Transnational crime undermines economies, societies, and governments in developing countries; national and global policy efforts needed to address shadow financial system responsible for processing these sums

Globally the business of transnational crime is valued at an average of $1.6 trillion to $2.2 trillion annually, according to a new report released by Global Financial Integrity (GFI), a Washington DC-based research and advisory organization.

Titled “Transnational Crime and the Developing World,” the study highlights that the combination of high profits and low risks for perpetrators of transnational crime and the support of a global shadow financial system perpetuate and drive these abuses.

“The international community has paid too little attention to combatting the money in transnational crime, instead preferring to focus on the materials or the manifestations of the crimes,” noted GFI President Raymond Baker, a longtime authority on financial crime. “The fight against transnational crime needs to be redirected to combatting the money the crimes generate. This means shutting down the global shadow financial system that facilitates the moving and secreting of illicitly generated funds. None of this is technically difficult. It is a matter of political will.”

Findings

Authored by GFI Policy Analyst Channing May, the study estimates that counterfeiting is the most valuable transnational crime at $923 billion to $1.13 trillion on average per year, followed by drug trafficking at $426 billion to $652 billion. The ranges demonstrate the serious magnitude of and threat posed by global transnational crime.

The revenues generated from the 11 crimes covered in this report not only line the pockets of the perpetrators but also finance violence, corruption, and other abuses. Very rarely do the revenues from transnational crime have any long-term benefit to citizens, communities, or economies of developing countries. Instead, the crimes undermine local and national economies, destroy the environment, and jeopardize the health and wellbeing of the public.

The report rankings for the illicit markets examined are:

Transnational Crime	Estimated Annual Value (US$)
Counterfeiting	$923 billion to $1.13 trillion
Drug Trafficking	$426 billion to $652 billion
Illegal Logging	$52 billion to $157 billion
Human Trafficking	$150.2 billion
Illegal Mining	$12 billion to $48 billion
IUU Fishing	$15.5 billion to $36.4 billion
Illegal Wildlife Trade	$5 billion to $23 billion
Crude Oil Theft	$5.2 billion to $11.9 billion
Small Arms & Light Weapons Trafficking	$1.7 billion to $3.5 billion
Organ Trafficking	$840 million to $1.7 billion
Total	$1.6 trillion to $2.2 trillion

“Transnational crime is a business, and business is very good,” said Ms. May. “Money is the primary motivation for these illegal activities. Linking this array of illegal goods are consistent trends in the organized networks involved in the crimes, the role of the global shadow financial system, and the negative consequences for governments, economies, and societies in developing countries. Very rarely do the revenues from transnational crime have any long-term benefit to citizens, communities, or economies of developing countries. Instead, the crimes undermine local and national economies, destroy the environment, and jeopardize the health and wellbeing of the public.”

Policy Recommendations

“The systemic nature of transnational crime calls for a broad approach to combating it,” stated GFI Program Manager Christine Clough, who contributed to the report. “Greater financial transparency has the potential to simultaneously curtail every transnational crime in every part of the world. The networks involved in these illicit markets are akin to major global corporations: they need access to finance and banking to be profitable to continue operating. They depend on the secrecy and anonymity of the global shadow financial system to launder their money and run their global enterprises successfully”

GFI recommends several steps governments and other regulatory bodies can take to increase the levels of detection and interdiction of the proceeds of transnational crime:

• Require that corporations registering and doing business within a country declare the name(s) of the entity’s true, ultimate beneficial owner(s)

• Flag financial and trade transactions involving individuals and corporations in “secrecy jurisdictions” as high-risk and require extra documentation

• Scrutinize import and export invoices for signs of misinvoicing, which may indicate technical and/or physical smuggling

• Use world market price databases such as GFTradeTM to estimate the risk of misinvoicing for the declared values and investigate suspicious transactions

• Share more information between agencies and departments on the illicit markets and actors that exist within a country’s borders

Methodology

The basis of the value estimates in this report is a compilation of numerous datasets and price statistics from governments, non-governmental bodies, law enforcement, and other experts. Each illicit market chapter briefly notes the methodology and data sources used for those goods, and a detailed description of certain methodologies, as well as tables with all of the data and sources used, are provided in the Appendix. Most of the estimates the report highlights are ranges rather than a single figure, because there is less precision in data pertaining to activities that are trying to stay hidden, such as transnational crime.

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Global Financial Integrity will launch this report at an event at the OpenGov Hub in Washington, DC on Wednesday, March 29th at 9:30am local time. The event will feature a brief presentation of the report and its findings by GFI Managing Director Tom Cardamone, followed by a panel discussion with GFI Policy Analyst Channing May, former Treasury Special Agent John Cassara, and Michael Dziedzic of Pax Advisory and a question & answer period; GFI Program Manager Christine Clough will moderate.