Barrelling up the coast of Liberia, a massive cargo vessel seemed not to notice as it ran over the smaller wooden fishing boat in its path, splitting it in half and causing the local fishermen to leap overboard to save their lives. Such seaborne hit-and-run incidents are common, especially along the coast of West Africa where foreign vessels routinely encroach on coastal waters, risking the nets and livelihoods of locals. What makes such cases worse is the inability or unwillingness of local governments to stop them. A major reason for this impunity lies in the savvy use in the maritime world of shell companies and joint ventures to hide ownership, profit, and responsibility.
Corruption globally is facilitated by corporate anonymity, such as tax-dodging bank accounts to hide revenue offshore, but few industries harbor greater levels of malfeasance through labyrinthine corporate structures than international fishing.
Partly this is because maritime law complicates enforcement and shrouds the privacy of a vessel’s beneficial owners while developing nations have become havens for intricate shell companies and joint venture agreements whose primary purpose is to insulate wrongdoers from the prying eyes of law enforcement, environmental lawyers, journalists or labor inspectors while buffering them from fines and criminal prosecution.
A new series of reports have begun to puncture the international fishing industry’s distinct corporate veil, highlighting in stark fashion how the businesses and legal protections of fishing companies are tied not just to overfishing and sea slavery but also to fraud, bribery, tax evasion, weapons trafficking, and oil dumping.
“Complex company structures provide the perfect cover for individuals who want to fish illegally to hide both themselves and profits”, said Duncan Copeland, Executive Director of Trygg Mat Tracking (TMT), a non-profit research organization specializing in illegal fishing and maritime crimes, and co-author of the recent report.
Released earlier this month, the report highlights the profound effects of international white-collar crime in developing nations and the role of corporate anonymity and shell companies in undermining the ability of financially strapped local governments to function.
For the developing world, the broader consequence of corporate secrecy and fake companies in the fishing industry is the rapid depletion of their fishing stocks, which is especially dangerous for regions that depend on fish as their primary dietary source of protein. The result is a loss of more than 300,000 local fishing jobs across West Africa and roughly $2.3 billion in revenue between 2010-2016.
“These structures need to be exposed to raise awareness about the damage they can cause,” said Per Erik Bergh, Secretary of Stop Illegal Fishing, an Africa-based independent nonprofit organization working to combat the devastating impacts of illegal fishing.
In an effort to ensure that some portion of the money to be made in new industries stays local, some developing countries require foreign investors to partner with native residents. However, the report reveals that this development strategy is often used instead in a corrupt fashion to protect foreign investors from local accountability while the developing nation also derives limited if any financial benefit from the partnerships. Furthermore, these joint ventures foster bribery and fraud that is used to gain influence among local operators.
West Africa’s waters are plied by a large foreign fleet whose owners exploit shell company structures as a means of bypassing national ownership requirements in order to gain access to fishing licenses via joint venture agreements. Their practices are routinely criticized, with a history of noncompliance to the regulations of coastal states and a systematic effort to under-report the amount of fish they actually caught, thereby avoiding fines and fees, according to a 2015 report by Greenpeace.
The TMT report also details the case of the Comoros-flagged Saly Reefer, caught in 2017 engaging in the act of transshipment, the process of transferring fish from one vessel to another while at sea so as to avoid inspectors onshore. The boat and its crew were subsequently arrested and escorted to the port of Bissau.
The Saly Reefer operated as part of a fleet, alongside the Silver Ice & Gabu Reefer, both of which have been implicated in a range of suspicious activities.
Investigators were able to establish that all three vessels were registered to a mysterious corporation domiciled in Panama, a connection that raised red flags given the country’s reputation as a tax haven and money laundering through its facilitation of shell companies.
Shell companies are set up as corporations with no purpose other than to manage various financial transactions for another entity. Their use and structures are particularly susceptible to exploitation by illegal fishing operators seeking to hide the identities of a vessel or companies’ true owners, as well as those overseeing its operations.
In the war against illegal fishing, the first battle must take place onshore to address the shadowy networks that continue to exploit the vulnerabilities of complicated, multinational corporate structures and practices which serve to obscure a vessel’s true beneficial ownership. They inflict staggering losses on the global seafood industry, estimated between $10-$36.4 billion annually, and are increasingly linked to a range of crimes beyond those committed at sea.
“Tracking down those behind these crimes requires cooperation between national agencies,” said Alistair McDonnell, a former criminal intelligence officer at Interpol, adding that developing countries need to strengthen their laws so as to puncture corporate secrecy.
Joseph Sullivan and Charlotte Norsworthy are writers for The Outlaw Ocean Project, a nonprofit journalism organization based in Washington D.C. that focuses on reporting about environmental and human rights crimes at sea.