Trending: Transitional Crime and Weekly Roundup

 In Anti-Money Laundering, Trending

Transnational Crime: Taking The World By Storm

With profits running high and risks staying moderately low, financial

criminals delving in the realms of popular categories of transnational crime such as

the trafficking of drugs, arms, and even humans have found their lines of business to

be quite lucrative, over the past several years specifically. A recent report from the

financial advisory group Global Financial Integrity (GFI) has found that “globally the

business of transnational crime is valued at an average of $1.6 trillion to $2.2 trillion

annually” (May, 2017). It is evident that making money is the main objective of

transnational criminal groups, and for the most part they have succeeded in making

a lot of it. The most unfortunate aspect of this trend is not necessarily that criminals

are making a fortune through illicit activity however, but rather the impact

transnational organized crime has on local and national governments, economies,

and communities altogether, brought about through corruption and violence.

Transnational organized crime involves the “planning and execution of illicit

business ventures by groups or networks of individuals working in more than one

country” (NIJ, 2007). The article “The Business of Transnational Crime” cited in BSA

News Now on Wednesday, April 12 th , 2017, examines the aforementioned GFI

report, which looked primarily into the eleven highest-earning transnational

criminal industries seen across the globe today. These eleven lines of business,

ranked from greatest to least profitable, are as follows: counterfeiting, drug

trafficking, illegal logging, human trafficking, illegal mining, IUU fishing, illegal

wildlife trade, crude oil theft, small arms/light weapons trafficking, organ

trafficking, and trafficking in cultural property. Of these elven, counterfeiting reigns

supreme in average annual earnings, raking in between $923 billion to $1.13 trillion,

with drug trafficking trailing slightly – bringing in a modest $426 billion to $652

billion annually (May, 2017). At the other end of the spectrum, organ trafficking

produced the lowest annual average – between $840 million and $1.7 billion. The

sheer amount of funds and range of ventures through which billions of dollars are

shifting hands demonstrates the magnitude of the problem, one that seems to be

growing.

What makes transnational criminal groups so effective is that a significant

amount of these groups function as actual businesses – entities that provide actual

material goods or services to individuals. Writer Channing May notes that “some of

these groups are so well organized and well funded that they rival legitimate

multinational corporations: they are the incorporation of transnational crime” (May,

2017). Another area of concern is that now after tasting success in one line of

business, criminal organizations are expanding into other realms, further

exacerbating the problem for law enforcement officials.

Frequently used tactics by law enforcement to attempt to tackle criminal

groups include pursuing the leaders of the groups, which has become ineffective

given the tendency of today’s organizations to stray away from the layered

leadership structures that have been seen in the past. On the other hand, going after

“low-level” group members, such as drug dealers at the street level to gain more

information on higher ups, has also been relatively ineffective. It is clear that if these

practices were to continue, transnational crime would too continue as a profitable

business for criminal groups around the world. Vast changes are clearly needed at

the international level to place more pressure on these groups. Doing so however

would require extreme teamwork at the governmental, business, and general

societal levels around the world. An increase in awareness on the scale of the issue

is also vital to its success, as is the need for law enforcement agencies to take a

stronger stance against organized crime taking place in their respective regions. The

article offers policy recommendations for governments and regulatory bodies to

help increase detection levels of transnational crime. Of these, revealing beneficial

ownership structure is a solution that is being widely proposed in today’s AML

sphere, specifically in luxury real estate purchases. Other recommendations include

beginning to “flag financial and trade transactions involving individuals and

corporations in “secrecy jurisdictions” as high-risk and require extra

documentation”, and “scrutinize import and export invoices for signs of

misinvoicing, which may indicate technical and/or physical smuggling” (May, 2017).

Writer Channing May sums up the topic perfectly by stating that

“Transnational crime is greater than the products and people involved—it is a

systemic problem” (May, 2017). Overall, it is fair to say that without the foundation

of the organized criminal system being targeted, nor the adoption of stronger AML

laws and greater levels of international cooperation, long-term results in the fight

against transnational crime will not be had.

Weekly Roundup

Shell’s Alleged Role in Nigerian Oil Corruption

Last week, Global RADAR’s weekly roundup covered the story of the former

oil minister of Nigeria who was recently charged with money laundering and

corruption stemming from a bribery scandal that took place prior to the 2015

Nigerian presidential election. This week, a new wrinkle was added to the case of

Nigerian oil corruption, as the prominent oil and gas company Royal Dutch Shell Plc,

commonly known as Shell, has come under fire for changing their previous stance

regarding their role and overall knowledge of a deal made with the Nigerian

government in 2011.

In March, Nigeria’s anti-graft agency filed charges against Shell and the

energy company Eni S.p.A., alleging that between them over $800 million was paid

corruptly to former Nigerian oil minister Dan Etete, his partners, and his company,

Malibu Oil & Gas Ltd in 2011 in order to acquire an oil field. Shell has denied the

corruption claims, stating that “its joint purchase with Eni SpA of the license was

‘fully legal’ and it paid no money to Dan Etete or his company Malabu Oil and Gas

Ltd.” (Katakey, 2017). However, after the release of internal emails from the

company, it is evident that staff members had knowledge of the risk involved with

the deal – specifically that Nigerian government officials could pocket some of the

funds.

According to Yahoo Finance’s article on the subject, “Shell and Eni SpA’s joint

purchase of Nigeria’s Oil Prospecting License 245 – estimated to hold about 9 billion

barrels of crude – is being investigated in three countries” (Katakey, 2017).

More Reforms Called for in China

A report from Reuters this week has exposed yet another example of political

corruption in China, and one with a rather extensive history. It has been revealed

that China’s petition system – the administrative system used by the Chinese

government for hearing complaints and grievances from citizens – has been swayed

by bribes. The system, which has been used for hundreds of years, has apparently

been taken advantage of by numerous “top officials in Beijing, including the former

vice chairman of the bureau, Xu Jie, who took bribes to make cases disappear”

(Shepherd, 2017).

It is believed that individuals use funds and other assets to bribe national

officials so that cases that are raised through the petition system would not reach

the central government for a final decision. Xu Jie received gifts and cash bribes

worth a reported 5.5 million yuan ($796,900 USD), and was sentenced to prison for

13 years in 2015. Roughly six million petitions are submitted each year throughout

China, leading many to believe that the structural problems of this operation, and

the national administration in general, are depriving Chinese citizens of fair

practice, as well as encouraging corruption altogether.

Bitcoin’s Market Price Rise

On April 11 th , the price of a single bitcoin grew to its highest level in three

years, with a sole coin traded as high as $1,232 USD. This marked increase comes

after news that Russian authorities may soon recognize the “world’s most popular

digital currency as a legitimate financial instrument some time next year” (Adinolfi,

2017). The news comes as a significant surprise to those in the financial services

sector, as Russian government had threatened jail time to any citizen using Bitcoin

in the past. Another factor that contributed to the rise of Bitcoin price on the market

was a Japanese law allowing large financial institutions (FI’s) to participate in the

Bitcoin market coming to fruition at the beginning of April.

A controversial software update that would have “expanded bitcoin’s ability

to process transactions threatened to split bitcoin into two separate tokens”, but

such expansion has gone by the wayside, another reason the price recently soared

(Adinolfi, 2017). The value of the digital currency received a boost at the beginning

of the year in what was regarded as a “perfect storm” that saw the election of

Donald Trump, Brexit, and the ban of large rupee notes in India all occurring during

the same general time period. Today, Bitcoin-centered startups continue to attract

high-profile investors such as American Express, Goldman Sachs, and many others.

With AML and Know Your Customer (KYC) regulations being updated around

the world to meet the growing data and analytics trend, the future looks bright for

Bitcoin technologies to change the way finances are handled across the globe.

 

Citations

Adinolfi, Joseph. "Bitcoin Touches 3-week High as Russia Mulls Recognizing It as a

Currency." MarketWatch. N.p., 11 Apr. 2017. Web.

Katakey, Rakteem. "Shell Knew Nigeria Ex-Minister's Company Would Get Oil-Deal

Cash." Yahoo! News. Yahoo!, 11 Apr. 2017. Web.

May, Channing. "The Business of Transnational Crime." Global Financial Integrity. N.p., 12

Apr. 2017. Web.

May, Channing. "Transnational Crime and the Developing World « Global Financial

Integrity." Global Financial Integrity. 27 Mar. 2017. Web.

Shepherd, Christian. "Corruption at Top Rung of China's Ancient Petition System Sparks

Calls for Reform." U.S. News. Reuters, 11 Apr. 2017. Web.

"Transnational Organized Crime." National Institute of Justice. 15 Nov. 2007. Web.

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