A study by the International Criminal Police Organization, United Nations Office on Drugs and Crime and World Bank attempts to understand the illicit financial flows from pirate activities off the Horn of Africa. The study focuses on Djibouti, Ethiopia, Kenya, Seychelles, and Somalia.
According to the report, it is estimated that more than $400 million was claimed in ransoms for pirate acts between April 2005 and December 2012 and 179 ships were hijacked off the coast of Somalia and the Horn of Africa during that time.
The report further states: “Twenty first century Somali Piracy not only creates problems in the region, but also has a global impact. Unchallenged piracy is not only a menace to political stability and a threat to international security, but it also undermines global growth prospects going forward. Up until now, little attention has been paid to tracking and disrupting the financial flows from piracy.”
The study also analyzes how much money is collected in ransom payments; how and to whom this money – the proceeds of piracy – are distributed, and how these proceeds may be invested.
In response to the question “Who benefits from the proceeds of piracy?” the report provides several answers. These are the “pirate financiers,” who stand in the middle of the piracy network. “They are the “money kingpins,” investors and beneficiaries of the piracy business. On average, they collect from 30 to 50 % of total ransom, working individually or as a group.” Other groups are “low level pirates,” who are the “Foot Soldiers” that typically receive a standard fee of $30,000 to 75,000 per ship, which only amounts to 0.01% – 0.025% of an average ransom payment and the local community that provides goods and services to pirates, including food, repair services and khat, which is a legal drug in Somalia.
In response to the question “How are the proceeds of piracy moved, invested, and used?,” the report provides the following answer: “The main reported locations of pirate financiers’ assets, suggest that contrary to conventional wisdom, many investments of proceeds of piracy are actually made within Somalia. The proceeds are typically moved by cross – border cash smuggling, trade based money laundering, bank wire transfer and the abuse of Money of Value Transfer Services.”
Investments from the
proceeds of piracy
The report also found that pirate financiers invest into a range of sectors, both legitimate business activities and criminal activities. “Some of these proceeds are recycled into financing criminal activities, including further piracy acts, human trafficking, including migrant smuggling, and investing in militias and military capacities on land in Somalia.Proceeds from piracy also find their way into the khat trade particularly in Kenya, where the khat trade is not monitored and therefore the most vulnerable to this risk.”
How to Break this Cycle?
There is need for a strong commitment by countries in the region to work together to better Monitor the Financial Flows from piracy and share regional financial intelligence, improve Cross-border Controls, especially border entry – exit points, and improve regional and international cooperation, the report suggests.
