For information only - not an official document
UNIS/CP/721
1 November 2013
WASHINGTON/VIENNA 1 November 2013 (UN Information Service) - Between US$339 million and US$413 million was taken in ransom from the hijacking of ships off the coast of Somalia and the Horn of Africa between 2005 and 2012, according to a report released today. The study - carried out by the World Bank, the United Nations Office on Drugs and Crime (UNODC) and INTERPOL - reveals that much of the ransom money was used to fuel a wide range of criminal activities on a global scale.
"Pirate Trails" - using data and evidence from interviews with former pirates, government officials, bankers and others involved in countering piracy - investigates the flow of ransom money paid out to Somali pirates operating in the Indian Ocean. The study examines the reach of the pirates into the stimulant "khat" trade, human trafficking and other illegal activities that hinder development.
Tracing a pattern that it calls "the pirate money model," the study analyses the investments made by a sample of 59 pirate "financiers" to reveal the range of sectors - including both legitimate businesses and criminal ventures - that were funded by the ransom money. Emphasizing the prominent position of pirate financiers, the report estimates that between 30 per cent and 75 per cent of the ransom money ends up with these financiers. The pirate "foot soldiers" aboard the ships receive just a fraction of the proceeds, amounting to between 1 per cent and 2.5 per cent of the total.
Stuart Yikona, a World Bank Senior Financial Sector Specialist and the report's co-author, says that its findings highlight the dangers posed not only by the hijackings themselves but also from the proceeds of the criminal acts: "Unchallenged piracy is not only a menace to stability and security, but it also has the power to corrupt the regional and international economy."
Piracy costs the global economy about US$18 billion a year in increased trade costs. Because the outbreak of piracy has reduced maritime activity around the Horn of Africa, East African countries since 2006 have suffered a significant decline in tourist arrivals and fishing yields. International remittances - a lifeline for the poor - have been affected by the decision of some banks to cease their operations with money remitters working with Somalia, which some financial institutions associate with risks involving the funding of terrorist activities.
"Pirate Trails" assesses how the ransom proceeds are moved, invested and used. The report calls for coordinated international action to address the issue, and it sets out how the flow of illicit money from the Indian Ocean can be disrupted.
Among the report's findings, "Pirate Trails" shows that ransom money was:
• Invested in criminal activities, such as arms trafficking, funding militias, migrant smuggling and human trafficking, and was used to further finance piracy activities.
• Laundered through the khat trade, particularly in Kenya, where it is not monitored and therefore is the most vulnerable to illicit international flows of money.
"Pirate Trails" also illustrates the effect of the hijackings on the local Somali economy in terms of the employment of footsoldiers and the purchase of goods to sustain the piracy operations.
A coordinated effort by international financial authorities is needed to address the threat, says Yikona: "The international community has mobilized a naval force to deal with the pirates. A similarly managed multinational effort is needed to disrupt and halt the flow of illicit money that circulates in the wake of their activities."
That assertion is echoed by Tofik Murshudlu, Chief of the Implementation Support Section in the Organized Crime and Illicit Trafficking Branch at UNODC, who notes that, while the international community may be winning the battle against pirate footsoldiers at sea, it should be wary not to lose the war against criminal kingpins on land. "The vast amounts of money collected by pirates, and the fact that they have faced virtually no constraint in moving and using their assets have allowed them not only to thrive, but also to develop their capacities on land," says Murshudlu. "These criminal groups and their assets will continue to pose a threat to the stability and security of the Horn of Africa unless long-term structural solutions are implemented to impede their current freedom of movement."
"Pirate Trails" calls for a range of practical measures, including strengthening the capacity of countries in the Horn of Africa to deal with illegal cross-border cash smuggling; risk-based oversight of Money Value Transfer Service Providers; and the development of mechanisms to monitor international financial flows into the khat trade.
"Pirate Trails" focuses on Djibouti, Ethiopia, Kenya, Seychelles, and Somalia. Its authors also carried out research in London, Copenhagen and Washington.
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About the World Bank Group
The World Bank Group is one of the world's largest sources of funding and development expertise for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in pursuing the World Bank Group's mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org and www.ifc.org.
About UNODC
The United Nations Office on Drugs and Crime (UNODC) is a global leader in the struggle against illicit drugs and transnational organized crime. It is committed to achieving health, security and justice for all by tackling such global threats, and by delivering legal and technical assistance to prevent terrorism. UNODC fulfills a three-fold mission: research and analysis to produce authoritative reports and crop surveys; technical assistance to States in ratifying and implementing international treaties on drugs, crime and terrorism, and developing domestic legislation consistent with these treaties; and training judicial officials. For more information, please visit www.unodc.org.
About INTERPOL
The International Criminal Police Organization (INTERPOL) is the world's largest international police organization, with 190 member countries. Its role is to enable police around the world to work together to make the world a safer place. INTERPOL's high-tech infrastructure of technical and operational support helps meet the growing challenges of fighting crime in the 21st century. It constantly provides and promotes innovative and cutting-edge solutions to global challenges in policing and security. INTERPOL facilitates the widest possible mutual assistance among all criminal law enforcement authorities; enables global access to police data and information; and provides operational support on specific priority crime areas. For more information, please visit www.interpol.int.
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For further information on the Pirate Trails report, please visit: http://www.worldbank.org/piratetrails
Contact for World Bank:
Richard
Miron
Telephone: (+1) 202 247 5611
Email: rmiron[at]worldbank.org
For UNODC:
Kevin
Town
Telephone: (+43 1) 260 60 5575
Email: kevin.town[at]unodc.org
