Money laundering continues to pose a serious global threat, with 64 countries fitting the criteria for “major money laundering countries,” the State Department said in the second part of its annual International Narcotics Control Strategy Report (INCSR), released this week.
Those countries ranged from such financial powerhouses as the United States, the United Kingdom, Switzerland, and Singapore to offshore hubs like the British Virgin Islands, the Bahamas, and Cyprus. Finally, the list also included countries without relatively low financial activity but high laundering risk due to robust drug networks and shoddy law enforcement.
The full list of 64 countries, which are the exact same 64 included in last year’s report, can be found here. Since 2011, no jurisdictions have been subtracted from the list and only two have been added: Curacao and St. Maarten. The two, both islands in the Caribbean, are autonomous entities within the Kingdom of the Netherlands and serve as drug transshipment points for drugs traveling from South America to Europe.
Each year the INCSR report focuses as much on money laundering as on drug trafficking, for the simple reason that the two are inextricably connected. In fact, countries’ classification in the report as “major money laundering countries” is based on whether their financial institutions deal significantly with proceeds from international drug trafficking crime, rather than on their legal frameworks for regulation or their cooperation in international regulation efforts.
The connection is a two-way street: major drug through-ways are likely to have weak rule of law, which allows for money laundering; at the same time, incoming floods of illicit funds – which money laundering allows – tend to lead to the breakdown of law enforcement and the corruption of public officials.
Among the trends the report highlighted were merchandise smuggling and hacker-gangster collaboration. Smuggled merchandise is a way to launder money while avoiding banks, and its use has grown exponentially in recent years, the INCSR said. It’s particularly popular in South America, where goods bought with drug money on the black market peso exchange (BMPE), are smuggled into Colombia, avoiding taxes, tariffs, and customs duties. In other trade-based money laundering schemes, goods are over- or under-invoiced to transfer value, according to the report.
In Russia, traditional organized crime figures are increasingly collaborating with highly-skilled hackers to manipulate the financial sector in another trend that the INCSR noted was present worldwide as well.
Overall, the report concluded, $1.6 trillion, or 2.7 percent of global Gross Domestic Product, was laundered in 2009, according to the United Nations Office on Drugs and Crime’s estimates for the most recent year on record.
Bolivia, Burma, and Venezuela failed to meet international norms in anti-narcotics in 2012, according to the US State Department International Narcotics Control Strategy Report (INCSR), released this week. The report determined that these three countries “failed demonstrably” to improve their efforts in combating the production and transport of narcotics.
The INCSR noted Bolivia’s failure to adopt a number of UN controls on coca cultivation, transport, and sale, and further criticized a reduction in Bolivia’s interdiction capabilities following the 2009 expulsion of DEA personnel. A combination of Bolivian failures and Colombian successes means that, for the first time since 1995, Bolivia is now producing more cocaine than its continental companion.
The INCSR conceded that Bolivia had taken some steps towards narcotics control, and expressed a desire to continue and build upon ongoing cooperation. Despite that limited success, however, Bolivia has made a “negligible contribution” to the global fight against narcotics, the report concluded.
Venezuela faces a different set of challenges. Unlike Bolivia, a key production center for narcotics, Venezuela’s largest role is as a transit route out of the continent. Weak border security, especially along the Colombia border, exacerbates the problem. Despite promising steps, including increased Venezuelan-Colombian cooperation on anti-trafficking and extraditions of wanted criminals to countries to stand trial, continued high-level political corruption and involvement in drug trafficking hamstrings Venezuela’s ability to tackle its drug problem, the report adds.
Burma remains the second largest source of illegal opium poppy in the world, according to the INCSR. In addition to opium production, Burma’s role in the production and trafficking of synthetic drugs, including methamphetamine pills and other stimulants [aa1] increased sharply. Burma maintains its position as a major player in the supply of synthetic drugs to South Asia in spite of increased efforts by the government to curtail the production of illicit substances. The report blamed Burma’s inadequate counter-narcotics efforts and ethnic tensions for Burma’s stalled progress.
Under US law, nations judged as having “failed demonstrably” to meet their counter-narcotics responsibilities face a freeze of US aid. However, Bolivia, Burma, and Venezuela will be spared this fate because of their importance to US national interests. A Presidential exemption for just such cases will allow them to continue to receive aid.
Two individuals at the center of a $900 million fraud at Kabul Bank were convicted of defrauding the Afghan people on Tuesday, according to a report by the New York Times. Sherkhan Farnood, the founder of Kabul Bank, and Khalilullah Frozi, his chief executive, were sentenced to five years of jail time each, and fined a combined $800 million, according to the Guardian. Nineteen others were also found guilty in connection with the financial crimes.
Investigators now say that Kabul bank operated much like an institutionalized ponzi scheme. When individuals deposited money into the bank, its owners removed it through fraudulent loans using faked corporate information to make them seem like legitimate bank business. They then took the money for themselves, the New York Times reported. As this process continued, an elaborate trail of false financial documents was used to cover up the embezzlement. The scheme collapsed in 2010 when the bank began to fail and a power struggle for control of the financial institution led to the disclosure of the faked loans and the losses.
Those involved in the fraud and the subsequent embezzlement and money laundering used the funds to live lavishly, even buying property in Dubai at the height of the property bubble, according to the Guardian.
In a nation as badly wracked by corruption as Afghanistan -- Transparency International ranked the country 174th in its Corruption Perceptions Index, the worst in the world -- the decision by the court to throw out the most serious of charges against those accused in the Kabul Bank scandal has raised questions. The judge dismissed money laundering charges against the accused; under Afghan law, money laundering convictions would have imposed an “automatic confiscation order” for the stolen funds. The lesser conviction on “breach of trust” will make it more difficult for law enforcement to track down the stolen money, the Guardian reported. "Today was a disappointment for the resolution of issues resulting from the Kabul Bank fraud," Drago Kos, the Slovenian chairman of the joint Afghan and international anti-corruption committee, told the Guardian. "International standards require sanctions that are proportionate, dissuasive, and effective. We feel that this is lacking in the judgment issued today,” he added.
Organized crime groups are behind the increased trafficking in great apes - which include gorillas, bonobos, chimpanzees, and orangutans - out of West and Central Africa, according to a United Nations Environmental Program (UNEP) report. The publication states that while great ape trafficking is not a new phenomenon, the scale of the problem merits increased international attention and a concerted response.
Accurately calculating the impact of smuggling on great ape populations is nearly impossible. Conservative estimates by UNEP that 50 percent of smuggled live apes and ape parts are confiscated would indicate that about 3,174 great apes are lost to the illicit trade yearly.
The effects of the great ape trade go beyond the ramifications to great apes themselves and the risk of species extinction. The nature of the smuggling also breeds corruption, as officials are bribed to allow passage through borders. The trade itself involves a complex network of small-scale local traffickers, large-scale international traffickers, and “a system of corruption and complicity” at an international level that allows smugglers to operate with “relative impunity,” Ofir Drori, founder of the Last Great Ape Organization, said in the UNEP report. The illicit trade in great apes also hurts the economies of source nations as it damages the tourism industry, a key source of income for much of West and Central Africa.
The UNEP report highlights Europe, the Middle East, and Southeast Asia as the prime markets for the illegal trade, with nations including Egypt, Turkey, South Africa, and Indonesia playing key roles as transit countries for traffickers. Smugglers of trophies or great ape meats utilize a combination of land and sea transport, whereas traffickers of live apes, which are much more difficult to transport through land or sea routes, most commonly utilize air transit to reach their destinations as quickly as possible. In all of these cases bribes, kickbacks, and complicity on the part of customs and border officials are rampant.
The smuggling of great apes mirrors a sharp rise in elephant and rhino poaching in recent years. In July 2012, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) reported that elephant poaching and ivory smuggling was at its highest rate in a decade, and that the situation represented the most serious crisis since the ivory trade was banned in 1989. Kenyan authorities confiscated the largest amount of ivory in the nation’s history in January 2013. The two tons of ivory, worth over $1.15 million, illustrates the fears voiced by UNEP and CITES on the growing threat of the illegal trade in animals and goods protected by international law.
The UNEP great ape report also includes a number of recommendations on more effectively tackling the smuggling. Greater enforcement is strongly stressed throughout the document as a necessity; investigation of suspects and the prosecution of offenders to the fullest extent of the applicable law needs to be improved, according to the report.
Further recommendations include emphasizing inspections for both imports and exports, and the strengthening of anti-corruption measures within law enforcement. Finally, UNEP recommends tackling demand for great apes, through a combination of public outreach using media outlets, targeting disreputable zoos, and DNA testing and tagging of confiscated great apes.
Greater information sharing, trust, cooperation, and enforcement are the keys for the EU in its fight against corruption, according to a speech given Tuesday by Cecelia Malmström, the European Union Commissioner for Home Affairs,
Malmström spoke about the dangers of corruption in the EUand the importance of tackling it while speaking to a group of anti-corruption experts at the Second Regional Workshop on the EU Anti-Corruption Report in Gothemburg, Sweden.
Malmström said that the sheer cost of corruption deserved the EU’s attention. “The Commission's best estimate is that 120 billion euros [over $156 billion] are lost each year to corruption,” Malmström said. The figure nearly equals the entire 2012 EU budget of 129 billion euros. The Commissioner did not elaborate on the methodology used to reach that estimate.
Malmström laid out the structure of the EU Anti-Corruption Report, set to be published for the first time in 2013 and biennially thereafter. The report will cover trends in corruption within the EU, specific issues for individual EU members, and includes a section on anti-corruption policies, according to Malmström.
She stressed that the Anti-Corruption Report could play a key role in improving the EU’s image, on multiple levels. A transparent report would help win back public trust. Globally, the EU could benefit from “looking thoroughly at problems at home instead of just pointing fingers at others,” Malmström said, adding that the report could also help to counter distrust between member states and fight instability.
Bulgarians marched in the streets en masse on Sunday in protest of corruption and poverty in the EU’s poorest country, despite the resignation of the previous Prime Minister and his cabinet, according to Radio Free Europe/Radio Liberty. Outgoing Prime Minister Boiko Borisov resigned after two weeks of protests that saw Bulgarians chanting slogans of “mafia” and “resign” in front of Parliament, the Economist reported.
The protests were originally targeted against electricity and fuel prices, but have since morphed into anti-government protests expressing general discontent with poor living standards and perceived corruption. Police and demonstrators have clashed violently on several occasions, and dozens of protestors have been injured and arrested. At least two men have set themselves on fire in protest.
Despite multiple attempts to quell the protests, including agreeing to revoke the license of a much-hated Czech-based energy company, stability continued to elude Borisov’s government. The Prime Minister sacked Finance Minister Simeon Djankov, whose austerity program was highly unpopular, but to no avail. Borisov finally caved to the pressure, submitting his resignation on February 21 and officially resigning along with his cabinet on February 27. That, too, failed to calm the storm, and Sunday saw continued protests across the country, with more than 50,000 demonstrators taking part in the largest action in the city of Varna.
New elections are set for May 12.
Interpol has launched "Project Scale" to tackle illegal fishing by coordinating transnational operations to target offenders and disrupt trafficking routes, according to an announcement.
Transnational fisheries crime, which includes harvesting prohibited species and fishing out-of-season, keeping more than the quota, or fishing without a license, is estimated to cost the global economy $23 billion annually, according to Interpol. The last decade saw an increase in transnational and organized criminal networks involved in fisheries crime, the agency said, and now the practice threatens the extinction of some species. Fisheries crime also affects food security and is a politically destabilizing factor due to the rise in corruption that accompanies it.
Interpol will play a central role in coordinating the fight against the black market fishing industry which has links to other serious crimes, including corruption, money laundering, fraud, and human and drug trafficking, the agency said. Interpol will work with law enforcement, non-governmental agencies and the private sector to provide a “unified and collective response to fisheries crime,” said Jean-Michel Louboutin, Interpol Executive Director of Police Services.
The action plan for the project includes the creation of a strategy to improve information sharing and operational support. The agency also plans to expand Interpol’s international marine enforcement network and conduct operations in vulnerable areas, with West Africa singled out as a particular area of concern. The project will also see the creation of a Fisheries Crime Working Group and National Environment Security Task Force, departments dedicated to working on crimes related to illegal fishing.
Interpol unveiled Project Scale at the International Fisheries Enforcement Conference on February 26. Conference participants were optimistic about the impact the Interpol-led project could have; it represents “a wonderful step forward in identifying, reducing and hopefully stopping illegal fishing,” according to José María Figueres, former President of Costa Rica and current co-chair of the Global Ocean Commission. Figueres acknowledged, however, that greater political will to tackle illegal fishing still needed to be cultivated.
The project “underlines the need for global cooperation in investigating the criminal aspects tied to illegal fishing,”said Arne Benjaminsen, Secretary General of Norway’s Ministry of Fisheries and Coastal Affairs. The Norwegian Ministry of Foreign Affairs and the Norwegian Agency for Development and Cooperation are funding the project, along with the Pew Charitable Trusts.
An Australian organized crime task force has seized a record 568 kilograms of crystal methamphetamine hydrochloride, also known as “ice”, CNN reported. The seizure in Sydney is nearly double the previous Australian law enforcement record of 306 kilograms, set in July 2012.
Authorities found the methamphetamine, worth an estimated $448 million on the street, in shipments of industrial cleaning supplies originating in China. Three men -- a Singaporean, an Australian, and an individual from Hong Kong -- have been taken into custody and charged with intent to possess a commercial amount of narcotics. They face potential life sentences if convicted.
The investigation began in September 2012 following a call from a Sydney-area citizen, ABC reported. A task force was set up and inquiries led authorities to a suspicious facility in the Sydney area. Monitoring of shipments to the facility led to the February 22, 2012 discovery of the methamphetamine. Police replaced the drugs with an inert substance and waited for those linked to the drugs to collect them. On Wednesday, the three suspects allegedly removed what they believed to be the methamphetamine, and were subsequently taken into custody by the task force.
During the course of the operation, six search warrants were also executed across Sydney, leading to the discovery of an alleged drug manufacturing lab, according to Australian Federal Police Commissioner Tony Negus.
Negus told reporters at the press conference that the task force was continuing its investigation, and that further investigations had not been ruled out. Authorities in China have also been notified of the case, he said. New South Wales Police Commissioner Andrew Scipione said that beyond the three suspects in custody, there are “more that will likely be arrested.”
The investigative task force involved cooperation between the Australian Federal Police, the New South Wales Police, Australian Customs, the New South Wales Crime Commission, and the Australian Crime Commission. Scipione stressed that while inter-agency cooperation was key to success, “none of it would have happened” if not for a single phone call from the Sydney community. The case, he said, underscored the importance of “community policing” in combating drug trafficking.
The Republic of Turkey risked being blacklisted by an international financial regulatory body on February 22, but the last-minute passing of a terrorism-financing law prevented the re-categorization of Turkey as non-compliant by the Financial Action Task Force (FATF).
The FATF sets international standards for curtailing terrorist financing, money laundering, and the proliferation of weapons of mass destruction. The body is comprised of 36 members, and relies as well on a network of regional bodies; over 180 jurisdictions are linked to the FATF.
In October 2012, the FATF stated it was “deeply concerned” regarding Turkey’s failure to meet its requirements as an FATF member, especially in relation to “fully criminalizing” terrorist financing and establishing an “adequate framework” to successfully pinpoint and freeze terrorist finances. The body said it would suspend Turkey’s membership on February 22, 2013 unless Turkey took remedial action.
Turkey came close to missing the FATF deadline, risking suspension from the organization. The Turkish Grand National Assembly adopted the Law on the Prevention of the Financing of Terrorism on February 7 and the legislation was signed into law on February 15. In a statement, , the FATF welcomed the Turkish government’s progress, noting that the new law addressed “many of the shortcomings” detailed by the FATF. The organization announced that despite a “number of ongoing shortcomings,” Turkey’s membership would not be suspended.
In the same statement, the FATF singled out Morocco and Tajikistan as members “not making significant progress” in their commitments. Morocco’s failure to address significant shortcomings in its terrorist financing laws, and “strategic” shortcomings in Tajikistan’s frameworks on money laundering and terrorist financing were noted.
Concurrently, the FATF welcomed “significant progress” by both Ghana and Venezuela in meeting membership responsibilities, noting that both nations had “established the legal and regulatory framework” necessary to meet their action plans. Both nations were removed from the FATF’s monitoring process, and will work with regional bodies affiliated with the FATF to ensure continued progress in addressing the “full range of issues” related to money laundering and terrorist financing.
Slovenian Prime Minister Janez Janša was removed from office Wednesday after a “no-confidence vote” in the Slovenian Parliament.
The 55-33 vote came on the heels of corruption allegations by the Commission for the Prevention of Corruption (CPC), Slovenian anti-corruption watchdog. Alenka Bratusek, from the opposition party Positive Slovenia (PS), has been picked as Janša’s replacement, Al Jazeera reported.
The CPC accused the ex-Prime Minister of failing to disclose over $260,000 in assets. Janša proclaimed his innocence but failed to explain his finances, Al Jazeera reported. When Janša refused to step down as Prime Minister, a number of coalition government partners split from his SDS Party, paving the way for a no-confidence vote.
Janša’s time in government had been highly unpopular. Slovenia was harshly affected by the 2008 financial crisis, and GDP per capita fell by 0.34% in 2011, leading to a loss of over $2.6 billion, according to World Bank estimates. Harsh austerity measures meant to bring a government deficit to a manageable level have sparked strikes and protests across Slovenia. Bratusek has listed growth and “balancing public financing” without harming economic health as her main goals.
Bratusek has two weeks to present Parliament with her cabinet and plans, as well as win a vote of approval. Regardless of the outcome of the vote, Slovenia is likely to hold early elections within the next year, Al Jazeera reported.