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Pirates Hauling $400 Million Pocket 1%-2.5% Share

Nov. 1 (Bloomberg) -- Pirates off the Horn of Africa pocket as little as 1 percent of ransoms, which they tend to spend on alcohol, expensive cars and prostitutes, while financiers keep as much as three-quarters of the loot, a new report shows.

The 129-page joint report by the World Bank, Interpol and the United Nations’s crime unit opens a window into their operating rules and lifestyle. It also shows the crime has evolved from locally funded operations to transnational networks, costing the global economy about $18 billion in increased trade expenses.

Piracy has resurfaced in recent years as a menace that’s disrupting international shipping and hurting the region’s economy. Groups using rocket-propelled grenades, AK-47s and tracking devices collected about $400 million from 179 ships hijacked from April 2005 to December 2012, according to the report.

“The vast amounts of money collected by pirates, and the fact that they have faced virtually no constraint in moving and using their assets, have allowed them not only to thrive, but also to develop their capacities on land,” Tofik Murshudlu, chief of the implementation support section in the Organized Crime and Illicit Trafficking Branch of the UN’s Office of Drugs and Crime, said in a statement.

The study includes interviews of more than 30 people involved in piracy off the coast of Somalia. When a ransom is received, the low-level pirates who hijacked the ship, or “foot soldiers,” receive $30,000 to $75,000, which amounts to 1 percent to 2.5 percent of the average payment. The first pirate on board can get as much as much as $10,000 extra, according to the report.

Financiers receive 30 percent to 75 percent of the total, according to the report. The proceeds are often reinvested within Somalia, including in legitimate business activities for money-laundering purposes, it said.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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