Textiles and Organized Crime: How Everyday Products Turn Criminal Profits

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Two recent cases from opposite ends of South America show how criminal activities as diverse as contraband smuggling and human trafficking converge around one simple everyday product: textiles.

In late April, Colombian prosecutors and police captured six people who stand accused of using a network of front companies to conceal a multi-million dollar contraband smuggling and money laundering ring.

According to prosecutors, the network established five apparently legitimate businesses, among them two of Colombia’s biggest clothes exporters, which were used to exploit tax and customs loopholes in a “technical contraband” operation — smuggling where the products are moved in through legal channels but with fraudulent documentation.

Their alleged modus operandi was to import cloth from China and Taiwan that would supposedly be made into clothes in Colombia and then exported to Venezuela and Guatemala. This allowed the companies to bring the cloth in without paying taxes and tariffs under the terms of a government program designed to reduce costs of importing primary materials for manufacturing to stimulate national production and exports.

However, the manufacturing and export side of the business was nothing more than a fiction, according to the case against them, as the companies used faked manufacturing contracts and simulated exports with illegally acquired customs documents. Instead the cloth was sold on local markets, undercutting legal competition.

The suspects in the case now face charges of money laundering, smuggling, illegal enrichment, criminal conspiracy, fictitious exportations, aggravated fraud, process fraud, and use of false documentation.

SEE ALSO: Colombia News and Profiles

Meanwhile, in Argentina, the death of two children in a fire has drawn attention to the country’s clandestine textile workshops, which are hotbeds of human trafficking.

The two brothers, aged seven and ten, were trapped in the basement of the house used as a workshop in central Buenos Aires, where they lived with their family and one other, reported Clarin. According to media reports, the owner of the workshop was Peruvian, while the workers were Bolivian immigrants

The tragedy has drawn attention to Argentina’s illegal textile workshops, which according to the investigations of Clarin, are run by criminal networks who rent, buy or squat houses, and then use them as workshops and makeshift housing for the workers. The majority of the workers are Bolivian and are forced to work long hours in poor conditions for very little pay. Some are victims of human trafficking and many workshops also use child labor, reported Clarin.

Most of the goods are then sold in La Salada, a market place with a reputation as one of the world’s largest sales points for contraband and counterfeit goods.

InSight Crime Analysis

While the cases in Colombia and Argentina compose of two very different criminal activities with different social and economic impacts, together they highlight how organized crime networks can profit from the simplest of products.

Unlike drugs, textiles and clothing are legal products, bought by the entire population and whose use does no damage in itself, but nevertheless the economies behind production, transport and sale create criminal opportunities and can lead to violence.

In Colombia, the technical contraband of the sort allegedly employed by the recently dismantled network accounts for 76 percent of smuggling, according to the National Tax and Customs Directorate (DIAN), and is increasingly linked to laundering profits from the drug trade and other criminal activities. Textiles and clothes are the most commonly smuggled product and in 2014, the Tax and Customs Police (POLFA) seized over $26.8 million of clothing and $3.6 million of cloth, together accounting for almost a third of the total worth of all contraband seizures.

The Argentina case is also representative of a wider trend. According to the investigations of local non-governmental organization La Alameda, led by politician Gustavo Vera, there are almost 50,000 clandestine workshops that supply La Salada market, of which the organization has denounced up to 3,000 to the authorities.

SEE ALSO: Coverage of Contraband

However, Colombia and Argentina are far from unique. In the Americas, numerous countries have thriving trades in contraband goods such as textiles and clothing, with prominent examples including the “Snake of the North” contraband caravans that move imported goods from Chile up to Bolivia and Peru. Illegal textile workshops are also a common criminal activity and are often the destinations for victims of human trafficking everywhere from Brazil to the United States.

Nor are Latin American criminals unique in profiting from the textiles trade, with examples from around the globe including the Chinese and Italian mafias, who both have similar interests in the textile industry.

The attraction of the industry to criminal groups is likely linked to both the nature of the product and the opportunities created by globalized trade.

Textiles and clothing are universally used products with huge markets. In regions such as Latin America and other regions with high inequality and economic under development, the informal market is frequently the principal source of clothes for large sections of the population, offering an easy route to dispose of illegal goods without attracting the attention of the authorities.

The ever expanding and more interconnected global trade routes also offer opportunities for enterprising criminal groups. The rise of cheap manufacturing in countries such as China creates economic incentives that are boosted with manipulated tax and customs regimes, while the huge quantities of goods moving in and out of international ports makes it easy to disguise illegal movements of products, especially when those products are themselves legal.

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