As the United Arab Emirates' Counter-Piracy conference concludes, the true financial impact of Somali piracy spreads like ink in water across the globalised world.
The figure of $7-12bn per year leaves many wondering how much longer this scourge will be allowed to blight the region's economy. Western governments have tried to stop money laundering which emanates from the proceeds of murder, hijack and kidnapping; but success seems as elusive as the pirates themselves. According to the International Monetary Fund some 2-5 per cent of the world's GDP is dirty; a percentage which political scientist Heidi Johnson equates to between $590m and $1.5 trillion per year.
As the size of their ill-gotten gains increases from around $150,000 in 2005, to the record breaking $9.5 million for the Samho Dream in 2010, so it becomes more difficult to launder or spend such large sums without drawing attention to their illicit, criminal activities.
Today there is increasing evidence that Somali pirate clans are circumventing financial strictures put in place to disrupt the financing of terrorism in the aftermath of 9/11 by using the traditional channels of Hawala, an informal money transfer system. Use of such channels adds considerably to the problems of tracking the money from the ransom drop to end user.
But it also gives the Gulf region's financial authorities an opportunity to contribute to the international efforts to turn off the money tap, without prejudicing those in Somalia who depend upon foreign remittances to survive.
The efforts these highly organised criminals will go to to hide their money is every bit as disciplined as their Columbian or Afghan Narco-terrorist brethren. They are adept at exploiting loopholes in the monitoring and regulatory structures of the global financial set up and retain expert counsel either through coercion or corruption to ensure they stay ahead of the authorities.
Somali Pirates enjoy one instant advantage over their counterparts; they can move large quantities of money out of their failed state with little or no difficulty. Once outside Somalia, the money has already been "laundered" once and subsequent laundering becomes ever easier.
Hawala's mode of operation makes it perfect for failed states that are unable to support the financial and technological infrastructure required by Western Banks. What also makes Hawala channels so attractive is the extent to which the network has expanded with the growth of distant diaspora. For instance it would be highly likely the 647,000 displaced Somalis in Yemen are completely reliant upon this traditional form of Arab banking. Over 14 per cent of Somalis are living abroad, many contributing to the flow of financial remittances into this war-ravaged state. To date, western efforts to shut off Hawala channels to groups like Al Shabab have been clumsy and threaten to remove an essential form of life support to 40 per cent of Somali households as an unintended consequence.
Following the conference, the GCC states could make a leading contribution in the fight against piracy, one in which they never need fire a single shot. Instead of the delivery of conventional military force, the provision of local finance experts and law enforcement personnel to international money laundering task forces would give an added and valuable dimension to current multi-national efforts. This role would instantly address article 5 of the Dubai conference declaration which stated:
"The international counter-piracy effort increasingly highlights the role of those funding piracy operations and others involved indirectly in the financing of piracy. The effective tracking and disrupting of illicit financial flows is an important tool to deter acts of piracy and to apprehend and prosecute those who finance piracy." (Final Declaration 19 April, 2011)
By educating and advising their Western colleagues on Hawala channels, local experts could potentially deny this avenue to those who kidnap and murder innocent seafarers. As many countries have found when dealing with a terrorist menace, preventing financing through organised criminality provides an advantage in the campaign to defeat the criminals.
Yet the complexity of Somalia is such that unless Hawala channels are selectively shut down when clear evidence exists of criminal intent, we stand the risk of delivering a legion of poor and disenfrancised generation of Somalis into the arms of pirate warlords or their terrorist cousins.
With its growing reputation within the international banking community, the GCC can and should partially shoulder this burden of responsibility, so as to restrict the flow of illegal money to and from the pirates through Hawala channels.
Financial regulation and investigation are key parts of a comprehensive counter piracy strategy. To date, they have yet to be fully exploited by those who wish to rid the region of this insidious threat to life, global trade and legitimate commerce. The conference was an excellent example of the GCC's proactivity and it would now be fitting if something tangible was realised from its ground breaking agenda.
The stage is now set for the announcement of a focused policy to restrict those Hawala channels which support piracy and terrorism, while redoubling international efforts to bring peace and stability to Somalia after a generation of civil war.
David Mugridge is a maritime security consultant and former British Royal Navy officer
