Countering Piracy by Disrupting Its Financial Networks

March 17, 2011
MV Sea Horse Sails into Port of Mombasa

The impact of piracy off the coast of Somalia is reaching alarming levels. Over the last five years, the average ransom paid per ship reportedly has jumped from $150,000 to $5.4 million. While this is a disturbing statistic in its own right, the price of a ransom is not the whole economic cost. A recent study estimated the actual cost of piracy on the international economy to be somewhere between $7 to 12 billion annually when you include all economic implications -- such as higher insurance premiums, longer transit times for detours, and depreciation of cargo while detained. Yet in this increasingly distressing narrative, the economic story is only part of the story.

Above all, there is also the human cost to consider. Innocent hostages are often held for months, sometimes under abusive conditions, and occasionally killed. The recent deaths of crewmen aboard the M/V Beluga Nomination and four U.S. citizens aboard the Quest underscore the potential for piracy to end in tragedy. Piracy also exacerbates Somalia's humanitarian suffering by disrupting the flow of humanitarian aid, and undermines its fragile political development.

The Contact Group on Piracy off the Coast of Somalia (CGPCS), a voluntary international forum created in January 2009 pursuant to UN Security Council Resolution 1851, leads the international community's response to piracy. The Contact Group is making progress on many fronts including: coordinating naval patrols, establishing a trust fund to assist prosecutions, addressing legal deficiencies in piracy-related laws, promoting shipping best management practices, and developing a strategic communications plan.

Yet more needs to be done. Domestically, we at the Bureau of Economic, Energy, and Business Affairs, along with the Bureau of Political Military Affairs, have championed U.S. Government efforts to develop a strategy for disrupting the financial networks that sustain piracy off the coast of Somalia.

As part of our effort to address the scourge of piracy, I recently opened an ad hoc meeting of the CGPCS to address the financial aspects of Somali piracy, which drew over 150 participants representing 46 countries and 10 international organizations. The discussion focused on how to identify and target piracy financiers and instigators, how to prosecute them, and how to better partner with the private sector. We also examined the applicability to piracy of techniques developed to attack the financial flows associated with terrorism, narcotics trafficking, and other transnational organized crime.

This highly collaborative meeting highlighted that sustained, international effort is needed to address piracy-related financial flows as part of an overall counter-piracy strategy. Working with our international partners, we will continue to identify and disrupt the financial flows related to piracy and do our part to alleviate the vast economic and human damage left in its wake.

You can follow Assistant Secretary Fernandez on Facebook and @EconEngage on Twitter.

Comments

Comments

Brian S.
|
Colorado, USA
March 18, 2011

Brian S. in Colorado writes:

Dear Assistant Secretary Fernandez,

The gist of your post is that the Contact Group (CGPCS) has been working up until now to:
*** coordinate naval patrols;
*** establish a trust fund to assist prosecutions;
*** fix deficiencies in piracy-related laws;
*** promote best management practices; and
*** communicate CGPCS accomplishments better.

And now, you personally are involved in trying to disrupt the financial networks used by Pirates and their investors.

The State Department even has a Rapporteur for Piracy now.

What more could the Department possibly do ?

Well, for one, you could hold someone responsible for achieving results. That is clearly missing. Keep granting all the authority you want, it won’t make any difference.

Up to now, there is a lot of activity dealing with symptoms of Piracy, but not even a glimmer of recognition as to what the root causes are.

If someone is required to reduce Piracy, they will have to identify and deal with the causes of Piracy.

It is my sense that, within State, you blame the Navy for not doing enough, and the shipping industry for enabling the Pirates. That is not fair. Neither the Navy nor industry can stop Pirates.

This problem cannot be solved by force alone. Pirate activity derives out of the economic situation ashore. The only solution will require a combination of economic development and strengthening of the Rule of Law. There is already a plan to do this.

THE PLAN

In December, 2008, a team that included the former Minister of Fisheries for the Puntland Regional Government, which ostensibly has authority over most of the Pirate havens, developed an approach to provide that combination of economic development and the Rule of Law, and submitted it to the CNO for consideration. Unfortunately, the Navy apparently feared that solving the Pirate problem too quickly might lead to smaller appropriations and fewer ships.

The approach was submitted to the POC designated for receipt of Unsolicited Proposals sent to AFRICOM. That contracting official made his own technical evaluation of the approach, based on who-knows-what expertise, without forwarding it, and found it lacked technical merit.

Finally, in April, 2009, we tried to send it to Secretary Clinton. On 13 April, Ms. Martha L. (A/LM/AQM) emailed me to say that the State Department had no responsibility for Piracy, and therefore no interest in stopping it. That was then.

If someone in State is now going to be held responsible for reducing Piracy, it would be appropriate to look at that approach again.

The former Fisheries Minister, in collaboration with the current President of Puntland, is still prepared to implement this approach, as soon as it is funded.

The US should not go ashore to implement this effort, but work through a local implementing partner like Musharax DGPL Ahmed Said Aw-Nur. Nobody is better suited to this undertaking.

Mr. Assistant Secretary, when you’re ready to fix this, send me an email.

Respectfully,

Brian S.

Latest Stories

September 4, 2008

Primer on Ramadan

Imam Mohamad Bashar Arafat, provides a primer about Ramadan and the tradition of Iftaar. more

Pages