Tag / Organised crime

by Mike Poverello

Argentina Customs Fraud – Similarities to Venezuela

Arg-aduana

A customs fraud that allegedly allowed a criminal network to steal millions from Argentina’s government looks eerily similar to how some of Venezuela’s private businesses and corrupt government officials have also benefitted from that Andean nation’s efforts to manipulate currency values.

Argentine authorities conducted 23 simultaneous search warrants and arrested 10 individuals accused of defrauding the state by more than $300 million between 2012 and 2015, according to a July 11 press release by Argentina’s Security Minister.

The scheme was rooted in the difference between the dollar’s official value against the Argentine peso and its informal black market price. Authorities claim that 55 front companies were used to falsify Anticipated Sworn Declarations of Importation (Declaraciones Juradas Anticipadas de Importación – DJAI). These documents allowed import companies to buy dollars from the government at a subsidized price in order to buy foreign goods. Argentina’s previous administration artificially boosted the value of a peso, so an official dollar was worth much less than on the black market. But under the scheme, DJAIs were produced for goods that were never imported and with the sole purpose of buying cheaper official dollars, before selling them at a much higher price on the black market exchange.

The investigation, initiated last year after an official complaint from the director of Argentina’s customs agency, focuses on a network of textile companies owned by members of Buenos Aires’ Korean community, according to Infobae.

Infobae, which described the well-structured network integrated by professional accountants as a “mafia,” notes that not a single official has been charged for corruption, even though the official press release admits that bribes were paid.

The scheme currently investigated in Argentina illustrates how organized crime can profit from government monetary policy, as well as a good dose of corruption.

The sum involved may appear large, but other regional country’s losses to such frauds are measured in percentages of the gross domestic product and reach the highest levels. In Guatemala, for example, corruption reached as high as the president, who was directly leading and benefitting from a vast customs fraud, according to government investigators prosecuting the case.

Argentina’s case, however, appears to have more similarities to Venezuela. Indeed, the latter’s government control of currency exchange rates and the sale of dollars was exploited to embezzle as much as $70 billion in a decade, reported The New York Times. And following a regional pattern, corruption stood as a primary factor enabling these frauds.

Source: InsightCrime.org and WCO IRIS Portal

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by Mike Poverello

Mexico – Recognising WCO Policies and Standards in the wake of Organised Crime

Port of Lazaro Cardenas Mexico [www.puertolazarocardenas.com.mx]

Port of Lazaro Cardenas Mexico [www.puertolazarocardenas.com.mx]

At the beginning of May the Mexican authorities detained the 73,700 dwt Jian Hua with this following on from the earlier seizure of 119,000 tonnes of iron ore in storage at the port.

At the end of April the Mayor of Lazaro Cardenas was arrested and accused of kidnapping, extortion and links to organised crime and in November last year federal troops took over the security and customs functions at the port of Lazaro Cardenas and remain in charge today.

The main aim of these measures is to eradicate the influence of the violent criminal organisation the Knights Templar, whose base of operations is the south western state of Michoacan where the port of Lazaro Cardenas is located.

Knights Templar, through the corruption of customs and other officials, has been using the port of Lazaro Cardenas for the extensive import and export of illegal drugs. The iron cargoes are one of many ‘business diversifications’ by the cartel but as the Jian Hua shipment proves are illegal in that the documentation associated with this cargo showed production at a mine that is not yet authorised for legal operation.

For years the state of Michoacan has basically been lawless and the area around the port of Lazaro Cardenas has been a battleground between the various drug gangs with the Knights Templar being in ascendancy since 2010.

Since, however, the entry of federal agencies into the state, and notably the Mexican navy into the port of Lazaro Cardenas, the influence of Knights Templar has gone into severe decline. The cartel has basically lost control of its biggest business. They have also felt the wrath of a public uprising, the sharp end of which are armed vigilantes backed by federal forces.

The optimistic view is that the port of Lazaro Cardenas will become ‘clean’ again with the demise of Knights Templar and the arrangements it had with other drug cartels. The negative view is that another cartel will step into Knight Templar’s shoes and the port will again find itself under external control and home to illegal activities.

Short steps

The lesson here, as independent organisations such as Control Risks emphasise, is that it is a few relatively short steps before a major port gateway can be comprehensively penetrated by criminal organisations. The conditions that created an opening for Knights Templar are not unusual in Latin America in Control Risks’ view.

For these reasons, and many others associated with port efficiency, it is very important to have secure and professional agencies active in ports that are specialists in security and border management. It is also important to realise in this context that considerable assistance is available from external agencies such as the World Customs Organisation (WCO) to establish the proper controls and security checks. Further, that it is often only by the use of independent agencies or organisations that comprehensive experience and know-how can be deployed to achieve this – the arms’ length approach which can circumvent internal corruption.

If corrupt elements are in place there will inevitably be resistance to change but an external agency forcing the pace of change, based on global experience, will play a major part in overcoming such elements.

Taking the WCO as an example, among other things it functions as a forum for dialogue and exchange of experiences between national Customs delegates. The WCO offers its members a range of conventions and other international instruments, as well as technical assistance and training services provided either directly by the secretariat, or with its participation. The secretariat also actively supports its members in their endeavours to modernise and build capacity within their respective national Customs administrations.

The WCO’s efforts to combat fraudulent activities are also recognised internationally. The partnership approach championed by the WCO is one of the keys to building bridges between Customs administrations and all the stakeholders in the transport chain. Source: Port Strategy

by Mike Poverello

Decay in ‘morals’ – irrational and corrupt behaviour

My recent post – Harbour mafia busted! – prompts a serious look at human judgement and the cause and effects of corrupt behaviour. The tragedy of the hit on Johan Nortje brings to reality the result of playing with danger. Those that will subsequently be convicted, most likely never conceived this ‘danger’ at the moment of their initial courtship with the criminal underworld. Neither did they perceive that a fellow law enforcement colleague would bear the brunt of their wrong-doing. That’s the reality of consequence of choice.

The origin of customs collection and control dates back more than 2000 years, as do attempts to undermine a country’s fiscal and economic security. Therefore the scourge of corruption is as old as the laws which gave rise to ‘controls’ at borders and ports of entry. The levying of taxes has always resulted in attempts to circumvent the payment thereof. Corruption of senior officials and politicians is the Achilles heel of poor and developing countries. It is a crime that is largely invisible but its consequences can be far reaching. It destroys confidence and morale in law enforcement structures, and robs local laborers and companies trying to etch out a decent living.

Over the centuries, and particularly the latter decades, governments and their law enforcement arms have fought against fraud in various ways. Populous countries (in the past) always had an abundance of people to staff the Customs or Border agency. Above all it was important for the government of the day to be seen as providing employment, hence a measure of comfort at election time. The close-knit command and control of port and border officials under strict observation of their respective port commanders – who in the past had ultimate control over their regions – proved effective in the main in preventing cross border crimes. However, the emergence of bootlegging and the mafia in the 1930’s (USA) proved a real challenge given that these ‘movements’ had an enormous amount of money to neutralise uncooperative customs officials and law enforcement officers. Buying the cooperation of officials left ‘blackmail’ hanging over the heads of the unfortunate officers. In many cases, breaking silence or turning state witness meant possible assassination for the individual and possibly his family as well. Yet, let it be said that such cross-border crime was very much tangible by way of the persons and the modus operandi involved. No, I’m not suggesting it was easy to contain, but it was certainly a whole lot more visible and localised for the authorities to contend with and address. Still, the manpower and the cost to deploy large task forces on the ground were inhibitive for law enforcement agencies.

Today, the world of ‘illicit goods’ is global; the operators can direct activities from the remotest parts of the world thanks to the information super-highway and all means of information and communication technology available today. Similarly, technology ensures near real-time payments to willing participants in crime. Despite this, the matter of ‘illicit goods’ remains a physical movement requiring ‘people’ to arrange and oversee transportation, and distribution to the buyer. It is a well-known fact that the movement of ‘illicit goods’ has a corresponding financial pipeline through which the profits of crime are channeled. Law enforcement has a challenge in trying to piece these activities together. This will involve cooperation of multiple agencies to bring about a result. More often than not, the selfish ambition of one or other agency overrides the collective approach to smash a syndicate. Once again its the age of key performance areas and indicators, and outcomes based initiatives which get ahead of the real issue – to neutralise an enemy. Today furthermore, unfortunately, its better to secure a huge penalty or forfeiture than to apprehend criminals and face months if not years in court – the revenue target is the primary goal. Money drives both the state and the criminal underworld.

Maybe I will be censured yet. Nonetheless, I will conclude with exercising some freedom of expression concerning views on what I believe fundamentally contributes to criminal and irrational behaviour. The democratic way of modern life has indeed perpetuated a lot of freedoms. With this, however, comes a corresponding responsibility and ability to discern between what is right or wrong. Freedom comes in both guises, sometimes simultaneously so as to confuse the mind – not unlike the ‘forbidden fruit’ in the Garden of Eden – making a choice between the right or wrong path. A flaw in democracy is that it tends to present everything in a “yes we can!” mentality. What this does is ‘challenge’ the individual or group to ‘achieve’. There might be little wrong with this, however, there are no documented guidelines on how to ‘achieve’, hence it is concluded that one must ‘achieve at all costs’. So what has this to do with corruption? The multiplicity of (false) ‘comforts’ offered by the modern world tend to excite the senses and numb the conscience. After all democracy tends to advocate equality in everything, so what can be wrong with a bit of excess, since one has freedom of choice? Wrong! unfortunately, this is the very mentality which drives ‘corrupt’ behaviour. There will always be consequences. Add to this indiscretion some measure of peer pressure, jealousy, or avarice and you have a recipe for a corrupt organisation.

The causes are multi-facetted –

  • The blatant disrespect of corporate structures in not recognising the need for staff to spend quality time with their families. (Less work = less profit and poor returns)
  • Parents too focused on personal gain or pleasing the shareholder, rather than tending to the real needs of their children to build honest citizens.
  • Ill-disciplined ‘educators’ who care little about their ‘learners’ and more about their rights!
  • Law enforcement agencies focused on revenue collection rather than law enforcement.
  • Lack of knowledge amongst politicians and heads of government agencies as to what their real mission ought to be.
  • Lack of a real support base within law enforcement agencies to deal with the threats being faced by their organisation.
  • Lack of role models in our society.

Is it little wonder then that the majority of tendencies today follow corruption? I’ve yet to note a single statesman (sorry states-person) who is morally upright. I would however like to concede that at least that maverick Prof. Jonathan Jansen (University of the Orange Freestate) is not afraid to stand up and talk straight.

Those interested in the topic of organised crime in Africa should can an interesting analysis (below) which the Internet has freely allowed me to obtain. ICT is without doubt a necessary evil!

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