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These are grim economic times,

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fellow TEDsters, grim economic times indeed.

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And so, I would like to cheer you up

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with one of the great, albeit largely unknown,

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commercial success stories

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of the past 20 years.

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Comparable, in its own very peculiar way,

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to the achievements of Microsoft or Google.

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And it's an industry which has bucked the current recession

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with equanimity.

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I refer to organized crime.

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Now organized crime has been around

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for a very long time, I hear you say,

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and these would be wise words, indeed.

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But in the last two decades,

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it has experienced an unprecedented expansion,

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now accounting for roughly 15 percent

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of the world's GDP.

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I like to call it the Global Shadow Economy,

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or McMafia, for short.

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So what triggered this extraordinary growth

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in cross-border crime?

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Well, of course, there is globalization,

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technology, communications, all that stuff,

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which we'll talk about a little bit later.

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But first, I would like to take you back

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to this event:

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the collapse of communism.

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All across Eastern Europe, a most momentous episode

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in our post-war history.

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Now it's time for full disclosure.

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This event meant a great deal to me personally.

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I had started smuggling books across the Iron Curtain

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to Democratic opposition groups in Eastern Europe,

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like Solidarity in Poland,

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when I was in my teens.

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I then started writing about Eastern Europe,

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and eventually I became the BBC's chief correspondent for the region,

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which is what I was doing in 1989.

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And so when 425 million people

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finally won the right

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to choose their own governments,

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I was ecstatic,

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but I was also a touch worried

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about some of the nastier things

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lurking behind the wall.

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It wasn't long, for example,

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before ethnic nationalism

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reared its bloody head

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in Yugoslavia.

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And amongst the chaos,

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amidst the euphoria,

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it took me a little while to understand

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that some of the people who had wielded power

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before 1989, in Eastern Europe,

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continued to do so after the revolutions there.

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Obviously there were characters like this.

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But there were also some more unexpected people

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who played a critical role in what was going on in Eastern Europe.

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Like this character. Remember these guys?

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They used to win the gold medals in weightlifting

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and wrestling, every four years in the Olympics,

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and they were the great celebrities of communism,

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with a fabulous lifestyle to go with it.

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They used to get great apartments in the center of town,

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casual sex on tap,

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and they could travel to the West very freely,

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which was a great luxury at the time.

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It may come as a surprise, but they played a critical role

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in the emergence of the market economy

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in Eastern Europe.

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Or as I like to call them, they are

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the midwives of capitalism.

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Here are some of those same weightlifters

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after their 1989 makeover.

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Now in Bulgaria --

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this photograph was taken in Bulgaria --

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when communism collapsed all over Eastern Europe,

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it wasn't just communism;

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it was the state that collapsed as well.

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That means your police force wasn't working.

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The court system wasn't functioning properly.

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So what was a business man in the brave new world

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of East European capitalism going to do

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to make sure that his contracts would be honored?

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Well, he would turn to people who were called, rather prosaically

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by sociologists, privatized law enforcement agencies.

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We prefer to know them as the mafia.

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And in Bulgaria, the mafia was soon joined

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with 14,000 people

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who were sacked from their jobs in the security services

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between 1989 and 1991.

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Now, when your state is collapsing,

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your economy is heading south at a rate of knots,

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the last people you want coming on to the labor market

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are 14,000 men and women whose chief skills

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are surveillance,

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are smuggling, building underground networks

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and killing people.

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But that's what happened all over Eastern Europe.

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Now, when I was working in the 1990s,

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I spent most of the time covering

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the appalling conflict in Yugoslavia.

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And I couldn't help notice

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that the people who were perpetrating the appalling atrocities,

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the paramilitary organizations,

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were actually the same people running

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the organized criminal syndicates.

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And I came to think that behind the violence

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lay a sinister criminal enterprise.

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And so I resolved to travel around the world

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examining this global criminal underworld

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by talking to policemen,

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by talking to victims, by talking to consumers

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of illicit goods and services.

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But above all else, by talking to the gangsters themselves.

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And the Balkans was a fabulous place to start.

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Why? Well of course

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there was the issue of law and order collapsing,

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but also, as they say in the retail trade,

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it's location, location, location.

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And what I noticed at the beginning of my research

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that the Balkans had turned into a vast transit zone

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for illicit goods and services coming from all over the world.

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Heroin, cocaine,

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women being trafficked into prostitution

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and precious minerals.

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And where were they heading?

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The European Union, which by now

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was beginning to reap the benefits of globalization,

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transforming it into

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the most affluent consumer market in history,

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eventually comprising some 500 million people.

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And a significant minority

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of those 500 million people

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like to spend some of their leisure time and spare cash

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sleeping with prostitutes,

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sticking 50 Euro notes up their nose

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and employing illegal migrant laborers.

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Now, organized crime in a globalizing world

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operates in the same way as any other business.

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It has zones of production,

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like Afghanistan and Columbia.

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It has zones of distribution,

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like Mexico and the Balkans.

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And then, of course, it has zones of consumption,

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like the European Union, Japan

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and of course, the United States.

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The zones of production and distribution

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tend to lie in the developing world,

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and they are often threatened by appalling violence

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and bloodshed.

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Take Mexico, for example.

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Six thousand people killed there in the last 18 months

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as a direct consequence of the cocaine trade.

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But what about the Democratic Republic of Congo?

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Since 1998, five million people have died there.

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It's not a conflict you read about much in the newspapers,

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but it's the biggest conflict on this planet

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since the Second World War.

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And why is it? Because mafias from all around the world

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cooperate with local paramilitaries

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in order to seize the supplies

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of the rich mineral resources

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of the region.

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In the year 2000, 80 percent of the world's coltan

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was sourced to the killing fields

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of the eastern Democratic Republic of Congo.

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Now, coltan you will find in almost every mobile phone,

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in almost every laptop

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and games console.

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The Congolese war lords were selling this stuff to the mafia

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in exchange for weapons,

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and the mafia would then sell it on to Western markets.

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And it is this Western desire

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to consume

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that is the primary driver

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of international organized crime.

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Now, let me show you some of my friends in action,

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caught conveniently on film by the Italian police,

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and smuggling duty-not-paid cigarettes.

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Now, cigarettes out the factory gate are very cheap.

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The European Union then imposes the highest taxes on them in the world.

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So if you can smuggle them into the E.U.,

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there are very handsome profits to be made,

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and I want to show you this to demonstrate

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the type of resources available to these groups.

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This boat is worth one million Euros when it's new.

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And it's the fastest thing on European waters.

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From 1994, for seven years,

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20 of these boats

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made the trip across the Adriatic,

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from Montenegro to Italy, every single night.

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And as a consequence of this trade,

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Britain alone lost eight billion dollars in revenue.

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And instead that money went to underwrite the wars in Yugoslavia

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and line the pockets of unscrupulous individuals.

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Now Italian police, when this trade started,

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had just two boats which could go at the same speed.

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And this is very important, because the only way you can catch these guys

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is if they run out of gas.

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Sometimes the gangsters would bring with them

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women being trafficked into prostitution,

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and if the police intervened, they would hurl

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the women into the sea

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so that the police had to go and save them from drowning,

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rather than chasing the bad guys.

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So I have shown you this to demonstrate

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how many boats, how many vessels it takes

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to catch one of these guys.

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And the answer is six vessels.

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And remember, 20 of these speed boats

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were coming across the Adriatic

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every single night.

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So what were these guys doing with all the money they were making?

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Well, this is where we come to globalization,

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because that was not just the deregulation of global trade.

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It was the liberalization of international financial markets.

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And boy, did that make it easy

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for the money launderers.

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The last two decades have been the champagne era

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for dirty lucre.

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In the 1990s, we saw financial centers around the world

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competing for their business,

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and there was simply no effective mechanism

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to prevent money laundering.

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And a lot of licit banks were also happy

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to accept deposits

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from very dubious sources

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without questions being asked.

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But at the heart of this, is the offshore banking network.

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Now these things

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are an essential part of the money laundering parade,

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and if you want to do something about illegal tax evasion

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and transnational organized crime, money laundering,

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you have to get rid of them.

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On a positive note, we at last have someone in the White House

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who has consistently spoken out

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against these corrosive entities.

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And if anyone is concerned about what I believe

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is the necessity for

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new legislation, regulation, effective regulation,

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I say, let's take a look at Bernie Madoff,

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who is now going to be spending the rest of his life in jail.

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Bernie Madoff stole 65 billion dollars.

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That puts him up there on the Olympus of gangsters

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with the Colombian cartels

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and the major Russian crime syndicates,

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but he did this for decades

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in the very heart of Wall Street,

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and no regulator picked up on it.

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So how many other Madoffs are there on Wall Street

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or in the city of London,

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fleecing ordinary folk

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and money laundering?

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Well I can tell you, it's quite a few of them.

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Let me go on to the 101 of international organized crime now.

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And that is narcotics. Our second marijuana farm photograph for the morning.

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This one, however, is in central British Columbia

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where I photographed it.

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It's one of the tens of thousands

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of mom-and-pop grow-ops in B.C.

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which ensure that over five percent

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of the province's GDP is accounted for by this trade.

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Now, I was taken by inspector Brian Cantera,

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of the Royal Canadian Mounted Police,

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to a cavernous warehouse east of Vancouver

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to see some of the goods which are regularly confiscated

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by the RCMP

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from the smugglers who are sending it,

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of course, down south to the United States

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where there is an insatiable market

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for B.C. Bud, as it's called,

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in part because it's marketed as organic,

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which of course goes down very well in California.

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(Laughter)

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(Applause)

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Now, even by the police's admission,

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this makes not a dent in the profits, really,

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of the major exporters.

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Since the beginning of globalization,

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the global narcotics market has expanded enormously.

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There has, however, been no concomitant increase

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in the resources available

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to police forces.

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This, however, may all be about to change,

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because something very strange is going on.

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The United Nations recognized

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earlier this -- it was last month actually --

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that Canada has become a key area of distribution and production

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of ecstasy and other synthetic drugs.

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Interestingly, the market share

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of heroin and cocaine is going down,

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because the pills are getting ever better at reproducing their highs.

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Now that is a game changer,

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because it shifts production away from the developing world

297
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and into the Western world.

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When that happens, it is a trend

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which is set to overwhelm our policing capacity in the West.

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The drugs policy which we've had in place for 40 years

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is long overdue for a very serious rethink,

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in my opinion.

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Now, the recession.

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Well, organized crime has already adapted

305
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very well to the recession.

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Not surprising, the most opportunistic industry

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in the whole world.

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And it has no rules to its regulatory system.

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Except, of course, it has two business risks:

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arrest by law enforcement,

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which is, frankly, the least of their worries,

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and competition from other groups,

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i.e. a bullet in the back of the head.

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What they've done is they've shifted their operations.

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People don't smoke as much dope, or visit prostitutes quite so frequently

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during a recession.

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And so instead, they have invaded financial

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and corporate crime in a big way,

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but above all, two sectors,

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and that is counterfeit goods

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and cybercrime.

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And it's been terribly successful.

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I would like to introduce you to Mr. Pringle.

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Or perhaps I should say, more accurately, Señor Pringle.

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I was introduced to this bit of kit by a Brazilian cybercriminal.

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We sat in a car on the Avenue Paulista

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in São Paulo, together.

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Hooked it up to my laptop,

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and within about five minutes he had penetrated

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00:15:53,000 --> 00:15:55,000
the computer security system

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of a major Brazilian bank.

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It's really not that difficult.

333
00:16:00,000 --> 00:16:03,000
And it's actually much easier because

334
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the fascinating thing about cybercrime

335
00:16:05,000 --> 00:16:09,000
is that it's not so much the technology.

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The key to cybercrime is what we call social engineering.

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Or to use the technical term for it,

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there's one born every minute.

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00:16:18,000 --> 00:16:21,000
You would not believe how easy it is

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00:16:21,000 --> 00:16:24,000
to persuade people to do things with their computers

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00:16:24,000 --> 00:16:27,000
which are objectively not in their interest.

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And it was very soon

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00:16:29,000 --> 00:16:31,000
when the cybercriminals learned that the quickest way to do this,

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00:16:31,000 --> 00:16:35,000
of course, the quickest way to a person's wallet

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is through the promise of sex and love.

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I expect some of you remember the ILOVEYOU virus,

347
00:16:41,000 --> 00:16:45,000
one of the very great worldwide viruses that came.

348
00:16:45,000 --> 00:16:48,000
I was very fortunate when the ILOVEYOU virus came out,

349
00:16:48,000 --> 00:16:51,000
because the first person I received it from

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00:16:51,000 --> 00:16:53,000
was an ex-girlfriend of mine.

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00:16:53,000 --> 00:16:58,000
Now, she harbored all sorts of sentiments and emotions towards me at the time,

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00:16:58,000 --> 00:17:00,000
but love was not amongst them.

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00:17:00,000 --> 00:17:02,000
(Laughter)

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And so as soon as I saw this drop into my inbox,

355
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I dispatched it hastily to the recycle bin

356
00:17:09,000 --> 00:17:14,000
and spared myself a very nasty infection.

357
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So, cybercrime, do watch out for it.

358
00:17:18,000 --> 00:17:20,000
One thing that we do know that the Internet is doing

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00:17:20,000 --> 00:17:23,000
is the Internet is assisting these guys.

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00:17:23,000 --> 00:17:26,000
These are mosquitos who carry the malarial parasite

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00:17:26,000 --> 00:17:30,000
which infests our blood when the mosy has had a free meal

362
00:17:30,000 --> 00:17:32,000
at our expense.

363
00:17:32,000 --> 00:17:35,000
Now, Artesunate is a very effective drug

364
00:17:35,000 --> 00:17:38,000
at destroying the parasite in the early days

365
00:17:38,000 --> 00:17:40,000
of infection.

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00:17:40,000 --> 00:17:42,000
But over the past year or so,

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00:17:42,000 --> 00:17:45,000
researchers in Cambodia have discovered

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00:17:45,000 --> 00:17:48,000
that what's happening is

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00:17:48,000 --> 00:17:51,000
the malarial parasite is developing a resistance.

370
00:17:51,000 --> 00:17:54,000
And they fear that the reason why it's developing a resistance

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is because Cambodians can't afford the drugs on the commercial market,

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and so they buy it from the Internet.

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And these pills contain only low doses

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00:18:03,000 --> 00:18:05,000
of the active ingredient.

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Which is why

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00:18:07,000 --> 00:18:11,000
the parasite is beginning to develop a resistance.

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00:18:11,000 --> 00:18:13,000
The reason I say this

378
00:18:13,000 --> 00:18:15,000
is because we have to know

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that organized crime

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00:18:17,000 --> 00:18:20,000
impacts all sorts of areas of our lives.

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You don't have to sleep with prostitutes

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00:18:23,000 --> 00:18:25,000
or take drugs

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00:18:25,000 --> 00:18:27,000
in order to have a relationship with organized crime.

384
00:18:27,000 --> 00:18:29,000
They affect our bank accounts.

385
00:18:29,000 --> 00:18:31,000
They affect our communications, our pension funds.

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00:18:31,000 --> 00:18:35,000
They even affect the food that we eat

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and our governments.

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00:18:37,000 --> 00:18:40,000
This is no longer an issue

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00:18:40,000 --> 00:18:43,000
of Sicilians from Palermo and New York.

390
00:18:43,000 --> 00:18:46,000
There is no romance involved with gangsters

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00:18:46,000 --> 00:18:48,000
in the 21st Century.

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This is a mighty industry,

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00:18:51,000 --> 00:18:54,000
and it creates instability and violence

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00:18:54,000 --> 00:18:56,000
wherever it goes.

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It is a major economic force

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00:18:58,000 --> 00:19:02,000
and we need to take it very, very seriously.

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00:19:02,000 --> 00:19:04,000
It's been a privilege talking to you.

398
00:19:04,000 --> 00:19:06,000
Thank you very much.

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(Applause)