Illicit trade
Thirteenth edition
Welcome to the thirteenth edition of the dark global matters.
This month we tackle the issue of illicit trade as part of transnational crime.
Illicit trade is the selling or purchasing of illegal or prohibited items or services. According to the Illicit Trade Group, illicit trade is either allowed by or done with intent to acquire financial resources, therefore illicit financial flows (IFFs) become a key aspect of illicit trade flows.
It further elaborates that illicit trade concerns “any commercial practice or transaction related to the production, acquisition, sale, purchase, shipment, movement, transfer, receipt, possession or distribution of any illicit product defined as such by international law, or any licit product for non-licit purposes as defined by international law”, as well as any conduct intended to facilitate such activities. Its practice includes both in-kind goods and services deemed illegal as they are considered to be dangerous, morally, socially or politically inappropriate, or not in line with existing market regulations.
According to the United Nations on Trade and Development Illicit Trade Forum held between 3 and 4th February,2020, Criminal networks actively engage in illicit trade on every continent and in every major economy, with adverse economic, social, environmental and even political impacts that are detrimental to sustainable development. Industries suffer lost business and governments lose out on job opportunities and much needed tax revenues, which has a negative impact on the quality of public services. The effects of illicit trade are also felt in the costs of law enforcement, incarceration and rehabilitation. Over the longer term, illicit trade also undermines trust in government and contributes to a declining trust in public institutions, undermines the rule-of-law, erodes human capital, deters foreign investment and deteriorates public health.
There is a clear link between illicit trade and other types of crime, such as human trafficking, drug trafficking, corruption, bribery and money laundering according to Interpol.
illicit trade could not be possible without both high- and low-level forms of corruption notes Louise I. Shelley. She further notes that corruption is a key facilitator of illicit trade. Because of corruption–both low- and high-level corruption1 –protected timber can be logged and traded; humans, drugs, and arms can be smuggled; and illicit goods can be transported across borders without payment of duty. When perpetrators are caught, the payment of bribes can ensure their release or minimize their sentences. This impunity contributes to the growth of illegal activity.
Illicit trade facilitated by corruption is always disturbing; together, these markets produce a more serious composite effect.
The corruption associated with illicit trade drives many of the most destabilizing phenomena in the world: the perpetuation of deadly conflicts, the proliferation of the arms and weapons trade, and the propagation of environmental degradation.
Interpol elaborates that Illicit trade is a global phenomenon as its underlying activities involve multiple countries.
The mastermind of an illicit trade operation may be located in country A, while the goods could be illegally produced in country B, distributed through country C and delivered to country D. They could be sold further through the Internet using a server based in country E, and the illegal gains may re-enter the global financial system through illicit processes such as money laundering taking place in country F.
UNCTAD noted that Illicit trade drains nearly 3% of the world’s economy. If it were a country, its dark economy would be larger than Brazil, Italy and Canada – and as large as Mexico and Indonesia combined.
It endangers public health, as sub-standard and fake antimalarial medicines alone cause more than 100,000 deaths per year in Sub-Saharan Africa.
Illicit trade also pushes endangered species to the brink of extinction and causes irreversible damage to ecosystems. For instance, illegal logging, with an estimated annual value of up to $157 billion, is the world’s most profitable crime involving natural resources.
Further, it threatens the rule of law, owing to its links with organized crime – from human trafficking networks and tobacco smuggling to the involvement of organized criminal groups in fuel theft and the trade of counterfeit goods. Even more frightening are the links to terrorist financing that heighten threats to national and global security.
A summary of the vice notes that;
(Source: Mapping the Impact of Illicit Trade on the SDGs report by TRACIT)
Counterfeit goods
Up to 5% of goods imported to the European Union are fake. Imports of counterfeit and pirated goods are worth nearly $500 billion a year.
Food and fish
Fake, substandard, smuggled and illegal agri-foods cost the global food industry an estimated $30 billion to $40 billion each year.
Côte d'Ivoire lost about 125,000 tons of cocoa to smuggling in the 2017- 2018 season, equivalent to 9% of the harvest – a significant loss in a country where cocoa accounts for 20% of exports.
One in four alcohol bottles worldwide are illicit, representing 25.8% of all global consumption.
Global losses to illegal, unreported and unregulated fishing are estimated at between $15 billion and $36 billion, representing 14 to 33% of global marine capture value.
Health
Between 72,000 and 169,000 children may be dying from pneumonia every year after receiving ineffective illicit medicines.
Mining
South Africa’s illegal trade in precious metals is estimated at $1.3 billion a year, a significant drain on the country’s GDP, export and trade balances. Illegally extracted gold and platinum alone cost the legal industry 5% to 10% of its annual production, according to South Africa’s Chamber of Mines.
Illegal gold mining in Ghana degrades forests, pollutes around 75% of the waterways and erodes biodiversity. The water contaminated with heavy metals has resulted in cases of poisoning.
curated by Tabitha Agaba