How Globalization Affects Transnational Crime

As world leaders increasingly debate drug legalization, CFR's Stewart Patrick and Phil Williams of the University of Pittsburgh discuss the explosion of transnational crime in a globalized world:

- "Transnational criminals have been one of the biggest beneficiaries of globalization," Williams says. Globalization facilitates international trade but also increases the difficulty of regulating global trade, he says; traffickers and smugglers have exploited this. Williams adds that globalization has increased inequality around the globe, and that "its disruptive effect has actually caused people to have to go into organized crime and operate in illicit markets as coping mechanisms."
- The global financial system has undergone widespread deregulation since the 1970s, allowing illicit actors to launder the proceeds of crime more easily, Williams says. "We've got some reregulation to try to deal with money laundering ... but it's not particularly effective," he adds.
- Terrorists, insurgents, and warlords all rely on illegal activities as a funding mechanism, says Williams. "Sometimes, when they engage in a criminal activity, they come into contact with criminal organizations, but for the most part, the direct group-to-group link is not that important. It's just a market activity or a supplier relationship," he notes, disputing the idea of a "crime-terror nexus."
- "There's no single model of a criminal organization," Williams says. The conventional wisdom that criminal networks have abandoned their hierarchical structure, he says, obscures the fact that criminals adopt myriad distinct structures depending on their circumstances--and some of them remain hierarchical.
- Illicit networks are challenging to states because states are militarily and diplomatically organized to deal with other states. Governments around the world "have found it very hard to adapt to non-state or sovereignty-free actors," Williams says.

This video is part of The Internationalist, a series dedicated to in-depth discussions about leveraging multilateral cooperation to meet today's transnational challenges.

http://www.cfr.org/global-governance/internationalist-08/p28403

This is Stewart Patrick

On this installment of the internationalist,

we'll be talking about
one of the biggest problems

confronting the international community.
That's the scourge of transnational crime.

We're fortunate today to be joined by
one of the major experts in global crime,

Phil Williams who's the Posvar Chair
in international security at the

University of Pittsburgh.
Phil it's great to have you here.

-Stewart, it's great to be here.
-Absolutely delighted to see you again.

It's often said that transnational
criminals have been one of the

biggest beneficiaries of globalization.

Is it true that transnational crime has
exploded since the end of the cold war?

And why has it been so hard for
nation states, either individually,

or collectively, to actually come
to grips with this phenomenon?

Two great questions. I think the first
is, I think it's clear, globalization has

been very beneficial trans-nationally
in several ways

First of all it's been a great facilitator
so the increase in global flows,

for example, and the intermodal container
have been absolutely wonderful for

various kinds of
smuggling and trafficking.

So that's the first way.
The second way is that globalization

hasn't raised all boats,
it's actually had winners and losers.

Its disruptive effect I think has actually
caused people to have to go into organized

crime and criminal activities and operate
in illicit markets as coping mechanisms.

(Stewart) Has there been a
connection at all between

the increase in transnational criminal
activity and movements towards

liberalization of financial flows
as well and sort of the

creation of global capital
markets and global -------?

Yeah, what you saw from the 70's onward
was the deregulation of global franchises.

And we got some new regulation to try to
deal with money laundering, but it's not

been particularly effective I would argue.
That took on further dimension after 9/11

when money laundering and terrorist
finance were conflated even though they

are in fact very different. Terrorists
are about raising money and using it for

nefarious purposes, they generally don't
launder much money. Whereas for criminals,

it's all about the proceeds of crime,
turning those proceeds from being

illegitimate to seeming to be
the product of a legitimate activity.

(Stewart) You mentioned terrorism,
a lot has been made,

especially since 9/11, of this supposed
nexus that is emerging between

transnational organized criminal
networks on the one hand,

and transnational terrorist groups
like Al Qaeda and Hezbolla.

What's the evidence,
how do you see this relationship?

I think there's an awful lot of
nonsense talked about that relationship.

I think the term nexus is politically appealing,

analytically appalling in this context.

But there is some basis for it and
the basis is that what we've seen is

a variety of violent armed groups, terrorists,
insurgents, warlords, engage in

criminal activities as a funding mechanism
and I think that's the key.

Sometimes when they engage in a criminal
activity, they come into contact with

criminal organizations. But for the most
part, the direct group to group link

is not that important or is just a market
activity or supplier kind of relationship.

There are exceptions. I think particularly
in insurgencies where the insurgents

and criminals are collocated, both
geographically, and in a common

opportunity space, in those circumstances
you tend to get cooperation.

A good example is kidnapping in Iraq.
Where there were groups in it

just for profit but would sometimes
kidnap people to order

from jihadi groups and would sometimes
kidnap people on speculation that they

could then sell them off.

(Stewart) You mean as a fundraiser

Well, for them it was
all about the profit.

For the jihadi groups,
it was both profit and politics.

When you think about conventional wisdom
and international criminals, the idea you

often have in mind is the mafia, the
hierarchical organization,

the Pablo Escobars and this
sort of previous generation.

(Stewart) When we're talking
about networks, has

the nature of how these operations
are organized changed?

I think it has. I think we're seeing a lot
more networked organizations which are not

the strict hierarchy. But again, we have
to be very careful because there is no

single model of a criminal organization.
I think you've got a great variety of

different kinds of
organizational structure.

One of the things we thought about for
many years was the 'Ndrangheta, the

Calabrian group over in Calabria,
but also operating extensively in Milan,

and with a global presence.
The standard view was

that the 'Ndrangheta
was, essentially networked,

and then as a result, a couple years ago,

of a major electronic eavesdropping
operation and 300 arrests,

they actually found that is was more
hierarchical than they thought.

There was a kind of
directing group at the top.

(Stewart) So there are still some models-

There are still, and I think there are a
lot of hybrids, too,

that we don't fully understand.

But I think the problem with a lot
of people who study it is

we tend to think sometimes,
this is the model, it's the only one.

And the world is really much more
diverse and complex than that.

A lot of people have pointed to the
relationship between

transnational criminal networks
on the one hand, and

weak and failing states.

I'm wondering how you see the
relationship between the sovereign,

territorial state and criminal networks.
What sort of attributes,

if you were going to exploit a state,

do they look for that and are they even as
dependent on states as much as

conventional wisdom would have?

I think they are.

These are what Jim Rosenau
once called sovereignty-free actors.

And I think states are very bad at dealing
with sovereignty-free actors.

States are geared up, they're organized,
both their diplomatic and military

capabilities are organized
to deal with other states.

So I think they found it very hard to
adapt to non-states,

or sovereignty-free actors.

So that's the big problem, and I think
you can see this in many ways.

I mean, when the US went into Iraq,
in the summer of 2003,

there was a UN delegation that actually
came and looked at organized crime.

They did a fabulous 30 page report,
saying this is going to be a huge problem.

One of the people on that delegation
once told me that when

they tried to brief US military and
civilian leaders in Iraq,

they were met with a mixture of
hostility and indifference.

(Stewart) A sort of not my lane?

This is not my lane and yet, it
contributed to that enormous

sense of security in the years after 2003,

and then the insurgents jumped on the
bandwagon, and realized

this could also be a big moneymaker.

And I think this is true, in general,
of insurgencies everywhere, now.

We've seen it with Farc, where some people
actually think it's actually even

transforming into just
a drug trafficking ring.

(Stewart) Exactly

Although I don't buy that completely,
I think it's much more a hybrid group.

But we see it in Farc, we see it with
groups like the Taliban,

the Haqqani network in Afghanistan.

So this is a global phenomenon where
a lot of political groups are using

criminal activities as
a funding mechanism.

(Stewart) Now the Obama administration

But, we didn't deal with
the weak state part of it.

Generally, I think, organized crime
loves weak states.

It doesn't want failed states,
but it likes weak states.

(Stewart) Failed states are too complicated
for everybody to deal with.

That's right. But a weak state is
wonderful. All states have

weaknesses, capacity gaps and
functional holes.

Criminals can exploit those, and
sometimes they become a surrogate

for the state. This is why I think many
organized crime groups and certain

insurgencies provide alternative
forms of government.

The Pentagon's had this notion
of ungoverned spaces.

I can think of very few
ungoverned spaces.

There are a lot of spaces that are
alternatively governed

by someone we don't like.

(Stewart) Right, alternatively governed,
not ungoverned.

Final question relates to what can be
done at the multilateral level.

I know the Obama administration came out
with a national strategy for confronting

transnational organized crime. The US
seems to come up with one about every

10 years or so. And the European security
strategy of earlier, not quite a decade

ago, talked about organized crime
as one of the biggest threats

but at the international level,
what are the major failings or weakness

in the UN system or organizations
that you'd like to see filled?

Well, I think generally,
multi-lateralism is problematic.

I think you've got to do it,
but I think we tend to see

lowest common denominator solutions,
we see buck passing,

we see kind of dilution of policies

because you've got to try to bring everybody

on board through consensus.

So I think there are inherent
weaknesses in multi-lateralism.

I also think both states,
and the community of states

are still bureaucratic, hierarchical,
slow to operate, slow to respond

to groups that are very agile,
very networked, very flexible

and able to respond very quickly both
to opportunities and to dangers.

(Stewart) Well, Phil Williams,
thank you so much for joining us

on this installment of the internationals.
If you'd like to join the conversation,

please join us on my blog,
The Internationalist, at cfr.org