Financial Crime and Corruption by Samuel Vaknin
2001. Nine of every 10 hijacked ships are ultimately
4083 words | Chapter 15
recovered, often with the help of the IMB.
Many masters and shipowners do not report piracy for
fear of delays due to protracted investigations, increased
insurance premiums, bad publicity, and stifling red tape.
The number of unreported attacks in 1999 was estimated
by the World Maritime Piracy Report to be 130.
According to "The Economist", the IMO believes that half
of all incidents remain untold. Still, increased patrols and
international collaboration among law enforcement
agencies dented the clear upward trend in maritime crime
- even in the piracy capital, Indonesia.
The number of incidents in the pirate-infested Malacca
Straits dropped from 75 in 2000 to 17 in 2001 - though the
number of crew "kidnap and ransom" operations,
especially in Aceh, has increased. Owners usually pay the
"reasonable" amounts demanded - c. $100,000 per ship.
Contrary to folklore, most ships are attacked while at
anchor.
Twenty one people, including passengers, were killed in
2001 - and 210 taken hostage. Assaults involving guns
were up 50 percent to 73 - those involving mere knives
down by a quarter to 105. Piracy seems to ebb and flow
with the business cycles of the host economies. The Asian
crisis, triggered by the freefall of the Thai baht in 1997-8,
gave a boost to East Asian maritime robbers. So did the
debt crises of Latin America a decade earlier. Drug
transporters - armed with light aircraft and high speed
motorboats - sometimes double as pirates during the dry
season of crop growth.
Pirates endanger ship and crew. But they often cause
collateral damage as well. Pirates have been known to
dump noxious cargo into the sea, or tie up the crew and let
an oil tanker steam ahead, its navigational aides smashed,
or tamper with substances dangerous to themselves and to
others, or cast crew and passengers adrift in tiny rafts with
little food and water.
Many shipowners resorted to installing on-board satellite
tracking systems, such as Shiploc, and aircraft-like "black
boxes". A bulletproof life vest, replete with an integral
jagged edged knife, was on display in the millennium
exhibition at the Millennium Dome two years ago. The
International Maritime Organization (IMO) is considering
to compel shipowners to tag their vessels with visibly
embossed numbers in compliance with the Safety of Life
at Sea Convention.
The IMB also advises shipping companies to closely
examine the papers of crew and masters, thousands of
whom carry forged documents. In 54 maritime
administrations surveyed in 2001 by the Seafarers'
International Research Centre, Cardiff University in
Wales, more than 12,000 cases of forged certificates of
competency were unearthed.
Many issuing authorities are either careless or venal or
both. The IMB accused the Coast Guard Office of Puerto
Rico for issuing 500 such "suspicious" certificates. The
Chinese customs and navy - especially along the southern
coast - have often been decried for working hand in glove
with pirates.
False documents are an integral - and crucial - part of
maritime piracy. The IMB says:
"Many of the phantom ships that set off to sea with a
cargo and then disappear are sailed by crewmen with false
passports and competency certificates. They usually
escape detection by the port authorities. In a recent case of
a vessel located and arrested in South-East Asia further to
IMB investigations, it has emerged that all the senior
officers had false passports. The ship's registry documents
were also false".
As documents go electronic and integrated in proprietary
or common cargo tracking systems, such forgery will
wane. Bolero - an international digital bill of lading ledger
- is backed by the European Union, banks, shipping and
insurance companies. The IMO is a proponent of a
technology to apply encrypted "digital signatures" to
electronic bills of lading. Still, the industry is highly
fragmented and many ships and ports don't even possess
rudimentary information technology. The protection
afforded by the likes of Bolero is at least five years away.
Pirates sometimes work hand in hand with conspiring
crew members (or, less often, stowaways). In many
countries - in East Asia, Latin America, and Africa -
Coast Guard operatives, corrupt drug agents, and other
law enforcement officials, moonlight as pirates. Renegade
members of British trained Indonesian anti-piracy squads
are still roaming the Malacca Straits.
Pirates also enjoy the support of an insidious and vast
network of suborned judges and bureaucrats. Local
villagers along the coasts of Indonesia and Malaysia - and
Africa - welcome pirate business and provide the
perpetrators with food and shelter.
Moreover, large tankers, container ships, and cargo
vessels are largely computerized and their crew members
few. The value of an average vessel's freight has increased
dramatically with improvements in container and oil
storage technologies. "Flag of convenience" registration
has assumed monstrous proportions, allowing ship owners
and managers to conceal their identity effectively. Belize,
Honduras, and Panama are the most notorious, no
questions asked, havens.
Piracy has matured into a branch of organized crime.
Hijacking requires money, equipment, weapons, planning,
experience and contacts with corrupt officials. The loot
per vessel ranges from $8 million to $200 million.
Pottengal Mukundan, Director of ICC's Commercial
Crime Services states in an IMB press release:
"(Piracy) typically involves a mother ship from which to
launch the attacks, a supply of automatic weapons, false
identity papers for the crew and vessel, fake cargo
documents, and a broker network to sell the stolen goods
illegally. Individual pirates don't have these resources.
Hijackings are the work of organized crime rings".
The IMB describes the aftermath of a typical hijacking:
"The Global Mars has probably been given a new name
and repainted. Armed with false registration papers and
bills of lading, the pirates - or more likely the mafia
bosses pulling the strings - will then try to dispose of their
booty. The vessel has probably put in to a port where the
false identity of vessel and cargo may escape detection.
Even when identified, the gangs have been known to bribe
local officials to allow them to sell the cargo and leave the
port".
Such a ship is often "recycled" a few times. It earns its
operators an average of $40-50 million per "cycle",
according to "The Economist". The pirates contract with
sellers or shipping agents to load it with a legitimate
consignment of goods or commodities. The sellers and
agents are unaware of the true identity of the ship, or of its
unsavory "owners/managers".
The pirates invariably produce an authentic vessel
registration certificate that they acquired from crooked
officials - and provide the sellers or agents with a bill of
lading. The payload is then sold to networks of traders in
stolen merchandise or to gullible buyers in a different port
of destination - and the ship is ready for yet another
round.
In January 2002, the Indonesian Navy has permanently
stationed six battleships in the Malacca Straits, three of
them off the coast of the secessionist region of Aceh. A
further 20-30 ships and 10 aircraft conduct daily patrols of
the treacherous traffic lane. Some 200-600 ships cross the
Straits daily. A mere 50 ships or so are boarded and
searched every month.
The Greek government has gunboats patrolling the 2
miles wide Corfu Channel, where yachts frequently fall
prey to Albanian pirates. Brazil has imposed an unpopular
anti-piracy inspection fee on berthing vessels and used the
proceeds to finance a SWAT team to protect ships and
their crews while in port. Both India and Thailand have
similar units.
International cooperation is also on the rise. About one
third of the world's shipping traffic goes through the
South China Sea. A conference convened by Japan in
March 2000 - Japanese vessels have become favored
targets of piracy in the last few years - pushed for the
ratification of the International Maritime Organisation's
(IMO) 1988 Rome Convention on the Suppression of
Unlawful Acts against the Safety of Maritime Navigation
by Asian and ASEAN countries.
The Convention makes piracy an extraterritorial crime
and, thus, removes the thorny issue of jurisdiction in cases
of piracy carried in another country's territorial waters or
out on the high seas. The Comite Maritime International -
the umbrella organization of national maritime law
associations - promulgated a model anti-piracy law last
year.
Though it rejected Japan's offer for collaboration, in a
sharp reversal of its previous policy, China started
handing down death sentences against murderous pirates.
The 13 marauders who seized the Cheung Son and
massacred its 23 Chinese sailors were executed five years
ago in the southern city of Shanwei. Another 25 people
received long prison sentences. The - declared - booty
amounted to a mere $300,000.
India and Iran - two emerging "pirates safe harbor"
destinations - have also tightened up sentencing and port
inspections. In the Alondra Rainbow hijacking, the Indian
Navy captured the Indonesian culprits in a cinematic
chase off Goa. They were later sentenced severely under
both the Indian Penal Code and international law. Even
the junta in Myanmar has taken tentative steps against
compatriots with piratical predilections.
Law enforcement does not tolerate a vacuum. "The
Economist" reports about two private military companies
- Marine Risk Management and Satellite Protection
Services (SPS) - which deploy airborne mercenaries to
deal with piracy. SPS has even suggested to station 2500
former Dutch marines in Subic Bay in the Philippines -
for a mere $2500 per day per combatant.
Shipowners are desperate. Quoted by "The Economist",
they "suggest that the region's governments negotiate the
right for navies to chase pirates across national
boundaries: the so-called 'right of hot pursuit'. So far, only
Singapore and Indonesia have negotiated limited rights.
Some suggest that the American navy should be invited
into territorial waters to combat piracy, a 'live' exercise it
might relish. At the very least, countries such as Indonesia
should advertise which bits of their territorial waters at
any time are patrolled and safe from pirates. No countries
currently do this".
XII. Legalizing Crime
Also Read:
Narcissists, Ethnic or Religious Affiliation, and Terrorists
"Those who have the command of the arms in a country
are masters of the state, and have it in their power to
make what revolutions they please. [Thus,] there is no
end to observations on the difference between the
measures likely to be pursued by a minister backed by a
standing army, and those of a court awed by the fear of
an armed people".
Aristotle (384-322 BC), Greek philosopher
"Murder being the very foundation of our social
institutions, it is consequently the most imperious
necessity of civilised life. If there were no murder,
government of any sort would be inconceivable. For the
admirable fact is that crime in general, and murder in
particular, not simply excuses it but represents its only
reason to exist ... Otherwise we would live in complete
anarchy, something we find unimaginable ..".
Octave Mirbeau (1848-1917), The Torture Garden
The state has a monopoly on behaviour usually deemed
criminal. It murders, kidnaps, and locks up people.
Sovereignty has come to be identified with the unbridled -
and exclusive - exercise of violence. The emergence of
modern international law has narrowed the field of
permissible conduct. A sovereign can no longer commit
genocide or ethnic cleansing with impunity, for instance.
Many acts - such as the waging of aggressive war, the
mistreatment of minorities, the suppression of the freedom
of association - hitherto sovereign privilege, have
thankfully been criminalized. Many politicians, hitherto
immune to international prosecution, are no longer so.
Consider Yugoslavia's Milosevic and Chile's Pinochet.
But, the irony is that a similar trend of criminalization -
within national legal systems - allows governments to
oppress their citizenry to an extent previously unknown.
Hitherto civil torts, permissible acts, and common
behaviour patterns are routinely criminalized by
legislators and regulators. Precious few are
decriminalized.
Consider, for instance, the criminalization in the
Economic Espionage Act (1996) of the misappropriation
of trade secrets and the criminalization of the violation of
copyrights in the Digital Millennium Copyright Act
(2000) - both in the USA. These used to be civil torts.
They still are in many countries. Drug use, common
behaviour in England only 50 years ago - is now criminal.
The list goes on.
Criminal laws pertaining to property have malignantly
proliferated and pervaded every economic and private
interaction. The result is a bewildering multitude of laws,
regulations statutes, and acts.
The average Babylonian could have memorizes and
assimilated the Hammurabic code 37 centuries ago - it
was short, simple, and intuitively just.
English criminal law - partly applicable in many of its
former colonies, such as India, Pakistan, Canada, and
Australia - is a mishmash of overlapping and
contradictory statutes - some of these hundreds of years
old - and court decisions, collectively known as "case
law".
Despite the publishing of a Model Penal Code in 1962 by
the American Law Institute, the criminal provisions of
various states within the USA often conflict. The typical
American can't hope to get acquainted with even a
negligible fraction of his country's fiendishly complex and
hopelessly brobdignagian criminal code. Such inevitable
ignorance breeds criminal behaviour - sometimes
inadvertently - and transforms many upright citizens into
delinquents.
In the land of the free - the USA - close to 2 million adults
are behind bars and another 4.5 million are on probation,
most of them on drug charges. The costs of
criminalization - both financial and social - are mind
boggling. According to "The Economist", America's
prison system cost it $54 billion a year - disregarding the
price tag of law enforcement, the judiciary, lost product,
and rehabilitation.
What constitutes a crime? A clear and consistent
definition has yet to transpire.
There are five types of criminal behaviour: crimes against
oneself, or "victimless crimes" (such as suicide, abortion,
and the consumption of drugs), crimes against others
(such as murder or mugging), crimes among consenting
adults (such as incest, and in certain countries,
homosexuality and euthanasia), crimes against collectives
(such as treason, genocide, or ethnic cleansing), and
crimes against the international community and world
order (such as executing prisoners of war). The last two
categories often overlap.
The Encyclopaedia Britannica provides this definition of a
crime: "The intentional commission of an act usually
deemed socially harmful or dangerous and specifically
defined, prohibited, and punishable under the criminal
law."
But who decides what is socially harmful? What about
acts committed unintentionally (known as "strict liability
offences" in the parlance)? How can we establish
intention - "mens rea", or the "guilty mind" - beyond a
reasonable doubt?
A much tighter definition would be: "The commission of
an act punishable under the criminal law." A crime is
what the law - state law, kinship law, religious law, or any
other widely accepted law - says is a crime. Legal systems
and texts often conflict.
Murderous blood feuds are legitimate according to the
15th century "Qanoon", still applicable in large parts of
Albania. Killing one's infant daughters and old relatives is
socially condoned - though illegal - in India, China,
Alaska, and parts of Africa. Genocide may have been
legally sanctioned in Germany and Rwanda - but is
strictly forbidden under international law.
Laws being the outcomes of compromises and power
plays, there is only a tenuous connection between justice
and morality. Some "crimes" are categorical imperatives.
Helping the Jews in Nazi Germany was a criminal act -
yet a highly moral one.
The ethical nature of some crimes depends on
circumstances, timing, and cultural context. Murder is a
vile deed - but assassinating Saddam Hussein may be
morally commendable. Killing an embryo is a crime in
some countries - but not so killing a fetus. A "status
offence" is not a criminal act if committed by an adult.
Mutilating the body of a live baby is heinous - but this is
the essence of Jewish circumcision. In some societies,
criminal guilt is collective. All Americans are held
blameworthy by the Arab street for the choices and
actions of their leaders. All Jews are accomplices in the
"crimes" of the "Zionists".
In all societies, crime is a growth industry. Millions of
professionals - judges, police officers, criminologists,
psychologists, journalists, publishers, prosecutors,
lawyers, social workers, probation officers, wardens,
sociologists, non-governmental-organizations, weapons
manufacturers, laboratory technicians, graphologists, and
private detectives - derive their livelihood, parasitically,
from crime. They often perpetuate models of punishment
and retribution that lead to recidivism rather than to to the
reintegration of criminals in society and their
rehabilitation.
Organized in vocal interest groups and lobbies, they harp
on the insecurities and phobias of the alienated urbanites.
They consume ever growing budgets and rejoice with
every new behaviour criminalized by exasperated
lawmakers. In the majority of countries, the justice system
is a dismal failure and law enforcement agencies are part
of the problem, not its solution.
The sad truth is that many types of crime are considered
by people to be normative and common behaviours and,
thus, go unreported. Victim surveys and self-report studies
conducted by criminologists reveal that most crimes go
unreported. The protracted fad of criminalization has
rendered criminal many perfectly acceptable and recurring
behaviours and acts. Homosexuality, abortion, gambling,
prostitution, pornography, and suicide have all been
criminal offences at one time or another.
But the quintessential example of over-criminalization is
drug abuse.
There is scant medical evidence that soft drugs such as
cannabis or MDMA ("Ecstasy") - and even cocaine - have
an irreversible effect on brain chemistry or functioning.
Last month an almighty row erupted in Britain when Jon
Cole, an addiction researcher at Liverpool University,
claimed, to quote "The Economist" quoting the
"Psychologist", that:
"Experimental evidence suggesting a link between
Ecstasy use and problems such as nerve damage and brain
impairment is flawed ... using this ill-substantiated cause-
and-effect to tell the 'chemical generation' that they are
brain damaged when they are not creates public health
problems of its own".
Moreover, it is commonly accepted that alcohol abuse and
nicotine abuse can be at least as harmful as the abuse of
marijuana, for instance. Yet, though somewhat curbed,
alcohol consumption and cigarette smoking are legal. In
contrast, users of cocaine - only a century ago
recommended by doctors as tranquilizer - face life in jail
in many countries, death in others. Almost everywhere pot
smokers are confronted with prison terms.
The "war on drugs" - one of the most expensive and
protracted in history - has failed abysmally. Drugs are
more abundant and cheaper than ever. The social costs
have been staggering: the emergence of violent crime
where none existed before, the destabilization of drug-
producing countries, the collusion of drug traffickers with
terrorists, and the death of millions - law enforcement
agents, criminals, and users.
Few doubt that legalizing most drugs would have a
beneficial effect. Crime empires would crumble
overnight, users would be assured of the quality of the
products they consume, and the addicted few would not
be incarcerated or stigmatized - but rather treated and
rehabilitated.
That soft, largely harmless, drugs continue to be illicit is
the outcome of compounded political and economic
pressures by lobby and interest groups of manufacturers
of legal drugs, law enforcement agencies, the judicial
system, and the aforementioned long list of those who
benefit from the status quo.
Only a popular movement can lead to the
decriminalization of the more innocuous drugs. But such a
crusade should be part of a larger campaign to reverse the
overall tide of criminalization. Many "crimes" should
revert to their erstwhile status as civil torts. Others should
be wiped off the statute books altogether. Hundreds of
thousands should be pardoned and allowed to reintegrate
in society, unencumbered by a past of transgressions
against an inane and inflationary penal code.
This, admittedly, will reduce the leverage the state has
today against its citizens and its ability to intrude on their
lives, preferences, privacy, and leisure. Bureaucrats and
politicians may find this abhorrent. Freedom loving
people should rejoice.
APPENDIX - Should Drugs be Legalized?
The decriminalization of drugs is a tangled issue
involving many separate moral/ethical and practical
strands which can, probably, be summarized thus:
(a) Whose body is it anyway? Where do I start and the
government begins? What gives the state the right to
intervene in decisions pertaining only to my self and
contravene them?
PRACTICAL:
The government exercises similar "rights" in other cases
(abortion, military conscription, sex)
(b) Is the government the optimal moral agent, the best or
the right arbiter, as far as drug abuse is concerned?
PRACTICAL:
For instance, governments collaborate with the illicit drug
trade when it fits their realpolitik purposes.
(c) Is substance abuse a personal or a social choice? Can
one limit the implications, repercussions and outcomes of
one's choices in general and of the choice to abuse drugs,
in particular? If the drug abuser in effect makes decisions
for others, too - does it justify the intervention of the
state? Is the state the agent of society, is it the only agent
of society and is it the right agent of society in the case of
drug abuse?
(d) What is the difference (in rigorous philosophical
principle) between legal and illegal substances? Is it
something in the nature of the substances? In the usage
and what follows? In the structure of society? Is it a moral
fashion?
PRACTICAL:
Does scientific research support or refute common myths
and ethos regarding drugs and their abuse?
Is scientific research influenced by the current anti-drugs
crusade and hype? Are certain facts suppressed and
certain subjects left unexplored?
(e) Should drugs be decriminalized for certain purposes
(e.g., marijuana and glaucoma)? If so, where should the
line be drawn and by whom?
PRACTICAL:
Recreational drugs sometimes alleviate depression.
Should this use be permitted?
XIII. Begging Your Trust in Africa
The syntax is tortured, the grammar mutilated, but the
message - sent by snail mail, telex, fax, or e-mail - is
coherent: an African bigwig or his heirs wish to transfer
funds amassed in years of graft and venality to a safe bank
account in the West. They seek the recipient's permission
to make use of his or her inconspicuous services for a
percentage of the loot - usually many millions of dollars.
A fee is required to expedite the proceedings, or to pay
taxes, or to bribe officials - they plausibly explain. A
recent (2005) variant involves payment with expertly
forged postal money orders for goods exported to a transit
address.
It is a scam two decades old - and it still works. In
September 2002, a bookkeeper for a Berkley, Michigan
law firm embezzled $2.1 million and wired it to various
bank accounts in South Africa and Taiwan. Other victims
were kidnapped for ransom as they traveled abroad to
collect their "share". Some never made it back. Every
year, there are 5 such murders as well as 8-10 snatchings
of American citizens alone. The usual ransom demanded
is half a million to a million dollars.
The scam is so widespread that the Nigerians saw fit to
explicitly ban it in article 419 of their penal code. The
Nigerian President, Olusegun Obasanjo castigated the
fraudsters for inflicting "incalculable damage to Nigerian
businesses" and for "placing the entire country under
suspicion".
"Wired" quotes statistics presented at the International
Conference on Advance Fee (419) Frauds in New York on
Sept. 17, 2002:
"Roughly 1 percent of the millions of people who receive
419 e-mails and faxes are successfully scammed. Annual
losses to the scam in the United States total more than
$100 million, and law enforcement officials believe
global losses may total over $1.5 billion".
According to the "IFCC 2001 Internet Fraud Report",
published by the FBI and the National White Collar Crime
Center, Nigerian letter fraud cases amount to 15.5 percent
of all grievances. The Internet Fraud Complaint Center
refers such rip-offs to the US Secret Service. While the
median loss in all manner of Internet fraud was $435 - in
the Nigerian scam it was a staggering $5575. But only one
in ten successful crimes is reported, says the FBI's report.
The IFCC provides this advisory to potential targets:
? Be skeptical of individuals representing
themselves as Nigerian or other foreign
government officials asking for your help in
placing large sums of money in overseas bank
accounts.
? Do not believe the promise of large sums of
money for your cooperation.
? Do not give out any personal information
regarding your savings, checking, credit, or other
financial accounts.
? If you are solicited, do not respond and quickly
notify the appropriate authorities.
The "419 Coalition" is more succinct and a lot more
pessimistic:
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