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The World Economic Forum's report "Global Risks 2011"
finds that three clusters of risk are particularly important for stakeholders to
understand and respond to in the coming decade.
The second cluster we examined is the illegal economy nexus.
At its core, this nexus consists of three risks:
illicit trade, corruption, and organized crime.
However, it links strongly to the risks of fragile states and terrorism.
The interaction between these risks creates challenges for both emerging
and advanced economies. Emerging economies suffer under chronic
threats to development as well as acute threats to stability.
Advanced economies, which drive a high proportion of the demand for the illegal
economy nexus, face regional and global instability as well as the pressure to
participate in corrupt practices.
All countries face the threat of terrorism and geo-political conflict as a result of
this nexus. Responding to these risks is difficult,
in part because the structures that enable illicit activities also benefit many
people who would not consider themselves as engaging in criminal behavior.
Secrecy jurisdictions allow individuals and corporations to avoid tax.
Increasing transparency and reducing illicit trade would undoubtedly involve
increased costs and lower profits for many businesses.
However, four levers exist to address this nexus:
improved global coordination and stronger multilateral frameworks would assist
activists and law enforcement in preventing flows of illicit capital out of
fragile states;
increasing the transparency of international financial and trade flows,
including harmonized global laws and better information exchange would help
highlight why corporations and individuals are engaging in illicit activity;
a greater understanding of the human and economic impact of engaging in illicit
trade could reduce demand for illicit goods in advanced economies
as for the continued success of programs such as the forum's
Partnering Against Corruption Initiative;
finally, reducing economic disparity would lower the incentives related to the supply
and consumption of the outputs of illicit trade, organized crime, and corruption.
You can download "Global Risks 2011," explore the underlying survey data,
and see the forum's other work in the area of risk response on our website.