Tag Archives: due diligence

The Criminal Supply Chain

Drugroutemap

This is part two in a series on business practices of transnational organized crime and drug trafficking organizations.

A critical component of the criminal business model is the supply chain and the swift and certain movement of goods from one point to another.  Analysts tasked with understanding crime perpetrated by illicit business networks like drug trafficking, bulk cash and weapons smuggling should use the Supply Chain Analysis (SCA) framework to gain insight into the operations.

The SCA framework asks analysts to set aside the illegality aspect of the transnational criminal organization in order to focus on business sustainability issues.  For example, how can the bulk cash smuggler shift transport routes to evade detection by competitors and law enforcement? Or how might a manufacturer amend a production schedule due to unforeseen circumstances?

Analysts should apply the following framework to these types of scenarios in order to better understand the individual components of the business supply chain and the supply chain in its entirety.  Once an analyst is fully immersed in the business side of the operations they will be better equipped to provide high level anticipatory and estimative analytic products rather than those that are simply descriptive.

The Supply Chain Framework:

Source: Identify the factual circumstances involved in the extraction and handling of the product or natural resource.

  • Is the point of extraction of production located in a high risk area?
  • If so, who retains control of the area in which production and/or extraction occurs?
  • Are contractors involved?

Logistics: Identify the factual circumstances involved in the transport, handling, trading, processing, refining and manufacturing of the natural resource or product.

  • How is the product or resource transported from point of origin to the next stage in the supply chain?
  • Are the products or resources packaged and shipped?
  • If so, by whom?

Operations: Identify the individuals, contractors and entities with a vested interest in the production of the product/natural resources.

  • Are the production and manufacturing practices transparent?

Distribution Logistics: Identify the individuals, contractors and entities with a vested interest in the successful distribution of the product.

  • How are the finished products transported from the manufacturer to consumers?
  • Who is responsible for transport?
  • Where are the critical distribution hubs?

Part three will provide an overview of the role of criminal facilitators and financial intermediaries within the illicit supply chain. Research indicates that both facilitators and financial intermediaries are instrumental to the operation and sustainability of the transnational criminal organization.

References:

The Economics of Drug Trafficking by the Organization of American States

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected or High-Risk Areas

Simulating the Afghanistan-Pakistan Opium Supply Chain

 

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Criminals Use U.S. Shell Companies

You need to read The Great Rip Off by Global Witness.

The report provides excellent case studies of criminal schemes involving the use of anonymous shell companies in the United States.

Three key takeaways for money laundering investigators:

  • Electronic access to specific company information varies by state.  States like Florida, Ohio and Kansas allow access to incorporation dates, beneficial owners, directors and shareholders, annual reports.  Whereas Delaware and New Jersey limit access by only making the company formation date and registered agent name and address publically available.
  • Businesses may be required to register and file paperwork with multiple state offices and divisions; for example an entity may be required to file Articles of Incorporation with the Secretary of State and tax information with the Department of Revenue. Investigators should check with all offices directly and not rely solely on Lexis Nexus or other data aggregators.
  • It is critical for investigators to review copies of all publically available business information made available via state business registries as the paper trail may contain key identifying information and handwritten signatures that may link entities to a larger criminal network.
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Source Evaluation

You’re only as good as your sources.  This is a good rule of thumb for analysts who, like journalists and investigators, may have to rely on other people, companies or databases for information or leads.

Ever wonder about the websites that provide free public information?   For some, it’s probably a good idea to only trust them about as far as you can throw them.   Others, found to be reliable and credible, can be trustworthy and a critical to research.

Curious, I did some of my own due diligence on Bizapedia.com, a website that kept appearing in my search result.

Check out a sample of what I found.

Source Eval

Got questions about a source? Don’t have time for background research? Let me know, I can help.

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