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August 28, 2014 Cliquez ici pour la version française
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Knowledge Centre

Mergers and Acquisitions

Holding Companies to Ransom

By NYA International. With contribution from numerous expert analysts within NYA’s Operations Centre team.

Kidnapping flourishes in environments where there is widespread poverty and disparity of wealth; active criminal and/or terrorist groups; high levels of corruption; and ineffective law enforcement. For criminal and terrorist groups around the world it is big business: According to the US Under Secretary for Terrorism and Financial Intelligence, David Cohen, an estimated USD120 million has been generated by terrorist organizations from ransom payments in the last eight years.

So what is the current situation and outlook in some of the key high-risk areas and what should companies operating in high-risk environments be doing about it?

High-risk areas:

Algeria and the Sahel region

Algeria has struggled with home grown Islamic militancy for many years. Formerly known as the Salafist Group for Preaching and Combat, or GSPC, AQIM is dedicated to overthrowing the Algerian government and establishing an Islamic state. The group has increasingly relied on kidnap for ransom of foreign nationals to fund its operations, and has carried out attacks across the Sahel region (an area of North Africa that stretches from the Atlantic Ocean in the West to the Red Sea in the East, covering parts of Senegal, Mauritania, Mali, Algeria, Niger, Chad, Sudan, South Sudan and Eritrea).

Militant activity in Algeria has previously been concentrated in the country’s northern Kabylie region with minimal targeting of companies operating in the area. The unprecedented attack on In Aménas in the early hours of January 16, 2013, wherein an attempted hijacking of a bus transporting workers from the Tigantourine gas facility (40km southwest of In Aménas) resulted in a bloody hostage siege, took many by surprise and prompted wide-scale re-evaluation of security protocols.

The In Aménas attack was symptomatic of a longer-term deterioration of the security situation in the wider Sahel region. The current risk of kidnapping of foreign nationals across the Sahel region is at an all-time high due to a combination of factors. Firstly, the internal conflict in Libya has created a surplus of arms and war-hardened militants – many of whom have now dispersed into neighbouring Sudan, Chad and Niger and who are ready to conduct attacks and kidnappings for a multitude of Islamic militant groups.

Secondly, the occupation of northern Mali by Islamic militants has effectively created a security vacuum and a staging ground for their operations. Whilst on-going military operations by French and African troops have succeeded in dislodging militants, the latter have moved into the northern extremis of Mali, Mauritania, Burkina Faso, Niger and Algeria, from where they are likely to launch a sustained campaign of ‘hit-and-run’ attacks (including kidnappings of foreign workers) across Mali and the wider region.

High-risk areas in the Sahel tend to be border regions, with extractive industries particularly targeted in kidnap-for-random incidents. As long as the region remains awash with weapons and trained militants, while at the same time policed by various security forces unable to effectively control such a vast area, it is likely that the threat will remain high for the foreseeable future.


Middle East and North Africa: Libya

A failure to instill political stability and security following Ghaddafi’s ousting in 2011 has resulted in countrywide conflict and an operational environment in which kidnap for ransom is rife. The actions of ‘rogue’ retired General Khalifa Haftar, who launched Operation Dignity on May 16 against Islamist militias, have served to propagate such an environment. In 2014 alone, NYA data records more than 100 kidnapping victims, the majority of whom are Libyan nationals. Trends have shown that those targeted are perceived high-net-worth individuals, as well as foreign diplomats based in Tripoli.

The risk of kidnapping to both domestic and foreign nationals in Libya is likely to remain high, as a weak government has failed to maintain law and order, allowing gangs to operate with impunity. The motives for kidnappings are both financial and political in nature. Militias loyal to General Haftar are said to have kidnapped a group of politicians following an attack on the GNC headquarters. The targeting of diplomats has tended to be a bid to secure the release of Libyan nationals held in the victim’s home country. The high profile kidnapping of Jordanian ambassador Fawaz al-Itan resulted in the Jordanian government releasing Mohamed Dersi, who had been jailed for life for a 2007 airport bomb plot in Jordan.

Compounding this issue is the fact that kidnapping has proven to be a lucrative and therefore successful business. On May 11, 2014 Abdisame Shaba Ben Saoud, a Libyan diplomat, was kidnapped by armed men in Derna. The group initially demanded a LYD10 million ransom (USD8.3 million) and reportedly released Saoud following a ‘sizeable ransom’ payment. On June 5, 2014, a deputy bank manager kidnapped in Ghadames was released following the payment of a LYD50,000 (USD831,600) ransom.


Iraq

An upsurge of Islamic extremism, a continuation of fighting between Sunni and Shia groups, and fall-out from the Syrian conflict has thrown Iraq back into a state of civil war. Expatriate workers had been targeted for a number of years but the period following the US military withdrawal saw kidnap incidents fall. Virtually all high-value workers were attractive targets irrespective of nationality, and protection measures were adjusted accordingly. As a result, local nationals became the targets though with far lower ransom demands – largely in the form of political concessions and/or prisoner releases.

The push by the Islamic State of Iraq and Sham or ISIS (now known simply as the Islamic State) in June 2014 resulted in a number of foreign nationals being kidnapped, including Turkish and Indian workers. These were opportunist incidents during the immediate fall out from the ISIS advance but have provided an added boost to the group’s finances. Some of these were Indian construction workers and Turkish truck drivers and the ransom demands appear to have been in the region of USD50,000 per driver, however reports suggest both groups were released after diplomatic pressure. A number of Christian clerics have also been abducted including two Catholic priests and a nun kidnapped in Tikrit on July 1, 2014.


Syria

Fighting between rebels and the government has been ongoing since 2011 and the frontline has ebbed and flowed as both government and rebel groups have taken or lost ground with the Assad government currently in the ascendancy. There has also been a significant reinforcement of Kurdish separatists who now control their own territory. Syrian rebels have also been riven with infighting between groups including ISIS who have taken territory covering both the Turkish and Iraqi borders.


The civil war has generated a number of kidnap cases amongst local nationals and foreign workers. Potentially the most targeted have been foreign journalists and aid workers who have been abducted by fighters on both sides of the conflict. The government has detained individuals to prevent or influence reporting and rebel groups primarily for financial gain or influence. Recent high profile incidents have included five members of Medicine sans Frontiers taken in December 2013 and released in April 2014, likely after a ransom was paid. Two Spanish journalists were also taken in September 2013 and released in March, and a Danish journalist abducted in May 2013 and released in June 2014. Though ransom payments and specific amounts have never been confirmed it has been suggested that jihadist groups may have made between USD1 million and USD8 million a month from kidnapping for ransom.


Sub-Saharan Africa: Nigeria

Nigeria is ranked amongst the top three countries for kidnap and ransom risk in the world. Traditionally high levels of kidnap-for-ransom activity have been seen in the volatile southern Niger Delta region, with militant groups operating under the umbrella of the Movement for the Emancipation of the Niger Delta (MEND) kidnapping foreign oil workers in protest against perceived exploitation of resources and the lack of economic development and wealth distribution. Following a government amnesty program in 2009, which incentivized rebels to cease their activities, attacks on oil installations and kidnappings declined. However, many lower-level rebels were excluded from the amnesty and have subsequently formed criminal groups who continue to carry out kidnappings. As a result, nearly all kidnappings in the Niger Delta region are now carried out for financial gain by low-level criminal gangs or former-MEND rebels. In May 2014 three foreign nationals were kidnapped along with two Nigerian nationals in the Niger Delta. The Nigerian victims were almost immediately abandoned, demonstrating both the deliberate targeting of foreign nationals and the perceived probable high-value ransom associated with foreign over domestic nationals.

Boko Haram activity has increased the risk of operating in the northeast of Nigeria, and increasingly towards northern Cameroon. Boko Haram have tended to target government and armed forces personnel in addition to symbols of Western influence, such as schools, bars and restaurants. The high profile kidnapping of 276 Chibok schoolgirls in April 2014 has been followed by similar mass kidnappings of women and children in nearby villages, despite army presence in the region.

Foreign and local nationals continue to be abducted, not only on land but also at sea, as part of thepersistent trend of piracy in the Gulf of Guinea. The primary goal of the West African (largely Nigerian) pirates is the theft of the ship’s cargo and stores, and the crew’s valuables. Seizing vessels for ransom, the modus operandi of Somali pirates around the Horn of Africa, is deemed to be unlikely in West Africa, due to the existence of national law enforcement and military assets. However there has been an observable spike in the number of piracy attacks in the Gulf of Guinea, in particular cases of crew being removed from vessels and held for ransom on land. Of the nine reported hijackings in Nigerian territorial waters (TTW) in the first six months of 2014, eight incidents resulted in crew kidnappings. These incidents have shown a clear targeting of key crewmembers; the Chief Engineer and Captain. There were 85% more kidnappings in 2013 compared to 2012 according to the NATO Shipping Centre, a trend which seems likely to continue given the legislative challenges of using Private Maritime Security Companies (PMSCs) in Nigerian TTW and compounded by recent issues of maritime jurisdiction between the Nigerian Navy and Maritime Police Authority.


Latin America: Colombia

Colombia has for years been synonymous with kidnapping. At the height of its influence, the country’s oldest, left wing rebel group the Revolutionary Armed Forces of Colombia (FARC) numbered some 18,000 armed combatants, with a further 8,000 – 10,000 persons in non-combatant logistical support roles. Although the group was traditionally motivated by its political aims, this morphed into financially motivated kidnap for ransom. In 2000, kidnappings attributed to the FARC numbered 1,078 (according to official statistics from the Colombian Ministry of Defence ‘Fondelibertad’) out of a total of 3,572 recorded incidents for that year.

Following the US-backed ‘Plan Colombia’ (a US – Colombian aid initiative involving US military / counter-narcotics support in the form of funding, training, equipment and other services, which came into effect in 1999) the situation has improved significantly. By 2002, FARC kidnappings had reduced slightly to 973 and then fell sharply to 319 by 2004.

Since 2012 the FARC has engaged in peace negotiations with the government and officially renounced kidnap for ransom as a sign of goodwill towards these talks. So far in the negotiations, preliminary agreements have been reached on three of five points on the agenda, including agrarian reforms, political participation, and illegal drug trafficking. It is expected that more follow-up agreements will be signed in the months to come.

In June 2014, the Colombian government confirmed that it had also initiated preliminary peace talks with the country's second largest guerrilla group - the National Liberation Army (ELN), which has approximately 3,000 members. These newly initiated talks raise the possibility of the demobilization of another major player in the Colombian conflict. However, there are concerns that parallel negotiations with the ELN will complicate on-going talks with the FARC.

Vast areas of land have opened up for oil and mining exploration and Latin America's fourth-largest oil producer saw foreign investment increase from USD2 billion in 2002, to nearly USD17 billion in 2013. Despite the on-going peace talks, attacks on the pipelines by left-wing rebels have increased almost ten-fold since 2010. As such, the US Energy Information Administration (EIA) reported that 2010 only saw 31 attacks, compared to 259 in 2013 and 33 in the first quarter of 2014. The latest pipeline attack on 30 June 2014, reportedly caused by ELN, left 13 people injured in the northeast state of Arauca.

The ultimate success of the talks will depend on whether the continuing attacks on civilians, the government and energy infrastructure will stop. Moreover, uncertainties remain on the post-conflict future of Colombia because any peace accord with guerrilla groups would be susceptible to further security risks for the country, as other illegal armed groups will seek to fill the vacuum left by the rebels in areas lacking state presence.


Latin America: Mexico

The security situation in Mexico continues to be undermined by sophisticated and dangerous drug cartels and other criminal groups, long regarded as an internal conflict. This struggle has become increasingly militarized, resulting in the widespread deployment of federal forces and use of localized vigilantes.

Despite the government’s efforts to contain the widespread violence instigated by the cartels, the number of violent assassinations has been on the increase. According to Mexico's National System of Public Security, 2006 saw 11,806 murders, whilst 2013 saw 18,388. The core of the Mexican conflict is located on the most valuable routes for trafficking drugs. Several criminal groups - including the Zetas, the gulf Cartel and Michoacán Family - are fighting for control of these corridors. However, no part of the country remains immune to the effects of organized crime, particularly as cartel-related violence has spread to competition with local gangs over other criminal activities, such as drug trafficking, kidnapping and extortion.

Whilst kidnappings are often attributed to cartels, localized kidnapping rings that operate independently from the drug trade have flourished in the last decade. In 2014 there were 1,698 kidnapping cases reported, with 695 incidents reported in the first five months of 2014. The victims range from wealthy foreign nationals and businessmen to local farmers, and the ransom demands vary accordingly.

Overall, the security situation in Mexico will remain volatile, as crime and other illicit activities will continue to have an effect on businesses and the socio-economic outlook of the country.


Duty of Care

Accurate global statistics about kidnap do not exist: many incidents go unreported and the figures that national authorities do hold are generally not widely publicized, for obvious reasons. However numerous sources cite tens of thousands of incidents worldwide each year.

Kidnapping is a risk that some major companies are very familiar with, and they have the experience and resources to manage it effectively. This is not necessarily the case with smaller companies and those operating in high-risk environments for the first time. Some organizations are going into high-risk environments without completely appreciating the threat or their possible exposure to kidnap, and are potentially putting their people at risk; in the event of an incident, organizations are often unprepared; risking reputation and exposing themselves to unnecessary liability.

In the Niger Delta there have been a number of high-profile cases of employees who have been kidnapped and who, after their release, have launched lawsuits against their employers for failing to adequately address and mitigate the safety and personal security risks faced by these individuals in that environment. This is a trend that we would expect to continue. Whilst the financial settlement may be considered insignificant for those companies concerned, the reputational damage and impact on the rest of the workforce can be far more compelling.

Fulfilling your Duty of Care obligations towards employees begins with awareness. That means having a thorough understanding of the operating environment that you are sending people to, and providing them with the right information and personal security awareness training to help them stay safe. This applies to both expatriates and local staff - both carry levels of risk.


Employee protection and training

Expatriate employees will almost always be attractive targets: they stand out, and their association to high net worth companies gives them a higher perceived value in the eyes of the abductors. In relatively isolated operating environments, employees have tended to be well protected. Organized militant groups have, however, mounted attacks on energy installations and supporting transportation, especially in the Niger Delta. Workers are also targeted when outside the protective security umbrella provided by their organization, in what are often ‘opportunistic’ attacks. This usually happens when an individual or group of individuals break protocols, take an unsanctioned excursion into local towns in search of entertainment, for example, and get caught in the ‘wrong place at the wrong time’.

Such opportunistic targeting, however, is relatively easy to address. With the right understanding of the area, good personal security awareness and the implementation of practical precautions you can significantly reduce your risk exposure. The challenge is often with the ‘experienced hands’, the people who have been living and working in a country for years. They tend to ‘acclimatize’ to the environment, their personal awareness and perception of the threat goes down and they start to become complacent.

Those who have been in country the longest also tend to have wider social circles. Often they have integrated with the local community, which can lead to them having a false sense of security. People feel they are ‘accepted’ and therefore safe, when in fact the more widely known they are, the wider their circle of vulnerability.

Local staff and their dependents are also susceptible and often have a very clear routine. The same bus takes workers to their compound, or the same barge takes workers to an offshore platform, at the same time, every day, and children go to school, or to the mosque at very predictable times. We’re seeing an increase in incidents involving children, who are particularly susceptible because they are seen as ‘soft targets’. And unlike opportunistic targeting, routine targeting is very difficult to stop, so specific actions are required to mitigate the risk.

While the training of staff is generally comprehensively addressed by major firms, the smaller companies are sometimes exposed, because they may not have a dedicated security department, so the issue is not always given the requisite attention. Personal security training should be provided across the board - to full time employees and contractors, people out there for the first time and to the ‘experienced hands’. It should also be specific to the local site and operating environment, and take the particular considerations of employees’ expat or local status into account. It is about making people aware of the dangers and what they can do to protect themselves.

The fundamentals are fairly straightforward, a lot of it is common sense: it’s about raising awareness and getting people to take responsibility for themselves. Preparing people in the event they're held hostage should be included as well, to help mitigate the physical and psychological impact as much as possible. As a victim there are certain key things that you ideally, should and shouldn’t do that can significantly improve your personal welfare and chances of survival.


Best Practice – operating procedures and crisis management planning

The next step for a company is to have detailed standard security operating procedures written specifically to each particular operating environment, which are regularly reviewed and up to date. It’s no good producing them and shutting them in a drawer, they need to be a ‘living’ document, adhered to and rigorously enforced. Some companies are more draconian than others in enforcing these procedures, but the fact is, that if a company is serious about reducing their risk of kidnap, they need to take a fairly hard-line approach. If you embed a culture of both awareness and personal responsibility, you really can have an impact on the level of risk.

At a corporate level there should be a crisis management plan at the ready and a crisis management team that understands what it needs to do in the event of an incident. Kidnap for ransom is generally part of an organization’s crisis management plan, but it is not something that is widely discussed in companies – viewed perhaps as being a confidential or sensitive matter, or the kind of low frequency, high impact event, that will hopefully never happen.

However it is strongly advised that organizations undertake a ‘practice run’ of a kidnap scenario, via a simulated, table-top exercise, because there are particularities to an incident of this nature that are not normally inherent with a more ‘technical’ crisis situation. Here, you are not dealing with the aftermath of an incident, a kidnap is an ongoing, dynamic event: how you handle it – particularly in the early stages – is critical and directly affects whether the victims are released alive, how long they are held for, and the vulnerability of other employees to future attack. Mistakes on the part of the company during a negotiation can have a negative impact on all of these.

Moreover the psychology of kidnap negotiation may be counter-intuitive to some senior-level executives in the crisis management team, who are more used to driving hard business negotiations. The same applies to the level of emotion involved. It’s high impact in an emotional sense. A real person has been taken, an employee, a colleague, a family member, the distress that it creates should not be underestimated. You need to give proper attention to assisting the families – getting it right is essential, not only for their welfare, but it may also have an impact upon the likelihood of litigation after the event.

Certain key decisions should be clarified in advance: when you are dealing with an incident you do not want to be slowed down by trying to establish your company’s policy towards payment of ransom – know this in advance so you can act accordingly. You should also understand the likely logistics of an incident, according to the country you are in, including any legal/legislative issues. You will potentially need a media strategy and decisions will need to be made regarding liaison with the local authorities – there is a lot to think about, and in the throes of an incident, things can unfold at an alarming rate. It’s also not unusual to be thrown the odd curveball, a phone call from an unknown intermediary, an instruction from the kidnappers that you weren’t expecting. If you’ve anticipated and are clear on certain predictable issues in advance, you can focus your attention on the things you can’t anticipate. Above all else, it is important to prepare for the long haul and ensure that the organization can continue to function whilst attention is focused on this incident.

The key advice that we give smaller companies and subcontractors is to do their due diligence – make it a part of their entry strategy. Don’t just assume that company you’re contracted to carries all the responsibility and is going to do everything for you in the event of any incident. Understand where your company’s responsibilities will start and end, and be fully prepared to manage your own crisis if you have to.

Don’t forget to look down the chain too, to the subcontractors that are working for you. We’ve seen it happen in Colombia, where companies take on subcontractors, unaware that they’ve been making concessionary payments to the FARC. Where this has happened you end up taking on this problem and distancing the organization from the issue can be very difficult. When the payments stop, that’s when the company is actively targeted in retribution, with attacks on assets or the kidnap of staff. And with the huge numbers of private security companies operating in places like Iraq, it’s important to include any subcontracted protective security in your due diligence too.

We still see a surprising level of naivety about these risks and companies that are caught unprepared. Don’t be under any illusion that it won't happen, or that it is someone else’s problem; it is critical that you take responsibility for the risks faced by your staff and their dependents. Be prepared.



NYA International is a specialist crisis prevention and response consultancy with over 24 years’ experience of helping clients reduce their exposure to and manage incidents of kidnap for ransom, extortion, marine piracy, detention, emergency evacuation and related global security incidents. NYA has the largest specialist consulting team in the industry and responds to an average of 80 – 100 cases each year. www.nyainternational.com



The opinions and positions expressed in this article are the authors’ own and not those of any AIG company. This article is for general information purposes only and is not legal advice. We strongly recommend that you review all information with independent legal and risk management consultants to assess your specific situation.



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