Uncovering the supply chains and sourcing methods that feed criminal organisations across the globe
There was a time when the supply chains of most of the world’s largest businesses remained hidden in the dark. Times change though, and consumer concerns over what goes on in the depths of the global supply chain have seen the pressure mount on companies to embrace transparency. Most firms with a consumer face have begun to do so – even the notoriously secretive Apple sees fit to publish an annual supplier responsibility report.
Yet, there are individuals and organisations that use their own supply chains to fuel clandestine activities. These supply chains are tangled up in the world of business with which we’re familiar, using chemicals, electronics and other components manufactured by legitimate businesses, twisting them for a use that is far beyond what they were originally intended for.
However, their effect is felt far and wide and has all-too-real implications.
On 27 March 2016, a suicide bomber, who officials would later describe as being in his mid-to-late 20s, blew himself up in a public park in Lahore, Pakistan, with more than 30 pounds of explosives strapped to his body.
The detonation is believed to have taken place at the gates to the park, near some children’s swings and close to an area where cars are left. Some 72 people were killed and a further 300 were injured. Speaking later at the mortuary, rescue worker Pervez Nazir told NBC News that 36 children were among the dead.
Responsibility for that attack was claimed by Jamaat-ul-Ahrar, a splinter group of the Pakistan Taliban. The device used was put together from products that were not military-supplied, they were improvised from pieces in a makeshift supply chain.
Across the world, attacks involving improvised explosive devices (IEDs) are commonplace and happen on a seemingly daily basis. Indeed, between 2011 and 2013, Action on Armed Violence, a London-based research and advocacy group funded by governments, the United Nations and human
rights organisations, recorded IED incidents in 66 countries and territories, resulting in more than 60,000 deaths and injuries. That, the research found, translated to a staggering 70% increase in injuries and deaths caused by IEDs during that period.
In July 2015, a police officer working for the US National Institute of Standards and Technology, a federal technology agency that works with industry to develop and apply technology, measurements, and standards, caused an explosion at one of the institution’s science labs as he tried to cook methamphetamine, a highly addictive drug.
The officer, who was subsequently sentenced to 41 months in prison had, in the days leading up to the explosion, purchased common cold remedies, household cleaning products and camping fuel – key ingredients in the methamphetamine-making process – and had notes on how to make the drug in his car.
Meanwhile, the 2012 National Survey on Drug Use and Health (NSDUH), sponsored by the Substance Abuse and Mental Health Services Administration (SAMHSA), an agency in the US Department of Health and Human Services (DHHS), found that approximately 1.2 million people, or 0.4% of
the country’s population, had reported using methamphetamine during the previous year.
Drugs and bombs are two of the most devastating devices on the planet, but there is little known about the supply chains that exist around them. Slowly, however, a light is being shone on these supply chains that have long lingered in the shadows. What’s more, the world has a better understanding of the interplay between criminal supply chains and the commercial world.
The common component parts of an IED are an initiator, a switch, a main charge, a power source and a holding container, according to a US Department of Homeland Security (DHS) document.
David Ibsen, executive director of the Counter Extremism Project, tells Procurement Leaders that car batteries are often used as a power supply, while mobile phones or electronic garage door openers are used as trigger devices.
For the explosive charge, the DHS document says fertilisers, gunpowder and hydrogen peroxides are used. A common example is ANFO, a mixture of ammonium nitrate (AN) and fuel oil (FO), a cocktail used by the mining industry to blast away rock to reach raw materials. ANFO has been linked to the 1995 bombing of US government offices in Oklahoma City, as well as those in Hyderabad, India, in 2013.
Another popular mix is triacetonetriperoxide (TAPT), a highly explosive and volatile white crystalline powder that has been linked to the explosions in the November 2015 attacks in Paris. It has also
been connected to the ‘shoe bomber’ Richard Reid who, in 2001, tried to detonate a device on an American Airlines flight. TAPT can be made using nail polish remover, hair bleaching products and acid.
Yet, it’s not just scavenged goods. In a study mandated by the European Union and carried out by Conflict Armament Research (CAR), it was found that IEDs produced and used by the so-called Islamic State (ISIS), the terrorist organisation that took over parts of Syria and Iraq in 2013 and 2014, are made up of components from around 50 companies located in 20 countries. This suggests that this particular supply chain is far more complex than many would have imagined.
These included, and possibly still include, businesses located in Turkey, India, China, the US and Russia, which produced, sold, or received materials such as chemical precursors, detonating cord, detonators, cables, wires and other electronic components.
The research was quick to point out that “in all identified cases”, producers have lawfully traded components with regional trade and distribution companies.
“These companies, in turn, have sold them to smaller commercial entities. By allowing individuals and groups affiliated with [ISIS] forces to acquire components used in IEDs, these small entities appear to be the weakest link in the chain of custody,” the report states.
It goes on to say that many components that can be used in the manufacture of homemade explosives, such as aluminium paste and urea, are not subject to transfer controls, including export licensing and, as such, their supply within the region is mostly unregulated and not extensively monitored.
Those components, it says, that are subject to export controls, such as detonators and detonator cord, are commonly used in the mining sector. This sector exists in both Turkey and Iraq, which surround ISIS territories.
“Proximity is a major reason why the goods traded by Iraqi and Turkish companies appear throughout the supply chains of components that [ISIS] forces use to manufacture IEDs,” the report states. The research was also able to examine the speed at which this supply chain operated and found it to be incredibly quick.
“The appearance of these components in possession of [ISIS] forces, as little as one month following their lawful supply to commercial entities in the region, speaks to lack of monitoring by national governments and companies alike,” the research says.
One of CAR’s field investigators, who does not wish to be named, tells Procurement Leaders that ISIS gets its hands on these components through intermediaries or by capturing them. That presents a worrying problem for a commercial world that would rather almost certainly distance itself from this problem.
Meanwhile, the methamphetamine supply chain demonstrates a different, but parallel, challenge to global crime prevention. Much like the police officer in the US who tried to manufacture the drug in a government laboratory using cold remedies, household cleaning products and camping fuel, there
are thousands of examples of individuals and organisations getting their hands on chemicals to create rudimentary but large-scale manufacturing facilities.
A Global Synthetic Drugs Assessment report from the United Nations Office on Drugs and Crime (UNODC) found that between 2010 and 2012 global methamphetamine seizures more than doubled, reaching 107 tonnes in 2012. The report also said extensive methamphetamine manufacturing has been reported in Mexico and the US, while increasing amounts of the drug were being smuggled from Mexico to the US.
The reason the police officer in our story purchased cold remedies was to get hold of pseudoephedrine, which is used in decongestant medicine and is found in the likes of Sudafed, made by Johnson & Johnson; and Advil Cold & Sinus, made by Pfizer. This became such a problem that the US banned the on-the-shelf sale of cold medicine containing pseudoephedrine in 2006. Daily and monthly limits were placed on how much medicine containing pseudoephedrine could be sold to individuals and a log of sales wa also established by pharmacies. Indeed, Highland Pharmaceuticals developed a cold medicine that contains pseudoephedrine but cannot be used in methamphetamine
production. The firm created a formulation called Tarex that it launched as a medicine called Zephrex-D in 2012. Emilie Dolan of Highland Pharmaceuticals said Tarex interrupts the methamphetamine process because rather than crystallising when heated with the chemicals, it results in a gooey substance.
There are occasionally ways to change products to counter their misuse, but authorities and businesses are looking deeper. How, then, can businesses influence the murky world of the after-sales supply chain?
Many will say it should be a case of tougher government regulations and they are, in certain respects, correct.
CAR’s field investigator says there are regulations in place to govern the sale of many of the components used in IEDs, but that information on the sale of such devices tends only to be accurate one step down the sales chain. After that, he says, it is increasingly difficult to know where those
products go, who is handling them and where they are diverted to. Of the components found in ISIS IEDs, the investigation was able to identify lot numbers, giving CAR the ability to trace where those
constituent parts came from originally, but not where they went in between. To plug this gap, the investigator suggests manufacturers should improve their retention of sales data and that they should ask intermediaries in the after-sales supply chain to do so as well.
“This would be a first step in understanding where these products are being diverted,” the investigator says.
The issue here, however, is it is difficult to identify intermediaries further down this supply chain once a good is sold and to stop them getting hold of products, especially if that organisation is able to capture areas previously thought safe. Indeed, so fast was ISIS’s initial campaign that it took many by surprise.
The CEP’s Ibsen says many of the ingredients ISIS needed were already on the ground and all
it had to do was pick them up once they took over an area. Meanwhile, the surprise element of its campaign, he says, meant that supply chains were not shut down as quickly as they could have been, allowing products to continue to flow into the region.
The other problem is that governments may regulate, but it is only when substances are purchased in large quantities that any suspicions are raised. Criminal organisations are aware of these gaps in the security surveillance. No matter what restrictions or regulations are placed on these goods, they will find other ways to get hold of what they need or other materials to use.
In the case of methamphetamine, the UNODC report noted a recent trend in manufacturing:
“As a result of the increased awareness of the main precursor chemicals used for the manufacture of ATS and synthetic substances, a number of member states have introduced and/or amended their legislation to more closely monitor shipments of precursor chemicals, leading to an increase in the number of countries reporting seizures of these chemicals to the International Narcotics Control Board (INCB).
“A second trend in recent years is the increased use of alternate forms of known precursors, such as pharmaceutical preparations containing pseudoephedrine/ephedrine in certain regions
of the world and the use of alternate precursor chemicals in the manufacture of ATS.” It noted that certain phenylacetic acid derivatives and novel precursor chemicals such as alphaphenylacetoacetonitrile were now being used. As such, there will be calls for individual businesses to do more and, again, in certain respects they will also be correct.
The call for businesses to retain more sales data and for more of these products to be regulated should not be overlooked, but it’s a daunting undertaking. The CEP’s Ibsen says there also needs to be greater vigilance on the part of those businesses that sell products that can be used in this way – the responsibility of businesses isn’t simply to make and sell, it could be to be a citizen
within the value chain.
Ibsen says avenues of extremist funding need to be targeted and shut down. ISIS, he points out,
has been funding itself through oil smuggling, as well by selling antiquities. These sales, he suggests, need to be clamped down on and their stockpiles of funds targeted and destroyed.
This could well involve the procurement function because selling to the wrong person or, indeed, having a criminal organisation use branded products carries the risk of causing severe reputational damage.
One CPO in the electronic components industry tells Procurement Leaders that his business considers this a “very sensitive” subject – hence his wish to remain anonymous.
For the products the company sources, the CPO says the firm carries out audits and makes suppliers answer questionnaires to try to understand where each subcomponent comes from. For the products it sells, meanwhile, the company screens customers, products and orders against a denied parties and sanction list. To do that, the business uses export control software that works in real time. If a company is a match or a near-match to those lists, the order is put on hold until further investigations can be carried out.
The company also asks to see an end user certificate from the purchasing company and even uses Google Earth to find out whether an address given actually exists. Regardless of the effort this company makes, it is still very difficult to gain a complete understanding of all the downstream layers.
The concerns, however, often lie with smaller businesses, those that do not have the knowledge internally or enough resources to plough into this. Small businesses remain a vital part of many supply chains, but they represent an obvious challenge in providing data and performing complex provenance activities. The key to solving this problem is for the communities of organisations in similar industries to come together to share best practice and for more resources to be placed
on the ground to track where products go.
Fail to do this as a minimum, the CPO says, and the risk is that a business will be caught out. “One individual transaction may only be small, but the consequences of getting that wrong are massive,” they warn.
“If an airliner came down because lithiumion batteries caught fire and it was found to be your product, then your name would be all over the papers and that would be very damaging. In the same respect, if you sold to terrorists and you got yourself on a government sanction list, people would not trade with you.”
The dark side of supply chains shows just how great an opportunity there is for very dangerous organisations to gain access to supplies, unhindered and unmonitored.
But businesses and governments have a responsibility to squeeze the life out of these activities by monitoring the aftersale supply chain and by using the push for transparency to make sure they have no part in these plans.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.
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