Over the past decades, trade flows have become increasingly international, spurring growth for many legitimate industries. On the flip side, this internationalization has also catalyzed many types of illicit flows. In its latest Transnational Security report, the Munich Security Conference (MSC) reinforces how this multifaceted phenomenon threatens security at all levels and suggests several recommendations to solve this global challenge.
Illicit trade, the dark side of globalization
In the past 60 years, cross-border exchanges have rapidly developed, creating an increasingly interconnected economy. In 1960, trade represented about 24 percent of global GDP—by 2017, it had reached 58 percent.
This growth has not only fueled legitimate forms of global economic interconnections, it has enhanced unlawful or illegitimate cross-border exchanges of goods like weapons, tobacco or pharmaceuticals, and even people, money or data. According to the MSC, illicit flows resulting from cross-border criminal operations account for between 1.6 and 2.2 trillion dollars annually. That’s nearly the UK’s gross domestic product.
Unlawful cross-border exchanges directly harm countries’ development, depriving them of a part of their revenues, reducing state capacities and weakening national economies.
"The African continent is estimated to have lost an average of 73 billion dollars annually between 2000 and 2015 from trade misinvoicing alone, thus obscuring the true nature or value of goods moved,” according to the report. This problem has also affected countries in the EU, where the 43.6 billion illicit cigarettes consumed in 2018 were equal to a tax loss of up to 10 billion euros, according to the KPMG Stella report.
There is another underrated—but high stakes—consequence of illicit trade: Such activity is often linked to organized crime or terrorism and represents a threat to transnational security. It can take the shape of a safety menace and a threat to consumer health. For instance, the rise of Fentanyl traffic caused up to 28,000 deaths in the United States in 2017, forcing the government to declare an opioid public health emergency.1
Or it can reinforce instability and insecurity in certain areas by fueling criminal or terrorist organizations. “Apart from being used to finance terrorist attacks, unchecked illicit flows may fuel ongoing conflicts, perpetuate broader instability and act as spoilers during peace processes,” MSC’s experts explained.
Whatever shape it takes, illicit trade provides a fertile ground for criminal organizations. Confronted by this phenomenon, international authorities have no choice but to address and respond to the issue. As the MSC report also noted: “By ignoring the political power and strategies of criminal groups, we risk overlooking a major force shaping contemporary global affairs.”
A coordinated response to a global issue
Global illicit flows happen across national borders, meaning no one—from government or law enforcement agencies in countries of origin, transit or destination to international organizations—can address this challenge alone. “Unilateral approaches are likely to merely change certain patterns and directions of illicit flows, which have been quick to adapt to changing circumstances in the past,” the report detailed.
To effectively fight illicit flows, a collective approach is needed at the regional and global levels. Unilateral actions are starting to emerge, and the issue is attracting growing attention from international policymakers as they try to address the role of illicit trade as an enabler of violence and corruption.
The UN has put the spotlight on the link between sustainable development and peace and security. In its Agenda 2030, the UN called on member states to “reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.”
The international law enforcement community is responding, with key institutions such as Interpol, Europol and the World Customs Organization conducting more joint operations targeting illicit trade, leading to an increasing number of arrests worldwide.
Despite these successful efforts, observers from the MSC argue that increasing awareness, multilateral institutions and peace missions still lack a clear mandate to combat transnational illicit flows. Thoughtful considerations are still needed, and building on the numerous commitments made in recent years to meaningfully counter illicit flows, conference experts formulated a set of recommendations:
• Improve data availability: Enhance the collection and analysis of data and its exchange among organizations that can play a valuable role in the fight against illicit flows, such as those in the public and the private sectors and even academia.
• Boost cross-border and cross-sector information sharing: Map overall trends in illicit routes and operating models more effectively by sharing information among institutions across sectors from law enforcement to security organizations to anti-trafficking NGOs.
• Share best practices and build capacities: Increase regional and international exchanges among stakeholders to reduce the gap between the countries most advanced in countering illicit flows and those lacking capacities to fight selected flows.
• Build broader coalitions: Establish more cross-industry and public-private partnerships to counter illicit flows more efficiently.
• Fight illicit flows in conflict situations: Augment ongoing efforts by organizations such as Interpol and UNODC to increase awareness and investigate cases.
• Bolster prosecution and deterrence: Increase the effectiveness of sanctions to dissuade traffickers from engaging in illicit activities. Expand the confiscation of money derived from illicit flows to reduce its attractiveness as an income source for networks and groups threatening security.
• Embrace new technology: Take advantage of the newest technologies to counter illicit activities by investigating possible applications for different types of illicitly traded goods and regularly updating the legal basis for law enforcement to access new developments.
Tackling transnational security threats requires more than the mere policing of crimes at a national level. Combating the scourge of illicit trade demands collaboration at every level of law enforcement, the public and private sectors. It’s a global challenge that calls for a global response.
1Transnational Security Report, cooperating across borders: tackling illicit flows, Munich Security Conference, June 2019.
Written by STOP: ILLEGAL