CORE-Observatory

Zambia and Zimbabwe’s single-stop solution to boosting intra-African trade, The Guardian 2012 (CORE2008)

Summary

The Guardian news article summarizes benefits and challenges of the African first one-stop border post, located at the Chirundu border crossing across the Zambezi river between Zambia and Zimbabwe. At the border post, officials in both countries inspect only inbound traffic, for example Zambian authorities control only incoming traffic from Zimbabwe. Thanks to this one-stop arrangement, trucks and barges are obliged to stop only once and undergo only one set of border formalities. The one-stop system has accelerated border crossing times tremendously, from a two or three day wait down to a thirty-minute rest. Moreover, the faster border formalities have translated into higher traffic at the border post (from earlier 2000 to today’s 14000 trucks per month) and associated larger tax and duty revenues. But most importantly, the faster and simpler border formalities have facilitated trade of many small-scale merchants, who commonly trade small amounts of food, clothes, and other everyday commodities. Today, these small merchants face less delays, cumbersome formalities, and arbitrary duties and facilitation payments that dishonest customs officials may impose on their goods. This progress has brought many of the informal merchants, who used to smuggle their merchandise before, back into the sphere of the formal economy. Even so, the smuggling is still a major problem in Africa: the article suggests that there are smuggling routes so established that 30 tonne trucks use them to evade customs controls, and that this informal smuggling economy accounts for a staggering one-third of the African gross domestic product (GDP). The article implies that the share of the informal economy could be further reduced through consolidation of African trade blocks (there are several), harmonization and simplification of border formalities, and enhanced border agency cooperation. The news report is available at: http://www.theguardian.com/global-development/2012/may/29/zambia-zimbabwe-intra-african-trade

Review by Toni Männistö (CBRA)

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Full review

This Guardian article showcases a great example of successful border agency cooperation in Africa. The CORE WP12, the “demonstrator Schipol” focusing on shipping of fresh cut flowers from Kenya to the Netherlands, might choose to study this African one-stop border concept in more detail. Closer analysis may reveal key success factors and obstacles that characterize the border agency cooperation in Africa. Also CORE’s WP19, that produces material for training and education, may use this African one-stop border as an illustrative example of border agency cooperation in developing countries. The CORE’s risk and IT clusters might need to explore this case in more detail to understand technical aspects of this one-stop border post concept.

Reference

The Guardian, Zambia and Zimbabwe’s single-stop solution to boosting intra-African trade, the Guardian, 29. May, 2012. Retrieved from http://www.theguardian.com/global-development/2012/may/29/zambia-zimbabwe-intra-african-trade

CORE2008

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Trade and money laundering uncontained (the Economist, May 2014, CORE2006)

Summary

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls. Review by Toni Männistö (CBRA)

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Full review

International trade is becoming one of the main instruments for cross-border money laundering aside common bank transfers, remittances and cash smuggling. The ”trade-based money laundering” disguises illegal trading as seemingly legitimate commercial transactions. The most common technique is mis-invoicing in which fraudsters undervalue imports or overvalue exports to repatriate ill-gotten money from abroad. For example, official records show that Mexican exports to US are much higher than the US imports from Mexico, a discrepancy that signs fraud by Mexican criminals, most likely drug cartels. In general, the trade-based money laundering offers new financial tools for a broad range of drug traffickers, arms smugglers, corrupt politicians, terrorists and evaders of taxes, duties and capital controls.

The new methods for cross-border money laundering and tax evasion concern most CORE demonstrations, especially those involving international cargo movements. The emerging risk of trade-based money laundering calls for new and more effective enforcement of trade transactions. CORE is developing new solutions (e.g., data pipeline and system-based supervision) for capturing and sharing trade information across logistics operators and law enforcement agencies. The new solutions likely improve law enforcement’s capability to detect suspicious trade transactions that may have something to do with the trade-based money laundering. However, building such capability requires IT integration (e.g., interoperability), risk awareness and education and training. CORE consortium addresses these complementary activities in work carried out in risk, IT and educational clusters.

Reference

Trade and money laundering uncontained, the Economist, May 3rd 2014

CORE2006

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