International smuggling has exploded, deepening and accelerating the collaboration of transnational organized crime and terrorist groups. Attacks like the Charlie Hebdo and Bataclan shootings in Paris, the kidnappings and murders by Boko Haram in Nigeria, and the San Bernardino shooting were partially funded by seemingly harmless illegal goods such as cheap cigarettes, smuggled oil, prostitution, fake Viagra, fake designer bags, and even bootleg DVDs.
But how can this be? In Blood Profits, Vanessa Neumann, an expert on dismantling illicit trade, explains how purchasing illegal goods translates to supporting organized crime and terrorists. Neumann shows how the effects of the collapsed Iron Curtain, USSR scientists and intelligence agents left without work, regional trade pacts, the dissipation of the East-versus-West mentality, and new-age technology have all led to an intricate network of illegal trade. She leads the reader through a variety of cases, both by geography and by industry (selecting industries where illicit trade is generally poorly understood), before extracting lessons learned into some policy recommendations that we can all embrace.
|Publisher:||St. Martin's Press|
|Product dimensions:||5.94(w) x 8.43(h) x 1.09(d)|
About the Author
DR. VANESSA NEUMANN is President of Asymmetrica, a consultancy on strategies for corporate clients and governments to dismantle illicit trade. Dr. Neumann is the OECD’s Advisory Group for the Task Force on Countering Illicit Trade, and holds fellowships at Yale University, Columbia University and the Foreign Policy Research Institute. Her company Asymmetrica is a member of the Global Counter Terrorism Research Network (GCTRN) for the United Nations Security Council’s Counter-Terrorism Committee Executive Directorate (CTED), authorized to brief the UN Security Council directly.
Read an Excerpt
A Simple Transaction
Jackie loves a bargain, and she's very chic — always on trend. As a banker, she knows a good deal when she sees one, and this was a deal that stopped her in her tracks.
She was on her way out of Bloomingdale's in New York City, where she'd picked up a bottle of her favorite perfume, when she came across the street vendor and his counterfeit luxury handbags. Her eyes scanned the offerings: limited-edition Louis Vuittons decorated by Japanese artist Takashi Murakami (some with cherries, some with blossoms), some D-shaped cross-body Pradas, and quilted Chanels.
"Nice selection," said Jackie.
Her eyes settled on a cream Chanel. The tall, very black man noticed.
"You have good taste," he said in a French African accent.
Jackie picked up the bag and inspected it. The leather was soft and smooth, the stitching good and straight.
"Where are you from?" she asked, opening the bag.
She looked up. "Alors, vous parlez francais?"
The bag didn't have the raised interlocking Cs on the inside, but it was a convincing replica from the outside.
"A hundred fifty dollars."
"That's expensive," she protested. The real thing retails for over $4,300.
"It's good bag," he answered.
"No Cs on the inside," she countered. He probably would not know the difference, but she was showing she did: if she could convince him of its defects, she could get him to lower the price.
He held firm. "It's good price for good bag."
"Eighty," she offered.
"No. One fifty."
"One twenty," Jackie countered.
A little yelp of pleasure escaped her lips as she pulled six twenties from her wallet and handed them to the vendor.
The vendor's name was Amadou, and his family was still in Senegal. He was trying to get them out of poverty, away from Al Qaeda in the Islamic Maghreb and drug traffickers and the separatists in Senegal's Casamance region, where his family lived, a staging point for insurgents doing cross-border attacks into their neighboring homelands, The Gambia and Guinea-Bissau. All of this activity means a lot of men are smuggling weapons through Amadou's village. The armed men are also protecting their Senegalese crops of marijuana, as well as shipments of heroin from Southwest and Southeast Asia and cocaine from South America; the drugs are bound for Europe.
Smugglers brought Amadou to the US, via Mexico, for a cost of $10,000. That was a princely sum for him, but he was told he could work it off and pay over time, and that this would be easy, as he would immediately get a job in America and even have money left over to send home to his family in Senegal.
But the journey was hard, and the reality very different from how the smugglers had sold it to him. He was provided a fake passport and flown to Spain. From there he traveled by boat to Colombia; Cuba, Ecuador, or Argentina were his other options. He stayed working in Colombia for six months to earn a bit more money to pay the smugglers for his onward journey into Mexico and then into the United States.
His debt to the smugglers never seemed to decline. His transporters had become his captors: they took away his passport and charged him for room and board in a building in Queens that warehoused many other illegal aliens they had brought in. The conditions were primitive: the aliens shivered in sleeping bags at night, their cold, huddled bodies covering the bare floor. He thought the people who smuggled him might even be related (either just through business or, more likely, families) to the Chinese smugglers who manufactured and shipped the handbags he was recruited into selling.
The counterfeit bags likely passed through Dubai's Jebel Ali Free Zone area in the United Arab Emirates. Some Dubai customs officials know about the shipments from China and handle them personally, because they are paid bribes by the criminal network's local representative. The corrupt customs officials stamp the paperwork to read that the shipments have been separated into new parcels and add new local company names to make it appear that the shipments originated in Dubai, rather than China, which would be a red flag for US customs agents to check for counterfeits.
To make doubly sure the counterfeits get through, the bags and labels are shipped separately, and the labels are stuck on the bags only after they both arrive at the Queens warehouse. Without the labels, the fake bags don't count as an infringement on intellectual property rights and therefore cannot be seized by law enforcement. The practice of legally shipping in generic items, then having workers, many of them illegal immigrants, stamp, embroider, or attach logos or other identifying details in the retail market is called "finishing."
Jackie's Chanel, like the rest of Amadou's bags, was likely made in Guangzhou, China. China is the primary source economy for counterfeit and pirated goods: it accounts for 63 percent of all counterfeit seizures, with a total value (based on suggested retail price) of $772 million; Hong Kong ranks second with $310 million, or 25 percent.
Or perhaps they were made in Thailand, through child slavery: little children, all under ten years old, sitting on the floor assembling counterfeit leather handbags. They work under brutal conditions: some of them have their legs broken so they cannot stand. In some cases, the lower legs are tied to the thigh bone, so the bones won't mend.
The Chinese criminal network (known as a triad) that owns the factories also ships heroin, crystal meth, and cocaine, sometimes by placing them inside the counterfeit bags. As well as illegal immigrants like Amadou, they also smuggle Asian girls, who then become prostitutes in Paris or Amsterdam or in the "massage parlors" of Camden, New Jersey — or any other city. The triads are well-organized networks of criminals, but they also have deep political connections in China and other countries with a significant Chinese population — all the Chinatowns in the world, for a start.
The profits from trafficking in people and drugs are then laundered through bets on fixed games and casinos the triads also own. A gambler in one country can access an online betting platform located in another country and maybe bet on the results of sporting events taking place in a third country in real time. From the casinos, the money from the winnings is then wired to London or straight to Geneva, where a good banker takes a higher-than-normal fee to "layer the money" — combine it with that of several other clients — into financial products held by trusts, controlled by a law firm in Liechtenstein or Panama. The money is now fully secure and untraceable.
The good Swiss banker will, when requested, transfer millions (or tens of millions) to a company incorporated in the Seychelles, with an office address in Dubai and a bank account in Guernsey. This is the company of an arms dealer, who ships weapons to fighters for the Colombian FARC, Lebanese Hezbollah, Boko Haram and Al Qaeda in the Islamic Maghreb in West Africa, Al Shabaab in Somalia, and Daesh (the Arabic name for ISIS) in Syria and Iraq.
My doorbell rings. It's Jackie.
"Oh my God, chica, I have to show you my new amazing buy." She pulls out her new cream-colored Chanel. "Isn't it great?! You can barely tell it from the real thing. You've got a great vendor right here, just a few blocks away. A hundred and twenty dollars, instead of forty-three hundred at retail."
I know that even at those prices the profit margin is as large as for a gram of heroin, but neither Amadou nor his suppliers nor the corrupt customs agents will ever likely see the inside of a prison cell.
My phone beeps with a text message from my boyfriend: he's on his way to Iraq to join the Mosul Offensive, the Iraqi-led, Western-coalition-supported military operation launched in October 2016 to liberate Mosul from Daesh. The city had been in the terrorist group's brutal grip since June 2014, when Daesh stormed across the region at lightning speed. It was then the world realized that Daesh was unlike any terrorist group that had come before. The Iraqi army had fled, dropping their US-supplied weapons, which the terrorists promptly picked up and added to their growing arsenal. At Mosul, Daesh leader Abu Bakr Al Baghdadi announced the establishment of the Islamic Caliphate, imposing a brutal rule that placed women under niqabs (the black veil that covers the entire face, leaving only a slit for the eyes) or making them sex slaves, chopping off the hands and heads of the noncompliant and pushing homosexuals off rooftops. My boyfriend, Chris (not his real name), would join the Special Forces in retaking the city. If he were to be captured by Daesh, I might someday be watching a video of his beheading.
I look at the counterfeit Chanel and ponder its true cost.
A WORLD OF FAKES
Everything from baby formula to medicine is counterfeited, with tragic results to consumers, who can be injured or killed. But consumers have little appetite to push for an aggressive crackdown: they like the bargains. The illegal trade is huge. The Organisation for Economic Co-operation and Development (OECD), which writes economic policy recommendations for its thirty-five member states and whose Task Force on Countering Illicit Trade I advise, estimates that in 2013 international trade in counterfeit and pirated goods amounted to 2.5 percent of world trade, worth US$461 billion. In the European Union, it was higher: up to 5 percent of imports.
But some people are suspicious of claims from brand holders about the huge harms to industry. Preeminent among them is Professor David Wall, from the University of Durham. Wall coauthored a report that argued that the real cost to the industry from counterfeiting could be one-fifth of previously calculated figures, and that consumers are rarely duped by black market manufacturers, and in fact welcome the choice offered by fakes. Besides, he argued: "it actually helps the brands, by quickening the fashion cycle and raising brand awareness." Counterfeit luxury goods are therefore a low priority in his view. He thinks an overstretched law enforcement should focus on "stuff that really causes public harm," like "dodgy aircraft parts."
He misunderstands the paradigm: how "pulling the thread" by investigating the consumer goods we buy every day leads to intelligence that impacts major bad guys and gives law enforcement powerful tools to defend our citizens. In the world of the crime-terror pipeline (CTP), money from counterfeit handbags, medicines, and cigarettes ends up buying weapons that kill our soldiers and bombs that terrorize our cities. The 1993 World Trade Center bombing was likely partly financed by the sales of counterfeit T-shirts, according to the International Anti-Counterfeiting Coalition. The former Spanish minister of the interior, Angel Acebes, said that "one of the [Al Qaeda] suspects [in the Madrid bombings of March 11, 2004] arrested was already a well-known counterfeiter." Counterfeit cigarettes fund paramilitary groups in Northern Ireland; counterfeit CDs and other goods fund Hezbollah in the Middle East. Al Qaeda supporters have been found with huge amounts of counterfeit items.
"If you find one Al Qaeda operative with it, it's like finding one roach in your house or one rat in your house," former Interpol secretary-general Ron Noble said. "It should be enough to draw your attention to it."
Counterfeits are tremendously popular. According to Wall's report, every year over two-fifths of all consumers (43 percent) buy counterfeit goods carrying one of the top designer labels, such as Louis Vuitton, Yves Saint Laurent, Burberry, or Gucci. Nearly a third of the sales are over the Internet, 90 percent of which are counterfeit, according to LVMH, the world's premier luxury goods conglomerate. It's not just clothes and accessories — everything we consume can be counterfeited: electronics, medicines and personal care products, eyewear (including contact lenses), toys, and even labels and tags, which as we saw above are often shipped separately. Even food is counterfeited: since the 1990s, fake eggs have been found in China and nearby countries. The yolk, white, and shell are made of gypsum powder, calcium carbonate, and wax. The cost of producing them can be half of what it costs to produce real eggs, especially when prices spike due to a supply crisis like during the avian flu in 2012. Fake eggs were more profitable and common then.
All the illegal goods we so easily obtain — cheap cigarettes, crude oil, prostitution, fake Viagra, fake designer bags, and even bootleg DVDs — fund serious bad guys. Either the goods themselves or the money from their sale passes through the hands of Russian mobsters, Muslim jihadists, Mexican cartels, Chinese triads, and Eastern European heads of state. And it is we who hand them that money.
From the jungles of Colombia to the halls of power in Washington and Paris, I have traced the growing collusion among criminals, terrorists, and those engaged in global trade. Terrorists are increasingly going into business: illegal transactions and illicit trade. Where once the money went to buy the weapons, the weapons now secure the money. This is the dark side of globalization: both criminals and terrorists feed off the free trade infrastructure, in which goods can cross borders more easily than ever before. The profits are huge. Thanks to drastic hikes in taxation, contraband cigarettes now have the same profit margin as cocaine, and counterfeit handbags are as profitable as heroin; and the penalties if one is caught are ludicrously light. So why wouldn't terrorists become increasingly involved in trafficking illicit consumer goods? Illicit trade is booming.
Officials are aware of the problem. On my November 2014 trip to the United Arab Emirates, a consultant to the emir of Abu Dhabi said during a private meeting: "We have a branding problem here — especially Dubai and the Jebel Ali Free Trade Zone. When people hear 'Dubai' or 'Jebel Ali,' they think: illicit trade. So the UAE is bending over backward to sign every anti-money-laundering and anti-illicit-trade protocol it can. But the reality is, we've got criminals and we've got terrorists, and they're parasitic on the infrastructure we've built."
The official clearly felt squeezed: "They've ruined what we built here, and we don't know what to do. Now terrorists are in the trade business and want to make a lot of money, and the criminals — who used to be easy to deal with, because they just wanted to make a lot of money — now have political objectives. It's a nightmare!" The UAE consultant's comments encapsulate the problem: the terrorists are increasingly behaving like criminal businessmen, moving from grievance to greed, while the criminals are increasingly challenging the government, and the more that criminals and terrorists interact, the more they learn from each other.
The reason is simple: terrorists need the money. The countries that significantly funded terrorist groups in the past (Iran, Libya, Saudi Arabia, Russia) are now giving them substantially less. Meanwhile wealthy and powerful individual donors have had their funding streams monitored and disrupted. Without traditional donations, terrorists have turned to doing business with criminals. It means they share information and learn faster and are more successful than ever before. This is the terrifying reality of the crime-terror pipeline: a convergence of the criminal threat with the terrorist threat — double trouble.
Convergence in the crime-terror pipeline contradicts traditional security thinking that terrorists and criminals don't want to be linked. The argument was: criminals don't want the additional scrutiny and heat that working with terrorists will bring, and terrorists are too ideological to work with profit-driven criminals; criminals move lots of money for a long period of time, while terrorists don't need that much money. But this is not what I have found in my work, investigating smuggled consumer goods and finding the connections with drug smugglers, terrorists, and corrupt government officials. In Colombia, Venezuela, and Lebanon, I learned how cocaine funds Hezbollah, which is also funded by smuggled cigarettes in North and South America. In Panama, I saw how counterfeit sporting goods fund Islamist radicalization programs. In Eastern Europe, Iraq, Syria, and Turkey, we found how "illicit white" (smuggled but not counterfeit) cigarettes fund Russian organized crime linked to the Russian intelligence service and its covert operations in Syria and Ukraine.
While any individual terrorist attack may be cheap (easily costing less than $10,000), maintaining a terrorist network is not. Operatives living throughout the network (which in some cases span the world) have to be housed, fed, trained, and transported. Terrorist networks also maintain Web sites, newspapers, and television stations, and they often provide social services to the local communities that are their constituencies and sources of support. Such networks cost hundreds of millions of dollars annually.
Excerpted from "Blood Profits"
Copyright © 2017 Vanessa Neumann.
Excerpted by permission of St. Martin's Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
CHAPTER 1: A SIMPLE TRANSACTION
A World of Fakes
Eating the State
The Power of Narrative
CHAPTER 2: LEARNING ABOUT CRIME, TERROR & CORRUPTION
Press and Politics
Medellín: The Land of Pablo Escobar and Narrative Operations
The Revolution’s Trusty Steeds
The Women with Electoral Power
CHAPTER 3: 'A LITTLE FUN'
Pipelines of Illicit Goods
The Business of Hunting Terrorists
Grievance to Greed
CHAPTER 4: FILLING THE PUZZLE
Trade and Terrorism
CHAPTER 5: SHEIKH, COLONEL, TRAFFICKER, TERRORIST
The Colonel and the Sheikh
Beirut or Tehran?
At the rally
The Case of the Lebanese Canadian Bank
Smuggling Drugs from the Beqaa Valley to America: A True Story
Monsar al-Kassar and PanAm 103
CHAPTER 6: THE WAR GAMES BEGIN
4th Generation Warfare: Asymmetric or ‘Total’ War
Landing in Guatemala
Smuggling as the Node in the Crime-Terror Pipeline
Flattening to Adapt
Growing Ties Between Criminals and Terrorists at the Southwest Border
Terrorists, Drugs and Diasporas
CHAPTER 7: KHANS, BAGS AND TRIADS
Land of the Great Khans
Silk Road Market: Counterfeits and Triads
To the Benefit of State and Criminal
CHAPTER 8: UP IN SMOKE
London and Paris
The Birth of Asymmetrica
Cigarette Smuggling, Syria, ISIS and Other Bad Guys
An All-Too-Obvious Solution
CHAPTER 9: BAD SPORT
The Quiet Australian
Panama: “You Are Not Who You Say You Are”
Trouble in Colón
Back with the Imam
Dirty Money in the Beautiful Game
The Lure of Lucre
Can Match Fixing Be Fixed?
CHAPTER 10: TRADING IN SICKNESS & VIOLENCE
Malaria and Islamism
Pharma’s Grey Markets
How to Exploit Supply Chain Gaps: The Case of RxNorth
‘A Crime Against Humanity’
CHAPTER 11: IT'S ALL ABOUT THE BENJAMINS
Combat or Accommodate?: The Kingpin Strategy v. Pax Mafiosa
Corruption, Illicit Trade & Violent Extremism
‘Calderón’s War’ and the Rule of Law
Money Laundering 101
Starving the Beast
CHAPTER 12: CRIME & TERROR CONVERGE
When Is Convergence Real?
When Terrorists Subcontract to Cartels: The Arbabsiar Plot
Legitimacy and Security
CHAPTER 13: THE STORIES WE TELL
Our Youth: At the Crossfire of the Information Wars
The Jihadi New Wave: Foreign Fighters & “Lone Wolves”
Why Identity Narratives Work
Identities in Crisis