Emerging technologies and the dark web are fueling illicit trade, which is posing a growing threat to global economies. Middle Eastern nations are among the many countries that have failed to prevent criminals from exploiting loopholes to traffic illegal goods.
As the Transnational Alliance to Combat Illicit Trade (TRACIT) points out, lying behind every sensational headline is another, often unreported, story which links to illicit trade. Take the North Korean nuclear crisis, which could spark a conflict costing hundreds of thousands of lives. Behind that story lies another about a criminal state that survives on counterfeit currency, arms and illicit goods such as cigarettes.
The refugee crisis ravaging Southeast Asia provides cover for human traffickers, while in the Middle East and North Africa, behind the uprisings and the humanitarian crises in war-torn countries like Yemen and Syria, lies another story about the illegal arms trade, a major factor in ongoing conflicts.
“Illicit trade is a growing threat to economies around the world; the extent and nature of illicit trade is growing as new ways are being developed to supply illicit goods in new categories, bypassing traditional efforts to control it,” John Reiners from analysis firm Oxford Economics told Arab News. “The cost is not just lost revenues to legitimate businesses and tax authorities, but there is a link between illicit trade and organized crime.
“Criminals fund illicit activity such as drugs and people smuggling, with proceeds from other illicit trades such as illicit cigarettes.”
While such activities have been around as long as there have been borders, experts say recent technology has changed the fundamentals of trade, in both legitimate and illegal economies.
As Mark Shaw, director of the Global Initiative Against Transnational Organized Crime, said: “The global revolution in telecommunications flattened organized crime structures, allowing for constant communication. And if you look at the data, it is almost amazing the degree to which illicit activities have matched licit ones since then.”
In her book, “Dark Commerce: How a New Illicit Economy Is Threatening Our Future,” expert Louise I. Shelley addresses illicit trade in tangible goods—drugs, human beings arms and counterfeits. In the past three decades, she writes, the most advanced forms of illicit trade have broken with all historical precedents and now “operate as if on steroids, tied to computers and social media.”
Shelley says new technology, communications and globalization fuel the exponential growth of dangerous forms of illegal trade – the markets for narcotics and child pornography online, the escalation of sex trafficking through web advertisements and the sale of endangered species. These in turn have exacerbated many of the world’s destabilizing phenomena – the perpetuation of conflicts, the proliferation of arms and weapons of mass destruction, and environmental degradation and extinction.
Reiners said that technological change is having a dramatic impact on trade and provides vast opportunities for illegal trading. Along with globalization, opening borders and e-commerce, it has become easier than ever for forgers to organize and expand their business. While drugs, firearms and weapons of war are among the most widely publicized illicit trafficked goods, Reiners said other illicit products such as cigarettes and tobacco, alcoholic drinks and medicines also have serious implications for public health and often offer strong financial incentives for consumers to avoid official channels.
“Consumer behavior has changed. Buyers now are now after the lowest prices, not the legitimacy of goods.
“Illicit trade is more likely to be online and carried out from the comfort of your own home, rather than haggling for goods in a dark alley, attracting more people to buying illicit goods, often unknowingly. “
Supply chains have become more international and complex, said Reiners, increasing vulnerabilities for illicit traders to exploit. “There are now vast volumes of small packages sent to consumers via the postal system, bypassing traditional customs points. As the economy becomes more digital, there are more opportunities for counterfeiters to create excellent copies and abuse intellectual property rights.”
Reiners also highlighted the complexities of enforcing controls on the dark net, where traders can easily switch jurisdictions. “Law enforcers have had some notable successes, but illicit traders are highly mobile. If you close down an illicit site, it pops up elsewhere. The dark web is heavily used for illicit trading, but more by hardened criminals that the average consumer.“
TRACIT annually produces its Global Illicit Trade Environment Index, which evaluates 84 economies on their structural capability to protect against illicit trade.
Its recently published 2018 report found that, while some countries in the Middle East and Africa were praised in several indicators – such as the UAE and Saudi Arabia for its effective customs procedures – overall the MENA region scored the most poorly among regions globally, with countries including Libya and Iraq scoring among the most poorly globally.
The UAE ranked second, after Israel, in the MENA region for its overall effectiveness in tackling illicit trade, out of 10 countries in MENA that were studied. Saudi Arabia ranked in fifth place.
The report noted that many countries were failing to recognize the importance of fighting illicit trade.
“Where economies aren’t under-resourced in customs or law enforcement, they may otherwise be indifferent or actively neglect illicit practices in order to continue reaping the economic benefits of being a global financial centre (like the UK) or a regional logistics hub (like Singapore, Dubai and Panama) or one of the world’s factories (like China and Vietnam) or a main source of narcotics (like Colombia). Or they may just be corrupt; corruption is far more pervasive than people appreciate, and it is by no means limited to the developing world.
“An international community of people – observers, experts, private sector executives and government officials – have identified the many ways in which illicit trade, in all its various forms, can be combated. Economies that are laggards on the issue can start small and build towards a better environment for preventing illicit trade. And the economies that are leaders should lead.”
Marco Cappellini, president of ViDiTrust and a member of the Coalition Against Illicit Trade, told Arab News that the damage to the global trade was rapidly rising toward €2 trillion and the emergency of evolving technologies, e-commerce and the dark web contributed to this figure.
“Over the last 15 years, the understanding that counterfeiting and illicit trade are scourges for developed countries has risen sharply across all stakeholders. Counterfeit goods exist in all markets, from fashion to spare parts and from toys to pharmaceutical products. The sale of counterfeit goods is on the rise year after year.”
In places like the the Middle East, which has a strong online focus and where e-commerce is expected to reach $48.8 billion, this shift online presents a new channel for illicit trade.
“Cyberspace is populated by honest sellers but also by criminal organizations,” Cappellini said. “There are several things that must be done to fight counterfeiting: Inform consumers about the risks associated in buying from dubious e-commerce stores. Inform brands that they can add security features to their products. Facilitate the cooperation between different countries to fight counterfeiting.”
Reiners said the biggest threats to global economies in the next decade, should governments fail to implement successful counteractive measures, include the substantial growth of illicit trade, loss of tax revenues, undermining of trust in the economy and trading systems, and the growth of organized crime.
He said a number of measures are needed, such as updating legal frameworks to be more relevant to the internet; monitoring and closing down illicit sites; encouraging and incentivizing major participants in e-commerce to take more responsibility for illicit trade; developing better ways of authenticating products and tracking them through the supply chain; and rerouting resources to match the new flows in trade, such as increased checks at parcel depots.
“Technology continues to provide opportunities for illicit traders and in the coming years, with advanced manufacturing, 3D printing and AI, this will continue. Those working to combat it need to invest in the latest techniques to keep up.”
By Jennifer Bell
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