Why Countering Illicit Trade Matters: Promoting Innovation and Securing Global Markets, Supply Chain Integrity, and Public Safety

Promoting and Securing Economic Development, Trade Facilitation, Integrity in Supply Chains, and Global Security

David M. Luna

President and CEO

Luna Global Networks & Convergence Strategies LLC

Chair (Departing), OECD Task Force on Countering Illicit Trade

Global Trade Development Week

Customs, Compliance & Trade Facilitation Summit

Dubai, UAE 

1 November 2017

It is an honor to participate and speak at this year’s Global Trade Development Week in Dubai, co-hosted by the Ministry of Economy and the Federal Customs Authority of the Government of the United Arab Emirates (UAE), and organized by the KW Group.  

It also is a pleasure to be able to share with you the outstanding work program of the OECD Task Force on Countering Illicit Trade, and the ways that it is advancing public-private partnerships across sectors and industries to combat today’s transnational illicit threats, and supporting law enforcement communities in their work to disrupt and dismantle illicit markets.

But first, I would like to applaud the leadership of the UAE Government for their commitment over the years in leading the world on innovation and inspiring dynamic collaborative partnerships across Dubai, Abu Dhabi, and other cities in this beautiful country that are connecting the world and fostering sustainable futures. 

As it continues to prepare to host Expo 2020 Dubai, even more people will have an opportunity to view with their own eyes the wonders that can be created when smart economic development strategies, investment policies, and market empowerment are harnessed towards greater horizons. 

But in all corners of the globe, the path to prosperity and sustainable economic growth must be managed prudently in today’s rapidly moving inter-dependent world that can be turbulent at times. As we have seen often, what happens today across globalized economies can have rippling effects from one region to another.

Today’s reality is one in which we live in a world where there is no region, no country, and no community that remains untouched by the destabilizing effects and corruptive influence of transnational organized crime and violent terrorism.

Illicit trade helps to fuel numerous cross-border threats, in which sophisticated criminals and complicit facilitators operate and thrive in the dark shadows of the global economy, where they exploit weaknesses in our borders and institutions, take advantage when there is a lack of transparency, regulatory oversight and corruption, and continue to diversify their portfolios in low-risk, high reward illicit activities.

Illicit trade also hampers economic development and trade facilitation, weakens the rule of law, imperils the integrity of global supply chains, and threatens our common security.

This is why countering illicit trade matters and is among the reasons that I personally believe that the growth of the global illicit economy is one of the most daunting challenges we face today.

Because if we are not vigilant in confronting threats such as corruption and illicit trade, an enduring agenda of prosperity, investment promotion, and economic growth is not sustainable.

Converging Threats Crippling Innovation and Economic Growth

Ladies and Gentlemen: The global illicit economy is experiencing a boom across a wide spectrum of activities causing wicked harms across sectors, industries, and communities alike.

From the trafficking in narcotics, arms, humans, counterfeits and pirated goods to the illegal trade in pharmaceuticals, electronics, tobacco and alcohol products, endangered wildlife, the smuggling of antiquities or natural resources, and related bribery and money laundering, the breadth and size of this global illegal economy is simply staggering.

According to various estimates, certain illicit commodities/markets generate tens of billions of dollars every year like the illegal tobacco trade; others generate even more in the hundreds of billions of dollars a year such as counterfeit goods, with some studies conservatively putting the overall illegal economy at a few trillion dollars, to include corruption and money laundering.

During my years of helping lead the OECD Task Force on Countering Illicit Trade (TFCIT), the OECD released numerous important reports that further illuminated the scale of illicit trade and the involvement of converging criminal networks.

In one of our reports, “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact”, the OECD and EU IPO estimated the value of imported fakes worldwide at $US 461 billion in 2013, or up to 2.5% of global trade in goods. In the report “Mapping the Real Routes of Fake Goods”, the OECD analysis shows that China is the top producer of counterfeit goods in nine out of ten product categories, and also highlights some of the leading global hubs for trade in counterfeit goods.

In another evidence-based report, “Countering Illicit Trade: Converging Criminal Networks”, the OECD informed the international community of the rapacious appetite of criminals for new illicit markets, and mapped various illicit activities around world. 

The UNODC estimated in 2011 that the profits of international organized crime are as high as 1.5-2 percent of GDP, 40 percent of the proceeds of which are derived from counterfeiting activities, and half of the profits of illicit trade laundered through the global financial system. 

Again: These are staggering amounts.

If we couple these alarming statistics with the realities across the global threat environment in which the corruptive influence of illicit trade converges to divert revenue from the legitimate economy, and siphons off the innovative and entrepreneurial spirit that propels economic growth, our global outlook becomes darker.

But it is not only the economic and financial harms that illicit trade poses to sectors, it has direct impacts on our communities when we realize that close to 21 million people are trafficked or in modern slavery, when communities are increasingly harmed every day from counterfeit medicines, tainted or contaminated food stuff, or when defective automotive and other illicit consumer products kill tens of thousands of people every year, if not more.

From a global security perspective, we cannot continue to ignore the harmful impacts that the dark side of globalization poses to thriving markets like Dubai, London, Hong Kong, Singapore, and many others

Illicit trade is helping to fund some of the world’s bad actors – enabling violent trafficking gangs to expand their operations, terrorist groups to finance their attacks against our communities, or rogue regimes to underwrite their nuclear programs.  

They continue their criminality through arbitraging or exploiting the weaknesses in our tax regimes, borders, customs, law enforcement and other institutions.

Net-Centric Partnerships: Cross-Border Intelligence-Sharing and Transformative Technologies

So what can we do about it?

First, we need to be honest with each other. We cannot continue to turn a blind eye to illicit trade and shift blame to others or shift the narrative to be someone else’s problem.   

It is true that complex challenges often require innovative solutions. 

We must fight networks with networks and make the fight against corruption front and center.  

We also need to take more cross-industry collective actions that target not only the bad actors engaged in illicit trade, but the enablers and facilitators as well who help to divert, smuggle, and traffic illicit commodities.

Working together, we can create holistic, multi-disciplinary partnerships to protect the integrity of our markets, the security of the legitimate global supply chain, and the health and safety of our people. 

These collaborative action-oriented coalitions are a win-win for all market stakeholders. 

Second, it is imperative that global action on countering illicit trade is elevated throughout the international community and within critical organizations, including the United Nations, the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), World Customs Organization (WCO), the World Bank and INTERPOL, and through cooperation including through the Gulf Cooperation Council (GCC), the Asia Pacific Economic Cooperation Forum (APEC), the Association of Southeast Asian Nations (ASEAN), and other regional fora around the world. 

It is a strong sign to have many of these organizations with us this week at the GTDW Dubai 2017 edition conference.

Third, at a national level, governments should begin folding illicit trade strategies to combat illegal tobacco and other illicit commodities into their broader security policy and legislative agendas that help to target their harmful effects on economies.

Fourth, we must accelerate cross-border intelligence-led policing to disrupt and dismantle the illicit trafficking networks that are fueling today’s global insecurity, and confiscate their criminally derived profits from illegal tobacco and other illicit commodities.

Fifth, we can build on centers of excellence in this region with new and innovative training institutes to incentivize our partners and help them to develop the technologies, capacities and capabilities to counter illicit trade, with more meaningful impact. 

This could include more formal inter-regional exchanges on best practices, case studies, and investigative techniques shared more regularly among experts and practitioners including information- and market-intelligence sharing. 

Innovative training and educational platforms are increasingly becoming more important where experts from the UAE and the GCC can readily partner with their counterparts from ASEAN or the United States, United Kingdom, France and across Europe.

This is how we build a vibrant network of networks and net-centric partnerships on countering illicit trade, where joint efforts and networks are synergized and mobilized.

It would be wonderful to see one day some sort of training facility in the UAE, a collaborative platform such as an Institute on Countering Illicit Trade where various market stakeholders can come together to facilitate strategic dialogues, exchange ideas, and share practices towards developing innovative solutions to disrupt illicit markets regionally, and globally.

Sixth, issues of integrity, governance, and sustainability are critical to global clean and fair trade. The benefits from trade are at risk when consumers and economies fall victim to counterfeiting, and other forms of illicit trade. 

The OECD is also engaged on the work related to sustaining the economic benefits of Free Trade Zones (FTZs). Such zones can have a “catalytic effect” on economies, including attracting Foreign Direct Investment and helping to expand economic growth. But in too many parts of the world, FTZs are also exploited on a daily basis by some to facilitate illicit activities that produce broader market reputational harm and put the physical security of many communities in danger.

I am pleased to note that, as part of the second phase of the TFCIT work, the OECD co-organized a joint Meeting on Enhancing Transparency in Free Trade Zones alongside the EU Intellectual Property Organisation (EUIPO) in Alicante, Spain in September. The success of this meeting and interest from all stakeholders confirms the value of focusing on specific measures, guidelines, and good practices that would help strengthen transparency in Free Trade Zones and find ways to reduce their vulnerability to the conduct of illicit trade. Important measures identified included better access to customs trade data and information on all goods and commodities incoming and outgoing.

Finally, transformative technologies such as advanced analytics, network mapping, and data visualization are very powerful tools that can help law enforcement communities and industries to identify emerging trends and patterns to anticipate threats, to target specific illicit hubs, and to investigate bad actors engaged in various cross-border trafficking crimes. 

As CNN reported a few weeks ago, companies such as Sayari Analytics are able to demonstrate how, by smartly leveraging data, one can more strategically target the cross-border illicit activities of criminal and threat networks, and help to curtail the financing that enables these criminal regimes to exist.

Why Fighting Illicit Trade Matters: Sustainable Futures

In closing, a strong enforcement and anti-illicit trade framework helps to safeguard our economies and brands alike, spurs new innovations that not only create jobs and save lives such as new medicines, but also lead to other revolutionary break-throughs.

If there is one thing I want to leave with you today it is this: Illicit trade is very real.

It is growing rapidly across the globe, and robbing communities of their future – and it represents a significant threat to global security and economic development. 

If we do not act decisively and make countering illicit trade a higher priority, we will, in essence, be ceding the future to illicit networks whose business models destroy wealth, create insecurity, and destabilize whole communities.

I hope that this week – and inspired by the welcoming Keynote Address by H.E. Sultan Bin Saeed Al Mansoori, Minister, Ministry of Economy, UAE – we have elevated a strategic urgency to counter illicit trade, harness newer partnerships to nurture sustainable innovations, inspire collaborative entrepreneurship, secure our future, and leave an enduring market integrity for the next generation. 

Thank you.

Mr. Luna, CEO & President, Luna Global Networks & Convergence Strategies LLC, is the Chair (Departing) of the OECD Task Force on Countering Illicit Trade. He is the former Senior Director for National Security and Diplomacy, Anti-Crime Programs, Bureau of International Narcotics and Law Enforcement (INL) Affairs, U.S. Department of State. He actively partners with inter-governmental, international organizations, and civil society groups on combating transnational threats and security risks. Follow Luna Global Networks & Convergence Strategies LLC at: https://lunaglobalnetworks.com/ .