Illicit Networks and the Rise of “Mafia States”

The conventional narrative of transnational crime describes a weak nation-state exploited by sophisticated organized criminal groups. In this zero-sum worldview, the state loses control as nonstate actors gain power. In some countries, however, government institutions—from executive bodies to intelligence services to central banks to the police—are involved in a  range of illicit activities. In a recent piece in Foreign Affairs, Moises Naim labeled this phenomenon “mafia states,” arguing that the new breed of criminal statehood poses a particular threat to the international community by “blurring the conceptual line” between the licit and illicit worlds.

To analyze the structure of illicit networks and assess gaps, weaknesses, and opportunities in anticrime efforts, Google Ideas and the Council on Foreign Relations launched a new roundtable series. The second roundtable, “Illicit Networks: Mafia States, Nonstate Actors,” convened fifteen experts to deconstruct the concept of ‘mafia states’ and explore its role in illicit networks. The discussion (summarized here) yielded several important observations.

• When it comes to the illicit, the traditional dichotomy between states and nonstate actors is no longer applicable. Criminal organizations are inherently attracted to states or regions where there are market opportunities, oversight is limited, institutions are weak, corruption is pervasive, and rule of law is absent. But illicit networks can also be harnessed by the elements of the state to advance political interests and reap profits. To varying degrees, states such as North Korea, Venezuela, Myanmar, Guinea-Bissau, Russia, and Ukraine, among others, rely heavily on profits from transnational crime. Existing multilateral tools to combat transnational crime, however, have yet to acknowledge and adapt to this convergence between states and organized crime. International treaties and initiatives primarily target nonstate criminal actors, and rely on states to comply with and implement recommended policies—a tactic that is significantly undercut when the state itself is involved in illicit activities.

• Mafia states are not a “new” threat. States have long been engaged in, or complicit with, illicit activity. For centuries, states smuggled goods to evade taxes and tariffs. For example, both the American Continental Army and the Confederate Army depended on transatlantic smuggling during the Revolutionary War and Civil War. And no contemporary criminal organization rivals the power and influence of the British East India Company, which held a monopoly on the global opium trade in the late eighteenth and early nineteenth centuries. But the establishment of new global prohibition regimes, particularly over the past several decades, exponentially increased the number of illicit commodities—including trafficking of endangered species, counterfeit products, and drugs—which were previously unregulated. Criminal groups as well as states have exploited the increasing demand for prohibited goods and the high profits available to those who assume the risks of trading in them.

• The term “mafia state” oversimplifies a broad spectrum of criminal-state relationships. There are weak and failing states like Somalia that are coopted or directly challenged by criminal organizations; “swiss cheese” states that have pockets of integrity and holes of criminality, such as Guatemala; and states that are fully functioning criminal enterprises, epitomized best by North Korea—also known to U.S. officials as the “Soprano state.” But illicit activity is not confined to weak or rogue states. China’s counterfeit industry employs millions of workers, and several high-ranking officials in Venezuela have been officially labeled “drug kingpins” by the U.S. government. In order for law enforcement to be effective, policymakers need a sharper and more nuanced understanding of the nature and functions of illicit networks.

• State collusion in transnational crime exacerbates law enforcement challenges. As sovereign entities, government institutions and officials enjoy a certain degree of protection and noninterference. Sheltered by the state apparatus, criminal groups can conduct their operations in relative security and stability, as well as gain access to critical tools of their trades, from passports to shipping registries to false end-user certificates for arms transfers. The usurpation of sovereignty for illegal activities plays havoc with global law enforcement cooperation. To address and overcome these challenges, Moises Naim proposes establishing “coalitions of the honest” among countries that meet certain standards of conduct. The Financial Action Task Force (FATF), for example, helped to set new norms for anti-money laundering and increase transparency in financial transactions.

• Critical information gaps impede progress. The activities of illicit networks are inherently difficult to track and quantify. Official statistics from international institutions and organizations are often based on fuzzy estimates provided by states themselves, which have a stake in the outcome (whether it is to increase financial assistance or mask the problem). Moreover, there is no single institution that collects solid data on illicit networks or facilitates information sharing among political authorities around the world. Technology may help overcome this information vacuum, if it is harnessed to organize, visualize, and publicize data in the public domain. Recent user-generated initiatives such as I Paid a Bribe, a website where citizens report instances of corruption, offer promising models for the future.