Home inFocus America's Global Reach (Summer 2013) Illicit Networks and Global Security

Illicit Networks and Global Security

Guermantes Lailari Summer 2013

Society is becoming more acutely aware of the pernicious effects of illicit activity—from drug trade often conducted in broad daylight on street corners across major global cities to the more hidden world of human trafficking—and faces serious choices about how to deal with the problem. Recently, the National Defense University Press published Convergence: Illicit Networks and National Security in the Age of Globalization [Ed. Michael Miklaucic and Jacqueline Brewer] presenting a full array of national security challenges facing a highly globalized and globalizing world. The contents would not be a surprise to those who read the daily papers and Internet news about cartels, gangs, money, and corruption. Nevertheless, the fact that the National Defense University has come to consider them to be national and global security problems is a step in a new—and important—direction.

The Size of the Problem

In 1982, Roberto Suárez Gómez, a Bolivian drug trafficker, offered to retire the Bolivian national debt of $3.8 billion on the condition that the U.S. Drug Enforcement Agency release his son. In 1986, in a similar episode, Pablo Escobar Gaviria, the infamous Colombian Medellín Cartel leader, offered to liquidate his drug empire worth about $13 billion in 1986 to pay off Colombia’s entire national debt in exchange for amnesty for his business partners and himself. Although neither of the South American countries accepted the offer, it does demonstrate the vast wealth that illicit activities generated even at that time and the resulting dangerous power it can and will wield.

The UN estimates that the total value of the illicit drug trade is approximately 0.9% of gross world product ($83.12 trillion in 2012), which is about $748 billion, and the resulting cost to world society for drug treatment is $200-250 billion. In effect, the total cost of illegal drugs to society is $1 trillion. Also according to the UN, the monetary value of human trafficking is over $100 billion. The 2012 UN Office on Drugs and Crime report, Global Report on Trafficking in Persons, states this includes sexual exploitation, forced labor, begging, petty crimes, removal of organs, and other types of exploitation. Less discussed is the total value of corruption, accounting for approximately $1 trillion, and the value of counterfeiting, which reaches towards $6 trillion. While it may be argued that money laundering would be counting illicit funds twice, each illicit transaction should be accounted for until the money is no longer in the illicit channel. As such, the estimated value of money laundering is $6 trillion.

A good example of money laundering is Hezbollah’s use of the Lebanese Christian Bank. The American and Canadian governments caught Hezbollah’s Ayman Joumaa drug trafficking and money laundering network conducting a large international scheme in which Lebanese financial institutions—including the Lebanese Christian Bank (eighth largest bank in Lebanon, worth over $5 billion) and two exchange houses—used the U.S. financial system to launder an average of $200 million per month in narcotics trafficking and other criminal proceeds through West Africa and back into Lebanon. This represents only one of Hezbollah’s numerous illicit networks operating throughout the world. In the United States, Hezbollah’s illicit activities include racketeering, money laundering, terrorism financing, weapons and planning, tax evasion, drug running, car theft rings, human trafficking, and credit card and bank fraud.

All these activities also have corrosive effects on society and the estimated total value falls somewhere between a (very) low of $1.5 trillion and as much as $15-16 trillion dollars—the equivalent of the 2012 U.S. GDP ($15.6 trillion) or approximately twice China’s GDP ($8.2 trillion). Imagine the influence of an economy as large as the United States on world financial institutions, global markets, political and governance institutions. Imagine how the world, each nation and each citizen could benefit from such a market if it were above ground. Imagine the amount of education, health care, infrastructure, and other constructive actions that could be used to make the world a better place. Instead, the illicit networks have wealth beyond their wildest dreams that corrupt industry, people, and the governance of nation states. These activities cause a drain on available resources, deprive governments of revenues to distribute based on well thought-out policies, distort decision-making, cause rent-seeking activities, and often impose negative externalities such as air and water pollution.

The Clinton administration analysis, International Crime Threat Assessment (2000), posited three major categories of threats caused by transnational organized crime: threats to Americans, threats to business and financial interests, and threats to global stabilization. (See Figure 1) Some of the specific areas overlap and others do not. Some new areas that were not well-developed at the time but are now highly developed include globalization as well as a huge array of Internet crimes.

The U.S. and other governments can no longer operate effectively and efficiently using specific legal authorities designed for the 20th century and not for a highly sophisticated 21st century illicit network. Although Congress and the Executive Branch have encouraged department and agency collaboration, unless their respective leadership makes it a priority, and as long as the mission and resources of their respective organizations are not at risk, they do not have financial or operational incentives to work together. Illicit networks can take advantage of these authority and capability seams and exploit them not only within a country but also between countries.

Figure 1

The Future: Lack of Resources

According to the authors of Convergence, food, water, and energy supplies will be the causes of future conflict. There are many examples where the requirement for oil has led to war. Take, for instance, the U.S. embargo of oil and rubber against Japan to pressure the Japanese to stop their Asian aggression in the late 1930’s. More recently, one pretext for Saddam Hussein attacking Kuwait in 1990 was the accusation that the Kuwaitis were stealing Iraqi oil by slant drilling, thus decreasing the money available for Iraq to rebuild itself after eight years of war with Iran. Various parts of the world, including nuclear-armed China and India, are and will be facing serious water stress, water scarcity, and water pollution challenges for their current and growing populations. Lack of sufficient water will lead to lack of food and increases in diseases and probably conflict.

As the world population increases from seven billion (achieved in 2011) to approximately nine billion by 2050, the challenge of finding sufficient food, water, and energy supplies will force those with the largest demands (the top eight are estimated to be India, China, United States, Pakistan, Indonesia, Nigeria, Bangladesh, and Brazil) to find supplies for their populations. Securing the movement of these supplies (referred to as lines of communications in military terminology) will also be critical as food, water, and energy will come from farther and farther distances.

However, if the nation-state cannot find a solution to resource scarcity problems, populations will find alternative means to meet the demand. Accordingly, more people will migrate legally or illegally and/or join illicit groups such as gangs and transnational organized criminal groups to survive. The sheer demographic growth will create greater demand for all types of illicit activity such as human smuggling and trafficking. For those who do not leave resource-scarce areas, gangs will naturally increase where the state cannot keep up with the challenges associated with the resource dilemma.

Ecologist Garrett Hardin wrote in 1968 to explain how in unregulated societies self-interest guides decisions that lead to destructive results for everyone, which he termed “the tragedy of the commons.” Furthermore, corruption rises in places that have scarcity as well as locations where the legal systems are weak. Events such as economic downturns or global shifts in the environment associated with pollution will exacerbate many of the problems listed above. These problems challenge governance even in normally stable, democratic regimes; an example of this occurred during the Great Depression in the late 1920s through the mid-1940s.

Besides non-state activity, there will also be an increase in state-encouraged or state-supported illicit activity. In most Western countries with strong criminal justice systems, governments are able to mitigate the problem. However, while the War on Drugs simply failed to stop the drug problem in the U.S. both on the supply and demand sides, other countries are themselves actually producing problems. For example, Chinese manufacturers have produced and are producing counterfeit and pirated goods, and conducting online piracy and patent infringement. The most recent Department of State U.S. Trade Representative’s Special 301 Report, as well as various articles and books, including Illicit by Moisés Naím, highlight these violations. Countries such as North Korea are so completely criminalized that they are directly involved in a variety of illicit activity, including counterfeiting U.S. $100 bills and violations of WMD proliferation to pariah countries such as Syria and Iran. Weak states such as Guinea Bissau (ranked 150 out of 176 in Transparency International’s corruption index) and Guinea (ranked 154 out of 176) have become major drug trafficking routes for drug smuggling from Latin America to Europe and they have a persistent corruption infestation.

Another example of the proliferation of illicit activity occurred after the break-up of the Soviet Union. When the USSR collapsed and Russia emerged under the suzerainty mostly of former KGB officers, it opened up a floodgate of illicit activity from arms smuggling to human smuggling starting in the late 1980’s. Similarly, other states breaking up could add to the fire of illicit activity that would ensue. Examples here include the breaking up of the former Yugoslavia as well as most recently Sudan creating Southern Sudan. Currently, the pattern of state break-up or breakdown appears to be occurring in the Middle East as former totalitarian regimes are being replaced by Islamist regimes (Egypt and, increasingly, Tunisia) or highly factionalized groups controlling different parts of a country (Iraq, Syria, Lebanon, and Libya). These break-ups also lead to increased illicit activities, such as arms smuggling, atrocities, corruption, and more.

Costs to Society

Many of the costs to society for these illicit activities are outlined in the previously mentioned Clinton administration report, International Crime Threat Assessment (2000). Illicit activity damages the nation-state since the activity incurs costs to society in the following three major categories: social, political, and economic, which overlap in various ways (Figure 2).

Figure 2


As a practical matter, most nation-states acknowledge that they tolerate a certain level of crime and corruption. When the crime becomes so bad that it corrodes state institutions (states with the highest corruption index such as Somalia, North Korea, and Afghanistan) or overwhelms the ability of the state to counter the violence (Northern Mexico), it can become a national security issue for that specific state as well as for neighboring countries. When international corporations are not willing to invest in these countries, the countries are less able to compete in the global market and become overwhelmed by “deviant globalization.” (Nils Gilman, Jesse Goldhammer and Steven Weber use this term in their 2011 book, Deviant Globalization: Black Market Economy in the 21st Century.) Then the illicit economy begins to take over. This process can lead to the collapse of the government, for example, when tax revenue declines because the government cannot tax illicit trade. Furthermore, many countries have endemic corruption throughout their bureaucracies that diverts funds from one sector to another to benefit some at the cost of the others. The corruption is not only within the bureaucracy; it disrupts legitimate business and creates an environment where illicit business becomes normal and accepted. This challenge can become a vicious cycle by destroying the justice system as well as the possibility of foreign investment due to the high entry costs and unreliable system and laws concerning the prohibition of participating in corrupt business practices.


There are some practical mechanisms for dealing with the problems described above. One would be for governments and law enforcement agencies to pursue the key personnel who enable the illicit trade to occur—the “shadow facilitators” or “super fixers,” including Viktor Bout or Monzer al-Kassar. By taking down these illicit arms traders, the network suffers from a lag time to reconstitute as well as the need to create a new trust group. The intent is not to destroy, rather to disrupt the system, which makes it effective only up to a point. Another important focus would be to prevent the use of laundered money in real estate with greater transparency on the sources of the money used in real estate purchases and better regulation. This would mirror the better job of due diligence banks have done in tracking money flowing through the financial system and mirrors guidelines recommended by the Financial Action Task Force (FATF)—the main international organization establishing international standards for combating money laundering and terrorist financing.

The web of international illicit networks challenges policy-makers and citizens to face the problems based on the most current academic research by the best researchers in the field. However, like the tip of an iceberg, what we see and what we know indicate that there is more below the surface. As government and industry plan to tackle these problems, there will be second and third-tier effects that will need to be taken into consideration. One thing is certain—the growth and spread of illicit networks makes it clear that doing nothing will lead to a world where there will be an increase in the number of nominal or collapsed states and a concomitant increase in global insecurity.

Guermantes Lailari is a retired USAF Foreign Area Officer who specialized in counterterrorism and the Middle East. The views expressed in this paper are those of the author and do not reflect the official policy or position of the U.S. government or Virginia Tech Applied Research Corporation.