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

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

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

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

  2. Karl Lallerstedt 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)

  3. The global picture

  4. Transnational organised crime United Nations Office on Drugs and Crime (UNODC) meta study for 2009 1.5 percentofworld GDP 6 times global developmentassistance budgets 870 billion USD (2012 = over one billion USD)

  5. Breakdown: Transnational organised crime UNODC meta study: Narcotics320 bn Counterfeiting 250 bn Trafficking 32 bn Excisegoods - anothersignificantcategory

  6. International Chamber of Commerce 2011 Counterfeiting a bigger problem?

  7. Illeffectsofillicittrade All illicittrade Normallylicitproducts 1) Reducesgovernmentrevenues (excise tax, import duty, VAT, income tax, corporate tax) 2) Underminesjobcreation and economicdevelopment 3) Consumer risk associatedwith ”normal products” Deaths duetomedication, foodstuffs, electricalcomponents, etc 1) Revenues for organised crimegroups, terrorists and insurgents • Economicpower = “military” power and politicalinfluence 2) Corrupts • Border guards, lawenforcement, military, politicians, civil servants 3) Smuggling routes Oncedeveloped for onegoodscan be used for others

  8. Africa: Illicittrade in normallylicitgoods

  9. 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

  10. 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

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

  12. 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

  13. Oil bunkering impact Estimated valueof stolen Nigerian oil per year $3 billion - $8 billion West Africa: Wholesale valueofcocainetoEurope is $1.25 billion UNODC, World DrugReport2013 Piracy, drug- and arms-trafficking in Niger Delta Networkssometimesoverlap Kidnappinglinkedtooiltheft Source: Chatam House September 2013

  14. 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

  15. Cigarettes • Africanssmoke 400 bncigarettes a year • 60 bnarebought on the black market • *Figures UNODC estimates from 2009 1 in 7 Cigarettes smoked in Africa are illegal

  16. South Africa 2012 30% consumption illegal 8.5 billion cigarettes tax losses 5bn Rand Source: The Tobacco Instituteof Southern Africa • “Information obtained suggests that a numberofwell-known organised crimefigureshavebeenmovingaway from investing in traditional illegal drug smuggling, and arenowgettinginvolved in the tobaccoindustry." • South African Revenue Service spokesperson Adrian Lackay, 2012

  17. 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

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

  19. Medication & tobacco: common factors Medication Tobacco Sources Asian imports: China & UAE Africanproduction Routes from Asia: Often container via/from FTZ (UAE) Containers: Oftenmis-declaredfor inland markets • Sources • Asian imports: China & India • Africanproduction • Routes from Asia: • Often container via FreeTradeZones (UAE) • Containers: • Oftenmis-declaredfor inland markets Customs Unions: ECOWAS/EAC/SADC facilitatemovementofgoods • Sources: UNODC & industry

  20. The future: Does illicittrade in normally legal goods risk becoming a bigger problem? Oil • - Higherprices= stronger criminalincentive • - Gulf of Guinea growing in importance as global supplierofoil • Tobacco • - Higher taxation = higher profits • Counterfeits • - Projected growth rate • - SignificantChineserole Source: Chatam House September 2013

  21. Thank you!

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