Executive Summary

Amongst the worst crimes associated with illicit trade is the demand it creates for forced and child labor to carry out the tasks of making counterfeits, sewing fake logos on luxury apparel, or harvesting illegal fish. This report shows that women, children and men of all ages and race are forced to labor in illicit sectors, where they are abused by organized criminals pursuing clandestine profits. It concludes that ending these human rights abuses will only be possible by eradicating illicit trade and the demand for forced labor associated with it.

Progress on stopping forced labor has been painfully slow, despite a long list of international legal treaties aimed at eradicating it. For example, more than 90 years after the introduction of ILO’s Forced Labour Convention, 25 million people continue to be coerced into a situation of forced labor, and the annual estimates of this crime are rising, not falling.

In an effort to address this situation, TRACIT has been investigating the incidence of forced labor* in a largely overlooked part of the global economy, namely illicit market activities. In these dark corners of the economy, illicit trade thrives in the presence of regulatory gaps, poor law enforcement, weak state institutions and where informal markets have been left unattended. Moreover, the poly-criminal nature of illicit traders reveals a tendency to practice more than one illegal activity, where counterfeiting, smuggling, money laundering and forced labor are often undertaken in tandem.

As a starting point, this report looks at the demand for forced labor from the perspective of the underlying economic activity that drives it. For example, recent work by the ILO, OECD, IOM and UNICEF** finds that global supply chains, encompassing all sorts of economic activity, can be a source of demand for forced labor. This study extends that methodology by examining supply chains for illicit products and markets and asks the following questions:

• If highly regulated legal supply chains can be infiltrated with forced labor, what can be said about unregulated, untaxed, unlicensed illicit sectors and trading markets?
• What is the impact of illicit economic activity – including manufacturing, downstream product distribution, trademark infringing activities and, in limited cases, upstream harvesting of illicit products – on the demand for forced labor?

In sum, the findings indicate that forced labor is prevalent in illicit activity, global in nature, and significant enough that it cannot be ignored by governments seeking to eradicate this form of human rights abuse.

Methodology

Information presented in the report was gathered through a series of interviews conducted with
a wide range of companies, trade associations, government agencies and intergovernmental organizations; conversations with private investigators; and extensive desk research.

To illustrate how illicit economic activities can be a source of demand for forced labor, it investigated the incidence of forced labor in eight sectors where illicit practices are regularly reported. These activities include: (i) counterfeiting of apparel, footwear and luxury goods; (ii) counterfeiting of electronics machinery and equipment; (iii) substandard and falsified medical products; (iv) illegal mining; (v) illegal unregulated and unreported fishing; (vi) illicit tobacco products; (vii) illegal pesticides; and (viii) illegal timber.

* In this report, references to ‘forced labor’ will include instances of trafficking in persons for the purpose of forced labor.

**ILO, OECD, IOM, UNICEF. (2019). Ending child labour, forced labour and human trafficking in global supply chains. Geneva: International Labour Organization, Organisation for Economic Co-operation and Development, International Organization for Migration and United Nations Children’s Fund. http://mne-guidelines.oecd.org/Ending-child-labour-forced-labour-and-human- trafficking-in-global-supply-chains.pdf

Findings*

• Incidents of forced labor are reported all along the illicit supply chain – from upstream agriculture harvesting and minerals extraction to counterfeit manufacturing and street-corner retailing further downstream.
• There is a complete disregard by illicit traders for human rights and labor rights in their treatment of workers, where children, women and men alike are exploited and, at worst, viewed as disposable components of production.
• It is difficult – but not impossible – to identify and mitigate labor abuses and enforce human rights in illicit sectors that purposely conceal detection and where regulatory frameworks are weak and/or poorly enforced.
• While significant work is being done to mitigate illicit trade and even more is being done to address forced labor, the nexus between the two topics is a largely unexplored area where further attention, research and data collection is needed.
• Illicit trade and its associated demand for forced labor is holding back progress and pushing the achievement of the UN Sustainable Development Goals (SDGs) relating to human rights further away.Building on the findings from this report, and in order to encourage effective policy responses to forced labor in illicit trade, TRACIT calls for the following:**

Governments must address the impact that illicit economic activities have on the demand for forced labor. This starts with accounting for the interconnected nature of forced labor and illicit trade so as to ensure that laws and regulations generally pertaining to preventing forced labor will specifically investigate and enforce against occurrences in illicit economic activity. This will require renewed political leadership to more effectively enforce existing international legal frameworks and to ensure the inclusion of anti-illicit trade policies in national plans to combat forced labor. Operationally, governments will need to strengthen inter-agency and inter- departmental cooperation at the national level, particularly by improving law enforcement capacities. Increased coordination across agencies responsible for law enforcement, labor, health, economy, security, finance, border control and trade will be critical for addressing the intersection between forced labor and illicit trade.

Governments must actively gather more and better data on the incidence of forced labor in illicit operations to improve the evidence-base for national and international policy-making and standard setting.

Governments must also strengthen investigative techniques to address human rights abuses in illicit trade and dismantle the organized criminal networks behind illicit trade.

• Since data is limited, and governments have not yet been successful in closing this gap, additional data collected in the field
  is needed to improve the understanding of how illicit supply networks operate, and how they recruit, use and abuse their labor force.
• Governments should support and build upon private sector initiatives – such as that undertaken by TRACIT*** – to collect intelligence from private sector investigations, raids, seizures and other measures along illicit supply chains operating in parallel to their legal equivalents.
• Game-changing technological innovations that can improve discovery and traceability of illicitly sourced product inputs need to be catalyzed. A predictive model that red flags sectors and regions at risk of labor abuse in illicit trade needs to be developed and built with the goal of strengthening law enforcement’s ability to detect, disrupt and dismantle these networks.

3. Governments should swiftly implement standing measures to stop illicit trade, thereby removing any associated demand for forced labor. Some of these recommendations include:*

• Focus law enforcement on policing illicit trade.
• Strengthen deterrent criminal penalties.
• Strengthen the customs environment and border control.
• Tighten controls on money laundering and corruption.
• Strengthen Intellectual Property Rights enforcement.

These measures can be more effective when governments appoint an Interagency Anti-Illicit Trade Coordinator to facilitate the exchange of intelligence and resources across law enforcement, customs, health and trade agencies, and to bring in private sector expertise through public-private partnerships.

Looking forward

Given the global priority on upholding human rights, it is remarkable that forced labor persists – and at such significant levels. But the evidence is abundant and cannot be ignored.

The purpose of this report is to improve the understanding of where and how forced labor is abused in the operations of illicit supply networks. The objective is to strengthen the ability to detect, disrupt, and dismantle illicit operations and, as a result of that, reduce the associated demand for forced labor.

Addressing the threat of illicit trade on workers’ rights will require renewed political will of government officials at all levels to prioritize the problem, collect more evidence and data, actively pursue solutions, and invest in enforcement measures. This study provides a first step, and it is hoped that this work will serve as a roadmap to help policy makers identify areas that merit greater attention and to formulate effective strategies to address the serious threats posed by illicit trade.