WHEN the Covid-19 pandemic hit South Africa in March, the government responded with heavy-handed measures, including a prohibition on alcoholic drinks and tobacco, hoping that strict restrictions would reduce violent crime, social gatherings for a weekend of binge-drinking, and health issues.
While the ban made headway with murder rates reported to have been reduced by 63 per cent, it also partly backfired. Illicit trade of alcohol is now booming in the country as organised crime groups have pounced, smuggling in contraband products for a quick profit. The production of counterfeit alcohol has also increased, becoming a potential health threat.
With the pandemic showing no signs of slowing down, plenty of goods have seen their demand spike since countries closed their borders and disrupted global supply chains. This has fuelled widespread illicit trade and led to trade-based money laundering, increasingly having a sizable impact on government revenues.
As government expenditure increases to battle Covid-19, the duty and taxes they require badly are disappearing into the pockets of criminals. Illicit trade will continue to prosper as the pandemic continues to wipe out jobs. With less money to spend, more people will look for cheaper, illegal goods. Trade-based money laundering is powering it all.
Invoices and trade documents can be falsified, quality and quantity of goods undeclared, and movement of these goods easily obscured. Front companies — legitimate businesses used to disguise illegal financial activities — are easy covers for illegal distributions. Malaysia is no exception to the proceedings.
Malaysia's geographical position in addition to the economic troubles that have been brought about by Covid-19 makes it even more vulnerable.
There are definite concerns over the porousness of borders that have been compromised by illegal syndicates determined to take advantage of growing demand.
Organised criminal groups would be on the lookout on how to further exploit the expected increase in demand for goods that are in short supply or have a hefty price differential due to differing excise taxes or regulations imposed, such as tobacco and alcohol products.
Even with strict border lock-downs in place during the current Recovery Movement Control Order (RMCO) period, which ends on Dec 31, illegal syndicates continue to stockpile their illicit inventory to meet demand, despite border and travel restrictions.
The supremely high levels of contraband cigarette trading, which is estimated to exceed over 60 per cent of the market or 12 billion sticks a year, could happen only through large scale container shipment smuggled through key entry points, possibly aided by unscrupulous elements.
Illicit traders are extremely resourceful. Many have reinvented themselves by harnessing e-commerce platforms as borders closed. In April, French police removed over 70 fraudulent websites claiming to sell Covid-19 treatments. In July, authorities in Europe took down Encrochat, an encrypted communications network used by criminals to distribute illicit goods and launder money.
It is pertinent that several industries have proposed greater containment of organised "channels of smuggling" in Malaysia, as an example the use of transshipment facilities through ports that have been abused for contraband smuggling. This is worthy of consideration.
We need to adapt and find new ways of dealing with them. First, public and private sectors need to harness data analytics to fight trade-based money laundering. Just like how criminals are turning to technology, we must also use it to fight crime.
With data analytics, authorities can compile and analyse trade documents from banks, exporters and importers onto a single platform.
They can easily scrutinise Customs information and bills of lading to see if any freight carriers had been previously associated with illegal activities, and flag them accordingly when they come to port.
Second, we need closer public-private partnerships. Having regular dialogue sessions will allow trade associations and consortiums to share data or provide timely feedback on any new government policies or taxes being considered with the relevant law enforcement and government bodies.
The World Customs Organisation is an example of how governments, academics and private organisations can come together to fight illicit trade. Another example can be seen in Crime Stoppers Asia's collaboration with industry and law enforcement partners.
We take in anonymous tips and analyse the information to generate an overview of criminal activity that can be pursued by our law enforcement partners.
The profits earned by organised criminal groups will likely fuel more serious crimes like drugs, weapons or human trafficking, and even terrorist networks.
The pandemic may have expanded the criminal battle space, but these unprecedented times have also called for even more global cooperation to address these threats. Our response will determine how successfully we can further curb the nexus of illegal trade and money laundering in the post-Covid-19 world.
The writer is the CEO of Crime Stoppers Asia, an international non-profit organisation committed to supporting law enforcement and preventing crimes through anonymous reporting