This week OBP seeks to highlight “Pirate Trails: Tracking the Illicit Financial Flows from Pirate Activities off the Horn of Africa,” a joint report published by the World Bank, the United Nations Office on Drugs and Crime and INTERPOL. Released in November 2013, “Pirate Trails,” is one of the most comprehensive studies on pirate financial flows and the business model of Somali piracy to date. The report has already generated significant discussion amongst stakeholders on how financial flows can be monitored by law enforcement agencies.
The report details the evolution of the pirate business model from pre- 2008 as an amateur business venture up to the current state of affairs, where pirate groups have become organized networks with members operating in multiple countries. In addition to discussing the progression of the business model, the report also highlights the three organizational schemes; artisanal, cooperative, and individualistic, observed in Somali piracy. These three schemes represent the different levels of organization and financial investment and payout. While ‘Pirate Trails,’ provides a detailed overview of the pirate business model much of the report’s focus is on tracking the financial flows associated with piracy. The report studies how the money is distributed after a ransom, how that money is then moved, and how the proceeds are invested. The authors explain that lower level pirates received about .01-.025% of an average ransom payment; these pirates often use their proceeds to buy khat, alcohol and expensive cars. It is estimated that the financiers receive an estimated 30-75% of the ransom payment. When following the money, the study found that more money than anticipated was invested back into Somalia, however, most is moved across the border through cash smuggling. The report also states there is a fear among international regulatory bodies and organizations that money or value transfer services (MVTS) have been utilized as well. The report then delves into the proceeds of piracy and how they are laundered; the authors focus on the khat industry, real estate, and how ransom money may be fueling other criminal activities such as human trafficking and investing into militias.
The report concludes with five recommendations to help halt the transnational illicit financial flows associated with piracy:
- Improve regional cooperation and collaboration
- Deal with control of cross-border cash smuggling
- Strengthen MVTS providers against criminal abuses; and
- Increase monitoring of production and trade in khat in Kenya and beyond
- Enhance data collection and monitoring of the real estate sector in countries in the region
OBP believes that World Bank, the United Nations Office on Drugs and Crime and INTERPOL have produced a strong resource for those interested in studying illicit financial flows associated with Somali piracy.