Black art

On one particular occasion, a security officer escorting our team noticed the presence in-store of a known local thief who had actually been banned from entering the premises. The woman in question was about to leave, so in the manner of people who have established an understanding with each other, the officer confronted her and suggested she give up anything she might have about her person by way of avoiding any unpleasantness.

The woman cordially agreed, and duly fished out eight packets of premium quality razor blades. Retailing at well over £10 per pack, at present these are one of the most popular targets for would-be thieves. The vigilant officer then gave the recovered merchandise to a shop assistant who immediately placed them back on the shelves. The officer proceeded to walk back through the store in a bid to catch up with our colleagues, only to turn around and spot another individual stashing the exact same batch of blades into his seemingly cavernous pockets!

Two attempts at theft of the same goods within ten minutes of each other. Is that normal, or was it just National Shaving Day? Where are all of these personal grooming products going, exactly?

Facing up to the truth
If the somewhat extraordinary retail 'moment' detailed here is even 10% typical of the norm, and if other similar products experience comparable levels of attack, it does tend to suggest that security managers are facing a Black Market in stolen, fast-moving consumer goods of impressive – or rather depressive – dimensions. Our own research adds to the growing body of knowledge that the main cause of such theft is the need for ready cash to buy hard drugs, although there is some indication that drug dealers themselves will take goods in payment (presumably if and when they feel there's more money to be had by successfully selling those goods on).

However, it's clear that in addition to the burden on public health resources, the resulting threat to profits, competitive prices, employee livelihoods, any future investment and indeed viable business will be crystal clear in the minds of most readers. As is the need for remedial action.

That said, how can security professionals be sure that any or all of their efforts to combat the problem are really getting to the heart of that problem? To ascertain the answer to this particular question, we first need to define the problem. In other words, what exactly is The Black Market?

The Oxford English Dictionary traces the term back to 1931 when it made its first-ever published appearance in the pages of The Economist. Systems for conducting business outside of the mainstream economy clearly pre-date this, yet the range of types of illegal transaction has always been very broad. Hence some observers discuss The Black Market solely in terms of the sale of illegal goods (eg proscribed drugs) while others extend the definition to include legal goods obtained illegally (eg by theft).

To complicate matters still further, Black Markets may deal in goods that are in restricted supply, such as fuel and some foodstuffs (as was the case during war time), or semi-respectably in those items that are simply unavailable via the normal channels because of other economic limitations (as in the former Soviet Union). In practice, this can entail a shady interface between legitimate and illegitimate markets which may be blurred to a greater degree by exploiting loopholes in, for example, the import/export laws.

A Black Market is one ‘whose transactions are not traceable by tax authority’

Perhaps the most comprehensive definition of the term is that used by economists, who propose that a Black Market is one "whose transactions are not traceable by tax authority".

Measuring the black economy
All of these definitions are totally justifiable, yet the labyrinthine range of possibilities they create makes it difficult to think about the size of the problem with any kind of scientific rigour or consistency.

Only recently, Friedrich Schneider – professor of economics at the Johannes Kepler University in Austria – attempted to measure black economies in something approaching 76 developed and emerging countries. His estimates for 1998 suggest that nearly $9 trillion of activity passed by undetected. A figure almost matching the legitimate output of the United States, in fact. A year later, Canadian retailers recorded an estimated $2.3 billion loss resulting from customer, employee and supplier theft, fraud and error. That just shows you the global scale of the problem.

Here in the UK, BBC News items suggest that The Black Market has an estimated value of £60 million. Various Governments – including our own – claim to have evidence purporting to the fact that losses are increasingly the responsibility of organised criminal gangs. However, our preliminary reflections at Perpetuity Research and Consultancy International (PRCI) have unearthed a range of hypotheses about the possible causes and nature of Black Markets. While they could be the natural end result of a rampant theft problem, it's also possible that the perceived problem is a consequence of passing the buck for bad accounting, dodgy sales practices or internal fraud. The whole issue is one that cries out for further scrutiny in the interests of all.

Taking the bull by the horns, a global multi-national company has commissioned PRCI to conduct an international study of The Black Market in stolen goods – specifically those that threaten their most sought-after products. While there is also likely to be a market in counterfeit goods, the focus of this study is on the genuine article and the various means by which it may be stolen.

Research operations in such far-flung corners of the world as parts of South Africa, Australia, Canada, the USA and many more nations will produce a comprehensive and detailed White Paper on what it is that makes Black Markets tick. And, perhaps more to the point, how they might be disrupted and then 'designed out' of the overall system.

Learning about vulnerabilities
In addition to collating the knowledge and experience that exists within the client organisation, we'll be picking the brains of police, Customs and Excise officials and private security companies the world over, in addition to the company's major retail customers. We want to know all about vulnerabilities in the manufacturing process (ie over-runs), packaging, logistics, distribution and eventual sale to the customer.

We're also keen to learn about the experiences of other companies, how they've attempted to deal with the problem and the extent to which they feel they've succeeded.