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Tuesday, December 6, 2016

Pirate Money Trail: Report Gives Insight, Urges Tracking

November 4, 2013

Cover of the Report: Image courtesy of the publishers

Cover of the Report: Image courtesy of the publishers

A study by the International Criminal Police Organization, United Nations Office on Drugs and Crime and World Bank attempts to understand the illicit financial flows from pirate activities off the Horn of Africa. The study focused on: Djibouti, Ethiopia, Kenya, Seychelles, and Somalia. Excerpts follow:

Background
It is estimated that  more than  US$400 million was claimed in ransoms for pirate acts between April 2005 and December 2012 and  179 ships were hijacked off the coast of Somalia and the Horn of Africa during that time.

Twenty first century Somali Piracy not only creates problems in the region, but also has a global impact. Unchallenged piracy is not only a menace to political stability and a threat to international security, but it also undermines global growth prospects going forward. Up until now, little attention has been paid to tracking and disrupting the financial flows from piracy.

The study (i) analyzes how much money is collected in ransom payments;  (ii)  how and to whom this money - the proceeds of piracy - are distributed; (iii) how these proceeds may be invested.

Who benefits from the proceeds of piracy?


• Pirate Financiers  stand in the middle of the piracy network. They are " The Money Kingpins", Investors and Beneficiaries of the piracy business. On average, they collect from 30 to 50 % of total ransom, working individually or as a group.
• Low Level Pirates, "The Foot Soldiers", typically receive a standard fee of US $ 30,000 to  75,000  per ship, which only amounts to  0.01% - 0.025% of an average ransom payment.
• The local community provides goods and services to pirates, including food, repair services and khat which is a legal drug in Somalia.

How are the proceeds of piracy moved, invested, and used?

The main reported locations of pirate financiers’ assets, suggest that contrary to conventional wisdom, many investments of proceeds of piracy are actually made within Somalia. The proceeds are typically moved by cross – border cash smuggling, trade based money laundering, bank wire transfer and the abuse of Money of Value Transfer Services.

Investments from the proceeds of piracy

Pirate financiers invest into a range of sectors, both legitimate business activities (in order to launder money) and criminal activities: 
• Some of these proceeds are recycled into financing criminal activities, including further piracy acts, human trafficking, including migrant smuggling, and investing in militias and military capacities on land in Somalia.
• Proceeds from piracy also find their way into the khat trade particularly in Kenya, where the khat trade is not monitored and therefore the most vulnerable to this risk.

How to Break this Cycle?


There is need for a strong commitment by countries in the region to work together to
• Better Monitor the Financial Flows from piracy and share regional financial intelligence
• Improve Cross-border Controls, especially border entry - exit points, and
• Improve Regional Cooperation and International Support.

The full .PDF Report can be accessed through: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTFINANCIALSECTOR/0,,contentMDK:23491862~pagePK:210058~piPK:210062~theSitePK:282885,00.html



 
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