Brokers Without Borders: How illicit arms brokers can slip through gaps in the Pacific and international arms control system | Financial Action Task Force On Money Laundering

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On 11 December 2009 a 35 ton cache of conventional weapons left North Korea bound for Iran. The following day the arms were intercepted and seized by authorities in Thailand. In an unexpected twist it was soon discovered that the plane chartered to carry out this illegal transfer was leased by a New Zealand registered shell company. To date those who arranged the transfer have not been held accountable. The case demonstrates that the existing international arms control system is not adequately combating illicit brokering. Illicit arms brokers continue to use global networks of companies and individuals to exploit regulatory gaps between jurisdictions to carry out their transactions with relative impunity. An effective Arms Trade Treaty, supported by robust national legislation and regional cooperation, will provide solutions to closing these gaps and stopping the irresponsible trade in deadly weapons. Since 2006, more than 2,000 people each day have died as a result of armed violence, and thousands more have had their human rights violated and their livelihoods undermined by the irresponsible trade and use of deadly weapons. The current international arms control system is failing to adequately regulate the arms trade and hold arms brokers and dealers accountable for their actions. As a result weapons continue to be transferred into environments where they are undermining development and fuelling human rights abuses. Oxfam has produced this report to examine publically available information about one specific case of illicit arms brokering. Through an analysis of the case and the enabling factors that allowed this illicit transfer to occur, the report identifies key lessons about how states can work together at the domestic, regional and international level to find solutions for the problem of illicit brokering.
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  Oxfam Case Study 18 October 2010 Brokers Without Borders How illicit arms brokers can slip through gaps in the Pacific and international arms control system www.oxfam.org Dec. 12, 2009: Thai police officers and soldiers remove boxes of weaponry from a foreign-registered cargo plane onto trucks at Don Muang airport in Bangkok, Thailand (AP Photo/File) On 11 December 2009 a 35 tonne cache of conventional weapons left North Korea bound for Iran. The following day the arms were intercepted and seized by authorities in Thailand. In an unexpected twist it was soon discovered that the plane chartered to carry out this illegal transfer was leased by a New Zealand registered shell company. To date those who arranged the transfer have not been held accountable. The case demonstrates that the existing international arms control system is not adequately combating illicit brokering. Illicit arms brokers continue to use global networks of companies and individuals to exploit regulatory gaps between jurisdictions to carry out their transactions with relative impunity. An effective Arms Trade Treaty, supported by robust national legislation and regional cooperation, will provide solutions to closing these gaps and stopping the irresponsible trade in deadly weapons.  2 Executive summary Since 2006, more than 2,000 people each day have died as a result of armed violence, 1  and thousands more have had their human rights violated and their livelihoods undermined by the irresponsible trade and use of deadly weapons. The current international arms control system is failing to adequately regulate the arms trade and hold arms brokers and dealers accountable for their actions. As a result weapons continue to be transferred into environments where they are undermining development and fuelling human rights abuses. Oxfam has produced this report to examine publically available information about one specific case of illicit arms brokering. Through an analysis of the case and the enabling factors that allowed this illicit transfer to occur, the report identifies key lessons about how states can work together at the domestic, regional and international level to find solutions for the problem of illicit brokering. On 11 December 2009 a 35 tonne cache of conventional weapons left the Democratic People’s Republic of Korea (‘North Korea’) bound for Iran, in violation of the UN arms embargo on North Korea. The following day the arms were intercepted in Bangkok by Thai authorities. In an unexpected twist it was soon discovered that the plane chartered to carry out this illegal transfer was leased by a New Zealand registered company, SP Trading. All of a sudden New Zealand, the country ranked as the world’s most peaceful nation in 2009, 2  was linked to one of the biggest international arms trafficking cases that year. Although the attempted transfer was undoubtedly illicit, to date only a single person linked to the case through the New Zealand registered SP Trading, has been charged. However SP Trading was only one of as many as eight companies involved at various levels, with connections to at least ten different countries spanning Asia, the Pacific, the Middle East, Eastern Europe and the Caucasus. These revelations have also demonstrated that while there is a perception that the Pacific has low exposure to arms trafficking, in reality the region is open to exploitation by illicit dealers. Illicit brokers have been able to manipulate gaps in New Zealand sanctions and company law frameworks to evade accountability. Without further action to prosecute those criminally responsible, or legislative action to sufficiently tighten New Zealand’s relevant regulations, the New Zealand system will remain open to further abuse. Oxfam and a range of other non-governmental organisations (NGOs) making up the Control Arms Campaign, have called for the creation of the first universal, legally binding Arms Trade Treaty (ATT) to address the inadequacies of the current international arms control system. An effective ATT could help tackle the problem of illicit brokering by imposing higher common international standards amongst states to hold companies and individuals in their jurisdictions accountable for their role in international arms transfers. This should include regulating their conduct and holding them liable where breaches of international law have occurred. Practically, a comprehensive ATT could provide the framework to resolve jurisdictional issues allowing illicit brokers to avoid prosecution and encourage greater cooperation between states to stamp out such activities. To close the gaps that allow illicit brokers to operate with few constraints, it is therefore critical that the scope of an ATT include effective controls on brokers and brokering transactions.  3 Contents   Acronyms ......................................................... 4 1 Introduction .................................................. 5 2 Methodology ................................................ 6 3 Impact of the arms trade ............................. 7 Efforts to curb the irresponsible arms trade ........ 8 4 The North Korea arms trafficking case .... 9 A chain of deceit ..................................................... 10 Mapping the illicit arms transfer ......................... 11 Timeline of Events .................................................. 13 5 Analysis of arms control arrangements . 15 New Zealand domestic law .................................. 15 Box 3: Shell Companies in the UK ....................... 21 Regional approaches: The Pacific ........................ 22 International law and agreements ....................... 23 Box 4: Box Leonid Minin ....................................... 24 5 Recommendations ..................................... 27 Closing the gaps through an ATT ....................... 27 Closing the gaps in the Pacific ............................. 29 Closing the gaps in New Zealand........................ 30 6 Conclusion .................................................. 31 Notes ............................................................... 32  4 Acronyms ATT Arms Trade Treaty CITS-UGA Centre for International Trade and Security, University of Georgia DPRK Democratic People’s Republic of Korea (‘North Korea’) FAS Federation of American Scientists FATF Financial Action Task Force MANPADs Man portable air defence systems MFAT Ministry of Foreign Affairs and Trade (New Zealand) NGO Non-Government Organisation NIOC National Iranian Oil Company IANSA International Action Network on Small Arms IPIS International Peace Information Service SALW Small Arms and Light Weapons SIPRI Stockholm International Peace Research Institute TransArms Trans Arms Research Center for the Logistics of Arms Transfers UN United Nations UNGA UN General Assembly UNPoA UN Programme of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons in All its Aspects UNIDIR United Nations Institute for Disarmament Research
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