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CHAPTER 1
Illicit Trade
PAST AS PROLOGUE
Commerce developed as human beings began to trade goods for their survival as well as luxury items to enhance their lives. Ancient writing developed to record and regulate commerce. Trade routes developed by land and sea to move valuable cargoes. Societies that assumed a leading role in commerce could amass significant wealth.
Illicit commerce emerged early in human history as trade provided opportunities for criminal as well as legal enrichment. The growth of commerce created new moneymaking opportunities, for both illegitimate and legitimate participants in trade. The new crimes that emerged, such as thievery, smuggling, and fencing, were outlawed nearly four thousand years ago in Mesopotamia. Several centuries later, in the thirteenth century BC, piracy in the Aegean and Mediterranean Seas was reported: the "Sea Peoples" were attacking ships laden with commercial cargo.
The Evolution of Fencing
One of the world's earliest legal documents, the Code of Hammurabi, dates to approximately 1754 BC and was found by French archaeologists over a century ago. The Code is inscribed on a pillar now prominently displayed in a place of honor at the Louvre Museum in Paris and includes the following provision:
If a free person buys or receives in pawn anything from another free person who is a minor, or from a free person's slave, without a contract signed by witnesses, that person is a fence and shall be executed.
The harsh laws of Hammurabi's Code governed Babylonian life. Much more limited than our legal codices today, this short document of 282 laws had many provisions dealing with property relations. This is hardly surprising, as the emergence of written language in the Middle East was strongly motivated by the need to record trade, preserve contracts, and regulate property relations.
From archaeological excavations of this period, we know that inhabitants of Mesopotamia had valuable household items, jewelry, and other items worth stealing. Therefore, the absolute rulers of the time needed to protect not only their citizens' welfare but also their property.
Fences are not executed today as in ancient Mesopotamia, but this enduring "profession" is still with us. Fast-forward to Western popular culture. The great Bertolt Brecht and Kurt Weill song "Mack the Knife" has become one of the most popular ballads of the twentieth century, popularized by singers in many genres — The Doors, Sting, Louis Armstrong, Ella Fitzgerald, Frank Sinatra, Bobby Darin. Yet most listeners have no idea who the sinister Mack is.
Mack was the protagonist of The Threepenny Opera, set in the sordid criminal world of 1920s Germany. Mack, a charismatic professional thief, cavorts with the fences who allow him to capitalize on what he has stolen. Although fences existed in pre–World War II Germany, Brecht, like so many writers before him, had mined history to find inspiration. In his earlier incarnation, Mack was Macheath, the dashing rogue of John Gay's Beggar's Opera, set in early-eighteenth-century London, the heyday of the fence at a time when the city was rife with crime. Fencing was an equal employment profession in the early 1700s: Moll, the heroine of the early great novel Moll Flanders by the famous author Daniel Defoe, fences the goods she steals to her "Governess." The problem of fencing crops up in many diverse locales and has never disappeared.
Fences are also part of our contemporary life. When I was working on my doctorate in pre-gentrified Philadelphia, one of my fellow graduate students was doing what in social science jargon is called "participant observation." In other words, my late colleague Carl Klockars spent fifteen months associating with the professional fence "Vincent Swaggi," who ran his "business" for thirty years in Philadelphia. Although Vincent had a constant flow of goods, he was never rich because his business could not grow significantly.
But life changed for fences with the advent of e-commerce. The virtual world, as we will repeatedly see, has facilitated the growth of illicit trade to unprecedented levels. It has transformed the world's oldest professions — fencing and prostitution — in ways never seen before. Unfortunately for him, Vincent Swaggi did not live to see the rise of e-fencing (electronic fencing), which enabled sales of stolen property to grow exponentially.
Online commerce started, and almost immediately the alarm bells sounded — the fencing of stolen property had already moved to the internet, where the risk of detection was low and profits were high. By 2007, analyses revealed that "fencers who use the Internet to market their goods can get 70 to 80 cents on the dollar compared to what the merchandise sells for at retail, whereas street sellers tend to receive only 30 cents on the dollar. ... Additionally, there is no easy way for law enforcement to find the identity of an online seller or follow that person to locate and identify the supplier."
Online fencing was a great benefit to thieves. In the past, many fences were selling property they had stolen from private individuals, like Macheath after his cohorts delivered their catch of the day to London fences, or Vincent Swaggi after receiving goods from local burglars and robbers. But with the ability to expand the selling of stolen goods via the internet, commercial enterprises became even greater targets of professional thieves. In 2016, the US Organized Crime Survey of the National Retail Federation revealed that 58 percent of the surveyed retailers had identified or recovered stolen goods online.
The Smirnovs of Vancouver, Canada, epitomize the transition to online fencing. Ludmilla and Evgeni Smirnov are not colorful figures like Macheath and his associates, nor are they embedded in their community like Vincent Swaggi. The numerous victims of the Smirnovs' thefts illustrate the proliferation of the online fencing of retail goods. To sell on a large scale, they had to acquire on a grand scale. They marketed on eBay what was stolen on their command from major supermarket chains in Vancouver, Portland, Oregon, and other locales along the Pacific Coast of the United States and Canada. Operating on eBay under the names "Crestsmile" and "Vipsmile," they specialized in the teeth whitener trade, but their stolen property also included hair growth treatments, Alli diet pills, and airbags for cars. Their target market was eastern Europe and Russia, where the internet is full of websites lauding the benefits of Crestsmile. Making $70,000 to $140,000 monthly in online sales of stolen goods, they rapidly acquired the attributes of wealth — a Lexus and two properties in Vancouver — all purchased with no declared income. Yet they were leaving a trace on the internet. From "March 2010 to April 2012, the couple conducted 27,750 separate sale transactions," a level of trade that was not possible without the facilitation of computers. This was Macheath and Swaggi on steroids.
The unraveling of this fencing operation, despite its virtual dimension, was the result of old-fashioned police work. When supermarkets, facing significant losses, focused their security operations on large-scale shoplifters of dental products, the Smirnovs in their Lexus were caught in a handoff of these stolen goods.
The end of the Smirnovs' online fencing operation is not unique. In many cases, illicit trade in the virtual world intersects with the real world. This permits the dismantling of criminals' online activities that would otherwise be hard to penetrate because of the anonymity offered by the cyberworld.
The Origins of Illicit Trade in Antiquity
As commerce developed, the disposal of stolen goods was only one of many problems associated with illicit trade. With the rise of counterfeit goods and currency as well as smuggling and attacks on cargo transport, early governments needed to ensure that trade products were authentic, that the currency paying for them was real, and that commerce safely reached its destination.
SMUGGLING
An early mention of smuggling was found in the ninth- to seventh-century BC letters of the archive of a governor of Nippur in the Assyrian Empire. Established in the second millennium BC, this empire stretched from the Levant on the west to the Persian Gulf in the east. The letters in the Nuppur governor's archives reveal that smugglers brought iron from Anatolia outside the state-controlled monopoly. Smugglers were present on the Assyrian border, and special roads were utilized by those moving contraband. These archival records reveal that, almost three thousand years ago, the government of a major empire was seeking to regulate trade and to establish monopolies, pricing, and access to goods, and that states were already monitoring smuggling groups and the routes they used to evade controls.
COUNTERFEITS: GOODS AND CURRENCY
The governments of ancient Greece and Rome faced other serious challenges to legitimate trade. Efforts to authenticate goods by means of trademarks was well established in ancient Rome, as the state needed to certify its products for sale. A 2016 exhibition in the wonderfully preserved Trajan Market in the Imperial Forum in Rome documents the diversity of trademarks used on clay and glass vessels to guarantee their authenticity. They also certified pharmaceuticals to ensure that individuals consumed only drugs that met standards.
Importation of counterfeits dates back at least two millennia. The great naturalist and historian Pliny the Elder, who lived from AD 23 to 79, said, "Such is the audacity of man, that he hath learned to counterfeit Nature, yea, and is so bold as to challenge her in her work." This articulate statement is a comment not just on the increasing craftsmanship of artisans but on an actual problem: the importation of counterfeit minerals and stones from India, including beryl and opals.
The sale of counterfeit products was not just a problem in the Western world. "In the Aztec Empire some dishonest dealers sold counterfeit cacao beans. Honest sellers divided beans into piles according to their origin. But the counterfeiters used artificial coloring to sell inferior beans or even disguised worthless amaranth dough or avocado seeds with cacao hulls."
Counterfeit currency in trade was even more pervasive and widespread than fake goods. Counterfeit coinage has been documented from very early in ancient Greek history, dating back to 550 to 600 BC. Counterfeit coins have been found at shrines of deities and in excavations of markets, and they have been identified in treasury records. Already in the fourth century BC, a significant number of counterfeit silver coins were in circulation in Athens, prompting the government to respond with legislation to address their pervasiveness. Many of these counterfeit silver coins came from Syria, which appears to have been a production center, but illicit coinage also came from a much larger region, some of it originating from Arabia, Palestine, and even Persia. This suggests the broad geography of the international trade of illicit coinage and its impact on the Greek economy. Penalties for engaging in such activity were severe. According to ancient Greek regulations, individuals could be executed for engaging in counterfeiting, and those tasked with properly analyzing and identifying counterfeit coinage could be whipped fifty lashes for failing to detect it.
In 375 BC, the ancient Greeks in Athens developed a novel legal solution to deal with the counterfeit coinage. Seized counterfeits were not destroyed but rather, according to the law, consecrated to the gods and placed under the care of the Mother of the Gods. There they were secured and could not be reused. This was a clever method to get counterfeits out of circulation, but why would a god prefer counterfeits to real coinage?
The experiences of the ancient Greeks with counterfeit currency were far from unique. The early currencies of Chinese civilization — which had coinage for millennia before it developed paper currency — were illegally reproduced by private citizens in different eras; fakes have been documented in copper, iron, and paper. Counterfeit money was so extensive that an entire treatise was written on the subject.
THE INTEGRITY OF TRADE
Scientific advances have contributed to the regulation of trade. The first legendary example dates to ancient Greece. One of the early principles of science was discovered in the third century BC by the great scientist Archimedes, who resided in Syracuse in eastern Sicily. To respond to a royal request to determine whether a crown produced as a tribute to the gods actually consisted of the quantity of gold provided to the craftsman, Archimedes needed to develop an accurate method of measurement to determine if the goldsmith was duplicitous. We cannot be certain whether, as legend has it, he ran around naked shouting, "Eureka, I found it!," but he did discover the principle of buoyancy. According to that principle, any "body completely or partially submerged in a fluid (gas or liquid) at rest is acted upon by an upward, or buoyant, force the magnitude of which is equal to the weight of the fluid displaced by the body." Measuring the amount of water displaced by the crown and comparing it to the amount of gold provided to the craftsman by the king, Archimedes discovered that the king had been cheated. An effort to determine product reliability thus led to one of the world's early great scientific discoveries.
THE SECURITY OF TRANSPORT
For trade, a key element of Mediterranean, Middle Eastern, and Chinese civilizations, to thrive, goods needed to be safely transported from source to destination. This is what we now refer to as the "supply chain." Goods were transported in ancient times by sea and across land. The raiding of caravans and piracy — the attacking of vessels at sea — have been recorded for millennia. The Odyssey, thought to have been written between 750 and 700 BC, contains the first recorded literary references to piracy, which that work does not view in neutral terms. Nestor says in the Homeric tale: "O Stranger who are you? ...Are you traveling for trade or are you just roaming around like pirates." This line, which indicates that piracy was considered the antithesis of trade, is one of many recurring references to piracy in the work of Homer, to whom the element of plunder seems to have been central.
The pirates were taking not only goods but also human beings, then viewed as property. The captives were sold into slavery, generating significant revenues for the pirates. Although slavery was a natural element of life according to Aristotle, not all trading that procured slaves was viewed in a positive light because of its linkages to piracy. As one scholar of Hellenistic slavery wrote, "pirates, after all, are already disapproved of for their piracy, [and] the fact that they deal in slaves just confirms their low status and enhances condemnation of them."
The Greek historian Thucydides suggests that the first effort to counter piracy was made by King Minos of Crete, the great ruler who in the fifth century BC built a navy. Rulers of Corinth, an ancient Greek city-state from 700 to 338 BC, also thought they could improve state revenues by cracking down on piracy. Thus, unauthorized trade, a recurring theme throughout history, was already being combated 2,500 years ago by rulers of different Greek states as they tried to secure their kingdoms' revenues.
Crete and Corinth were dependent on sea trade. Trade by land passage posed other challenges to safe transport, some of which are recorded on cuneiforms from Mesopotamia. Caravans containing many pack animals loaded with valuable goods worth stealing were plundered as they traversed the numerous trade routes that crisscrossed the Middle East. Frankincense and myrrh from the Arabian Gulf — the gifts immortalized in Nativity scenes — traveled to parts of the Roman Empire. Among the other goods plundered in South Arabia and Mesopotamia were precious stones, alabaster, iron, and purple wool, cloth destined for royalty. Because trade and military routes often coincided, the state assumed an important role in protecting these caravans from attacks by nomads. Bedouins, ever since the time of cuneiform sources and up to the nineteenth century, have been named as raiders of caravans. But some of the nomadic attackers, seeing the financial advantages of participation, transitioned into legitimate trade.
Caravan travel in other regions faced similar challenges from tribal attackers. The merchants who used the famous Silk Road, which stretched from China to Constantinople, encountered the fierce tribes of Central Asia. The Han government derived considerable profit from this route, and the Chinese used force, treaties, and heavy reprisals to gain control over the Central Asian tribes that pillaged caravans. Because of security concerns, caravans rarely traveled without armed protection. Yet, because of the value of the diverse cargo, perils remained for millennia for those who navigated the Silk Road. Silk and other textiles, then as now, were a key and valuable good of international trade, as we discuss shortly.
(Continues…)
Excerpted from "Dark Commerce"
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