Ukraine and Trans National Organized Crime

By Wolodymyr Derzko

Several residents of Luhansk were recently apprehended by police and the Ukrainian Interior Ministry’s organized crime unit for trying to sell 2 Strela 3M anti-aircraft missiles to a Russian national, who was ready to resell it to partisans in Chechnya. According to the Segonia Newspaper in Kyiv: “A member of one of the Donetsk criminal gangs asked his acquaintance in Luhansk Region to hide them from prying eyes for a time. But later he was killed, and the missiles were tucked away at the Luhansk man’s home until one of his friends working in construction in Russia said he had found a real buyer.”  The charged suspects included a former serviceman (who earlier served as a warrant officer and possibly had personal access to arms and munitions storage areas), a Russian citizen who formerly worked protecting cash money transfers and a recent Ukrainian junior champion boxer. The article calls the Strela, which means arrow, a hot commodity - a “terrorist’s dream”.  Apparently Arab fighters are willing to barter three to four Stinger missile units for one Strela.

The above vignette and other recent media stories show that trans-national organized crime (TOC) networks are alive and prospering in Ukraine and around the globe.

Their “business” activities are diverse, ranging from the traditional crimes of money laundering, narcotics, illegal arms sales, human trafficking, gambling, prostitution, bribery and corruption, extortion and kidnapping, to the more recently popular crimes including commercial fraud, identity theft, trade in endangered species, cyber crimes, illegal chemicals, fake pharmaceuticals and medical devices, music and film piracy and other intellectual property crimes, environmental crimes, trans-national shipments and illegal dumping. The 14 million AIDS orphans worldwide constitute an irresistible new talent pool from which to recruit new members for organized crime.

Ukraine, like other countries, is wrestling with this problem with mixed success. The UN Convention against Trans-national Organized Crime came into force in September 2003. It calls for a variety of methods for international cooperation to help fight organized crime. Nevertheless, TOC continues to grow. It has yet to surface on the world agenda in the same way that poverty, water, global warming and sustainable development have to garner a coordinated international effort.

Estimates of global money laundering range from 2% to 10% of global GDP ($1.2 trillion to $6.2 trillion). Compare this to military budgets worldwide of $1.2 trillion annually. Ukraine has managed to put a cap on this and has been taken off the list of high risk countries, but increasingly trans-national organized crime (TOC) is using other means besides banks to manage transfers including cash couriers, money transfer agencies, diamonds and other means.

The World Bank estimates that over $1 trillion was paid in bribes last year, but it’s not clear how much of that was paid out by TOC. Who knows how much money and barter value TOC makes in influencing government policy and corporate decisions.

Other crimes are equally shocking. The annual illegal drug trade is estimated at $500-$900 billion.  Intellectual property loss in the USA alone is estimated between $200 and $250 billion. Human traffickers pull in about $10 billion per year. Some 137 countries have been identified as destinations for human trafficking, including Canada and Ukraine - which is a prime source country for human trafficking victims, as well.

One main reason for the mixed success in combating TOC is the lack of effective integration of law enforcement agencies across all countries. One idea that is being floated around is a supra-national system that would focus all global law enforcement resources on one TOC leader at a time. All banks would need to cooperate by installing special software upgrades to identify suspicious transactions or be frozen out of the international system. Countries would have to give up some sovereignty, but this would be more than made up by having the international community chasing your local TOC network anywhere on earth. This global prioritization system would target TOC networks that launder the most amount of money globally and act in unison. This system would identify top criminal groups by the amount of money laundered, prepare legal cases, identify suspects’ assets that can be frozen, establish the current whereabouts of the suspect, assess the local authorities’ ability to make an arrest, set the location for prosecution (preferably outside the accused country), freeze assets at the time of arrest, that would be transferred into the system upon conviction to support the efforts to catch the next priority TOC on the list. When everything is ready to go, all the orders would be executed at the same time in all countries to apprehend the criminal(s), freeze assets and access and proceed to open the court case for immediate action.

Both Canada and Ukraine would benefit by ratifying such a proposal if it ever became real and cooperate internationally.

Wolodymyr Derzko is a lecturer in the Certificate Program in Innovation & Entrepreneurship at the University of Toronto, School of Continuing Studies