OECD calls for “urgent” measures to address illicit trade gaps

The Organisation for Economic Co-operation and Development has lamented over what it sees as “serious weaknesses” in global efforts to tackle illicit trade.

In a report – titled Governance Frameworks to Counter Illicit Trade – published to explore the institutional capacity to effectively counter illicit trade, the OECD highlights the ineffective penalties and sanctions for shipping illicit goods, the insufficient checks and screening of small parcels, and the lack of control over goods passing through free trade zones.

“Globalisation and free trade are strong drivers of economic growth. They have also opened up new opportunities for illicit trade activities,” the report said. “So far, the governments’ response to the risk of illicit trade has been largely uncoordinated and left many enforcement gaps that are easily exploited by criminal networks.”

The report notes that governments have taken a range of actions to counter illicit trade but claims their efforts have “fallen short in many respects” because criminal networks adapt to avoid detection and circumvent law enforcement.

According to the OECD, penalties and sanctions are particularly lax in regards to counterfeit products and wildlife trafficking, “which go largely unpunished due to difficulties in coordinating effective responses, the impact of corruption in markets, lenient sanctions, and perceptions that these are “victimless” crimes that do not warrant sufficient action”. As a result, the risk-reward ratio for criminals makes this area of illicit trade particularly attractive, the report said.

The OECD also found that the “sharp growth” in the use of postal and courier systems to deliver small parcels containing prohibited or restricted goods – further complicated by the rise in online shopping – has meant governments have struggled to screen and intercept the goods, which has allowed criminals to exploit this. “The seriousness of the situation is supported by the OECD survey of member countries, where most respondents indicated that the growing volume of small parcels posed a major threat to their ability to combat illicit trade,” the report noted.

Meanwhile, free trade zones (FTZs), which have reduced regulatory and legal burdens and a lack of sufficient oversight and inadequate standards for business registration practices, have also been exploited by criminals. “Without further actions from governments to increase oversight and transparency in FTZs, criminal elements will continue to use zones to exploit the shortcomings in institutional law enforcement capacities,” the report said.

The OECD said that a focus on strengthening penalties, small shipment screening and eliminating illicit trade in free trade zones was “urgently needed”.

The OECD recommended strengthening international frameworks and sharing cross-border information, expanding the scope of penalties, and developing and implementing national strategies to counter illicit trade.

It also recommended that courier and postal companies become engaged with detecting and intercepting illicit goods, as well as improving data collection, engaging e-commerce platform operators in efforts to detect transactions of suspicious goods and improved targeting of dodgy online traders.

Furthermore, the OECD suggested that FTZs have improved data collection and sharing, enhanced security, and penalties for the misuse of zones, as well as strengthened cooperation of stakeholders and streamlined customs procedures.

The report aimed to promote “tractable policy reforms and fosters international co-operation aimed at the reduction and deterrence of the risk of illicit trade” and called for governments to re-examine their institutional capacities to counter illicit trade, including examining policies that may inadvertently create business opportunities for criminals, as well as finding ways to reduce consumer demand for such goods.

“Governments from all countries need to reassess their institutional capacities to counter illicit trade and identify the areas where action is needed, especially where it would yield the greatest public benefits,” it said.

“This report is meant to contribute to a shared understanding across countries affected by illicit trade. The goal is to develop common solutions to address this risk. The study shows that effective governance frameworks and public institutions and international cooperation can improve the ability of countries to respond efficiently in a co-ordinated way to the growing scourge of illicit trade.”

The report was welcomed by anti-illicit trade group Tracit. “We fully support OECD’s efforts to upgrade institutional capacities and national government leadership to counter illicit trade,” said Tracit director general Jeffrey Hardy. “What is needed is a joined-up approach that leverages enforcement and governance measures and multiples the effectiveness of available resources across sectors and across borders. Tracit stands ready to support the OECD in its important work moving forward.”

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