THEME 5
Monitoring, compliance and control

Creating and implementing an effective deterrent

S. Stuart^[68]
Ministry of Fisheries
PO Box 1020
Wellington, New Zealand
<[email protected]>

1. INTRODUCTION

This paper deals with integrating compliance and fisheries management strategy, compliance theory and the New Zealand Ministry of Fisheries compliance strategy. In particular it focuses on the need to create and implement an effective deterrent against offending. It explains some of the innovative changes New Zealand has made over the past five years to support this strategy, principally by opting to move from real-time offence detection to retrospective offence detection, and aligning people and skills to achieve a cost effective deterrent against offending. Case studies are described to illustrate key concepts.

Briefly, and by way of background, New Zealand operates a rights-based quota management system (QMS) which is complemented by a legal framework that provides a strongly deterrent-based penalty and sanction scheme. The QMS is based on a documentary product flow system in which participants are required to submit and keep fishing returns and other documentation relating to fish movements and transactions.

2. COMPLIANCE AND FISHERIES MANAGEMENT

The starting point for the compliance strategy is that vessels and fishing companies do not commit offences, people do, i.e. achieving compliance is not just about catching the crooks, it is about creating incentives that influence people’s behaviour to comply with the rules

Fisheries management is really about managing people. It is about influencing the behaviour of the participants in the fishery - be they quota holders, harvesters, licensed fish receivers or retailers of fish products - in a way that encourages them to comply with the rules and thereby achieving society’s goals of sustainable fisheries. Even effective fisheries management frameworks will not, on their own, deliver sustainable fisheries unless those working within them agree with and comply with the rules that underpin them (Crothers 1999).

New Zealand has worked hard over the years to include stakeholders in the development and operation of the whole fisheries management system. People are far more likely to support a system when they have been included in its development. In so doing, the system gains legitimacy in the eyes of stakeholders in terms of process and outcomes. Building legitimacy translates into higher levels of voluntary compliance with the rules.

The point is that the success - or otherwise - of a fisheries management regime depends on achieving optimal levels of compliance with the rules that underpin it. Our strategy over the years has been to forge strong relationships with stakeholders and encourage rights-holders to participate in all fisheries management processes, including the development of compliance strategy. We have found that this strategy has led to higher levels of voluntary compliance.

3. COMPLIANCE

3.1 The real world

Before one gets carried away with concepts of legitimacy, voluntary compliance and stakeholder participation, one ought to have a quick look at the real world of compliance. As we are all aware, achieving 100 percent compliance with rules is not likely, nor is it necessarily desirable. But what causes one person to obey the rules and another to break them? What are the driving forces behind the decisions people make to ether comply or offend? In this regard fishers are no different to other segments of society.

In a typical situation about 80 percent of fishers will normally comply with the rules if the incentives and social influence they face are strong enough. A further 10 percent are so strongly influenced by moral and social obligations they will comply most, if not all of the time. Of most concern is a hard core of about 10 percent of fishers who set out to deliberately break the rules. These fishers have no respect for the legitimacy, or otherwise, of the rules and will tend to violate chronically and repeatedly. They may go to extraordinary lengths to avoid detection and apprehension. They are motivated by the reward of tangible short-term gains (usually financial) from illegal activity (Sutinen 1996).

The result is that most of the non-compliance and most of the risk to the sustainable management of the fishery is perpetrated by a relatively small group of hard-core non-compiling fishers. Only by changing the economic incentives, reducing the potential illegal gains and increasing detection rates and penalties can we hope to control this segment of fishers. In other words, a "big stick" hard line enforcement approach and in so doing create a deterrent to others contemplating similar offending.

3.2 The theory

If achieving high levels of compliance is about influencing behaviour, how can this be achieved? In order to achieve high levels of compliance one must first understand four key sources of motivation that influence people’s decisions to either comply or not comply with regulations. These follow.

i. The amount of illegal gain or benefit likely to be gained - this is the amount of cold hard cash that can be earned from breaking a rule.

ii. The expected penalty if detected offending - harsh penalties seek to deter individuals from breaking a rule.

iii. Moral obligation to comply - this is based on a person believing that complying with the rules is the "right thing to do".

iv. The fourth motivator - social influence - recognizes that most people’s behaviour is influenced by their peers and the people who matter to them.

Having understood the motivators that influence behaviour, the key is to apply them to compliance strategy development. The literature outlines two basic analytical frameworks that can influence behaviour to achieve high levels of compliance with the rules.

These are:

• instrumental and

• normative

The first perspective - the instrumental - argues that people are driven by self-interest alone and that compliance is determined by the certainty and severity of sanction in the event of violation of the rules (Figure 1).

This is the "big stick" model, sometimes called the "deterrence approach". It is a feature of most centralized government fish management regimes, especially those that are open-access systems. Policy-makers have long believed a big enough stick will offset the illegal gain and remove the incentive to break the rule. Experience tells us that this is rarely the case.

Regimes of this kind tend to be ineffective due to the low level of support by the regulated community, the high costs of enforcement and the reluctance of the judiciary to impose deterrence penalties. The normative perspective on the other hand stresses the morality and internalized social norms of individuals. It also includes a deterrent component but seeks to maximize voluntary compliance. It is founded on a belief that people will comply with rules they believe are fair and reasonable, and that are being administered in a fair and reasonable manner (Figure 2). In other words - and this is a key point - the moral obligation to comply is based on an individual’s perception of the fairness and appropriateness of the law and its institutions. This is a key factor to keep in mind when formulating and implementing a compliance regime.

4. COMPLIANCE STRATEGY DEVELOPMENT

4.1 Objectives

The Ministry of Fisheries’ strategic aim is "to achieve optimal levels of compliance". This aim is achieved through two mutually supporting goals (Figure 3) of

• maximizing voluntary compliance and

• creating an effective deterrent.

This strategy can be likened to a "carrot and stick" approach, voluntarily comply with the rules or face hard line enforcement and prosecution action. Both arms of the strategy are necessary to achieve optimal compliance - but the main focus of this presentation is on creating an effective deterrent. However, to give context, it is useful to first understand the concept of maximizing voluntary compliance.

4.2 Maximizing voluntary compliance

For 90 percent of the fisher population it is possible to put down the big stick and design a system in which people willingly cooperate. That is a strategy of "maximizing voluntary compliance". However, this involves the concept of legitimacy.

To be successful, a fisheries management system must be perceived to have legitimacy. Legitimacy operates on three levels.

i. It starts with agreement on what a society wants to achieve from the use of its fisheries - that is, the vision and goals - and on the best management system to support this.

ii. It extends to the strategies, rules and services that support the goal.

iii. Finally, it extends to the integrity of the agencies that administer the system.

If stakeholders don’t see that system as giving them a fair go, they may turn their backs on it. Building legitimacy might be more time consuming and costly up front but the payback comes later though lower costs of enforcement and higher rates of compliance.

4.3 Effective deterrence

Creating an effective deterrent has its origins in the Instrumental theory of compliance, which argues that compliance is determined by the certainty and severity of sanction when rules are violated. Thus, compliance is determined by a fisher’s perception of the product of the probabilities of:

• chances of detection x

• enforcement action being taken x

• being successfully prosecuted and convicted and

• the penalty, with this being greater than potential illegal gains.

It has been argued that a strategy of creating an effective deterrent is expensive due to the high costs involved of enforcement. The reason an effective deterrent strategy can be costly is that many agencies rely on real-time offence detection. Given that offending may take place in the deep sea far from the prying eyes of enforcement officers, high levels of at-sea or aerial surveillance, at-sea inspections, observer coverage or dockside monitoring are required to create a credible detection capability that could influence fisher behaviour.

It is common knowledge within Police circles that only about 3 percent of all offences are detected in real time. Not surprisingly patrolling police vehicles have proven to be an ineffective way of detecting offending. The same could be said for fisheries patrolling. The typical odds of being apprehended violating a fisheries regulation is below one percent and often close to zero (Sutinen 1996).

Simply put, in terms of real-time offence detection the strategy of creating an effective deterrent falls at the first hurdle due to the inability to create a perception in the minds of fishers that the probability of being detected is high. By not achieving this first and important threshold the remaining arms of the strategy also fail. The question is, how does one turn this perception around?

4.4 Moving to retrospective offence detection

The major obstacle to creating an effective deterrent is the inability to detect serious as distinct from minor or technical violations. The critical issue and the challenge for fishery enforcement agencies is moving from real-time offence detection to retrospective offence detection This means that a fisher contemplating offending must not only be concerned with real-time apprehension by enforcement authorities, but with the fear and threat of being subsequently apprehended months, or even years, later hanging over their heads. Once this threat materializes against just a few fishers, the impact on the remaining fishers can be quite marked.

As an example, in New Zealand several vessels were recently prosecuted for area misreporting as a result of retrospective offence detection techniques. The fact that this type of offending had been detected spread quickly through Industry. Almost immediately a noticeable change in fisher behaviour occurred that suggested many other fishers may have also been previously offending.

It is this kind of approach that changes fisher behaviour, because the risks of being detected and prosecuted are now perceived to have increased to the point that the benefits of offending are outweighed by the risk of being caught and the imposition of deterrent penalties. The point here is that one needs to only retrospectively detect and successfully prosecute a small number of serious offences to have a significant deterrence impact.

4.5 The tools and techniques

The model of generalist enforcement officers able to cover a wide range of duties will not suffice in this environment. Generalist officers are still required for traditional enforcement and compliance work, but this model requires the development of specialist skills and expertise in quite specific areas.

To achieve retrospective offence detection, and thereby increase detection capability, investments must be made in three key areas of the organization:

i. information systems and management
ii. analytical skills and
iii. specialist multi-disciplinary investigative teams.

Information systems and management

The need for good quality information from a variety of sources is critical to retrospective offence detection. Fortunately for New Zealand some of this work has been done by virtue of the QMS being a documentary-based product flow system where participants are required to submit and keep a range of documentation relating to fish movements and transactions. This provides a wealth of information about fishing, catching and landing practices as well as providing traceability of fish sales and movements.

The Ministry of Fisheries’ Compliance Programme has invested heavily over the past five years in a range of information systems that provide valuable compliance-related information. These include:

• observer trip information where approximately 10-15 percent of deep-sea fisheries are covered annually

• vessel monitoring system (VMS) data - all vessels >28 metres must operate a VMS

• industry self-audit reports submitted annually for all medium to large licensed fish receivers

• Compliance Activity Monitoring System (CAMS) records the results of all inspections and fishing contacts undertaken by Fishery Officers

• Fisheries Intelligence Network (FIN) is an intelligence database used to record and store intelligence gained from a wide range of sources

• Offences Systems is a database that records prosecutions, warnings, inquiry or investigative files

• Threat Assessments which are a comprehensive analysis of all main fish stocks and details the major risks of offending for each fish stock and

• strategic alliances with other government organizations and overseas agencies that allow access to a wide range of fisheries-related information and intelligence.

The range of information available covers nearly all aspects of the fishing industry and provides invaluable source material able to be used for offence detection purposes. However, few traditional enforcement officers have the skill and aptitude to interrogate databases and make sense of wide-ranging and complex information.

Analytical skills

Once the organization is data and information "rich" then every effort must be made to build an analytical capacity to ensure that maximum value is being obtained from the information. Specialist skills and expertise are required to analyse, interpret and distil the information into meaningful reports that identify offences and direct enforcement activity.

The Ministry of Fisheries has invested in the development of its analytical capability and can now benefits from a range of specialist skills such as the following.

• Forensic Analysts, who spend much of their time delving though databases using techniques such as statistical, comparative and discrepancy analysis together with fisheries management, observer and scientific expertise to develop:

  i. fishing trends and patterns
  ii. fish stock and vessel profiles and
  iii. company and fisher profiles.

• Computer Forensics - this small team of people are expert in capturing, to evidential standard, electronic information. Specialist tools and techniques are used to clone fishing company computers, laptops and databases, and electronic information stored on equipment such as fish plotters, communications equipment and navigational equipment. Having safely captured the information, specialist tools and software are used to investigate the information and detect offending.

• Forensic Accountants who are able to undertake fishing company audits, investigative audits, product flow analysis, and analysis of company and business documentation and fishing returns.

With a focus on offence detection, the collective results of these specialists is to identify such offences as dumping, fishing in closed areas, area misreporting, species misreporting and quota fraud. In nearly all cases traditional enforcement techniques that focus on real-time offence detection would not have detected the offending.

5. MULTI-DISCIPLINARY INVESTIGATIVE TEAMS

Having increased offence detection capability it is important to develop credible capacity to investigate and prosecute any offences that detected. This is best achieved through a highly specialized multi-disciplinary investigative teams comprising:

• forensic accountants

• forensic analysts

• computer forensics

• investigators/fishery officers and

• solicitors.

These teams have a sole responsibility to investigate and prosecute serious offences and might only achieve a few prosecutions per year. Scarce resources should be used in a cost-effective manner to target serious violations, as reductions in illegal fishing will be greatest when the chronic and flagrant violator is apprehended and fined.

Also, a positive multiplier effect of deterrence is expected when the chronic and flagrant violators are apprehended and penalized. On the other hand, severe enforcement actions taken against the marginal, inadvertent or infrequent violator may be counter-productive and possibly have a negative multiplier effect on deterrence.

While the process for retrospective offence detection, analysis and investigation is different, the reality is many of the skills are complementary and a single well-supported multi-disciplinary team can achieve both, all without necessarily having to leave land.

6. CASE STUDIES

6.1 Species misreporting

To demonstrate retrospective offence detection, the following case study provides some insight to the effectiveness of the approach.

Background

The hoki fishery is New Zealand’s largest deepwater fishery by volume and as such is the backbone of the New Zealand fishing industry. A large number of vessels participate in the fishery each year with fishing activity being most intensive around the West Coast of the South Island (WCSI) between July-September each year. The fishery is a mixed fishery with a large number of quota and non-quota species typically being caught during each trip. Suspicions have long been held of large-scale offending occurring, particularly in the areas of dumping, high grading and misreporting.

Response

A specialist Serious Offences Unit commenced an analytical process to develop a fish stock profile of the WCSI hoki fishery. A large amount of data and information was analysed going back over seven years. The base data used were observer catch-effort logbook data, which is considered to have a high degree of reliability. Additional input was also sought from scientists and hoki fish stock experts. This information was subsequently compared against a large body of independent data from science and research observations and then against fisher returns (Figure 4).

A high-level hoki profile was developed with a large number of subprofiles. The task was to then compare all vessels in the fishery against the profile and identify those that fell outside the profile. The profile was able to identify that for each hoki trip, between 8 to 17 quota species and 13 to 26 non-quota species should be caught and landed. When this profile of a typical hoki trip was compared against the hoki fishing fleet some interesting trends emerged.

A number of vessels were identified that had catch profiles inconsistent with the fish stock profile including several vessels from one company. It became clear from the analysis that large scale intentional misreporting had been detected as these vessels were not reporting a number of quota and non-quota species as having been caught.

The hoki profile was expanded to compare the presence and absence of species between observed trips and non-observed trips in relation to the same vessels. This subprofile identified 12 species of fish that should be caught on every trip. The information was graphed and compared against actual reported catches by the suspect vessels. This revealed some interesting vessel profiles (Table 2).

Every white or empty square in Table 1 represents a species of fish, which according to the profile, should have been caught but was not reported as having been taken by the vessels. It is clear from the analysis that the vessels were only reporting higher-value species with many species being either dumped or misreported.

Through this in-depth analysis, evidence of offending had been detected not only against these vessels but other vessels as well. The Serious Offences Unit investigated these offences and a successful prosecution followed resulting in substantial fines and forfeiture of vessels.

The following year the hoki profile was updated and again retrospectively compared to the fleet. A noticeable change in fisher behaviour was clearly evident with most fishers reporting in a manner consistent with the hoki profile developed.

6.2 Area misreporting

A second more recent example of retrospective offence detection occurred when a deep-sea vessel was suspected of misreporting the area in which the species of hake had been caught. The vessel had fished both the WCSI hake fishery and the Chatham Rise hake fishery. Suspicions had arisen that while the majority of hake was reported as having been caught on the Chatham Rise, it had in fact been taken from the WCSI fishery.

A team of analysts developed a profile of the hake fishery, which included catch rates and locations, spawning times, and industry catching practices. It was discovered that when the suspect vessel catch returns were analyzed against the profile:

• the vessels in question had unrealistically low catch rates on the WCSI

• the vessels had unrealistically high catch rates on the Chatham Rise

• that no other vessels had caught those quantities of hake at that time of year on the Chatham Rise and

• that the catch rates were consistent with a spawning fishery, yet hake did not spawn until several months later.

The analytical profile was able to conclude that it was highly probable that hake reported as having been taken on the Chatham Rise must have been caught on the WCSI. The Serious Offences Unit investigated this case and a successful prosecution resulted. Again noticeable changes in reporting behaviour were noted as a result of this prosecution, not only in the hake fishery but other fisheries as well.

Why had fishers’ behaviour changed? Fishers’ perception of the risk of being detected and successfully prosecuted had changed to the extent that fishers had been influenced to comply with the rules. Simply put, the risks of being detected and prosecuted outweighed the benefits of illegal activity.

6.3 Conclusions

By adopting a retrospective approach to offence detection, those contemplating offending will need to balance the risks of

• the offence being detected sometime in the future

• enforcement action being taken by a highly specialized multi-disciplinary investigative team

• being successfully prosecuted and convicted due to the wide range of analytical, forensic and accounting skills being adopted and

• the penalty being greater than potential illegal gains due to the harsh penalty and forfeiture regime.

Result - A cost effective approach to creating an "effective deterrent". The New Zealand experience is that it is not just about catching the crooks, it’s about creating incentives that influence people’s behaviour to comply with the rules

7. LITERATURE CITED

Sutinen, J.G. 1996. Foundations of Compliance Strategy: A Framework for Policy. A report to the Compliance Business Unit New Zealand Ministry of Fisheries, July 1996.

Crothers, S. 1999. Administration of Enforcement Mechanisms for Rights-Based Fisheries Management Systems. In: Shotton, R. (Ed). Use of property rights in fisheries management. Proceedings of the FishRights99 Conference. Fremantle, Western Australia, 11-19 November 1999. Mini course lectures and core conference presentations. FAO Fisheries Technical Paper. No. 404/1. Rome, FAO. 2000. 342p.