The illicit money outflows to foreign safe havens is another negative impact suffered by countries of origin

The people smuggling networks, as any other organized crime groups that operate across different countries, are very sophisticated, not only in their operational structure but also in the organization of their finances. Fighting against money laundering internationally and against the outflow of the illicit profits from the countries of origin should ameliorate the severe burden that people smuggling means for a lot of African nations.

▲ A rescue of refugees in the Mediterranean Sea [Spain's Navy]

ARTICLE / Pablo Arbuniés

According to the UNHCR, the United Nations Refugee Agency, 116,000 migrants crossed the Mediterranean from North Africa to Europe in 2018 and more than 2,200 died in the process. The majority of these migrants are believed to have used smuggling services. This flow of irregular migrants moves around 4 billion euros yearly worldwide and has a crucial impact on African economies.

People smuggling is possible due to the constant interaction and cooperation of many specialized networks. These networks are part of different Organized Crime Groups (OCGs) across many different countries, constituting an even bigger highly-organized network. The global smuggling network provides a wide range of different “services” including other illegal features such as document fraud, and involves a certain degree of infiltration in both sending and host societies (1).

Separation of tasks is extremely important for the survival of the business, as a well-organized network is less vulnerable to criminal investigations, and if the investigations succeed, only small units of the network are exposed. The migration process can be divided into three main stages: mobilization, requirements en route and integration into the destination countries. Each stage is managed by one or more specialized networks that can be independent actors or part of a bigger network.

The process of mobilization involves the recruitment of the migrants in their countries of origin. At this point, it is important to remark that recruiters will only deal with “clients” of their same nationality. After the recruitment, the smugglers ensure them a safe passage to the meeting points located in Khartoum (Sudan) and Agadez (Niger). These cities, respectively located in the south-eastern and south-western entries of the Sahara, serve as focal communication points and are home to some networks’ headquarters. From here, another part of the network takes charge of the migrants and safeguards their journey to Libya often crossing the Sahara on foot. Once in Libya the migrants go under the custody of a third network that takes them to the coast of either Tripoli or Benghazi with the paid protection of the local militias, and once in the coast they can finally embark on one of the overcrowded boats that hopefully will take them to the closest European islands, often being Lampedusa and Malta the destination.

This journey is very expensive for the migrants, as they have to pay the different smugglers in each step. However, the exact prices are hard to estimate due to the scarce reliable sources on the subject and the heterogeneity of the networks involved. Moreover, not only is it expensive, it is also extremely dangerous, with a vast number of fatalities all along this odyssey. Only in 2016, a record number 4,720 migrants died in the Mediterranean Sea according to the International Organization for Migration (IOM), and the number of deaths in the Sahara is impossible to estimate. However, the variety of offers can provide much safer—and thus much more expensive—options such as embarking on a plane with false documentation, which grants the clients a non-existing risk of dying during the journey and a much lower risk of being caught and deported.

As we can see, people smuggling networks offer a wide range of services and prices in order to suit best the demands and financial capabilities of their potential clients, just like any other successful business in the world, involving different forms of interaction and cooperation. Indeed, these networks operate as cartels with centralized systems of management and planning. Another critical part of the business is the gathering of information, mainly about border patrols, changing routes and armed militias that could be a threat or potential co-workers, but also on asylum procedures. This information gathering is tasked to a core group of individuals that manage the constant flows of information and have access to well organized and centralized communication systems.

To deal with the overwhelming amounts of money involved in the process, these networks need a highly organized financial branch, able to deal with the payments and also to launder the money obtained and reinvest it on other legal or illegal activities.

Money laundering and impact in the local economies

International smuggling of migrants is said to move around 4 billion euros yearly all around the world. According to Frontex, most of this money is used to fund other illegal activities such as drugs trafficking or buying weapons to reinforce the network’s power. But also, a big amount of money is laundered in order to be invested in legal activities or to be transferred to tax havens.

The money moved by these networks which carry illegal activities is classified as Illicit Financial Flows (IFFs), which we can define as illegal movements of money or capital from one country to another, or those in which the funds have been illegally obtained, transferred or utilized. IFFs are considered very harmful for developing economies such as the ones we can find in Africa, because usually they involve international monetary aids leaving the country for tax havens instead of being utilized according to their intended ends.

In order to launder the money, the most complex networks have what we could consider to be accountancy branches, just like any other OCGs around the world. These accountancy branches seek to place the money outside the countries of origin or operation in order to avoid scrutiny and look for stable economies with predictable financial systems and weak anti-money laundering policies. There they can diversify their investment portfolios and spread the risk without a major threat of being caught by Financial Intelligence Units (FUIs). OCGs seek to invest in products that move extremely quickly in the market such as food products, which makes tracking the money even harder.

An interesting case of money laundering takes place in Europe involving the Pink Panthers, a Serbian band of thieves formed during the Yugoslavian war and now extended as a method, which only reinvested their benefits in their cities of origin back in Serbia. These investments proved to be very beneficial to local economies and helped the country fight the devastating effect of the war. In the same way, IFFs originated by people smugglers could in some way be beneficial for the receiving countries, but in reality only a small part of the network’s income is reinvested in Africa, and overall, the continent losses a big amount of money in favour of tax havens and funding other illicit activities. In addition, we shall not forget that the source of these funds are illegal activities involving violence and connected to other illicit activities.

In conclusion, it is crucial for the development of the continent to efficiently tackle not only money laundering but also all kinds of IFFs such as tax evasion, international bribery and the recovery of stolen assets.  This is an indispensable step in order to have the financial stability required for a sustainable economic development. Moreover, repatriation on flight capital should be prioritized, as it would help a higher sustainable growth without depending on external borrowing and development funds.

The case of Nigeria

We must take into consideration that Nigeria had often been referred in the past as the most corrupt country in the world, and it has serious problems involving money laundering and capital flight. In addition, effectively tackling money laundering could potentially cut the finances of the terrorist group Boko Haram, which operates in the north of the country.  These financial characteristics added to the inefficiency of the Nigerian Financial Intelligence Unit (NFIU) and its dependence from the government, made Nigeria a very suitable country for money laundering.

In 2017, the Egmont Group, a body of 159 national Financial Intelligence Units focused on money laundering and terrorist financing, suspended Nigeria from its membership due to the lack of a legal framework and its dependence from Nigeria’s state Economic and Financial Crimes Commission.

However, in the past months the Nigerian government, headed by Muhammadu Buhari, has been an example on how to tackle money laundering and deal with the institutional problems that it involves. In March 2018, the parliament passed a new law that aims to tackle money laundering and funding for terrorism by allowing its financial technology unit to operate independently from the control of the state, thus eliminating the unnecessary bureaucracy that used to slow down the investigations. More precisely, this law makes the NFIU an independent body able to share information and to cooperate with its counterparts in other states.

The international community showed its conformity with the new legislation and the NFIU was readmitted in the Egmont Group in July. Whether these policies will fulfil their potential or not, only time can tell.

(1) Salt, J. and Stein, J. (1997). Migration as a Business: The Case of Trafficking.