Border security

Michael Yui. Singapore, Malaysia

1st Sep 2010

Part 1 The Nature and Growth of Transnational Organised Crime 1990-2010


Outside specialist circles, little is written about the gradual erosion of governance in weak states caused by transnational organised crime. Yet transnational organised crime has developed enormously in the Asia-Pacific region since 1990 and the end of the Cold War. It has played a role in the steady decline of effective governance in the fragile Pacific states. It certainly played a role in the failure of the Solomon Islands.

It might open the way for defacto colonial rule by China in some Pacific states should they so choose; and if they do not (as in the Solomon Islands) it creates a strategic distraction for powers such as Australia who may oppose the spread of Chinese influence. The corrosive influence of transnational organised crime in the Solomon Islands played a role in forcing a necessary Australian colonial intervention.

Transnational organised crime also poses direct strategic threats to the region. The development of two profitable, highly successful and extremely sophisticated trans-Pacific drug supply chains since 1995 bears witness to this. Multi-ton shipments of cocaine move west, while similar shipments of heroin, methamphetamines and precursors (as well as people) move east. Meanwhile, the supply chains established are used to flood Pacific states with counterfeit goods, ruining honest businesses and enabling illegal immigrants and their masters to seriously damage their economies. All along these supply chains, local governance is eroded, or laid open to corruption on a scale it cannot possibly withstand.

This article is the first of two, which will examines all of these issues. The first article will cover the broad picture, while the second – to be published in October APDR - will cover the impacts on individual Pacific States.

Transnational Organised Crime

Transnational organised crime is different. Conventional criminal acts are committed by individuals to meet the criminal’s immediate needs. Organised crime is exemplified by outlaw motorcycle groups. They work for profits over the long term by organising services, whereby customer demands for illegal goods and services are met. Transnational organised crime however, simply raises the stakes to a new plane. To qualify, it has to meet one or more of the following criteria.

• Transnational organised crime transgresses borders and oceans. An example being a supply chain for counterfeit goods produced in China and sold in Australia.

• Transnational organised crime is committed in one nation but involves a criminal group in more than one nation. An example being where Tongan transnational organised criminals move cocaine and heroin from Tongan stockpiles to Australia.

• Transnational organised crime is committed in one nation but has a substantial effect in another nation. An example being where Fijian Indian organised criminals undervalue exports from India to Fiji and deny Fiji customs revenue.

• Transnational organised crime is committed in one nation, but part of the preparation, planning, direction or control takes place in another. An example is the construction of the methamphetamines ‘Superlab’ in Suva, Fiji, but which was planned in China.

Criminals are expert risk managers, well aware of the need to protect their operational and financial cores. Transnational organised criminal businesses are no longer mono-ethnic or wedded to one commodity. They are motivated by their capacity to generate the highest profit at the lowest risk across a number of commodities or services. This is why they have organised specialised subcontractors.

These operate on or within the margins of criminality, providing services in two tiers. The first includes legal assistance, banking, accountants, stockbrokers, information technology, business consultants and specialised chemists. The second tier is composed of ‘expendable and purchased supporters’. These include corrupt customs officers, immigration officers, politicians, judges, police, other officials, and media.

Transnational organised crime is globalised. The ‘businesses’ are network oriented, technologically sophisticated, entrepreneurial, and have legal and illegal business wings, where the legal businesses help launder money from the illegal wing. Their structure mimics that of normal multi-national businesses.

A well-established trend is that of transnational organised crime groups providing specialist services. These include importing and concealing drugs, specialised administration, such as provision of fraudulent documents, specialist money laundering services, provision of ‘street enforcement’ such as the PNG rascal gangs providing ‘muscle’ for Chinese transnational organised crime groups in Port Moresby.

In the Pacific, criminal syndicates and networks routinely operate using a convergence of these specialised and subcontracted skills. The advantages are significant. Using this business model the transnational organised crime enterprise is cellular. This improves security and protects the brain and nervous system of the ‘business’ by providing expendable arms. For example, if a rascal carrying out a sub-contract murder on behalf of the ‘business’ is caught. Only the can subcontractor can be betrayed, itself expendable. Such subcontracting generates trust between ethnically disparate groups, minimises fratricide, encourages a reduction in violent competition, and above all maximises profits.

The outcome is a lean, flat, flexible organisational structure, with subcontractors assuming many of the higher risks. In turn, this encourages modular behavior. A group can be assembled for one job, disbanded, re-branded by a specialist subcontractor in identity theft, and then reformed as part of a different group for another job. This is a law enforcement nightmare. It makes law enforcement trans-jurisdictional, and demands sophisticated identity forensic work, which Pacific island states simply do not have.

Transnational criminals are not like the old mafia. They shun attention. Lifestyles are ‘comfortable’, not lavish as in the past. Profits are invested in legitimate businesses, property and shares. This is both good business and good security. Such investments make the senior criminal staff indistinguishable from legitimate businessmen, at least on the surface. In turn, this makes law enforcement more difficult.

It can also have the additional ‘beneficial effect’ of forcing legitimate businesses into illegal activities to remain competitive with the criminal-owned business. This improves the camouflage of the transnational crime business. An example is provided in the trade in smuggling counterfeit goods into Palau. Originally started by transnational crime syndicates, legal businesses are now forced to also import counterfeit goods in order to compete.


Academics have debated on criminal use of corporate and network business models. The reality is, they just use whatever works best. They mix and match to suit past experiences, current operations and the environment, with the focus being reliable long-term income flow at lowest risk. Transnational crime in the Pacific is composed of networks which cross international boundaries, and which operate as a mixture of networks and corporate hierarchies within various countries. As an example, in PNG there is a logical structure where ethnic-based Chinese illegal immigrants work within a legitimate businesses hierarchy. These launder money from illegal businesses, which have a corporate hierarchy at local level, linked by networks across PNG. They are supported by a network of corrupt officials. The outcome is a flexible arrangement, whereby local hierarchies are contained within an overall transnational criminal network. This system is extremely resistant to law enforcement. It is made nearly invulnerable by a carefully tended network of senior corrupt officials. Senior officials are ‘handled’ by a local organised criminal figure and who is also a legitimate businessman.

However, local cultural issues are important. In PNG, senior corrupt officials such as Ministers are ‘big men’ in their own right. They cannot be subordinated and act as business partners, and not simply underlings. They have their own army of wantoks and are quite capable of having any number of Chinese killed. This has occurred more than once in PNG. They are not ‘on the payroll’, in the Singaporean business sense.

They have ample violent followers. They are never ‘blackmailable’. The relationship is regarded by them, as an official doing favours for a legitimate businessman. Naturally, he is rewarded for his assistance.

In this Melanesian ‘Big Man’ system, the Big Man is not abusing his authority. He is using it to obtain a natural advantage for his kinship group, his wantoks. This is why the organised criminal must be involved in local business. However, what works in Melanesia does not necessarily fit in Micronesia or Polynesia.

Economic Considerations

The terms ‘organised crime’ and ‘transnational crime’ can be misleading. Above the individual level there is nothing disorganised about crime, as the terms imply. It can be regarded as a business, for it follows a rational economic pattern. Like any business, organised crime works to maximise profit and seeks to expand into new markets in any non-chaotic environment.

During the 1980s, Tongan and Fijian organised crime expanded outside their national and émigré community boundaries. During the 1990s, Chinese organised crime organisations realised that the Pacific formed a new market into which they could expand. But this was not the main game. The Pacific was not only uniquely vulnerable, it also offered excellent access to profitable targets like Australia, and finally formed a highway by which a number of massively profitable trades could be developed between America and Asia.

The perceived ethnic divisions between organised crime entities are a barrier to understanding them. Chinese transnational criminal businesses employ European, Malay and Persian specialists, often on a sub-contract basis with access to criminal ‘contractor and human resources companies’. They work in business relationships with West African, Australian, Mexican, Columbian, Russian and Israeli criminal businesses. What price, then, ethnic exclusivity?

According to the head of the Australian Crime Commission, John Lawler “...if organized crime was a country, it would be the 11th largest economy in the world”. Just in Australia, he thinks it turns over $A11-15 billion annually, with at least $A6 billion being sent offshore each year. He has publicly stated that transnational crime expanded quickly following the end of the Cold war, as once-sealed borders opened and long pent up market demands were unleashed.

As the Vladivostok Centre has noted, a semi-legal operation smuggling jeans and second-hand cars into the Marianas and smuggling logs out has established a logistics supply chain. They can expand their profits by offering this service to others, or by smuggling drugs themselves. And they can also provide others with training on how to corrupt their ‘business opposition’ and attack it from all sides.

All of this generated large flows of illegal goods (half being drugs according to the ACC) and services (half being trafficked people). They also generated new criminal industries, especially in money laundering. This was needed to deal with the vast cash flows the new trades generated. Here in Asia, this linked seamlessly with the traditional Chinese hui kan underground banking system, used by criminal organisations for a thousand years.

Today, in the Pacific, this means suborning the Customs Service, Police, legal system and politicians all at once. Where governance is fragile, this is lethal to the state.

Papua-New Guinea is a case in point, as the latest major corruption scandal shows. Something like Kina 300 million has been stolen from the public purse by corrupt politicians working with a corrupt legal system. The current Commissioner of PNG Customs, Mr. Gary Jufa, is widely thought of as an honest reformer. But what real chance does even a paladin of virtue really have in such an environment? If a major logging company can allegedly buy the Prime Minister and his Forestry Minister for $US20 million and allegedly obtain Royal PNG Constabulary special squads to murder local opponents and so enforce clear felling, exactly what is the difference between that ‘legal timber company’ and an organised crime ‘company’?

It’s all just business.

So, today in Asia and the Pacific, ethnicity relates more to human resources management within the illegal business. What makes it important is trust and how to minimise risk. In the Pacific, you can most easily trust your wantoks. That is the major significance of ethnicity in organised crime. For example, in Fiji, Indian organised crime has strong links to other organised criminal ‘companies’ based in India.

So they insert trusted insiders into the Republic of Fiji Customs Service and avoid duties on legal imports and exports, and smuggle people as well. In Tonga, Tongan organised crime has transnational links to the Tongan émigré communities in the USA and Australia-New Zealand. So it is unsurprising that Tongan transnational criminals have for years organised a heroin and cocaine flow from the Americas to a stockpile in Tonga, from which they maintain a routine cocaine and heroin trade to Australia and New Zealand, where they link to ‘retail networks’ run by the locals. Many of these are themselves Tongan, or Tongans who have developed existing ‘trusted networks’ of locals.

Even if there is little personal trust involved, they can and do deal with each other. After all, both businesses will profit by stable business arrangements. So these entities increasingly deal with each other as ‘illegal businesses’.

The Illegal Market

The market is any demand for goods and services. Where these have been made expensive by tax or illegal by legislation, an opportunity for illegal suppliers is generated. So recent tobacco price increases in Australia have been much celebrated in Southern China, where large volumes of counterfeit cigarettes are manufactured. Container loads of these are now on their way to Australia and very few of them will be intercepted.

Legalisation is no help. It sometimes collapses criminal involvement but those days are probably past. They are now so sophisticated that legalisation either just increases the level of competition or opens new opportunities. In the case of legalised casinos and the illegal gambling industry, legalisation simply gave the organised criminals competition. This delighted them, as it also opened astounding opportunities in money laundering. In turn, this gave them a commercial advantage over their ‘legal’ competitors! So the effect of casino legalisation merely legalised criminal activities and extended their existing market advantage. In Australia, the 1985 legalisation of brothels in Victoria proved this point.

The view that legalising narcotics would somehow end criminal involvement is a current example of this naïve, superficial and simplistic view. It would just make organised and transnational crime stronger, entrench their profits and extend their market advantages. The view that ‘they would at least pay tax’ is touchingly doe-eyed. Since when do criminals meekly do so? It is easier and cheaper to corrupt the local taxation department and reap other advantages from that, just as they do in Macao.

Organised crime ‘businesses’ respond to globalisation exactly as legal businesses do. Their major advantage is that they benefit from jurisdictional differences and enforcement legislation while avoiding (by corrupting local officials), the bureaucratic issues faced by legal businesses. On top of this, they destroy legal businesses by smuggling in cheap or counterfeit goods. Duties are avoided by corrupting customs officials. Even better from their perspective, the legal businesses face more commercial pressure through monetary demands from these same corrupt officials.

The best example of this process is again PNG. Since 1990, these unfair commercial pressures have forced locally owned businesses to behave corruptly themselves, just to survive. This is how the ‘New Chinese’ organised criminal businesses took over the PNG economy. In 1990, PNG had the old ‘PNG Chinese’, who had been there for many decades. The ‘New Chinese’ (near-universally illegal immigrants) were first moved in by organised criminal entities to operate small retail businesses. They used the existing ‘PNG Chinese’ community to help obtain citizenship or residency.

The ‘New Chinese’ immediately exploited their superior links to Mainland China to obtain commercial advantage over existing ‘PNG Chinese’ businesses. For example, they organised the counterfeiting of basic consumer goods like Colgate toothpaste, which they sold at half the price of the real stuff, but at 80% profit margin! By these means they gradually forced the ‘PNG Chinese’ out, (often buying their businesses) created the local social and logistics infrastructure required by the transnational criminal groups backing them, ‘opened up’ local government, police and customs through corruption, and obtained the ability to hide illegal profits in legal businesses.

They apparently had no deliberate intention to wreck PNG, even though they were indifferent to this outcome. Societal collapse generates long-term instability and cuts retail profit, but it opens the way to massive profit through stealing the resource-base of an entire country. It also allows a country like China to convert a fragile state like PNG into a defacto colony. This is what is occurring in PNG.

There is a long-term threat to security, in the national security sense, from transnational crime. It lies in the erosion of faith in democratic processes and institutions, which occur, in criminalised societies. This collapse of governance provides good cover and a breeding ground for other problems, such as are evident in failed states worldwide.

APDR at a glance