Illicit markets2


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  • Hi, we’re the illicit markets group.(Introduce ourselves)Today we will generally discuss the topic of illicit markets and then move into specific markets and a case study.
  • [Ben]So, first of all, what is an illicit market?Illicit markets are also known as black markets. An illicit or “black” market is illegal traffic or trade in officially controlled or scarce commodities.
  • [Ben]So, why do illicit markets exist?In short, illicit markets exist solely because of consumer demand. In other words, illicit markets only provide goods and services that people want.Sometimes, because of government regulation or the policies of producers, the public demands more of a good than the market provides. Other times, products are priced higher than consumers are willing to pay.Illicit markets make up this difference between what the official market supplies and what consumers really demand. Likewise, illicit markets will provide goods and services and different prices than the legal market.How products are regulated is very important when considering how they might be traded illicitly.
  • [Ben]When our group talked with Dan Schneider, a professor at American University, he stressed the fact that illicit markets are comprised of criminal networks that can adapt to traffic a variety of goods. We came up with the analogy of a factory being refurbished to produce something else.In other words, much like a factory, criminal networks will react to the market by changing their business. Of course, instead of switching from making cars to washing machines, a criminal network might go from supplying drugs to pirated media.
  • [Ben]So, how do illicit markets work?One important thing to know is that criminal groups don’t limit themselves to one market.Additionally, unlike the popular perception of “the mob,” these modern criminals have arranged themselves into networks, not organizations with any real chain of command.This means that illicit goods travel through many middlemen on their transport from producer to consumer. This makes law enforcement tricky because it is hard to predict how these illicit goods will be transported.Furthermore, because many aspects of these networks are product-independent, criminals can switch products when law enforcement starts cracking down on the smuggling of a particular good.
  • I’m going to quickly discuss the conditions under which illicit markets form.
  • [Ben]First we’ll discuss the case of a price floor.When the price of a product is kept too high for certain consumers, illicit markets will provide that product for a lower price.
  • [Ben]For instance, Cigarettes are regulated with a “sin tax.” This means that the government keeps cigarette prices high for the public good. Because of this, cigarettes are sometimes traded illegally.
  • [Ben]Digital media is expensive yet easy to reproduce. Therefore, DVDs, CDs, and software are often pirated and sold illicitly.
  • [Ben]This is the case of limited or controlled supply of products.Sometimes the supply of a product is controlled or limited. Illicit markets will provide these products at different prices.
  • [Ben]Prescription drugs are often heavily regulated. Some consumers want certain drugs but have no chance of getting a prescription. Others don’t want to pay the high prices dictated by drug companies. Illicit markets can provide prescription drugs to both of these consumer groups.
  • [Ben]Some products are illegal and cannot be acquired by legal means.If there is a demand for an illegal product, it will likely be traded in an illicit market.Examples of prohibited products include prostitution, forged documents, stolen goods, babies, organs, or illegal drugs.
  • [Ben]Back when alcoholic beverages were illegal in the United States, “moonshine” could be found in illicit markets.
  • [Ben]Here are a few things to remember as we continue our presentation.Product regulation varies from country to country.Illicit markets exist for goods AND services.Not all illicit markets involve violence.Illicit markets only exist because of consumer demand.
  • [NICK](introduction,eg: good morning; hello; how y’all doin’ out there; etc.)
  • [ZAC]When analysts examine arms sales they look at three general categories: the white arms market, the gray arms market and the black arms market. The white arms market is the legal, above-the-board transfer of weapons in accordance with the national laws and international treaties or restrictions. The people involved in a white arms deal will file the proper paperwork, including end-user certificates, noting what is being sold, who is selling it and to whom it is being sold. There is an understanding that the receiving party does not intend to transfer the weapons to a third party. [NICK]Now, the white arms market can be deceived and manipulated, and when this happens, we get the gray market — literally, white arms that are shifted into the hands of someone other than the purported recipient. One of the classic ways to do this is to either falsify an end-user certificate, or bribe an official in a third country to sign an end-user certificate but then allow a shipment of arms to pass through a country en route to a third location. This type of transaction is frequently used in cases where there are international arms embargoes against a particular countryor where it is illegal to sell arms to a militant group.[ZAC]At the far end of the spectrum is the black arms market where the guns are contraband from the start and all the business is conducted under the table. There are no end-user certificates and the weapons are smuggled covertly. Examples of this would be the smuggling of arms from the former Soviet Unionand Afghanistan into Europe through places like Kosovo and Slovenia, or the smuggling of arms into South America from Asia.
  • [ZAC]Throughout the world, the AK-47 is among the most commonly sold small arm in all three markets (white, gray, and black).In some countries, prices for AKs are very low; in Pakistan, Somalia, Rwanda, Mozambique, Congo and Ethiopia, prices are between $30–$125 per weapon, and prices have fallen in the last few decades due to mass counterfeiting.
  • [Nick]When looking at avenues for arms smuggling, you realize trafficking weapons is commonly a mereafterthought of drug smugglers. Nearly all major weapon smuggling routes are on top of already existing drug trade paths, possibly switching direction.For example, as cocaine leaves South America and enters Africa, and moves through the Balkan states, a large shipment of Kalashnikov rifles would be taken back along the same path, through west African states, and back to the drug suppliers in South America, while stopping by civilly-unstable African nations to drop off some of the shipment to warlords who allowed the passage of the drugs through their territory.
  • [Abbey]“Bulgaria’s geography, and its situation along the Balkan Route, is immensely important to its relationship with illicit markets. This connection became significant as Bulgaria shrugged off the weight of the old Soviet Union, and found itself responsible for halting illicit trade through its borders. This task became particularly important as Bulgaria began to seek a place in the European Union, which has strict regulations regarding entering nations”
  • [Abbey}“During our trip to DC, we met with the First Secretary and Police Liaison, Mr. Ivan Anchev. He graciously welcomed us into his Embassy and talked openly and honestly with us about Bulgaria and its struggle against Illicit Markets.”
  • [Abbey] “Throughout the 1990s, Bulgaria worked to repair the cracks left by the fall of the Soviet Union. Currency counterfeiting, drug trafficking, and human trafficking have all been serious problems.”
  • [Abbey]“Through much of the 1990s, Bulgaria was blacklisted by the US for its association with counterfeiting of the dollar. At first, it was mostly a passage into other European nations. However, as organized crime groups inside Bulgaria grew stronger, Bulgaria began producing the super-dollar itself.”
  • [Abbey]“As a nation along a trade route, Bulgaria has to secure its borders. Especially now that Bulgaria is on an outside border of the EU, it must be diligent because of terrorists looking to infiltrate Western Europe. To help eliminate this risk, Bulgaria created extremely sophisticated passports in 2001 and 2002. By utilizing special inks, complicated printing, unique paper, and holograms, Bulgaria has created what are considered some of the best passports in the entire EU by US Homeland Security. Additionally, Bulgaria has implemented procedures to prevent theft of blank passports. By closing all gaps in transportation of passports throughout production, Bulgaria has avoided losing even a single blank passport.
  • [Abbey]“Drug trafficking is currently one of the biggest problems Bulgaria has to contend with. Drug traffickers from the Middle East try to smuggle drugs through Bulgaria’s borders, knowing that with the relatively free movement through the EU, it will be easier to transport drugs once inside the boundaries. Traffickers from Latin America also work through Eastern Europe, coming through Africa with the ultimate aim of Western Europe. However, Bulgaria works very closely with the United States FBI and the European Union to prevent drug trafficking and has found success as it attempts to eliminate the organized crime groups in the country. Traffickers have begun taking other routes to bypass Bulgaria’s strengthened borders.”
  • [Abbey]“As a route into Western Europe, Bulgaria contends with issues of human trafficking regularly. Mr. Anchev described the three kinds of human trafficking that Bulgaria sees: sex, labor, and babies. He explains that though the free movement inside the EU is good for the economy, it is a disaster for law enforcement, as most borders do not even require show of ID to pass through. Because of this, pregnant women from Bulgaria are able to travel outside of the country, where they can sell their babies to desperate families looking to adopt. Mr. Anchev explained that this is called “passive human trafficking, and is almost impossible to stop”
  • [Abbey]“When we asked Mr. Anchev about how Bulgaria has managed to get rid of so many of its problems – arms trafficking, document forgery, organized crime, counterfeit currency – so quickly, he explained that they did not have another choice. He told us that the people were demanding a safer society, a more honest and fair and prosperous one. Additionally, we learned that Bulgaria, in return for the prosperity brought by association with the US and the EU, was willing to make changes. They were willing to undergo difficult reforms that would be advantageous to their country if they were promised assistance and inclusion. “This is the only way – to be constant in your effort” “Bulgaria, as a case study, is similar to many other stories. It is a small country, just gaining economic stability, and is fighting hard against outside pressures and inside forces looking to engage in criminal activity. In my opinion, Bulgaria is winning the fight. Mr. Anchev explained frankly that the criminals are always one step ahead, that law enforcement can never give up, that they must focus on everything at once. ‘This is the only way’, he said, ‘to be constant in your effort’. Though it was underfunded and working against the twin troubles of a new government and a new economic system, Bulgaria’s diligence has paid off. “Without international cooperation, it is impossible to do almost anything against it”“In our discussion of Bulgaria’s solution to illicit markets, Mr. Anchev also said ‘without international cooperation, it is impossible to do almost anything against it’. I find this particularly poignant today, when globalization is at every turn. Illicit markets are not a national issue or even a regional issue. The drug trade, for instance, often hits two continents before it reaches Bulgaria and the rest of Eastern Europe. Every modern market occurs on an international level, including illicit ones. The only way to end global illicit trade is to think globally.
  • [Abbey]“Every nation, in an effort to end the trade of illicit goods, must think internationally and remain diligent in their efforts as Bulgaria has. But we must also think outside the box. In our discussion with Professor Dan Schneider from American University, we talked about Supply and Demand. He echoed Mr. Anchev’s observations that criminals are always one step ahead of law enforcement, voicing the idea that if the demand is there, the supply will be there too. He questioned us: should we legalize certain goods to prevent a demand for their illegal provision. Will this decrease violence? These are questions citizens should consider when voting and questions lawmakers should consider when legislating.”
  • [Abbey]“In the end, our trip to DC brought up as many questions as it answered. Our experiences in the National Gallery, with Professor Schneider, and with Mr. Anchev at the Bulgarian Embassy exposed us to new ideas about how illicit markets affect the world and how we can affect illicit markets. First and foremost, we can avoid becoming consumers, avoid encouraging violence and economic destabilization. Secondly, we can encourage our governments to cooperate internationally and to focus on defeating markets that are most harmful to daily lives. Finally, we can simply be aware – aware of global events, of trends, of how a seemingly localized action, like the purchase of smuggled drugs, can fund a war and pay for loss of life.”
  • Illicit markets2

    1. 1. Zachary Braha • Zachary Crawford • Abbey Francis Celeste Gonzalez • ElissaKrapf • James Scully Benjamin Spener • Tiffany Torres • Nicholas Ward Charlotte Wyrick<br />Illicit Markets<br />Group led by Galen McQuillen<br />
    2. 2. Our group… again<br />Photo taken by Zachary Crawford (right)<br />
    3. 3. The Rest of the Group:<br />
    4. 4. What is an illicit market?<br />An illicit or “black” market is illegal traffic or trade in officially controlled or scarce commodities.<br />--- from the Oxford American Dictionary<br />
    5. 5. Why do illicit markets exist?<br />Illicit markets are driven by consumer demand.<br />Illicit markets exist because some products are regulated.<br />Products can be regulated by the government or by corporations.<br />Illicit markets form when the demand for a product exceeds the legal supply for it.<br />How products are regulated has a great impact on how illicit markets function. <br />
    6. 6. Illicit Market Networks: an Assembly Line<br />Just like a factory being refurbished to make a new product, the same criminal networks are often used to buy, transport, and sell a variety of illicit goods.<br />
    7. 7. How do illicit markets work?<br />Certain criminal groups will transport a variety of illicit goods.<br />Groups are not run centrally– they are networks.<br />Illicit goods change hands many times before reaching consumers.<br />Criminals adapt to market or policy changes by switching products.<br />
    8. 8. Conditions of Illicit Markets<br />
    9. 9. Price Floor<br />When the price of a product is kept too high for certain consumers, illicit markets will provide that product for a lower price. <br />
    10. 10. Cigarettes<br />Cigarettes are a classic example of a product that is kept expensive by the government. Cigarettes can sometimes be bought illicitly for lower prices.<br />
    11. 11. Pirated Media<br />Because DVDs, CDs, and software are expensive– and easy to reproduce– they are often pirated and sold illicitly.<br />
    12. 12. Limited or Controlled Supply<br />When the supply of a product is controlled limited, illicit markets will provide that product at different prices.<br />
    13. 13. Prescription Medication<br />Obtaining prescription medication requires doctor approval; also, pharmaceutical companies keep drug prices high. Illicit markets provide these medications to those without a prescription or potentially at lower prices.<br />
    14. 14. Prohibited Products<br />Some products are simply illegal.<br />If demand exists for a product, an illicit market will as well.<br />E.g. prostitution, forged documents, stolen goods, babies, organs, or illegal drugs--- marijuana, cocaine, opiates, etc.<br />
    15. 15. Moonshiners during Prohibition<br />During Prohibition in the United States, an illicit market existed to meet consumer demand for alcoholic beverages.<br />
    16. 16. Things to Remember<br />Product regulation varies from country to country.<br />Illicit markets exist for goods and services.<br />Not all illicit markets involve violence.<br />Illicit markets only exist because of consumer demand.<br />
    17. 17. Human Trafficking<br />Zachary Braha and James Scully<br />
    18. 18. The Palermo Protocol defines human trafficking as "recruitment, transportation, transfer, harboring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, … for the purpose of exploitation.” <br />
    19. 19. Basic Information<br />Human trafficking is a multi-billion dollar international industry.<br />Industry revenue: $5-9 billion per year<br />Human trafficking occurs all across the world.<br />Human trafficking is the fastest growing criminal industry in the world.<br />About 4,000,000 persons are trafficked each year.<br />70% are women<br />50% are minors<br />
    20. 20. Human Trafficking across the World<br />Green denotes countries that have made significant efforts to curb human trafficking, yellow represents some efforts, and red represents countries that have made no efforts. Grey indicates that there is no data.<br />Source: United States Department of State<br />
    21. 21. Interception<br />For example, 24 mid to high level sex ring members were arrested across 7 countries by Europol<br />Human traffickers can be caught by intercepting them and their human cargo along certain routes.<br />These routes include:<br />Routes between Mediterranean ports<br />Off the west coast of Africa to the Canary Islands<br />From Eastern to Western Europe <br />
    22. 22. Human Trafficking is a Business<br />It is important to remember that people (mainly women) are trafficked because there is a demand for them.<br />This demand can be caused by any large male population<br />These populations can arise during large construction projects.<br />An example of this is a nation preparing to host the World Cup or the Olympics.<br />There were an estimated 10,000 sex workers at the Sydney Olympics.<br />
    23. 23. Unforeseen Problems<br />When trafficked women are liberated, several problems can arise.<br />First of all, it is often difficult to send them back home.<br />Many women end up being kept in holding facilities.<br />Many require job training in order to reenter society.<br />
    24. 24. The Way Ahead<br />It is unlikely that human trafficking will ever stop– the demand for sex slaves is too high.<br />The best scenario would be to have an increase in domestic prosecution of human traffickers.<br />To do this, more international cooperation is needed.<br />Powerful nations like the U.S. should pressure nations to catch human traffickers.<br />European nations are a good example of how this international cooperation could work.<br />
    25. 25. The Arms Trade: Tricks of the Trade<br />Zachary Crawford and Nicholas Ward<br />
    26. 26. Traditional arms control models are essentially based on three assumptions:<br />That most arms production is government-controlled or authorized;<br />That most transfers are conducted on a government-to-government basis;<br />That recipient states do not produce or transfer significant amounts of arms.<br />
    27. 27. Kalashnikov Automatic Rifle (AK-47)<br />The AK-47, originally a Russian weapon, is one of the most widely used– and widely traded– weapons in the world. There are stockpiles of these weapons left over from the Soviet Union.<br />
    28. 28. Cocaine entering Europe from South America Source: INCB, Interpol<br />
    29. 29. The Drug Trade<br />Celeste Gonzalez and Tiffany Torres<br />
    30. 30. United Nations Report<br />Production and consumption of cannabis, cocaine, amphetamines, and ecstasy has stabilized at the global level. The opium industry is expanding due to production in Afghanistan. The opium industry is expanding into the southern provinces of Afghanistan, where the government does not retain much control.<br />
    31. 31. Country Examples<br />Columbia<br />¾ of the world’s cocaine originates from Columbia<br />Heroin production is increasing.<br />Drug cartels benefit from the protection of armed groups.<br />Afghanistan<br />Opium production continues even with foreign military presence in the nation.<br />Revenue from the drug trade is used to fund terrorism<br />
    32. 32. Cocaine<br />Cocaine is used to fund armed groups in Columbia.<br />
    33. 33. Perspectives<br />Drugs are misused and become an addiction, making them dangerous.<br />Argument over whether to legalize or prohibit all/certain drugs.<br />Some argue that making drugs illegal does little to stop drug use and that legalizing them would allow for regulation of the industry.<br />Others argue that legalizing drugs would encourage use and decrease the health and/or moral fiber of society.<br />Because the drug trade is often associated with violence, there is a moral imperative to stop it.<br />
    34. 34. Solutions<br />The United Nations, including the U.S., have made drugs illegal and put a strong emphasis on stopping the illegal drug trade.<br />This has led to some overcrowding of prisons and high law enforcement costs.<br />The Netherlands sees drugs mainly as a health issue and decriminalized “soft” drugs in small proportions.<br />This led to “drug tourism”– people going to visit the country to use certain drugs.<br />Joseph A Califano's (Jr. Chairman of The National Center of Addiction and Substance Abuse of Columbia University) view:<br />Regulation and Control– “more energy and resources should be used for research, prevention, and treatment while citizens and institutions take responsibility to fight misuse and addiction”<br />
    35. 35. Illicit Art Trading<br />ElissaKrapf and Charlotte Wyrick<br />
    36. 36. Art in Nazi Germany<br />Hitler<br />His Appreciation for Art<br />Denied entry into Academy of Fine Arts in Vienna<br />Fuels agenda later on<br />Purchased and looted art for cultural advancement<br />Art and Prejudice<br />Slavic degeneracy<br />Germanic/Arian superior<br />“Pure” subject matter<br />
    37. 37. Looting and its Effects<br />Major targets: Italy, France, Russia, Poland, and other Slavic countries<br />Destruction of culture vs. appreciation of culture<br />Hiding/evacuation of art on both sides<br />ERR<br />Entry of Monument Men <br />
    38. 38. Current Events<br />Major awareness efforts since late 90s<br />Klimt’s Paintings<br />“Portrait of a Young Man” by Raphael (right)<br />Austria controversy<br />
    39. 39. Klimt's “Portrait of Adele Bloch-Bauer”<br />
    40. 40. Bulgaria: a Case Study<br />Abbey Francis<br />
    41. 41. Basic Information<br />Situated in Eastern Europe, along the Balkan route<br />GDP of $90.54 Billion (72nd in the world)<br />Behind the “Iron Curtain” before the fall of the Berlin Wall in 1991<br />Recently gained membership to the European Union<br />
    42. 42.
    43. 43. Our Trip to Bulgaria<br />The Bulgarian Embassy is Bulgarian territory.<br />
    44. 44. Illicit Markets and Bulgaria: the 1990’s<br />Currency counterfeiting – “The Super-Dollar” and destabilization<br />The “Super-Dollar” was internationally blacklisted.<br />Passport forgery<br />Drug trafficking<br />Human trafficking <br />
    45. 45. Currency Counterfeiting<br />Source, passage, and destination<br />Saddam Hussein<br />Organized Crime<br />
    46. 46. Passport Forgery<br />Terrorism concerns<br />Specialization<br />“Closing the gaps”<br />
    47. 47. Drug Trafficking<br />“The Balkan Route”<br />Markets and organized crime<br />
    48. 48. Human Trafficking<br />3 kinds:<br />Sex<br />Labor<br />Babies<br />
    49. 49. Bulgaria’s Solution<br />Wall of the people<br />“This is the only way – to be constant in your effort”<br />Foreign pressure<br />International guidelines<br />“Without international cooperation, it is impossible to do almost anything against it”<br />
    50. 50. Conclusion<br />
    51. 51. Global Solutions<br />International Cooperation<br />Constant Effort<br />Supply and Demand<br />
    52. 52. Our Conclusions…<br />Photo taken by Zachary Crawford<br />