Illicit trade in consumer goods and normally licit products

Illicit trade in consumer goods
and normally licit products
17th October 2013
Karl Lallerstedt
Karl Lallerstedt
co-founder Black Market Watch
member OECD Task Force on Charting Illicit Trade
Political and Economic Analyst
- Department of State
- The Economist Intelligence Unit
- Oxford Analytica
Illicit Trade Expertise
- Anti-illicit trade director, Fortune 500 Company
- Steering committee, International Chamber of
Commerce Business Action to Stop Counterfeiting
and Piracy (BASCAP)
The global picture
Transnational organised crime
United Nations Office on Drugs and Crime (UNODC) meta
study for 2009
1.5 percent of world GDP
6 times global development assistance budgets
870 billion USD
(2012 = over one billion USD)
Breakdown: Transnational
organised crime
UNODC meta study:
Narcotics 320 bn
Counterfeiting 250 bn
Trafficking 32 bn
Excise goods - another significant category
International Chamber of Commerce 2011
Counterfeiting a bigger problem?
Ill effects of illicit trade
All illicit trade
Normally licit products
1) Revenues for organised crime groups, terrorists
and insurgents
Economic power = “military” power and political
1) Reduces government revenues (excise tax,
import duty, VAT, income tax, corporate tax)
2) Corrupts
Border guards, law enforcement, military,
politicians, civil servants
2) Undermines job creation and economic
3) Smuggling routes
Once developed for one goods can be used for
3) Consumer risk associated with ”normal
Deaths due to medication, foodstuffs, electrical
components, etc
Illicit trade in normally licit goods
African terror attacks
in the news
Kenya - September Westgate Mall attack
61 civilians killed, including EU citizens
Al-Shabaab claimed responsibility
Algeria - January gas plant attack
39 foreign hostages killed, including EU citizens
Al-Qaeda linked terrorists led by Moktar Belmoktar
What did the two attacks have
in common?
Perpetrators have profiteered on illicit trade in
consumer goods
Charcoal smuggling --> Gulf
Consumer goods smuggling --> Kenya
Poaching trade - ivory and rhino --> China
Moktar Belmoktar
A.K.A. “Mr MARLBORO” smuggling across Sahel
Illicit trade: the economics
West Africa estimates, source: UNODC 2009
Nigeria: Oil Bunkering
“one of the greatest threats to the rule of law in West
Africa is rooted in the smuggling of a licit
commodity: oil”
UNODC 2009
Oil bunkering impact
Estimated value of stolen Nigerian oil per year
$3 billion - $8 billion
West Africa: Wholesale value of cocaine to Europe is $1.25 billion
UNODC, World Drug Report 2013
Piracy, drug- and arms-trafficking in Niger Delta
Networks sometimes overlap
Kidnapping linked to oil theft
Source: Chatam House September 2013
“There is evidence to suggest that the worldwide
retail value of the illicit trade in tobacco products
may be comparable to the cocaine market”
- Transcrime (The Joint Research Centre on Organised Crime of
the Università Cattolica del Sacro Cuore and the University of
Trento, Italy), 2012
Africans smoke 400 bn cigarettes a year
60 bn are bought on the black market
1 in 7
Cigarettes smoked in Africa are illegal
*Figures UNODC estimates from 2009
South Africa
30% consumption illegal
8.5 billion cigarettes
tax losses 5bn Rand
Source: The Tobacco Institute of Southern Africa
“Information obtained suggests that a number of wellknown organised crime figures have been moving away
from investing in traditional illegal drug smuggling, and are
now getting involved in the tobacco industry."
South African Revenue Service spokesperson Adrian Lackay, 2012
In 21 surveys of drugs from six classes from 21 countries in sub-Saharan Africa:
20% were classified as falsified
35% failed chemical analysis
Source: The Lancet, 2012
Charts;UNODC 2013, WHO data from 2011
Medication - WCO project in Africa
1 week operation using new IPM tool, July 2012
Diagrams: WCO
Medication & tobacco: common factors
Asian imports: China & India
African production
Asian imports: China & UAE
African production
Routes from Asia:
Often container via Free Trade Zones (UAE)
Routes from Asia:
Often container via/from FTZ (UAE)
Often mis-declared for inland markets
Often mis-declared for inland markets
Customs Unions: ECOWAS/EAC/SADC facilitate movement of goods
Sources: UNODC & industry
The future:
Does illicit trade in normally legal goods risk becoming a
bigger problem?
- Higher prices = stronger criminal incentive
- Gulf of Guinea growing in importance as global supplier of oil
- Higher taxation = higher profits
- Projected growth rate
- Significant Chinese role
Source: Chatam House September 2013
Thank you!