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1. Transparency and Reporting on Arms Exports within and from the EU

Author:
Ian Stewart
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
The EU’s annual report on arms export control presently lags behind the national reports of many countries. The introduction of a searchable online database will be a substantial step in increasing the user-friendliness of the report. This paper makes recommendations with regard to readability, comprehensiveness and comparability. Perhaps the principal recommendation is that steps be taken to harmonise the data provided under the categories ‘licensed value’ and ‘actual exports’, which are presently not consistently interpreted across the EU. The main argument of this paper is that the EU should move towards using data visualisation to complement the lengthy statistical tables in the annual report and thus make it more readable. The EU and its Member States should also explore opportunities to enhance the data contained in the report to include additional identified data fields, narrative sections to complement the statistical data, and disaggregated data on licence denials. In identifying additional data fields that could be included, the paper also examines the challenges associated with the provision of the data in each case.
Topic:
Arms Control and Proliferation, Regional Cooperation, European Union, Exports, and Illegal Trade
Political Geography:
Europe

2. Unitary Taxation of Multinationals: Implications for Sustainable Development

Author:
Alexander Ezenagu
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
As part of the United Nations Sustainable Development Goal 16 on the rule of law, Target 16.42 aims to “significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime” by 2030. This policy brief argues that tax avoidance under existing international tax rules gives rise to illicit financial flows and is hindering the sustainable development of African countries.
Topic:
Law Enforcement, Sustainable Development Goals, International Crime, and Illegal Trade
Political Geography:
Africa

3. Global Governance to Combat Illicit Financial Flows

Author:
Council on Foreign Relations
Publication Date:
10-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
International efforts to curb illicit financial flows (IFFs) resemble post–Cold War collaboration in other issue areas that have risen on the global agenda: climate change, global health, internet govern- ance, and cybersecurity. Nongovernmental actors, including private corporations and nongovern- mental organizations (NGOs), have often driven agenda-setting in those domains. The focus has shifted over time, as new issues have been added and as older issues have assumed renewed im- portance. That reshaped agenda has in turn affected the institutional ecosystem of global action, which is captured only in part by formal and informal intergovernmental institutions. These new is- sue areas are characterized not by a single dominant institution or core set of institutions but by mul- tiple clusters of institutions that have each claimed a segment of the agenda and the instruments of cooperation. The result is a fragmented landscape with disjointed actors and organizations that often compete, collaborate, and act in parallel in pursuing their collective ends.1 The term of art for such an institutional landscape, one with several institutional or legal founda- tions, is “regime complex.”1 The regime complex for combating IFFs differs in its complexity from other, similar issue areas. Defining IFFs produces disagreement among researchers, activists, and policymakers. “Illicit” captures a normative judgment perhaps broader than “illegal.” For law en- forcement, IFFs are framed by predicate crimes, activities that are illegal in one jurisdiction or anoth- er and often of greater interest to authorities than IFFs. For those interested in broader global out- comes, such as the effects of IFFs on economic development, “illicit” could include cross-border fi- nancial flows associated with activities that they believe should be forbidden, such as tax avoidance by multinational corporations (MNCs). Those activities may not be illegal, however.2 These categories shift over time: bribery of foreign officials by corporations based in Organization for Economic Co- operation and Development (OECD) countries was made illegal in the United States well before it was criminalized in other industrialized countries. Variations in national treatment of both IFFs of certain kinds and the underlying predicate crimes have made harmonization of national policies and their implementation in many IFF domains difficult. IFFs are also one of the most important features of globalization’s dark side. Unlike other illicit or dangerous cross-border flows, however, IFFs bear almost no markers in and of themselves: pecunia non olet. Tainted food, endangered species, and dangerous individuals all present fewer problems of identification. For IFFs, it is suspicious activity rather than a characteristic of the funds themselves that generates the attention of those attempting to curb the flows. These definitional and identification problems make measuring the effectiveness of counter-IFF policies more difficult than assessing the effectiveness of policies in other issue areas. As many skep- tics and critics have pointed out, without a clear grasp of the scale of underlying flows, the scale of effects, though perhaps not the direction, of policies to counter those flows cannot reliably be deter- mined.3 If the costs of enforcement and compliance or unintended negative effects are included in estimates, the balance sheet becomes even more uncertain. International collaboration to curb IFFs and domestic measures to support that collaboration are directed to a wide array of predicate crimes that produce IFFs (drug trafficking, terrorism, or tax eva- sion) or to negative externalities (global “bads,” such as corruption) that both support IFFs and are sustained and promoted by them. This diversity of IFF sources and effects, and the public policy goals that follow, mobilize an unusually large number of actors: law enforcement agencies, financial super- visors and ministries, private financial institutions, and NGOs. These actors are interested more in certain IFFs and predicate crimes than in others. The links between specific crimes or categories of crime and larger global outcomes of interest, whether economic development or international securi- ty, are often second or third order. As a result, political attention to these issues—and willingness to bear the costs of implementation—fluctuates over time and across jurisdictions. As Peter Reuter and Edwin M. Truman observed in their classic 2004 account, the anti–money laundering (AML) regime (a subset of the complex countering IFFs) “reflects shifting priorities, compromises, and trade-offs.”4 This variation over time is particularly important in combating IFFs, because enforcement depends largely on national governments and both their incentives and their capacity to enact anti-IFF poli- cies. Financial markets and naming-and-shaming campaigns can strengthen those national efforts; they can also direct attention and effort against particular IFFs. However, they cannot substitute en- tirely for government action. What follows is a summary and introduction to organized international efforts to combat IFFs. In order to limit the policy universe, the narrower definition of IFFs used by the World Bank—“money illegally earned, transferred, or used that crosses borders”—will be used to define the wider interna- tional regime complex to combat IFFs.5 Mapping the institutions and actors involved in this issue area over time will capture the evolution of the global IFF agenda and the politics surrounding its de- velopment and implementation.
Topic:
International Trade and Finance, Governance, Institutionalism, and Illegal Trade
Political Geography:
Global Focus

4. Searching for Illicit Dual Use Items in Online Marketplaces: A Semi-Automated Approach

Author:
Bryan Lee, Margaret Arno, and Daniel Salisbury
Publication Date:
04-2017
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
Online business today takes place in a global marketplace. Drop shipments and containerized shipping have made the export and import of materials and finished goods easier than ever. Anyone who has ever purchased something online is already familiar with this world from the consumer perspective. However, online marketplaces are increasingly important for business-to-business commerce as well. Suppliers of many high-tech products use online platforms for both domestic and international transfers, including products that are considered dual-use. Dual-use commodities are items which are used for civilian industry but also have potential application in the development of weapons of mass destruction. As the popularity of online marketplaces increases, so does the risk that illicit trafficking networks can misuse these platforms as a means of gaining access to critical dual-use commodities. Well-known US-based platforms like eBay, Amazon, and Craigslist are thought to have reasonably effective procedures to screen for dual-use materials that might be controlled. However, even these firms have been challenged by the upsurge in use of their platforms for trade in potentially sensitive items. For non-US based platforms, reports highlighting how some sites have been used for illicit trafficking may have brought increased attention to the issue, but it remains unclear how effective screening methodologies are. Further, it is unclear if smaller sites that specialize in business-to-business transfers of industrial materials understand or implement controls on the sale of dual-use technologies. This report explores the value of semi-automated approaches to gather and analyze data from online marketplaces to further understanding of the prevalence of dual-use technologies and the potential for proliferators to use these marketplaces to illicitly procure these items. It concludes that large-scale harvesting of online marketplace information is possible using off-the-shelf open source technologies and basic programming skills. Data gathered through such harvesting methods, however, are of generally poor quality. Machine learning techniques are likely to improve data collection and closer cooperation between online marketplaces and compliance officials would be an effective method of keeping these marketplaces safe and open for business.
Topic:
Digital Economy, Trafficking, Illegal Trade, and Digitization
Political Geography:
Global Focus

5. Taiwan’s Export Control System: Overview and Recommendations

Author:
James Martin Center for Nonproliferation Studies
Publication Date:
08-2017
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
This report provides an overview and assessment of Taiwan’s export control program, with a focus on strategic high-tech commodities (SHTC). It highlights Taiwan’s global position as a major port for both shipping and dual-use exports, identifying the key legislation and organizations that address SHTC exports. It thoroughly examines the key organizations, legislation, licensing procedures, and challenges within Taiwan’s export control system. Overall, Taiwan has a strong, modern export control system, and any deficiencies are similar to other jurisdictions of the same size in terms of trade and shipping. Nonetheless, Taiwan’s isolation in the international community continues to make it a target for illicit trade, including financing of items related to weapons of mass destruction (WMD). Using open-source data, this report identifies twenty-five export-control cases involving Taiwanese persons and/or entities. All of these cases were prosecuted in Taiwan or abroad. In an attempt to identify unprosecuted cases, researchers incorporated publicly available data, including the Panama Papers. The report finds no evidence of unprosecuted illicit WMD-related trade. Despite its international isolation, Taiwan has an opportunity to become a leader in safe international trade. By fully embracing export control and proliferation finance laws and enforcement, Taiwan could become a natural hub for export controls
Topic:
Arms Control and Proliferation, Nuclear Weapons, Weapons of Mass Destruction, and Illegal Trade
Political Geography:
China, Taiwan, and Asia

6. Countering North Korean Procurement Networks Through Financial Measures: The Role of Southeast Asia

Author:
Eda Erol and Leonard Spector
Publication Date:
12-2017
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
This Occasional Paper is made up of four studies intended to aid Southeast Asian governments and financial institutions in their efforts to counter the financing of weapon of mass destruction programs in North Korea and other states of concern. “Countering North Korean Procurement Networks through Financial Measures: The Role of Southeast Asia,” highlights how North Korea has exploited weak financial controls in the region to advance its nuclear and missile programs. The study reviews Security Council and Financial Action Task Force actions to combat such abuse of the international banking system, as well as the role of US sanctions. Effective implementation of these measures in Southeast Asia, the study concludes, could contribute significantly to constraining North Korea and other proliferant states. “Needed Next Steps to Strengthen Measures to Counter Proliferation Finance,” identifies gaps in international measures to combat proliferation finance, and calls on the Security Council and the Financial Action Task Force to clarify standards for national-level implementation of counter-proliferation-finance rules and to adopt improved enforcement mechanisms. The analysis urges Southeast Asian governments and financial institutions to implement existing measures with greater vigor. “Chinpo Shipping: A Singaporean Financial Agent of North Korea” details how North Korea created an off-shore de facto bank to finance its illegal activities and how Singapore’s courts addressed the first known prosecution for financing proliferation. The case underscores that greater due diligence by banks and regulatory authorities is urgently needed. Finally, “Due Diligence and the Panama Papers Episode: Lessons for Proliferation Finance,” shows how a North Korean bank, denied access to the international banking system, set up an off-shore entity to transact its business. The analysis calls for greatly strengthened enforcement efforts by offshore tax havens, closer scrutiny of clients by banks and law firms conducting international business, and greater efforts by Southeast Asian governments to block sanctions-violating front companies from accessing their banking systems.
Topic:
Law Enforcement, Illegal Trade, Procurement, and Banking
Political Geography:
Asia and North Korea

7. Outlawing State-Sponsored Nuclear Procurement Programs & Recovery of Misappropriated Nuclear Goods

Author:
Leonard Spector
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
State-sponsored illicit nuclear-procurement activities have played a crucial role in advancing the nuclear programs of Iran and North Korea and will undoubtedly be used by the next country that seeks to pursue a nuclear-weapon capability. Such repeated state-sponsored abuse of other states’ export-control systems undermines a key objective of UN Security Council Resolution (UNSCR) 1540, which requires all states to adopt such controls. However, as this study details, this dangerous conduct has never been condemned as a distinct offense against international norms and rules sufficient to trigger sanctions or other punitive action against the offending state. This study proposes to outlaw state-sponsored illicit nuclear-procurement programs through the accretion of declarations by international and multilateral bodies condemning this conduct and expressing the intention to consider punitive measures in future cases where this conduct is observed. Even if consensus on such a declaration cannot be reached in every relevant forum, repeated, well-publicized demands for such action by a group of diplomatically influential aggrieved states can have a significant deterrent effect. Importantly, with illicit procurement activities often serving as an early indication of a clandestine nuclear-weapon program, establishing this activity as an offense against international norms would set the stage for early, concerted action against the next offending state, well before its nuclear program might approach its goal.
Topic:
Nuclear Weapons, Nonproliferation, Illegal Trade, and Procurement
Political Geography:
Global Focus

8. A Crime Pattern Analysis of the Illegal Ivory Trade in China

Author:
Jiang Nan
Publication Date:
06-2015
Content Type:
Working Paper
Institution:
Australian National University Department of International Relations
Abstract:
The illegal ivory trade fuels illegal elephant poaching in both Africa and Asia. The illegal ivory trade in China is considered a key threat to the survival of the elephant species: since 2009, China has become the largest illegal ivory market in the world. Although China has uncovered a great number of cases of illegal ivory trade with the seizure of illegal ivory in the past decade, this trade is still growing. A deeper understanding of the nature and patterns of illegal ivory trade through an analysis of ivory seizure data should improve the efficiency of efforts to prevent the illegal ivory trade in China. This paper analyses data on 106 seizures of illegal ivory that was collected from Chinese news reports between 1999 and 2014, with a particular focus on its frequency and illegal trade ‘hotspot’ locations in China. The analysis found three illegal ivory trade cycles (2001–2005, 2006–2010, and 2011–2014) and four hotspots. Preventing the illegal ivory trade will require more international cooperation and coordination between China and other countries.
Topic:
International Cooperation, Trade, Illegal Trade, and Ivory
Political Geography:
Africa, China, and Asia

9. Countering Nuclear Commodity Smuggling: A System of Systems

Author:
Leonard Spector
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
James Martin Center for Nonproliferation Studies
Abstract:
A comprehensive Center for Nonproliferation Studies report calls on the United States and other concerned countries to adopt tighter controls to stem the flow of nuclear-related goods to Iran, North Korea, and other states of proliferation concern. Even modest improvements across the spectrum of today’s nuclear technology controls could greatly strengthen overall international efforts to constrain illicit nuclear procurement networks, the study found. The now available report, Countering Nuclear Commodity Smuggling: A System of Systems, was prepared by Leonard S. Spector and Egle Murauskaite. The study was supported by the US Department of Defense.
Topic:
Nuclear Weapons, Science and Technology, Nuclear Power, Nonproliferation, and Illegal Trade
Political Geography:
Iran, Middle East, Asia, and North Korea

10. Arms Trafficking: The International and Domestic Legal Framework

Author:
Oona A. Hathaway, Elizabeth Nielsen, Chelsea Purvis, Saurrabh Sanghvi, and Sara Solow
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Center for Global Legal Challenges, Yale Law School
Abstract:
The conventional arms trade,2 both legal and illegal, is vast in scope. As of 2001, there were an estimated half billion documented small arms in the world, more than one for every twelve people.3 International arms sales are a booming business, and the United States is the world’s largest exporter. In 2008, worldwide arms transfer agreements reached a value of $55.2 billion, of which 76.4% involved developing nations.4 The United States accounted for $37.8 billion, or 68.4%, of these worldwide arms transfer agreements,5 and U.S. activity falls into five categories: foreign military sales agreements between foreign governments and the Department of Defense, direct commercial sales to foreign buyers negotiated by U.S. companies, leases of military equipment by U.S. entities, excess defense materials, and emergency decreases of weapons stockpiles.6 An extensive legal regime has emerged at the international and domestic levels to regulate conventional arms trafficking. This report aims to provide an overview of that framework. It surveys existing international arms trafficking agreements and provides an analytic framework for distinguishing between them. It also surveys the domestic legal framework regarding arms trafficking. Together, these overviews provide a starting point for identifying the shortcomings of existing law, identifying gaps in the legal framework as it currently operates, and considering options to begin to address these shortcomings. This report begins in Part I by briefly outlining the scope of the problem of conventional arms trafficking. It then turns in Part II to identifying three fundamental axes on which international arms trafficking agreements differ. First, each agreement targets one or more points in a conventional arms life cycle: it targets the point of production; the point of domestic ownership and transfer; or the point of interstate transfer. Second, agreements differ in the scope of weapons they cover—they may target different classes of weapons (such as major conventional weapons, small arms and light weapons, and dual-use technologies) and different legal categories of weapons (for example, some cover both legal and illicit weapons, while others only focus on illicit weapons). Third, agreements differ in terms of their enforceability: some are legally binding while others set nonbinding goals. Part III of the report examines the ways in which the United States regulates arms trafficking through its domestic laws and international agreements. It shows that the United States places strong controls on interstate transfers of arms, but it has a more mixed record when it comes to regulating earlier stages of the arms life cycle. While U.S. law places a number of marking and recordkeeping requirements on arms producers and sellers, domestic ownership laws are lax compared to those of other countries. Part IV shows that there are three major gaps in extant arms trafficking agreements. First, the international agreements that are the most enforceable either fail to target arms trafficking at multiple points in the life cycle or fail to cover a broad scope of weapons. Second, arms trafficking agreements do not adequately regulate the illicit resale of arms in the black market after they are produced and sold for the first time legally. This is because there is no binding and enforceable agreement that requires states to track all domestic weapons transfers, from their initial sale to the final sale before their export. Finally, major arms suppliers, such as the United States, are not party to several major arms trafficking agreements. To address these shortcomings, this report offers three options available to U.S. policymakers for strengthening arms trafficking laws. First, the United States could increase multilateral engagement by ratifying the leading regional arms trafficking agreement, Inter-American Convention Against Illicit Manufacturing of and Trafficking in Firearms, Ammunitions, Explosives, and Other Related Materials (CIFTA). Doing so would likely require no changes in U.S. domestic law but would strengthen the U.S. ability to coordinate its arms control efforts with other countries while encouraging other countries to more effectively address arms trafficking. Second, the United States could increase bilateral programmatic assistance to address arms trafficking—at the very least by taking arms trafficking into account in existing assistance programs. Finally, the United States could engage more actively in leading negotiations over a robust and comprehensive arms trade treaty. Such an agreement would ideally aim to bring the international legal standards developed in CIFTA to the global stage. In leading the way toward such a comprehensive treaty, the United States could encourage universal adoption of the high standards the United States already has in place to ensure that arms are not transferred for illegitimate purposes—purposes that may directly affect U.S. security interests.
Topic:
International Trade and Finance, Arms Trade, Trafficking, Legal Theory, and Illegal Trade
Political Geography:
Global Focus