Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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10/13/2011 Piracy for Ransom Increasingly Lucrative, Ventures Sometimes Syndicated 

A report by the Financial Action Task Force on piracy describes the increasingly lucrative nature of the business of holding ships and crews for ransom, as well as the difficulty that the international community faces in stopping piracy on the high seas.  Whereas freeing a vessel and crew in 2005 cost an average of $150,000, by 2010 this had grown to $5.2 million.  In one case, the hijacking of the German-owned vessel Victoria, the division of the ransom money was actually documented. 

The commander-in-chief of the hijacking crew got $900,000 for his efforts, the interpreter got $60,000, the accountant also got $60,000, while the first attacker on the vessel got $150,000.  Apparently there was a significant premium for being first on the vessel because the other attackers got $41,000 apiece.  If the position of accountant in a hijacking crew sounds strange, even stranger may be the chef of the hijacking crew, who got $20,000.  The sous chef got $9,000.  This particular hijacking operation was open for investment and each of 20 backers got $12,000, though it is not stated what portion of this was return of capital.  The FATF says that Puntland, a largely autonomous state inside Somalia, is believed to be sheltering pirates with some government officials involved in piracy networks and some perhaps among the investors.  Most ransoms are paid by airdrops of cash, often near the hijacked ship which the pirates leave once they’ve verified receipt of the agreed-upon amount, disappearing on speedboats.  Insurance companies often pay the ransom, with negotiations handled by various intermediaries, some of whom are chosen by the pirates and have an interest in keeping the ransoms high.  The cash is often transferred into hawala networks, though the weakness of the anti-money laundering programs in Somalia and many surrounding countries has made it virtually impossible to verify where or when the money is actually laundered.  The international piracy report and other developments will be discussed in the next issue of the Monitor. 


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