Free-trade zones (FTZs) can be attractive to criminal groups as well as legitimate businesses according to a paper published by the Royal United Services Institute’s (RUSI’s) Centre for Financial Crime and Security Studies.
The paper identifies factors that render FTZs vulnerable to illicit trade and financial crime and proposes measures to detect and prevent it.
To explore common challenges and responses that transcend countries’ individual circumstances, it examines four country case studies: Morocco, Panama, Singapore and the UAE.
Based on 74 interviews, two research workshops and an analysis of publicly available literature, the paper identifies key challenges faced by the case study countries, which are also likely to apply to other countries that host FTZs.
These include the lack of consistent international standards and incentives for the policing of goods that pass through FTZs in transit and inadequate understanding of FTZ–related criminal risks in general and financial crime risks specifically.
Uncertainty in the division of responsibility for the monitoring, governance and regulation of FTZs, including limited information sharing and failure to involve customs agencies in FTZ–level risks assessment is also a challenge for countries hosting FTZs.
Lack of monitoring and cooperation
So is the absence of credible monitoring of FTZ administrators and users, as well as the resulting gap in enforcement and the lack of proportionate sanctions and anti-money laundering and counter financing of terrorism (AML/CFT) supervision of FTZ–based businesses.
Limited cooperation with the private sector is also highlighted as a challenge in the paper.
Cause for optimism
While these challenges are formidable the paper says they are not insurmountable and advances have been made at the national level.
But to support the implementation of new international standards, the paper makes a range of recommendations in the areas of policing FTZs; understanding FTZ–related criminal risks; dividing responsibilities in FTZ governance and ensuring coordination; implementing AML/CTF and sanctions measures, and cooperating with the private sector.
London based RUSI is the world’s oldest independent thinktank on international defence and security.
The report, Improving Governance and Tackling Crime in Free-Trade Zones, by Anton Moiseienko, Alexandria Reid and Isabella Chase can be found here.
Categories: Trade Based Financial crimes News