The crime of the century

Illicit trade has always existed, right back to ancient times, but it is flourishing like never before, aided by the technological revolution of the 1990s - electronic money transfer, the internet and mobile phones - and globalisation, which has opened up the market to stateless, and often anonymous, criminals able to switch from product to product, sometimes using their dealings to support terrorism, but most often simply to make money.

Worryingly, there seems to be no way of holding back the tide. The growth in illegal commerce is accelerating even as new agencies - public and private - together with vast sums of money are thrown at a problem that has permeated every society around the world, both rich and poor.

Equally worrying is the extent of corruption and passive complicity among those supposed to be policing the illicit traders, as well as the ordinary citizens who turn a blind eye to illegal downloading from the internet or the smuggling of cigarettes from Europe, and who even accept some fake goods as desirable items in their own right.

In a newly published analysis of an issue generally regarded as poorly understood, editor and publisher Moiss Nam, who is also a fellow at the World Economic Forum, has produced the first detailed account of the murky world of "transnational crime" which has escalated to a level such that, in some cases, it matches or seriously challenges legal trade.

US companies, for instance, estimate that between $200bn and $250bn in annual revenue is lost to counterfeiters. The EU claims that 100,000 jobs are lost each year to the same trade. In 2003 it was estimated that counterfeit goods cost the state of New York $34bn, depriving it of $1.6bn in tax revenue.

The damage spreads further - to consumers whose safety and health may be threatened, along with the future of the genuine manufacturers. From cosmetics to car parts, DVDs to detergent, the copycats are everywhere, flooding the world economy with fake and faulty goods passed off as the real thing. Between 2000 and 2004, the Italian authorities seized 200,000 fake Rolex watches that were so well made they could fool even the company itself.

The companies content themselves - to some extent - in the knowledge that the buyers who pay $100 for a $5,000 watch would not have been customers anyway. However, Nam argues that hoping for the best is a luxury few companies can afford and that "even well-heeled, demanding customers are finding that the quality of fakes is now so high that paying several times more for an original is losing its appeal".

The counterfeiters are, like the drugs and arms dealers, the ones most vivid in the public's mind, but others dealing in stolen art, hazardous waste or endangered species are growing in number and exploiting the same technologies and changes in political and economic climates that are making it easier to ply their trade.

They prey on wealthy Westerners who will pay fabulous prices for exotic birds, art treasures or body parts - kidneys, for instance - that are bought from the poor who can massively exceed their annual income in one transaction. There are horror stories of forcible "donations" - patients coaxed into surgery for minor ailments who wake to find themselves minus a kidney; others who are tricked into overseas employment but learn that they are part of some gruesome trade in key organs, or else coerced into slave labour or the sex trade.

Many of these activities become the means by which illicit traders fund their wider goals - sometimes terror campaigns. Nam says the September 11 raids on America, and subsequent attacks on Madrid and Bali, triggered changes in the way governments responded to transnational criminals and terrorists. The authorities, he says, have to stop looking for the answers in evil and corrupt states and among organised criminal gangs, and acknowledge that in the new environment, the perpetrators are usually stateless and lacking in hierarchies or singular heads.

But the battle extends beyond the criminals themselves. Corruption at state level, through officials falsifying paperwork or accepting bribes, allows illicit trade to flourish. Where they can be paid many times their salary to ignore an illegal cargo, it leaves the authorities weakened and vulnerable.

Such is the growth of illicit trade in some poorer countries that it has become the way in which they function, blurring the definition of what is and is not acceptable, legal or illegal. Where basic infrastructure has been undeveloped, even non-existent, the criminal traders have moved in, creating their own versions of law enforcement, banking and journalism, and influencing, and even directly running, big corporations, local and central government.

Where the criminals pay well and reward their supporters, few are prepared to challenge them. Nam says: "At one extreme are countries where the smuggling routes, the hidden factories, the pilfered natural resources, the dirty money transactions, can no longer be distinguished from the official economy and government."

Underpinning these activities is the movement of dirty money around the financial systems of the developed world, where electronic banking has transformed the abilities of criminals to launder their proceeds more easily across borders and at an instant. While money laundering rules have been tightened, it still goes on - much of it with impunity.

During the 1990s, 23 London-based banks laundered more than $1.3bn stolen by General Sani Abacha, the former Nigerian dictator. Not a single institution or individual was named, let alone prosecuted, by British authorities for participating in or perhaps even engineering this operation.

The author argues that those battling against the illegal traders are losing because they are constrained by borders, legislation, budgets, and a lack of co-operation - while their opponents face none of these restraints and are much more adept at changing methods, technologies, products and destinations. Because they do not have to abide by any rules or borders, and they are able to master the latest technologies to suit their purpose, goods can be shipped quickly and efficiently around the world before the authorities know what is happening.

Nam's theme is that the seals that once bound nations have dissolved due to the technological, political and economic revolutions of the 1990s. The collapse of communism and the rise of the internet have contributed to shifts in populations, to rootless cheap labour and a worldwide demand for everything from Adobe software and CDs to asthma inhalers and Gucci accessories that cannot be met by legitimate means alone. The changes are profound and accelerating. Last year, for instance, there were three times as many illegal immigrants in Spain than in 2001.

If this sounds like a doomsday scenario, Nam notes that there are also some notable successes against the illicit traders and that "heroes" sometimes emerge - those who risk life and limb, often working undercover, fighting dangerous narcotics dealers in South America or traffickers in slave labour in central Africa.

But scores of journalists have died in the course of exposing criminal gangs. Judges, police officers, even nuns, have been murdered. Illicit traders no know bounds in getting their goods to market and will take whatever action is deemed necessary to achieve it. As Nam states, the fight against them has a long tradition, but it is no longer just about crime. In the new environment of "transnational" world politics and economics, it calls for a better understanding of the extent to which they are tightening their grip and we are losing the battle.

Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy, by Moiss Nam. Published by Heinemann, 12.99, paperback

DIRTY MONEY

The pharmaceutical industry estimates that a quarter to a half of the African market is counterfeit

Albania and Romania made human trafficking illegal for the first time in 2001

Counterfeiting is equal to 5%- 10% of world trade, on a par with the GDP of Australia

Since the early 1990s trade in counterfeit goods has grown at eight times the speed of legitimate trade

The perpetrators of the 1993 Word Trade Centre bombing were part-funded by selling counterfeit t-shirts from a Broadway store

Militants suspected of the 2004 Madrid bombs operated a home-based business in counterfeit CDs

One money launderer moved $36m in US cocaine profits back to Colombia by way of Europe using 100 accounts spread across 68 banks in nine countries

Close to three-quarters of Indonesian logging is illegal

In the EU, where hazardous waste exports are supposed to be banned close to a quarter of waste exports were illegal