Natural Resources and Violent Conflict - WaterWiki.net

follow the money 179of weapons and components to the harmonized system by whichnational customs agencies track goods in transit.Strengths and Weaknesses. Certification regimes provide a levelof harmonization and control over commodities requiring certificates.They provide a means by which well-intentioned entities and personscan choose to deal only in licit commodities, thereby creating marketincentives for licit goods to be of greater value than illicit goods. Thecertification process simultaneously creates universal rules to distinguishlicit from illicit activity and thus provides a basis for structuringnational regimes and national regulatory and enforcement activity insupport of national regions. Finally, the certification regimes providean evidentiary trail for regulatory and enforcement activity, as abusesby corrupt officials and criminal organizations through unlawful issuance,forgery of certificates, or frauds are exposed.Regimes requiring the certification of goods have not tended to createadequate verification mechanisms. None of the certification regimeshas simultaneously provided for immediate integration of recordkeeping regarding certified commodities and the actual financialmechanisms (whether wire transfers or currency deposits) that accompanythe physical movements of goods. The sectoral regimes have notbeen able to address problems of domestic capacity and corruption inareas of weak governance, with the result that links in the chain havefacilitated considerable circumvention of the certificate process. Notably,enforcement activity against those involved in illicit buying andselling of prohibited commodities, including diamonds, endangeredspecies, and firearms, remains relatively haphazard and often confinedto a few jurisdictions. Financial institutions generally have littleawareness of certification regimes, and financial regulators do notmake their enforcement a visible component of anti–money launderingobligations.Certifications have had an impact in every sector in which they havebeen adopted. However, limited capacity and corruption create substantialgaps in regulatory and enforcement activity, and criminal organizationsstructure their activities to circumvent certification programs.Certification regimes rely especially on the institutional competenceand integrity of customs agencies, which are often deficient. Thesedeficiencies worsen substantially where such competence and integrityare needed most—in areas of resource exploitation and in areas ofconflict. To date, cross-fertilization between certification regimes andanti–money laundering regulations has been minimal. The Palermo conventionrequires anti–money laundering laws to cover all illicit proceeds.