Plumbing the Depths of the “Shadow Economy”: Reflections of an Antiquities Trade Scholar at an Organized Crime Workshop

shadow economy, illicit trade

On the 12th November, I attended a very special workshop, held at the stunning Stamford Plaza hotel in Brisbane, Australia. Hosted by both CEPS (Centre for Excellence in Policing and Security) and the ASMF (Australian Security Medals Foundation), it brought together a number of regional and international experts from academia, law enforcement, INTERPOL, police forces, and private security businesses.

With the aim of “exploring a range of issues relating to the nature and extent of illicit trade/intellectual property crime and law enforcement,” this post will summarize proceedings and, most importantly, explore connections between these areas of criminological practice and the seemingly “tangential” study of the antiquities trade. As was emphasized by the first presenter (Srgt. David Lake, Phoenix, AZ police), we are all part of the same over-arching “shadow economy.”

The workshop opened with what was, to me, a very fitting analogy. Mr. Rod Cowan, of the private security firm SecurityIsYourBusiness, began by poignantly revealing that he had stage 4 cancer! Why? Well, because as he himself has been experiencing, with diligence, treatment, and intervention, one can bolster their immune system to defeat, or at least keep in check, a ‘sickness’ even that severe.

By extension, he related that at an INTERPOL conference on organized crime/security last year, he just so happened to be the only Australian in the room, and when a map highlighting which countries had the most recent cases/highest rates of theft, Australia didn’t even appear.

“Either this means that Australia is doing everything right….or that people aren’t paying nearly enough attention.”

The take home message here, worth sharing, was that those of us gathered in the room (security specialists, academics, lawyers, criminologists, INTERPOL legal reps, former undercover agents, etc.) should see ourselves as “society’s immune system,” there to monitor and expose the illicit “shadow economies” that are costing many industries untold amounts of money, as well as jeopardizing the world’s cultural and biological heritage. Although the focus of the workshop was the Australian region, the lessons and information shared have worldwide applications.

shadow economy, Phoenix PD Srgt. David Lake, Phoenix Police Department, discussing the “shadow economy in counterfeit goods.

To begin with, Srgt. David Lake of the Phoenix PD gave an informative talk on what he called ‘economics based policing’, and how the aforementioned “shadow economy” affects us all. Regardless of the type of illicit activity being encountered, it was stressed that we must find new ways to respond as fast as perpetrators (if ever possible…), and react before violence and massive increases in ill-gotten gains reveal themselves as “symptoms.” Giving examples from the US/Mexico border, he detailed how cartels are moving into the counterfeit goods racket (organized commercial crime), with profits as much as 600% greater than the already staggering amounts gained from narco-trafficking.

If the legitimate economy holds that the customer is always right, then the task of all criminal syndicates from the demand end is to divert them (us) into participating in this “shadow economy.” What was so illuminating to me is that his talk, and others, brought the perspectives of once/former business owners and police to mind.

What does the shadow economy comprise of? Everything from untaxed labor to kickbacks, counterfeits, IP theft, fraud, e-crime, drugs, illegal gambling, the sex trade, and of course wildlife and antiquities.

As a store owner turned cop, he allegedly understood all about the logistics required to move products in bulk onto the licit market, and thus made it abundantly clear that criminals who could, for example, move 18,000 stolen lobsters in 12 hours in the US, or collectively rob 3.5 trains/day in Mexico, would already have markets identified.  Thus, it is crucial, he emphasized, that we “stop it at the marketplace,” as “once it’s out of legitimate supply, we’ve lost…”

People decide to traffic in stolen goods for a number of reasons, primarily involving feeling overly regulated or taxed by the rules of the licit market. In Australia, according to Srgt. Lake, the shadow economy now exceeds 15%, and is substantially greater in the US, Mexico, parts of Europe, etc. Apparently, if all counterfeit production was stopped globally, the economies of 60 countries (!) would collapse. From the law enforcement side, better understanding and monitoring “market re-entry points” at local and global scales is vital.

Mr. Philip Flogel, of NSW Fair Trading continued discussions around themes of the effects of the “shadow economy” on the legitimate economy and consumer safety, by initially discussing the synthetic drug market and that, even though all such products are currently banned under fair trade laws and the number of cases in hard-hit towns like Newcastle are down, forensic toxicologists can barely keep up with identification. Other examples of more local scams and crimes that exploit consumer demand via the creation of false markets include a recent rash of “driveway repair” scams in the US and elsewhere, internet fraud (suggestion to antiquities trade scholars: if a dealer ONLY has online purchase available, take special notice), and of course, counterfeit clothing.

As Mr. Flogel, and the next speaker, Mr. Ken Taylor (Trademark Investigation Services), profits from counterfeit brand-name clothing appear to be skyrocketing in Australia and beyond, despite numerous laws in place, and much media attention when raids are conducted on market stalls. The hiring of private security companies to investigate such cases has markedly increased over the last few years, in part due to Australian legislation that allows anything with a declared value of $1,000 or less automatically gets through Customs with no GST (unless the package is visibly dripping blood or ticking, perhaps…). In the case of counterfeit clothing, make-up, etc., storage space needs for goods seized can be substantial, and (alas) cases can take years to reach trial. Both speakers on this topic stressed that much more cooperation is needed between investigators, security firms, and law enforcement on all scales.

Australian Customs agents inspect a counterfeit goods seizure. Brisbane, 2009. Australian Customs agents inspect a counterfeit goods seizure. Brisbane, 2009.

Following on from this, Ms. Julie Ayling, from RegNet, at the ANU, gave an interesting talk on what’s called “TEC,” or Transnational Environmental Crime. This can involve everything from illicit polluting, timber trafficking, illegal fishing, and of course the wildlife trade; with a combined estimate of $31 billion/yr (?) Hard to know, really…

Like counterfeiting or the antiquities trade, TEC also represents a “poly-crime,” i.e. run by organized and well-financed criminal networks who also dabble in other trades (e.g. Irish groups robbing rhino horns from museums, dealing drugs, doing driveway repaving scams, etc.).

As was pointed out, TEC is an “economic” crime as well, given how difficult it has been to prevent poaching from the supply end, lingering corruption issues, and the losses to “source” countries that suffer diminished chances for wildlife tourism. Parallels between this and potential lost cultural heritage/archaeology tourism revenues in countries affected by the antiquities trade are readily apparent.

The final speaker during the morning session was Dr. Rick Brown, of the Australian Institute of Criminology. His talk provided a very unique perspective; presenting the findings of qualitative and quantitative research investigating small stolen goods markets “at street level” using qualitative and quantitative data solicited from 3-4,000 detainees for drug offences in four cities. The most important information to come from this data, in my opinion, are that we must not underestimate the role of informal networks and dealers themselves when it comes to moving small-scale portable goods (whether that be antiquities or burgled computers).

Dr. Rick Brown, Australian Institute of Criminology Dr. Rick Brown, Australian Institute of Criminology: Don’t underestimate the role of informal networks!

In this study, locally available drugs in each city allegedly decreased over time, but results suggested that users who steal were having to steal more and convert more to cash within their own informal networks to afford their habit.

Here, demand reduction in one area (drugs) does not necessarily mean less crime or effective outreach.

This seems to be mirrored in the antiquities trade, where increased apprehension and confiscation of larger pieces has begun to translate into greater due diligence performed by all market actors, but the trade in smaller items along more informal networks remains confounding.

The final three speakers of the day consisted of Prof. Duncan Chappell (Faculty of Law, University of Sydney), Ms. Rosella Mangion (INTERPOL legal rep), and Sir Ronnie Flanagan (former Chief Constable of the Police Service of Northern Ireland, now advisee to British American Tobacco over the illicit cigarette trade). Prof. Chappell’s talk was more or less what he and I presented at the Protection of Cultural Property in Asia conference in February this year. As our research into Australian and Southeast Asian antiquities markets continues, we can increasingly argue that market reduction is a sound approach. Of course, market reduction in the absence of (questionably effective) sanctions will make no further progress without further outreach.

Ms. Mangion further clarified the role of INTERPOL in the fight against illicit traffic of all kinds, noting especially that a trafficking charge must be an offence in both the source and demand country involved, but that it is up to us (since INTERPOL is not a police force) to “think like prosecutors” while investigations occur.

Given that all aspects of the diverse “shadow economy” involves both actors and facilitators, and that treaties in place currently are all either criminal law, trade-specific, or country-specific in focus, it was argued that greater operational cooperation was needed to watch for “unexplained wealth” (especially given poorly regulated on-line dealing).

Efforts to better ID, trace, freeze and confiscate the proceeds gained by all illicit trades will rob them of their power. This was driven home in Sir Flanagan’s talk about the international illicit tobacco trade, operating on a HUGE scale. Allegedly, we’re talking billions of dollars, millions of illicit cigarettes/shipment, multiple Western markets (including Australia) from sources in Asia, and marked increases in violence. It was all encapsulated in the story of a Loyalist crime lord (rose to prominence during the Troubles) who in recent years was posing as an unemployed laborer collecting welfare, but in reality was organizing “hits,” living large, etc. Nearly untouchable and untraceable, until connections to the cigarette racket allowed authorities to follow the money and seize assets.

At the end of the day, we were all divided into groups to discuss and then give feedback on a few key thematic questions/priorities; a way to pool our combined experiences and look for common ground in light of new info. Questions such as: How can investigators and academics better leverage the private sector (i.e. security industry)? What do the police/government agents want more of? How can the private sector better engage in outreach? What aspects of the shadow economy does the private sector see changing in future? How so? It all relates back to what Mr. Rowan and Mr. Lake pointed out; if we are to be society’s immune system, we must be strong and well informed enough to stay ahead of the symptoms!

One obvious requirement is more production and routine use of visual guides (e.g. ICOM Red Lists) for not only more source countries in the antiquities trade, but also species smuggling, and even counterfeit products. With the skills of counterfeiters, forgers and smugglers getting so advanced and high-tech, the “arms race” (if you will) is still far too lopsided. We were also of the opinion that fostering of subject matter experts outside of the investigative/law enforcement community is vital; especially if those experts (e.g. academic archaeologists, biologists, museologists, etc.) are given permission to tap into their colleagues’ expertise.As I suggested when I spoke, if we’re up against such complex poly-crime networks, then we have to fight fire with fire and create much wider networks of individuals able to identify, investigate and monitor.

Watching the shadow economy...all together now? Watching the shadow economy…all together now?

Finally, another obvious conclusion to come from the day’s proceedings was the need for more effective outreach in all areas of illicit trade prevention. I know, I know…easier said than done. And yet, I feel that the need still exists in many areas of the shadow economy to transition from a situation of licit markets hijacked or flooded by illicit goods and/or dealer’s communities with voluntary codes of ethics (propped up by a lingering no-questions-asked trade) to one in which increased awareness by buyers and sellers makes the dealer community more willing to self-police, thus lessening the work of investigative journalists and law enforcement.

Although those scant few of us working on illicit trades outside the purview of drugs and IP might have felt a bit tangential considering the rest of the delegates, I remain honoured to have participated, and do feel that everyone learned from everyone else. As always, the test now is to see how much lasting collaboration comes from it. However, I feel confident that workshops such as this help to ensure that Australia and its region continue to improve on what we’re doing right, and certainly not be ignored on the world stage for much longer.

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