This is the first book review in CBRAs supply chain security blog, drilling into the complexities and challenges of global illicit trade.

Illicit trade is here to stay, but government and society needs to focus resources on tackling the most disruptive, dangerous and destabilizing elements. This is the message from one of the most renowned author on the subject, Dr. Moisés Naim, in his 2005 book ‘Illicit: How smugglers, traffickers, and copycats are hijacking the global economy’. Below I present nine tenets derived from the book – after having discussed these directly with Dr. Naim.

Tenet 1. Illicit trade takes a broad variety of forms, being driven by high profits, not low morals: Illicit trade includes illegal drugs, endangered species, human chattel for sex slavery and sweatshops, human cadavers and live organs for transplant, machine guns and rocket launchers, and centrifuges and precursor chemicals used in nuclear weapons development, to name few examples. Illicit traders move in and out of product lines as economic incentives dictate, and practical considerations permit. Illicit trafficking is an economic phenomenon, not a moral one.

Tenet 2. Illicit trade breaks the rules, sometimes with the help of the public sector – and is not always disruptive to legitimate businesses: Illicit trade breaks the rules – the laws, regulations, licenses, taxes, embargoes, and all the procedures that nations employ to organize commerce, protect their citizens, raise revenues, and enforce moral codes. Part of illicit trade is highly disruptive to legitimate businesses – and part is not, i.e. the gray area between legal and illegal transactions, which the illicit traders have turned to a great advantage. In many cases, public sector actors supply the illicit traders with false documents, inflated billing statements, precious goods for sale on the world market, armed protection, and the well-timed governmental distraction that allows trade a trade to be successfully completed.

Tenet 3. Illicit traders mimic licit trade and logistics actors – while simultaneously collaborating with many of them: Instead of distinguishing between traffickers, smugglers, pirates, coyotes and the likes, one should assess illicit traders in their true roles: investors, bankers, entrepreneurs, brokers, transporters, warehouse-keepers, wholesalers, logistics managers, distributors and more. One should also recognize the vital links between illicit traders and licit banks, airlines, shipping companies, freight forwarders, truckers, courier companies, jewelers, art galleries, doctors, lawyers, pharmaceutical and chemical manufacturers, international money transmitting companies and myriad others that provide the infrastructure that enables illicit trading to operate swiftly, efficiently and stealthily.

Tenet 4. Organized crime behind illicit trade is becoming less organized – and less tied to states / nations: The new environment gives an advantage to organizations capable of responding and adapting rapidly to new opportunities and able to constantly shift locations, tactics, and ways and means to make the most money possible. As a result, ´organized crime´ itself is changing – becoming less organized in the traditional sense of command and control structures, and more decentralized, thus shifting beyond the typical mafioso´s comfort zone. Also, instead of searching for ”the state” behind, one should seek ”the network”, when attempting to explain, and eventually anticipate and prevent, troubling world developments.

Tenet 5. Major forces are transforming illicit markets – lessons applied from business school courses: Major industrial upheavals occur when new revolutionary products are introduced, when new technologies drastically change the way a product is manufactured or delivered to clients, when consumers´ preferences change, or when there is a surge in new customers, often as a result of new geographical markets. The equilibrium is also lost when new competitors challenge traditional ones, when governments change the rules of the game, or when long-standing, often tacit arrangements and pacts among dominant firms are broken. All these forces are transforming the illicit markets.

Tenet 6. Illicit trade is no longer about crime rates – it is about global instability: Illicit trade is not merely a law enforcement problem that has been with us since time immemorial. It is that, but it is also a new threat that, thanks to technologies, new economics, and new politics, has acquired the ability to change the world. This is no longer about crime rates – it is about global instability. We need more clarity about who the main players are, what drives them, the political and social consequences, and what it means that governments have failed to contain them despite all their massive efforts and expense in doing so.

Tenet 7. State-of-the-art technologies can help – but no silver bullets exist: Promising technologies to fight against illicit trade and to enhance security in global supply chains include RFIDs, package and product tags, biometrics, detection and security devices, surveillance and eavesdropping, computer models and data mining tools, human tracking with GPS, and biotechnology, amongst others. But, as we know from so many other areas of human activity, technology may be a necessary condition for progress, but it is never sufficient. Indeed, believing that technology alone can save the day in the fight against illicit trade can be a fatal mistake.

Tenet 8. Governments need goals they can achieve –and they can´t do it alone: Defragmenting of governments is required: bring together scattered resources to be more effective. Produce better coordinated efforts between the various agencies. Some of the illicit trades need to become licit: resources now wasted enforcing the prohibition of marijuana, all counterfeits, or temporary illegal workers should be deployed in the fight against the more dangerous illicit trades. Fight a global problem with global solutions: new ways to make international co-operation between governments against illicit trade are required. And lastly, political will to improve the situation needs to be increased and everyone in the society needs to become involved.

Tenet 9. The world ahead – the challenge and the opportunity: For now, the trend is toward more illicit trade. More trafficking, more black holes, more conflict and confusion, and borders that remain porous despite government attempts to seal them. Only an attack on what makes illicit trade profitable stands a chance of containing its rise. Only fresh ideas that take into account the profound changes that globalization has wrought on states, governments, politics, and the conduct of civic life can help us understand where we are. As Adam Smith wrote in 1776: ”Not many people are scrupulous about smuggling when, without perjury, they can find a safe and easy opportunity of doing so. To pretend to have any scruple about buying smuggled goods… would in most countries be regarded as one of those pedantic pieces of hypocrisy…”. To find a way to make the world better without evading or glossing over this true statement, is both our challenge and our opportunity.

PS. This blog entry is a re-print from May 2010 – Shippers Voice web-journal, Supply chain security Searchlight –section – as part of FP7-LOGSEC project.