AGENDA: ''The destructive impact of illicit trade and the illegal economy on

economic growth, sustainable development and global Security.''

The agenda is very self-explanatory and covers a large variety of issues faced by
todays world.
This guide will help you to understand the gravity and severity of the issues that need
to be discussed under this agenda while providing you with information so that you
may be able to get a firm grasp of the global situation.

Illicit Trade and the illegal economy:

Be it smuggling, counterfeit or tax evasion, governments are losing billions of dollars
in tax revenues, legitimate businesses are being undermined and consumers are
being exposed to poorly made and unregulated products.
Illicit trade is not just the work of small operators. Organised crime is increasingly
dominant, exploiting differences between national regulatory regimes, advances in
technology and global financial and transportation links to traffic illicit goods.
Illegal manufacturing facilities and distribution networks span continents and
substantial resources are invested in copying even the most sophisticated anticounterfeiting devices such as paper tax stamps and holograms.
Black market trafficking usually takes place on a regional or local level; publicly
available data suggests that the multi-ton, inter-continental shipments organized by
the merchants of death account for only a small fraction of illicit transfers. Among
the most important forms of illicit trafficking is the ant tradenumerous shipments
of small numbers of weapons that, over time, result in the accumulation of large
numbers of illicit products by unauthorized end users.

Transnational Organised crime and the globalized illegal

economy:
Transnational organised crime encompasses virtually all serious profit-motivated
criminal actions of an international nature where more than one country is involved.
There are many activities that can be characterized as transnational organised
crime: drug trafficking, smuggling of migrants, human trafficking, money laundering,
trafficking in firearms, counterfeit goods, wildlife and cultural property and even
some aspects of cybercrime.

Why Are Shadow Economies Growing?

Countries with relatively low tax rates, fewer laws and regulations, and a wellestablished rule of law tend to have smaller shadow economies.
Macroeconomic and microeconomic modelling studies based on data for several
countries suggest that the major driving forces behind the size and growth of the
shadow economy are an increasing burden of tax and social security payments,
combined with rising restrictions in the official labour market. Wage rates in the
official economy also play a role.

Measuring the Shadow Economy:

Method

Main Features

DIRECT APPROACHES
Sample survey

Estimates size of shadow economy from survey data.

Tax audit

Estimates size of shadow economy from audit

measurements of undeclared taxable income.

INDIRECT APPROACHES
National accounting statistics Estimates size of shadow economy on basis of the
discrepancy between income and expenditure
statistics in national accounting or in individual data.
Labor force statistics

Estimates growth in shadow economy on basis of

decline in labor participation in the official economy,
assuming the labor force has a constant participation
rate overall.

Transactions

Uses data on the overall volume of monetary

transactions in the economy to calculate total
nominal (unofficial plus official) GDP, then estimates
size of shadow economy by subtracting official GDP
from total nominal GDP.

Currency demand

Estimates size of shadow economy from the demand

for cash, assuming shadow transactions are
undertaken in cash and that an increase in the
shadow economy will raise demand for cash.

Physical inputs
(electricity consumption)

Estimates growth of shadow economy from electricity

consumption, assuming that electricity consumption is
the single best physical indicator of overall economic
activity. Subtracts the growth rate of official GDP from
the growth rate of total electricity consumption and
attributes the difference to the growth of the shadow
economy.

MODELS
Latent variable approach

Estimates the size of the shadow economy as a

function of observed variables that are assumed to
influence the shadow economyfor example, the
burden of taxation, the burden of government
regulationand of variables where shadow
economic activities leave traces, like cash, official
working time, unemployment, etc. Advantageous
method because it considers multiple causes and
effects simultaneously.

Terrorism and the illicit Trade:

Although the link between terrorism and other related crimes, such as drug
trafficking, is evident and has been recognized by the United Nations Security
Council, a thorough understanding is needed in order to develop solid strategies to
prevent and disrupt these crimes.
According to the UNODC's World Drug Report 2007, the total potential value of
Afghanistan's 2006 opium harvest accruiing to farmers, laboratory owners and
Afghan traffickers reached about $US3.1 billion. In addition, it is reported that in 2004,
some 400 tons of cocaine was exported from one Latin American country, with an
estimated domestic value of US$ 2 billion. How much of this money is used for
perpetrating acts of terrorism? Estimates vary. But even a small percentage would
be more than sufficient for some individuals or groups to plan, finance and carry out
terrorist acts.

Terrorist Financing:
Terrorist financing provides funds for terrorist activity. It may involve funds raised from
legitimate sources, such as personal donations and profits from businesses and
charitable organizations, as well as from criminal sources, such as the drug trade, the
smuggling of weapons and other goods, fraud, kidnapping and extortion.
Terrorists use techniques like those of money launderers to evade authorities'
attention and to protect the identity of their sponsors and of the ultimate
beneficiaries of the funds. However, financial transactions associated with terrorist
financing tend to be in smaller amounts than is the case with money laundering,
and when terrorists raise funds from legitimate sources, the detection and tracking of
these funds becomes more difficult.
To move their funds, terrorists use the formal banking system, informal value-transfer
systems, Hawalas and Hundis and, the oldest method of asset-transfer, the physical
transportation of cash, gold and other valuables through smuggling routes.
An expert on terrorist financing, says the largest source of terrorists' income is the illicit

drug trade. Many terrorist groups have supported themselves through other illegal
commerce as well.
Donations were once the largest source of terrorist funding, coming mostly from
charities and wealthy individuals. For years, individuals and charities based in Saudi
Arabia were the most important source of funds for al-Qaeda, according to a 2002
CFR Task Force Report.
Many terrorist organizations attempt to operate legitimate businesses, which
generate their own profits and can also be used as a front for money laundering.

Drug Trafficking:
Drug trafficking is the global illicit trade covering the cultivation, manufacturing,
distribution and sale of substances which are subject to drug prohibition laws.
Environment risks in the Customs context relate to the cross-border trafficking of
endangered species, hazardous and toxic waste, and ozone-depleting substances,
and trading in indigenous or protected timber, etc. These phenomena threaten
sustainable development and ecological balance

Biggest underground economies.

VALUE in U.S. DOLLARS
1. Counterfeit Drugs$200 Billion
2. Prostitution$186.00 Billion
3. Counterfeit Electronics$169 Billion
4. Marijuana$141.80 Billion
5. Illegal Gambling$140 Billion
6. Cocaine$85 Billion
7. Prescription Drugs$72.5 Billion
8. Heroin$68 Billion
9. Software Piracy$63 Billion
10. Cigarette Smuggling$50 Billion

SOLUTIONS:

UN Action:
At The International Conference on Drug Abuse and Illicit trafficking in December
1987 the UN General Assembly decided to observe June 26 as the International Day
against Drug Abuse and Illicit Trafficking.
The UN Office on Drugs and Crime (UNODC) has, over the years, been actively
involved in launching campaigns to mobilize support for drug control. The UNODC
often teams up with other organizations and encourages people in society to
actively take part in these campaigns.
Convention against Transnational Organized Crime, which has been ratified by 170
parties and provides a universal legal framework to help identify, deter and
dismantle organized criminal groups. At a practical level, UNODC helps strengthen
the capacity of States to track and prevent money-laundering with training and
technical assistance for following the money trail. These measures can help cut off
the profits of crime
Governments, organizations and individuals in many countries, including Vietnam,
Borneo and Thailand, have actively participated in promotional events and larger
scale activities, such as public rallies and mass media involvement, to promote the
awareness of dangers associated with illicit drugs.
The 9/11 attacks brought an international sense of urgency to disrupting terrorists'
financial networks. Within a few weeks, the UN Security Council adopted a wideranging resolution demanding countries take action to suppress terrorist financing.
The following month, the Financial Action Task Force, an intergovernmental body,
issued a list of recommendations that became the basis for many governments'
efforts. These included passing legislation specifically criminalizing terrorist financing,
requiring financial institutions to report suspicious transactions, creating a greater
degree of international cooperation in tracking down terrorist financiers, and
ratifying the UN convention on financing terrorism, a step that has been taken by
150 countries

Interpols Response:
Undertaken activities revolve around five central pillars:
1. Operations: support regional and global operations to break up the networks
behind trafficking in illicit goods and to remove dangerous and sub-standard
goods from circulation.
2. Capacity Building and Training: deliver clear, consistent and specialized training
programmes under the umbrella of the International IP Crime Investigators
College (IIPCIC). These enable investigators to effectively combat current and
emerging threats posed by all types of trafficking in illicit goods.
3. Raising awareness: global awareness campaign uses online and offline
communications channels to raise global awareness and understanding about
the links between trafficking in illicit goods and the funding of transnational
organized criminal networks.
4. Legal assistance: provide technical legal assistance (legislative drafting and
training) to countries at the request of their respective governments.
5. I-Checkit: the INTERPOL-Checkit programme combines key information from
private industry and law enforcement to allow targeted users to verify whether a
product has been traded illicitly

Illicit Trade Reports:

Success: The analysis contained in this Report is based on the data from the Customs
Enforcement Network (CEN). CEN is a living database, as data is constantly being
updated. This Report, issued on an annual basis, serves as a collective effort to
represent the current situation around five key risk areas for Customs enforcement,
namely, drugs enforcement, environment, health and safety/IPR, security and
revenue assurance. The objective of this publication is to raise awareness on the
critical areas of Customs enforcement and to contribute to the pool of information
for studying the phenomenon of illegal trade.
Limitations: Since data submission is a voluntary process, there are certain limitations
that need to be taken into consideration when performing the analysis:
exceptionally large seizures may have a high impact on trends and patterns; some
countries provide partial data or do not report seizures on particular commodities. As
the level of analysis is critically dependent on the quantity and quality of submitted
data, the figures in this Report cannot suggest a complete picture on seizures at the
global level.

Possible Solutions:
Combating a global phenomenon such as transnational organized crime requires
partnerships at all levels. Governments, businesses, civil society, international
organizations and people in all corners of the world have a part to play. Some
aspects that are critical in fighting organized crime include:

Coordination: integrated action at the international level is crucial in identifying,

investigating and prosecuting the people and groups behind these crimes.

Education and awareness-raising: ordinary citizens should learn more about

organized crime and how it affects everyday lives. Express your concerns to policy
and decision makers so that this truly global threat is considered by politicians to be
a top priority among the public's major concerns. Consumers also have a key role to
play: know what you are purchasing, do so ethically and make sure that you do not
fuel organized crime.

Intelligence and technology: criminal justice systems and conventional law

enforcement methods are often no match for powerful criminal networks. Better
intelligence methods need to be developed through the training of more
specialized law enforcement units, which should be equipped with state-of-the-art
technology.

Assistance: developing countries need assistance in building their capacity to

counter these threats. An important tool that can help with this is the United Nations

A positive approach to raise the motivation to stay in the official economy by

improving the efficiency of public services, reducing the tax and social security
burden imposed on labor and/or by raising civic virtue has been used only rarely.
Many policy makers doubt whether such measures work at all. In any case, they are
effective only in the longer run. One possibility is to adjust public supply more closely
to what the citizens desire, and to lower cost for a given quantity and quality of
public supply. This can be attempted by streamlining public sector activities (e.g. by
New Public Management). A more fundamental way is to improve the political
process via opening the political arena to contending interests, and strengthening
the democratic participation rights of the citizens.

Because terrorist networks transcend national boundaries, improving international

cooperation is essential. One of the problems of coordination is reaching common
ground on 'what is a terrorist organization.'" The UN General Assembly has tried for
more than a decade to agree on a definition for terrorism, which would help
underpin a comprehensive treaty banning the practice. Beyond that, Napoleoni
calls for an international body dedicated to information-sharing and an international
court to oversee the terrorism blacklist of individuals and organizations.