Global Financial Integrity


Everything Everywhere All At Once: Understanding the Implications of the Belt and Road Initiative on TBML and Illicit Supply Chains


The report was authored by Global Financial Integrity’s Policy Director Lakshmi Kumar and King’s College London’s Associate Professor (Senior Lecturer) Dr. Alexander Kupatadze.

China’s Belt and Road Initiative (BRI), sometimes referred to as ‘Globalisation 2.0,’ is a global infrastructure development strategy that aims to fundamentally reshape global trade. The BRI is a key element of the Chinese President Xi Jinping’s ‘Major Country Diplomacy,’ which intends to expand China’s leadership role in global affairs. The BRI covers 149 countries and promises increased connectivity between China and the rest of the world through infrastructure projects, policy coordination, unimpeded trade, financial integration, and people-to-people bonds. Since its inception in 2013, China has already spent an estimated US$200 billion on renewing and modernising infrastructure along the sea and overland trade routes that make up the BRI. However, it is not clear whether the BRI will actually deliver on its promise of achieving deeply transformative economic growth.

Much like the impact of the internet when global online connectivity transformed criminality (global cybercrime now generates over US$1.5 trillion per year), the rapid development of infrastructural linkages and logistical corridors has the potential to radically alter the illegal trade landscape. As with the inception of the internet, the BRI has not been designed and implemented with the aversion of crime in mind, which may lead to negative developments including the expansion of illicit supply chains.

To understand the consequences of BRI connectivity, we convened a two-day-long workshop at King’s College London with the financial support of the European Anti-Fraud Office (OLAF), attended by leading experts on illicit trade as well as representatives of both consumer industries (namely tobacco, pharmaceuticals, and fertilisers) and international organisations. This paper is an outcome of the discussion(s) that took place at that same workshop as well as the research of the two co-authors on the BRI and its implications for illicit trade.

Key Findings

  • BRI projects render supply chains more stretched and complicated, thereby increasing opportunities for illicit activity and criminal exploitation.
  • BRI expansion creates more rent-seeking opportunities among political elites in BRI partner countries and makes the environment more vulnerable to corrupt practices in customs and border agencies.
  • The BRI increases legal trade that may contribute to the proliferation of counterfeit and diverted commodities.
  • The impact of the BRI on increasing illicit trade flows at present is negligible. However, improved road and railway transportation may deliver illegal commodities faster and with more regularity.
  • New BRI infrastructure projects may attract the migration of illicit actors, who intend to profit from the economic growth as a result.
  • The absence and purposeful manipulation of trade data in countries that are part of the BRI increases the challenge of detecting trade-based money laundering and illicit activity across supply chains.
  • Improved trade facilitation only exacerbates pre-existing limitations in supervision, oversight and enforcement in free-trade zones, while new transhipment schemes may make it easier to mask the origin of products.
  • An increase in trade means consequent growth in trade-based money laundering (TBML) activities including opportunities for newer and more innovative black market peso exchange schemes to launder proceeds from drug trafficking in the EU.

Key Recommendations

  • Ensure easy and transparent access to both aggregated and disaggregated data.
  • Increase the law enforcement presence and disclosure of trade data going through free-trade zones.
  • Implement beneficial ownership registries across the financial, transport and trade systems.
  • Improve cross-border sharing of trade data.
  • Implement TBML assessment and price assessment tools at the country level.
  • Require commercial entities including consumer industry actors and shipping and transport companies to conduct better and more detailed due diligence processes.

The report was funded by the European Union’s HERCULE III programme grant to King’s College London.