Crime waves

Economic diversification is exposing Pacific islands countries to new criminal threats, according to the latest report by the Global Initiative Against Transnational Organized Crime.

The countries have implemented regulations and policies in tax regimes and company law to attract foreign business and investment, capitalising on their natural resources such as timber, minerals and fish and seizing new digitally enabled opportunities. But these measures are also attracting organised crime that involve private companies.

Many vulnerabilities diminish Pacific Island nations’ resilience in the face of criminal activities. Problems include limited monitoring and enforcement capabilities, inadequate technical skills (to evaluate cryptocurrency schemes, for example), weak or absent due-diligence processes and public service corruption.

Some of the most serious examples of convergence between business and organised crime happen in the logging industries in Papua New Guinea and Solomon Islands. These industries are dominated by Malaysian and Chinese companies that harvest and export timber primarily to China. Although the business operators are legitimate, most of their activities involve illegal practices, including felling of protected species, excessive harvesting and tax avoidance.

In addition to financial and environmental crimes, human trafficking contaminates the Pacific region’s mining, logging and fishing supply chains. Asian men are trafficked to the Pacific islands as labourers. Women and children are trafficked domestically to logging camps for sexual exploitation. The large flow of foreigners is also boosting illicit drug importation. In 2023, Solomon Islands authorities made their first-ever seizure of methamphetamine and ketamine, which had been smuggled in by Chinese entrepreneurs using logging operations as cover.

Furthermore, the regulatory environment in some Pacific countries is being exploited by those who are not interested in investing in the region.

Some avoid sanctions by misusing local open maritime registries to adopt the flag of a country with favourable tax regimes and less stringent regulations. For example, Russian ships, banned from US and European ports over the war in Ukraine, have been given the Marshallese flag. The Marshall Islands is among the top three flag states in the world by registered tonnage.

Other individuals, some sanctioned, take advantage of company laws that make some Pacific countries ideal destinations for offshoring and hiding assets. Corporate anonymity allows businesses registered in the Marshall Islands, for example, to engage in money laundering. In 2022, a US-led investigation resulted in the seizure of two super yachts worth more than US$1 billion in Fiji. The investigation uncovered a global web of shell companies and trusts registered in the Marshall Islands and elsewhere that had hidden the identity of the yachts’ owner, Suleiman Kerimov, who had been under US sanctions and is reportedly linked to Russian President Vladimir Putin.

Golden passports and visas, which allow foreigners to buy residency or citizenship through investment, are also open to corruption. While they are an essential source of revenue for some Pacific islands, such schemes lack proper due diligence mechanisms. In 2023, it emerged that the fugitive brothers Atul and Rajesh Gupta, businessmen accused of syphoning large sums of money from South Africa’s state funds, had acquired Vanuatu citizenship. Criminals from Lebanon, Italy and Russia have also taken advantage of the region’s lax citizenship schemes, and Chinese spies have entered Britain on Vanuatu passports.

There is a real tension in Pacific Island nations between the desire to welcome investors and the fear of attracting criminal exploitation. This can be partly overcome by increasing the countries’ resilience so that they can screen investors more effectively and stop them from abusing the system for illicit gain or employing exploitative practices.

Building resilience is difficult, however, and the challenge is compounded by the disparity in diplomatic power between Pacific nations and the countries from which illicit foreign investment originates, especially in the case of China. This often results in certain companies receiving more favourable treatment with greater access and impunity. There is also an added risk that if these foreign business actors have close relationships with their governments, they could become tools for political influence in the Pacific.

Pacific island nations need the golden passports, flags of convenience and offshoring opportunities to connect them to the global economy, even though their measures attract illicit networks that reach Asia, Europe, Africa and the Americas. To help protect them, we must better integrate the Pacific islands into global efforts to counter transnational crime perpetrated by outright criminal groups and business actors alike.

This article was published by The Strategist.