Pirates, Inc.: Inside the booming Somali business
Meet the modern-day brigands behind the sometimes sophisticated, always risky operations that raked in an estimated $80 million in ransoms in 2008.
(Page 2 of 5)
But while Puntland had a degree of security and stability missing in the rest of Somalia, government corruption allowed criminal enterprises to flourish, with arms smuggling and people-trafficking, counterfeiting and piracy. When pirates bring a ship to port for the protracted process of negotiating a ransom, they generally find safe harbor in Puntland's ports of Ayl and Bossasso.Skip to next paragraph
Subscribe Today to the Monitor
Hassan says he was contacted by an investor "to attack foreign ships in exchange for ransom," but he refuses to name the man or say where he is based.
Given the hundreds of ships attacked over the past decade off the Somali coast – and now even as far away as the Seychelles in the Indian Ocean – it is clear that Somali piracy is a multimillion-dollar industry, worthy of a Harvard Business Review profile. The face of Somali piracy in your daily newspaper may look like Hassan – a baby-faced adolescent with an AK-47. But behind him is a vast network of investors and corrupt officials who buy the speedboats, weaponry, and GPS devices; who select targets from the Lloyd's of London list of insured ships; and who distribute the bulk of the dividends among themselves by underground money transfer systems.
"It's like an IPO [initial public offering]," says J. Peter Pham, a political scientist and expert on Somali pirate financing at James Madison University in Harrisburg, Va. "For a start-up operation, you need more money, between $150 [thousand] to $250,000, but if you want to provide capital to an existing operation, then you can give $50,000 to have a share in the profits."
Like most diaspora communities, Somalis send money to family members still living back home to help them survive, using either legal but expensive money transfer systems like Western Union, or traditional and shady systems called hawala. Through hawala – "by air," in Hindi – a businessman can give money in Minneapolis or Manchester, knowing that it can be received in Mogadishu within hours. Hawala dealers profit the way Western Union does, by taking a small percentage. But hawala is off the books and untracked.