Author: Roman Kernchen
Date: 14-09-2026
Illicit trade is often imagined as taking place outside legitimate markets: prohibited goods move through clandestine channels, criminal actors bypass formal controls, and enforcement intervenes at the boundary between legal and illegal economic activity. Chemical supply chains present a more complicated picture. Diversion can begin within otherwise legitimate commercial structures, involving lawful products, registered companies and apparently ordinary transactions.
The governance problem is therefore not always the movement of an intrinsically illicit item. It may arise when a legitimate transaction no longer provides reliable visibility over the customer, intended end use or onward transfer.
Legal chemicals, illicit pathways
Operation Fabryka, coordinated by Europol and culminating in a major enforcement action in January 2026, illustrates the problem. The investigation targeted a network importing precursor chemicals from China and India, moving them through the European Union, repackaging them in Poland and distributing them onwards to illicit synthetic-drug laboratories. Authorities seized approximately 1,000 tonnes of chemicals, while legal companies and established commercial channels formed part of the distribution structure.
The starting point is particularly relevant. Chemicals with legitimate industrial applications entered commercial channels, while quantities, customer relationships, repackaging and onward distribution gradually became indicators of a different purpose.
Operation Fabryka concerns synthetic-drug production and should not be conflated with chemical-weapons proliferation. Its wider relevance lies in the architecture of diversion. Lawful sourcing, legitimate companies and ordinary commercial infrastructure can form part of an illicit pathway. The licit–illicit interface may therefore be embedded in customer relationships, intermediaries, unusual volumes and onward transfers rather than appearing at a clearly identifiable border between legal and illegal markets.
This is particularly relevant to GLITSS Working Group 2, which examines the physical and organisational structures that facilitate illicit trade, including governance, infrastructure, norms and the illicit/licit economy paradox.
From material control to transactional visibility
In 2026, the Organisation for the Prohibition of Chemical Weapons launched its Indicative Guidelines on Know Your Customer (KYC) in the Chemical Supply Chain. The guidelines are intended to help stakeholders assess whom they conduct business with and reduce the risk that dual-use or toxic chemicals are sold for illicit activities.
The significance of this approach is that part of the security function shifts from the material itself to the transaction surrounding it.
Formal controls remain indispensable. Scheduled substances, licensing requirements, customs procedures and export-control lists establish important boundaries. Yet customer due diligence addresses a different problem. A product with legitimate uses may not itself provide a sufficient warning signal. Relevant information may instead emerge from the relationship between product, purchaser, volume, routing, intermediary and stated end use.
A supplier may therefore have to consider whether an unfamiliar customer, atypical order size, unexpected destination, unusual intermediary structure or unclear end-use explanation is merely commercially unusual or sufficiently anomalous to justify additional scrutiny. This does not make unusual behaviour evidence of criminal intent. It creates a risk-identification problem: when should an otherwise lawful transaction trigger additional verification?
When legitimate acquisition is followed by illicit repurposing
Diversion is often imagined spatially: an item leaves an authorised channel and enters an unauthorised one. The more difficult governance problem may arise where the initial acquisition remains legitimate but the subsequent purpose changes.
A chemical, item of equipment or technical capability may be acquired through an ordinary transaction for an apparently plausible purpose and later transferred, resold or repurposed for an unauthorised use. The decisive transition from licit to illicit activity may therefore occur after the original supplier has completed a formally lawful transaction.
Commercial suppliers cannot exercise unlimited control over downstream use, nor can every irregularity be treated as a security threat. Excessive due-diligence requirements could impose costs without producing proportionate security benefits. The governance challenge is therefore not complete visibility. It is risk-based visibility: identifying combinations of factors that justify closer scrutiny while preserving legitimate trade.
The same tension is visible in the current evaluation of the EU Dual-Use Regulation, which examines how security objectives can be pursued while minimising unnecessary burdens on legitimate trade, competitiveness, innovation and research collaboration. The question is not simply whether controls should become stronger, but where they create meaningful additional visibility.
The licit–illicit interface as a governance and information problem
Taken together, Operation Fabryka and the OPCW KYC initiative suggest that the licit–illicit interface can usefully be understood as an information and governance problem. The vulnerability is not necessarily the absence of formal prohibition. It may instead be an inability to distinguish normal commercial complexity from patterns consistent with diversion.
This places greater weight on reconstructability. Once a suspicious transfer is identified, can organisations establish who purchased the material, which intermediaries were involved, what end use was declared, whether quantities or destinations were unusual, and whether concerns were recognised and escalated? Customer and transaction records then become more than routine compliance documentation; they become part of the security architecture of the supply chain.
Three broader governance questions follow:
- When should a formally legitimate transaction become a security-relevant signal?
- How far can responsibility for customer and end-use visibility reasonably extend beyond the immediate transaction?
- How can KYC and risk-based due diligence complement formal controls without converting ordinary commercial uncertainty into presumed wrongdoing?
These questions extend beyond drug precursors. Comparable problems can arise around biological materials, specialised equipment, research services, technical information and other dual-use capabilities where lawful acquisition and harmful use are separated not by the legality of the initial transaction but by what subsequently happens to the material or capability.
The emerging lesson is not that legitimate trade should itself be regarded with suspicion. It is that the boundary between licit and illicit activity increasingly has to be governed within legitimate supply chains, rather than only at their external perimeter. Customer due diligence, end-use awareness and transaction-level visibility are attempts to make that boundary more observable without undermining legitimate commercial activity.
Selected sources
- Europol (2026), “24 industrial-scale labs dismantled in the largest-ever operation against synthetic drugs.”
- Organisation for the Prohibition of Chemical Weapons (2026), “Indicative Guidelines on Know Your Customer (KYC) in the Chemical Supply Chain.”
- European Commission (2026), “Overall evaluation of Regulation (EU) 2021/821.”
- GLITSS Working Group 2, “Platform: The governance of illicit trade.”
Author: Dr. Roman Kernchen, BSIRA – Office for Security Studies and Risk Analysis.
Image source: PxHere, CC0 Public Domain, https://pxhere.com/en/photo/908300
