Organized crime and illicit economies are increasingly prominent sources of political corruption, as criminal networks pour money into parties and forge alliances with officials and their intermediaries. Transnational organized crime generates an estimated $870 billion in annual revenue, according to a report published in 2016 by the Global Initiative against Transnational Organized Crime. Transactional corruption of law enforcement and public officials diverts resources from the state, and increasingly, in countries with poor institutions, the receipt of a bribe is perceived as a right of office — while payment of a bribe is seen as a cost of doing business. This has generated distrust in politicians, distorted markets, undermined public infrastructure, and disengaged citizens.
Crime and corruption are further facilitated by the decline of stigma associated with illegal acts; illicit activity is regularly used to gain political power, or to buy legitimacy with the public. A lack of law enforcement, penalties, or any deterring government presence at all runs the risk of increasing complicity over time. The high-level business and government officials who enable criminal behaviour through neglect or complicity are exacting heavy cost on the society at large. According to a UN estimate published in 2018 the annual cost of corruption amounts to $3.6 trillion. That is almost 3 times the current monetary circulation in the US.
How Does Illicit Economy Impact Macro-Structures In Society?
The effects of the illicit economy are, of course, multifaceted. The existence of criminal activities hurts the entire system with the same magnitude, albeit in a different manner. The impact of the illicit economy on the macro-structures of society can be defined as follows:
Political: The biggest effect it can have on a country’s political landscape is that it undermines the growth of democracy. Politicians who have the financial backing of corrupt elements often have great successes in their political career. Criminal organizations and corrupt politicians enter into the political arena and enjoy big positions only to profit off of state resources. Such practices are an assault on rule of law. When the head of the state shows no qualms in engaging in corrupt activities, people at all levels find it difficult to resist the urge of participating in the illicit economy. This leads to rampant corruption that silently erodes legitimate societies.
Judiciary: Regardless of it being independent, the judiciary cannot divorce itself from the infiltration of corrupt elements. When such elements find space inside the judiciary, they disrupt the working of the law-enforcement agencies that find it increasingly difficult to apprehend people who are violating the law. The judiciary itself remains a puppet at the hand of powerful people who kill off or bribe judges, prosecutors, and witnesses to create fear and escape punishment.
Economy: Some argue that the illicit economy results in economic benefits in the form of job opportunities. But this means that the accumulation of wealth is in the hands of a few people and the state is incurring a loss in revenue as the state cannot formally charge income tax from these people who are employed by criminal groups. While there may exist a boon in certain sectors, many other sectors remain stagnant resulting in high inflation and downward trajectory of overall economic growth.
Environment: Illicit trade of the wildlife in Africa and certain countries in South East Asia has contributed to the extinction of some rare species. In Amazon and Congo, illegal logging and informal mines are silently reducing the reserves of rain forests. This decline in the forest cover is contributing to global warming and, ultimately, the loss of species. In addition, through illicit smuggling of toxic material into waterways, criminal groups are damaging the world’s richest ecosystem.
Security: Illicit economies hurt a country’s rule of law. Militant groups rely on the illicit economy to finance their training. Many criminal groups grab people’s property and ask them for large amounts of money. The money is then used to properly equip themselves so that they can fight against the state.
La Linea (The Line) — The Paradigmatic Case of Guatemala
It was on October 27, 2017, when the former president of Guatemala, Otto Perez Molina, and his former vice-president, Roxana Baldetti, were formally accused of corruption crimes by a Guatemalan judge. This happened at least two years after massive protests broke out in the country in September 2015 when thousands of protesters took to the street to demand the resignation of the then president Molina.
The protests were fuelled by the revelations of the Attorney General Office and the International Commission Against Impunity in Guatemala (CICIG) that highlighted how a parallel customs office facilitated importers to avoid taxes. All of this was being carried out in an organized manner. The now-convicted president and the vice president appointed high ranking officials to manage the parallel office. These officers laundered the money and collected the bribes. Against this, the officers were offered cash money, helicopters, and mansions. This judicial case and the sophisticated criminal structure that facilitated the crime is being called La Linea (The Line). The name refers to the ‘phone line’ that importers called to, to request unlawful assistance so that they can evade taxes (the money that was the state’s right).
In an unprecedented move, Judge Miguel Angel Galves held that there was sufficient and appropriate evidence available to back the claims of the Attorney General and the CICIG. At least 31 former agents, some of who are former government officers, currently face the second stage of judgment and are yet to hear their final sentences. The investigations into this case have led CICIG to uncover seven more corruption schemes which are currently under probe.
But all of this has brought undue criticism for the CICIG which is being accused of being a tool for political victimization. Powerful corrupt sectors are arguing that the institution itself is a violation of Guatemalan sovereignty. But whatever the corrupt segment of society says, many people regard the CICIG as their only hope that will restore justice in the country. In fact, in August 2017, thousands of people showed solidarity to the CICIG when they protested against the current Guatemalan president when he tried to fire the commissioner of the CICIG after the authorities launched an investigation against the president’s son.
Learning and Recommendations
The fascinating thing about La Linea case was that it wasn’t used to sack only the president. When the case surfaced, the Attorney General’s office uncovered the entire chain of corruption. This means that the authorities were committed to finding out the loopholes in the structure that somehow facilitated the execution of criminal activities. When it comes to political corruption, the important thing is to work toward structural improvements.
Here’s a closer look at how the Guatemalan authorities address the high-profile corruption scandal.
1. In Guatemala, the authorities didn’t solely focus on the president, a high-profile official who garnered public attention, and label the arrest as “the mission accomplished”, but they also looked into the inherent fault of the system that let criminal activities pass through undetected. Only prosecuting a high-profile official would have allowed the authorities to address only the symptom of a much larger problem. But what the agencies did in Guatemala was that they uncover the entire racket that was involved in the crime. Around 30 people face prosecution in this case. The redressal of this problem will only be made possible if the country carries out the structural improvement to root out the possibility of any corrupt activities.
2. The Attorney General and the CICIG didn’t restrict their investigations to public servants. In the subsequent stage of the investigation, also called “The Cooptation” case, the authorities included private actors. This means that besides apprehending government officers, the agencies investigated private players as well who were later convicted. The precedent set by the Guatemalan authorities is likely to go a long way in disrupting corruption. Following suit, Brazil adopted a similar approach while investigating the Oberderetch case.
3. The CICIG took quick action to break the cycle of cooptation, corruption, and infiltration that was negatively impacting every Guatemalan institution. In a country where the judiciary is weak and the law-enforcement agencies cannot perform freely and state institutions, including these two, are infiltrated by criminal networks, it is difficult to tackle corruption. Keeping in mind these limitations, the Guatemalan authorities adopt an arrangement of a UN-supported independent and international commission to investigate the case in an efficient manner.
These lessons, including those that are coming out of Brazil, should be looked into by the countries that face the problem of corruption and where elite forces feed off the common man’s misery. Confronting the networks and systems of corruption is not an easy task. The authorities may even face the backlash of societies that have internalized corrupt practices. But taking tough measures is the only solution to transform societies.
Illicit activities continue to grow at unprecedented rates, affecting particularly regions with lack of governance and social structure. With scarcity of political stability in many regions around the world , it is even more important to address this issues.
Curtailing the illicit economy requires a range of solutions that span from harnessing technology to fight illicit trade, identifying governance gaps and sharing best practices to the adoption of a multidisciplinary approach that introduces an international public-private partnership platform, where the knowledge, expertise and experiences of various actors can be shared to develop a global governance regime to deal with illicit trade.