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April 16, 2010

The Murky Boundaries of Illicit Trade

Catherine New
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The biggest threat to international security is not terrorism but illicit trade, Moisés Naím, editor in chief of Foreign Policy, told students at the KPMG Peat Marwick/Stanley R. Klion Forum on Ethics on March 31, 2010. Technological innovation coupled with cultural and demographic shifts are changing the ways illicit trade is conducted and perceived, he said. Professor Bruce Kogut introduced the speaker and the event was hosted by the Sanford C. Bernstein & Co. Center for Leadership and Ethics.

Underground economies have become a central part of globalization and are increasingly pervasive as the lines between legal and illegal business activities blur. Naím cited several drivers that are blurring the lines, including the diversification of business and the need for factions to influence regulators. “Some places call this corruption,” he said. “Others call it lobbying.” Philanthropy is another possible grey area for corruption and Naím suggested that criminal elements give away money, much like businesses do, as a way to build feel-good awareness for their “brand.”

The recent Rio Tinto case, which Professor Ray Fisman examined in Foreign Policy, highlighted the challenges multinational companies face in diverse business environments where they are subject to different standards and laws.

Additional reporting provided by the Sanford C. Bernstein & Co. Center for Leadership and Ethics.