Afghan and U.S. Drug Enforcement Agency personnel destroy ‘hashish bunkers’ in Afghanistan as part of Operation Albatross in 2010. DEA photo

Transnational Crime Made a Trillion Dollars in 2016

Politicians and cops are doing very little to stop it

Kevin Knodell
Mar 29, 2017 · 8 min read


Crime does pay — and don’t ever let anyone tell you otherwise. According to a new report from Global Financial Integrity, transnational crime groups currently rake in an estimated $1.6 trillion to $2.2 trillion in annual revenue.

Fear of the drug trade and other forms of cross-border crime have long been a focus for American lawmakers. “The international community has been aggressively combating drug trafficking for more than 40 years, yet supplies of drugs are undiminished and prices have not risen,” GFI noted in its March 27, 2017 report. “Often utilizing the same channels, human trafficking for forced labor and sexual exploitation has exploded.”

Drug traffickers alone earn between $426 billion to $652 billion annually. But they’re not even the most profitable criminal enterprise — not even nearly. Counterfeiting brings in an estimated $923 billion to $1.13 trillion each year.

“These are businesses,” Channing May, a GFI policy analyst and author of the report, told War is Boring. “People are involved in organized crime to make money.”

“They’re essentially like multinational corporations,” May added. “They have multiple products that they push that they’re involved in like drugs, or human trafficking or illegal waste dumping and they’re really all over the world.”

The result is a global shadow economy that’s hard to trace, but whose windfalls often end up in the hands of unsavory characters. They use the money — which they often hide in shell corporations — to bribe politicians and finance insurgencies, hardening the conditions that allow lucrative criminal enterprises to function in the first place.

“The international community has paid too little attention to combating the money in transnational crime, instead preferring to focus on the materials or the manifestations of the crimes,” GFI president Raymond Baker noted.

“The fight against transnational crime needs to be redirected to combating the money the crimes generate,” Baker continued. “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.”

Part of the problem is that everyday people and policymakers don’t really understand this criminal world. Public perception of crime is heavily informed by pop culture that focuses on cops chasing down bad guys and getting in gunfights.

In reality, the largest criminal moneymaker — counterfeiting — provokes very little fear in the general populace and draws little scrutiny from policymakers. We don’t associate pirated DVDs, fake handbags and knockoff sneakers with terrorism, gang violence or civil wars. It all seems … harmless.

Nevertheless, counterfeiting benefits terrorist and insurgent groups around the world.

Counterfeiters sell their illicit goods in a variety of ways. Most people think of the secondary market — street vendors pushing cheap products that both sellers and buyers understand are fake. “Generally these items are more like apparel like your fake Rolex, your purse or your scarf,” May explained. “The more insidious is the primary market where you don’t even know it’s fake.”

Counterfeiters will try to pass off fake goods to consumers and even retailers at full price in order to maximize profits. This is a particular problem with electronics or medicine, as the products may be ineffective or even dangerous. For many of these fakers, online sales channels such as Amazon and eBay are the easiest, and least regulated, ways to attract unsuspecting buyers.

The proceeds can wind up funding terrorism. Islamic State and Al Qaeda have both used proceeds from counterfeit clothing sales to buy supplies and weapons. Counterfeiting helped finance ISIS’s bloody attack on the Bataclan theater in Paris in November 2015.

“This happened with a lot of the recent attacks in Paris and Europe,” May explained. “Al Qaeda at one point even put out an announcement recommending affiliates engage in counterfeiting because it has such great profit … they are able to so easily insert products into the primary market or people willingly buy them from the secondary market — and there’s great profit with such low risk.”

The U.S. Coast Guard intercepts a drug-smuggling submarine in 2015. Coast Guard photo

“People just don’t have that connection between intellectual property theft and any kind of criminal or terrorist activity and the consequences of that — the violence, the insecurity and the instability.”

Terror and insurgent groups, although typically more ideologically-driven than groups such as cartels are, likewise need money to finance operations — and are similarly opportunistic.

The Taliban, once a fierce opponent of the drug trade, now invests in poppies and opium to help finance the Afghanistan insurgency.

Criminals and terrorists have become proficient at laundering and redirecting illicit funds, often hiding money inside shell companies.

“Law enforcement — a lot of times when they’re trying to get into tracing or tracking certain transactions, they can get real stuck on who actually owns a certain companies,” May said. “If you look at the Panama Papers, that was a huge example that shows the problems with these shell companies, and it allows a lot of these groups to be very insulated from law enforcement and from investigations.”

The Panama Papers — one of the largest data leaks in history — included 11.5 million documents detailing the financial dealings of more than 214,488 offshore entities. An anonymous source leaked the documents, which belonged to Panamanian law firm Mossack Fonseca, to reporters in 2015.

An investigation of the documents coordinated by the International Consortium of Investigative Journalists produced an avalanche of news stories, many resulting in criminal investigations of political and business leaders around the world — several with connections to organized crime.

However, stories of shady finances don’t capture the public imagination the way that drug busts and shootouts do. They’re complicated, hard to explain and rarely include a satisfying visual element.

As a result, political leaders around the world have a tendency to direct law-enforcement resources toward interdicting illegal goods and arresting smugglers instead of investigating shell companies and building cases against financiers.

“The DEA has always been ‘drugs and thugs,’” May said. “It’s really sexy for them to be able to have on the front page of the newspaper that we’ve arrested 10 bad guys and we have 100 kilos of cocaine and it looks great … it’s not sexy to show a bank statement and say we’ve seized their money.”

The DEA and other law-enforcement agencies like to “cut off the head of the snake” by eliminating key leaders within criminal organizations.

“It doesn’t work,” May argued. Kill or arrest one leader and the money still flows — often into the hands of politicians and law-enforcement officials handling the leader’s case. “You have organizations, particularly in Latin America, where their leaders are able to operate effectively from jail and keep running the business,” May pointed out.

There are other consequences to this approach. Killing or capturing cartel leaders can create vacuums that then encourage internal competition within crime groups. An organization may splinter into factions that become even harder to track — and are sometimes even more violent than their predecessors were.

The capture of Mexican drug kingpin El Chapo has done little to end violence on the Mexican border, nor has it slowed drug traffic.

“When you go after the head of a business that already has an established market, whether it be drugs or iPhones … it’s not going to make a huge difference,” May explained. And currently the United States is the largest consumer of illicit drugs — by far.

New U.S. Attorney General Jeff Sessions is a longtime drug warrior who has promised to make anti-drug enforcement a major emphasis of his tenure. The administration’s anti-drug policy focuses largely on boosting arrests and building a massive wall across the southern border to stop the flow of goods and people.

But drugs have always come into the country a variety of ways. Cartels do indeed use land route and drug mules to move their product across the border, but they also frequently dig deep tunnels to move it under the border. Other cartels have used gyrocopters and even drones to bypass border patrol agents. The border didn’t even used to be the main route.

“For years, they were flying cocaine and marijuana through the Caribbean,” May said. “They moved to the land route after there was a greater amount of interdictions.”

Trump’s proposed budget includes deep cuts to the Coast Guard, one of the key agencies for interdicting maritime traffickers. Those cuts, along with increased attention on land routes, could simply prompt traffickers to return to the sea. “They have the money, the resources and the technology to compete with the government,” May said.

Criminal and terrorist groups always adapt. In the United States and Canada, years of marijuana imports have resulted in widespread domestic cultivation and a decreased need for imports from south of the border. But an increase in opiate addiction in the United States, largely stemming from prescription drug abuse, has fueled a new demand for heroin.

As a result, many drug cartels are shifting from cannabis to poppy cultivation. “If there’s a demand for something there’s always going to be a supply for it,” May said.

The focus on seizing drugs rather than cash has simply caused organizations to morph. May pointed out that crackdowns in Colombia forced drug-cultivation to move to Peru. “You absolutely have to go after the money,” May argued.

Otherwise, criminals are going to “diversify or move their business somewhere else.”

Fundamentally, defeating organized crime means investing in economic alternatives for criminals. Drug trafficking and counterfeiting groups thrive in weak economies. Boost the legitimate economy and you rob the illegitimate economy of its allure. “Profit-based crimes have profit-based solutions,” May said.

War Is Boring

From drones to AKs, high technology to low politics…

Kevin Knodell

Written by

Journalist & Author. Bylines: The Daily Beast, Playboy, The Nib etc. Former Contributing Editor for War is Boring.

War Is Boring

From drones to AKs, high technology to low politics, exploring how and why we fight above, on and below an angry world

Kevin Knodell

Written by

Journalist & Author. Bylines: The Daily Beast, Playboy, The Nib etc. Former Contributing Editor for War is Boring.

War Is Boring

From drones to AKs, high technology to low politics, exploring how and why we fight above, on and below an angry world

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