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Illicit trade in consumer goods and normally licit products 17th October 2013 Karl Lallerstedt.

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Presentation on theme: "Illicit trade in consumer goods and normally licit products 17th October 2013 Karl Lallerstedt."— Presentation transcript:


2 Illicit trade in consumer goods and normally licit products 17th October 2013 Karl Lallerstedt

3 co-founder Black Market Watch member OECD Task Force on Charting Illicit Trade Past 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)

4 The global picture

5 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)

6 Breakdown: Transnational organised crime UNODC meta study: Narcotics 320 bn Counterfeiting 250 bn Trafficking 32 bn Excise goods - another significant category

7 International Chamber of Commerce 2011 Counterfeiting a bigger problem?

8 Ill effects of illicit trade All illicit trade 1) Revenues for organised crime groups, terrorists and insurgents Economic power = military power and political influence 2) Corrupts Border guards, law enforcement, military, politicians, civil servants 3) Smuggling routes Once developed for one goods can be used for others Normally licit products 1) Reduces government revenues (excise tax, import duty, VAT, income tax, corporate tax) 2) Undermines job creation and economic development 3) Consumer risk associated with normal products Deaths due to medication, foodstuffs, electrical components, etc

9 Africa: Illicit trade in normally licit goods

10 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 responsible

11 What did the two attacks have in common? Perpetrators have profiteered on illicit trade in consumer goods Al-Shabaab Charcoal smuggling --> Gulf Consumer goods smuggling --> Kenya Poaching trade - ivory and rhino --> China Moktar Belmoktar A.K.A. Mr MARLBORO smuggling across Sahel

12 Illicit trade: the economics West Africa estimates, source: UNODC 2009

13 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

14 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

15 Cigarettes 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

16 Cigarettes Africans smoke 400 bn cigarettes a year 60 bn are bought on the black market *Figures UNODC estimates from 2009 1 in 7 Cigarettes smoked in Africa are illegal

17 South Africa 2012 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 well- known 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

18 Medication 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

19 Medication - WCO project in Africa 1 week operation using new IPM tool, July 2012 Diagrams: WCO

20 Medication & tobacco: common factors Medication Sources Asian imports: China & India African production Routes from Asia: Often container via Free Trade Zones (UAE) Containers: Often mis-declared for inland markets Tobacco Sources Asian imports: China & UAE African production Routes from Asia: Often container via/from FTZ (UAE) Containers: Often mis-declared for inland markets Customs Unions: ECOWAS/EAC/SADC facilitate movement of goods Sources: UNODC & industry

21 The future: Does illicit trade in normally legal goods risk becoming a bigger problem? Oil - Higher prices = stronger criminal incentive - Gulf of Guinea growing in importance as global supplier of oil Tobacco - Higher taxation = higher profits Counterfeits - Projected growth rate - Significant Chinese role Source: Chatam House September 2013

22 Thank you!

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