Opinion: Global shadow financial system enables the plunder of the world’s oceans and seas

This opinion piece was originally published by Devex

This year, the United Nations will host its “Ocean Conference” from June 5-9 in New York. Billed as a “game changer” event aiming to reverse the decline in the health of the world’s oceans and seas, it is expected to attract thousands of policymakers, scientists and other stakeholders, to stimulate action in support of Sustainable Development Goal 14, “life below water.”

That the event is sorely needed is not in question. The state of the world’s oceans and seas is dire, in large part due to human activities, and in particular to human-induced climate change, pollution and overfishing.

The U.N. Development Program warns of alarming rates of ocean acidification, while the average temperature of the upper layers of the ocean has already increased by 0.6°c over the last 100 years. Rising ocean temperatures have accelerated unprecedented coral bleaching events; Australia’s Great Barrier Reef is probably the worst.

Pressure on the world’s fish stocks is also at an all-time high. Globally, more than one third of fish stocks worldwide are classified by the Food and Agriculture Organization as overfished beyond sustainable limits; many more are considered “fully exploited” in a context where demand for fish continues to increase year-on-year.

The world’s shadow financial system plays a key role in enabling some of the worst abuses of the ocean’s precious resources yet this is rarely front and centre of international policy discussions. Fisheries crime — frequently transnational and highly organised — includes illegal fishing, transshipments of marine resources, document, tax and customs fraud, corruption and money laundering. These activities are facilitated by an international financial system that enables the perpetrators to hide the proceeds of their crimes through a complex web of tax havens, privacy laws and corporate structures — such as anonymous shell companies — across multiple legal jurisdictions.
“Flags of convenience, ” or FOCs, compound the problem. The U.N.’s Office on Drugs and Crime reports that fishing vessels have been found to operate under three separate names and three different flags — so-called flag hopping — which can make it extremely difficult to monitor and track and their activities. FOCs also enable ship owners to avoid taxes and lower safety standards for seafarers.

Global Financial Integrity recently estimated that illegal, unregulated and unreported, or IUU, fishing creates $15.5 billion to $36.4 billion in illicit profits annually. The European Commission estimates that almost 20 percent of the annual fish catch worldwide is caught illegally. This number is much higher in certain regions of the world however. Most occurs off the coasts of developing countries with the problem especially acute in West Africa, where GFI estimates that 37 to 40 percent of the catch is illegal. The Pew Trust estimates the total value of illegally harvested or transshipped tuna in the Pacific at about $616.11 million a year.

This is perhaps no major surprise since poorer countries have fewer capacities to effectively police their waters, and may be more vulnerable to bribery and corruption. But it also means IUU fishing has serious development and security dimensions in addition to its harmful environmental impacts. Diminishing fish stocks can undermine local and national food security as well as negatively impact the livelihoods of subsistence, small-scale and artisanal fishers. It can deprive states of much needed economic revenue for sustainable development, while illegal operators benefit from an unfair competitive advantage. As fish stocks decline, the price of fish rises, which creates even more incentives to (over)fish.

Illegal vessels have also been associated with horrific human rights abuses. The Guardian has found that migrant slaves are used on trawlers that catch fish sold in the U.S., U.K. and Europe. UNODC also reports that illegal fishing vessels have been used to smuggle people, drugs and weapons across borders.

The Ocean Conference can help to tackle such abuses: The organisers are urging policymakers and other stakeholders to make “voluntary” commitments to support SDG 14. Indonesia has committed to establishing a regional cooperation mechanism to combat fisheries crimes in Asia-Pacific. More can be done, however, to clean up the international financial system and to combat financial secrecy which enables the large-scale and systematic plunder of some of the earth’s most precious and dwindling resources.

The networks involved in these criminal activities need access to finance and banking to be profitable and to continue to operate. Anonymous companies are the vehicles of choice for criminals and the corrupt. To combat this, countries could commit to collecting beneficial ownership information on companies, trusts and other legal entities registered within their borders, and make information about companies publicly available. Policymakers could also commit to strengthening intelligence and cross-border cooperation, with a particular focus on supporting developing countries to use intelligence, identify illegal practices and deal with corruption. Customs officials, especially in developing nations, need more support to scrutinise import and export invoices for signs of trade mis-invoicing. All countries should commit to implementing anti-money laundering and counter-terrorist financing standards in full, to protect the international financial system from abuse. Developing countries also need more financial and technical assistance to devise credible strategies for managing their ocean and sea resources responsibly over the long-term.

 The Ocean Conference provides an opportunity for countries around the world to pledge to take decisive political action. It should not be missed.
The UN Ocean Conference in 2017 was an opportunity to catalyse action in support of the world’s oceans and seas

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