SE Asia Piracy: criminal networks, corporate collusion and corruption

Date: Monday, September 28, 2015
Source: Hellenic Shipping News

According to the latest International Maritime Bureau (IMB) incident report, now more than half of the world’s piracy attacks are occurring in South East Asia. Piracy in the Gulf of Aden, which was the scourge of global shipping from 2011-14 has all but disappeared. But the problem is far from solved, whilst global piracy has dropped overall in the past few years the start of 2015 has seen a consistent rise in attacks.

Responsible for this increate are both the Gulf of Guinea, which remains a hotspot for armed robbery at sea and kidnap for ransom, and south east Asia. Piracy in the waters off Indonesia, the Malakka and Singapore Straights has risen almost exponentially, representing almost 40 per cent of 2015 attacks globally.

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Source: International Maritime Bureau

 

The majority of these incidents related to illegal oil bunkering. Singapore is the bunkering capital of the world, with incidents even occurring within the city-state’s famous port. Vessels arrange illicit ship-to-ship (STS) transfers without paying the proper fees and avoid the designated areas. Weak legislation and lax fines are abused as primarily Singapore-flagged and owned vessels bunker with their automatic identification systems (AIS) shut off to avoid suspicion. This lucrative industry with individuals able to earn between €30,000 up to €500,000 for each successful hit.

What is curious therefore, is the lack of response from the regional or international community to address the threat. Unlike Somali piracy, SE Asia has failed to capture the headlines; it has not triggered multi-lateral naval patrols or the proliferation of high-level strategies that we have seen in the Horn, or even in West Africa. Why?

-SE Asian piracy has been downplayed in past years, and has been described as unorganized and low-level – more appropriately described as theft at sea, rather than genuine piracy.
-The successful heists themselves have been of quite small amounts, which has lead to chronic under-reporting, as the value of the cargo is less than the cost to insurance premiums if the region were to be considered in a higher risk category – a jeopardy faced by shipping companies already in the Gulfs of Aden and Guinea. The Director of the IMB has estimated that 70% of attacks on ships in SE Asia go unreported.
-There is significant demand in the region for the illicit product. Despite globally falling oil prices, stolen oil is still cheaper than market prices, and the evidence shows that the primary market for the stolen oil is China. Though Chinese growth has slowed to single digits, the demand for discounted oil is always far greater than supply.

There are a number of challenges presented to the countries in the region to respond: first, the body of water is vast, and filled with thousands of islands – there are 14,000 small islands in the Indonesian archipelago alone – making it almost impossible to conduct effective surveillance. Secondly, the complex division of national authorities makes cooperation a challenge. Past efforts have focus on sea-based activities, but even where interdiction has been possible, the lack of tools for legal cooperation and mutual legal assistance have proved a hindrance for subsequent prosecution.

Political will appears to be low for getting serious about SE Asia piracy, but this apathy has allowed serious and organised criminal syndicates to proliferate and professionalize into ‘logistical masterpieces’ that are developing corruption networks to protect their activities. Karsten von Hoesslin of Risk Intelligence, who has spent many years investigating and tracking these networks explains: “Today, everything is pre-planned and is part of a larger criminal activity. It is very easy to counterfeit legal papers for the products such as palm oil, gas or petrol and to transport them.”

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Source: von Hoesslin, Risk Intelligence

 

SE Asian piracy follows a scheme of stealing product and value whilst avoiding the excessive violence, hostage taking and hijacking of African piracy – arguably another reason why it has failed to gain headline attention.

On average a team of 7-12 pirates will usually board the attacked vessel for a period of time (an estimated six to ten hours) in order to proceed with the siphoning of product whilst the original crew is gagged and bound. Since no individuals are kidnapped for ransom, a reasonable degree of violence can be expected, although usually only light weapons are used. These incidents all occur usually under the cover of the night. Stolen goods are then carried on a phantom ship, with another 15 pirates manning the vessel, which will take the stolen crude to be blended, refined and sold under the cover of counterfeit documents. These attacks occur on sea and require a high level of logistic know-how as well as coordination between the actors on and off-shore.

According to von Hoesslin, there are between 6-8 key criminal networks at play in SE Asia, but like any criminal enterprise these are supported by vast networks of corrupt officials, facilitators, money launders and low level operatives that are spread across all of the countries in the region.

His analysis shows a organisational structure (shown below) with a handful of group leaders who move about with impunity, connected to a dozen fixers or middle men from all over the region; they connect to half a dozen known known buyers of illicit crude who eagerly bargain down the price of the illicit product. There are at least four skilled forgers in play to supply false purchase and registration documentation, nearly ten phantom ships to hire out, and of course countless numbers of individuals willing to be insiders or part of the networks. The modus operandi of hijacking for product theft is deeply embedded in South East Asian shipping affairs in what many have described as a deeply corrupt industry. Insiders within the industry and of the targeted vessel carrying fuel are crucial for the group to gain valuable information where and how fuel and oil can be siphoned.

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Source: von Hoesslin, Risk Intelligence

 

With ICC and IMB reports suggesting that there is a crude oil hijacking in SE Asian waters every two weeks, the region is arguably needs renewed focus in the war on maritime crime, and the growing consolidation and professionalisation of criminal networks should be of concern for the integrity of the states in the region. It is time for us to get serious about SE Asia piracy.

Later this year, the Global Initiative against Transnational Organized Crime looks forward to publishing a full report by Karsten von Hoesslin on SE Asia piracy, its genesis as a regional criminal industry, examining and analysing the business model, the networks at play and the implications for international security and trade policy.

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