Murphy's Law: The Pirates Next Door

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May 13, 2010: The maritime insurance companies that have paid out over $100 million in ransoms to Somali pirates over the last two years, have used their intelligence gathering resources to trace a lot of the money. While this information may be of use in prosecuting those who support the pirates from outside Somalia, it also provides the insurance companies with information they can use when negotiating the ransoms.

That $100 million got spread around to several thousand people. Local clan leaders and politicians get ten percent, which explains why it's been so difficult to get the Puntland government (where most of the pirate gangs operate) to do anything about the problem. The leaders of the gangs take 60 percent to pay for mother ships, speedboats, food, housing, weapons, boarding gear, GPS units and radios, as well as fees for intelligence (from people with access to this information, inside shipping companies and ports) and negotiators (who are believed to handle the intel collection and banking needs of the pirates), and profits for themselves. The pirates who took the ship get to divide up 30 percent (amounting to over a hundred thousand dollars per man). Sometimes, other pirates in the gang get a small cut (a few hundred dollars each) as well, mainly for morale purposes. These sharing arrangements are often written down and sworn to. There have been a few gun battles when there were different interpretations of these deals, but the pirate leaders have generally been good negotiators.

About 40 percent of the money going to the pirates (especially the big shots) is sent outside Somalia (to Kenya, the Persian Gulf and the larger expatriate communities in Britain and North America) for investment. Many Somalis don't want to live in Somalia, at least not the way the place is run (or not run), so investing money elsewhere provides a refuge to flee to eventually. Staying in Somalia with a hundred thousand dollars makes you a very wealthy man, but also a target for bandits, Islamic radicals and clan rivals.

Investigators have also found pirate groups soliciting cash from Somali expatriates to finance pirate gangs. It can cost over $10,000 to start a pirate operation, and several thousand dollars a month to run it. Expatriate Somalis are offered the opportunity to invest, and double or triple (or much more) their money if your gang snags a ransom. In addition to the risk (slight so far) of losing their investment, these expatriate Somalis also risk arrest and prosecution in their new homeland for financing a criminal enterprise.

 


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