Cross Border Business Risks Pursuing Opportunities Abroad
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Kidnappings Involving Small and Medium Sized Enterprises (SMEs)
Owners, managers, and employees of SMEs are a frequent kidnapping target in Mexico, especially if their business is prominent and well known in a particular area. The primary targets are owners and members of the management including their dependents. It is also not unusual for domestic workers of SME owners and their families, including maids, drivers, and bodyguards, to be complicit in the kidnapping of their employers – either through coercion by the kidnappers, or the offer of a financial reward.
Some of Mexico’s highest risk kidnap states for SMEs include Guerrero, Tamaulipas and Michoacán. A recent increase of incidents involving SMEs in the states of Oaxaca and Pueblo indicates an emerging risk in those south-central and south-western states.
Unity has assisted multiple SME special risk policyholders successfully resolving kidnap incidents. In one typical case in Mexico, the victim was the manager of a regional distribution company.
One of the kidnappers visited the company’s warehouse in broad daylight, located the victim, discreetly showed him a pistol tucked in his waistband, and directed him outside into the group’s car. Unity advised, prepared, and supported the client over the next two days to obtain his safe release. The victim arrived back at his residence in the early morning hours of the third day distraught and fatigued from lack of sleep and dehydration, but unharmed. The following afternoon the kidnappers called again, demanding additional money and making further kidnap threats. Unity’s advice continued and the client resisted further money demands, after which the calls eventually ceased. The company had a plan and procedure in place for this type of situation, which ultimately helped them reduce further damage to their business and the safety of their employees.
Extortion of Small Medium Businesses
Extortion is an even more pervasive and wide-ranging crime than kidnapping in Mexico. According to the Mexican NGO Observatorio Nacional Ciudadano, the number of extortions nationwide increased 110 percent from 2012 to 2013, amounting to nearly six million cases. Of those it is estimated that less than five percent are actually reported to the authorities. Moreover, of the reported cases in 2013, 56 percent resulted in no judicial action and only 19 percent were processed by the authorities.
There is a wide variety of groups engaged in extortion in Mexico, including well-organized transnational criminal organizations, often associated with Mexico’s major drug-trafficking cartels; small and independent criminal groups; and even some corrupt and heavy handed labor unions seeking to intimidate and threaten SMEs to further their own political or financial interests.
Extortion cases against SMEs in Mexico often involve businesses such as transportation, the telecommunications service sector, retail, and manufacturers operating in lower-income areas where law enforcement is largely ineffectual. This includes Mexico State and the Federal District, the northern state of Chihuahua, the states at the Atlantic coast – from Tabasco and Veracruz to Tamaulipas, Michoacán, and Guerrero on the Pacific. Victims of reported cases in January 2015 include an owner of a furniture store, bus drivers, and a manager of a construction supply company.
Extortion cases typically start out with a phone call to the management team; or in more serious cases, visits to the business. Criminals tend to state that an ‘agreement needs to be worked out for a monthly security fee’ rather than make direct threats and demands. Further visits or phone calls can become increasingly aggressive leading to kidnapping or other violence in some cases when demands are ignored. More sophisticated extortionists will the finances of the targeted individual and business. It is also common for extortion demands to dissipate and eventually cease when carefully and professionally addressed. It is critical to conduct a proper assessment, including the potential for violence, in developing a strategy for addressing an extortion attempt.
Outlook
Looking forward, the conditions that promote kidnap for ransom and extortion are unlikely to change in Mexico in the medium to long term. Extortion and kidnappings will undoubtedly continue to be risks that businesses and medium sized businesses have to be aware of and prepare for. That preparation should include company policies and procedural development in the event of an incident, security assessments and audits, and proper vetting procedures for subcontractor selection. With the proper education and training it is possible to reduce these new risks when entering the Mexican market and ensure the safety and protection of your business and employees.
This article was co-written by Paul Allum – Director of Intelligence at Unity Resources Group, Security and Risk Analysis Intelligence and Liaison
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