annually.

Table Y. Annual Value of Illegal Gold Mining in Latin America (US$ millions)% of Total Gold
Country
Annual Value
MiningBolivia$100
31-45%
Brazil$400
10-14%
Colombia$2,00080%
Ecuador$400
70-77%
Guyana$200
15-22%
Mexico$500
9%Nicaragua
$100
13%
Peru
$2,60022-28%
Venezuela$700
86-91%
Total$7,000.
Source: Global Initiative against Transnational Organized Crime

The global value of illegal diamond mining has received more attention than other minerals largely due
to the work on conflict diamonds and the Kimberley Process. Conflict diamonds are generally thought torepresent less than one percent of global production, however illicitly mined diamonds are estimated toaccount for 20 percent of worldwide production, worth approximately US$2.74 billion in 2015.341
There are no official statistics regarding the percentage of illegal colored gemstones in global trade, so
until further research is produced, for the purposes of this discussion we will make the assumption thatthe illegal production of colored gemstones occurs at the same rate as diamonds. Therefore, the global
value of illegal mining of natural gemstones other than diamonds was worth an estimated US$500 million
in 2013.342
The high profits discussed above are not shared equally among all participants; it is the middlemen,traders, and exporters who benefit the most. Illegal miners, at the bottom of the production chain,
are price takers and thus receive the smallest profit. Some indigenous communities in Brazil allow
illegal mining on their land in exchange for a percentage of sales, but middlemen frequently collude toundervalue the diamonds by as much as 30 to 40 percent.343 Illegal miners in Sierra Leone fare worse,
receiving roughly one-fifth the export value of diamonds they dig up.344

Livia Wagner, Organized Crime and Illegally Mined Gold in Latin America (Geneva: Global Initiative against Transnational Organized Crime, 2016), 8,
http://globalinitiative.net/wp-content/uploads/2016/03/TGIATOC-OC-and-Illegally-Mined-Gold-in-Latin-America-Report-1718-digital.pdf.
341
Sigismond A. Wilson, “Sierra Leone’s Illicit Diamonds: The Challenges and the Way Forward,” GeoJournal 76, no. 3 (2011): 193, doi:http://dx.doi.
org.proxyau.wrlc.org/10.1007/s10708-009-9321-6; De Beers, “The Diamond Insight Report 2016” (De Beers, 2016), 26, https://cdgwebsites.com/
debeers/impact_2016/stable/downloads/De_Beers_Insight_Report_2016_web-ready.pdf.
342
U.S. Geological Survey, “2013 Minerals Yearbook: Gemstones” (Washington, DC: U.S. Department of the Interior, U.S. Geological Survey, 2016),
29.5, http://minerals.usgs.gov/minerals/pubs/commodity/gemstones/myb1-2013-gemst.pdf.
343
Fellipe Abreu and Luiz Felipe Silva, “How Illegal Diamond Mining Threatens Brazil’s Indigenous Communities,” InSight Crime, October 14, 2015,
http://www.insightcrime.org/news-analysis/how-illegal-diamond-mining-threatens-brazil-s-indigenous-communities.
344“The Truth About Diamonds” (Global Witness, 2006), 3, https://www.globalwitness.org/sites/default/files/import/the_truth_about_diamonds.pdf.
340

Global Financial Integrity76

C. Dynamics

The discussion of conflict minerals has traditionally focused on five specific minerals—diamonds, gold,tin, tungsten, and tantalum—which finance conflict and violence in Africa. However the connection
between conflict and mineral resources is not limited to these five in the context of violent unrest in
Africa. Illegal mining involves a variety of mineral resources around the world, and it is responsible forinciting and perpetuating conflict, crime, and human rights abuses.
There are two primary types of mining: underground (sub-surface) mining and alluvial (surface) mining.
Underground mining operations are typically large-scale and conducted by legal companies, since
extraction normally requires significant upfront investment costs and specialized equipment. As themining operations are underground and confined to a relatively limited area, it is easier for mining
companies to secure the sites against illegal mining activities.
Illegal sub-surface mining commonly occurs in disused or abandoned mining sites that have beenabandoned by legal commercial operations. Illegal miners travel deep underground in an attempt toretrieve any minerals that still remain, often using dangerous explosives to access new rock. Theseminers face serious risks such as collapses and the accumulation of noxious fumes.
Alluvial mining, on the other hand, takes place on the surface, with mineral deposits spread over a wide
area. The minerals are much easier to access, generally requiring only simple tools to dig and sift theearth. Artisanal small-scale mining, legal and illegal, dominates at alluvial sites due to these low costs
compared to underground mining. In addition, the dispersal of alluvial deposits over a widespreadarea makes it more difficult for governments and commercial operations to monitor for illegal activity,
particularly when the mining sites are located in remote areas of the country.
For many individuals, illegal mining is the best, and sometimes only, employment opportunity and it canoften provide higher revenues than formal work. The rise in world gold prices circa 2008 to present has
attracted many to engage in illegal gold mining. In Peru, for example, agrarian laborers are able to earn
five times more from illegal mining compared to local employment wages.345
The exploitation of natural resources is a lucrative source of financing for organized crime groups(OCGs), terrorist organizations, and insurgent groups, because it offers a “low level of detection,prosecution and lower penalties” in comparison to other funding sources.346 Mexican drug trafficking
organizations, including Los Zetas, the Sinaloa Cartel, and the Knights Templar (Caballeros Templarios),
expanded their interests into illegal gold mining beginning around 2010, extorting both illegal miners
and legal mine operators, as well as actually controlling mining operations from production to export.347
According to one assessment, combined extortion payments from extraction, transportation, and export
earn the Knights Templar US$12 to $13 per ton of iron; in one month alone they earn an estimated
US$7.2 million from iron exports at a single port.348
Illegally-extracted minerals typically must be laundered before they leave the source country. Minerals,
like timber, may be comingled with legally-sourced pieces in order to launder them. Another option is theuse of fraudulent documentation to certify that minerals, such as diamonds, have been ethically sourced.
Some illegal mining operations use recycled and/or forged Kimberley Process certificates to launderillegally-mined diamonds.349
Indigenous communities in Colombia have long mined for tungsten and tantalum. Tiger Hill (Cerro“Beyond Deforestation: Illegal Gold Mining and Human Health,” Public Policy Peru 2016, March 19, 2016, https://umdpolicyperu2016.wordpress.
com/2016/03/19/beyond-deforestation-illegal-gold-mining-and-human-health/.
346
Financial Action Task Force, Emerging Terrorist Finance Risks (Paris: Financial Action Task Force, 2015), 39, http://www.fatf-gafi.org/media/fatf/
documents/reports/Emerging-Terrorist-Financing-Risks.pdf.
347
Patrick Corcoran, “Illegal Mining a Golden Opportunity for Mexico Crime Groups,” InSight Crime, September 29, 2016, http://www.insightcrime.
org/news-analysis/mexico-crime-groups-increasing-involvement-illegal-mining.
348
Laurence Cuvillier, “How Chinese Mining Companies Sustain Organized Crime in Mexico,” VICE News, June 25, 2014, https://news.vice.com/
article/how-chinese-mining-companies-sustain-organized-crime-in-mexico.
349
Financial Action Task Force, Money Laundering and Terrorist Financing through Trade in Diamonds (Paris: Financial Action Task Force, 2013), 111,
http://www.fatf-gafi.org/media/fatf/documents/reports/ML-TF-through-trade-in-diamonds.pdf.
345							

Transnational Crime and the Developing World

77

Tigre), the only established tungsten mine in Colombia, is located on Amazon Indian land, however
the Revolutionary Armed Forces of Colombia (FARC) controlled the territory. Despite the only known
source of tungsten being under the control of a guerrilla organization, more than 500 tons of tungsten
were exported from Colombia from 2011 to 2015, valued at approximately US$8 million.350 Companies
allegedly falsified the tungsten ore’s origin, reporting that it came from other mines, such as Caney de losCristales, which these companies claim have tungsten deposits.351 The use of these “shell” mines, where
no actual ore and/or mining occurs, is similar to the “shell” plantations used to launder illegally-sourced
timber.
Brokers and middlemen launder gemstones in order to separate them from their illicit origin as wellas to increase their value. Some illegally-mined Afghan emeralds are smuggled through Pakistan into
Colombia, where they are then marketed as Colombian emeralds since they are considered to be of ahigher quality, thus fetching higher prices.352
Precious stones and metals, particularly diamonds and gold, are commonly used as an alternative
form of currency around the world. They are excellent commodities for terrorist financing and money
laundering. The following is a list of the advantages of precious stones and metals for terrorist financing
and money laundering:353
•
•
•
•
•
•
•
•

Liquid, i.e., easily convertible
Easily alteredOffer anonymity
Maintain stable value and market price
Easy to conceal
High value-to-size ratio
High demand
Exempt from cross-border currency declarations

According to the Financial Action Task Force, countries are more vulnerable to money laundering andterrorist financing through illegal mining when alluvial mining is prevalent.354 Alluvial deposits are more
susceptible to illegal mining, because less effort is required to access the minerals and because they are
spread over a large area, making it harder to detect illegal operations.355 It is also much easier to launderminerals from unsupervised deposits into the legal trade, allowing criminal and terrorist groups to profit
as well as use the minerals to transfer value.
Gold and gemstones are particularly adept vehicles for trade misinvoicing. The value of gold is basedon its weight and purity (e.g., 24 karat and 14 karat), however it is difficult to determine the purity with
the naked eye. Criminals may misinvoice 24 karat gold as 14 karat gold so as to undervalue an export,
allowing for capital flight.
The four qualities used to evaluate diamonds—cut, clarity, carat, and color—allow for a high level ofsubjectivity in pricing; there is no set market price for diamonds from which customs officers can easily
detect misinvoicing. These features allow for easy price manipulation, particularly because customs
classification (and therefore taxes and duties) is based only on the number of carats.356

D. Developing Countries

Illegal mining, like other natural resource crimes, has major environmental, security, and economic
impacts. Pollution and violence rob communities of land, water, and human resources, resulting in“UN Comtrade Database,” United Nations, accessed November 2, 2016, http://comtrade.un.org/data/.
Michael Smith, “Terrorist Tungsten in Colombia Taints Global Phone-to-Car Sales,” Bloomberg.com, August 8, 2013, http://www.bloomberg.com/
news/articles/2013-08-08/terrorist-tungsten-in-colombia-taints-global-phone-to-car-sales.
352
Adnan R. Khan, “The Dangerous World of Pakistan’s Gem Trade,” Maclean’s, May 24, 2014, http://www.macleans.ca/news/world/pakistans-bloodstones/.
353
Cassara, Trade-Based Money Laundering, 91–95.
354
Financial Action Task Force, ML and TF through Trade in Diamonds, 59.
355
Ibid.
356
Ibid., 53.
350
351

Global Financial Integrity

78damages that can affect generations. The extractive industry can play an important role in developing
economies and serve as a source of domestic resource mobilization, but weak rule of law and the lack ofeffective governmental oversight for natural resources can enable and fuel conflict and inequality.
There are high environmental costs associated with illegal mining practices. Illegal mining is a significant
driver of deforestation, as illegal miners will clear large swaths of forest in order to access mineraldeposits. An estimated 50,000 hectares of forests had been lost to illegal gold mining in the Madre deDios region of Peru as of September 2012.357 Deforestation leads to significant habitat loss, negatively
impacting wildlife and contributing to climate change, soil erosion, and flooding.
Illegal mining also has a serious impact on species conservation. Illegal miners push into distant territory
in order to access new mineral deposits, which requires them to source food from the local environment.
Artisanal miners in eastern Democratic Republic of the Congo operate at remote illegal mining sites forextended periods of time, and they have turned to poaching local wildlife for bushmeat. This poachinghas been a primary driver of the decline of the Grauer’s gorilla, which was recently declared a criticallyendangered subspecies after its population fell by more than 77 percent between 1995 and 2015.358
Artisanal miners frequently use inexpensive, toxic substances in the refining process, substances which
regularly end up contaminating local food and water supplies. Mercury is effective at separating andamalgamating gold particles, however this heavy metal is extremely toxic, and exposure to it, even insmall amounts, can cause irreversible organ damage as well as neurological and behavioral disorders
in humans.359 The Peruvian government declared a 60-day state of emergency in May 2016 in 11
districts of Madre de Dios due to extensive mercury poisoning, affecting approximately 50,000 people,
particularly indigenous communities.360 In the Amazon, an estimated 2.8 grams of mercury waste isleft over from every one gram of gold extracted; miners extract 15 tons of gold each day, creating
approximately 42 tons of dumped mercury waste.361
Exposure to lead, another heavy metal that causes serious mental and physical impairment, is alsoa hazard of illegal mining. Artisanal miners typically grind gold ore in order to process it, a method
which releases a significant amount of dust; when ore with high lead content is ground, the lead dust
is released as well, resulting in direct and indirect contamination. In Nigeria’s Zamfara and Niger states,
thousands have suffered from lead poisoning, with children being the most vulnerable. In May 2015,at least 28 children in Niger state died from lead poisoning, attributed to unsafe processing of illegallymined gold; five years earlier in Zamfara state, at least 400 children died from similar circumstances.362
Illegal mining impacts human security not just in terms of health but also safety. There is a high incidenceof crime and violence that coincides with illegal mining, control of territory, and its associated revenues,
a common flashpoint. In South Africa, there are more than 14,000 illegal miners, known locally as “zamazamas,” which operate in armed gangs.363 While illegal mining in itself is dangerous enough, there havebeen many incidences of gang shootings and sabotage for the control of the numerous abandoned gold
mines that litter the Witwatersrand Basin.364
Human trafficking, particularly labor and sexual exploitation, frequently occurs in conjunction with illegal
Gregory P. Asner et al., “Elevated Rates of Gold Mining in the Amazon Revealed through High-Resolution Monitoring,” Proceedings of the National
Academy of Sciences of the United States of America 110, no. 46 (November 2013): 18455, doi:10.1073/pnas.1318271110.
358
Ed Stoddard, “Illegal Mining Hits Congo Gorilla Population: Conservationists,” Reuters, April 6, 2016, http://www.reuters.com/article/us-africa-gorillas-idUSKCN0X30T2; “Largest Gorilla Subspecies Declared Critically Endangered by IUCN Red List,” Wildlife Conservation Society, September 4,
2016, https://newsroom.wcs.org/News-Releases/articleType/ArticleView/articleId/9247/Largest-Gorilla-Subspecies-Declared-Critically-Endangeredby-IUCN-Red-List.aspx.
359“Mercury and Health,” World Health Organization, January 2016, http://www.who.int/mediacentre/factsheets/fs361/en/.
360
Simeon Tegel, “Peru Declares State of Emergency in Its Jungles Due to Rampant Mercury Poisoning,” VICE News, May 24, 2016, https://news.
vice.com/article/peru-declares-state-of-emergency-in-its-jungles-due-to-rampant-mercury-poisoning.
361“Beyond Deforestation.”
362“Lead Poisoning ‘Kills 28 Children’ in Central Nigeria,” The New Vision, May 15, 2015, http://search.proquest.com.proxyau.wrlc.org/
docview/1681035632/citation/96F1896EAF924079PQ/43.
363
Channing May, “Good as Gold? South Africa’s Problem with Illegal Gold Mining Is Severe and Growing,” Global Financial Integrity, November 20,
2014, http://www.gfintegrity.org/good-gold-south-africas-problem-illegal-gold-mining-severe-growing/.
364South Africa’s Illegal Gold Mines, VICE News, 2014, https://www.vice.com/en_uk/video/south-africas-illegal-gold-mines.
357							

Transnational Crime and the Developing World79mining, as mining recruiters usually employing deception to recruit miners. Illegal miners, like illegal
loggers, are routinely forced to play inflated prices for goods due to limited options in remote areas; ifthey don’t have the money, they can fall into debt bondage, borrowing against future earnings. It is often
the most marginalized who are exploited the most, such as indigenous communities, undocumented
citizens, and migrants.
The sexual exploitation of women and children at mining camps and towns is common. Some women,
like the miners, are deceived, led to believe that they are only to work as cooks in the mining camps,
while many others are forced against their will. The Global Initiative against Transnational Organized
Crime has described the scale of sex trafficking in Peruvian mining camps as “staggering” and has
noted that in one mining area of Madre de Dios, 60 percent of sex workers were minors.365
Illegal mining has regularly been used as a source of financing during times of conflict. Armed rebel
groups can earn indirect and direct revenues from illegal mining operations, and they also trade someminerals, particularly diamonds, for other goods, such as arms and supplies. The Muslim Séléka andthe mostly Christian Anti-balaka militias have tapped much of the mineral resources in the Central
African Republic for financing during the country’s ongoing civil war (2012-present). The Séléka havebeen earning roughly US$150,000 from the taxation of illegal gold mining annually at just the Ndassima
mine.366
Governments that are unable to effectively control illegal and/or informal mining lose revenues,
sometimes significant amounts. This includes revenues from licensing and concessions as well as
any taxes and duties on illegally-extracted minerals that are smuggled out of the country. The Afghan
government is still unable to significantly mobilize the country’s mineral wealth—gold, emeralds, rubies,
lapis lazuli, chromite, and copper, among others—into development resources. The government loses
approximately US$5.4 million in revenues annually from the illegal mining of chromite in the Khost
province alone, whereas terrorist organizations such as the Taliban have been able to capitalize on theseresources for decades.367
Economic losses are magnified when illegal mining is combined with other financial crimes. Precious
metals and stones are good commodities for money laundering, particularly trade-based money
laundering. Illicit actors can easily over- or under-invoice these minerals in order to evade taxes andduties or send capital into or out of countries unseen.
In South Africa, individuals and groups combine illegal gold mining, trade misinvoicing, and tax fraud
to smuggle illegal gold out of the country as well as increase criminal revenues (Figure VIII). The South
African Revenue Service (SARS) does not charge value-added tax (VAT) on mined gold, instead it
imposes a 14 percent tax on processed (e.g., scrap) gold. Company A uses a falsified paper trail tomisinvoice illegally mined gold as scrap gold and sells it to Company B; Company A does NOT pay VAT
on the sale but claims it did on the invoice.368 Company A exports the gold and Company B, again using
forged documentation, applies for and receives a VAT refund from SARS.369

Wagner, Organized Crime and Illegally Mined Gold, 31.
United Nations Security Council, “Letter Dated 28 October 2014 from the Panel of Exports on the Central African Republic Established pursuant
to Security Council Resolution 2127 (2013) Addressed to the President of the Security Council” (S/2014/762, New York, October 29, 2014), 3, http://
www.un.org/ga/search/view_doc.asp?symbol=S/2014/762.
367
Matthew DuPee, “Afghanistan’s Conflict Minerals: The Crime-State-Insurgent Nexus,” Combating Terrorism Center at West Point, February 16,
2016, https://www.ctc.usma.edu/posts/afghanistans-conflict-minerals-the-crime-state-insurgent-nexus.
368
Cassara, Trade-Based Money Laundering,103–4.
369
Naomi Fowler, “Exposed: Illegal Gold, Trade Mis-Invoicing And Tax Fraud In South Africa,” Tax Justice Network, September 29, 2014, http://www.
taxjustice.net/2014/09/29/exposed-illegal-gold-trade-mis-invoicing-tax-fraud-south-africa/.
365
366

Global Financial Integrity

80Figure VIII. Illegal Mining, Trade Misinvoicing, and Tax Fraud
Beneficial Owner

Company A

Unrefined Illegally-MinedGold
Misinvoiced
as scrap gold
on customs
invoice.

Company B

Company B requests,
and receives, a VAT
refund from SARS.
The gold isexported toCompany B,“legitimizing” thegold.

VAT is NOT paid
although it is shownon the invoice.

Many countries have attempted initiatives to bring illegal mining into compliance, encouraging informal
artisanal and small-scale miners to register, pay taxes and fees, obtain titles, and follow environmental,
labor, and safety regulations. This has met with limited success as it has proven difficult to square formal
and customary laws as well as regulate long-standing traditional mining rights.
Some governments have also faced challenges in determining licensing and tax schedules.
Governments must strike a balance between setting licensing fees and taxes high enough as to make it
profitable and making them too high as to make them unaffordable to the average citizen. Licensing fees
and taxes in Sierra Leone are typically affordable, but the bribes miners must pay to mining officials andcommunity leaders, known as “handshakes,” roughly triple their expenses.370 Even if a miner is willingto operate formally, rent-seeking behavior of government and mining officials can actually push them toillegal mining, causing the government to lose revenues.

E. Recent Developments

Chinese investment and presence in Africa has grown sharply since the mid-2000s, a trend that has
been reflected in illegal mining. Africa, and Ghana in particular, has experienced a unique phenomenonof illegal foreign miners who have come from halfway around the world. Illegal gold mining, known as“galamsey,” is not a new activity in Ghana, however the country has undergone an “illegal gold rush” duein large part to the influx of illegal Chinese miners.

370

Wilson, “Sierra Leone’s Illicit Diamonds,” 199.

							

Transnational Crime and the Developing World81

It is illegal for foreigners to engage in small-scale mining in Ghana, yet Chinese migrants have been
largely undeterred due to rising gold prices. The arrival of these Chinese miners, often entering Ghana
illegally from neighboring countries, has caused significant conflict with Ghanaian citizens, especiallylocal artisanal miners.371 Allegations have arisen that Chinese miners, sometimes armed, have destroyed
farmlands and polluted water sources in order to look for gold, regularly leading to clashes between
them and the local population.372
Facing rising tensions, violence, and pollution, Ghana has stepped up the arrest and deportation ofillegal Chinese miners. In June and July 2013 alone more than 4,500 illegal Chinese gold miners weredeported from Ghana.373 More recently, the Ghanaian government deported more than 30 illegal miners,
the majority of whom were Chinese, in August 2016.374 Ghana relies on China for billions of dollars inloans and trade, and the crackdown on illegal foreign miners has created a difficult situation for Ghana.375
The increase in anti-Chinese sentiment in Ghana is mirrored throughout much of Africa, due in large partto conflict between locals and Chinese migrants. Natural resource extraction is a common flashpoint,
but any sector or activity that puts migrants and locals into competition is sensitive. Resentment iscommonly evident when locals are not employed in foreign-financed projects or when they feel theoperations of foreign companies are plunderous rather than mutually advantageous.

F. Summary

Illegal mining is a valuable transnational crime, estimated to be worth US$12 billion to $48 billion
annually. To better combat the trade in conflict minerals, the discussion must be broadened to include
the illegal mining of any mineral that generates conflict, regardless of type, location, or circumstances.
Illegal miners typically receive a fraction of the value of the minerals they extract but accrue the greatest
amount of risk. For OCGs, terrorist organizations, and paramilitary groups, illegal mining provides a highprofit, low risk financing source as well as an opportunity to launder dirty money from other activities.
Mineral resources have the ability to greatly contribute to a country’s domestic resource mobilization anddevelopment, however illegal mining undermines these opportunities. Illegal mining has serious, longlasting repercussions on the environment, human security, and economic development that must be
combatted in order to benefit both nations and their citizens. The incursion of illegal Chinese gold miners
in some African countries, particularly Ghana, has triggered serious conflict between the immigrants andlocal populations.

“Ghana Arrests Chinese over ‘Illegal Mining,’” Al Jazeera, June 7, 2013, http://www.aljazeera.com/news/africa/2013/06/201367934304981.html.
The Price of Gold: Chinese Mining in Ghana (The Guardian, 2013), https://www.youtube.com/watch?v=ohrrE1rjzLo.
373
Afua Hirsch, “Ghana Deports Thousands in Crackdown on Illegal Chinese Goldminers,” The Guardian, July 15, 2015, https://www.theguardian.
com/world/2013/jul/15/ghana-deports-chinese-goldminers.
374
Joseph Afrane, “Ghana Deports over 30 Chinese Nationals,” World Today Press, August 1, 2016, http://worldtodaypress.com/2016/08/ghanadeports-over-30-chinese-nationals/.
375
Hirsch, “Ghana Deports Thousands in Crackdown on Illegal Chinese Goldminers.”
371
372

Global Financial Integrity82

XII. Crude Oil Theft
A. Overview

Crude oil theft involves the theft of state- or privately-owned oil, most commonly from pipelines but
also from facilities, tankers, or even offshore platforms. Similar to illegal mining, while oil production
occurs in developed and developing countries around the world, developing countries experience thegreatest level of oil theft, often due to weak rule of law, higher levels of criminal activity, and/or economic
desperation.
A variety of actors have been enticed by the revenues that can be earned, particularly when world
oil prices are high. However, oil theft is not simply about lost government or corporate revenues: it
frequently involves criminal or terrorist activity, environmental harm, and impacts on human health andsecurity. There is still a strong demand for stolen oil, and profits to be made, despite the significant dropin oil prices that began in late 2014.

B. Value

The value of worldwide crude oil theft is directly tied to production volumes and world market prices
for oil. When oil prices were averaging US$100 or more per barrel, oil theft was valued much higher; forexample, bunkering in Nigeria was estimated to be worth US$12 billion in 2012.376 Oil prices fell by halfthroughout 2015 and had slowly begun to recover as of December 2016, thus the overall value of thecriminal market has likewise fallen, though the levels of theft have remained relatively unchanged.
Crude oil theft is estimated to be worth at least US$5.2 billion to $11.9 billion annually as of 2015.377
This is a conservative estimate as it is based on crude oil theft in six countries: Colombia, Indonesia,
Mexico, Syria, Russia, and Nigeria. Crude oil theft occurs in any country that produces oil, yet these six
countries (listed in Table AA) have both high levels of theft as well as available statistics.

Table Z. Crude Oil Theft Volume and Value (US$)
Barrels Per Day
Country
Low
High
Colombia440
4,700
Indonesia
1,000
5,000
Mexico10,00023,500Syria
10,00040,000Russia150,000
Nigeria
100,000
400,000
Daily Total
271,440
623,200
Annual Total
99,075,600
227,468,000

Daily Value Lost
Low
High
$20,928$245,904$52,320$261,600$523,200$1,229,520$523,200$2,092,800$7,848,000$5,232,000$20,928,000$14,201,741$32,605,824$5,183,635,392$11,901,125,760

Sources: See discussion below for data sources.

The volume of stolen oil compared to total global production is very small yet there are significant
financial effects, both for government revenues lost as well as criminal profits gained. Approximately
99 million to 227 million barrels of oil are stolen each year from these six countries, which is equivalent
to roughly 0.3 to 0.6 percent of global annual production.378 For developing countries, though, the daily
loss of tens of thousands to millions of dollars in oil revenues has a direct impact on the ability of thegovernment to mobilize domestic resources for development. Furthermore, organized crime groups(OCGs) often use these revenues to finance criminal activities that seriously undermine domestic
Lisa Otto, “Westward Ho! The Evolution of Maritime Piracy in Nigeria,” Portuguese Journal of Social Science 13, no. 3 (September 2014): 319,
doi:10.1386/pjss.13.3.313_1.
377
Based on the average Brent crude oil price of US$52.32 per barrel in 2015. “Short-Term Energy Outlook,” U.S. Energy Information Administration,
November 8, 2016, https://www.eia.gov/forecasts/steo/report/prices.cfm.
378
An estimated 35 billion barrels for 2016. “Oil,” International Energy Agency, accessed November 29, 2016, https://www.iea.org/about/faqs/oil/.
376							

Transnational Crime and the Developing World83stability.
Nigeria has in recent years been the epicenter of worldwide crude oil theft, with 100,000 to 400,000
barrels stolen each day, which is equal to roughly 4.3 to 17.2 percent of daily domestic production.379 Oiltheft results in significant direct financial losses for the Government of Nigeria—more than US$1.9 billion
to $7.6 billion in 2015, as well as additional indirect losses related to reduced production, pollution, andinsecurity.
Russia and Indonesia are frequently cited as being “plagued” by oil theft, but there is very little context
on volume, dynamics, or value outside specific incidences, pipelines, or regions. Russia suffers from thesecond highest level of oil theft, yet there is scant open-source information for what is a major criminal
enterprise. The country loses an estimated US$7.8 million each day (150,000 barrels per day (BPD)),
from Transneft pipelines in the Caucasus region alone, particularly Dagestan.380 Data on the theft ofcrude oil in Indonesia is sparse, and the 1,000 to 5,000 BPD stolen, worth approximately US$52,000 to$261,000, is representative only of the loss from pipelines in Sumatra.381
Crude oil theft in Syria is currently estimated at 10,000 to 40,000 BPD, which, due to the Islamic Stateof Iraq and the Levant’s (ISIL) control of principal oil fields, represents the majority of the country’s total
oil production.382 The stolen crude has a daily international market value of about US$523,000 to $2.1
million, however much of it remains within the domestic market and is sold at below-market prices.
The volume of crude oil stolen in Mexico each day is less than one percent of total domestic daily
production, but the participation of violent drug trafficking organizations (DTOs) in oil theft has increased
the direct and indirect costs to the country. Thieves steal approximately 10,000 to 23,500 barrels eachday, worth an estimated US$523,000 to $1.2 million; however, Mexico suffers additional losses from thetheft of refined fuel products, such as gasoline.383 Pemex, Mexico’s state-owned oil company, loses anestimated US$1 to $5 billion a year to fuel theft.384
Colombia has the lowest level of oil theft of the six countries, but this small amount has a serious impact
since the majority of the stolen crude, once refined, is used by DTOs to produce cocaine. Ecopetrol,
Colombia’s state-owned oil company, estimated that more than 160,000 barrels of oil were stolen
nationwide in 2014, equal to almost 440 barrels per day.385 In 2015, a surge in oil theft in the northeastern
department of Norte de Santander led to approximately 4,700 BPD stolen in that area alone.386 A best
379 Akintunde Akinleye, “As Oil ‘Bunkering’ Rises in Nigeria, Thieves Say They Have No Choice,” The Globe and Mail, January 16, 2013, http://www.
theglobeandmail.com/report-on-business/international-business/african-and-mideast-business/as-oil-bunkering-rises-in-nigeria-thieves-say-theyhave-no-choice/article7435665/; Nirit Ben-Ari, “Piracy in West Africa,” Africa Renewal Online, December 2013, http://www.un.org/africarenewal/
magazine/december-2013/piracy-west-africa; Jon Gambrell and Associated Press, “Oil Bunkering Threatens Nigeria’s Economy, Environment,” Washington Post, July 20, 2013, https://www.washingtonpost.com/national/oil-bunkering-threatens-nigerias-economy-environment/2013/07/18/e38cb4a0e273-11e2-aef3-339619eab080_story.html; Otto, “Westward Ho!,” 13; Christina Katsouris and Aaron Sayne, Nigeria’s Criminal Crude: International
Options to Combat the Export of Stolen Oil (London: Chatham House, 2013), 16, https://www.chathamhouse.org/sites/files/chathamhouse/public/
Research/Africa/0913pr_nigeriaoil.pdf.
380
Katsouris and Sayne, Nigeria’s Criminal Crude, 16.
381
Amahl S. Azwar and Linda Yulisman, “Government Calls for Crackdown on Oil Thefts,” The Jakarta Post, July 30, 2013, http://www.thejakartapost.
com/news/2013/07/30/government-calls-crackdown-oil-thefts.html; Katsouris and Sayne, Nigeria’s Criminal Crude, 16.
382
Erika Solomon, Robin Kwong, and Steven Bernard, “Inside Isis Inc: The Journey of a Barrel of Oil,” Financial Times, December 11, 2015, http://ig.ft.
com/sites/2015/isis-oil/; “Oil Market Report - 14 October 2014,” International Energy Agency, October 14, 2014, 20–21, https://www.iea.org/oilmarketreport/reports/2014/1014/.
383
Christopher Woody, “Drug Cartels Have Been Stealing Huge Amounts of One of Mexico’s Biggest Revenue Sources,” Business Insider, May 12,
2016, http://www.businessinsider.com/mexico-oil-theft-from-pipelines; Marguerite Cawley, “Mexico Fuel Theft: Big Earner for the Zetas?,” InSight
Crime, August 4, 2014, http://www.insightcrime.org/news-briefs/mexico-fuel-theft-big-earner-zetas; Lucia Bird, “Mexico Fuel Theft Remains Lucrative
Despite Oil Price Drop,” InSight Crime, March 15, 2016, http://www.insightcrime.org/news-briefs/mexico-fuel-theft-remains-lucrative-despite-oilprice-drop.
384
Mike LaSusa, “Mexico State Oil Company Lost $1.5 Billion to Theft in 2016,” InSight Crime, February 3, 2017, http://www.insightcrime.org/newsbriefs/mexico-state-oil-company-lost-billion-theft-2016; Woody, “Drug Cartels Have Been Stealing”; Dex Dunford, “Oil Thefts Surge In Mexico As
Cartels Become Specialized,” OilPrice.com, February 15, 2016, http://oilprice.com/Energy/Energy-General/Oil-Thefts-Surge-In-Mexico-As-CartelsBecome-Specialized.html; “Pemex to Stop Sending Finished Fuels through Pipelines to Fight Theft,” Agencia EFE, February 18, 2015, http://www.efe.
com/efe/english/business/pemex-to-stop-sending-finished-fuels-through-pipelines-fight-theft/50000265-2540139; “Why Drug Cartels Are Stealing
Mexico’s Fuel,” Stratfor, October 21, 2015, https://www.stratfor.com/analysis/why-drug-cartels-are-stealing-mexicos-fuel; Bird, “Mexico Fuel Theft
Remains Lucrative”; Ioan Grillo, “Stolen Oil: A Gusher of Cash for Mexican Drug Cartels,” Time, March 9, 2011, http://content.time.com/time/world/
article/0,8599,2058007,00.html.
385
Michael Lohmuller, “Colombia-Venezuela Border Closure Contributes to Oil Theft,” InSight Crime, November 17, 2015, http://www.insightcrime.
org/news-briefs/colombia-venezuela-border-closure-contributes-to-oil-theft.
386
A Colombian official stated that the amount of oil stolen daily from the Caño Limon-Coveñas pipeline in Norte de Santander was worth approxi-

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estimate places the daily loss of crude oil at around US$20,000 to $245,000, which translates into
significant savings for guerrilla groups and OCGs, since they can refine the stolen crude rather thanpurchase gasoline for use in cocaine production.

C. Dynamics

Crude oil theft is a spectrum of methods, motivations, and markets. Thefts occur both onshore andoffshore and target all aspects of the oil industry, from crude oil and refined products to pipelines andtankers. Groups engaged in the large-scale sale of crude seek lucrative profits or financing, while theindividuals involved in small-scale theft and refining are seeking to earn a living. Stolen crude that isrefined typically remains within the domestic market, whereas unrefined fuel is smuggled to international
markets.
The methods used to steal crude oil largely depend on the country’s oil infrastructure and thesophistication of the individual or group. The most common source of stolen oil is pipelines; thieves
penetrate the pipelines using tools as simple as hacksaws and load the crude into cans and drums, or
install more sophisticated taps to which hoses can be connected. Pipelines are the most vulnerable
point for crude oil theft because they regularly run through remote and/or hard-to-control territory,
making monitoring and protection difficult as well as expensive. Another more direct option is to takethe oil straight from wellheads.387 Brazen OCGs even siphon oil directly from holding facilities and export
terminals using tankers.388 Groups also target oil tankers offshore, selling the cargo straight away ortransferring it to another ship for later sale.389
Individuals in developing countries commonly engage in crude oil theft and illegal refining as an
economic alternative to unemployment or poverty. Those employed in bunkering in Nigeria can earn
upwards of US$50 to $60 a day, far surpassing the country’s 2015 GDP per capita of US$3,203.390 Manyfrom the Niger Delta region do not view bunkering as illegal, holding the opinion that the oil belongs
to the people, and see bunkering as the sole way to benefit from the (often) mismanaged domestic
resource. In Mexico, the theft of 10,000 liters of oil (nearly 62 barrels) returns roughly US$4,600; for 20 to
40 minutes of work, small teams earn nearly half of the country’s annual GDP per capita (US$10,353).391
While greater revenues could be earned from drug trafficking, the lower risks of arrest and violence in oil
theft may be more attractive to some.

mately US$10,000, which, at US$52.32/barrel average price in 2015, is equivalent to roughly 4,700 barrels. Ibid.
387
Nabih Bulos, “How Does Islamic State Make Money off Oil Fields in Syria and Iraq?,” Los Angeles Times, December 6, 2015, http://www.latimes.
com/world/middleeast/la-fg-islamic-state-oil-qa-20151206-story.html.
388
VICE News, Mexican Oil and Drug Cartels: Cocaine & Crude, 2014, https://www.youtube.com/watch?v=mPEfArQU7tc#t=639; Katsouris andSayne, Nigeria’s Criminal Crude, 4.
389
Otto, “Westward Ho!,” 320.
390
Alan Taylor, “Nigeria’s Illegal Oil Refineries,” The Atlantic, January 15, 2013, http://www.theatlantic.com/photo/2013/01/nigerias-illegal-oil-refineries/100439/; “World DataBank,” [Online Database], The World Bank, accessed December 22, 2016, http://databank.worldbank.org/data/home.aspx.
391
VICE News, Mexican Oil and Drug Cartels; “World DataBank.”							

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Box 4. Oil and War
Due to the ongoing Syrian Civil War, the lack of work and extensive displacement of citizens have
driven many to crude oil theft and refining. In late 2013, and while under the control of the Free Syrian
Army, individuals engaged in refining stolen crude into fuel at makeshift refining sites near the city of
Deir ez-Zor earned roughly US$15-$18 per barrel (3,000 Syrian pounds).17 In 2014, the Syrian Arab
Republic had a GDP per capita of US$1,821, or roughly US$7 per day, so an individual potentiallyearned more than twice the average daily wage by refining just one barrel of stolen oil.18
Crude oil theft has played a significant role in ISIL’s ability to self-finance the majority of its budget.
At the peak of its territorial control in late 2014, ISIL produced an estimated 80,000 to 120,000
BPD between Syria and Iraq, which generated daily revenues of approximately US$2 million to $4
million.19 Most of the stolen crude in Syria is refined into low quality fuels which are used by citizens
to supplement fuel shortages due to the continuing conflict.20 According to the Financial Action Task
Force, ISIL’s control of oilfields provides the greatest benefits to the group through its use of the oil andoil products as well as the sales to local customers.21 These revenues demonstrate the serious threatof territorial control, because ISIL has been able to fund much of its operations internally. Payments foroil sales are largely completed in cash, informal value transfer, or trade.22 Methods commonly used tointerrupt terrorist financing, such as sanctions, are not effective at directly targeting these transactions
since they do not move through the formal financial system.
The theft of crude oil has provided OCGs with profits comparable to other more “traditional”
transnational crimes, such as arms trafficking, while presenting much lower risks of arrest andpunishment. The coordination and sophistication of these larger organizations allow for greater amountsof oil to be stolen in comparison to individual operators or small groups, which result in much higher
losses for governments. Their involvement has also undermined security in some areas as groups use
violent means to protect territory and profits.
Individuals and local criminal groups were typically responsible for oil theft in Nigeria, but the highprofits and low risks attracted more sophisticated OCGs, which are largely responsible for the sale ofcrude to foreign buyers.398 Their networks have allowed them to connect with international markets, andstolen Nigerian crude has allegedly made its way to other countries in Africa as well as much farther
away to the United States, Latin America, Eastern Europe, and Asia.399 These transactions threaten the
security of the Niger Delta by funding violent criminal groups and creating a strong incentive for them toperpetuate conflict between the people and the government.
DTOs and OCGs have diversified into oil theft and other criminal activities due to increased pressure on
drug trafficking. DTOs in Mexico, and Los Zetas and the Gulf Cartel in particular, greatly expanded theirinvolvement in oil theft around 2010. They have developed a sophisticated, large-scale criminal industry
with significant profits. Los Zetas have allegedly devoted an entire specialized unit to oil theft since alarge number of fuel pipelines run through their territories (See Figure IX).400“Syria’s Illegal Oil Wells,” VICE, 2014, http://www.vice.com/video/syria-syrian-oil.
Based on an average work year of 260 days. “Syrian Arab Republic,” UN Data, accessed December 6, 2016, http://data.un.org/CountryProfile.
aspx?crName=Syrian%20Arab%20Republic.
394
Jean-Charles Brisard and Damien Martinez, “Islamic State: The Economy-Based Terrorist Funding” (London: Thomson Reuters, October 2014), 7,
http://cat-int.org/wp-content/uploads/2016/06/White-Paper-IS-Funding_Final.pdf.
395
Ben Hubbard, “ISIS-Imposed Fuel Embargo Threatens Syria’s Medical Centers,” The New York Times, June 18, 2015, https://www.nytimes.
com/2015/06/19/world/middleeast/isis-imposed-fuel-embargo-threatens-syrias-medical-centers.html.
396
Financial Action Task Force, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (Paris: Financial Action Task Force,2015), 13, http://www.fatf-gafi.org/media/fatf/documents/reports/Financing-of-the-terrorist-organisation-ISIL.pdf.
397
Ibid., 14.
398
Katsouris and Sayne, Nigeria’s Criminal Crude, 2–3.
399
Ibid., 33–34.
400
Dunford, “Oil Thefts Surge In Mexico.”392
393

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Figure IX. Pipelines and Drug Trafficking Organization Territory, 2015

Sources: Drug Enforcement Administration; The Energy Consulting Group

Mexico and Russia have a much greater capacity to refine crude oil compared to the other four countries
covered in this chapter and there are therefore numerous refined fuel pipelines traversing the twocountries—pipeline that can be illegally tapped. There is a vibrant (and documented) market for the theftof all fuel products in Mexico, refined and unrefined. Stealing refined products is more profitable thanstealing crude as the gasoline is easy to sell domestically, both informally by the roadside or formallythrough gas stations. Los Zetas and the Gulf Cartel combined earn as much as US$268 million annuallyfrom the sale of stolen gasoline to distributors, despite the gasoline being sold for less than half of theofficial sale price.401
There is a strong connection between crude oil theft and drug trafficking in Colombia. Coca leaves
are typically processed into coca base by soaking them in gasoline before being further refined into
cocaine. Colombia’s state-owned oil company Ecopetrol announced that more than 160,000 barrels ofoil were stolen in 2014, the overwhelming majority (92 percent) of which was stolen in the southwestern
departments of Nariño and Putumayo, which are also two of the principal coca growing regions of the
Kyra Gurney, “Mexico Criminal Groups Running Sophisticated Distribution Networks for Stolen Oil,” InSight Crime, June 18, 2014, http://www.
insightcrime.org/news-briefs/mexico-criminal-groups-running-sophisticated-distribution-networks-for-stolen-oil.
401							

Transnational Crime and the Developing World87

country (see Figure X).402 The National Liberation Army (ELN) and the now-demobilized Revolutionary
Armed Forces of Colombia (FARC), as well as BACRIM (bandas criminales – criminal gangs) such as
the Rostrojos and Urabeños (also known as Clan Usuga), are all known to be involved in stealing andrefining crude oil to use in the processing of cocaine.

Figure X. Cocaine and Crude

Sources: Strafor; Sémhur, Wikimedia Commons

Oil theft occurs on land and offshore. The theft of large volumes of oil from vessels in Nigeria has wide
economic impacts. Maritime piracy in the Gulf of Guinea has been strongly influenced by illegal oil theftin Nigeria, spurring an industry of petro-piracy, which can generate millions of dollars per stolen cargoload of petroleum products.403 In the first half of 2016, Nigeria experienced 24 actual and attemptedpiracy attacks, with many more attacks unreported.404 Pirates are well armed and routinely target tankers
with oil cargo. With the waters of the region described as dangerous, traffic in the gulf has decreased
as maritime companies and insurers attempt to reduce risks, which leads to negative impacts on
government revenues.405
The transnational smuggling of stolen crude customarily requires the use of fraudulent documentation inorder to launder the illicit oil. OCGs in Mexico steal both refined and unrefined fuel, therefore it is neither
necessary nor profitable to refine stolen products. Rather, crude and gas condensate are sometimes
smuggled to buyers in the United States with the use of misinvoicing and falsified documents toobfuscate the fuel’s illicit origins.406 Pemex has filed lawsuits and sought criminal charges against U.S. oil
brokers and companies that have purchased stolen oil products.407
Lohmuller, “Colombia-Venezuela Border Closure.”
United Nations Office on Drugs and Crime, Transnational Organized Crime in West Africa, 51.
International Maritime Bureau, “Piracy and Armed Robbery against Ships: Report for the Period 1 January - 30 June 2016” (London: International
Chamber of Commerce, International Maritime Bureau, July 2016), 5, 18, http://icc.se/wp-content/uploads/2016/07/2016-Q2-IMB-Piracy-ReportAbridged.pdf.
405
Ben-Ari, “Piracy in West Africa.”
406“Black Gold on the Black Market,” The Economist, August 4, 2012, http://www.economist.com/node/21559962.
407“Mexico: An Oil Nation in Crisis,” Council on Hemispheric Affairs, October 22, 2009, http://www.coha.org/mexico-an-oil-nation-in-crisis/; “Mexico’s
Pemex Sues 9 U.S. Companies in Oil Thefts,” Associated Press, June 2, 2011, http://www.foxnews.com/us/2011/06/02/mexicos-pemex-sues-uscompanies-in-oil-thefts.html; Laurel Brubaker Calkins, “Shell, Conocophillips Defeat Pemex Suit Over Stolen Gas,” Bloomberg, May 30, 2014, https://www.bloomberg.com/news/articles/2014-05-30/shell-conocophillips-defeat-pemex-suit-over-stolen-gas.
402
403
404

Global Financial Integrity88Small-scale oil theft and refining is typically cash-based, which can easily be laundered through bulk
cash smuggling and cash-intensive businesses, whereas sizable transactions with foreign entities arelikely to involve the use of the formal financial system, such as wire transfers, trade misinvoicing, or
the purchase of luxury goods or real estate.408 An estimated 80-90 percent of stolen crude in Nigeria issmuggled out of the country.409 Groups involved in the large-scale sale of crude use a series of boats
to transfer stolen crude onshore to larger ships waiting offshore, which is normally destined for theinternational market.410

D. Developing Countries

The damage of crude oil theft extends beyond lost revenues since governments are forced to expend
additional funds to combat theft as well as to repair damages and clean up pollution. Oil theft andrefinement is a dangerous profession and the involvement of OCGs, guerrilla groups, and terrorist
organizations escalates insecurity and furthers risks to those involved. Crude oil theft frequently results inlong-term environmental damage from oil spills, which in turn have serious impacts on the ability of local
communities to secure income, employment, and clean food and water. Damage to communities canalso undermine support for the government, often to the direct benefit of insurgent groups.
Crude oil is an incredibly valuable natural resource that can serve as an important revenue sourcefor developing countries. The theft of crude oil can therefore have serious impacts on oil exporting
countries’ ability to mobilize domestic resources. Mexico’s Pemex estimates that the company loses
as much as US$5 billion each year to fuel theft, a serious loss of income as oil revenues customarily
subsidize roughly a third of the government’s budget.411 The loss of substantial amounts of revenues due
to illegal oil theft has direct impacts on the government’s budget and, by extension, its ability to provide
public services, invest in infrastructure, manage public debt, and fulfill other roles and obligations.
Oil theft also causes significant indirect financial losses to companies and governments due to increased
expenses attributable to repairs, security, and environmental cleanup. The theft of refined products
from pipelines seriously interrupts delivery, which can trigger domestic fuel shortages.412 Sustained,
unmitigated theft can drive private companies to suspend production, minimize development, andterminate in-country operations, further harming foreign direct investment.413
The efforts of OCGs, guerrilla groups, and terrorist organizations to maintain control of territory andresources inevitably produces security threats to communities as well as legitimate operators. The theftand sale of crude oil is used to finance, and therefore perpetuate, conflict, terror, and insecurity. Stolen
crude oil has been a significant source of financing for ISIL, providing the group with billions of dollars infunding that has been particularly challenging for the international community to combat. When active,
the FARC received indirect financial benefits from crude oil theft, since the crude was refined and thenused in the processing of cocaine. Governments have a difficult time in combating TOC and terrorism ifthey are unable to separate OCGs, guerrilla groups, and terrorist organizations from their financing.
Oil theft and refining typically involve rudimentary methods that endanger the safety of those involved aswell as local populations. Oil thieves generally tap pipelines using simple tools such as hacksaws andblades, which increases the risk of accidents.414 In the small Mexican town of San Martin Texmelucan,
a leak from an illegal pipeline tap set off a large explosion; the resulting fire decimated the town andkilled many of the residents.415 Makeshift refinery operations are equally dangerous because the refining
process produces noxious fumes as well as unstable fuel products which can also lead to explosions.
Katsouris and Sayne, Nigeria’s Criminal Crude, 38.
Ibid., 28; Akinleye, “As Oil ‘Bunkering’ Rises in Nigeria.”
410
Katsouris and Sayne, Nigeria’s Criminal Crude, 8, 33–34.
411“Pemex to Stop Sending Finished Fuels”; “Mexico Plans Fresh Budget Cuts in 2017 as Oil Slump Bites,” Reuters, April 1, 2016, http://www.
reuters.com/article/mexico-budget-idUSL2N17502A.
412“Ten Mexican States Hit by Gasoline Shortages, Pemex Blames Theft from Pipelines,” ETEnergyworld, December 25, 2016, http://energy.economictimes.indiatimes.com/news/oil-and-gas/ten-mexican-states-hit-by-gasoline-shortages-pemex-blames-theft-from-pipelines/56165181.
413
Elisha Bala-Gbogbo, “Shell to Chevron Move Offshore as Nigerian Risks Mount,” Bloomberg, July 31, 2013, https://www.bloomberg.com/news/
articles/2013-07-30/shell-flees-to-nigerian-offshore-fields-amid-onshore-woes; Amy Stillman, “Mexico’s Fuel Market Is Open, But the Imports Aren’t
Flowing,” Bloomberg, June 28, 2016, https://www.bloomberg.com/news/articles/2016-06-28/mexico-s-fuel-market-is-open-but-the-imports-aren-tflowing.
414
Gambrell and Associated Press, “Oil Bunkering Threatens Nigeria’s Economy, Environment.”
415
Grillo, “Stolen Oil.”
408
409							

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Oil theft-related pollution also has serious impacts on the health and livelihoods of local communities,
similar to illegal mining. Food and water sources are contaminated in the immediate aftermath of spills,
while long-term pollution can prevent farming and decimate fisheries, negatively impacting communities
that depend on agriculture and fishing for food and livelihoods. Chronic oil theft and its associatedpollution has left the Niger Delta ecosystem as one of the most damaged in the world; the United
Nations estimates that reversing the damage would require at least US$1 billion and 30 years (as of2011).416

E. Recent Developments

The value of crude oil theft is directly tied to world oil prices, however falling crude oil prices have
had relatively little impact on the level of the theft. Between 2014 and 2015, the average annual priceper barrel of crude oil dropped by nearly 50 percent, from US$98.97 to $52.32, yet worldwide thefthas continued unabated. Changes in the volume of crude oil theft are connected more to productprofitability, demand, and ease of business/production.
Crude oil theft is a high-profit activity with minimal to moderate investment costs that are generally
quickly recouped. Stolen crude oil is essentially free, which contributes to criminals being able tomaintain profitability from the sale of crude during drops in world market prices; oil theft will continue
as long as the profits outweigh the costs and the risks. However, rising market prices do usually lead toincreased oil theft from new participants entering the market to take advantage of stronger profits.
The frequency and volume of crude oil theft is sometimes linked to the availability of refined fuelproducts. The eastern department of Norte de Santander, a major region for coca cultivation,
experienced a surge in oil theft in 2015, losing 4,700 barrels each day, which was largely attributed to theAugust 2015 closure of the Colombia-Venezuela border that lead to an increased demand for crude.417
Guerrilla and insurgent groups in Norte de Santander typically sourced cheap gasoline (US$0.01 per liter)from Venezuela. With the border closures, some cocaine processors have turned to refining stolen crude
oil rather than purchasing domestic gasoline.
The volume of oil theft is also connected to access as well as ease of production. ISIL’s income fromcrude oil theft has suffered mostly from airstrikes and territory losses rather than the drop in fuel prices.
At its highest point of territorial control, ISIL had the ability to earn up to an estimated US$1.5 billion
annually from crude oil theft, however the continuing loss of territory has caused ISIL to lose nearly halfof the oil fields it controlled in Syria, from approximately 60 percent to one third, and to lose complete
control of all oilfields in Iraq.418 In addition, Russian and coalition airstrikes, particularly the campaign
Tidal Wave II, have majorly disrupted the group’s production and distribution operations.419 Since ISIL
consistently sold stolen crude far below market value, it was relatively insulated from plummeting oil
prices; decreased production volumes, however, have constricted supply and have had a much greater
impact on the group’s financing.

Otto, “Westward Ho! ” 318.
Lohmuller, “Colombia-Venezuela Border Closure Contributes to Oil Theft.”
418
Brisard and Martinez, “Islamic State,” 7; Tim Daiss, “Why Islamic State’s (ISIS) Oil Revenue Is Plunging,” Forbes, August 26, 2016, http://www.
forbes.com/sites/timdaiss/2016/08/26/why-islamic-states-oil-revenue-is-plunging/; “Islamic State Loses Control of Last Oil Wells in Iraq: Oil Ministry,”
Reuters, September 28, 2016, http://www.reuters.com/article/us-mideast-crisis-iraq-oil-idUSKCN11Y1UA.
419
Matthew M. Reed, “2016: The Best Year Yet for Coalition Strikes Against ISIS Oil,” The Fuse, January 30, 2017, http://energyfuse.org/2016-bestyear-coalition-strikes-isis-oil/.
416
417

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F. Summary

The theft of crude oil robs governments and enriches criminals, insurgents, and terrorists. Thefts in
Colombia, Indonesia, Mexico, Syria, Russia, and Nigeria are equal to less than one percent of global
annual production, yet the stolen oil provides significant revenues of at least US$5.2 billion to $11.9
billion annually. Crude oil theft can occur in any country that produces oil, but the weak rule of law andeconomic desperation found in many developing countries facilitate and drive oil theft. The stolen crudeis either sold internationally or refined for sale on the domestic market.
Governments lose not only considerable revenues to crude oil theft but are also forced to dispense
additional financial resources to repair pipelines, increase security, and clean up spills. Oil theft andrefining routinely results in serious environmental pollution which can have generational effects,
contaminating food and water sources as well as threatening livelihoods that rely on the land andwaterways. Crude oil is an extremely beneficial natural resource that, if managed correctly, can serve as
an important revenue source for developing countries.

							

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XIII. Policy Recommendations
Overview

The previous 11 chapters demonstrate how transnational crime is a systemic problem, and why
curtailing it thus requires a broad approach. This global illicit economy is more than just one network,
one country, or one crime—it is an industry with a retail value of at least US$1.6 trillion to $2.2 trillion
per annum. Laundering the proceeds of, and therefore sustaining, this industry is the global shadow
financial system: a vast network of banks, intermediaries, and secrecy jurisdictions around the world thatmove all forms of illicit money, from the proceeds of tax evasion, to revenue from organized crime, to theresources of terrorist organizations. Increasing financial transparency, especially through the creation of
public registries of beneficial ownership information, limiting secrecy jurisdictions, and curtailing trade
misinvoicing, along with improved information sharing across government agencies, has the potential tosignificantly shrink all forms of transnational crime simultaneously.

Beneficial Ownership Transparency

The most important financial transparency tool for combatting transnational crime is being able toidentify the person or people behind an account or business entity, known as the beneficial owner.
Criminal investigators routinely run into dead-ends when trying to follow the money trail of a given
transnational criminal transaction or network because layers upon layers of anonymous companies
and secret bank accounts can be insurmountable. This is equally true in developed and developing
countries.
Anonymous companies are a feature in every transnational criminal market in this report, whether tohide connections to particular individuals or to hide the origins of revenues or goods—or both. For
example, sex trafficking rings disguise their ownership of legitimate hospitality businesses, such asnightclubs, to facilitate prostitution and to launder the revenue from this illegal activity by adding it to
the nightclub’s accounts so that it appears to be legally earned revenue from the nightclub’s ordinary
business (see page 25). Another example comes from Italy, where Giacomo Medici used numerous
anonymous companies over several decades to traffic illicit antiquities and disguise the origin of these
items. Unknown to major auction houses and wealthy buyers, Medici bought and sold the same items
successively among the various companies he owned, giving the goods the appearance of a legitimate
history or provenance (see page 38-39). This scheme would not have been possible if he had beenrequired to disclose his ultimate ownership or control of these entities. The Panama Papers investigation
provides further examples of the vast scale of secret companies operating in the global financial
system.420
The most comprehensive way for countries to combat the creation and use of these anonymouscompanies is to require beneficial ownership information to be provided by companies when they
are formed, require that the information be updated regularly, and for countries to keep beneficial
ownership information in a central register. In addition, it is important to require that banks and othergatekeepers to the financial system identify the beneficial owners of their corporate clients.421 Certain
minimum standards apply to these efforts, starting with ensuring that laws and regulations include
strong definitions of beneficial ownership—definitions that capture the natural persons who directly
or indirectly own or control a company and that exclude persons who act solely as nominees or
employees of that company.422 Because anonymous companies can be used anywhere in the world, it
is important that law enforcement agents around the globe have easy access to beneficial ownership
information in all countries. The information would also be particularly helpful for banks and otherfinancial institutions in their efforts to identify those who may be trying to use their services to laundermoney. Furthermore, companies operating internationally could use the information to better understand
Martha M. Hamilton, “Panamanian Law Firm Is Gatekeeper To Vast Flow of Murky Offshore Secrets,” The Panama Papers, April 3, 2016, https://panamapapers.icij.org/20160403-mossack-fonseca-offshore-secrets.html.
421
The Financial Action Task Force, the international standard-setting body for anti-money laundering, refers to these gatekeepers as designated nonfinancial businesses and professions or DNFBPs.
422“Beneficial Ownership,” Financial Transparency Coalition, accessed February 27, 2017, https://financialtransparency.org/issues/beneficial-ownership/.
420							

Transnational Crime and the Developing World93with whom they may really be doing business and the risks that may result. For these reasons, it would
be best for countries to make the beneficial ownership information they collect freely, or publicly,
available. The United Kingdom and Ukraine have already begun implementing public registers ofbeneficial ownership information, and fourteen more countries have committed to implementing or
exploring the implementation of public registers.423 In addition, all European Union Member States willsoon be creating their own registers of beneficial ownership information that must be available to law
enforcement and to financial institutions as well as to others person who can demonstrate that they havea legitimate interest in knowing the information; they also have the option of simply making their registers
open to the public.424
By having access to the names of people behind any given account, banks will be better able to apply
anti-money laundering (AML) safeguards, and investigators will be much more successful in tracking,charging, and convicting the people and groups involved in transnational crime. If a known criminal
approached a bank to open an account, it would be fairly straightforward for the bank to check andlearn, for instance, that he or she is wanted in France on suspicion of arms trafficking. As investigators
identify players in the ivory smuggling business from East Africa to East Asia, for example, they could
pass those names to banks to track relevant financial transactions, allowing the investigators to gather
key evidence, freeze accounts, and work more quickly to identify additional illegal actors. Even where
false beneficial ownership information is provided by a company, that information can provide invaluableclues and evidence for law enforcement that they would not otherwise have. For example, when law
enforcement determines that a company provided a false name as a beneficial owner, they can search
to see whether that same false beneficial ownership information was provided for other companies andconnect the criminals to related crimes or expand their investigation appropriately.

Secrecy Jurisdictions

Financial institutions and intermediaries make use of numerous jurisdictions around the world thatspecialize in offering sophisticated financial anonymity to launder the vast sums of money generated bytransnational crime. These “secrecy jurisdictions” are the result of carefully crafted laws that allow for
fully anonymous companies or the use of nominee directors in place of the true beneficial owners andthat make it virtually impossible for law enforcement or anyone else to ever connect the criminal with themoney. Many secrecy jurisdictions do not even require the collection of any kind of beneficial ownership
information when someone forms a company, or if they do they will also frequently have laws thatprevent that information from ever being shared.425
The Tax Justice Network (TJN) produces a bi-annual “Financial Secrecy Index” (FSI) that measures thelevel of financial secrecy in 102 jurisdictions. The top five jurisdictions in TJN’s 2015 FSI were, startingfrom the top, Switzerland, Hong Kong, the United States, Singapore, and the Cayman Islands.426 This
list helps illustrate the fact that the shadow financial system exists not in back alleys but parallel to andmixed in with the legitimate financial system.
Transnational crime cannot continue to exist on this US$1.6 trillion to $2.2 trillion scale without financial
secrecy jurisdictions. This global network and the financial institutions and intermediaries doing businessin these areas are laundering money and providing banking services that facilitate all of the crimes
detailed in this report. Without these services, illicit actors and transnational networks would have a far
more difficult time trying to run their criminal enterprises. Secrecy jurisdictions allow them to launder andspend their profits—the only reason they are involved in these illegal markets in the first place—and to
make the necessary payments to their “employees” and suppliers of goods and services.
The current business model for illegal, unreported, and unregulated (IUU) fishing is heavily dependent
Global Financial Integrity and Global Witness, Chancing It: How Secret Company Ownership Is a Risk to Investors (Washington, DC: Global Financial Integrity; Global Witness, 2016), 16, http://www.gfintegrity.org/report/chancing-it-how-secret-company-ownership-is-a-risk-to-investors/.
424
Ibid.
425
“What Is a Secrecy Jurisdiction?,” Financial Secrecy Index, accessed February 27, 2017, http://www.financialsecrecyindex.com/faq/what-is-asecrecy-jurisdiction.
426“Financial Secrecy Index - 2015 Results,” Tax Justice Network, accessed February 27, 2017, http://www.financialsecrecyindex.com/introduction/
fsi-2015-results.
423

Global Financial Integrity94

on the lack of oversight secrecy jurisdictions provide in exchange for fees. The chapter on IUU fishing inthis report highlights the importance of “flags of convenience,” which vessels in this industry use on topof anonymous ownership to avoid thorough maritime, labor, and fishing regulations. The list of countries
offering flags of convenience closely correlates with the list of secrecy jurisdictions. A good exampleof this is Panama, which the report notes had “approximately 8,600 registered vessels as of 2014,
compared to 3,700 vessels in China and 3,400 in the United States” (see page 64). Panama was publicly
exposed as one of the most notorious secrecy jurisdictions in 2016 by the Consortium of Investigative
Journalists’ “Panama Papers” investigation, but those who rely on secrecy as part of their businessmodels, such as IUU fishing fleets and organized crime, have been aware of Panama’s secrecy regime
for many years.
Applying intergovernmental and public pressure to these jurisdictions to change their laws and closely
scrutinizing transactions linked to these jurisdictions will result in significant strain on all transnational
criminal markets. Switzerland, a long-time and well-known secrecy jurisdictions, has begun changing its
laws to start to move away from playing a major role in the shadow financial system.427 These changes
are the result of strong, sustained international pressure over the last several years, first from civilsociety organizations and increasingly from other Western governments, the latter largely motivated by
tax evasion. The United States in particular has settled numerous lawsuits with banks in Switzerland,
resulting in billions of dollars in fines, even causing some banks to close.428 Civil society and media
campaigns, in connection with several high-profile whistleblowers in the financial sector as well as
document leaks, have also helped to demonstrate the complicity of the Swiss financial system, enabled
by Swiss bank secrecy laws, in a range of crimes and abuses.429
Governments in non-secrecy jurisdictions can almost immediately begin to limit the utility of secrecy
jurisdictions for transnational crime by instructing their central banks and their customs agencies
to scrutinize transactions involving people or entities located in these countries. People involved intransnational crime use secrecy jurisdictions and anonymous companies in order to avoid detection,
both of their illicit transactions and of themselves. A policy of scrutinizing wire transfers and cross-border
trade with these basic characteristics will greatly increase the risks these actors face. Raise the risk
enough relative to the potential gains and buyers, sellers, middlemen and facilitators will scale back theirinvolvement in transnational criminal markets, move their money and activities to an ever-decreasing
number of available secrecy jurisdictions, or divest completely.

Trade Misinvoicing

Customs agencies, central banks, and private banks need to employ new techniques and strategies todetect the technical smuggling of the value of illicit goods through cross-border trade—which may help
catch instances of physical smuggling of illicit goods as well. Specifically, these entities should focus on
trade misinvoicing, of which trade-based money laundering (TBML) is a subset. Trade misinvoicing isa method of moving money illicitly across borders that involves deliberately misreporting the value of acommercial transaction on an invoice submitted to customs by fraudulently mis-reporting the quantity,
quality, price per unit, type of good, or any other fact that would result in the shipment being over- or
under-invoiced. Export over-invoicing creates a paper trail to transfer added value into the country ofexport, and import over-invoicing is used to justify the transfer of a higher amount of money out of acountry. Criminals easily and quickly shift substantial sums of money across international borders by
fraudulently manipulating the price, quantity, or quality of a good or service on an invoice to their desired
level.430
Transnational criminals, and others wishing to disguise the movement of money from one country toanother, provide fraudulent values on export and/or import invoices to justify the transfer of that samevalue of money from a financial account in one country to an account in another country. They use trade
Ralph Atkins, “Switzerland Moves Further to End Bank Secrecy,” Financial Times, December 29, 2016, https://www.ft.com/content/890a4262c795-11e6-8f29-9445cac8966f.
428“Swiss Bank Program,” U.S. Department of Justice, February 6, 2017, https://www.justice.gov/tax/swiss-bank-program.
429“A Leak in Paradise,” A Leak in Paradise, 2016, http://www.aleakinparadise.com/.
430“Trade Misinvoicing,” Global Financial Integrity, accessed February 27, 2017, http://www.gfintegrity.org/issue/trade-misinvoicing/.
427							

Transnational Crime and the Developing World95

misinvoicing to settle the accounts for the prior sale of illicit goods and as a method of laundering andmoving their illicit money from one jurisdiction to another. Individuals and groups are successfully using
this technique in every market covered in this report; some even do double-duty by moving both thevalue and the good(s) through the same misinvoiced trade. For example, the chapter on drug trafficking
notes that organizations in Colombia have imported goods from the United States that they boughtwith proceeds of drug sales, which then transfers that value back to Colombia (see page 9). Groups
involved in arms trafficking use misinvoicing to launder the value of and also to ship the illicit goods by
misidentifying the items as goods of similar shape and density (see page 17).
The key to curtailing trade misinvoicing is for customs officers, central bank staff, bankers, anddesignated non-financial businesses and professions, such as auditors, to employ risk-based detection
strategies to identify and flag transactions that warrant scrutiny. The first approach is for these fourgroups to have access to world market prices for goods, so that they are able to observe when the valueon the invoice may be far too low or too high given the description of the goods. GFI launched such asystem in 2016 called GFTrade™. It is a cloud-based system with trade data from most of the world’s
largest trading countries that shows graphically and numerically for any given invoice whether or not therecorded value for the good’s classification—called a harmonized system (HS) code—is within a predetermined range. A declared value outside of that range suggests that further investigation is warranted
to determine whether it is a case of fraud.431
The level of information available about the parties involved in the trade should be another indicatorof risk and the need for further examination; what you do not know can hurt you. Beneficial ownership
information can help customs agents determine whether a given transaction may be linked to persons
involved in illegal activity—a significant risk factor. The importer or the exporter being registered in asecrecy jurisdiction should be another indicator of risk for tax evasion and for all other forms of criminal
enterprise that rely on secrecy jurisdictions as a form of protection. Customs agencies can add these
two indicators to their risk-flagging system.
Criminals need to manage risk and avoid detection, and a greater focus on catching instances of trade
misinvoicing through the above measures will greatly increase the risk criminals face when trying to
smuggle their illegal goods or their dirty money through cross-border trade. By implementing thesemeasures, authorities can catch more illegal transactions, which will likely also provide them with further
evidence to map the illicit networks and to successfully prosecute in courts. Criminals should also
respond to the greater threat of detection and interception by discontinuing their use of these routes,
which should create greater difficulties for them in moving their goods and their money where they needthem to go. These difficulties will likely also discourage some buyers of illicit goods, due to the increased
risks and costs that they too will likely face. Financial transparency both facilitates stronger enforcement
against illegal activity and provides a powerful disincentive to engage in some such activities in the firstplace.

Interagency Cooperation

This report demonstrates that transnational crime requires a much broader response than just increased
law enforcement, and successfully combatting these abuses requires greater information sharing
and cooperation across numerous government agencies. The fundamental goal of the previous threerecommendations is to increase the availability of information on the money flows underpinningtransnational crime in order to combat it. Sharing that information within and across governments
will amplify its impact by allowing connections to be made more easily between traditionally separate
oversight and enforcement areas. Tax administrations, central banks, customs agencies, financial
intelligence units (FIUs), natural resource bureaus, and law enforcement in particular need to work
together to share intelligence related to the structures, finances of, patterns of, and individuals involvedin transnational crime.
Productive interagency cooperation on combatting transnational crime includes regular coordination
431“GFTrade,” Global Financial Integrity, accessed February 27, 2017, http://www.gfintegrity.org/gftrade/.

Global Financial Integrity96

at the top levels, and authorized cooperation among staff, on cross-agency issues, and continuous
information sharing in order to close gaps in enforcement and intelligence. Each agency collects
through its daily operations and mandates key pieces of the information puzzle for identifying possible
transnational criminal activity and mapping the scope of these crimes and the groups and individuals
involved. The central bank has data on monetary flows in and out of the country; the mining agency
knows the locations of resource deposits and who has contracts to extract and/or export theseminerals; the navy and the coast guard have records of illegal fishing and smuggling activities they haveintercepted offshore; and, the customs department has records of the types of goods and the values
and quantities that companies are reporting for imports and exports. This is not an exhaustive list. The
recommendations for collection of beneficial ownership information, the list of secrecy jurisdictions,and the data on cases of trade misinvoicing that will come from enhanced customs enforcement will
add to the wealth of intelligence each government will possess relating to transnational crime. Sharing
information on request is too slow, cumbersome, and limiting; experts within each agency need
continuous access to relevant databases in order to keep up with the nimble and adaptive nature oftransnational crime.
This report includes several examples of crimes that authorities did catch or could have caught asa result of interagency cooperation and information sharing. The chapter on the illegal wildlife tradenotes that traffickers sometimes hide large shipments of their illegal goods among common bulk goods
like cashews, soya, and timber (see page 54). Customs agencies in countries impacted by wildlife
trafficking, including neighboring countries, could monitor and compile data on exports of these types ofcommodities and compare the names of companies involved and volumes exported with the agencies
that oversee these markets to search for possible discrepancies and imbalances, such as annual soya
exports exceeding total domestic production. Mining offers similar possibilities, especially with regard
to gold, which criminals can misrepresent as a lower or higher quality to alter the cross-border valuetransfer—which may not match the quantities of particular value categories or HS codes that the mining
ministry knows to exist domestically (see page 74).

Summary

Financial transparency is a powerful disincentive for illicit activity. This report estimates that the global
annual value of transnational crime is US$1.6 trillion to $2.2 trillion; it is not possible to move such sumsof money around the globe entirely in cash. The participants in these illegal markets depend on being
able to access the global financial system, and that access in turn relies on their ability to keep theiridentities and the origins of their goods secret.
This chapter presented four key areas in which governments can take action to make it significantly
harder for transnational criminals to hide their businesses. Creating registers of beneficial ownership
information will eliminate the use of anonymous companies to disguise the names of those involved
in illegal transactions, particularly if those registers are public. Scrutinizing cross-border transfers ofgoods tied to secrecy jurisdictions will further reduce the ease of anonymity, especially with IUU fishing.
Trade misinvoicing, in particular TBML, features frequently in transnational crime of all types, particularly
for large volumes or values, and combatting trade misinvoicing will significantly undercut the scale of
TBML. Finally, governments should greatly enhance inter-agency cooperation and information sharing tomonitor for patterns, discrepancies, and disparities between the data and knowledge each possesses tobetter identify and combat transnational illegal enterprises.
Shrink financial secrecy and the shadow financial system and you can reduce all transnational crimes inall countries.

							

Transnational Crime and the Developing World

97

Global Financial Integrity98

XIV. Conclusion
Transnational crime is a business, and business is very good. As shown in Table X, the combined annual
value of the 11 transnational criminal markets examined in this report is estimated to be US$1.6 trillion to$2.2 trillion. These massive revenues are the primary motivation for individuals, organized crime groups(OCGs), terrorists, and insurgent groups to engage in these illegal activities. Transnational crime willcontinue to grow until the paradigm of high profits and low risks is challenged; profits must be slashedand risks intensified.

Table AA. The Retail Value of Transnational Crime
Transnational Crime
Drug Trafficking
Small Arms & Light Weapons Trafficking
Human Trafficking
Organ Trafficking
Trafficking in Cultural Property
Counterfeiting
Illegal Wildlife TradeIUU Fishing
Illegal Logging
Illegal Mining
Crude Oil Theft
Total

Estimated Annual Value (US$)$426 billion to $652 billion$1.7 billion to $3.5 billion$150.2 billion$840 million to $1.7 billion$1.2 billion to $1.6 billion$923 billion to $1.13 trillion$5 billion to $23 billion$15.5 billion to $36.4 billion$52 billion to $157 billion$12 billion to $48 billion$5.2 billion to $11.9 billion$1.6 trillion to $2.2 trillion

Dirty money begets dirty money: the revenues generated from crime not only line the pockets ofperpetrators but also finance additional criminal activities and violence. A primary illustration of this isseen in drug trafficking organizations beginning to invest in other illegal markets, including illegal mining,
wildlife trafficking, and crude oil theft. Stopping the flow of dirty money prevents criminals from profiting,and it combats the perpetuation of crime.
Interdiction of illegal commodities is important, but these are profit-motivated crimes—more action isneeded that focuses on the money. Law enforcement must place a much greater emphasis on following
and seizing the money in order to understand, identify, and disrupt trafficking networks.
The opacity of the global financial system—particularly anonymous shell companies and secrecy
jurisdictions—greatly enables criminals to profit from transnational organized crime by providing
anonymity and protection. The Panama Papers investigation includes numerous examples of theseconnections, including ties to drug trafficking, art theft, money laundering, terrorism, corruption, robbery,tax evasion, and fraud.432 So long as there is a vibrant global shadow financial system, so too willtransnational crime thrive.
Authorities have not regarded some crimes, including natural resource crimes as well as trafficking
in counterfeit goods, as serious transnational organized crime. There is not an inherent high level ofviolence associated with these activities, unlike drugs and arms trafficking, and they have therefore
been treated with less urgency and fewer resources. What is overlooked is the fact that the proceedsfrom these crimes can provide financing to violent OCGs, terrorists, and insurgent groups, as well as
undermine the wellbeing of communities.
International Consortium of Investigative Journalists, “Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption,”
The Panama Papers, April 3, 2016, https://panamapapers.icij.org/20160403-panama-papers-global-overview.html.
432							

Transnational Crime and the Developing World

99

For many developing countries, the abundance of natural resources, such as minerals, crude oil, and/or timber, is impeding development and increasing income inequality, due in part to high levels ofcorruption and weak rule of law. These are public goods that should benefit the many, yet they arebeing stolen for the private gain of a few. The control of natural resources, such as diamonds, timber, or
narcotics, can lead to conflict when illicit networks perceive potential financial benefit.433
Very rarely do the revenues from transnational crime have any long-term benefit to citizens, communities,
or economies of developing countries. It is time to take the fight against the criminals and these illicit
networks to their wallets and bank accounts.

433

Paul Collier and Anke Hoeffler, “Greed and Grievance in Civil War,” Oxford Economic Papers 56 (2004): 587–89.

Global Financial Integrity100Appendix: Methodology
This appendix is intended to provide both an explanation of methodology for calculations as well assources that did not fit into their respective chapters. The appendix contains information for six transnational criminal markets: drug trafficking, trafficking of small arms and light weapons (SALW), the illegalorgan trade, trafficking in cultural property, the illegal wildlife trade, and illegal, unreported, and unregulated fishing.
For all goods, the appropriate rates of exchange for prices not originally quoted in U.S. dollars (US$) arecalculated based on the date the source was published using the International Monetary Fund’s (IMF)
Exchange Rate Archives.434 If the currency is not provided by the IMF, then exchange rate data from thecountry’s central bank is used.

A. Drug Trafficking

This section outlines the methodology for calculating the global market and submarket values for drugtrafficking. Two methods were used to arrive at these market values, one working forward and the otherbackward. Both methods use simple economic techniques and do not take into account market factors
such as changes in demand and supply.

1. Global Drug Market Values: Rate of Inflation

Working forward, the rate of inflation was applied to the last submarket estimates produced by theUnited Nations Office on Drugs and Crime (UNODC), the sum of which provided the updated global
market value.

Appendix Table A. Inflation Adjusted Value of Global Drug Market, 2014 (US$)
Last Estimate
2014 Estimate
Submarket
Year
Value
Inflation
Value
Rounded435
Cannabis
2003$141.9 billion
28.66%$182,569,773,913$183 billion
Cocaine436
2009$85 billion
10.35%$93,795,289,391$94 billion
437
Opiates
2009$68 billion
10.35%$75,036,289,391$75 billion
438
ATS
2006
$63.4 billion
17.43%$74,449,714,286$74 billion
Total
$426
billion.
.
.
Sources: UNODC; US Inflation Calculator439

2. Global Drug Market Values: Global GDP

Working backward, the value of the global illicit drug market to world gross domestic product (GDP) wasused. The UNODC estimated that the global drug market was worth US$320 billion in 2003, equivalent
to approximately 0.8 percent of global GDP.440 Assuming that the global market still represents the same
percentage of global GDP, the illicit global drug market would be worth US$651 billion in 2014.441 The
individual submarket values were determined by assuming that these markets grew at the same rate as
If the exact date is not listed in the archives, then the closest prior date is used. “Exchange Rate Archives by Month,” International Monetary Fund,
accessed February 21, 2017, https://www.imf.org/external/np/fin/data/param_rms_mth.aspx.
435
United Nations Office on Drugs and Crime, World Drug Report 2005 (Vienna: United Nations Office on Drugs and Crime, 2005), 17, http://www.
unodc.org/pdf/WDR_2005/volume_1_web.pdf.
436
United Nations Office on Drugs and Crime, World Drug Report 2011 (Vienna: United Nations Office on Drugs and Crime, 2011), 17, http://www.
unodc.org/documents/data-and-analysis/WDR2011/World_Drug_Report_2011_ebook.pdf.
437
Ibid., 16.
438
United Nations Office on Drugs and Crime, Amphetamines and Ecstasy: 2008 Global ATS Assessment (Vienna: United Nations Office on Drugs andCrime, 2008), 12, https://www.unodc.org/documents/scientific/ATS/Global-ATS-Assessment-2008-Web.pdf.
439“Consumer Price Index Data from 1913 to 2016,” US Inflation Calculator, September 16, 2016, http://www.usinflationcalculator.com/inflation/
consumer-price-index-and-annual-percent-changes-from-1913-to-2008/.
440
The UNODC’s World Drug Report 2005 states that the global illicit drug market is worth 0.9 percent of global GDP at the retail level, however updated GDP figures from the World Bank show it to actually be 0.83 percent. United Nations Office on Drugs and Crime, World Drug Report 2005, 127.
441
The value of the global illicit drug market in 2014 (US$651 billion) based on the rate of growth does not match the total value shown in Table B due
to rounding of the individual submarket values.
434							

Transnational Crime and the Developing World101

the global market.

Appendix Table B. Global Drug Market Value by Percent of GDP (current US$)Year
Global GDP442
Drugs to GDP (%)
Global Drug Market Value443
2003$38,733,017,865,848
0.83%$321,600,000,000
2014$78,377,098,842,809
0.83%‡$650,764,551,194
Assuming the global drug market represents the same percentage as in 2003.
Sources: UNODC; World DataBank‡

Appendix Table C. Global Drug Submarket Values by GDP Growth (US$)
Market2003 Value444
GDP Growth
2014 Value
Cannabis$141.9 billion$145,237,717,085$287,137,717,085
Cocaine$70.5 billion$72,158,273,816$142,658,273,816
Opiates$65 billion$66,528,904,937$131,528,904,937
ATS$44.4 billion$45,444,359,680$89,844,359,680
Total$321.8 billion$329,369,255,518$651,169,255,518

Rounded$287 billion$143 billion$132 billion$90 billion$652 billion†

Source: UNODC†
The total value for the global drug market in 2014 shown in Table C does not match that shown in Table B due to rounding of the 		
individual submarket values.

B. Trafficking of Small Arms and Light Weapons

This section provides an explanation of the methodology used to calculate the value of global SALW
trafficking and furnishes a list of sources for AK-47 prices.

1. Global Arms Trade

The value of SALW trafficking was calculated from trade data reported to the United Nations (UN)
Comtrade database. While UN Comtrade does capture a sizeable amount of global trade, reporting isvoluntary, so recorded figures may not accurately depict the actual size of global trade. The data are for
confirmed imports and exports in 2014, and do not include the value of export licenses (authorizations)or arms export agreements. The data correspond to harmonized system (HS) classification 07 and using
HS codes for military weapons, revolvers and pistols, firearms and other similar devices (e.g. shotguns
and rifles), firearm parts and accessories, and ammunition and projectiles.445“GDP (Current US$),” The World Bank, accessed January 25, 2017, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2015&start=2003.
United Nations Office on Drugs and Crime, World Drug Report 2005, 17.
Ibid.
445
Specifically, the HS codes used are: (HS 9301) military weapons - other than revolvers, pistols and arms of heading 9307; (HS 9302) revolvers
and pistols - other than those of heading 9303 or 9304; (HS 9303) firearms - other similar devices (e.g. sporting shotguns and rifles, muzzle-loading
firearms, very pistols, devices for firing flares or blank ammunition, captive bolt humane killers, line throwing guns); (HS 9305) firearms - parts andaccessories of articles headings 9301-9304; and (HS 9306) bombs, grenades, torpedoes, mines, missiles and similar munitions of war and parts
thereof, cartridges and other ammunition, projectiles and parts thereof, including shot and cartridge wads. Some of the data falling under HS 9306 are
not SALW (e.g., torpedoes and missiles), however detailed data to exclude such non-SALW elements from the HS 9306 aggregate are not available.
Excluded from the study are spring, rubber, air and gas mechanized firearms (HS 9304) and swords, cutlasses, bayonets and related items (HS 9307).
442
443
444

Global Financial Integrity102

2. The Average Cost of an AK-47

The below table (Table D) lists the sources from which AK-47 prices were collected.

Appendix Table D. The Average Cost of an AK-47 Around the World (US$)
Country
Afghanistan
Belgium447
India448
Iraq (Kurdistan)449
Lebanaon (2011-2012)450
Mexico (at the Northern border)451
Mexico (at the Southern border)452
Nigeria453
Online (Dark Web)454
Pakistan (2011-2012)455
Pakistan, craft (2011-2012)456
Somalia (2011)457
Somalia (2013)458
Syria (2011)459
Syria (2012)460
Yemen461
446

Price$600-$1,500$1,135$1,087-$9,058$700$1,606$1,200-$1,600$2,000-$4,000$1,292-$2,067$2,800-$3,600$1,205
$148
$350
$750
$1,200$2,100$1,396

C. Illegal Organ Trade

This section presents the methodology for calculating the estimated value of the global illegal organ
trade as well as the prices for organ-specific transplants, sorted by country, from which price ranges
were determined. Also included are the sources for all price-related data.

Heath Druzin, “Fearing Post-2014 Environment, Afghans Buy up Weapons,” Stars and Stripes, December 5, 2012, http://www.stripes.com/news/
fearing-post-2014-environment-afghans-buy-up-weapons-1.199416.
447
Colin Freeman, “Inside the ‘Ant Trade’ - How Europe’s Terrorists Get Their Guns,” The Telegraph, November 23, 2015, http://www.telegraph.co.uk/
news/worldnews/europe/12010458/Inside-the-Ant-Trade-how-Europes-terrorists-get-their-guns.html.
448
Russian-made model. Manimugdha S. Sharmar, “How the Market for Illegal Weapons Is Booming in India,” The Economic Times, November 25,
2012, http://economictimes.indiatimes.com/news/politics-and-nation/how-the-market-for-illegal-weapons-is-booming-in-india/articleshow/17356337.
cms?intenttarget=no.
449
Matt Cetti-Roberts and Kevin Knodell, “How Much Does a Gun Cost in Kurdistan?,” War Is Boring, August 21, 2014, https://warisboring.com/howmuch-does-a-gun-cost-in-kurdistan-800ca37ebdfc.
450
Nicolas Florquin, “Price Watch: Arms and Ammunition at Illicit Markets,” in Small Arms Survey 2013: Everyday Dangers (Geneva: Small Arms Survey, 2013), 257, http://www.smallarmssurvey.org/fileadmin/docs/A-Yearbook/2013/en/Small-Arms-Survey-2013-Chapter-11-EN.pdf.
451
Eric L. Olson, “A Shared Responsibility: Counternarcotics and Citizen Security in the Americas,” S. Hrg. 112-57, Committee on Foreign Relations(2011), 55, https://www.gpo.gov/fdsys/pkg/CHRG-112shrg67800/pdf/CHRG-112shrg67800.pdf.
452
Ibid.
453
Jude Isiguzo, “‘I Stack AK 47 Guns inside Yam Flour and Smuggle to Nigeria,’” The Nation Nigeria, April 1, 2014, http://thenationonlineng.net/
stack-ak-47-guns-inside-yam-flour-smuggle-nigeria/.
454
Patrick Howell O’Neill, “Enter the Armory, the Dark Web’s Walmart of Weaponry,” The Daily Dot, April 4, 2014, http://www.dailydot.com/crime/
armory-deep-web-weapons/.
455
Florquin, “Price Watch: Arms and Ammunition at Illicit Markets,” 257.
456
Ibid.
457
Hamza Mohamed, “Illicit Gun Trade Barrels Ahead in Mogadishu,” Al Jazeera, February 12, 2013, http://www.aljazeera.com/indepth/features/2013/02/20132111214770878.html.
458
Ibid.
459
Nicholas Blanford, “As Syria Unravels, Prices Soar for Guns, Grenades, and RPGs,” Christian Science Monitor, January 9, 2012, http://www.
csmonitor.com/World/Middle-East/2012/0109/As-Syria-unravels-prices-soar-for-guns-grenades-and-RPGs.
460
Ibid.
461
Saeed Al Batati, “Yemenis Trade in Weapons on Facebook,” Gulf News, April 4, 2014, http://gulfnews.com/news/gulf/yemen/yemenis-trade-inweapons-on-facebook-1.1312724.
446							

Transnational Crime and the Developing World103

1. Estimated Value of the Illegal Organ Trade

The prices for organ transplants vary widely by type of organ, by the country in which the operation is
performed, and by the nationality of the transplant recipient. For example, kidney prices showed thegreatest variation. The price range for kidney transplants extended from a low of US$14,000 in Pakistan
to a high of US$237,000 in Singapore, with a median of US$80,000.462 In order to narrow the price range
to provide a more robust observation, the 25th and 75th percentiles were used as the lower and upperbounds for each range.

Appendix Table E. Estimated Value of the Illegal Organ Trade
Organ
Kidney
Liver
Heart
Lung
Pancreas
Total

No. Illegal
Transplants463
7,995
2,615
654
469
233
11,966

Price Low
$50,000$99,000$130,000$150,000$110,000.

Price High
$120,000$145,000$290,000$290,000$140,000.

Total Low

Total High$399,750,000$258,885,000$85,020,000$70,350,000$25,630,000$839,635,000$959,400,000$379,175,000$189,660,000$136,010,000$32,620,000$1,696,865,000

Appendix Table F. Prices Paid to Kidney Vendors Around the World
Vendor Country
Canada464
China466
China468
China470
China472
China474
China476
China478
Colombia480
Colombia482
Colombia484
India486
Indonesia488
Indonesia490
Iraq492
Israel494
Israel496
Israel498
Israel500

Price High
$100,000$32,000$62,000$63,000$65,000$65,000$70,000$85,000$50,000$80,000$80,000$25,700$30,000$47,000$20,000$120,000$150,000$175,000$200,000

Vendor Country
Japan465
Lebanon467
Mexico469
Pakistan471
Pakistan473
Pakistan475
Pakistan477
Pakistan479
Philippines481
Philippines483
Singapore485
South Africa487
Sri Lanka489
Sri Lanka491
Turkey493
Turkey495
Turkey497
United States499
United States501

Price High
$100,000$15,000$125,000$14,000$20,500$40,000$50,000$60,000$60,000$85,000$237,000$120,000$53,000$122,000$100,000$118,276$145,000$120,000$150,000

Yosuke Shimazono, “The State of the International Organ Trade: A Provisional Picture Based on Integration of Available Information,” Bulletin of theWorld Health Organization 85, no. 12 (2007): 956; University of Queensland Human Trafficking Working Group, “Wang Chin Sing v Public Prosecutor,”
Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.org/cld/case-law-doc/traffickingpersonscrimetype/sgp/2008/wang_chin_sing_v_public_prosecutor.html?lng=en&tmpl=htms; Luis Fábregas, “Transplant ‘Tourism’ Questioned at Medical Centers in Colombia,”
TribLIVE.com, February 18, 2007, http://triblive.com/x/pittsburghtrib/news/regional/s_493727.html; “Doctor, Wife Jailed for Buying Illegally Harvested
Kidney,” The Japan Times Online, January 27, 2012, http://www.japantimes.co.jp/news/2012/01/27/national/doctor-wife-jailed-for-buying-illegallyharvested-kidney/.
463
Illegal transplants are estimated to represent 10 percent of all legal transplants. Global Observatory on Donation and Transplantation, “Organ
Donation and Transplantation Activities 2014” (Madrid: Organización Nacional de Trasplantes, April 2016), http://www.transplant-observatory.org/
data-reports-2014/.
462

Global Financial Integrity

104

Japan502$80,000
Low
High
Median25th Percentile
75th Percentile

Appendix Table G. Price Range of Liver Transplants (US$)
Country
Price
503
China
China504
China505
China506
China507
China508
China509$14,000$237,000$80,000$50,000$120,000$21,900$98,000$120,000$130,000$130,000$130,000$160,000“Business of Organ Harvesting,” Stop Organ Harvesting in China, accessed July 14, 2016, http://www.stoporganharvesting.org/business-of-organharvesting/.
465
Transplant in Peru. Michael Smith, “Desperate Americans Buy Kidneys from Peru Poor in Fatal Trade,” Bloomberg.com, May 12, 2011, http://www.
bloomberg.com/news/articles/2011-05-12/desperate-americans-buy-kidneys-from-peru-poor-in-fatal-trade.
466
MacLeod, “Organ Harvesting Changes in China Will Be Tough to Realize.”
467
Shimazono, “State of the International Organ Trade,” 956.
468
“How Much Are My Organs Worth?,” Visually, January 24, 2012, http://visual.ly/how-much-are-my-organs-worth.
469
Shimazono, “State of the International Organ Trade,” 956.
470
Ibid.
471
“How Much Are My Organs Worth?”
472
Shimazono, “State of the International Organ Trade,” 956.
473
Ruth Evans, “Pakistani Police Rescue 24 from Organ Trafficking Gang,” BBC News, January 24, 2017, http://www.bbc.com/news/
health-38722052.
474
Sue Dunlevy, “Australians Turn to Black Market for Human Organs,” News.com.au, August 7, 2016, http://www.news.com.au/national/australiansturn-to-black-market-for-human-organs/news-story/06905df7ffc5337cb53927c9de1cce3a.
475
Evans, “Pakistani Police Rescue 24 from Organ Trafficking Gang.”
476
Fábregas, “Transplant ‘Tourism’ Questioned at Medical Centers in Colombia.”
477
Nancy Scheper-Hughes, “Perpetual Scars,” New Internationalist, May 2014, 21.
478
Fábregas, “Transplant ‘Tourism’ Questioned at Medical Centers in Colombia.”
479
Shimazono, “State of the International Organ Trade,” 956.
480
“How Much Are My Organs Worth?”
481
Transplant performed in Singapore. University of Queensland Human Trafficking Working Group, “Wang Chin Sing v Public Prosecutor.”
482
Transplant in West Bengal, donor from Nepal or Bangladesh. Nishtha Chugh, “Need a Kidney? Inside the World’s Biggest Organ Market,” Al
Jazeera, October 8, 2015, http://www.aljazeera.com/indepth/features/2015/10/kidney-worlds-biggest-organ-market-151007074725022.html.
483“How Much Are My Organs Worth?”
484
Samantha Hawley, “Organ Trafficking Trade Plays on the Poor and Desperate in Indonesia Village,” ABC News, February 17, 2016, http://www.abc.
net.au/news/2016-02-18/organ-trafficking-trade-operating-in-indonesian-villages/7178882.
485
Transplant in Sri Lanka, foreign recipient. Chugh, “Need a Kidney?”
486
Indonesian recipient, transplant performed in Singapore. University of Queensland Human Trafficking Working Group, “Wang Chin Sing v Public
Prosecutor.”
487
Transplant in Sri Lanka, foreign recipient. Chugh, “Need a Kidney?”
488“How Much Are My Organs Worth?”
489
Bienstock, Tales from the Organ Trade.
490
Transplant performed in South Africa. Shaun Swingler, “The Dark World of Internet Kidney Trafficking,” Health24, April 8, 2016, http://www.
health24.com/Medical/Kidney-and-bladder/News/The-dark-world-of-internet-kidney-trafficking-20150225.
491
Paul Lewis, “The Doctor at the Heart of Kosovo’s Organ Scandal,” The Guardian, December 17, 2010, https://www.theguardian.com/world/2010/
dec/17/kosovo-medicus-organ-clinic.
492
Transplant performed in Sri Lanka. Kevin Sack, “Transplant Brokers in Israel Lure Desperate Kidney Patients to Costa Rica,” The New York Times,
August 17, 2014, http://www.nytimes.com/2014/08/17/world/middleeast/transplant-brokers-in-israel-lure-desperate-kidney-patients-to-costa-rica.
html.
493
“How Much Are My Organs Worth?”
494
Transplant performed in Costa Rica. Sack, “Transplant Brokers in Israel Lure Desperate Kidney Patients to Costa Rica.”
495
Dianne Small-Jordan, “Organ Harvesting, Human Trafficking, and the Black Market,” Decoded Science, March 23, 2016, http://www.decodedscience.org/organ-harvesting-human-trafficking-black-market/56966.
496
Transplant performed in Sri Lanka. Sack, “Transplant Brokers in Israel Lure Desperate Kidney Patients to Costa Rica.”
497
Scheper-Hughes, “Perpetual Scars,” 19.
498“Doctor, Wife Jailed for Buying Illegally Harvested Kidney.”464							

Transnational Crime and the Developing World

105

Colombia510
Pakistan511
South Korea512
Taiwan513$100,000$25,000$165,600$290,000$21,900$290,000$130,000$99,000$145,000Low
HighMedian25th Percentile
75th Percentile
Appendix Table H. Price Range of Heart Transplants (US$)
Country

Price

China
China515
China516
Colombia517
India518
Singapore519
South Africa520
South Korea521
Taiwan522
514

Low
High
Median25th Percentile
75th Percentile$130,000$130,000$190,000$90,000$65,000$290,000$290,000$290,000$290,000$65,000$290,000$190,000$130,000$290,000

Zuo Likun, “Human Organ Black Market Exploiting Poverty and Hope,” The China Post, May 10, 2010, http://www.chinapost.com.tw/china/national-news/2010/05/10/255889/Human-organ.htm.
500“Business of Organ Harvesting.”
501
Shimazono, “State of the International Organ Trade,” 956.
502
“How Much Are My Organs Worth?”
503“Business of Organ Harvesting.”
504
Shimazono, “State of the International Organ Trade,” 956
505
Dunlevy, “Australians Turn to Black Market for Human Organs.”
506
Fábregas, “Transplant ‘Tourism’ Questioned at Medical Centers in Colombia.”
507“How Much Are My Organs Worth?”
508“7 Nabbed for International Organ Trafficking,” Yonhap News Agency, February 25, 2013, http://english.yonhapnews.co.kr/news/2013/02/25/19/02
00000000AEN20130225006300315F.HTML.
509“How Much Are My Organs Worth?”
510
Ibid.
511
Shimazono, “State of the International Organ Trade,” 956.
512
Dunlevy, “Australians Turn to Black Market for Human Organs.”
513“How Much Are My Organs Worth?”
514
Maura Lerner, “U.S. Man Defies Doctors’ Advice, Gets Heart Transplant in India,” The Seattle Times, October 2, 2010, http://www.seattletimes.
com/nation-world/us-man-defies-doctors-advice-gets-heart-transplant-in-india/.
515“How Much Are My Organs Worth?”
516
Ibid.
517
Ibid.
518
Ibid.
499

Global Financial Integrity106Appendix Table I. Price Range of Lung Transplants (US$)
Country

Price

China523
China524
China525
China526
Singapore527
South Africa528
Taiwan529$110,000$150,000$150,000$170,000$290,000$290,000$290,000$110,000$290,000$170,000$150,000$290,000Low
HighMedianth
25 Percentile
75th Percentile519

Appendix Table J. Price Range of Pancreas Transplants (US$)
Country

Price

China530
China531
China532
Singapore533
South Africa534
South Korea535
Low
High
Median25th Percentile
75th Percentile$88,000$110,000$110,000$140,000$140,000$140,000$88,000$140,000$125,000$110,000$140,000

2. Kidney Transplants: Vendors vs. Recipients

The below table (Table K) depicts the substantial difference between the price paid by the organ recipient
and the amount received by the organ vendor for kidney transplants, sorted by the country in which thetransplant was performed.

Ibid.
Shimazono, “State of the International Organ Trade,” 956.
521
“Business of Organ Harvesting.”
522
Ibid.
523
“How Much Are My Organs Worth?”
524
Ibid.
525
Ibid.
526
“Business of Organ Harvesting.”
527“How Much Are My Organs Worth?”
528
Shimazono, “State of the International Organ Trade,” 956.
529
“How Much Are My Organs Worth?”
530
Ibid.
531
Ibid.
519
520

							

Transnational Crime and the Developing World107

Appendix Table K. Kidney Transplants: Vendors vs. Recipients (US$)
VendorRecipientTransplant
performed in
From
Received
From
Paid
536
China
China
$5,000 Israel$100,000
537
Costa Rica
Costa Rice
$18,500 Israel$175,000
Kosovo538
Moldova$12,000 Canada$120,000
539
Peru
Peru
$7,000 Mexico$125,000
540
Singapore
Indonesia$18,700 Singapore$237,000
541
South Africa
Israel$20,000 Israel$120,000South Africa542
Brazil, Romania$6,000 Israel$120,000
543
United States
Israel$10,000 Israel, U.S.
$120,000

Markup1,900%
846%
900%
1,686%
1,166%
500%
1,900%
1,100%

3. Kidney Vendor Payments

The below table (Table L) presents the average payments received by vendors for selling their kidney,sorted by the vendor’s country of citizenship.

Appendix Table L. Prices Paid to Kidney Vendors Around the World
Vendor Country
Price Low
Price High
Vendor Country
Price Low
Bangladesh544$2,000$3,000 Lebanon545$3,000546
547Belarus$8,000$10,000 Moldova$2,500548
549
Brazil$3,000$10,000 Nepal$200
Cambodia550$3,000 Nicaragua551
China552$3,500$15,000 Pakistan553$1,300554
555
Colombia$1,000$3,000 Peru
$5,000556
557
Costa Rica
$5,500$6,000 Philippines$1,000Egypt558$2,000 Romania559$2,700
560
561
India
$1,000$6,000 Syria
562
Indonesia$5,000$23,000 Turkey563$7,500
Iraq564$1,000 United States565$20,000
Israel566$10,000$25,000 Viet Nam567
Japan568$16,000 Yemen569$5,000570
Jordan$500$5,000Price High
$7,000$3,000$900$5,000$2,100$12,000$2,500$6,000$3,000$10,000$30,000$2,400$7,000Scheper-Hughes, “Perpetual Scars,” 16.
Sack, “Transplant Brokers in Israel Lure Desperate Kidney Patients to Costa Rica.”
Bienstock, Tales from the Organ Trade.
535
Smith, “Desperate Americans Buy Kidneys from Peru Poor in Fatal Trade.”
536
University of Queensland Human Trafficking Working Group, “Wang Chin Sing v Public Prosecutor.”
537
Swingler, “The Dark World of Internet Kidney Trafficking.”
538
Ibid.
539
Small-Jordan, “Organ Harvesting, Human Trafficking, and the Black Market.”
532
533
534

Global Financial Integrity108

D. Trafficking in Cultural Property

This section provides a list of 15 notable art heists, sorted from most to least valuable, and also includes
the year of the heist, a description of the stolen property, and where the heist took place.

“Bangladesh ‘Kidney Trafficking Ring’ Uncovered,” BBC News, August 30, 2011, http://www.bbc.com/news/world-south-asia-14715820.
Ahmad Haj Hamdo, “The Underbelly of Syria’s War: A Thriving Trade in Human Organs,” UPI, May 12, 2016, http://www.upi.com/Top_News/WorldNews/2016/05/12/The-underbelly-of-Syrias-war-a-thriving-trade-in-human-organs/5301462896201/; Putz, “Lebanese Black Market.”
542
Michael Smith, Daryna Krasnolutska, and David Glovin Subscribe, “Organ Gangs Force Poor to Sell Kidneys for Desperate Israelis,”
Bloomberg.com, accessed August 18, 2016, http://www.bloomberg.com/news/articles/2011-11-01/organ-gangs-force-poor-to-sell-kidneys-fordesperate-israelis.
543Peter Hummel, “Kidneys on Special Offer,” DW.com, July 31, 2012, http://www.dw.com/en/kidneys-on-special-offer/a-16134667; ScheperHughes, “Perpetual Scars,” 14.
544
Swingler, “The Dark World of Internet Kidney Trafficking”; Scheper-Hughes, “Perpetual Scars,” 17; Roger Lee Mendoza, “Colombia’s Organ Trade:
Evidence from Bogotá and Medellín,” Journal of Public Health 18, no. 4 (2010): 378, doi:http://dx.doi.org.proxyau.wrlc.org/10.1007/s10389-010-03203; Edward Fox, “Desperation, Lack of Donors Drives Organ Trafficking in Latin America,” InSight Crime, July 19, 2012, http://www.insightcrime.org/
news-analysis/desperation-lack-of-donors-drives-organ-trafficking-in-latin-america.
545
Sugam Pokharel, “Nepal’s Organ Trail: How Traffickers Steal Kidneys,” CNN, July 15, 2015, http://www.cnn.com/2014/06/26/world/asia/freedomproject-nepals-organ-trail/index.html.
546
Preeti Jha, “Cambodia-Thai Kidney Trafficking Sparks Fears of New Organ Market,” The Nation, October 27, 2014, http://search.proquest.com.
proxyau.wrlc.org/docview/1616660078/abstract/B3E4FF9CA96C4BF2PQ/97.
547
Smith, “Desperate Americans Buy Kidneys from Peru Poor in Fatal Trade.”
548
Mitch Moxley, “For Chinese, Kidney Donation Is a Click Away,” Al Jazeera, May 12, 2011, http://www.aljazeera.com/indepth/featur
es/2011/05/201151110112848287.html; MacLeod, “Organ Harvesting Changes in China Will Be Tough to Realize.”
549
The Cruelest Cut - Pakistan’s Kidney Mafia, 2007, https://www.youtube.com/watch?v=vi7A_jK64qc.
550
Mendoza, “Colombia’s Organ Trade,” 378.
551
Scheper-Hughes, “Perpetual Scars,” 17; Smith, “Desperate Americans Buy Kidneys from Peru Poor in Fatal Trade.”
552
Sack, “Transplant Brokers in Israel Lure Desperate Kidney Patients to Costa Rica”; Zach Dyer, “Doctors, Pizzeria Owner Arrested for Alleged
Organ Trafficking Released in Costa Rica,” McClatchy - Tribune Business News, October 17, 2013, http://search.proquest.com.proxyau.wrlc.org/
docview/1442508314/abstract/E228592DFC04DC5PQ/50.
553
Scheper-Hughes, “Perpetual Scars,” 17, 21; Bienstock, Tales from the Organ Trade.
554
Bienstock, Tales from the Organ Trade.
555
Swingler, “The Dark World of Internet Kidney Trafficking”; Hummel, “Kidneys on Special Offer”; Scheper-Hughes, “Perpetual Scars,” 17.
556
Scheper-Hughes, “Perpetual Scars,” 17; Bienstock, Tales from the Organ Trade; Hummel, “Kidneys on Special Offer”; “Top Delhi Hospital Involvedin Organ Trafficking Racket,” RT International, June 5, 2016, https://www.rt.com/news/345498-india-kidney-trafficking-delhi/; Maria Thomas, “Top Indian Hospitals Are Buying Kidneys from Poor Villagers to Sell to Rich Patients,” Quartz, August 12, 2016, http://qz.com/755854/top-indian-hospitalsare-buying-kidneys-from-poor-villagers-to-sell-to-rich-patients/; Swingler, “The Dark World of Internet Kidney Trafficking”; Chugh, “Need a Kidney?”
557
Hamdo, “The Underbelly of Syria’s War.”
558
Step Vassen, “Organ-Trafficking Syndicate Uncovered in Indonesia,” Al Jazeera, February 22, 2016, http://www.aljazeera.com/news/2016/02/
indonesia-trafficking-syndicate-organ-160222145823810.html; University of Queensland Human Trafficking Working Group, “Wang Chin Sing v Public
Prosecutor.”
559
Hummel, “Kidneys on Special Offer”; Bienstock, Tales from the Organ Trade; Hamdo, “The Underbelly of Syria’s War”; Scheper-Hughes, “Perpetual
Scars,” 17; Mendoza, “Colombia’s Organ Trade,” 378.
560
Hamdo, “The Underbelly of Syria’s War.”
561
Bienstock, Tales from the Organ Trade; Mendoza, “Colombia’s Organ Trade,” 378; Scheper-Hughes, “Perpetual Scars,” 13.
562
Small-Jordan, “Organ Harvesting, Human Trafficking, and the Black Market”; Smith, Krasnolutska, and Subscribe, “Organ Gangs Force Poor to
Sell Kidneys for Desperate Israelis”; Swingler, “The Dark World of Internet Kidney Trafficking”; Mendoza, “Colombia’s Organ Trade,” 378; ScheperHughes, “Perpetual Scars,” 17, 21–22.
563“Vietnam: Organ Sale Brokers to Stand Trial for Human Trafficking,” Asia News Monitor, August 16, 2011, http://search.proquest.com.proxyau.wrlc.
org/docview/889126249/abstract/B3E4FF9CA96C4BF2PQ/115.
564“Tokyo Gangster, Homeless Man Arrested over ‘organ Trafficking,’” The Japan Times Online, July 22, 2015, http://www.japantimes.co.jp/
news/2015/07/22/national/crime-legal/tokyo-gangster-homeless-man-arrested-organ-trafficking/.
565“Yemeni with Egypt Connection Arrested for Organ Trafficking,” Daily News Egypt, June 25, 2010, http://search.proquest.com.proxyau.wrlc.org/
docview/520508007/citation/B3E4FF9CA96C4BF2PQ/111.
566
The Protection Project, “Case No. 2772/2009,” Database, Human Trafficking Knowledge Portal, (n.f.), https://www.unodc.org/cld/case-lawdoc/traffickingpersonscrimetype/jor/case_no._27722009.html?lng=en&tmpl=htms; The Protection Project, “Case No. 2635/2009,” Database,
Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no._26352009.
html?lng=en&tmpl=htms; The Protection Project, “Case No. 1908/2009,” Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.
org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no_19082009.html?lng=en&tmpl=htms; The Protection Project, “Case No. 2060/2009,”
Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no._20602009.
html?lng=en&tmpl=htms; The Protection Project, “Case No. 2745/2009,” Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.
org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no._27452009.html?lng=en&tmpl=htms; The Protection Project, “Case No. 2454/2009,”
Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no._24542009.
html?lng=en&tmpl=htms; The Protection Project, “Case No. 2530/2009,” Database, Human Trafficking Knowledge Portal, (n.d.), https://www.unodc.
org/cld/case-law-doc/traffickingpersonscrimetype/jor/case_no._25302009.html?lng=en&tmpl=htms.
540541							

Transnational Crime and the Developing World

109

Appendix Table M. Notable Art Heists
Year
Artwork Stolen

Location
The Louvre
Paris, France
Isabella Stewart Gardner
MuseumBoston, Massachusetts,
United States

Estimated Value

1911

Mona Lisa by da Vinci

1990

13 pieces including Storm on the Sea ofGalilee by Rembrandt and The Concert by
Vermeer

1991

20 paintings including Sunflower and The
Potato Eaters by van Gogh

The Van Gogh Museum
Amsterdam, Netherlands$500 million573

2008

4 paintings including Poppies near Vetheuilby Monet and Boy in a Red Waistcoat by
CézanneFoundation E.G. Bührle
Zurich, Switzerland$163 million574

2010
2004
1994

Musée d'Art Moderne de la
5 pieces including Le Pigeon aux petis-poisVille de Parisby Picasso and La Pastorale by Matisse
Paris, France
The Munch Museum
The Scream (1910) and Madonna by Munch
Oslo, Norway
National Gallery
The Scream (1893) by Munch
Oslo, Norway$794 million571$500 million572$123 million575$121 million576$100 million577

2002

Two pieces by van Gogh including View of
the Sea at Scheveningen

The Van Gogh Museum
Amsterdam, Netherlands$100 million578

2007

Three pieces including Maya and Her Dolland Portrait of Jacqueline by Picasso

Private residence
Paris, France$68 million579

2010

Poppy Flowers by van Gogh

Mohamed Mahmoud KhalilMuseumCairo, Egypt$55 million580

2007

Portrait of Suzanne Bloch by Picasso and O
Lavrador de Café by Portinari

São Paulo Museum of Art
São Paulo, Brazil$55 million581

2003

Madonna of the Yarnwinder by da Vinci

1985

140 Maya, Aztec, Zapotec, and Miztec
artifacts, including jade and gold pieces

2012

7 pieces including Tête d'Arlequin by
Picasso and Femme devant une fenêtre
ouverte by Gauguin

Kunsthal Museum
Rotterdam, Netherlands$24 million584

2005

Reclining Figure, a 2-ton bronze sculpture
by Moore

Henry Moore Foundation
Much Hadham, England$5.3 million585

Global Financial Integrity

Drumlanrig Castle
Dumfriesshire, Scotland
National Museum of
Anthropology
Mexico City, Mexico$47 to $79 million582>$27 million583

110

E. The Illegal Wildlife Trade

This section on the illegal wildlife trade provides the methodology for estimating the trade’s global value,
retail prices for specific wildlife and wildlife products, and a comparison of source- and market-country
prices for specific goods.

1. Global Illegal Wildlife Trade Value

The below table (Table N) presents a list of sources and values from which the value of the global illegal
wildlife trade was calculated.

Appendix Table N. Global Illegal Wildlife Trade Values (US$)
SourceYear
586
UNEP, CITES, IUCN, TRAFFIC
2013
TRAFFIC587
2014
588
Congressional Research Service
2013
589
Kevin Xie, Harvard International Review
2015Royal United Services Institute590
2015
591
WWF and Dalberg Global Development Advisors
2012592
Stephen F. Pires, Global Crime
2012

Value
$5 billion to $20 billion$5 billion to $20 billion$7 billion to $10 billion$7 billion to $10 billion$7 billion to $23 billion$7.8 billion to $10 billion$8 billion to $10 billion

Melanie Wellsmith, European Journal on Criminal Policy and Research 593

2011$9 billion to $11 billion

African Wildlife Foundation
U4595
Sarah Morrison, The Independent 596
Natalie Southwick, InSight Crime 597
UNEP and INTERPOL598
David Sheldrick Wildlife Trust599
Office of the Director for National Intelligence600
IFAW601

2014
2015
2014
2013
2013
2015
2013
2013

$10 billion$10 billiton to $20 billion$12 billion$15 billion to $20 billion$15 billion to $20 billion$15 billion to $20 billion$17 billion$19 billion

594

Insurance value adjusted for inflation. “Highest Insurance Valuation for a Painting,” Guinness World Records, accessed February 7, 2017, http://
www.guinnessworldrecords.com/world-records/highest-insurance-valuation-for-a-painting/.
568
Tom Mashberg, “Isabella Stewart Gardner Heist: 25 Years of Theories,” The New York Times, February 26, 2015, https://www.nytimes.
com/2015/03/01/arts/design/isabella-stewart-gardner-heist-25-years-of-theories.html.
569“April 14, 1991 - Museum Theft, Van Gogh Museum, Amsterdam,” Association for Research into Crimes against Art, September 30, 2016, http://
art-crime.blogspot.com/2016/09/april-14-1991-museum-theft-van-gogh.html.
570
Uta Harnischfeger and Nicholas Kulish, “At Zurich Museum, a Theft of 4 Masterworks,” The New York Times, February 12, 2008, http://www.
nytimes.com/2008/02/12/world/europe/12swiss.html.
571
Henry Samuel, “‘Spiderman’ Art Thief Stole €100m of Masterpieces from Paris Museum with ‘Disconcerting Ease’, Court Told,” The Telegraph,
January 31, 2017, http://www.telegraph.co.uk/news/2017/01/30/spiderman-art-thief-stole-100m-masterpieces-paris-museum-disconcerting/.
572
Walter Gibbs, “Stolen Munch Paintings Are Recovered,” The New York Times, September 1, 2006, http://www.nytimes.com/2006/09/01/world/
europe/31cnd-scream.html.
573
Estimated value for the 1893 version based on the estimated value of the 1910 version. Ibid.
574
Josephine McKenna, “Van Gogh Masterpieces Stolen from Amsterdam in Daring Heist 14 Years Ago Turn up in Italian Mafia’s Country Mansion,”
The Telegraph, September 30, 2016, http://www.telegraph.co.uk/news/2016/09/30/van-gogh-paintings-discovered-in-italy-14-years-after-they-were/.
575“Stolen Picassos Found in Paris,” BBC News, August 7, 2007, http://news.bbc.co.uk/2/hi/europe/6935819.stm.
576“Van Gogh Stolen from Egyptian Museum for the Second Time,” The Telegraph, August 21, 2010, http://www.telegraph.co.uk/news/worldnews/
africaandindianocean/egypt/7958041/Van-Gogh-stolen-from-Egyptian-museum-for-the-second-time.html.
577
Tom Phillips, “Stolen Picasso Recovered Undamaged in Brazil,” The Guardian, January 10, 2008, https://www.theguardian.com/world/2008/jan/10/
artsfunding.artnews.
578“Da Vinci Painting Stolen,” BBC News, August 27, 2003, http://news.bbc.co.uk/2/hi/uk_news/scotland/3185441.stm; Severin Carrell, “Five Clearedof Trying to Extort £4.25m from Duke over Stolen Da Vinci Painting,” The Guardian, April 21, 2010, https://www.theguardian.com/artanddesign/2010/
apr/21/art-theft-trial-leonardo-da-vinci.
579
Robert J. McCartney, “Ancient Art Stolen In Mexico,” The Washington Post, December 27, 1985, https://www.washingtonpost.com/archive/politics/1985/12/27/ancient-art-stolen-in-mexico/608bdf81-11e3-442b-8978-70e72254fc97/?utm_term=.c7eee23db5d2.
580
Lex Boon, “The Art of Stealing: The Tragic Fate of the Masterpieces Stolen from Rotterdam,” Nrc.nl, accessed March 18, 2016, http://www.nrc.nl/
kunsthal-en/.
581
Mark Townsend and Caroline Davies, “Mystery of the Stolen Moore Solved,” The Guardian, May 16, 2009, https://www.theguardian.com/artanddesign/2009/may/17/henry-moore-sculpture-theft-reclining-figure.
567							

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Stimson Center602
IFAW603
Victoria Rossi, InSight Crime604
Hugh S. Wilkins, Environmental Policy and Law605
C4ADS606
UNEP607

2013
2014
2012
2014
2014
2016

$19 billion$19 billion$20 billion$20 billion$23 billion$23 billion

2. Retail Market Prices of Wildlife and Wildlife Parts

The below tables show retail market prices for various wildlife and wildlife products (Table O) as well as acomparison between payments the poacher receives and the final retail market value prices (Table P).

Product

Live

Appendix Table O. Sample Retail Market Prices (US$)
Item
608
African grey parrot
Slow loris609
Baby elephant (Thailand)610
Gorilla611
Raw bear bile extract (per gram)612
Whole pangolin (restaurant in Viet Nam)613
Tiger bone glu (per kilogram, Hanoi)614
Shahtoosh shawl (each, international market)615

Price$2,000$5,000$7,000$400,000$19$1,750$10,000$20,000

UNEP et al., Elephants in the Dust: The African Elephant Crisis (Oslo: United Nations Environment Programme; GRID-Arendal, 2013), 57, https://www.cites.org/sites/default/files/common/resources/pub/Elephants_in_the_dust.pdf.
583
Tom Milliken, Illegal Trade in Ivory and Rhino Horn: An Assessment to Improve Law Enforcement Under the Wildlife TRAPS Project (Cambridge,
UK: USAID; TRAFFIC, 2014), 1, https://www.usaid.gov/sites/default/files/documents/1865/W-TRAPS-Elephant-Rhino-report.pdf.
584
Liana S. Wyler and Pervaze A. Sheikh, “International Illegal Trade in Wildlife: Threats and U.S. Policy” (Washington, DC: Congressional ResearchService, 2013), 1, https://digital.library.unt.edu/ark:/67531/metadc228072/m1/1/high_res_d/RL34395%20_2013Jul23.pdf.
585
Kevin Xie, “Crime Gone Wild: The Dangers of the International Illegal Wildlife Trade,” Harvard International Review 36, no. 4 (Summer 2015): 60.
586
Tom Maguire and Cathy Haenlein, An Illusion of Complicity: Terrorism and the Illegal Ivory Trade in East Africa (London: Royal United Services
Institute, 2015), 1, https://rusi.org/sites/default/files/201509_an_illusion_of_complicity_0.pdf.
587
World Wildlife Fund and Dalberg Global Development Advisors, Fighting Illicit Wildlife Trafficking: A Consultation with Governments (Gland, Switzerland: WWF International, 2012), 9, http://d2ouvy59p0dg6k.cloudfront.net/downloads/wwffightingillicitwildlifetrafficking_lr_1.pdf.
588
Stephen F. Pires, “The Illegal Parrot Trade: A Literature Review,” Global Crime 13, no. 3 (2012): 176.
589
Melanie Wellsmith, “Wildlife Crime: The Problems of Enforcement,” European Journal on Criminal Policy and Research 17, no. 1 (2011): 134.
590
“Tackling Poaching & Illegal Wildlife Trafficking in Africa” (African Wildlife Foundation, 2014), 2, https://www.awf.org/sites/default/files/media/Resources/Facts%20%26amp%3B%20Brochures/Wildlife%20trafficking%20booklet_lower-res.pdf.
591
Tanya Wyatt and Ahn Ngoc Cao, Corruption and Wildlife Trafficking, U4 Issue, No. 11 (Bergen, Norway: U4 Anti-Corruption Resource Center, 2015),
4, http://www.u4.no/publications/corruption-and-wildlife-trafficking/.
592
Sarah Morrison, “Time to Hunt down the ‘Kingpins’ of Wildlife Crime,” The Independent, February 6, 2014, http://www.independent.co.uk/voices/
comment/time-to-hunt-down-the-kingpins-of-wildlife-crime-9113150.html.
593
Natalie Southwick, “58,000 Trafficked Animals Seized Annually in Colombia,” InSight Crime, November 28, 2013, http://www.insightcrime.org/
news-briefs/58000-trafficked-animals-seized-annually-in-colombia.
594
United Nations Environment Programme, “UNEP and INTERPOL Assess Impacts of Environmental Crime on Security and Development - UNEP”(Press Release, November 6, 2013), http://www.unep.org/newscentre/Default.aspx?DocumentID=2755&ArticleID=9686&l=en.
595
David Sheldrick Wildlife Trust, Dead or Alive? Valuing an Elephant (Surrey, UK: The David Sheldrick Wildlife Trust, 2015), http://iworry.org/wp-content/uploads/2013/09/Dead-or-Alive-Final-LR.pdf.
596“Wildlife Poaching Threatens Economic, Security Priorities in Africa” (Office of the Director of National Intelligence, September 6, 2013), 2, https://www.dni.gov/files/documents/Wildlife_Poaching_White_Paper_2013.pdf.
597
Marina Ratchford, Beth Allgood, and Paul Todd, Criminal Nature: The Global Security Implications of the Illegal Wildlife Trade (Washington, DC:
International Fund for Animal Welfare, 2013), 4, http://www.ifaw.org/united-states/resource-centre/criminal-nature-global-security-implications-illegalwildlife-tra-0.
598
Johan Bergenas, Killing Animals, Buying Arms: Setting the Stage for Collaborative Solutions to Poaching + Wildlife Crime (Washington, DC: Stimson Center, 2013), 3, http://www.stimson.org/sites/default/files/file-attachments/killing_animals_buying_arms_WEB_1.pdf.
599
Jo Hastie and Tania McCrea-Steele, Wanted - Dead or Alive: Exposing Online Wildlife Trade (London: International Fund for Animal Welfare, 2014),
4, http://www.ifaw.org/united-states/resource-centre/wanted-dead-or-alive-exposing-online-wildlife-trade.
600
Victoria Rossi, “Colombia Police Rescued Over 46,000 Illegally Trafficked Animals in 2012,” InSight Crime, September 4, 2012, http://www.insightcrime.org/news-briefs/colombia-46000-illegally-trafficked-animals-2012.
601
Hugh S. Wilkins, “Linking Environment with Peace and Security: Decisions on Sanctions on Illicit Wildlife Trafficking,” Environmental Policy and Law
44, no. 3 (2014): 277.
602
Varun Vira, Thomas Ewing, and Jackson Miller, Out of Africa: Mapping the Global Trade in Illicit Elephant Ivory (Washington, DC: C4ADS, 2014), 3,
https://static1.squarespace.com/static/566ef8b4d8af107232d5358a/t/56af83ee1f40390e88337743/1454343151910/Out+of+Africa.pdf.
603“Apes Seizure Database Reveals True Extent of Illegal Trade, ” United Nations Environment Programme, September 29, 2016, http://web.unep.org/
newscentre/apes-seizure-database-reveals-true-extent-illegal-trade.
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Appendix Table P. Source vs. Market Country Prices (US$)

Product

Live

Commodity
Macaw616
Chimpanzee617

What thePoacher Receives$2 to $20
$50

Falcon618
Pangolin meat (per kilogram)619
Bear gall bladder (whole)620
Tiger pelt621$500$22.50$100 to $150
$1,500What theConsumer Pays
$600 to $10,000$20,000$50,000 to$100,000$250 to $350
$5,000 to $10,000$16,000

Rate of Markup (%)
29,900% to 49,900%
39,900%9,900% to 19,900%
1,011% to 1,456%
4,900% to 6,567%
967%

F. IUU Fishing

In their 2009 report “Estimating the Worldwide Extent of Illegal Fishing,” Agnew et al. were the first to
conduct a worldwide analysis of the value and volume of illegal and unreported fishing in marine capture
production. They estimated that illegal and unreported fishing represents approximately 13 to 31 percentof the global market (by volume) based on data from 2000-2003, and calculated the lower and upper
estimates of the total value of current illegal and unreported fishing losses worldwide at between US $10
billion and $23.5 billion, with the volume of losses for marine capture production at between 11 and 26
million tons.618
Agnew et al. analyzed illegal and unreported catches in 54 exclusive economic zones (EEZs) and 15 highsea waters subject to a Regional Fisheries Management Organization’s jurisdiction, which correspond tothe marine fishing areas used by the Food and Agriculture Organization (FAO) of the United Nations.619
They then used the FAO’s price data to come up with a single estimate of price per ton of fish for eachyear covered by the case study.
Their study is based on data that are more than a decade old, yet inferences can still be drawn and thenapplied to current statistics. Based on the data provided in their report in “Table 1 – Summary of regional
estimates of illegal fishing, averaged over 2000-2003,” it is possible to estimate the lower and upper
percentages of illegal fishing to each regional catch (Table Q).620

Agence France-Presse, “Uganda Frees Smuggled Parrots Back into the Wild,” Modern Ghana, July 28, 2011, http://www.modernghana.com/
news/342420/uganda-frees-smuggled-parrots-back-into-the-wild.html.
605
Exotics, Crimes Against Nature (Nat Geo Wild, 2011), https://www.youtube.com/watch?v=KzgTAbp-Fyo.
606
Daniel Schearf, “Thai Wildlife Group Raided for Criticizing Elephant Poaching,” Voice of America, February 21, 2012, http://www.voanews.com/
content/thai-wildlife-group-raided-for-criticizing-elephant-poaching-139978243/169726.html.
607
Daniel Stiles et al., eds., Stolen Apes: The Illicit Trade in Chimpanzees, Gorillas, Bonobos and Orangutans, A Rapid Response Assessment (Nairobi:
United Nations Environment Programme; GRID-Arendal, 2013), 9, http://www.grida.no/publications/rr/apes/.
608
Lee Siow Ling, Elizabeth A. Burgess, and Serene C.L. Chng, Hard to Bear: An Assessment of Trade in Bear Bile and Gall Bladder in Malaysia (Petaling Jaya, Malaysia: TRAFFIC, 2015), 18, http://www.trafficj.org/publication/15_Hard_to_Bear_Malaysia.pdf.
609
John D. Sutter, “The Most Trafficked Mammal You’ve Never Heard Of,” CNN, April 2014, http://www.cnn.com/interactive/2014/04/opinion/sutterchange-the-list-pangolin-trafficking/index.html.
610
Ibid.
611
“Tibetan Antelope,” World Wildlife Fund, accessed August 15, 2016, http://wwf.panda.org/what_we_do/endangered_species/tibetan_antelope/.
612
Pires, “Illegal Parrot Trade,” 182, 185.
613
Stiles et al., Stolen Apes, 42.
614
Tanya Wyatt, “The Illegal Trade of Raptors in the Russian Federation,” Contemporary Justice Review 14, no. 2 (2011): 112, 119.
615
Sutter, “Most Trafficked Mammal.”
616
Monica Von Dobeneck, “Four Charged with Illegally Selling Bear Gall Bladders,” PennLive.com, September 5, 2012, http://www.pennlive.com/
midstate/index.ssf/2012/09/four_charged_with_selling_bear.html.
617
Debbie Banks, Sam Lawson, and Belinda Wright, eds., Skinning the Cat: Crime and Politics of the Big Cat Skin Trade (London: Environmental
Investigation Agency; Wildlife Protection Society of India, 2006), 15, http://www.wpsi-india.org/images/EIA-WPSI_Skinning_The_Cat.pdf.
618
David J. Agnew et al., “Estimating the Worldwide Extent of Illegal Fishing,” PLoS ONE 4, no. 2 (2009): 4, doi:10.1371/journal.pone.0004570.
619
Ibid., 5.
620
Ibid., 2.
604							

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Appendix Table Q. Summary of Regional Estimates of Illegal Fishing, Averaged Over2000-2003
Reported Catch Lower Estimate
Lower
Upper Estimate
Upper
Regionof Case Study of Illegal Catch Illegal Catch of Illegal Catch Illegal CatchSpecies(tons)
Percentage(tons)
Percentage
Northwest Atlantic
557,147
22,325
4%
82,26615%
Northeast Atlantic
6,677,607
364,908
5%
842,467
13%
Western Central Atlantic
390,942
21,745
6%
58,51415%
Eastern Central Atlantic
1,154,586
294,08925%
562,169
49%
Southwest Atlantic
1,403,601
227,86516%
673,712
48%
Southeast Atlantic
1,351,635
52,972
4%
139,392
10%
Western Indian
2,165,792
229,28511%
559,942
26%
Eastern Indian
2,263,158
467,86521%
970,589
43%
Northwest Pacific
7,358,470
1,325,763
18%
3,505,600
48%
Northeast Pacific
196,587
2,326
1%
8,449
4%
Western Central Pacific
3,740,192
785,89721%
1,729,588
46%
Eastern Central Pacific
1,374,062
129,7729%278,450
20%Southwest Pacific451,677
5,227
1%
32,848
7%Southeast Pacific
9,799,047
1,197,547
12%
2,567,890
26%
Antarctic
136,654
9,593
7%
9,593
7%
625
Total
39,021,155
5,140,928
13%
12,040,052
31%
Source: Agenw et al.

After estimating the lower and upper rates of illegal fishing to total regional catch, Global Financial
Integrity then applied those rates to the average world capture production by marine fishing area forthe most recent data period 2011-2014 (Table R), as calculated from data in the FAO Fishery and
Aquaculture Statistics 2014 Yearbook.622
Two marine fishing areas monitored by the FAO were not covered by the Agnew et al. study, the Arctic
Sea and the Mediterranean and Black Seas. The Mediterranean and Black Seas marine fishing area wasincorporated into GFI’s calculation in order to provide a more comprehensive estimation; the average
lower and upper percentages of illegal fishing (13 and 31 percent, respectively) were used for this region.
The Arctic Sea was not included because of the negligible volume of fishing (one to seven tons per year,
2011-2014).

The totals provided by the Agnew et al. study do not match the actual sum of the volume columns. The correct totals are: reported catch of casestudy species as 39,021,157; total lower estimate of illegal catch as 5,137,179; and the total upper estimate of illegal catch as 12,021,469. For continuity, the totals provided by Agnew et al. were used.
622
Food and Agriculture Organization of the United Nations, Fishery and Aquaculture Statistics: 2014 FAO Yearbook (Rome: Food and Agriculture
Organization of the United Nations, 2016), 8, http://www.fao.org/3/a-i5716t.pdf.
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Appendix Table R. Estimated Illegal Catch Volume, 2011-2014
Lower
Average Catch
Lower Estimate
Estimate,
Region2011-2014of Illegal Catch
Percent of(tons)(tons)
Catch
Northwest Atlantic
1,919,811
4%
76,927.24
Northeast Atlantic
8,292,501
5%453,156.34
Western Central Atlantic
1,337,528
6%
74,396.06
Eastern Central Atlantic
4,287,464
25%
1,092,076.29
Southwest Atlantic
2,005,617
16%
325,598.17
Southeast Atlantic
1,484,722
4%
58,187.82
Western Indian
4,512,690
11%
477,743.07
Eastern Indian
7,526,232
21%
1,555,905.75
Northwest Pacific
21,548,300
18%
3,882,320.49
Northeast Pacific3,054,645
1%
36,142.29
Western Central Pacific
12,206,355
21%
2,564,824.95
Eastern Central Pacific
1,959,457
9%
185,059.08
Southwest Pacific576,899
1%
6,676.12
Southeast Pacific
8,988,419
12%
1,098,479.70
Antarctic
231,284
7%
16,235.95
Mediterranean and Black Seas
1,268,443
13%
164,897.59
Total
81,200,367
15%
12,068,627

Upper
Upper Estimate
Estimate,of Illegal Catch
Percent of(tons)
Catch
15%
283,47113%
1,046,207
15%
200,19449%
2,087,570
48%
962,67310%
153,11726%
1,166,707
43%
3,227,737
48%
10,265,683
4%
131,28446%
5,644,621
20%
397,079
7%
41,95526%
2,355,461
7%
16,23631%393,217.33
35%
28,373,210

Source: FAO; Agnew et al.

The total estimated annual volume of illegal catch is approximately 12 to 28 million tons, equal to
15 to 35 percent of the total average marine capture catch. The average price per ton for capture
fisheries (2011-2014) was US$1,284, so the estimated annual value of illegal and unreported fishing isapproximately US$15.5 to $36.4 billion.623

623

Ibid., 50.

							

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AboutGlobal Financial Integrity

Founded in 2006, Global Financial Integrity (GFI) is a non-profit, Washington, DC-based research andadvisory organization, which produces high-caliber analyses of illicit financial flows, advises developing
country governments on effective policy solutions and technical solutions to illicit flows, and promotes
pragmatic transparency measures in the international financial system as a means to global development and security.

Lead Author

Channing May is a Policy Analyst at Global Financial Integrity. She received a Master’s degree in International Relations at American University’s School of International Service, focusing on the financial
aspects of transnational organized crime and terrorism. Prior to joining GFI, Channing worked in banking
and taught English as a Second Language (ESL) in South Korea and Morocco. Channing has a Graduate Certificate in French Translation from American University and a BA in Hebrew from the University of
Wisconsin.

Contributing Author

Christine Clough is a Program Manager at Global Financial Integrity. Her work at GFI focuses on
research projects, events, and the Policy Advisory Program; at present she also serves as GFI’s Acting
Communications Director. Christine has represented GFI on the UNCAC Civil Society Coalition Coordinating Committee since 2013. Prior to joining GFI, Christine was employed most recently at the U.S.
Small Business Administration’s Office of Advocacy, working with Congress, federal agencies, and theWhite House to advocate for the needs and critical role of small business in the U.S. economy. Christine also has experience working on terrorism and homeland security at think-tanks in Washington, DC.
Christine has a MA in Security Studies from Georgetown University and a BA in International Relations
and Economics from Connecticut College.

Acknoledgments

Raymond Baker (President), Tom Cardamone (Managing Director), Matthew Salomon (Senior Economist), Heather Lowe (Legal Counsel & Director of Government Affairs), Liz Confalone (Policy Counsel), Ivy
Lau (Policy Intern), and Angela Qi (Policy Intern) also contributed to the production of this report.
Brija Johnson of Global Financial Integrity was responsible for the design and layout of this report.

							

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