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Black Market Billions: How Organized Retail Crime Funds Global Terrorists

By Hitha Prabhakar

Published by FT Press

Published Date: Nov 5, 2011

Description

From piracy to counterfeiting to cargo theft, organized retail crime has exploded into a $38 billion industry. Synchronized global teams of thieves are pilfering immense volumes of high-value products, counterfeiting even more--and using the profits to support the world’s most vicious terrorists and criminal gangs.

In this eye-opening piece of investigative journalism, top business reporter Hitha Prabhakar connects the dots and follows the money deep into the world’s fastest-growing criminal industry. You'll learn how the Internet, social media, and disposable cell phones have opened the floodgates for a new generation of criminals--and how buying something as innocent as a counterfeit handbag or discounted cigarettes actually funds terrorist groups from Al-Qaeda to Central America’s drug lords.

Black Market Billions draws on extensive first person interviews with law enforcement, industry, and the criminals themselves to reveal how retail crime rings impact the security in every country in which they operate. Prabhakar goes "inside" to reveal why the piracy economy has exploded...why preventive measures have failed...and what to expect next, as organized retail crime reaches a terrifying critical mass.

Table of Contents

Introduction     1

 

Part I: The Piracy Economy

 

Chapter 1: Organized Retail Crime Goes Global     9
Why Is ORC Such a Threat?     11
The Promised Land: Money Talks     13
Made in America: Homegrown Terrorism     17
Recruiting from the Inside     19
From Prison to Gangs to the World’s Most Notorious Terrorist Group     21
Access to Funding Gets Creative     25
Burrowing In: The Hezbollah Finds a Home in the U.S. and South America     27
From America to South America: Ties Get Stronger in the Tri-Border Region     28

 

Chapter 2 When a Deal Isn’t a Deal     31
Getting a Slice of Luxury the Cheapest Way Possible     34
The “Real Deal”     36
Dying for a Deal: The Recession Doesn’t Make Aspirations Go Away     38
Big Takedowns Take Precedence Over Smaller Offenders     39
Counterfeiters and ORC Move Their Operations Online     40
eBay’s Swift Response     42
Too Little, Too Late     44
Lurking in the Shadows: Stolen Gift Cards Bought Online     45
Easy to Obtain, Easy to Sell     46
Fake-out: Retailers Fronting as Legitimate Stores     48
Protecting Yourself: Know the Signs of E-fencing/ORC     51

 

Chapter 3: The Cost to the Stores     53
The Blame Game     54
Insider Information: Employee Theft and ORC     54
Human Resources Fail: Hiring the Wrong People     56
Wholesale Scam: Terrorist-Affiliated Warehouses Sell to the Little Guy     61
Taking a Bite Out of the Balance Sheet: Economic Downturn Fosters Cargo Theft     64
Coordinating Information in Real Time: LAPD and APD Case Studies     67

 

Part II: Follow the Money

 

Chapter 4: The Money Trail and the Business of Cross-Border Trade     77
The Warehouse: Ground Zero for Cross-Border Trade     80
Profile of a Purchaser     81
Keeping Shelves Stocked Through Cargo Theft      83
Coveted Items: Over-the-Counter Drugs     84
Profile of a Cargo Thief      86
“Shell Stores”: A Conduit for Organized Retail Crime      87
Shell Stores Move Online     89
A Hotbed of Stolen Merchandise: Flea Markets     91
Nabbing the Bad Guys: Classifying Organized Retail Crime as a Felony      91
Insurance Companies: The Missing Link     93
The Gray Market: Another Retail Facilitator of ORC     94
Laws Have Been Passed, But Are They Helping?     95

 

Chapter 5: Profile of a Booster and a Fence      97
Moving the Merchandise: The Role of a Fence     100
Being Convicted as a Level 1 Fence: More Like a Slap on the Wrist Than a Slap in the Face     101
The Level 2 Booster: Inside the Mind of a Potentially Dangerous Criminal     104
Other Forms of Theft from a Level 2 Booster     106
Level 3 Boosters and Fences: A High-Level Organization Equals High Profits     108
Level 3 Boosters: Frequently Lifted Merchandise     112
Curbing Boosters and Fences: What Does and Doesn’t Work     115

 

Chapter 6: Family Ties     119
When Family Funds Support Terrorism     121
Assad Muhammad Barakat and His “Family”     123
Illegal Entry into the U.S. Is Not Difficult—if You Have Money     127
The Great Entrepreneurs: Terrorists      132
The Trust Factor: The Basis of Any Organized Retail Crime Ring     136

 

Chapter 7: Money Laundering 2.0     139
The Three Stages of Money Laundering     141
Organized Retail Crime and Latin America     151
Funneling Money Through the Black Market Peso Exchange     152
The South American, Mexican, and African Connection      155

 

Chapter 8: The Political Agenda     159
Homegrown Terrorism: How Retail Theft and Piracy Has Funded Terrorist Operations     160
Rebel Kids: Extremist Ideas Financed Through International ORC     163
When Things Went Awry     164
ORC Funding by Way of Somalia: A Tale of Two Misguided Kids     165
As Local as Down the Street     168
Funding Evil Under the Guise of Charitable Contributions: The Mosques     168
Muslim Charities: Capitalizing on Natural Disaster and Religious Empathy     169
Terrorist Fund-Raising Via Charities Finds Roots in the U.S.     172
Charitable Donation Loopholes: How the IRS and Banking Systems Failed to Prevent Fraudulent ORC Funds from Financing Terrorist Groups     173
Charities Turn to a Cyber Audience     175
Why the Government Can’t Regulate Charities     175

 

Chapter 9: Strange Bedfellows      179
How Banned TVs Funded Bombings     180
The Business of Cigarette Smuggling      183
The EC Versus R.J. Reynolds Tobacco     185
The Role of Money Brokers and Money Launderers     186
The History of Cigarette Smuggling     188
Cigarette Smuggling Funds Local Terrorism Around the World     189
Chiquita International Brands: “Either You Pay Me, or I Am Going to Kill You.”     192
Dole Foods’ Involvement with the Colombian Paramilitary     195

 

Part III: Putting a Band-Aid on a Broken Leg

 

Chapter 10: The Failure of Preventative Measures     201
Acting Locally, Thinking Globally     202
Types of ORC Theft Prevention That Are Supposed to Work But Don’t     204
A Bottom-Line Breakdown of Costs     207
Legal Issues: Defining ORC Versus Shoplifting and Shrinkage     215
Regulating the Resale Market     216

 

Chapter 11: Letting the Bad Guy Get Away     219
Regulation Epic Fail: How Banking BSAs and AML Programs Let Terrorist Funding Slip Through the Cracks     222
Continued Failure to Regulate IFTs: The Costs to Local and Federal Governments as Well as Retailers     223
Failure to Regulate Hawalas     224
IFTs Get Sophisticated: Stored Value Cards     227
Bulk Cash Smuggling Comes in a Smaller Package     228
Retailers Feel the Pain of SVC Fraud     230
Credit Card Fraud Is Even Worse     231
RICO Defined     234
Why ORC Rings Still Exist: Money Laundering and the RICO Statute     235
More Problems with RICO: It’s in the Definition     236
Laws That Once Protected Potential Terrorists Have Changed     239
Defining “Material Support” and “Coordination”     239

 

Epilogue     243

Glossary     247

Endnotes     271

Index     299

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ISBN-10: 0-13-277641-3

ISBN-13: 978-0-13-277641-7

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