East Africa pirates took up to $413m since 2005

A photo taken on January 4, 2010 shows an armed Somali pirate keeping vigil on the coastline near Hobyo, northeastern Somalia. AFP / MOHAMED DAHIR 

By AFP
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Horn of Africa pirates have raked in up to $413 million in ransom since 2005, with most of it used to finance "global scale" criminal operations, a new study said Friday.

The study said the pirates themselves get little of the money paid them by international ship and cargo owners, with their financiers getting most of the take.

The money then is spun into criminal operations including arms trafficking, migrant smuggling, and to fund militias, as well as into legitimate businesses, according to the joint study by the World Bank, United Nations and Interpol.

The study, "Pirate Trails," points to the need to go after the money itself, as it is laundered and used in other areas, and not just the pirates.

"The international community has mobilised a naval force to deal with the pirates," said Stuart Yikona, a World Bank financial sector expert and co-author of the report.

"A similarly managed multinational effort is needed to disrupt and halt the flow of illicit money that circulates in the wake of their activities."

The study paints a picture of an increasingly sophisticated industry operating mainly from Somalia.

It is based on interviews with government officials, bankers, local businesses and former pirates.

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It says that pirates, hijacking vessels from small sailboats to oil supertankers off the busy coast of East Africa, have been able to ransom off their captives for between $339 million and $413 million between 2005 and 2012.

From 30 per cent to 75 per cent of the money ends up in the hands of "financiers," with only a small amount going to the pirates themselves.

KHAT TRADE

Most of the money stays in the region, with a substantial amount laundered through the trade in khat, a popular narcotic leaf in the East African region.

The study says there is evidence that pirate financiers have used their gains to establish their own stakes in the khat trade.

In addition, they buy heavily into real estate, and could be getting into oil trade, transportation, restaurants and hotels.

But it cited a greater concern over pirate financiers "investing in militias and military capabilities" in Somalia, running human trafficking operations, and other criminal activities.

"The fact that proceeds from piracy are being used to perpetuate other criminal activities is concerning for the development and stability of the region as a whole, and deserves increased attention from local and international stakeholders," it said.

The study paints a picture of a piracy economy in impoverished coastal Somalia that has brought benefits, but also sharply pushed up living costs, due to the flood of ransom cash.

Pirates end up paying more for many crucial goods; khat costs three times the price in non-pirate towns.

Three key pirate networks dominate the industry, in operations more complex, and formal enough to now involve operating contracts, with lawyers acting as go-betweens to conclude deals between the key parties in the piracy event.

Businessmen involved on the pirates' side also clean up by selling goods at hugely inflated prices to the pirates themselves.

"All pirates accept the situation and realise this is the cost and social norm of doing business," it said.

Aside from higher prices, the study argued though that Somalia has paid the price in terms of lower security, less willingness by outsiders to travel there, and regional instability.

Fishing has declined in the region, with a sharp 28.5 per cent fall since 2006 of fish product exports from piracy-affected East African countries.