The Fine Art of Customs Workaround, Part II
While the civilization strives towards diminishing trade barriers around the world, smuggling of goods across borders is a big topic and for a good reason.
Smuggled diamonds fund wars
The most blatant expression of working around the rules is sanction busting. In effect the smugglers are thumbing their noses to the world. The rules being broken are drawn up by international agreement, usually by the UN.
It’s been happening down the years, from the oil brought in from Mozambique to the rebel Southern Rhodesia in the 1960s, to the illicit trade to and from current world hotspots, such as Iran.
One of the most lucrative examples of late 20th and early 21st-century shipping rules-busting concerns the diamond trade out of Angola. Diamonds funded armed conflicts in across West Africa, despite improved enforcement and monitoring of UN arms and strict sanctions.
The global network of arms dealers and diamond merchants, orchestrated by Angolan rebel leader Jonas Savimbi and the Liberian government, managed a very effective workaround. Weak international controls on diamond exports allowed sanctions-busters to bypass regulations and smuggle them into neighbouring countries for sale on world markets.
The UN imposed sanctions on the Angolan rebel movement UNITA in 1993 to weaken its war-making capacity. But lax enforcement by member states allowed the movement to finance its operations with these smuggled “conflict diamonds” and re-arm with impunity.
At one point UNITA was the single largest producer of diamonds in Angola. As recently as the year 2000 about half of Angola’s yearly output of diamonds, and 5 per cent of annual rough diamond sales worldwide, were being smuggled out of the country.
Sanctions required states to seize all Angolan diamonds entering their territory without a government certificate of origin. Yet, “to date not a single parcel of illicit Angolan gems has been intercepted anywhere,” a UN report from 2000 noted. “These diamonds seem to vanish into thin air.”
One answer is that they disappeared into the legitimate trade. Investigators reported that a large volume of Angolan stones were taken clandestinely to third countries where they were mixed with legally mined diamonds and sent on to Antwerp or Tel Aviv for finishing.
How the sanctions-busters break the rules
Sanctions against Tehran are designed to stifle its oil exports and to hamper its nuclear programme. Despite the recent thawing of relations with the West, the U.S. has said it would continue enforcing sanctions still in place.
Western sanctions imposed on Iran have blocked sales of its oil to the West and made it increasingly difficult for Iran’s fleet to obtain insurance and financing for deals with Asian buyers.
However, Iran managed to ship 29.4 percent more crude to major Asian customers in July 2014 compared with a year earlier. China, Tehran’s biggest client, accounting for most of the increase.
In the past, Iranian oil tankers have sent incorrect satellite signals to confuse global tracking systems and Iranian state tanker company NITC changed tanker names in response to the sanctions. There are ways round the best-administered sanctions regime, as a well-informed article in ‘Foreign Policy’ explains.
The writer notes the obvious – no sanctions regime is ironclad. The oldest trick in the book is still to bribe or blackmail high-ranking officials. Then you might want to create companies making harmless things like detergent in countries that might not be looking too hard, as a way to launder funds and purchase outlawed goods from the West.
After some convoluted payments through different people in different countries, the dealer gets the goods to a transit point close to Iran and sends them over the border by train or truck.
Another workaround ploy is to use one of Europe’s many private airports, where export and customs controls are not so tight. The goods are flown into third countries, and then on to Iran. Russians or Eastern Europeans are used to front the business.
Yet another method is to use obscure UN agencies (the World Intellectual Property Organisation is the example given) as a front for moving about dual-use equipment and technology in the name of development aid. U.N. containers are not so likely to be searched at customs.
There are many suggested ways of moving Iranian oil about, using refineries in countries they don’t ask too many questions, getting paid in local currencies, sending it to market via various complex routes.
But, says the writer, would-be evaders should beware. If he has thought of these examples, “you can be sure enforcement officials have imagined and examined many others. It is becoming increasingly difficult for sanctions-evaders to find loopholes in the US sanctions regime against Iran. American officials are increasingly able to crack down on sanctions violators.”
Making the rules stick
Sanctions are still nations’ preferred way of making the maverick pay. Further measures to hit Russia’s trade were imposed this year (2014) over the Ukraine crisis.
However there are signs that bypassing tough new rules isn’t as easy as it was. For example Switzerland, a neutral country not affected by Russia retaliatory measures against the West, is refusing to help out the Western exporters affected by the sanctions.
Switzerland has rebuffed attempts by some EU food producers to sidestep the Russian ban on imports from the EU, by refusing to have goods sent through its territory. A spokesman said Switzerland is required to certify food exports for hygiene, which it can’t do if the products are processed outside its borders.
Gun running doesn’t pay?
People working around the import and export, and sanction system don’t necessarily fit a type. Of the shady dealer working out from some anonymous office on a remote mid-European airstrip, for example.
Gary Hyde, 43, was an apparently respectable man living in a Yorkshire village with his wife and two children. He worked in a gun shop since he left school, and went on to lead the business. He was considered such an expert on international arms laws that he attended briefings at the United Nations Institute for Disarmament Research. He won contracts from the Ministry of Defence to bring in decommissioned weapons.
But Hyde had another use for his specialist knowledge. His clandestine activities led him to Southwark Crown Court, where, in 2012, he was found guilty of breaching UK trade controls. He was sentenced to seven years imprisonment for illegally supplying what prosecutors described as a huge shipment of arms from China to Nigeria.
The deal involved shipping 80,000 weapons, including AK-47s and Makarov pistols and 32m rounds of ammunition, a transaction that would have required 37 sea containers, each 6 metres long. It involved transactions stretching across Germany, China, Poland and Dubai. The deal was supposed to net Hyde more than $1m, which he intended to hide in a secret family trust in Liechtenstein.
Is there a technological fix?
In the end governments and companies can write all the restrictions they like, and the bad guys will continue to circumvent them. It’s clear that human scrutiny isn’t good enough. Technology will have to provide the answer, and there are signs that it’s getting much better.
After the 9/11 terrorist attack, the U.S. Congress required that all containers coming to the United States be scanned by non-intrusive inspection and radiation detection equipment before being loaded onto US-bound ships in foreign ports.
The 2012 deadline was missed, with only 3 percent of incoming cargo being scanned. Now legislators are trying again, with a proposal to test the implementation of 100 percent scanning technology at two U.S. ports.
It would be a massive, and expensive exercise, but it seems the technology is already with us. Decision Sciences’ Multi-Mode Passive Detection System (MMPDS) is a scanner which can be scaled to any size, be it for cargo at sea ports, border crossings or other applications.
It harnesses the natural phenomenon in which cosmic rays enter our upper atmosphere and create muons, high energy particles which harmlessly rain down on the planet’s surface. The scanner tracks muons through even heavily shielded materials and computes a 3-D image of whatever object is being scanned.
MMPDS is said to be capable of scanning all types of vehicles, rail cars and ship and air cargo containers. It takes 45 seconds, on average, to clear a typical 40-foot shipping container. The system will identify and locate in 3-D any radiological threats, even when densely shielded.
Meanwhile, Brazil is one country which turned the customs work-arounds into a fine art. The first part of the article describes the many creative methods Brazilians use to smuggle goods across the borders from Paraguay.