International Crime Threat Assessment
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This global assessment was preparedS Government interagency working group in support of and pursuant to the President's International Crime Control Strategy. Representatives from the Central Intelligence Agency; Federal Bureau of Investigation; Drug Enforcement Administration; US Customs Service; US Seoret Service; financial Crimes Enforcement Network; National Drug Intelligence Center; the Departments of State, the Treasury, Justice, ond Transportation; the Office of National Drug Control Policy; ond the National Security Council participated in the drafting of this assessment.
Contents
Introduction
Context of International Crime
hanging World
Global Reach of Organized Crime Groups
Sophistication of Criminal Organizations
and Extremist Group Involvement in
Crime Activities
and the Political-Criminal Nexus
Shortcomings
Crimes Affecting US Interests
Trafficking
Smuggling
in Women and Children
Crimes
Violations
Technology Transfers and Smuggling of
for Weapons of Mass Destruction
Trafficking
in Precious Gems
Contraband Smuggling
Property Rights (IPR) Violations
Economic Espionage
Corrupt Business Practices
Fraud
Crime
Laundering
rtititi oi inicmaiioiiji criminal rtcuviij Western Europe
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Organized Crime
and Central Europe
the Baltics, and the Newly Independent States
Baltic Slates
and Moldova
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Caucasus and Central Asia
Organized Crime
Balkans
Albanian Criminal Croups
Asia. Turkey, the Middle East, and Eastern Mediterranean
Asia
Chinese Criminal Networks
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Yakuza
Criminal Enterprises
America
Caribbean
America
American Alien Smuggling Networks
States
for US Strategic Interests
Problem of Criminal Safehavcns, Klcptocracies. and Failed States
Future of International Crime
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International Crime Threat Assessment
The rapid .spread of international crime since the end of the Cold War is unprecedented in wale, facilitatedotuh/jtHMi and technological advances, andignificant challenge to the United Stales and democratic governments and free market csxinocnies around the world. The President has identifiedenmcirect and immediate threat to the national security of the Unitedo meet this challenge, the Departments of Justice, Stale, andclosely with numerousomprehensive nauonal strategyight international crime and reduce its impact on Americans The International Crime Coo no! Strategy, which was released ina dynamic action plan that servesoadmapoordinated, effective, long-tcni) attack oncrime. The Strategy's eight overarching goals, supported by implementing objectives, are as follows:
Extend the first line of defense beyond US borders.
Protect US borders by attacking smuggling and smuggling-related crimes.
Deny safchuven to international criminals.Counter international financial crime.
Prevent criminal exploitation of international trade.
Respond to emerging international crime threats.
Poster international cooperation and the rule of law.
Optimize the full range of US efforts.
At the direction of the President and as pan of the International Crime ControlSinteragency working group has prepared the following comprehensive assessment of the threat posed by international crime to Americans and their
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Retrrie
communities, US businesses and financial institutions, and global security and stability. The assessment is divided into five parts:
ddresses ihc Global Context ofCrime, identifying thosethe implicationshanging world, the greater sophistication of cnminal organi/atioos. and instjtu-uooal shortcomings elsewhere in thehave contnbuted to the growing problem ofcrime.
Chapter IIomprehensive overview of specific International Crimen Affecting UStheir effect on American lives and livelihood, costs to US business interests at home and abroad, and impact on US national security interests around the world
Chapter III addresses Worldwide Areas of Interna-tional Criminal Activity, particularly as source areas for specific crimes and bases of operations for international criminal organizations. This section includes an analysis of the driving factors incountries and region* thai allow criminaland international criminal activity to flourish, as well as an assessment of the impact of international criminal activity on stability in these countries and regions, including threats to the growth and nurturing of democratic and free market systems. Finally, this section discusses thecriminalnd internationalof organized crime groups originating in these countries or regions
Chapter IV addresses the ('unsequrnce* of Inter-anatasal Crime for US Strategic Interests,the ability to work cooperatively with foreign governments and the problem of criminal safe-havens,nd failed states.
erspective on the Future of International Crime as it develops in the next 10
years.
Chapter I
Global Context of International Crime
hanging World
Law enforcement official* around (he world haveignificant increase in the range and scope of international criminal activity since the, The level and severity of this activity and thegiiiwth in the power and influence ofcriminal organizations have raised concerns among governments all over the world particularly in Westernthe threat criminals pose to govcmability and stability in many countries and to the global economy International criminalhave been qukk io take advantage of the oppor-tunnies resulting from the revolutionary changes la work)usiness, technology, and communica lions that have suengthened democracy and freebrought the world's nations closer together, and given the United Stales unprecedented security and prosperity:
Post-Cold War landscape. The end of the Cold War resulted in (he breakdown of political and economic barriers not only in Europe but alw around the world. This change opened the way for substantially increased ttadc. movement of people, and capital news between democracies and free nuuketand the formerly closed societies and markets that had been controlled by Soviet power The end of the Cold War also brought with it an end torivalry in other regions of the wortd.movement inward peace and more open borders- These developments have allowedcriminals to expand then networks and increase (heir cooperation in illicit activities and financial transaction*.
EconomU and trade liberalization. Increasinginterdependence has both promoted andfrom reforms in many countries opening or liberalizing slate-controlled economies with the intention of boosting trade and becoming morein the global marketplace. Criminals have taken advantage of transitioning ami more open
Multilateral economic agreements reducing trade barrier* in North America. Europe. Asia, and oiher regions of the world have substantially increased the volume of international Dade. In the United Stales, the volume of trade has doubledto the US Customs Service, and will double again3 Criminal groups have takenof the high volume of legitimate trade indrugs, arms, and other contraband across national boundaries
The advent of intermodal commercialincluding standardized cargo containers,cargo tracking, and automated cargo-transfershippersecurely andtransfer containers delivered by sea to other ships for onward shipment orommercial railroads and trucks for overland transportation. Criminals arc able to exploit the complexity of the intermodalto hide drugs or other contraband or lo conceal the true origin and ownership of cargo within whichis hidden
Technological adiances. The last decade hasrevolutionary advances in information and communications technologies that have brought the wortd closer together. Modern telccumniunxatioBs and information systems that underpin legitimate commercial activity in today's fast-paced global market are as easily used by criminal networks Commercially available state-of-the-artequipment greatly facilitates international criminalmaking deals ami coordinating the large volume of illicit trade. In addition to the reliability and swiftness of thethisords criminals considerable security from law enforcement operations.to I'S law enforcement agencies, manyenme groups and drug trafficker!ombination of pirated and encrypted cellulai phone* and bootleg or stolen phone cards that they replace after short periods of use.
Through the use of computers, international criminals have an unprecedented capability to obtain, process, and protect information and sidestep law enforcement investigations They can use the interactiveof advanced computers and telec ommun icatiors systems to plot marketing strategies for drugs and other illicit commodjiicv to find the most efficient routes and methods for smuggling and moving money in the financial system, and to create false trails for law enforcement or banking security International criminals also take advantage of the speed andof financial transactions and the fact that there arc few safeguards to prevent abuse of the system to move large amounts of money without scrutiny. Moresome criminal organizations appear to be adept at using technology for counterintelligenceand for tracking law enforcement activities.
Globalization of business. The revolution in modern tekcommunications and information systems and lowering of political and economic barriers that have so greatly quickened the pace, volume, and scope of international commerce are daily being exploited by criminal networks worldwide. Imernaiionalare attracted to major global commercial and banking centers where ihry take advantage ofseaports and airports, the high volume oftrade, the concentration of modern telecommunication* and information systems, and the presence of major financial institutions. They count on avoiding close scrutiny of their activities because of the importance to businesses andof facilitating commercial and financialand rapid transshipment of products.
Explosion in international travel With (he breaking down of international political andbamers and the globalization of business, there is more freedom of movement, andtransportation of goods and services is easier. The proliferation of air transportation connections and easing of immigration and visa restrictions in mam- countries to prornole international commerce, especially within regional trade blocs, have also facilitated cnminal activity. In the past, more limited travel options between countries and more stringent border checks made crossing national boundaries
difficult for international criminals. Now. criminalsreat many choices of travel routes and can arrange itineraries to minimize risk. Border controls within many regional economicas the Europeanoften nonexistent.
illion people entered the United States overland from Mexico and Canada,illion people arrived on moreommercialand private flights,illion arrived by sea. according to the US Customs Service. Inillionautomobiles andUS borders with Mexico and Canada, and moreerchant andships and other maritime vessels docked at US seaports or US coastal harbors. US seaports handled moreillion shipping containersillion tons of cargoS Customs is able to inspect onlyercent of the goods entering the Unitedigure that will drop to about 1in the next five years as the volume of tradeto grow. This tremendous volume of traffic and trade into the United States provides international criminals tremendous opportunity to smuggledrugs and counterfeitthe country, as well as to illegally export firearm.,vehicles, and other contraband overseas.
Growing Global Reach of Organized Crime Groups
The phenomenon of international organized crime is not new. Italian. Chinese, and Nigerian criminal groups, for example, have long had members or cells in foreign countries and international connections to obtain, distribute, or market contraband. In general, however, their international criminal activities were more limited in scope, and their foreign cells operated mostly autonomously orew specific functions for the larger group. Border controls, the slower pace of transportation and communication, and the requirement to move illicit money in bulk cash
* '% Moritimc ConloincrsUS Commcrtiol
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Inlernotionol Commcrciol Flights ond Persons Entering the United Stoles by flir
nom> Atlantic Ocean
Commercial Flights Entering the Unrtod
Persons Entering the United States by Air
Dotafor fiscal years, provided by US Customs Service.
24*8here has beenni incraoto in *hn mrrbc of commordol lights entering tho United Stow*0
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Central Characteristics Common to Organized Crime Groups
crime it defined by US law enforcementcontinuing and self perpetuating criminalhaving an organized structure, fed by fear and corruption, and moliwted byrganized crime groups oftenamily or ethnic base, but members usually identify more closely with the orga nization than they do with blood relatiwrs. Theymaintain their position through the threat or use of violence, corruption of public officials, graft, or extortion. The widespread political, economic, social, and technological changes occurring within the wortd have allowed organized crime groups to become increasingly active worldwide. The ability ofcrime gn-ups to adapt to these changes and their use of impnntd transportation and communication technology haxe hindered law enforcement efforts against them
Most organized crime groups have the followingm common:
Seeking financialusiness must profit to survive, and organized crimeuch the same way. Greed and the quest for profits probably dictate "tort organized crime decisions than any other single motive. It is this consuming desire for money, and the power that typically goes with it. which drives and sustoins organized crime.
Requiring member loyalty through ethnicity and family considerations. Although not an absolute mandate for every organized crime group, most groups require their members to be of the somebackground The purpose of this preference is
twofold hint, criminals generally believe they can better trust those people they know, or know of, thereby reducing the likelihood of law enforcement infiltrating the group. Second, some of these groups originated from the pursuitommon goal or scheme, whether economic, societal, or political.
I'unuing corruption of government officials. Most organized crime groups have been enormouslym their illegal ventures because they have successfully corrupted those persons charged with investigating and prosecuting them In fact, some of these groups have to thoroughly and utteriy cor-rupted those officials that it is no longer possible to distinguish between the two.
Hierarchical structure. Generally, organized crime groupstructure with defined leadership-subordinate roles, through which the group's objec lives are achieved.
Criminal diversity. Typically, organized crime groups engage in more than one type of crime.
Organizational maturity. In most oases organized crime groups hate some permanence and do not depend on die continuing participation of oneew indit-iduals for their existence.
Multijuris&ttomal activities. Usually, organized enme gwups operate or have influencelarge areasegion, country, or countries.
were significant impediments to internationaldynamics of globalization, however, particularly
activity. For many wganued crime groups, theirreduction of harriers to movement of people,
national criminal activities were more regionaland financial transactions across borders, have
global. For thoseore worldwideinternational organized crime groupsoperations were mostly confined toa large ethnic expatriate population.
s
expand both their global reach and criminal business interests. International organized crime groups are able to operate increasingly outside traditionallake quick advantage of new opportunities, and move more readily into new geographic areas. The major international organized crime groups have become more global in their operations, while many smaller and more local crime groups have expanded beyond their country's borders to become regional crime threats.
Since the end of the Cold Wur, organized crime groups from Russia, China, Italy. Nigeria, and Japan have increased their international presence and worldwide networks or have become involved in morecriminal activities Most of the world's major international organized crime groups are present in the United Slates.
Greater Sophistication of Criminal Organizations
International criminaltraditional organized crime groups and drug-traffickingtaken advantage of the dramatic changes in technology, world politics, and ihe global economy to become more sophisticated and flexible in theirhey have extensive worldwide networks and infrastructure to support their criminal operations, they are inherently flexible in their operations,quickly to challenges from rivals and from law enforcement; they have tremendous financial resources to draw upon: and they are completelyInternational crirninab spare no expense togovernment and law enforcement officials in foreign countries that serve as their bases of operation or as critical avenues for transshipment of drugs, arras, other contraband, illegal aliens, or trafficked women and children. Organized crime groups routinely resort to violence to advance and protect their interests.
Organized crime groups remain ruthless in protcet-ing their interests from rivals and law enforcement alike. Criminalkillings, vendetta murders, kidnappings, bondage, even occasional small-scaleincreased withfor illicit markets and resources, and it often has spilled over into society ai large.
Globalization hasore professional criminal element. International criminals make use of the latest commercial and technological developments to expand and improve the efficiency of their operations, and they have the financial resources toat-ever access, know-how. and technology they may need or desire. Many criminal groups employ individuals wilh specific expertise lo facilitate their operations.esult, they are able to quickly idenufy and adapt to market changes.
Major drug smuggling and other interoaiionalgroups use transportation specialists and legal experts to research commercial flows and to team about tariff laws and administrative procedures in Ihe world's major commercial ports. With such information, they are able to exploit international air. sea, and land shipping to move drugs,ther contraband, illegal aliens, and even money past customs and law enforcement.
International criminal organizations use financial experts (some trained in the world's best business schools) to identify new money-launderingto manage investments, and to establish fronii that can be used as covers for smuggling and fraud schemes. This has allowed cnminal groups to increasingly diversify their financial operationslobal scale.
legal expertise is effectively used by international criminals to protect themselves from investigations and prosecutions. Lawyers in their pay have used detailed knowledge of the law to manipulate the judicial system and to influence law enforcement legislation to protect criminal interests in countries around the world.
Globalization has enabled organized crime groups to diversify their criminal activities. Colombian diug-trafficking organizations, for example, are also involved in counterfeiung: Nigerian and Asian crime groups engage in alien smuggling; Russian and Asian crime groups traffic women for worldwide sexand Russian, Asian. Nigerian, and Italiansyndicates engage in Miphisticaied. high-tech
financial crimes. Many of the larger criminalhave established business-like structures to facilitate and provide cover for their operations, including front companies, quasi-legitimate bus! nesscs. and investments in fully legitimate firms
Much more than in the past, criminal organizations arc networking and cooperating with one another, enabling them to merge expertise and to broaden the scope of their activities. Rather than treat each other as rivals, many criminal organizations are shanngservices, resources, and market accessto the principle of comparative advantage. By doing so. ihey can reduce their risks and costs and arc better able to exploit illicit criminal opportunities. Although most cooperation between criminalso far has been largely tactical such as col laboraiing in smuggling ventures, arranging illicit financial transactions, or tatsnderingpotential for broader alliances to undertake morecriminal schemes in an increasingly globalis significant. The willingness and capability of large, well established international organized crime groups to move into new areas and develop mutually ln.iKli.ial relationships with local criminal groups is unprecedented.
Insurgency and Extremist Group Involvement In Organized Crime Activities
One of the more significant developments sinceof the Cold War has been the growingof insurgent, paramilitary, andcrimes are primarily againstcriminal activities more associated withorganized enme groups and drugAlthough various insurgent andhad been involved in traditional criminalbefore, particularly the drug trade, their rolewasubsidiary one of extortingprotection to drug trafficking andoperating in areas they controlledsome of these insurgent or extremist gioupsdrug traffickers and other criminaloften fleeting, but sometimesarrangements basedoincidenceIn either case, the relationship wasand marked by mutual suspicion andForFOR
In Peru from thentil the, the extremistminoso insurgents profited from protecting coca fields and extorting drugoperating in the Andean region Ihey
In Western Europe, members of the terroristWorkers' Party (PKK) in Turkry have engaged in drug trafficking and other crimes to help finance local operations.
Among the changes brought by the end of the Cold War. however, was the loss of Soviet, Cuban, and other Communist benefactors for many regionaland extremist groups. Unable to rely on aid from state sponsors, many insurgent and extremist groups were forced to find alternative sources of funds io remain militarily relevant, and involvement in drug trafficking and other criminal activity became aas an independent source of revenue.
In Colombia, since the. Marxisthave not been able to rely on financial support from Cuba and Russia Some insurgent fronts of the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation ArmyN) gcneraie substantial revenue by taxing and protecting coca cultivation, cocaine processing, and drug shipments in the areas they control. The US Governmentthat the FARC may earn as much as half of its revenue from involvement in the Colombian drug trade.
In Africa, both the National Union for the Total Independence of Angola (UNITA) bj Angola and the Revolutionary United From (RUF) in Sierra Leone raise most of the revenue lo pay the costs ofinsurgencies from mining and illegallydiamonds in the areas their forces control For UNITA. exploiting the diamond industry became critical to its survival once Cuban and more limited Soviet aid dned up by the. The RUF's principal external supporter, neighboring Liberia, receives payment in diamonds as the price for its troop, logistics, and material support.
Beside* engaging in drug trafficking and otheractiviiy to raise needed revenue, insurgeni and extremis! groups have other motivations lorAmong the most important is to advance tbeir political objectives by isolating the regions they coo trol from the national economy. By so doing, they deprive the government of theoooornicus i& most notably the case with themines held by the insurgents in Angola and Sienaincrease the dependence of the local population on their control and authority. In someas in the drug-producing regions of Colombia, largely controlled by the FARC and right-wing paramilitaryand extremist groupsidespread illegal economy or illicit activity thai is the primary source of income for the local population.
With the substantial decline in state-sponsoredmany- insurgencies and extremist groups reach out to criminal networks to acquire arms and tmiin that cannot be obtained through more traditional or legitimate channels. Unlike insurgent groups, criminal groups are well connected to outside gray armstransportation coordinators, money launderers. and other specialists who can provide the weapons and other logistics support once given by stateOrganized crime groups arc also more likely than armed illegal political, ideological, or religiousto have stables of corrupt contacts in customs, immigration, and other law enforcement authorities to facilitate the smuggling of weapons and otherto extremist and insurgent groups. Armed groups are also turning to criminals to acquireitems, like encryption software or globalequipment, that are otherwise unobtainable
For some insurgent groups involved in cnminalthe activiiy itself may eventually become their pn-mary motivation In Burma, for example, ethnic-based insurgent armies that were originally formed as national liberation movements supported byChina have become drag-trafficking armies.ince Burma's military regime negotiated cease-fire agreements that leave them alone, insurgent armies like the United Wa State Army the largest producei of heroin and merhamphctamine inAsia- arc now engaged almost exclusively in the
lucrative business of drug trafficking. They turned increasingly to drug trafficking when China began substantially reducing its support in.
Corruption and the Political-Criminal Nexus
While organized crime groups and other criminalhave become more sophisticated in tlieirand capabilities, corruption remains an indispensable tool of the criminal trade Corruption is inherent to criminal actisity; cnminal groups corrupt society, business, law enforcement, and government. Beyond corrupting mid- and low-level lawpersonnel and government bureaucrats tolind eye or proactivcly facilitate their on site criminal activities, crime groups seek to corrupt high-leveland government officialsariety ofincluding to:
Gain high-level protection for themselves and their activities. Implicit alliances withosition to head off or limn policy or law enfurccmem initiatives that could interfere with their criminal activities allow crime groupselatively benign environment In somethe relative power of their high-level political ptoicctors may he the most important factor in how well orriminal group prospers.
Gain Insider Information on national-level law enforcement Investigations. Access toosition to authorize or influence invesri -gatkms and prosecutions provides major crime figures with warning of governments' attempts to target them, the potential to learn about the sources and direction of investigations, and the possibility to terminate or sidetrack investigations or toival criminal group instead.
Gain Insider Information on national economic planning. Unsavory businessmen and many organized crime groups seek to invest in productive
business enterprises and to profit from economic and infrastructure development projects, both to use as fronts for their criminal operations and totheir income and their role in society. Having advanced knowledge of government plans forofferings or compciitivc bidding forprojects, for example, givesotential advantage over individuals and businesses without criminal tics. In many cases, criminal groups try to use their high-level official connections to ensure they win competitive bids.
Influence legislation or statutory regulations that
could affect their interests. High-level politicians in league with crime figures could sidetrack or weaken provisions in key legislation that would threaten (heir safely, such as extradition, or push for laws that would promote theiras their ability to launder money, make illicit financial transactions, engage in illegal trade practices, or move contraband products.
Criminal groups arc most successful in corrupting high-level politicians and government officials in countries that arc their home base of operations. Countries with policies thai favor governmentand foreign trade restrictions to protect domestic industries, foreign exchange controls, and stateof utilities and natural resources are particularly vulnerable to high-level corruption. Senior officials who have authority lo grant import or export permits, fix import and export duties, determine preferential exchange rates, decide on government-let contracts or privatization offerings, or waive internal taxes aretargeted by criminal groups or may themselves seekelationship with criminal interests. High-level politicians and government officials enter into corrupt alliances with criminal groups to:
pressure and reprisals from criminal groups demanding favors. Politicians and officials who doubt the willingness or capability of theirto protect them from criminal threats arc most vulnerable to the combination of lucrative bribe offers and intimidation.
their public position or potential leverage for financial payoffs from criminal groups. Officialsosition to decide or influence law enforcement operations or investigations may l'c,,ia"jppjj'j^jQ jqd,
either to preclude government interference in the activities of criminal groups or to help facilitate their operations.
their public authority for personal profit from illicit activities. High-level politicians and officials profit by using their ability to influence government economic decisions on behalf ofinterests. For example, ihey may accept financial kickbacks for awarding contracts io businesscontrolled or influenced by crime figures.
personal or political favors from criminal associations. In some cases, senior politicians and officials seek criminal associations lo obtain funds or assets that they can personally use for legitimate investments or for their own involvement in quasi-legitimate or illicit profitable business activities. Criminal associations can also help them to launder and hide illicit proceeds garnered through abuse of their positions of authority'. In other cases, ihey rely on criminal groups for uiformation that can discredit polilical or bureaucratic rivals or to provide under-the-table campaign financing.
Corruptionrand scale weakens social, political, and legal institutions and actsatalyst for further criminaldrug and contraband smuggling, illegal migration, and the penetration of criminal groups into the legitimate economy. This is particularly one in countries that arc making thetransition to market economies, where widespread corruption degrades their ability to enforce the rule of law.
In addition to undermining the political legitimacy of the government, the consequences of corruption can be severeountry's economic performance.reduces incentives for investment because businessmen perceive whatever portion of anis claimed by corrupt officialsax.disrupts the productive allocation of talent and labor in society and distorts the composition of fiscal expenditure, since corrupt officials make keydecisions that arc often based on their ownbest interests, rather than those of the country. High levels of corruption are also associated with lower-quality public infrastructure projects and services, because productive expenditures are cut to
A Global Forum on Fighting Corruption: Safeguarding Integrity among Justice and Security Officials
Institutional Shortcomings
The growth and spread of inteinational crime have also fed off the many institutional shortcomings of countries around the world Police and judicialin many couotnet are ill-prepared to combat sophisticated criminal organizations because they lack adequate resources, have limned investigativeor are plagued by corruption Many countries have outdated or nonexistent laws to addressmonev laundering, financial and high-tech
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Inhe United Stales hosted the first global forum to fight corruption among government officials responsible for upholding the rule of law. Officials fromountries participated and agreedeclaration that calls on governments to adoptpractices to promote integrity andfight corruption among justice, security, and other public officials and to assist each other in this regard through mutual evaluation.esult of this initiative, severalas Romania and Souththeir awn regional conferences in the past year to continue the workore local level. Thewith help from the United States, willollow-up global forum at the Hague inhe Dutch anticipate officialsountries willintellectual property piracy, corrupt business practices, or immigration. Moreover, manyhave been slow to recognize the threat posed by criminal activities and increasingly powerfulcrime groups. Criminals use thesetheir tremendous resources to corrupt and intimidate public officials and businessfind safchavens for themselves, their illicit operations, and their tainted money.
that do not allow or limit extradition or mutual legal assistance, do not recognize theof some US laws, or that have no legal statutes to deal with some criminal activities are often ideal sanctuaries for criminals seeking to evade justice in the United States.
The resourcefulness of organized crime groupsin acquiring sophisticated technology is posing unprecedented challenges for law enforcement and security forces. Many law enforcement agencies in world regions hard hit by criminal activity are poorly funded and equipped and are increasingly outmaneu-vered by crime syndicates using state-of-the-artTechnological sophistication gives crime groups more options to target or retaliate against the police, judicial, or government officials if lawpressure becomes too threatening to their
enforcement and security agencies increasingly may need to treat the security apparatus ofinternational criminal organizations the same as hostile intelligence services.
Finally, while globalization has allowed international criminals to operate virtually without regard togovernments and law enforcement agencies remain limited by national boundaries. Nationalconcerns and jurisdictional restrictions are impediments to targeting criminal activities that cross international boundaries. Unlike criminals,and law enforcement agencies must respect other nations' sovereignty and legal statutes in law enforcement operations.
International Crimes Affecting US Interests
This graphic depiction of how intentional crimes affect US interest* should not be inttforeled as sugges*ing ony level of fhreol magnitude; crimes imersechng all three circles of rti reals to US interests are no*reater threat than those intersecting two or only one.
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Crimes AfFecting US Interests
The threat lo the United States from intcrnalioruil crime continues lo grow as criminals exploit theof trade and finance and rapid changes in technology These developments have helped create new mechanism* for trafficking contraband,illicit trade, laundering money, and engaging in large Kale economic crimes. They have also opened the door lo new criminal opportunities Whilecrime groups have greatly benefited from these developments, the pace of globalization andadvancements also have inadvertently resulted in some legitimate businesses becoming engaged in economic criminal activity.
The President's International Crime Control Strategy states thai uucmaiional crime threatens vital USin three broad, interrelated categories:
to Americans and their communities.
which affect the lives, livelihood, and social welfare of US citizens living in the United Stales and abroad.
Threats lo American businesses and financial institutions, which affect US Dade, theof US products, and the US interesttable worldwide financial system
Threats to global security and stability, which affect the broader US national security interest in promoting regional peace and democratic and free market systems, particularly in regions whereregimes aspire lo develop weapons of mass destruction or where US forces may be deployed.
This chapter addresses the major international crimes identifiedhreat io US interests in theCrime Control Strategy, including their impact and costs lo American citizens, businesses, or national secunty interests. This survey docs not address them in any priority order indicating severity ol threat io US interest*.
icrtorism and drug trafficking most directly ihrealen Americani|frt^r
DATE:1 international crimes are addressed in greater detail in the Slate Department's annual hmerns of Global Terrorism and International Narcotics ControlReports and the administration's annual National Drug Control Strategy.
Illegal immigration, worldwide trafficking of women and children, and environmental crimes may pose direct threats to safety, health stability, values, and other interests of Americanwell as to me entire world community of which the United Stateseading member
The illicit transfer or trafficking of products across international borders including the violation of US or international sancuons. illicit transfer andof materials for weapons of mass destruction, arms trafficking, and Uafficking in diamonds and other preciousUS nationalobjectives of isolating pariuh regimes andregional stability.
Economic trade crimes such as piracy, theof contraband, (he violation of intellectual properly rights tIPR) through product piracy and counterfeiting, industrial theft and economicand foreign corrupt business practices rob US companies of substantial commercial revenues and affect then competitiveness in world markets.
Financial crimes such as counterfeiting US currency and other monetary irunnimcnts. sophisticated fraud schemes directed at both individuals and businesses, high-tech computer crimes taigeting businesses and financial institutions, and money laundering cause significant financial losses lo American citizens and companies at home and overseas and contribute to instability in the intemalioiuil financial system.
Terrorism
Many international terrorist groups continue to see US interests as prime targets. Terrorists continue toiheir operational ability to strikeroad
Terrorist
of targets using both crude and sophisticated methods.3 World Trade Center bombing in New York City;56 bombings in Saudi Arabia;7 massacre of Western tourists in Luxor, Egypt;8 bombings of US Embassies in Kenya and Tanzania; and the0 suicide attack on the USS Cole in Yemen highlight theterrorist threat posed to American lives and property, at home and abroad.
hereerrorist attacks against US targets2 percent increasehen therenti-US terrorist attacks-including the bombing of US Embassies in Nairobi. Kenya, and Dar es Salaam, Tanzania.
The terrorist threat to US citizens and national security interests comes principally from organized groups with political, ethnic, or religious agendas in their countries, state sponsors of terroristand transnational groups with broader goals.
Traditional, established terrorist organizationsbacked by state sponsors such as Iran. Iraq, Syria. Libya. Sudan. North Korea, andathreat, Iran, which still considersegitimate foreign policy tool,errorist infrastructure and ties to Islamic extremists andgroups that giveorldwide terrorist
Islamic terrorist groups with vague internationalhaverowing threat in recent years. These groups are sometimes loosely organized, draw their membership from communities in severalcountries, and obtain support from an informal international network of like-minded extremists rather than from state sponsors of terrorism. Many of these terrorists met while fighting against the Soviets in Afghanistan or have since received military and explosives training there.
Totcil Persons Killed UJorldujicle in International Terrorist0
group led by Ramzi Youscf. die convicted mas tcrrnind of the World Trade Center bombing- and the network maintained by Afghanistan based terrorist Usama Bin Laden are prime examples of thisin the international terrorist threat.
national Ahmed Rcssam. who was arrested in Port Angeles. Washington, attempting to smuggle bombmakjnif material into the United Slates from Canada, was associated with an extremist group based in Algeria that has ties to Bin Ladin's organi zanon
The international political and economic changes that drag-trafficking and organized crime groups are exploiting to facilitate their activities are enhancing the ability of terrorist groups to operate worldwide. International terrorist groups ate ponicularly adept at exploiting the advantages of more open borders and the globalization of international commerce to move people, money, and material across national borders Like drug trafficking and other criminal organizations.
terrorist groups are becoming more sophisticated in the use of computer technology thai enhances their communications and logistic networks.
Although terrorist groups and criminal organizations have similar requirements for moving people, money, and material across international borders, traditionally there has been minimal cooperation between them. Terrorist groups maintain their own clandestineand typically control all aspects of their opera lions to minimize the risk of exposure. There is the potential, however, for cooperation between tramna tKwial tenons! groups and criminal organization*.
Some terrorist groups thatingle stale sponsor may use criminal activities to help finance thcii operations.
Some terrorist groups look to organized crime groups to xssijt them in acquiring more sophisti-catcd weapons or materials
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Drug Trafficking
The worldwide ilhcli drug industry it one of the great est threatsocial stability and welfare in the United Stales. In addition to the terrible human cost ofand associated healthHIV and AIDS- endured by users of illicit narcotics, drug abuseignificant impact on the social fabric thai affects all American- Drug abuse undermines family cohesion andemble daily and often lifelong effect on the lives of children across the country.
Results from the most recent National Household Survey on Drug Abuse indicated8 million Americansercent of ihc populationears orcurrent users of illicit drugs, having used them within the previousays.
ccordingtudy sponsored by the Office of National Drug Control Policyhere wereillion hard-core users of cocaineard-core heroin users in the United
ONDCP estimates there0 drug-related deaths0 who died directly from drug consumption This was the only year for wtnch this estimate, derivedethodology that incorporates deaths from other drug-related causes, was made.
Medical examiners frometropolitan areas in the United States reported more0 direct drug abuse deathshe latest year for which figures arc available, accordingurveyby the Drug Abuse Warning Network.
Drug-related causes accounted for aboutercent of new AIDS cases for men ander cent of new AIDS cases for women in the United Stalesccording to data from (he Centers of Diseaseand Prevention.
mericansillion on illegal drugs, accordingtudy sponsored by ONDCP
The estimated total costs of drug abuse in the Unitedhealth care and lostSIillionhe latest year for which data arc available, according to the US National Institute for Drug Abuseearlyillion of that was for health-care costs and medical consequences
US Depart merit of Labor studies have shown that drug users arc less dependable than other workers; they arc twice as likely as nonusers to lake unex-cused absences from work, are nearly twice as likely to switch jobs, and arc more than three times as likely to he terminated
Moreillion Americans in the work force agend older used illicit drugslo (he National Household Survey on Drugercent of full-time workersof pan-time workers reported current illicit use in the survey.
Drug use is estimated toear in decreased productivity and lost earnings in the United States, according8 report by NIDA.
Drug abuse also leads to antisocial behavior anddisrespect for laws and instituuons. The drug trade brings with it high levels of street enme andby addicts needing in pay for drugs and by drug groups fighting for turf. Theretrong correlation between drug abuse and crime.
More than two thirds of the adult males arrested for crimes tested positive for at least one drugccording to the Arrestee Drug Abuse Monitoring Progiam sponsored by the National Institute of Jus-live.
economic costs of drug abuse to US citizens and society are substantial. These include significantspending of disposable income on illegal drugs; costs associated with medical care and drugprograms for drug abusers; lost productivity in the workplace; and spending required by federal, state, and local law enforcement agencies and judicial and penal systems io deal with drug nlaicd crimes APrRIVEl FIR REllASE
mm tin
US Customs Seizures of MDMA
lor liscol years provided by US Customs Service.
Drug Production
The most dangerous drugs of abuse in the United Statea-cocaine. heroin, MDMA (also known as
smuggled into the country by mtemahooal cnminal orgaruuiions from source countries in Latin America. Asia,MDMA-Europe. Cocainein the United Stales, the world's most important and largest market, has declined seanewtiat since its peak in the, but has remained relativelyfor most of the last decade. Cocaine is produced in the South Amencan Andean countries of Colombia. Peru, and Bolivia; Colombia is the source of an esu maiedercent of the cocaine supply in the US
he United States seized someetric tons of cocaine at its borders, according to the US Customs Service.
Fueled by high-purity, low-cost heroin introduced into the US market by Southeast Asian and Colombian traffickers, heroin use in the United States increased significanUy in thend has leveled off in recent years. The purity of heroin currently available in the United States is higher than ever Southwest Asia's -Golden Crescent" (Afghanistan and Pakistani and Southeast Asia's "Golden Tnanglc" (Burma. Laos, and Thailand) are the world's major sources of heroin for the mtemational market, but Colombia is the largest source of supply for the US heroin market and Mexico the second largest. Colom but and Mexico accounl for aboutercent of the US heroin markei, with heroin from Southeast Asia making up most of the remainder.
ilograms of heroin were seized at US poits-of-entryccordingS Customs Service data.
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The use of syDihetic drugs in Ihe Uniied Slates, many of which come from abroad, hasowproblem os'er the last decade. Beginning in, there hasramatic surge in theproduction and consumption of syntheticamphetamine-type stimulants, including methamphetamlne and ecstasy.
The majority of methamphetanune available in ihe US market is produced by Mexican traffickersin the United States or in Mexico; the US Drug Enforcement Administration (DEA) estimates that Mexican trafficking groups controloercent of the US mcthamphetaminc supply. There hasignificant increase in methamphetaminein Southeast Asia in recent years. Althoughhas found its way to the US market from Southeast Asia, increasing quantities of "Thai labs" have been seized in the western United States.
Most of the ecstasy in the US market is produced in ihe Netherlands. Amsterdam, Brussels. Frankfurt, and Paris are major European hubs for transshipping ecstasy to foreign markets, including the United States. US law enforcement reporting indicates that the Dominican Republic, Surirtame, and Curacao are used as transshipment points for US-bound ecstasy from Europe and that Mexican and South American traffickers are becoming involved in the ecstasy trade. Inccording to the US Customsillion ecstasy tablets were seized being smuggled into the Unitedsevenfold increaw: cawablets seizedFororeillion tablets were seized.
Marijuana remains the most widely used and readily available illicit drug in the United States. It is thedrug for nearly all users of more dangerous illicit drugs. While most of the marijuana consumed in the United States is from domestic sources, including both outdoor and indoor cannabis cultivation in everyignificant share of the US market is met bygrown in Mexico, with lesser amounts coming from Jamaica, Colombia, and Canada. Very little of the cannabis grown in other majorMorocco, Lebanon, Afghanistan. Thailand, andto the Uniied States.
etric tons of marijuana were seized entering the United States, most of which came from Mexico.
DruK-Trafficking Networks
International drug-trafTicking organizations have extensive networks of suppliers and front companies and businesses to facilitate narcotics smuggling and laundering of illicit proceeds. Colombian anduaiTicking organizations dominate the drug trade in the Western Hemisphere. Colombia supplies most of the cocaine and contributes the largest share ofto the US market, and Mexico is the major avenue for cocaine trafficking into the United States as wellajor supplier of heroin, marijuana, and mctham-phctamine. In the Asian source regions, heroinis dominated by large trafficking organizations, but the trafficking networks smuggling heroin from Asia are more diffuse. Asian herointypically change hands among criminalas the drug is smuggled to markets in the United States and elsewhere.
The evolution of the international drug trade in the last decade has included greater involvementrowing number of players and more worldwide trafficking of synthetic drugs. Criminal organizations whoseactivities focus more on traditional contraband smuggling, racketeering enterprises, and fraud schemes have become increasingly involved indrug trafficking. Although they generally arc not narcotics producers themselves, many organized crimethose from Russia, China, Italy, andcultivated and expanded tics to drug-trafficking organizations to obtain cocaine, heroin, and synthetic drugs for their own distribution markets and trafficking networks. Traffickers from many countries increasingly are eschewing traditional preferences for criminal partnerships with singlegroups and collaborating in the purchase,and distribution of illegal drugs. Nontraditional traffickingrebel armies and extremistalso turned to the drug tradeeans of raising revenue.
Taking advantage of more open borders and modern telecommunications technology, intcrrutional drug-irafficking organizations are sophisticated and flexible in their operations. They adapt quickly to lawpressures by finding new methods for smuggling drugs, new transshipment routes, and newto launder money. In many of the major cocaine- and heroin-producing and transit countries, drug traffickers have acquired significant power and wealth through ihe use of violence, intimidation, and payoffs of corrupt officials. They are ruthless intheir operations, threatening and sometimes resorting to violence against US law enforcement officers and Americans working and living in drug-producing and transit countries.
Global Implications
The consequences of drug abuse and trafficking areajor challenge to countries worldwide, and they have become serious enough in recent years to affect regional stability. Countries that today arc major narcotics producing or transit areas have significant drug addiction problems that grew with theirin the drug uade. In some countries, largeof the population are stricken by AIDS, undermining economic growth and future prospects. The social, economic, and political stresses these problems cause are felt across national borders,lo regional economic problems and political tensions.
Allen Smuggling
Alien smuggling groups traffic in "humanorchestrating the movement ofor fraudulently documented foreignthe United Slates and other prosperous countriescramped, unhealthy, and dangerousunder economic or demographicChina, India, and Pakistan in Asia,Caribbean island nations, and Centralstales in the Westerntheof illegal migrants seeking new homesin the United States and Canada.illegal migrants come for economicare criminals and associates of extremistin their destination country, illegalinto ethnic communities lo find workIheII
The US Immigration and Naturalization Service (INS) estimated6 that there wereillion undocumented aliens illegally in the United States, representingercent of the total USMore than half of ihe illegal immigrants in theexican nationals;ame from CentralMost illegal aliens entered ihe United States with out passing through immigration controls. The40their visas. Nearlyercent of foreign nationals illegally living or working in the United Stales are concentrated in five stales: California. Texas. New York. Florida, and Illinois. Forty1 percent live in California alone.
The US Government estimatesllegal migrants are brought into the United Stales annually by organized alien smuggling networks; another estimated half-million enter without the assistance of alien smugglers. Most illegal migrants enter the United Slates overland from Mexico or Canada.
According lo US Government estimates,llegal migrants who entered the United Slates9 were Mexican nationals, andere Central American nationals.
Chinese smugglers, known as snakeheads, often move aliens into the United States by maritimeincluding offshore transfers of migrants, but also transit South and Central America, Mexico, and Canada. The US Gov-ernment estimates00 Chinese were smuggled into the United States
Alien smuggling contributes to the broader problem of increasing numbers of foreign nationals illegallyin the United States, as well as in other relatively prosperous countries, who are straining social and econontic resources and contributing to rising crime and anti-immigrant sentiment. Illegal alienswages and working conditions for legalincreasing the potential health and safety risks lo the work force, illegal immigration also increases the burden and cost of some government social programs.
Via olr
Approximate number oi illegal migrants0
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9 wuX roG0.
Illicit Chinese Migrant flow to the United0
of links connecting some alien smuggling to drug trafficking, terrorist or extremist politicaland other organized crime groupsajor cause forariety of sourcesthat drug shipments arc sometimes collocated with illegal aliens in transit to the United States. Some
primarily drag-trafficking groups are believed to include or work with alien smugglers. Many ethnic-based criminalNigerian, Chinese, and Russian crimeillegal aliens smuggled into the country to undertake higher-risk criminal activities. Terrorists and members of extremist organizations seeking to enter the United
Stales and wanting: lo avoid detection ai pom-of-entry sometime* use the services of alien smugglingincluding document forging services.
of the constraints in3 World Trade Center bombing entered the United Slate* with false documents.
Alien smuggling also raises serious human rightsMost illegal migrants come to the United States willingly in searchetter livelihood and higher standard of living, and they pay alien smugglers high prices for that oppominity. However, because they lack legal status and rights, they are often abused en route and once they reach their destinations. Some illegal migrants die in transit from cramped, unhealthy, and unsafe conditions or from abusive treatment hy their handlers. Once in the United States, most illegal aliens work in menial jobs with fewand their status puts them very oltcn at the mercy of exploitative employers. To pay off large debts to their smugglers, marry illegal immigrants wind up working in unregulated and untaxed industries Some ahen smuggling evolves into traffickingwhere the illegal migrants are forced by theirinto other enmes or virtual slavery in pay off their debts.1
avoid US law enforcement authorities, it is not uncommon (or smugglers to abandon their clients in the desert without food or water, or lo loss ihem in frigid waters. On Chinese alien smuggling vesselsumber of migrants were beaten byuntil they lost consciousness, according io the US Coast Guard. Smugglers also coerced female migrants into sex by withholding food or otherwise
1 The US Government and two ibflereni UN ptowols make aon between alienwhich foreign individuals willingly contract lo be smuggledountry by penoca who gain financial or other material personal bcnctii from procuring ihe illegaltrafficking id persons. In which individuals (particularly women and children) are recruited or trantported. by means of fraud, deception, coercion, abduction, or the abuse of power, for purposes of espJorlatlufi, including sexual exploitation, forced 1
making ihe journey miserable for noncompliant females.
In the last iwo years there have been several major incidents involving would-be illegal Chinesefound dead inside cargo containers, including three in Seattle in0 andn Briiain in
Alien Smuggling Networks
Dlegal migration facilitated by organized aliennetworks is on the rise. The easing of national border controls worldwide, growth of commercial travel options, availability of technology that can be readily adapted to forge identification and traveland the rising sophistication of global criminal networks arc key factors contributing lo thisThe vast pool of potential migrants seekingopportunity innited Stales and other developed countries, diminished opportunities for legal migration as ihe worlds more prosperousseek lo reduce immigration, and increased border enforcement and interdiction of illegal migrants have translated into substantial profits for alien smuggling groups.
The UN estimates that migrantillion people andillionaccordingeport in
Besidesrofitable criminal business,illegal immigrants is less risky than trafficking in other illicit contraband, such as drugs. Only aof source and transit countries have enactedstatutes against alien smuggling, and virtually no ethnic group stigmatizes the practice. Mostthose in Centralrimary conduit for smuggling illegal migrants into the Unitedlax toward alien smuggling because ihey view il largelyS problem and perceive higher bilateral pnnrilic* with Washington.
Alien smuggling thrives in corrupt environments, and bribery imdcrmines effective enforcement againslborder crossings and false documentation where corruption is less endemic. The ready availability of means lo counterfeit and forge travel documents also minimizes die risks for traffickers in "human cargo."
The networks involved in alien smuggling are highly efficient movers of people across national frontiers. Unlike other international criminal organizations, some of which smuggle illegal aliens as an adjunct to other criminal activities, alien smuggling groupsare less hierarchical and more characterized by loose networks of associates to facilitate theof illegal migrants across regions and continents. These networks typically include local agents who recruit people interested in illegal immigration to the United States and elsewhere and bring them together for departure; travel processors who arrange forand any necessary travel documents; and international "brokers" along the way who facilitate intermediate passages and make arrangements for arrival at final destinations. The widespread dispersion of associates gives alien smuggling groups theto quickly and easily shift routes or call upon different operatives if law enforcement or otherdisrupt their operations. The fact that groups of illegal aliens are typically handed from smuggler to smuggler during portions of their journey' makes itto target and disrupt alien smuggling networks.
Central America has emerged as the primary gateway for US-bound illegal migrants from all over the world. Scores of loosely linked networks that span the region and extend into Asia facilitate their movement. These networks include an abundance of smugglers and escorts, fraudulent document vendors, safehousc keepers, corrupt airline and bus company employees, and corrupt officials. While illegal migrants from China and elsewhere outside the Western Hemisphere have handlers for all stages of their journey through Central America, many Central American migrants do not enlist the servicesmuggler until theyreach Mexico. Many illegal migrants caught in Central America arc deported to the country from which they most recently arrived, which is usually another country in the region or hemisphere, because they travel without documents indicating their country of origin. From there, they usually resume traveling northward.
Although many alien smuggling groups are highly specialized, the growing profitability of this criminal business has increased the involvement of largersyndicates. Some groups have engaged inboth drugs and people, although not necessarily at the same lime.
The Chinese Fuk Ching Gang, for example, has engaged in large-scale smuggling of illegalby sea. This group was reportedly responsible for organizing the voyage of the Golden Venture, which ran aground off New York City3 with hundreds of illegal Chinese aliens from Fujianaboard.
Trafficking in Women and Children
Trafficking in human beings, especially women and children, across international borders for sexual exploitation and forced labor is an increasing crime problem as wellrave violation of human nghts. People caught in human trafficking rings are placed in situations of abuse and exploitation including enforced prostitution, sexual slavery, sweatshop labor, domestK servitude or other forms of coerced labor, service, or subjugation that subject them to the threat of violence, rape, battery, and extreme cruelty.
The US Government estimated7omen and children weic moved acrossborders by (reffieking rings each year. Some nongovernmental orguni/uiiotii estimate the number to be significantly higher,
The worldwide brothel industry earns atrom trafficking victims, according to USestimates.
00 women and children wereto the United States, according to USestimatesercent of the worldwide total. Most are from Southeast Asia and Latin America. There have alsoew cases where .American women have been trafficked abroad. US international airports in New York. Miami. Chiigclev and San Francisco arc major entry points for traffic ken bringing women and children into the United Statcv Greater Customs andscruiiny at these airports have caused the District of Columbia. Cleveland. Orlando. Atlanta, and
Global Trafficking in Ulomen and Children:
' Major Source Regions and Destinations
stimates
Numerical estimafes indude inlraregional trafficking but exclude inf'aoountry trafficking. For the purpose of fhese estimates, children are defined as females younger fhonears old. This segment of theforfor approximatelyercent of fhe total, according fo various reports. Males underears old accountery small2rioinly for slavery.
Houstonmerge as significant pons-of-cntry for victinu of trafficking rings. Like alien smuggling in general, trafficking in women and children help* build criminal support structures in the United States.
Trafficking to the United States violate- USi mmigraiion. and labor Laws, as well at theof Trafficking and Violence Protection Act. Trafficking also usually involves conspiracy and visa, mail, and wire fraud. The gross, systematic violation of human rights, which often includesextortion, and enslavement, is also aof US laws,
onda policerothel operator who smuggled Mexican women and underageinto the United States and forced them to work as prostitutes to pay off0 smuggle fee.
Then cross-border crime*rowing concern. US law enforcementalso report an increase in international sex tourism in whichUStravel to foreign countries to have sex with children.
thenot yet teenagers-are victims of trafficking, having been sold by their familiet or kidnapped and forced into bondage.
Trafficking Networks
Traffickers of women and children, much liketraffickers, operate boldly across sovereignThey prey on women from countries where economic and employment prospects arc bleak,crime is rampant, and females have urole in society, Often these women are tncked into leaving their countries by false promise* of aeconomic life abroad; traffickers lure victims widi false advertisements and promises of jobs as models, dancers, waitresses, and maids. Once the women are abroad, traffickersariety of coercive means to sell and enslave them. In other instances, traffickers buy young girls from their relatives The I'Non Cnme Prevention and Criminal Justice hasramatic increase in the abduction of children for commercial purposes by organized crime syndicates.
According to the US Government, anomen and children from Southeast Asia were trafficked across international bordersccounting for nearly one-third of the worldwide total. Nearly half are youngerndtrafficked within the East Asia-Pacific region, primanly to wealthier markets such asHong Kong. Singapore, Japan, and Australia. An0 women from Southeast Asia were trafficked to the US marketbout two-thirds of the total trafficking victim* Drought into the United Stales that year.
Latin America was the second-larger source region for women and children trafficked to the Uniied Stales0 of theomen and children caught in Latin Amencanrings7 were sent to the United States, according to US Government estimates.
former Soviet Union andrope is becoming an important center for trafficking in women and children. The US Government csnmates thatf the women and children from countries in these regions were caught in trafficking ringsestimatedsent to Western Kuropc. with Germany, Italy, and the Netherlands the most likely destinationsomen and children from the former Soviet Union and Eastern Europe were brought to the United States
ictims from South Asia wereto buyers elsewhere in the region, in theLast, and in Southeast Asia
Traffickers of women and childrenariety of methods to move their victims across national and international boundaries. They sometimes operate through nominally reputable employment agencies, travel agencies, entertainment companies, or marriage agencies legitimate travel documents are often obtained and used to cross international borders, after which the trafficking victims disappear or overstay their visas. Traffickers, however, also use fraudulent
documents to obtain genuine travelor use altered or counterfeit decurnents to move the women and children. Victims caught in these trafficking nngs arc most often moved out of their home countries and regions by commercial airlines. Traffickers typically move them in smallhange flights frequently, and vary their nnites In efforts to avoid being caught.
While small trafficking groups with loosely connected networks and affiliates dominate the global trade in women and children, the role of large, pdyenme international criminal organizations is becoming an increasing problem Because women and children are seeneusable commodity, trafficking in human beings isajor source of income for tome organized crime groups. Profits from (his activity arc laundered and fed into other illicit activities, including narcotics and arms trafficking.
Corrupt officials often facilitate trafficking in the source, transit, or destination countries. Lawofficials in the source countries often ignore the recruitment process, since they believe lhat in most cases ihe actual coercion lakes place at the final
In Bulgaria, four seniortwo involved in security or anticrimefired in7 because of thcL- link* lo an organized crime group involved in procuring women for forced prostitution, accordingulgarian press.
In Thailand, traffickers recruit military and police force member* to serve as escorts for women who are being trafficked to foreign sex markets.
omen and children to the United States and abroad is likely to continue increasing in the years ahead given the large profits, relatively low risk, and rare convictions for traffickers. Lack of visa and border controls, as well as almost noriexisient antitralfickiiig legislation in many source and transit countries, will only further embolden (he traffickers. Economic hardship, poor employment prospect- and the low status of females in many source countries will continuenderpin the problem.
hese concerns are leading to increased inlema tkmal courrwrrneasures.eads of state, for example, used their communiqueall for activitiesrevent trafficking, prosecute the criminals, and protect Ihe victims.
he United Statesesolution on trafficking in women and children that was adopted by the UN Crime Cornmission. The resultingon trafficking in persons, cosponsored by the United States and Argentina, will be attached to the UN Convention Against Transnational Organized Crime.
Environmental Crimes
Environmental crime is one of the most profitable and fastest growing new areas of international criminal activity. Growing international environmentalhave led to (he proliferation of multilateraland national laws and regulations to control pollutants that arc health or environmental hazards, to prevent wanton exploitation of scarce natural resources, and to protect endangered plant and animal species. Criminal organizations around themost notably in Italy, Russia. China, andtaken advantage of the significantly greater costs for wasic disposal, as well as the much-increased value of rare or precious natural resource commodities (hat are the subycci of tight trade and sale restrictions, to earn substantial illicit income from circumventinglaws and regulations
The US GosvTrtment estimates that local andcrime syndicates worldwide1 billion annually from hazardous waste dumping, smuggling proscribed twzardous materials, and exploiting and trafficking protected natural resources.
The tremendous costs for legally disposing of poltui-aots and dangerous chemicals have created new illicit business opportunities for criminal organizations, who2 billion per year for dumping trash and hazardous watte materials Organized crime groups are taking increasing advantage of the mu In billion-dollar legal trade in recyclableuch j< .crap metals, to cominglc or illegally expon or dump toxic wastes. Most of these wastes are shipped in "irash-for-cash" schemes to countries in Eastern mid Centra) Europe. Asia, and Afnca where disposal costs and enforcement of environmentol regulations are lower The lack of specific legislation governing suchany countries and poor enforcement or limited legal penalties in many others (often only fines that are insignificant in comparison to the millions inthat can be made from this activity) reduce the risks for international crime groups involved in dumping hazardous wastes.
While enme groups in Russia. Japan, and elsewhere have increasingly moved into illegal waste disposal. Italian criminal og animations are the most involved largely because of then success in infiltrating Italy's industrial watte disposal sector. They have used their control over waste-disposal businesses, bothand front companies, to secure contract? in Italy and elsewhere in Europe and illegally dump wastes to boost profits.
About half theillion metric tons of wasteannually in Italy disappears and is presumed to be illegally dumped, according to Italian press soun.ivtalian law enforcement authorities investigating the role of Italian organized crime in the illegal export and dumping of hazardous wastes claimed that criminal groups control most of Italy's waste disposal contracts.
Italian authontics claimed7 thaiillion rnctric tons of toxic and industrial waste areannually inllegal domestic dumpocal waterways or in the Mediterranean.
here were at leasttalian crime groups trafficking and disposing of hazardous waste, which was shipped to dumpsites in Albania, Eastern
Europe, and the African west coast, according to European law enforcement officials cited in the
The lack of inexpensive, adequate, safe disposal options for radioactive waste is also attracting the increased involvement of organized crime groups throughout Europe. In many cases, these groups appear to be using illicit networks already in place for smuggling arms, drugs, and other contraband.
authontics are irrvcsugating illegalof radioactive wastes from Austria. France, andof which have good, but costly,Eastern Europe into theand Adriatic Seas by companies purportedly hired by Italian organized crime groups.n 'Ndranghcia Italian organized crime family was being investigated by Italian authorities for dijrnping radioactive waste off Italy '* southern coast, according to press reports
Criminal groups also smuggle environmentally harmful products, particularly ozone-depleting chlo-rofluorocarbons (CFCs) whose legal trade is subjecttringent international restrictions. The illegal trade of these substances intoruled Stales and otherts accomplivhed through false labeling,paperwork, and bogus export corporations.
size of (he global black market for ozone-depicting substances is estimated by the UN to range00 metric tons annually, with more than half entering the United Stales. Illegal imports ofubstances are far ihrapcr :han CFCs that are legally recycled or obtained fromexisting slocks.
I he stealing and illicit trade of natural resources is
ignificani incomefor criminalearning8 billion per year. Well-organized cnminal groups in Africa. Eastern Europe, Latin America. China, and Southeast and Southwest Asia are heavily involved in illegal logging and trade of forest limber Illegal logging threatens biodiversity and has contributed to the significant decline in forest
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area* worldwide Russian and Chinese crime groups earn substantial income from illegal fishing. Poaching not only depletes seafood stocks, but also deprives seafood industries of legitimate earnings andauthorities of import and capon revenues
Russian crime syndicates arc believed to earn as much as VI billion annually from the illegal export ofillion metric tons of seafood, according to press reports citing Russian law enforcementThe poaching of sturgeon from the northern Caspian Sea and the sale of crab and other seafood to Japan make up much of the trade Japan,mported more than SI bitlkxi worth of fish fromtimes the volume thai Moscow says itording to trade data.
The illegal trade in animalparticularwhale, and hawksbiU turtleanimal species has alsoucrative business, particularly for Chinese and other Asian criminal gtoups. Ihe illegal trade in exotic birds, ivory and rhino horn, reptiles and insects, rare tigers, and wild game is estimated to cam criminal groupsillion per year. Inaiver of the interna -tional ban on ihe African ivory tradellowlo lapanurge in poaching and smuggling of African and Asian elephant ivory.
Sanctions Violations
Some slates of wHtcern use international criminalto help in their efforts to undermine US and multilateral sanctions aimed at isolating those st.no from the global community. Regional and inicma-linnal networks of front companies, unethical businessmen, and crime groups help these regimes evade trade, military, and financial sanctions byclandestine shipments of embargoed products, including weapons, and executing financial transfers.
In, trade and other sanctions on Serbia and Montenegro in the former Yugoslavia, Iraq. Libya,ain were imposed by Western countries or the United Nations. In addition to these sanctions, ihe Uniied Slates has maintained financial sanctions, as
well as extensive trade embargoes, on Cuba, North Korea, Iran, and several other countries
Iraq, which unlike the other states of concern isunder comprehensive trade sanctions, has used traditional means for smuggling contraband lo earn substantial illicit capon revenue that Baghdad uses to fund procurement of embargoed goods Much of Iraq's smuggling-derived income comes fromillicit exports of gasoil through lian's territorial waters and across its land borders. Barges, smallcargo ships, and dhows are used by the Iraqis for maritime smuggling of gasoil exports.
In most cases, states of concern make use of Icgitimaie and illicit business infrastructures lo circumventMuch of this activity lakes place in countriesigh volume of commercial trade, including legal commerce with the regime, that could maskdealings. In some cases, organized crime groups haveignificant role in attempt* to circumvem trade sanctions. Most notably in the former Yugoslavia, local crime groups have nourished by stepping in Ui arrange clandestine shipments of embargoed goods and lo provide covert financing.
Illicit Technology Transfers and Smuggling of Materials for Weapons of Mass Destruction
Several countries- including Iran.bya.and Northrelied on networks of independent brokers and front companies to acquire controlled technology and circumvent US andefforts to prevent them from developingof mass destruction. The threat posed by continuing indications that states of concern andgroup* are inlent on acquiring nuclear, clienucal. or biological weapons increases the likelihood that international cnminal networks may be used tothe materials needed for their production.
There is no confirmed reporting that organizedgroups have planned or attempted to steal nuclear warheads or weapons-usable nuclear material
(uranium wilh greaterperceDtoncenuaiion andnown thefts o( weap om-usable nuclear malerval haw primarily been com-mined by opportunists with insider knowledge of the facilily storing nuclear material but without buyers identified prior to the (heft
To date, there haveotal of3 kilograms of weapons usable uranium at various enrichmentsrams ofless than what is necessaryuclear weapon.
Arms Trafficking
Illicit gray- and black-market arms sales became an increasing problem duringnd pose an array of threats to L'S national security and foreign policy interests Ihe end of the Cold VVai tod the winding down of several regional conflicts, such as those in Lebanon and Central America, increased the availability of both newly produced and usedThe items typically sold on the illegal armsinclude spare parts for large weapons systems, particularly for clients under UN embargoes orby the original seller, small arms, including assault rifles, and man-portable antitank andweapons; and ammunition for both small arms and larger artillery and armor systems In some cases, however, larger military systems also are sold
The US Government estimates thai militaryworth several hundred million dollars is sold annually on the illegal arms market to countries under UN arms embargoes Insurgents, lerrorists, and organized criminal groups acquire smallerof small arms and other light infantry weapons cm the illegal arms marker
Most illegal arms sales arc through the gray arms market, which has been dominated by individual bio km- and their arms brokeringthe past decade. Gray-market arms transfers exploit lepumate export licensing processes, usually by using false paperwork to disguise the recipient, the military nature of the goods involved,supplier Obtaining licenses, however fraudulent, allows gray-market players lo make deals appear legii-irrulc. helping them io arrange payment and interna-Dona! transportation for transactions that can be valued at millions of dollars and involve hurkdreda of tons of weapons.
In sonse cases, however, large illegal arms shipments arranged by gray arms brokers will be smuggled as contraband. Illicit arms sold or transferred to com-batanLs in Afghanistan and the former republics of Yugoslavia were often provided by foreign suppliers donating and iransporting (ens of millions of dollars worth of sseapons disguised as "humanitarian aid."
The end of the Cold War has made the bloated defense induvtiy and large inventory of weapons in Russia and other former Warsaw Pact countries an easy mark for gray-market brokers.orivil conflicts in Afghanistan and (heof the former Yugoslavia have purchased dozens of complete helicopters and fighter aircraft from gray arms suppliers. Brokers also acquire militaryfrom US and other Western suppliers
Black-market arms transfers do not go through an export licensing process. Rather, smugglers rely exclusively on hiding contraband arms fromofficials. Black-markel transfers usually involve smaller quantities of weapons, often pilfered from
military mocks or ganshops. The theft and illegal sales of weapons and other military slocks hasignificant problem in Russia
Organized crime groups have become increasingly involved in arms trafficking since the end of the Cold War, taking advantage of both ihe availability of large numbers of infantry weapons from the former Soviet Bloc countries and regional conflicts.
In the midst of conflicts in the former Yugoslavia. Italian and Russian criminal organizations have been buying and selling military-style arms on the black market, and cnminal groups operating in ihe legion arc increasingly well aimed.
Threats to US Security Interests Illicit arms sales help fuel conflicts and undermine US political and military efforts to promote stability in several regions of the world The illegal arms trade has helped arm combatants in the former Yugoslavia and Africa. Countries onder UN or other international arms embargoes in which the United Statesare major clients in the illicit arms market.by insurgents and factions in civil war increase the risk to US military personnel and law enforcement officers opcraung in hostile environments overseas.
Insurgents and extremists acquire some small arms and ammunition to augment their own inventories of weapon* Although terrorist groups (reqoerUl) try lo obtain weapons on then own. their greatest source of conventional military weapons continues to be state sponsors like Iran and Libya.
Drug traffickers and organized criminal groups have increasingly turned lo the illicit arms market in. In additionmuggling weapons via the black market, these organizations have used gray-market acquisitions of military weapons io strengthen their ability to defend their operations from government forces and rival organizations.
Trafficking in Precious (iema
The lucrative market for diamonds, gold, and other precious gems has attracted the interest of organized crime groups as well as become the dominant source of revenue for warlords and insurgent groups in war-torn diamond-rich areas in Africa. Diamond brokers traditionally have given little scrutiny to the source of rough diamonds they purchase for the global industry in precious perns and jewelry Trafficking ingold, and other precious gems has notundercut the profits of legitimate mining industries, but has deprived national governments of significant export-related revenues.
Nearly three-quarters of the world's roughvalued at2 billion on the open market -ore mined in Africa, according8 industry estimates. Of ihe8 diamond pro-duclkm in Africa.ejccni was mined informally, mostly by insurgent groups.
Russian, Chinese, Italian, and African criminal groups are involved in the illegal trade of precious minerals and gems. Russian crime groups are believed to have infiltrated the legitimate diamond and gold industries in Russia to smuggle precious gems out of the country They use an array of front companies to conceal and facilitate smuggling operations. Payoffs to local authontics allow them to avoid customs duties and other tarilU, increasing iheir profit potential when they sell these precious gems at market value to indus-Lry brokers
Russian crime groups illegally extract andetric tons of amber worth an estimatedillion each year, according8 press reports.
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Criminal syndicates operating in South Africa stoleetric ions of gold ami diamonds valued0 million. according to press reports citing South African rjolice.
In Southeast Asia, smuggling of precious gemsajor source of revenue for the Khmer Rouge insurgency in Cambodia andecondary source of income for drug-trafficking insurgent armies baaed in Burma.
In recent years, trafficking in diamonds by insurgent groups in Africa to finance their wars in the face of regional and international efforts and embargoes to end the lighting hasignificant problem. The UNITA insurgent group in Angola, rebel mihuas in the Democratic Republic of the Congond the Revolutionary United Front (RUT') in Sierra Leone exploit ihe lucrative diamond mines located in areas they control lo raise revenue for arms purchases and other operational expenses. The RUFs principalneighboringprofits from the illicit diamond trade in Sierra Leone
The sale of diamonds for arms and other supplies by insurgent groups in Africa has stymied regional and international peace efforts and kept the fighting at high levels, resulting in significant casualties and dis-placemem of civilian populationsontrol of most of their countries' diamond mines has also deprived the governments ol substantial revenues.
According to an industry estimate, the value of rough-cul diamondsy UNITA rebels8 was0 million, as compared toof0 million for producing mines in areas controlled by the Angolan Government. Since the government offensive inowever, the loss of dininond mines and international sanctions have curtailed UNTTA's diamond productionoillion.
The same industry source indicates that rough-cut diamonds from source-areas partly controlled by insurgent groups in DROC were valued ul8 million
Growing international concern about the ability of African insurgent groups noted for their atrocities against civilians to finance their operations through the trafficking in rough-cut diamonds has led tofor international certification regimes, although much work remains to be done.
Piracy
Maritime piracy, which is particularly prevalent off (he coasts of Southeast Asia and Africa, threatens the security of some of (he world's most important sea lanes as well as the safe and orderly flow of interna-tional maritime commerce. Piracy raises insurance races, restricts free trade, increases tensions between the affected littoral states, their neighbors, and the countries whose flagged ships arc attacked or hijacked. This criminal activity also has the potential to cause enormous damage to the sea and shorelines when ships carrying environmentally hazardousare targeted Pirates endanger navigation byvessels, including fully laden tankers, under way and not in command, increasing the risk of collision or grounding.
According to data made available by the US Coast Guard, direct financial losses incurredesult of high-seas piracy are estimated ai0 million per year.
Reported incidenis of maritime piracy have more than doubledccording to data from the Imer-national MaritimeB) Piracy Reporting Center based in Malaysia, averaginger year over the last five years as compared to on average of lessiracy incidents0hese figures, however, understate the extern of Ihe problem because most piracy attacks go unreported. In particular, incidenis involving coastal fishermen and recreational boaters arc heavily undcr-reportcd.
herettacks on ships at sea. at anchor, or in port, according to the International
Most of (he diamond trade inone. earningillion annually, is controlled by the RUF
Maritime Bureau's Piracy Reporting Center. Piracy attacks increased byercent8rcwrnembers taken hostage in ship
Most acts of maritime piracy take place in poorly patrolled straits and coastal waterways, where pirates are able to strike quickly with little warning. Piracyignificant problem (as it has been forlong the coasts of Indonesia. Malaysia. Thailand, and the Philippines, where numerous maritime choke points channel large numbers of merchant ships into coastal waters where they are most vulnerable to attack. The west coast of Africa, off Nigeria andand Somalia's east coast are the most piracy-prone areas in Africa. In liast Africa, the ports of Mombasa. Kenya, and Dar es Salaam. Tanzania, are plagued by pirate attacks against berthed or anchored ships.arge number of piracy attacks areof opportunity, local piess reporting indicates that in some cases ships are specifically targeted for their cargo and the sale of their goods is prearranged on the black market.
Of the total piracyeportedight ships were hijacked, mostly in the waters off South-cast Asia and Somalia.
Pirate groups generally appear to operatebut some may be linked to more traditional organized crime groups.
The growing sophistication and increasing violence of piracyajor concern to the maritime industry and to governments, particularly in Asia where piracy is having greater impact on nuuitime commerce. There are increasing incidents of maritime piratesmultiship attacks and attempting to disguise their vessels. They often appear to be familiar withschedules, plotting their attacks and hijackings of cargo accordingly. In some cases, pirates target only local shipping lines, which may own only one or two vessels, rather than ships from larger shippingIn addition, many of the pirate ships arewell-armed and inclined to use force when seizing targeted vessels.5he
number of crewmembcrs assaulted, injured, or killed increased each year, according to data from theMaritime Bureau in Malaysia
Nondrug Contraband Smuggling
NoiKlrug contraband smuflcjing across internationalillegal import and export ofgoods such as alcohol, cigarettes, textiles, and manufactureda highly profitableactivity that typically carries lighter criminal pen-aiues than narcotics trafficking. The evasion of tariffs and taxes on commodities can reap sizable illicitfor criminal organizations or companies engaged in illegaloften at the expense of USboth by saving tax payments and by undercutting the market price of legitimate sales. The trafficking of contraband across interrianonal rxeders is prevalent in countries with large volumes of commercial trade, which helps minimize the risk of law enforcement detection and high import duties.
* High profits and lighter penalties in contraband smuggling have attracted criminal organizations from Asia, the former Soviet Union, the Middle East, and Central and South Amenca.
Consumer demand forIrjbacoo and alcohol products and expensive items such as luxuryespecially high in countries where high-impon tariffs and excise taxes add sigmTicanUy to the price of legitimaie sales, intcr-national contraband smuggling nngs cater toseeking to acquire luxury items cheaply by avoiding customs duties and other taxes. Revenue losses caused by the trafficking and black-market sale of contraband commodities can be significant.
* Russia, China, and countries of the formerare among those with the highest tariffs onimports, making them pnmc markets for contraband smuggling.
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drug trafficker* often use illicit drug pro coedsurchase cigarettes that they smuggle into Colombia for black-market sales, avoiding highand taxes on legal tobacco imports, according to the US Bureau of Alcohol, Tobacco, and Firearms.
smuggling into European Union countries cost7 billionccording to an EU study. The Scandinavian ctmnlrics have alsomajor revenue losses because of trafficking and black-market sales of tobacco and alcohol by crime groups, primarily from the former Soviet Bloc and former Yugoslavia, that ciicumvcnl their import, excise, and value-added taxes.
Illegal imports and exportsarticular problem for the United Slates, which is considered by criminals with international connection* to beajorand source for contraband as wellransjifor international contraband smuggling. Criminals involved in smuggling contraband rely on the volume of export trade in the Uniied States to conceal their illicit activities.
Customs data indicate moreillionehicles, and moic0 trucks and containers enter the Uniied States daily. The Customs Service is able to physically examine onlyercent of all goods crossing USeach day. Five years from now, US Customs will be able lo inspectercent of all goods entering the United States if resource levels remain unchanged
such as firearms, alcohol, or cigarettes, is frequently concealed in shipping containers or packaging for seemingly legiunute goods
In addition. Ihe United Stales isransit country for merchandise being shipped tn anotherdestination. Routing contrabandransit country helps to conceal the true country of origin on merchandise that is controlled or restricted by the importing country
Most contraband smuggling is facilitated by physical concealmeni of the illicit goods orraudulent misrepresentation of facts False invoicing, over or
under valuation of goods, and transfer pneeare frequently used to misrepresent the value of smuggled goods; undervaluation of goods allowstraffickers to avoid tariffs or excise taxes, while overvaluation is used either to disguise the true identity of the item or lo launder illicitly derived
Contraband Smuggling Into the United States
The volume of contraband commercial goods entering the United States skews the marketplace for some manufacturing, retail, and even high-tech industries by providing consumers with less expensive substitutes for legitimate products, hindering the competitiveness of US businesses. Moreover, many' contraband imports are substandardas tainted foods, substandard automotive parts, or dangerous imitation pharmaceuticalmay threaten public health and safety.
The uncontrolled movement and disposal ofwastes and malerial into and within the United Slates may cause harm to public safely and theThe black market for diloroflcairiKarbonshich deplete ozone from the atmosphere, in the Uniied Statesrope is an extremely lucrative illicit business for international cnminal* Russia. China. Mexico, and India are major sources of the00 metric tons of CFCs that US Customs has reported are smuggled into the United Slates each year. In addition to undermining internalinnal progress toward eliminating the use of ozone-depleting substances, the illegal CFC trade evades the high cost of US excise taxes on legally imported CFCs and takes business away from US cornpanies developing ozone-safe chemicals and the equipment that uses them.
Brokers in Mexico can purchase frcon. much of it legally imported from China, for less thaner kilogram and sell it in Los Angeles forimes as much, according to US Customs officials.
* Industry estimatesndicated that smugglers Of ozone -depleting substances earn as much0 million annually from sales to buyers in Europe and North America and deprive the US Government of0 million in excise tax revenues each year.
The United Slates is most often the destination of illicit tridc in protected wildlife and rare plants.
although both the United States and Canada are also raided to obtain exotic plants and animals. Trafficking in exotic species thrcaiens biodiversity and could expose unsuspecting Americans to deadly diseases.
Contra band Smuggling Out of uie United States
Illegal exports of contraband leaving the United Statesignificant problem, with criminal networks engaged in this activity taking advantage of USand state laws as well as the border control focus on the smuggling of drugs, illegal immigrants, and other contraband into the United States Commodities smuggled out of the United States are often items restricted for export by US law and involve munitions list items, firearms, and defense.related technologies tightly controlled for export by the US Government. Other ncms frequently smuggled out of the United States include stolen automobiles, dual-use items, and other goods that are difficult to obtain.
Illegal traffickingS-orlgin firearms hasecurity issue of concern for many foreign governments. Foreign law enforcement agencies continue to uncover US manufactured firearms owned by narcotics traffickers, insurgents, terronsts. and organized crime groups. Several foreignare pressing the US Government lo stem the international flow of weapons from the United States. The US Customs Service seized6 million in arms and ammunition at US ports-of-entry and exit
The illegal smuggling and traflicking ofcigarettes and alcohol by worldwide criminal networks results in major losses of legitimate state revenue* in Europe, Russia, Asia, and (he Wwacn Hemisphere Some alcohol and (obacco contraband are legally exported but stolen in transit often a( an intermediatealter they legally entered the destination country for black-market sales. Some US cigarette manufacturers sell directly to knownIf US taxes on cigarettes rise over uaNMBM
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eral years, international enme syndicates may expand smuggling oncrabonj inio the United Stales toimport taxes.
Contraband smuggling groups with worldwidearerowing demand for stolenfrom the United States, as well as Western Europe andsury and sports utility vehicles arc in particular high demand by criminals because of their high international black-nuukct values and lowof being detected by law enforcement inmarkets. The annual global contraband trade in stolen vehicles is5 billion
7 ihe FBI Uniform Crime Report estimatedillion automobiles are stolen annually in the United Slates, ofalued ateach are illegally uarisported out of thethe overseas blackfor stolen US vehicles worth aboutillion Fewerercent of US stolen vehiclesoverseas are repatrialed.
European law enforcement agencies reportehicles worth someillion arc acquired by car theft rings annually io the European Union countries.
The demand for stolen luxury cars is especially high in Russia and China, where import tariffs average moreercent for most types of luxuryaccording to data from the US Commerce Dc^sartmcni and industry sources. According (oby (he National Insurance Crime Bureau, stolen vehicles sold in Europe fetch three to four times their US market value.
Crime syndicates from China. Russia. Eastern Europe, and Mexico dominate much of the world trade incars. Russian and Asian enme groups rely on members or associates in the United States, who often collaborate with local theft gangs in US cities, to steal vehicles and arrange for transport overseas. Bothand Asian criminal groups cooperate withsmuggling rings thai appear to be responsible for
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moving stolen vehicles across Ihe US-Mexican border for re-export to Russia and China, according (oindustry and press sources. Automobilesyndicates export most of the vehicles stolen in the United States in maritime shipping containers either directly from US seaports, or after driving the vehicles into Mexico. Most vehicles stolen in Western Europe, on the other hand, arc simply driven lo Russia or other destinations
International car theft rings run by Russian. Asian, and other crime groups appear to be increasingly organized and professional in their operations, according to US Customv reporting Theirinclude altering vehicle idermfkalion numbers so the stolen vehicles cannot be traced. Manyin which these vehicles are sold lack theexpertise to detect such tampering.
Trafficking stolen vehicles also belps crime groups facilitate other international criminal activities. Stolen vehicles, for example, sometimes arc used to conceal and transport narcotics or either smuggled contraband.
Intellectual Property Rights flPR) Violations
Most intellectual property rights (IPR) crimes affect-rog US businesses involve the theft of trade secrets and copyright, trademark, and patent violations.violations of intellectual propertylariy the sale of counterfeit or illegally manufactured products distort international trade, undermine the legitimate marketplace, and cause extensive revenue losses to legitimate industries. The explosion ofand the Internet have further enabled IPRto easily copy and illegally distribute trade secrets, tradcniarks, and logos
US businesses are particularly vulnerable andhard hit by counterfeiting and other forms of copyrighl, trademark, and patent infringement because the United Stales leads the world in theand export of intellectualin motion pictures, computer software, sound recording, and book publishing. These industries contributed more0 billionhe US economyrercent of GDP, according to
International Intellectual Property AssociationCopyright industry products have surpassed agricultural products as ihe single-largesi exportin the US economy, and America's three largest software companies are now worm more than the steel, automotive, aerospace, chemical, and plastics industries combined.
Counterfeit or illegally manufactured productswith, and often displace, legitimate sales. US businesses increasingly arc losing legitimate sales due to the manufacture and distribution of illegal products that violate intellectual property rights. Many of these illegal products are exported io the United Smes. but most are circulated in markets abroad in directwith the legitimaie products of US firms In some countries, illicit products saturate the domestic market so completely thai it is impossible for owners of intellectual pfoperly copyrights and trademarks to establish leginmate manufacturing or distribution interests.
US businesses experience significant profil andloss due lo the (heft of trade secrets. Foreign companies seek to steal US tradetheft of sensitive information pertaining to research anddervxlopmerit. production processes, and corporate strategies -to erode US companies' overseas market competitiveness and technological leadership, By so doing, ihey also try to outmaneuvcr or underbid US companies, hoping to tilt the playing field in their favor. The American Society for Industrialhichomprehensive survey ofompanies, estimated0 thai potential known losses to all American industry resulting from the thefl of proprietary information amountedillion.
Copyrighl violations primarily involve the illicit production and sale of computer software, recorded music, and videos. The International Intellectual
Property Alliance estimated that,rade losses suffered by US-based industries due to copyrighttotaledillion, with losses to the motion picture industry7 billion, the sound recording and music publishing industryhe business software industry athe entertainment software industry4 billion, and the book publishing industryaw enforcement raids around the world resulted in the seizure ofillioncopies of motion picture videocassettes,to the Motion Picture Association; also seized were more0 VCRs with an estimatedcapacity of almostillion pirate videos per year.
one in every three compact discs (CDs) soldounterfeit copy, according to an estimate publishedata provided by theFederation of the Phcttographic Industrylhat,orldwide sales of pirated sound recordings totaled more thanillion.
situation is as bad for computer software. According to current estimates by the BusinessAlliance, stolen software costs the industryillion globally andillion during the last five years. The average global piracy rate for software isercent of total sales,S rate of aboutercent.lobal Software Piracy Report estimatedfew business software applications sold worldwide6 were pirated copies.
Trademark violations include the counterfeiting of certain products and trademark goods. According to current estimates by the International Chamber of Commerceounterfeit irademarked products account forercent of0 billionecent survey ofeading apparel and footwear companies by theTrademark Association indicated annual losses of nearlyillion. Online counterfeit sales mayillion annually worldwide,to ICC estimates.
S Customsillion in counterfeit imported merchandise, an increaseillion during the previous year. Recordincluding audiocassettes. videocassettes. andcomputer parts, sunglasses, and clothing were the commodities most commonly seized.
Patent violations involve the illegal manufacture of products using production processes, designs, or materials that are protected by patents giving the holder the right to exclude others from making, using, or selling an inventionpecified period of time.5 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires that members of the World Trade Organization protect most inventionseriod ofears and (hat their domestic laws permit effective action against patent infringement.
The Pharmaceutical Research and Manufacturers Association estimates that the pharmaceuticalloses more thanillion annually due tomedications sold on the open market. US nongencric pharmaceutical sales totaledorldwidestimated sales86 billion.
Besides significant business losses. IPR enme costs the US Government tax revenue and reduces potential jobs available to US citizens. The International Anti-CounterfeitingCC) estimated8 that product and software counterfeiting costs the United States more0 billion per year in lost sales, jobs, and tax revenues. The US Customs Service has estimated that foreign counterfeiting of UShas caused the lossjobs in the United States.
IPR crimes threaten consumer interests in the United States and elsewhere when counterfeit products are reproduced using bogus or inferior materials and poor quality controls that can affect public safety and health.S authorities have identified or seized nonconforming parts in US-produccdand commercial airplanes and substandardused in household products and consumables such as infant formula and pharmaceuticals.
World Health Organization estimated7 that atercent of the medicines soldare counterfeit products. US authorities have confiscated misbranded and counterfeitincluding birth control pills and AIDS, heart, diabetes, cancer, and diet medications
Global Dimertsiom
IPR violationslobal phenomenon. Mosthave brought laws protecting intellectualrights up to international standards, but few are devoting the political or budgetary' support necessary to enforce the laws. Intellectual property violations are flourishing because of ineffective laws, weakinadequate resources devoted to investigations and prosecutions, corrupt government officials, and uninformed or inadequately trained law enforcement officers In many of the countries that are major IPR violators, the governmentlind eye to the activity in the interest of boosting its industries' com-petjuveness in the international marketplace.
East and Southeast Asia are primary regions of IPR violation* thai cause significant losses to USChina and Hong Kong harbor majorof Western toys and clothing, while firms In Malaysia. Singapore, and Taiwan copy US audio, video, and software products. According to the US Customs Service,ercent of US IPR seizures (mostly music CDs, computer software packages, and movies) in the first half9 were from China and Taiwan.
In Eastern Europe, Ukraine has emerged as theproducer of illegal optical disc pirated products, exporting pirated CDs for distribution throughout the world. Most of the NIS in the former Soviet Union are improving IPR law* for their admission to the World Trade Organization, but implementation and enforcement are uncertain.
Israels substantive laws remain dctkient under5 TRIPS Agreement, and iteyhubegional network for pirated optical media products that exlends into Russia and Eastern Europe.
America is the third-largest market for illegal duplication of CDs, videos, and cassettes, according to the international Intellectual Property Alliance. Illegal production of these products is centered in Brazil and Argentina, whose governments have toughened their IPR laws but nonetheless arefurther IPR improvements. Paraguay continues toegional center for pirated goods, especially optical media, and servesransshipment point for large volumes of IPK-infringing products from Asia to the larger markets bordering Paraguay,Brazil.
Although many IPR crimes are committed bylegitimate foreign manufacturing, business, and import/export enterprises to enhance theircriminal organizations are becomingplayers in all stages of IPR crime, from manufacture to distribution. Product piracy andare attractive to criminal organizations because of the absence of strong criminallaws and the potential for large profits in thegoods market. Moreover, some criminal and terrorist organizations use the proceeds fromand selling counterfeit brand name consumer goods to fund other types of criminal activity, both in the United States and elsewhere.
New York City, ethnic Chinese crime syndicates are increasingly counterfeiting consumer productsource of tax-free income. The Vietnamese gang "Born to Kill" reportedly relies on the sale of counterfeit Rolex and Cartier watches to fund gang activities. The group's founder has claimed earningsillion from counterfeit product sales.
aw enforcement official* in Lot, Angeles discovered several Chinese criminalincluding Ihe Wah Clung, the Big Circle Boys, and the Four Seasio counterfeiting floppy discs and CD-ROMs. Asset seizures totaled moreillion in illicit products andequipment, plastic explosives. TNT. and firearms
Past press reporting indicated that the Provisional Irish Republican Army funded some of its terrorist activities through the sale of counterfeit perfumes, veterinary products. Nunc videos, computerand pharmaceuticals.
Foreign Economic Espionage
The stealing of trade secrets from the US Government and from US businesses through economic espionage, in addition to industrial theft,rowing threat to US global economic competitiveness These activities are typically carried out by foreign governmentsagencies, or industries to illicitly acquireor restricted informal ion related to critical technologies, trade, finance, or corporate strategy. The United States has enacted the Economic Espionage Act6 lo criminalize both sUte-sponsored and commercial theft of trade secrets, but few otherhave similar laws. Indeed, collecting "businessby means considered foreign economica commonly acceptedpractice in many countries.
companies ond governments routinely take advantage of technological advances in globalsuch as the Internet and digitalthat haw increased opportunities for industrial theft and the ease of information transfers
The potential losses to all US industry resulting from economic espionage were estimated to be0 billioa. according0 estimate by the American Society for Industrial Security, whichomprehensive survey of industrial theft This figure is three times what itew years ago.
Some foreign governments engage in economiclo acquire US trade secrets involvingtechnologies with potential military applications or to help enhance the global competitiveness of their corrunercial industries. Economic espionagecommercial industries is directed againststrategies, markeung plans, or bidding strategies Of US businesses or US Government positions inor multilateral trade negotiations.
Foreign Corrupt Business Practices
Foreign corrupt business practices cost US firmsof dollars each year in lost contracts. While the United States banned bribery of foreign government officials more thanean ago with ihe Foreignpi Practices Act, other industrialized countriesto permit overseas bribery, and some still allow tax deductions for such payments. However, bribery of governmenth: the lawvirtually
every country where rt might occur.
Foreign firms often use bribes to help wincontracts. About half of the known bribes in the last five years were for defense contracts, with the other offers directed at major purchases byand paraslatal organizations formfrastructurc, energy, and uansportation projects. The actual extern of the practice is probably much larger than available evidence indicates. Pro curemeni corruption is common in virtually all parts of the developing world in Asia. Africa, and Latin America, as well as pans of Europe
Global Implications
Corrupt business practices have significant costs for the gosernmcnts that allow them. Governments that regularly allow bribery may ultimately undermine legitimate business activity, creating disincentives for US and other foreign firms to invest in their countries Domestic companies Unit arc allowed lo use bribes to exclude foreign competitors may create undeserved monopolies that deter hcallhy economic growth and development. Bribery also contributes to powny and
instability in developing countries by undermining the legitimacy of state structures and wasting government resource!!.
Bribes related to government or parastatal contracts promote officialat the highest politicaladversely affects internaloperations and fostets negative foreignof such governments. In recent years, government leaders in South Korea, Pakistan, India, Greece, and elsewhere have become enmeshed in procurement corruption scandals. Bribe recipients arc vulnerable to exposure in countries with alternating politicalree press, or independent judicial authorities.
Although international initiatives are under way to limit international bribery, effective curbs may be years away. Inember states of the Organization for Economic Cooperation andgroup of the major industrialized countries signed an international conventionthem to pass laws comparable to Ihe US Foreign Corrupt Piactices Act.
The Convention on Combating Bribery of Foreign Public Officials in International Businessdoes not directly address the once-common practice of permitting businesses to deduct bribes paid to foreign officials from their income taxes, but the OECD has recommended that all member stales act to eliminate the tax deductibility of bribes. Most member countries have begun to implementhange.
Effective enforcement of laws against foreignbribery willonger term goal. To date, no country' other than the United Stales is known to have prosecuted anyone for violationaw passed to implement the OECD convention.
The implementing laws of many countries for the OECD antibriberyhad beenbyf Iheignatory countries as ofay lake years of negotiation and furtheraction to finalize. The Inter-AmericanAgainst Corruption, which entered into force8 and which the United States ratifiednd the Criminal Law Convention Against Corruption of the Council of Europe, which the United Slates signed in OciamiftTfillORMtiASii^ UTtlMZIII
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state parties to pass laws against the bribery of foreign public officials in business iransactions. In addition, multilateral lending institutions such as the World Bank and the International Monetary Fund ate making efforts to combat corruption by addressing it in the context of their lending programs and by supporting governmental anticomiption efforts.
Counterfeiting
US dollars are the most commonly counterfeitedin the world because they are the currency of choice worldwide. International criminals produce, distribute, and use counterfeit US money for profit, to make illicit transactions,inance illegal operations, and to promote illicit activities. Profits for criminal groups placing counterfeit US money into circulation are close toents per dollar, according to the US Secret Service. Moreover, selling counterfeit currency can provide criminal organizations with capital to invest in other illicit activities, such as the purchase and distribution of illegal weapons and narcotics.
International counterfeiting schemes also include reproducing financial instruments such as commercial checks, traveler's checks, and money orders. Fictitious securities and negotiable instruments are increasingly being used by international criminal enterprises to defraud governments, individuals, corporations, and financial institutions. Criminals have used bogus instruments to obtain government benefits, toloans, to serve as insurance collateral, and to defraud individual investors, pension funds, andaccounts.
About half of counterfeit US currency is produced abroad, where many of Ihe illicit financial transactions by terrorist, drug trafficking, and organized crime groups take place. The US Federal Reserve estimates that0 billion of genuine US currency is in circulation worldwide, of which two-thirds circulates outside the United States.
* About one-third of US counterfeit currencyin the United States in the past three yearsin Colombia, according to US Secret Service data. Lax counterfeiting laws and established drug-trafficking networks in Colombia arc key factors that facilitate the production and distribution of counterfeit US dollars.
US Counterfeit Currency Activity
or Seized In the US
or Seized Abroad
Amount of counterfeit US currency identified as having been passed ot retail level or seized by law enforcement.
Source: US Secret Service..
circulation of counterfeit US currency is growing worldwide despite vigorous anticountcrfcitingin the United States and overseas. This increase is due in part to the improved quality andof rcr^duction equipment. Advanced design, copying, and publishing technology has enhancedof high-quality counterfeit US currency and other financial instruments. Counterfeit US currency produced with advanced reprographic capabilities and distributed in the United Stales has increased from lessercent5 toercent
Coatinucd improvements in counterfeitingwould enhance the quality and increase the quantity of counterfeit US currency in circulation, making it more difficult for law enforcement and financial institutions to identify false currency.
Counterfeit currency and financial instruments areroblem for other governments. Foreignlacking adequate government oversight and enforcement of counterfeiting regulations are often susceptible to domestic production and distribution of
counterfeit currency. Counterfeiters are also able to take advantage of countries with corrupt, poorlyor poorly equipped financial institutions.
Threats to US Interests
While, at present, the production and circulation of counterfeit US currencyinimal threat to the US economy, technological advances inand the extension of counterfeiting knowledge to more criminal groups may, in some circumstances, undermine US economic interests. US interests are most threatened by the use of counterfeit cunency by-some criminalterroristexpand and finance activities andthat such groups could otherwise not afford. Some organized crime groups, drug traffickers, and terrorist organizations appear to be involved inand distributing counterfeit currency to reap profits and to finance other illegal activities. Theexpansion of these criminal organizations has helped increase distribution of counterfeit currency.
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* Some Italian anil Russian crime groups may be involved in printing counterfeit US dollars, possibly to purchase narcotics, military weapons, and other contraband.
Internationally isolated stales of concern. like North Korea and Iran, that have in the pasi resorted to illegal means to finance their operations may be involved in printing or distributing counterfeit US currency.
Financial Fraud
Wide-ranging and complex financial fraud schemes by international criminal organizations arc stealingof dollars annually from US citizens, businesses, and government entitlement programs. Financial fraud crimes have become more prevalent in recent years as greater amounts of personal and corporate financial lnlormalioo are made available through computer technology and access devices, such as credit cards, debit cards, and sman cards. Worldwide economic and financial systems are continuingvolveashless society, plastic cards containing digitized financial information arc increasingly being used to effect commerce- In addition. Internet- relatedcrime is of growing international concern.Russian, Nigcriun. and Asiantaken advantage of theseto become involvedide range of sophisticated fraud schemes.
Financial Fraud Against Individuals
US citizens are direct targets of many fraud schemes originating outside the United States. These include soliciting money for ostensibly legitimate charities or overseas investment or business opporlunities. In(he accessibility of personal financialand the ability to gain access to financial accounts, through stolen bank cards or fraudulent
means, allow criminalsal petsonal savings or use personal financial assets as collateral for their own investments or transactions such as setting up illicit front companies.
* Advance fee frauds committed largely by Nigerian criminal syndicates are among the most lucrative financial crimes targeting individuals and businesses worldwide. Criminals purporting to be officials of their government, banking system, or oil companies mail or fax letters to individuals and businesses in the United States that entice victims with theto take part in million-dollar windfalls,up-front fees are paid for necessary expenses such as bribes, taxes, and legal fees.S victims reported losses of several hundred million dollars to advance fee frauds, according to US law enforcement. The Secret Service has reported receivingallsieces of correspondence per day from potential
imited extent, international criminals have also used Internel bunking to target individuals in financial fraud schemes.7 collapse of (he Antigua-based European Union Bankhose Russian owners fled Antigua with perhaps as muchin deposiiors' funds, highlights the threat posed to individuals from financial frauds facilitated byInternet-enabled banking services. The firsi .ill' shore bank to operate exclusively on (he Internet, EUB actively solicited depositors over ihe Iniemet with offers of complete privacy, confidenliality. andThe bank's collapse was precipitated byloans to shell companies owned by EUB shareholders.
j one-month period,dvertisement wasillion times, which ledail messages from potential clients andctivated accounts for the bank, according lo press reporting. The EUB Web site was so successful, it was the recipient7 'Top Business Site" award by ComFrnd. an Internet business directory.
Financial Fraud Against Businesses
The victimization of US businesses and financialthrough sophisticated financial fraud schemes results in substantial lost revenue, as well as lessbut nonetheless real lost opportunities and jobs. International criminals are able to use computerand access devices to manipulate accounts and direct the illicit transfer of funds. The ability to rapidly move funds between distant banks or financialhinders law enforcerncrii's ability lo tracktransactions and allows sopbisncated criminal organiradons to mount complex financial fraud schemes
he Association of Certified Fraudestimated financial losses from fraud perpetrated by domestic and international cnminals in the Uniied States ai more0 billion per year.
Frauds involving credit, debit, and smart cards and communications systems that transfer financial datarowing problem. International cnminals are exploiting electronic payment technology through false purchases and by producing counterfeit cards for the commercial marketplace, according to industry and law enforcement reporting. The huge profits and relatively minor penalties associated with the enmc make these kinds of financial frauds attractive togroups that have the capability to pull them off.
According lo current industryraudulent credit cards cost the US banking industry ai least S2 billion annually; losses worldwide are estimated lo be an additional SI billion each year.
Industry experts indicate thai organized crime groupsignificant role in credit card frauds and other schemes to defraud banks and financial institutions.
Nigerian crime groups capitalize on their ability to produce fraudulent identities and to suborn key employees of banks and companies in order to steal customer credit card dala. Chinese and Japanesegroups are adept at producing forged credit cards. Russian criminal syndicates are using their access to computers and technological expertise to access account data.
While South America and Mexico are emerging as centers for producing counterfeit credit cards in the Western Hemisphere, Chinese crime groups with operations in major commercial centers in East Asia (particularly Hong Kong) and North America are most notorious for fraudulent credil curd activity.
crackdown on counterfeit credit cardin southern China resulted in the seizure ofof fraudulent cards, uncut blank credit cards, magnetic strips, issuer holograms, encoders. Laptop computers, and extensive manufacturing equipment Law enforcement investigation* reseated that the scheme stretched to Hong Kong, Macau. Taiwan, Bangkok. Canada. Honolulu, and Buffalo.
Financial fraud schemes are also directed against the insurance industry', government entitlement programs, and government lax revenues Medical fraudincluding staged accidents mid false hilling toa particularly lucrative source of income. Fraudulent claims from theft, propertyand automobile accidents cost insurancemillions of dollars each year The federal medicare and welfare systems suffer substantial losses due to fraudulent claims for benefits, including false medical billings and false identities, many of which victimize real intended bencficianet.
and Russian cnminal groups have been implicated in these kinds of financial fraud crimes. Russian crime groups in the United States also orchestrate computer, telecommunications, andgoods contract fraud
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48
0 Computer Crime oncl Security Survey
How Big Is the Problem?
omputer Security InsMufe/FBl Study
of componios polled reported computer security breaches within tht lastonths.
financial lossesrganizations5 million.
Likely Sources of Attack
number of incidtntf
90
40
-20
hrMpfnrwnl
10
Source: Computer Security Institute.
Crime
High-tech crimes targeting computer networks are becoming an increasing law enforcement and national security problem because of the growing reliance in the United States of government entities, public
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utilities, industries, businesses, and financialon electronic data and information storage, retrieval, and transmission. Increasingly, otheraround the world face the same vulnerability. The creation of complex computer networks on which
many government, public, private, and financialdepend has created opportunities for illicit
access, disruption, and destruction of informationide range of hackers. Although most computer attacks arc conducted by disgruntled employees and independent hackers, according to US lawinformation, the threat from foreign intelligence services and foreign corporate competitors isfor US national security interests. Moreover, international terrorist and criminal organizations have increasing capability to penetrate and exploitinformation and data systems.
penetration of computer systems provides criminals the ability to access and manipulatefinancial, commercial, and government data. The muToduction of computer viruses candata system integrity. Hostilewhether individuals, mdusuial spies, foreignterrorist or criminalpotentially disrupt critical public-sector assets.
The greater dependence on computer systems for daily business and administrativethe increasing interconnections between computerincreased both (he vulnerability and potential costs of systems penetration. USand information industries have developed the most technologically advanced systems and networks in the world, Many critical public irtTrastructujepower and energy,and transportationoperated or managed by computer networks. Accordinghe US Customs Service, all major international industries, businesses, and financial institutions rely oncomputer systems for commercial and financial transactions to remain competitive.
on computer and information systems of US corporations, financial institutions, universities, and government agencies through unauthorized access by employees and external system penetration ranged from denial of service andraud and theft of proprietary mformation. according to surveys jointly conducted by the FBI and Computer Security Institute.
Illegal intrusion and exploitation of computerin the United States have sirably increased over the last several years, causing millions of dollars in losses to US businesses and potentially threatening the reliability of public services.
According to the0 FBI-Computer Security institute survey of security practitioners in USfinancial institutions, universities, and governmentf the respondents cited financial losses5 million from computerdouble the reported losses8 million
number of US businesses reporting computer intrusions through Internet connections rose fromercent6 toercentccording to the joini survey.
significant percentage of the mformation needed to carry' out essential government functions isat some point by information systems in the nonfederal sector of the national information
Criminals Exploiting High Technology As worldwide dependence on technology increases, high-tech crime is becoming an increasingly attractive source of revenue for organized crime groups,ell as an attractive option for them to make commercial and financial transactions thai support their criminal activities. With little of the risks and penaltieswith more traditional criminal activity, high-tech crime allows criminals to operate in the relativeof computer networks, often beyond the reach of law enforcement where the crime was committed.
International crirninals, including members oforganized crime groups, arc increasinglyliterate, enabling them to use cutting-edge technologies for illicit gain. International criminals rely on publicly available sources lo obtainon systemail mailing lists routinely distribute vulnerability information andthat can be used to exploit computer systems.
In addition, vulnerabilities arc publicly exposed in books, magazine and newspaper articles, electronic bulletin board messages,rowing list of Web sites thai are targeted atide-rangingnetwork of potential hackers about the latestfor staging computer attacks.
Criminal groups may also esplou businesses and government agencies using programmers, many of whom are lesser paid foreigners, to make software fixes or write new programs to gain access tosystems and the information (hey contain. Press reports indicateussian-speaking crime group in the United Stales recruited unemployed programmers in Russia to hack into othercomputer systems, embezzle funds, and create programs to protect its funds in US banks.
Internationa! criminals are using computeis loide range of criminal activity, including as analternative means to commit many traditional crimes. The use of computer networks allowsto more securely and efficiently orchestrate and implement crimes without regard to national borders. Drug traffickers, for example, arc usingail and the Internetvoid detection and monitor ing of their communications over normal telephone and communications channels.
The Internet has also become ihe primary means used by international child pomogiaphy rings totheir material worldwide. International childrings arc operating in dozens of countries, peddling their illicit wares through the Internet and other global distribution networks. Modemallows these child pomographers to store vast quantities of digital images on small portableeasily smuggled into the United States and
Moreover, criminal commercial and financialthrough computers occur amidst countlesspublic, business, and personal uses of computer networks, making them especially difficult to identify. Transactions involving technology or components for weapons of massmbargoed items under US or international sanctions are being done through computers. Virtually any commodity.
including weapons of mass destruction and theirparts and delivery systems, is being offered for international sale on Internet sites.
US Customs investigation* show that many Internet sellers of contraband materials openly advertise thai they have been in operation for many years without being caught by law enforcement. Inhere werengoing US Customs investigations involving the sale of counterfeit goods over the Internet
Computers are also exploited by internationaltoide range of economicparticularly targeting US commercial interests.financial fraud through illicit access to credit card numbers and commercial accounts has the potential to cause serious losses for US businesses conducting electronic commerce over the Internet.
Accordingoint FRl-Computci SecuriiysurveyS business respondenis reportedillion in losses caused by computer financial frauds. Telecommunications fraud from computer attacks cost these companies anillion in losses.
Inackers pleaded guilty to breaking into US phone companies for calling card numbers that eventually made their way to organized crime syndicates in Italy. US law enforcement information indicates that this high-lech theft cost the US phone companies an estimatedillion
Imellcctual property rights violations through Useof computer networks are also an increasing threatS businesses US businesses responding in8 survey reported lossesillion in theft of proprietary information from computer attacks.
International criminals may be using computerand related methods for financial gain. Industry and law enforcement reporting indicates thatcriminals arc using advances in technology tobanks and other financial institutions. Theand speed of electronic transactions may
encourage criminal exploitation of these technologies. While US and many Western and Asian banks and financial institutions maintain adequate securityto prevent outside penetration of computer-based data financial transaction systems, some have outdated or las security practices that high techare able to exploit.
Inccording to press reports. Italian author lie-icilian Mafia-led crime group Out was planning to >leal as much0 million in European Union aid earmarked for Sicily. Employing corrupl officials from the taigctcd bankelecommunications firm, the crime syndicate broke into the bank's computer network,irtual banking site linked to the intert>ank payments network, and was able to divertS million of the EU aid to Mafia controlled bank account* in Italy and abroad before they were discovered
Inomputer hacker was convicted in9 of breaking into the ShanghaiExchange, where he changed transaction records that cost two Chinese companies moreccording to Chinese press reports.
In South Africa inn unidentified Crime syiidicate Stole hundreds of thousands offrom local banks by using the Internet and bank-by-telephone services lo hack inio financialaccording to press reports.
ndividuals in St Petersburg,aided by insiderto steal moreillionS bank by nuking approx-tmaielyire transfers to accounts around the world. Members of the gang have since been arrested in several countries, and most of ihe stolen funds have been recovered.
Money Laundering
Money laundering allows criminals to hide andillicit proceeds derived from criminal activities. Money laundering hinders efforts by regulatory and law enforcement agencies to identify the source of
illegal proceeds, trace (he funds to specific criminal activities, and confiscate cnminals' financial assets. Moreover, the successful laundering of illicit funds helps to support and finance future criminal activity, including any of the international crimes identified in this assessment. While international law enforcement, intelligence, and financial experts agree that the amount of illegal proceeds in the world is huge and growing, there is little analytical work supporting most estimates of moneyew estimates have been attempted, but no consensus view has emerged about the magnitude of money launderinglobal, regional, or national scale.1
According to one recent estimate, worldwide money-Uundering activity is roughlynllion per year,0 billion of that representing laundering related to drugormer Managing Director of the International Monetary Fund (IMF) has estimated worldwideercent of the world'sill ion at the low end of the range and perhaps as high asrillion.
The infrastructure used by international crime groups to launder illicitmust be placed, layered, and integrated to be "legitimized" in the legal economy -is extensive and worldwide. There are many methods for launderingmong those favored by criminal organizations is to establishlegitimate businesses as fronts for illegal activity and money laundering. These tend to be cash-basedas hotels, casinos, restaurants, financial service firms, construction companies, and travelostensibly legitimateinvolve substantial cash-flow. This makes itfor law enforcement agencies to identify illegal
*ncertainty stoutwniliiy of measuring ihe amount of money laundering because of ihe difficulty in obtainingill'j Money launderingme In the United Stuiea.illnuncc criminal ofTcru* in many orher countrsn.uJl>thec* rrUSWd IO Choi dm*nmoc* iaondmngiu.net jiime. rilimwn aneaural in eMiaeetm aith one or bkrade vmrtv i4 jiirk-Mjiri/ and predicate erlminildtllcrbetween countnc*.
proceeds. From companies enableegitimate and illicit funds in the business, in addition tolausible source of wealth to deny involvement in criminal activity.
tcrnational banking and financial systems are routinely used to legitimize and transfer criminal proceeds. Huge sums of money are laundered in the world's largest financialas Hong Kong, lapan, Germany, the United Kingdom, and the Unitedthough extensive legislation and enforcement measures make it more difficult and risky to conduct illicit financial transactions in theseLaundcrcrs also use banks located in secrecy havens to hide illicit funds. In some cases, money launderets may recruit bank employees to conduct moncy-laundcring transactions on behalf of theorganization. Some organized crime groups have sought to gain ownership of banks to facilitate their own money-laundering activity.
Several factors contributeountry's vulnerability to moneyack of adequate legislation or appropriate enforcement to address the problem, bank secrecy laws, weak or corrupt financial institutions, and inadequate or ineffective regulatory supervision of the financial sector.
Latin America, money-laundering investigations are hamstrung by bank secrecy laws, lack of trained personnel, inadequate legislation, or corruption. Weak enforcement of existing legislation in some countries does little to discourage illicit financial activities. In addition, many countries have only drug-related money-laundering laws, which limit the government's ability to prosecute the laundering of proceeds from other crimes.
Russia and the NIS, which are transitioning to free market economies and developing theirsectors, organized crime groups have capitalized on industry privatization programs tooothold in the legitimate economy. Weak bankinglax law enforcement,eneral lack of money-laundering controlsavorablefor illicit financial activity.
hankingas Liechtenstein, The Bahamas. Nauru, andoffer bank and corporate secrecy, low lax rates, ease of corporate formation, and low incorporation fees. These provisions can provide incentives forto conduct illicit financial activities in these countries. Moreover, smaller, emerging offshore havens. Typically in the South Pacific, lack money-laundering legislation and are less regulated than some established offshore financial centers.
In Southeast and Southwest Asia and the Middle East, parallel Informal bankingas the hawala, hundi. or huianfor laundering funds outside the formal banking system. These traditional nonbanking systems arc increasingly being used by criminals, drug traffickers, and terrorist organizations operating throughout the world to launder and move illicit funds across long distances because they facilitate the rapid and cost-effective transfer of money and leave virtually nopaper trail for law enforcement investigators or financial regulators.
multinational Financial Action Task Forcestablished atummit9 to examine measures to combat money laundering, has noted the significant role that alternative remittance systems are playing to facilitate money laundering worldwide.
The FATF has also observed an increase in illicit funds being laundered through nonbank financialsuch as currency exchange houses, money remitters, and gaming establishments. Theselend to be less regulated than bankingand are often used to place money into the legitimate economy.
The Colombian black-market peso exchangerimary money-laundering system used bydrug traffickers, according lo the US Treasury Department. This laundering system works byselling their US-dollar drug proceedsiscount to brokers who credit them with anamount of pesos in Colombian banks. Thein the United States are then sold to Colombian businessmen at an exchange rate better than theColombian rate, who then use these funds to finance the purchase and export ofgoods from the United States. In this way, the dollars that began as drug proceeds are launderedrocess that effectively circumvents both US and Colombian currency reporting requirements: Colombian drug profits in the United States, in effect, are repatriated in the form of trade goods. US law enforcement estimates that the black-market peso exchange may be responsible for laundering up to SS billion in drug proceeds annually.
Colombian. Mexican, and Dominican drug cartels arc suspected of using certain money remitters to launder drug proceeds. These businesses arrange payments to recipients in exchange for ausually up toercent of the transaction value. In the United States, money remitters are now required to report suspicious activity, file currency transactions reports for transfers, and register with the federal government. They will soon be required to conduct enhanced recordkeeping and reporting for certain high-risk transactions.
Casinos and other forms of gaming establishments are popular for money* laundering because of the large, daily volumes of cash transactions that help hide money-laundering activity.umderers can take advantage of the increasinglyfinancial services offered by gaming establishments. Organized crime groups andtraffickers are opening new casinos and other gaming establishments or acquiring existing ones. In the United States, reporting of suspicious activity by casinos will soon be mandatory.
Securities brokers and dealers and money service businesses, such as check cashers and money order sellers, are also vulnerable to money laundering. There are anoney servicein the United States. Like money remitters, these businesses will soon be required to register with (he federal government and to report suspiciousWithin three years. US regulations will require securities brokers and dealers to reportactivity, which they may now do voluntarily.
Threats From Money Laundering to World Economies
The International Monetary Fund hasumber of adverse macroeconomic effects resulting from money laundering, such as greater volatility in foreign exchange markets and interest rates andin market expectations. While current money-laundering activity in the United States has noteconomic stability, it has hindered USefforts to collect taxes and resulted in greater government expenditures in regulating the banking sector, financial markets, and the business
In developing economies, the accumulation and move-mem of large quantities of illicit funds can destabilize the economy. Investments by criminal groups in licit business enterprises can scare away honest investors and place companies owned byomparative disadvantage. Widespread money laundering can undermine the solvency and credibility of banks and other financial institutions and erode the public's trust in the financial system. It can also drive away potential investors and place legal investors at risk. Small economies are also vulnerable to destabilization from sophisticated fraud schemes that are attracted to large amounts of free-flowing cash. Finally, developing economies ate particularly vulnerable to attempts by money laundcrers to corrupt institutions and key individuals with large amounts of cash, potentially undermining political stability.
* Widespread money laundering and fraudulentinvestment schemes orchestrated by Italian and Albanian criminal groups in Iheed to significant political instability in Albania, the effects of which are still being felt.
Efforts by sorne countries, such as those in the former Soviet Bloc, to develop modem banking systems can be greatly inhibited by criminal involvement in their financial sectors. Criminal infiltration into the banking sector can impede government efforts to reform the banking industry. Moreover, criminal organizations with control or significant influence over domestic banks arc not likely to use sound hanking practices. Rather, criminals may use bank capital to finance illicit activities, acquire businesses, or make bad loans, raising the risk of bank insolvency and disruption of domestic financial markets.
Increasing international attention to money laundering has led many countries to implementlegislation and other preventative measures. In addition, international standards are being established tonking transparency and to reduce bank secrecy and other processes that disguise asset
3 countries have implementedor regulations requiring banks to maintain records of large currency transactions. During the same time period, the number of countries requiring banks to maintain uniform financial records grew from
In addition, more countries are beginning tocontrols over nonbank financial institutions. Currently,ountries require these institutions to meet the same customer identification standards and reporting requirements required of domestic banks.
Inhe FATF publiclyahamas, Cayman Islands, Cook Islands. Dominica, Israel, Lebanon, Liechtenstein, Marshall Islands. Nauru, Niuc, Panama, theRussia, Si. Kilts and Nevis, and St Vincent and thebeing noncooperative and deficient in their anti-rnoncy-laundcring regulatory systems and practices. Inhe USissued advisories to US financial institutions noting that the ami-money-laundering regimes in these jurisdictions were deficient. Other members ofssued similar financial advisories.
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Rrwrit
Chapter III
Areas of International Criminal Activity
The end of the Cold War and globalization of business and travel have given international criminalsfreedom of movement, making it easier for them to cross borders and to expand the range and scope of their operations.esult, virtually every region or country in the world has seen an increase in internationalource or transit zone for illegal contraband orenue for money lauodcring or illicit financial transactions,ase of operations for criminal organizations with global networks, Many regions or countries serve all three purposes for international criminal operations. Besides making the law enforcement and security challenges for the United States more complex, the global spread of international crime threatens vital US interests at home and abroad.
This chapter addresses the world's major regions and countries of international criminal activiiy that threaten Americans. US business and economicand US security interests. Each regional oroverview focuses on three key issues:
The dynamicrelating to political and economic changereater role in the globaldifferent regions or countries that are helping to drive international criminal activiiy there and how crime groups are taking advantage of them.
The impact of criminal activity and crime-related corruption on political and economic stability.
The characteristics, criminal activities, and scope of operations of major organized crime threatsin the different regions and countries.
Western Europe
Like the United States, the West European countries areucrative target and an attractive operating environment for international criminals because of their relative wealth and modem financial,and transportation infrastructure. The well-to-do West European population rivals the United States as the most desirable market for drugs, as well as other contraband, and an arena for financial fraud schemes victimizing individuals, businesses, andentitlement programs. The speed andof modem commercial and banking services available in West European cities make litemvulnerable to illicit financialincluding money laundering and arranging financing for illegal activities. The single-market reforms of the European Union <EU) under the Schcngen Agreement dial permit unfettered movement of goods, services, labor, and capital throughout most of Western Europe; sophisticated infrastructure for facilitatingtrade; and tremendous volume of people and goods passing through commercial airports andare exploited by international criminals to move drugs, arms, illegal aliens, and other contraband throughout Western Europe and lo use EU gateways to reach every other region in the world.
Western Europe has long been popular for money laundering and illicit financial transactions because of its advanced economies and financial systems.groups and states of concern use West European
corrimetcial and financial centers in efforts to evade international embargoes or to acquire proscribedand materials for weapons of massMost West European governments have changed, or are changing, their domestic laws to conform to FATFanti-money-laundering standards. Despite these recent legal changes and improved enforcementhowever. Western Europerimary locale for money laundering by criminal organizations operating both inside and outside the Eli because it offers numerous alternative channels through which to place and legitimize illicit proceeds.
EU members arc facing an increasing threat from international drug traffickers and from illegal migrants, many of whom wind up employed bycrime groups to make their livelihood. The size and profitability of the West European drugare close to rivaling that of the United States. Turkish and Albanian criminal groups dominate wholesale distribution of Southwest Asian heroin in must of die EU countries, according to European law enforcement information. South American drugclosely with Italian organizedbeenrowing cocainesince the.
The Netherlands' deep water pons at Amsterdam and Rotterdam and Spain's extensive rocky coastline are primary entry points forSouth AmericanWestern Europe, according to analysis of seizure data and law enforcement information. According to Interpol, cocaine seizures in Europe have more than tripled in Ihe last decade3 metric tons0 to aboutetric tons
The EU countries arerimary destination for illegal migrants, including women and childreninto the continent for prostitution andbusinesses controlled by organized crime.
Organized crime has flourished most in the poorer Mediterranean region of the continent. Relatively stagnant economic conditions and highin this region, compared to northern Europe,
have helped to drive organized criminal activity.criminal activity has thrived particularly in southern Italy and the Balkans, and along tilecross-Mediterranean and cross-Adriaticroutes on historical trade arteries between Europe, North Africa, the Middle East, and Asia. Moreover, traditional cultural and societal emphases on familial tics have promoted group cohesiveness widiin criminal organizations. In southern Europe, particularly Italy, organized crime groups have expanded their influence through political
Playing on these historical factors, organized crime remains deeply entrenched in Italy despite theof new antimafia laws and the arrests of several high-ranking crime bossestalian organized crime groups continue toignificant impact on the economy. Through the companies they control, Italian organized crime groups have secured public works contracts worth bUlions of dollars. They have profited from ccxst overruns and kickbacks in fulfilling these contracts.
According to Italian trade association estimates, Italian criminal organizations7 earned moreillion from illicit activities as well as involvement in legitimate economic sectors,illionhe Italian tradeestimates that Italian organized crime groups have combined assets5 billion.
Indigenous criminal organizations arc less entrenched elsewhere in Western Europe, but foreign ethnic-based crime groups have established footholds in expatriate enclaves in most EU countries. Cultural and linguistic ties between the Iberian Peninsula and Latin America are exploited by South American drug traffickers who stimulate the demand for cocaine in Western Europe's more profitable market. Liberal immigration orpolicies have led to large migrant populations in
Mrr.-ic
SO
45
25
ir.
l j
10
Source: Interpol
West European urban areas where criminal cells with ties to Turkey. Iran, the Balkan countries, North Africa, and other regions have taken root. Thesegroups are largely involved in contrabandincluding drugs and arms.and ethnic Albanian crime groups, foron legal and illegal immigrant communities that maintain drug distribution networks in Western Europe.
Although Turkish criminal groups remain Ihesource of supply, ethnic Albanian crime groups appear to have largely replaced the Turks as the principal distributors of Southwest Asian heroin to parts of Western Europe, according to press reports. They are also challenging Italian criminal syndicates for control of other rackets in Westcountries.
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The Political Dimension
Public perceptions in many EU countries blameethnic organized crime groups for high crime rates as well as other societal ills. The sometimesanti-immigrant sentiment and support forparties in several countries are attributed in part to the role of foreign crirninal groups in druggunrunning. financial frauds, and alienAlthough Europeans historically have tended toiberal view toward drug use. viewing drug addictionedical and social problem, EUhave become increasingly concerned about abuse trends and haveore aggressive stand toward narcotics trafficking.
Heroin remains in general the most serious drug problem facing Western Europe; it is the drug most often cited in drug-related crime, deaths, demand for treatment, and HFV infection. The cocaine problem in Europe has been growing for the last decade, and EU data5 suggest that cocaine hasheroin as the most frequently used hard drug in Spain and France. Meanwhile, according to annual EU reports, the use of syntlieticamphetamines andincreased markedly2 in virtually all memberparticularly among adolescents andyoung adults.
With the criminal threat they face having become more multidimensional in the last decade because of the collapse of Cold War barriers, the implementation of the Schcngen Agreement, and the growing presence of Russian and ethnic Albanian criminal groups, the West European countries in genera) have increased their attention to the problem, Italy's aggressive law enforcement campaign targeting the Sicilian Mafia in thehat resulted in the arrests of several key Mafia bosses has weakened its power andOther West European countries are more focused on foreign ethnic organized crime groups operating inside their borders.
groups; and Russian criminal groups have attracted attention throughout Western Europe. Switzerland jailed Russian crime boss Sergey Mikhaylov, leader of the powerful Solntsevo syndicate, but failed to convict, in pan because of the Russianlack of cooperation in ihe criminalFrance hasop Russian crime figure.
Greatei awareness of the international criminal threat has increased anticrimc cooperation within Western Europe. In theuropol was established for sharing information and to help stimulate lawcollaboration. Police cooperation among EU members against international criminal networks has been enhanced, particularly against groups involved in drug trafficking, financial frauds, and money
Recent scandals involving illicit financial transactions in Switzerland and Liechtenstein have focusedon the criminal exploitation of West European hanking centers.former bank secrecybecome significantly more active inmoney laundering in recent years, passing new money-laundering legislation8 that set tighter standards for the banking sector and initiating aof alerting foreign governments to suspicious transactions in Switzerland. In Liechtenstein, press reports of money laundering by Russian organized crime groups have brought renewed attention to the need to reform its financial services sector. Since the, there is evidence that major criminalLatin Americangroups, Italian organized crime, and Russian crimetaken advantage ofweak banking controls and strong tradition of banking secrecy to launder money and make other illicit financial transactions.
esult of its FATF listingoncooperative jurisdiction, Liechtenstein has taken several actionsry lo remedy these defects.
Uniied Kingdom and Italy are particularlyabout Nigerian criminal groups; Italy,and several Nordic countries are concerned about the growing crime role of ethnic Albanian
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Italian Organized Crime
Italy's largest criminalSicilian Mafia, Calabnan 'Ndiangheia. Neapolitan Camorra, and Puglian Sacra Coronabom and bred in rugged rural areas, where ihey engaged in local criminal rackets and were generally esteemed asof" local peasanthe defeat of Italian fascism in World War II allowed these groups to extend their influence into urban areas, which pro-sidcd greater openings to the outside world. Many of Italy's banking, commercial, and port facilities fell under the influence or control of organized crime. In the last half century. Italian organized crime groups have become self-sustaining, multifacctcd criminal organications with considerable clout in Italy'sand ccorwmic systems. They have proven to be resilient and opportunistic, often emerging stronger from periodic government attempts to crack down on organized crime and taking advantage of new criminal opportunities.
Italian criminal organizations share the cturacteris-be of irxorporating close-knit crime families or clans. According lo the FBI. the four major Italian organized crime groupsrime families and more0 members. The Sicilian Mafia is the oldest, most powerful, and most hierarchical of Italy's crime groups.
As Italian ctiminal organizations became moreand concerned with ncciuing power and wealth, there was increasingly strong public support in Italyrackdown against organized crime. By largely abandoning their traditional "code ofhich, for example, did not tolerate common crime oragainst women and children, the Sicilian Mafia in particular began forfeiting public acquiescence; unlike in the past, large numbers of Sicilians nowoppose the Mafia. Encouraged by strong publicoutrage over iwo particularlyMafia assassinations of leading Italian ar.ticrime prosecutors Falcone and Borsellino inhave mounted an aggressive campaign against organized crime. Aided by informants, Italian law enforcement authorities have made some significant arrests thai have disrupted Italian criminal
The3 arrest of reputed Sicilianrrest of hisclaimedfor moreurders, including setting off the bomb that killed Falcone;cries of sweeping prosecutions and convictions in both Italy and the United States have weakened the power and influence of the Sicilian Mafia. The Camorra was hurt by the3 arrest of one of ilsRosetta Cutolo.
Intalian authorities captured Salva-tore Genovese, one of the most wanted Sicilian Mafia leaders who hadugitive for seven years. Genovese is believed to have been the right-band man of Sicilian Mafia boss Bettiardo Proven-zano. who isugitive. Despite being on the run, Genovese, before his arrest, continued topublic works contracts.
The testimony of informants indicates that Italian criminal organizations have responded by making organizational and operational adjustments, including restructuring into smaller compartmented cells, that have tightened security and allowed them to continue widespread international criminal activities.
International Connections' Italian organized crime groups have moved well beyond their home regions in southern Italy and are now firmly entrenched throughout Europe, in Central and South America, the Caribbean. Canada, and file United States. Expatriate Italian communities and established international criminal connections in these regions have given Italian organized crime groups the mfrastructure and capability to move highly profitable contrabanddrugs, arms, andlaunder illicit proceedslobal basis. They maintain legitimate business holdingsthat are often usedover for their criminal operations. Italian crime groups' longtime investments in real estate and entertainmentgamblingGermany. France. Monaco, Spain's Costa del Sol, and the Caribbean arc conduits for money laundering. Since the,
Italian criminal organization* have been reportedproperties and businesses in Eastern and Central Europe and many at the NIS of the former Soviet Union to launder money. According to media accounts, Sicilian Mafia front companies have been identified in virtually every* East European country and in Russia.
Although Italian cnminal organizations continue to operate largely independently in their traditionalsmuggling and extortion rackets, theirinvolvement in international drug trafficking, arms smuggling, and money laundering has caused them to develop cooperative longterm relationships with each other and with foreign criminal groups. The Sicilian Mafia, 'Ndrangheta, Camorra. and Sacra Corona Unita have shared well-establishedsmuggling routes and sometimes helped finance each other's trafficking operations, according to US law enforcement Collaboration with criminal groups from Turkey. Asia, Russia, the Balkans, and Latin America has assured Italian organized crime reliable sources of supply for drugs and arms Italian criminal syndicates haveib Albanian crime groups in trafficking women and children from the Balkans and Nigeria and illegal migrants to Italy. They have alsorominent role in money laundering for Colombian traffickers and other foreign criminal organizations.
Drug and Arms Trafficking
The rule ot Italian criminalons in thedrug market has diminished, but drug trafficking remains an important source of revenue for Italian crime syndicates. Italian criminal organizations have traditionally procured Southwest Asian heroin from Turkish traffickers and have more recently established heroin-traffic king links to Russian, ethnic Albanian, and Asian crime groups. Italian crime groups also col' laborate with South American traffickers to acquire cocaine.
Since the collapse of the Soviet Bloc, local crime groups in the volatile Balkan states haveajor source of arms and explosives for Italiancrime The former Yugoslavia and Albania appear to be the primary aicna for Italian criminal organizations to both acquire and sell illicit weapons.
Press reports89 indicated that black-market prices for Yugoslav-origin infantry weapons rangedercent more than theprices for those weapons, and profits on explosives are enormous.
its traditional base of operations along Italy's southern Adriatic coast, the Sacra Corona Unita is extensively involved in smuggling arms from the Balkans.
Environmental Crimes
The illicit trafficking and disposal of hazardous wastes and trash is emerging as one of the most lucrative activities for Italian organized crime groups. Theenvironmental group in Italy estimates that Italian syndicates8illion annually from thedumping of hazardous wastes arid from othercrimes, such as trafficking in endangered species. According to Italian press reports, frontand legitimate waste-removal businessesby Italian crime groups dominate both the legal and illicit waste disposal business throughout Italy and in pans of France and Switzerland.
talian law enforcement officials reported more0 crimes against the environment andriminal groups involved in such activity.
The dumping of hazardous wastes and trash appears to be the most significant source of illicit income for Italy's Camorra crime syndicates, topping theirprostitution, and embezzlement activities. Camorra clans control the collection of solid waste in Naples and surrounding municipalities. At the legiona) level. Camorra crime groups collect,and dispose of hazardous and noxious wastes coining from other regions.
US Presence
Italian criminal organizations maintain an activein the United States and are involved in drugarms smuggling, financial frauds, extortion, illegal gambling, counterfeiting, and moneyUS law enforcement indicates that the Sicilian Mafia is the most active Italian organized crime group in the United Stales and iiiaintains close contact with US La Cosa Nostra crime families in New York,Los Angeles. Chicago, Philadelphia. Detroit,and Tampa. 'Ndrangheta, Caroora, and Sacra Corona groups also operate in the United States,in Florida.
Italian organized crime groups continue to be involved in smuggling drugs into the United States, although they no longer arc as significant as they had been in, when they were responsible for as much asercent of the US heroin trade,to DBAeries of investigations and prosecutions in Italy. Turkey, and the Uniied States targeting Italian networks supplying heroin to the United Stales inubstantially reduced the role of Italian organized crime in the US drug market. Italian crime groups make extensive use of specialty companies as fronts to move drugs and probably to launder drug money in both the United States and Canada.
Several Italian organized crime families continue to smuggle heroin into the United States usingin Venezuela and Canada.
Eastern and Central Europe
In Eastern and Central Europe, the fall of Communist regimes and end of tight border controls have attracted foreign criminal organizations. International criminal activity in the region increased rapidly in thes new democratic governments focused on more fundamental political, social, and economic problems. Russian, Italian, ethnic Albanian. Nigerian, and Chinese criminal organizations and Colombian dmg-trafficking groups have all made inroads into this region since the breakdown of the old order. Into developing these countries as targets foractivity, international organized crime groups arc exploiting their relatively weak law eilforcement and loose border controls to circumventr8TuR
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and Russian criminal organizations, inhave been active in developing mutuallyrelationships with local criminal groups in transitioningommunist countries that help facilitate their drug and arms trafficking operations.
(icography is one of the primary factors in the growth of organized crime in Eastern and Central Europe. The regiontrategic crossroads between Russia and the"source" areas for international crutiinalWesternrimary market for drugs and other illicit products. Contraband trade also crosses the region from West to East, as international criminalalcohol and tobacco products, luxury automobiles, and other high-demand consumer items generally unavailable or prohibitively expensive in Russia from Western Europe.
wrdcrs with seven countries andwell-developed transportation system makeriajor transit zone for all kinds of contraband smuggling. Stricter border controls and concerted efforts against organized crime in recent years have helped alter drug-trafficking routes and shipping methods, but Hungarian officials caution that the amount of drugs moving through the countryhas not decreased.
Poland and the Czech Republic are also crossroads for smuggling directed at West European markets and extensive traffic in stolen vehicles being moved from Western Europe lu the EasL EU officialsPoland's admittance to the European Union fear that weak border controls on Poland's eastern border with Ukraine couldateway for illegal immigrants and organized crime into northern Europe.
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" Bulgaria and Romania remain key ccmnlrics on the traditional Balkan route between Turkey and central and northern Europe, Criminal groups in the region take advantage of the heavy volume of commercial traffic along this route to conceal and smuggleThe BalkanBulgaria as itstraditionally been the major avenue for smuggling Southwest Asian heroin to profitable West European markets. In the busiest months,trucks bonded and sealed under International Truck Route (TIR)cross from Turkey into Bulgaria on their way to other European destinations.
Criminals in Eastern and Central Europe have taken advantage of increased trade and commercial relation', with Western Europe. Many criminal gangs from these countries have expanded their local criminal rackets into Western Europe. Polish crime gangs, for example, are now competing with the Netherlandsignificant source of amphetamines for Western Europe. Potish-produced amphetajnines, known for (heir purity, make up at leastercent of themarket, according to European law enforcement officials. Poland, the Czech Republic, and Romania arc key sources for women and children illegally transported to Western Europe and elsewhere,the United States.
Bulgaria was the world's second-largestafterpirated and counterfeit CDsccording to US Justice DepartmentThe government has cracked down on violators since8 by introducing licensingand raiding illicit CD-production operations. Because of its geographic location. Bulgaria isignificant transit country for illegal CDs produced throughout the region, with pirated goods produced in Greece. Moldova, and Ukraine moving easily across its borders.
0 of (he women and children caught in tralneking ringsore thanercent of the worldwide total, were from Eastern Europe, according to US Government estimates.
Since Ihe European Union countries beganand enforcing tougher regulations against money laundering in the, criminalfrom both East and West have moved some of their money-laundering activities into die transitioning economies of Eastern and Central Europe. They have taken advantage of inadequatelack of laws granting government agencies regulatory and criminal investigationpoorof the region's developing modem banking and financial system* to smuggle cash and legitimize large sums of illicit profits.
The multilateral Financial Action Task Force has estimated that money laundering in Poland alone has grown fromillion lo S3 billion per year during.
In recent years, press reporting citing government and law enforcement officials indicates that Italian and Russian criminal organizations have movedinto the legitimate economy of many formerly Communist East and Central European countries. These criminal organizations and unscrupuloushave taken advantage of poor regulations guiding privatization of national assets andof banks lo purchase or invcsl heavily in banks, financial institutions, and businesses and lo defraud fledgling stock markets These activities have enabled criminal organizations to operate companies as fronts for smuggling contraband between Fast and West and for laundering illicit proceeds. Concerns thai criminal ciememi have tried to take advantage of theprocess has nude officials in some of thesemore cautious about foreign investment.
The impact of criminal activity within their borders has focused the concern* of government and law enforcement officials in Eastern and Central Europe As they have transitionedocialist system to market-oriented economics, the formerly Communist Eastern and Central European countries have had to confront crimes that were piev iously nonexistent. The previous regimes had no laws or regulations forwith crimes such as money laundering, slockfraud, and theft of intellectual property rights.
Criminal activities, often abetted by corrupthave undennined the economy in many of the region's countries. For example, unsecured insider lending and laundering of the proceeds through financial outflows contributed to the collapse ofbanking sectorhe Romanianrecently esti mated that at leastercent of the country's finances flow from the "gray"Corruption in Slovakia, particularly relating to privatization, has slowed economic growth. Polish officialsillion in revenue was lost from pirated music CDsPR legislation enacted by Poland0 has the potential to reduce this problem-Crime, corruption, and drug addiction have become salient political issues in many East and Centralcountries. According0 public poll in the Czech Republic.ercent of thatcitizens believe economic crime and corruption are the country's most serious problems. Crimeajor issue in the8 elections in Hungary thai toppled the former socialist government and broughtew center-right administration; the newInterior Minister declared dial an appropriate response to organized crime was one of the newtop priorities.
Bulgaria's government, electedlso made combating organized crime andolicy priority, including cracking down on product piracy. Inhe prime minister sacked two-thirds of his cabinet, in part in response to allegations of corruption, according to local media. Inulgaria ordered the expulsion of eightcrime figures, according to media accounts.
The interest of most of the region's countries in becoming members of the European Union has encouraged them to consider regulations andto deal more effectivelyroad range of criminal activities, including cross-border smuggling and money laundering. Government and lawofficials from these countries have been meeting with their West European and US counterparts to set up training and assistance programs for combating international criminal activity within their borders.
Russia, the Baltics, and the Newly Independent States
A major side effect of the end of the Cold War is that Russia and the NIS that were pan of the former Soviet Union have become fertile ground for organized crime to expand its illicit activities. The end of police states, the relaxation of social controls, and the opening of borders in these formerly "closed" societies have allowed both local and foreign criminal organizations unprecedented freedom to operate. Criminal networks comprised of traditional organized crime groups, highly skilled professionals, and corrupt officials and politicians have moved quickly to fill vacuums created in climates of radical political, economic, and social change.
* The intertwining of organized crime and officialin Russia is undermining development of democratic and free market institutions.
Criminal groups have been aggressive in cultivating business relationships with politicians, government officials, and businessmajor factor in theirervasive and powerful force inthe Baltics, and other NIS ccamtries. Corruptin Russia have also provided criminal front companies with export licenses, customs exemptions, and government contracts.
The greater integration of Russia and the other states of the former Soviet Union with much of the rest of the world since the end of the Cold War has opened new avenues for international criminal activity.crime groups are using the region's fledgling free market and banking sectors to move large amounts of capital across borders, to launder money, and toa variety of financial frauds. The removal offormerly tight control over travel between different regions of the former Soviet Union and open
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borders with Europe io particular has greatlythe smuggling of drugs, arms, illegaltrafficking of women andvehicles, alcohol, cigarettes, and other illicit contraband.
* The former Soviet Union hasignificant market and international transit route for hashish, opium, and heroin from Southwest Asia, particularly Afghanistan. With several Central Asian countries bordering on Afghanistan, good east-west railfrom Central Asia to Ukraine and western Russia, and lax enforcement, the former Soviet Union has become very attractive to international traffickers as an alternative to the uacutionalthrough Turkey and the formerfor moving drugs and other contraband to Western Europe.
In Russia and many of the NIS, an alliance of corrupt government, criminal, and business elements resisted the effective implementation and enfoicement of legal and economic reforms that would have inhibited their ability to gain control or substantial influence over the productive resources formerly owned by the Soviet state and to expand their illegal activities. Russian organized crime groups have capitalized on weak enforcement of existing regulations and inadequate or nonexistent legislation. They exploited the fitful growth of the private sector by investing in banks and businesses, providing protection of persons andsettling disputes and contract fulfillment, and offering seemingly affordable loans with expensive strings attached. Law enforcement capabilities are hamstrung by cutbacks in funding, poor training and equipment, lack of sophisticated investigativeand laws that do not apply to many of the illicit activities carried out by criminal groups,financial crimes.
Russiariminal codeutand enforcement have been weak.raft criminal procedure code having languished in
the Duma for several years, the Russians are relyingeavily amended criminal procedure code from the Soviet era. Inconsistencies between the new criminal code and the criminal procedure code now in use impede the effective prosecution of crimes.
Russia has drafted anti-money-launderingthat generally meets international standards, but has yet to submit it to the Duma for ratification.
None of the countries in the former Soviet Union have legislation that would enable law enforcement to arrest those who conspire in criminal activity, not just those who actually commit the crime.
While most of the NIS in the former Soviet Union are improving IPR laws for their admission to the World Trade Organization, none consistently enforce them, and few impose criminal penalties. IPR reform in the Eurasia region faces opposition by organized crime groups trafficking in counterfeit and pirated products.
Russia
Political Context
Economic and political instability following theof the Soviet Union1 allowed organized crime to consolidate its position in Russian society. The government's continued ownership of major enterprises and role in regulating the economy created enormous opportunities for bribery and corruption of government officials in economic ministries and throughout government bureaucracies. Besides profiting from insider influence inroad range of economic-related criminal activities. Russian organized crime on occasion has been able to influence the legislative agenda.
Russian cnminals continue to buy political influence to protect their assets, to facilitate criminal activities, and to avoid prosecution. Some crime groups invested in the political process byandelection campaigns, including funding parties and candidates. Corruption in Russia's security and law enforcement institutions is an additional impediment to dealing effectively with the power of Russian crime groups.
Economic Penetrations
Crime and corruption haveignificant impact on the Russian economy. Russian organized crime groups have cashed in on privatization of formerly state-owned industries. Most significantly, Russianhave made substantia) inroads into lucrativesectors of the economy. Russian criminal experts say that organized crime is present in practically all of Russia's regions-Russian organized crime is invested in Russia'sfinancial sector. To some extent, Russiangroups have penetrated the banking sector by periodically providing cash infusions to financially troubled banks, using extortion or intimidation, and purchasing existing banks outright or establishing new ones, according to media accounts. They use their control or influence over banking institutions toillicit proceeds, to obtain financial information about competitors or potential extortion targets, and to withhold financial information from governmentByussian criminal groups had penetrated moreanks, according to one Russian Government estimate.
Some of the business enterprises associated with criminal organizations in Russia are largecorporations engaged in import/export trade and commodities brokering whose networks and assets deprive the Russian Government of substantialrevenues. Like many legitimate enterprises,associated with crimeappear to be well-connected to political elites in Russia and other
MIS and use their political tics, as well as bribery, to win concessionary contracts or to protect criminal transactions.
The hard-currency-earning oil and gas trading sector of the Russian economy is one of the most lucrative havens for organized crime. The international scope and relative profitability of Russia's oil and gasare attractive for conducting money laundering and other illicit financial activity. Criminal groups are involved primarily in oil and gas distribution,extortion, oil theft, and money laundering. Russian crime groups gained considerable clout in fuel and energy industries by supplying short-term business loans to oil companies and providing access to corrupted government officials who can lobby for favorable legislation, or influence business deals.
Russia's aluminum industry hasarget of criminal groups because of its multtbilliondollarIn addition, the fact that the aluminum industry is highlyplants produce more thanercent of Russia's totalgroups to infiltrate this industrial sector withease.
Russian organized crime has also been extensively involved in smuggling gems and precious metals out of the country. According to Russian Government estimates,illion worth of diamonds are smuggled out of Russia each year.8ussian law enforcement removed frometric ton of gold, moreetric ton of silver,0 carats of uncut diamonds, cut gems, emeralds, rubies, sapphires, and pearls.
Impact on Russia's Financial System Although not directly responsible for Russia's fiscal, banking, and investment problems. Russian organized crime groups have contributed to their severity by exacerbating systemic problems. Capital
Russia: Criminal Penetrations of Key economic Sectors
Metals
Oil
artel caviar
Precious metals
shipping
stones A* Timber
estimated by the Russian Government to be aboutonth, almost certainly includes some laundering of money from organized criminal activity. Russian crime groups reinvest little of their profits from even ostensibly legitimate businessas hotels, restaurants, andinstead frequently transferring their proceeds to more secure Wesl European and offshore financial centers. Failure to repatriate export earnings andimport deals reportedly are the most common methods used by Russian criminals to move capital abroad.
A researcher at the UK-based Organized Russian and Eurasian Crime Research Center conservatively has estimated that organized crime money accounts for aboutercent of total capital flight fromUsing the recent estimate ofillion-per-month capital flight from Russia, this would mean that Russian crime groups are sendingnnually overseas to launder or hide.
According lo one Russian estimate, ihe underground economy accounted forercent of (he country's GDPoreover. Russian crime syndicates almost certainly conceal all or part of the incomeby businesses they control from (as. authorities by sending most of the money outside Russia.
Accordingdy by then-President Yeltsin's staff,oercent of private businesses paid extortion fees to organized crime amounting tooercent of their revenue, malting them unlikelyeet their full tax obligations
Russia's financial problems are primarily exacerbatedoor investment climate that fails io attract the capital necessary lor economic growth Besidescorruption, weak enforcement of contracts, and high luxes, legitimateboth domestic anddeterred by widespread extortion and the violence associated with having to deal with organized crime. Accordingublishedussian bankers and at least twice as many businessmen wereontract lulling*4herekillings in Russia, according lo published figures.
US and olhcr foreign businesses interested inand joint-venture oprsortunilies not only cannot competeevel playing field due to the poor investment climate, but must also cope with cnrninal extortion and racketeering Io do business in Russia. In the absence of effective legal protections. Russian businesses often rely on criminal groups and pay sig-nificani fees for protection, debt collection, capital, and information gathering. Representingnrninal groups oftenole in negotiating contracts or resolving business disputes, which often end violently
Western busnvevsmen arc not immune from criminal strong-arm tactics. In6 USPaul Tatum. part ownerajor hotel in Moscow who was involvedinancial dispute with his Russian business partners, was killed in a
"contract style" shooting. Although no one has ever been brought to justice for the crime. Russiansuspect organized crime was involved.
Social and Political Implications
Besides it* significant impact on the economy,activity hasubstannal toll on Russian society Rising crime rates arc overwhelming judicial systems in Russia, which are woefully underfunded and vulnerable to bribes from criminals, according to Russian press accounts. Criminal violence remains rampant, with crime groups targeung rivals,businessmen and hankers, and ariticrimc media, enforcement, or pouricaJ crusaders for assassination. Many Russian citizens have been victimized inand cUburatc schemes defrauding them of properly and savings, some of which end in murder.
Over ihe past five years, Russia's domestic nurkrt for illegal drugs has grown substantially as (he flow-through of hashish, heroin, and other opiates from Southwest Asia, through Central Asia and Russia, to Western Europe fed by the surge in Afghan opium productionwith the end of Soviet trawl controls and the opening of borders with Europe Offi -cial Russian data show dramatic increases in drug addiction and crime rates since the collapse of the Soviet Union.ccording to Russian data, therefficially registered drug users in Russia, ofere considered drug addicts. The Russian Ministry of Interior (MVD) and Health Ministry, however, estimate that the actual lotals arcillion users andillionillion users would beercent of (he Russian population. Russian and international health officials estimate thaidrug users are responsible foroercent of0 officially registered HIV cases; because of the lack of comprehensive HIV testing and reliable reporting methods, government officials andexperts suspect ihe actual number of Russian HIV cases may be five ioimes higher man official cstimaicv
The growth of crime and widespread corrupliun. together with Russia's struggling economy, isRussia's transition tofully functioning democracy and free market economy. Many Russians blame free market reforms for the breakdown of law and order and for having benefited rximanly criminal entrepreneurs. Discredited for corruption and political ineffectiveness, it has become increasingly difficult for the Russian Government to meet its citizens' expectations for social justice, equality of opportunity, and improved living standards Popular perceptions of liberal democracy as ineffectual, corrupt, and even in league with organized crime may boost the appeal of antidemocratic politicians opposed to further reform.
The Baltic States
The relative dependence of Estonia. Latvia, and Umuania on Russian energy supplies and theof Baltic ports for Russian transit trade provide significant oppottuiutics for Russian and othercrime groups Although all three countries have reoriented their trade more toward the West, Russiaajor trading partner for Latvia andThe Baltk states are the major commercial outlet between Russia and the West; according to Interfax Foreign Trade Report figures, the major Baltic pons handle nearlyillion ions of Russian cargoRussian and other organized crime groups are taking advantage of the high volume of trade through these ports to smuggle contraband both ways,drugs transiting Russia to Western markets and automobiles stolen in Europe for Russian buyers. The trade in strategicfuel and energya particularly lucrative target for criminal groups
* Operating within the si/able ethnic RussianIn the Baltic countries. Russian crime groups have taken advantage of the privatization process to boy business enterprises that became part of their criminal empires. They have established numerous front companies, particularly in the import/export sector for the purposes of facilitating illicit trade and laundering money.
The rapid growth and poor government oversight of the Baltic countries' financial sectorsew Russian criminal groups to acquire some control or influence in banking institutions to launder money and to make insider loans to their own front companies. The collapse of Latvia's Banklargest commercial bank in Latvia at the time of its failure in Augustthe potentially severeof this trend. Bank Baltija was the centerpieceussian and Latvian crime syndicate that used the bank to make bad loans to its own companies, defrauding the bank's accounts of as muchThe bank's collapseajor financial crisis in Latvia, contributed to the fall of theand forced Latvia to seek short-term assistance from the International Monetary Fund. This episode prompted Latvia to adopt tougher laws regulating the banking sector.
Ukraine and Moldova
trategic crossroads between Bast and West, Ukraine hasignificant increase in all forms of organized criminal activity during. Transportation routes through Ukraine are used by Russian and Ukrainian organized crime groups to smuggle arms, drugs, other contraband, illegaland trafficked women between Russia. Ukraine, and Western Europe. The volume oftrade, including in strategic commodities such as oil. make Black Sea ports in Odesa and in the Crimea attractive to organized crime. Russian organized crime groups are particularly well-connected in Crimea andback to Soviet rule
Organized crime has flourished in Moldova over the past decade, especially in the breakaway Transnistria Region. Moldova's local crime groups haveclose ties to Russian. Ukrainian, and othercriminal syndicates that also act in the country. Criminal groups in Moldova are frustratingefforts to attract needed foreign investment and are contributing to political and social instability.
Moldova ii one ol the largest per capita sources of trafficked women and girl* in the NIS, primarily for the sex industry in Turkey, Greece, Italy, and the Balkans.
As in Russia, the overlapping connections among the new business class, criminal groups, and government officials have madeignificant problem for Ukraine and Moldova. Political connections have assisted criminal groups and their front companies' efforts to acquire lucrative contracts or state-issued license* for exports, particularly in the energy and metals-trading industries Corruption in Ukraine has contributedignificant level of gangland violence thai has involved or targeted government officials.
The Caucasus and Central Asia
In both regions, criminal groups are laking advantage of nominal border controls and weak lawThe mountainous, remote Caucasus countries of Georgia. Armenia, and Azerbaijan, have traditionally not had the benefit of active control by lawCnrninal activity there has been largely local and focused on extortion, robbery, smuggling, and kidnapping. The Central Asian countries have become an increasingly irriportant ahernalivc to traditional Southwest Asian-Balkans routes for heroin andshipments from Afghanistan destined for Russia and Europe. Tajikistan is the major gateway for Afghan heroin being smuggled into Russia. Organized crime groups in Centra) Asia and the Caucasus will look to take advantage of development in the Caspian Sea oil basin, which gives them potential access to lucrative oil revenues.
The Central Asian countries arc increasingly calling for action against the expanding drug trade from Afghanistan. Uzbekistan. Kyrgyistan. and Tajikistan in particular belicse that drug traffickingajor source of funds for insurgencies threatening their national security.
Russian Organized Crime
Powerful Russian criminal organizations withnetworks arc one of the most troubling andlegacies of ihe former Soviet Union. Russian criminal groups had their gcne.ds in the
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when the black market helped to grease the wheels of Ihe command economy, including ensuring that large state-owned lactones received the necessary supplies lo keep operating. They also developed allies among Soviet officials by providing them goods and services difficult to obtain in the USSR. While in Sovietduring, some of the top crime leaders forged personal lies that today facilitatecoordination of activities, sharing of business investments, and support for one another when in trouble. Russian organized crime groups exploited the privatization of state-owned resources and systemic weaknesses in Russia's fledgling market economy following the collapse of the Communist system to build powerful criminal empires They cultivated mutually beneficial relationships with government officials and politicians to become powerful players in Russian politics and society
According lo die MVD. ihere are H9 major criminal communities in Russia lhat comprisemaller criminalevcn of these communilies, made uproups with0 members, also operate inther countries. The USestimates thcic arcophisticatedcrime groups in Russiaroad range of operations, some of which extend beyond Russia's borders in someifferent countries. Most Russian criminal organizations arc located in industrial and commercial centers, giving them opportunity to make inroads into lucrative sectors of the Russian economy.
Russian crime groups are characterized by ruthtcss-ness and violence, and many are veryormidable challenge to Russian law enforcement elements, u, hich are often outgunned, and underfunded parttcularly at the local level. There is no apparent supreme hierarchy among Russian organized crime groups, not is any one groupthe activities of the others. Instead, Russian criminal organizations have Iheir own spheres of influence (hat are generally defined by geography,and. in some cases, specific cnrninal activity.
International Hants of Operation
From their Russian base, the leaders of major Russian organized crime groups have broadened theirworldwide through political and businesswhich (hey have used io facilitate their
scale. Since ihe collapse of the Soviet Union, Russian organized crime groups have spread rapidly beyond the former Soviet borders andresence in someountries in Europe. North and South America, the Caribbean. Asia, and Africa. The internationalof Russian organized crime, however, is most pronounced in Eastern and Central Europe, where Russian crime groups are involved in narcotics and
weapons trafficking, car theft, and financial crimes. Russian organized crime money-launderinghave been observed in offshore banking centers in the South Pacific. Cyprus, and various Caribbean islands as well as in East European economies. These groups tend to mount sophisticated large-scalefraud schemes.
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Solntsevo: Russian Organized Crime Group With International Dimensions
The Solntsevo criminal organization is widelylo be the most powerful Russian crimein terms of wealth, influence, and financial control. Its leadership, structure, and operations exemplify the new breed of Russian criminals that emerged with the breakup of the Soviet system. Rather than the traditional "ihieves-tn-law" who dominated the criminal underworld during the Soviet period and played moregodfather" role in overseeing loosely organized criminal networks, the leaders of Solntsem and other post-Soviet Russian criminal groups are not only more flamboyant, aggressive, and politically savvy; hut also well-versed in modemand business practices that allow them toefficiently across international borders.
The power and wealth of the Solntsevo crime group derive largely from its financial and business network in Russia and highly placed political connections. According to press reports, Soinisevo benefits from Moscow city projects through its reported linksonstruction, tourism, real estate, and utilitythat obtained many ofitsproperties from the city and holds others jointly with the municipal
While dominating Moscow's criminal underworld-including the market for drugs, particularlySolntsevo also has extensive worldwide operations. Solntsevo's international criminal activities are said to include trafficking narcotics and arms and money laundering.
extortion rackets and prostitution rings, trade in black-market consumer goods and drugs, and to launder money.
Russian crime groups are also attracted to countries that have liberal cash circulation laws, few restrictions on direct investment, and allow nonresidents tobusinesses. Investments in the real estate, tourist, and entertainment sectors, interest in banks andservices companies, and the establishment of front companies in countries frequented by tourists and businessmen from the former Soviet Unioneady haven for laundering and hidingceeds earned there and smuggled out of Russia and the NIS.
* Russian organized crime groups have affiliated themselves with Italian criminal organizations to increase their illicit profits and range of operations, according to press reporting. They have used their ties to Italian criminal groups to establish extensive businesses inas much35 alone, according totrade industryto facilitate money laundering. Russian and Italian criminals cooperate in international drug trafficking, arms smuggling, and counterfeiting.
Over the last several years, Russian organized crime groups have been expanding their operationsby establishing international businessin offshore financial centers. Low iricorporation fees and quick startup provisions in many offshore havens have enabled Russian criminals to change firmany law enforcementagainstrelative ease and low cost. The use of nominee shareholders and directors also hides ownership and helps to avoid account inquiries in the case of litigation or criminal investigations.
former Soviet Bloc borders, Russiantake advantage of places that arc most attractive to Russian businessmen and tourists, using them as cover and opportunity to engageroad range of criminal activities. Russian criminals use overseas resorts frequented by Russian speakers to run
Once Russian criminal proceeds have been placed in an offshore firm, Ihey can be moved quickly andsafely through (he global electronic funds trans-fer network supporting inlcmational banking and commerce.
Transnational ('rimes
Russian organized crime groups are heavily involved in economic crimes The bulk of the most serious economic crimes are in the credit and financial spheres: the Russian Gosemment reported moreconomic crime*boutercent or the total crimes registered. The most commoncrimes include credit defaults, theft by bank employees, and forging of documents.
Russian criminal groups take advantage of the tourist industry and prey on Russian tourists and Russian-owned businesses overseas, particularly in thethey most frequent. Tounsm industries abroad catering to Russian visions are shaken down and exploited by Russian organized crime. According to Russian press reporting in IV9K. Russian crime groups routinely demand Hltoercent of Ihe revenue ftom hotels, casinos, and restaurants fiequenied by Russian speakers Crime groups from the former Soviet Union use the tourism industry to moveas tourists or members of large tourto serve in prostitution ringsot most, of the women reportedly arc held in virtual slavery.
Some Russian crime groups own interests in several airlines, air charters, and travel agencies operating in the termer Soviet Union and elsewhere that they use to facilitate and conceal their criminal operation*he trjvtl industry providesab with cover and the means to smuggle contraband from abroad into Russia, including drugs andappliances, clothing, and other consumer goods that they sell on the black market.
VVith the former Soviet Union having opened as an avenue for narcotics shipments from Afghanistan, Russian criminal organizations have gotteninvolved in Ihe drug trade. There is littleconfirming major Russian involvement in the
transit of narcotics across the former Soviet Union, but Russian organized crime groups dominate the domestic drug market and take advantage of Baltic seaports and Russia's now-porous borders withEurope to smuggle heroin into West European markets and bring cocaine into Russia.
Press reporting from the region says that Russian troops in Tajikistan have accepted large bribes to facilitate the movement of Afghanistan-produced narcotics into Central Asia and are themselves involved in drug trafficking. In Ihe most notable incident, Tajikistan officialsilograms of opiumussian Border Guards helicopter in
International drug traffickers and Russian criminal groups have established relationships both to move narcotics through the former Soviet Union and tothe Russian market. Press reporting, which cited Russian law enforcement and Interpol information, indicates that by thetalian and Russian crime groups had at least tacit agreements toin the movement of narcotics through the former Soviet Union
With close ties to corrupt officers and soldiers in the Russian armed forces, Russian organized crime groups are heavily involved in illicit arms trafficking. Most Russian criminal arms deals involve sales within Russia and other countries of the former Soviet Union, including to combatants in ethnic conflicts inGeorgia, Armenia, and Azerbaijan. Somearms trafficking has been to countries in the throes of civil conflict. Unconfirmed press rerwting indicates that Russian criminal groups have sold large caliber weapons to Latin American drug traffickers in exchange for cocaine.
Russian Organized Crime in (he United Stales
Russian organized crime hasrowing law enforcement problem in the United Stales since small groups beganoothold in this country in
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the. Although many Russian crime groups are based in the United Stales, other* are cellsased oversea* As in Russia, there is no supreme authority tying these groups together in the United States.
Larger Russian criminal organizations based inand other locations overseas have become an increasing law enforcement concern since they beganS presence after1 dissolution of the Soviet Union. Unlike the smaller gangs thai were already established in Russian-speakingcriminal focus is on white collar fraud crimes and which do not have any specific lies to Russian organized crimelarger groups are involved in large-scale criminal activities, with international dimensions, that generate enctrrnous profits. Their connections to powerful cnminal organi-rations in Russia provideource of illicitand cnminal expertise. The US-based members or affiliates of these groups provide services like laundering large sums of money or acquiring drugs for the Russian market.
cnminal organizations in the United States are adept at moving fundslobal complex of front companies, offshore financial serviceand enmc-controlled banks to facilitateof criminal proceeds originating in Russia, as well as to launder funds generated from US-based criminal opeiulions.
Although Russian organized crime is still not asa threat in the United States as la Cosa Nostra and some other ethnic-based crime croups. Iheand international connections of Russian crime groups in the US make them well-positioned to expand their cnminal operations. US taw enforcement indicates thai Russian criminals innilcd States are. in general, better educated and more skilled than membersosa Nostra; law enforcementconsider Russians among the best in the world in orchestral mg economic and financial crimes.
criminal organizations operating in the United Slates are primarily involved in extortion, drug trafficking, auto theft, cigarette smuggling, trafficking in stolen art and icons, and moneyRussian crime groups are not major players in ihe US drug iuse the United Si for cocaine destined for I
Russian criminals are also extensively involvedide array of fraudulent schemes, including health care fraud and defrauding financial insntulions Some of these scams are in league with La Cosa Nostra. Insurance fraud schemes in the Uniied States by Russian crime groups nettedillion from California's subscribers to one insurancein, according lo press reports,0 from an insurance company in Boston ui the.
The Balkans
The breakup of the former Yugoslavia and ensuing regional conflictse ledharp nse in criminal activity in the region. Previous Serbian. Croatian, and Bosnian Governments all used cnminal networkseans to evade international sanctions and acquire material necessary for the war effort. The collusion between governments and local cnminal gangs weakened la* enforcement and provided an environment ripe for corruption. Under Milosevic, the Serbian Government colluded with cnminalnetworks io evade Western sanctions. Thesewere critical in supplying the black market, which served as Serbia's de facto service economy, and may have accounted for someoercent of the country's GDP.
Many of the cnminal business enterprises set up toearlier sanctions are still operating The lift ing of many sanctions since the Dayton peace accord in IsNS did not diminish the activities and localof criminal groups in the region because they were now finiily rooted in society. As the regionto rebuild local ecortomies, criminal groups have little trouble finding gang-member recruits from the large number of unemployed and underemployed, many of whom view crime as an attractive source of income. Organized crime in the former Yugoslavia also continues to benefit from corruption and weak law enforcement
Local enmc groups in all the countries of the former Yugoslavia arc taking advantage of opportunities for gunninnmg, smuggling liquor and cigarettes,in women for prostitution, extortion, and money laundcnng. Trafficking of heroin uirough the former Yugoslavia toward markets in Western Europe hasajor business for organized crime groups.
Criminal groups lied inio manufacturing enterprises are engaged in theft of intellectual property rights. Moreover, the region's local crime groups havecooperative networks to move relatively freely across borders.
Local crime groups not only threatenedof police and justice provisions of the Dayton peace accord, but their activities also impeded efforts to promote political reconciliation and economic reconstruction. Criminal gangsignificant problem throughout Bosnia.
Kosovo remains plagued by criminal activity. Ethnic Albanian, Bosnian. Croatian, and Serbian organized crime groups arc taking advantage of corruption and the region's porous borders to traffic women, drugs, arms, and other contraband. The former KosovoArmy may have used its organized crime links to Europe to obtain arms and ammunition.
Organized crime groups from outside the region,from Italy, have forged ties to local criminal groups in the former Yugoslavia to facilitate their own international criminalarms and drug smuggling. They have also used theto set up various criminal rackets in the region, including financial fraud schemes involvingthat can destabilize the economy. Italiancrime groups have strengthened criminal relationships across the Adriatic, according to press reporting,
Albania, once the most isolated country in Europe,aven for local and foreign criminal groups after the collapse of its Stalinist regime. The opening of the country's borders and political disarray in Tirana have allowed Albania torimary alternative to traditional Balkan smuggling routes through the former Yugoslavia that were disrupted by the breakout of elhnic fighting in therganized crimethe Sacra Corona Unita from Italy's Pugltan region across the Adriaticquick toresence in Albania. They routinely use Albania's long and now virtually unguarded coastlinetaging area for smuggling drugs, arms, and other contraband across the Adriatic Sea to Italy.
Albanian crime gangs flourished in the noliticaland economic chaos that followed the. Hoshj rWfrnPSJ" downfall. They are very wellsizable quantities of weapons from formerdominate much of the ruralparticularly in the southern part of the country. Criminal syndicatesowerful presence in the port cities of Dunes and VIore and other major cities. Relying on longstanding cross-Adriatic and Balkans smuggling routes, Albanian crime gangs control the local black market in consumer goods, weapons, and narcotics. In addition to acquiring heroin from Turkish criminal organizations. Albanian crime groups have become involved in cocaine trafficking, with some South American cocaine being shipped directly into Albania. Albanian crime groups are cultivatingthroughout Albania for distribution in both the domestic and broader European market, particularly Italy and Greece.
esult, Albania hasalkans hub for drugcocaine and heroin for the Europeansmuggling, and other contraband smuggling. Albanian crime groups have expanded their criminal operations across theinto Italy, where they haveignificant criminal threat.
Organized crime has influenced political anddevelopments in Albania. Thousands oflost their life savings to complex countrywide pyramid investment fraud schemes run by Albanian crime gangs and largely stage-managed by Italian criminal organizations. The collapse of the pyramid firms in6olitical crisis so severe it toppled the central government. Despite theof public order since then and efforts by theand police to curb their activities, Albanian crime groups remain powerfulorrupt influence on Albania's fragile institutions.
Ethnic Albanian Criminal Groups
Elhnic Albanian criminal syndicates arc one of the most significant of ihe smaller, more local crime groups that have recently expanded beyond their country's rx>rders.egacy of the political, social, and economic chaos that resulted from the downfall of Albania's Stalinist regime and the breakup of the former Yugoslavia in the, ethnic Albanian crime groups haveresence
throughout Europe ami arcrowingfor European law enforcement. Albanian crime groups, whether originating in Kosovo or Albania itself, are typically from tightly knit clans.
By collaborating with criminal organizations incountries and with Italian organized crime groups, ethnic Albanian crime gangs have become very active in smuggling drugs, arms, cigarettes, and illegal aliens and trafficking women throughout the region. Ethnic Albanian criminal gangs have also used tics to foreign organized crime groups and the large number of expatriate Albanians to expand theirinto the European Union ciHintrics. Whileon Turkish traffickersource for heroin, ethnic Albanian groups have become majorof Turkish criminal groups in traffickingparticularly Southwest Asianparts ofand northern Europe, accordingolice agencies throughout the continent Police officials have been quoted in the media as saying that Albanians now dominate meal vales of heroin in Norway, Sweden, southern Germany, and Switzerland Albaniangroups may also be challenging Italian organized crime interests in Italy, including heroin distribution and movement of illegal aliens from southern Italy to the north. According to Italian law enforcement,crime syndicates9 controlled most of the prostitution rackets in Iialy and were smugglinghashish, cigarettes, weapons, and other contra-hand into Italy for shipment to Western Europe. Italian law enforcement officials claim ethnic Albanian crime groups also traffic women and children to Italy
Albanian criminal syndicates are moving into the northeastern United Stales, although their criminal activities are still small-scale.
materials associated with weapons of massMajor port and commercial cities in theparticularly Istanbul. Karachi, Mumbaindkey centers of criminal activity.organizations in these cities exploit extensive underworld connections, pervasive political andcorruption, and the large volume of trade and financial transactions. Although commercial centers now have modem financial services, criminals also rode their funds and arrange illicit financing through complex, virtually impenetrable uiMfctrgroundsystems.
South Asia
The South Asia regionrimary source of heroin for tile international drug trade, primanly for the West Asian. European, and Eurasian markets. Afghanistan is the world's largest producer of illicitajor transit country for Afghan-produced opiates and isource of illicit opium poppy. In India, substantial amounts of opium arc diverted to the black market from legal production forindustries in the United States and elsewhere. South Asian heroin traffickers maintain extensivethroughout the region in commercial centers and port cities to arrange financing and movement of drugs. Interpol reports that someercent of theused in Western Europe comes from South Asia
The US Government's annual crop estimates show that opium production in Afghanistan is more than eight times higher than inllicit opium poppy' cultivation has increased despite publicby the Taliban, which controls most of Afghanistan, that they were cutting back on the opium industry. Afghanistan by itself now accounts forercent of illicit worldwide global opium
opium poppy cultivation in Pakistan, on the other hand, has declined from once significant to marginal levels, in large pan because of intensive eradication efforts. Pakistan now accounts for lessercent of the world's illicit opium rjroduc-Ooo.
Illegal drug abuse has skyrocketed in the major source and transit countnes that are at the crossroads of the Southwest Asia heroinillion local addicts consume much of the region's opium HRproduction, according lo UN estimates.
South Aula. Turkey, the Middle EaM, and Eastern Mediterranean
Criminal nr^im/aium* with international networks centered in Turkey. Pakistan. India, the United Arab Emiratesnd Cyprus operate within acommercial tradition of moving contraband merchandise through the South Asia-Middle East-Eastern Mediterranean region. The regionocal point for narcotics and arms smuggling between Europe and Asia and foride illicit deals, including lo evade USanctions and lo transfer controlled technoldV<ttWn1frll>1
In Pakistan alone, (he heroin addict population has grown from virtually none0 lo moreillion and petlups as highillion, according to some estimates.
Under predominantly Taliban rule, internationaland drug traffickers have been able to operate with impunity in Afghanistan. The Taliban have given sanctuaiy to renegade Saudi terrorist Usatna Bin Ladin. allowing him and other terrorist groups totraining camps in Afghanistan. Bin Ladin, in return, has used his extensive wealth and businessio help financially support the Taliban. Despite the Taliban's public condemnation of the illicitindustry, virtually all of Afghanistan's opium poppy cultivation and morphine base and heroinlaboratories are located in Taliban-controlled territory. The 'IBliban profits from (he Afghan drug trade by (axing opium production and drug
Iran remains die most important conduit for Afghan drugs being moved toward lucrative markets in West-em Europe Traffickers use historical trade routes to move drugs, as well as other contraband, fromAsia through Iran to Turkey, or to Iranian Persian Gulf coast seaports and harbors for shipmenthe Arabian Peninsula. Bedeviled by its own large opium and heroin abuse problem. Iran has given high priority to drug interdiction and harsh punishment for captured traffickers In recent years. Iran has been among the top countries in making drug seizures and hasigh price in live* with moreilled in armed confrontations with traffickers
Pakistan and India both have traditional andcnrninal underworlds involved in contraband smuggling, including drugs, gold, and consumer goods. Until Afghanistan began emergingajor center for refining opiates into morphine base andin the, most of the region's opiatelaboratories were located in remote Pakistani territory adjacent to (he Afghan border. With its better-developed infrastructure,ajor regional commercial center and port in Karachi. Pakistanajor transshipment route foropiates. India's well-developed Hansporutioo infrastructure, long and porous coastline, and lenient export policies and controls have played into the hands of cnrninal smuggling operations for drugs, gems, and other prized contrabSnWIWaWo^lMfte
m Ml SMI depots provide an easy means of smuggling drugs and other contraband from the interior to Indian seaports like Munrh.il. Goa. Chennaind Calcutta thatarge volume of international trade.
India's legitimate industries that support the world's pharmaceutical marketsource of supply for raw materials and precursor chemicals for the illicit drug trade. Indian officialsignificantof diversion from India's extensive legitimate opiumsupplies much of Ihe world's pharmaceuticalthe more lucrative black market. As much asercent of India's9 opium crop may have been diverted to (he black marker, accordingndian officials In addition, some Indian-produced ephednne and pscudoephe-drinc intended for pharmaceutical manufacturers has gone toward the production of tnethamphetamine in Southeast Asia.
Turkey
Astride the Europe-Asia continental divide. Turkey alsoraditional criminal underworld and history of smuggling. While tralfickers are making greater use of the former Soviet Union as an alternative route for moving Southwest Asian heroinestern markets. Turkeyinchpin in the region's heroin trade. Narcotics brokers in Turkeyritical role inmorphine base and heroin from producers in Southwest Asia and moving the drug to distnbuiion networks in luirope and North America. Much of the heroin entering Turkey passes through territory in the southeast controlled by the Kurdistan Workers Partyhich iterrorist group. The PKK reportedly levies taxes on traffickers moving drugs tiirough border crossings with Iran or territory in southeastern Turkey that it controls.
PKK members in Europe have been involved in wholesale and retail distribution of heroin, as well as other cnrninal activities, lo help fund their opera (ions. Some may funnel narcotics and criminalinto party coffers. It is unclear, however, whether or io what extent the PKK central command may direct or participate in such activities, or has ties to other drag-trafficking groups in Turkey.
Rfghoniston Opium Cultivation
70
United Arab Emirates
egional transportation, banking, and commercial crossroads between Europe, the Middle East, North Africa, and Asia, theits permissiveemerged as an important locus of criminal activity. The UAE maintains an advanced maritime shipping infrastructure, including at leastommercial seaports, to facilitate international trade. According to the international shipping industry, UAE seaports arc handlingillion containers perillion in Dubai alone. More thanercent
of containers arriving in UAE pons are in transit and are not inspected by customs officials, making them an attractive shipping option for criminals trafficking contraband through the region. The UAE also has extensive international air connections: more thanirlines provide scheduled passenger service between Dubai and more than ISO foreign destinations. Some UAE-based firms are probably front companies for criminal organizations or states of concern.
Soulh Asian Heroin Trafficking and Criminal Networks
Much of the Afghan opium industry and drugin Southi-tH Asia is controlledetwork of traffickers bated in Pakistan and Afghanistan. Their ethnic, tribal, and political affiliations give them the connections and capability to negotiate drugassemble drug loads, and transport shipments to wholesale buyers in Turkey and other international markets. This network of loosely affiliated traffickers frequently cooperates with other traffickers based in Pakistan. Afghanistan. Iran, and the UAE.
Powerful Indian criminal syndicates, particularly Mumbai-based crime groups, became involved in intemalttmal drug trafficking in thehen the Iran-Iraq war disrupted traditioiuilAston heroin trafficking routes from Pakistan, through Iran, u< lurkey. Relying on Indian expatriates living in the UAE. Indian crime syndicates use long-established networks for smuggling gold, silver,currency, electronic goods, and otherto transship heroin from Soulh Asia lo markets in Europe and.esser extent. North America.
Indian criminal syndicates also may be involved in arms trafficking, alien smuggling, and trafficking in women. Narcotics trafficking may be an important source of revenue for Indian crime syndicates;patterns show connections to Europe. Africa, Southeast Asia, and regionally lo Sri Lanka. Indian crime groups also dominate the meihaaualone drug trade in eastern and southern Africa; South Africaarticularly important market for meihaqualone, also known as mandrax, which is produced primarily in India.
There is extensive smuggling of contraband uirough Dubai, into whose ports more than half of theshipped to and through the liAR arrive. Dubai is an important transit point for precursor chemicals required for the production of heroin in Afghanistan and Pakistan. The UAE is becoming a
more important transit avenue for drug shipments from Southwest Asia on their way to Turkey. Europe, and Africa.
crime groups from Russia and other former Sovietfroma have established criminal andnetworks in Dubai.
Dubai hasignificant center fur financing illicit activities, in pan because the preference of many businesses to deal in large amounts of cash makes it difficult for banks to distinguish between legitimate and illicit transactions. Drug traffickers, cnminal organizations, and terrorist groups appear lo use the Dubai banking system to launder money and conduct major financial transactions The UAE isajor center for underground banking hawalatied to India and Pakistan.
to press reports, mancy-laundcnngin the UAE may total SI billion annually. The UAE is actively considering statutes that would make moneyrime, and the UAE Central Bank has recently Issued new regulations to combat money laundering
Lebanon
Although its political situation is stabilizing, lebanonaven for terrorist training, as wellinor dnig-trafficking and processing center. Several Islamic extremis! and Middle East terrorist factions continue to maintain training camps in the Bckaaand some have used the countrytaging area for terrorist attacks against Israel Syrian andauthorities cracked down on opium and cannabis cultivation in, hut drug traffickers continue to operate in the area. Opiates from Southwest Asia and cocaine from South America appear to be moving through Lebanon into Turkey. Syria. Israel. Jordan, the Arabian Peninsula, and other destinations.
Israel
Since the collapse of ihe Soviet Union. Israel hasignificant operalirn; area for Russianwho lake advantage of Israel's large Russian immigrant community of moreocriminal activities in Israel and abroad andillicit proceeds. Several international cnrninal figures from Russia. Ukraine, and other NTS have obtained Israeli citizenship and passports, oftenfor the rairpose o!al'chaven in Israel and to facilitate their international travel. According to press reports. Israeli police officials have estimated thato I5 organized crime groups from the former Soviet Union, including Solntsevo.resence in Israel.
Russian criminals who have obtained Israeliappear to believe they are protected fromlaw enforcement investigations and that they will not be extraditedoreign country to stand trial for crimes commined there.
Prior lo Israel'saw making moneya crime intrict bank secrecy laws and die absence of currency import controls and bank reporting requirements madeajor haven for money laundering by Russian cnrninal syndicates Israeli police sources estimate thai organized crime groups have invested as much5 billion in Israel since the. The security of Israeliand the stability and growth of the Israeliare attractive to criminals seeking irrvestmeni opportunities for their illicit proceeds. One recent press report cued Israeli police sources as saying about S5 billion of Israelsillion in foreign exchange reserves may be attributed to moneyto Russian organized crime.
The growing presence of Russian crime groups has exacerbated the organized enme problem in Israel. Russian enme groups IrallVc women into Israel from Russia and ihe NIS. control prostitution rackets, and illegally produce and import music and computerCDs. Russian criminals in Israel may also be involved in diamond smuggling; Israelub of Ihe legitimate international diamond trade, imponing more than half of worldwide diamond production.
Cyprus
usiness ermronmcnt thatinimum of regulationsocation as in etc major commercial routes, Cyprus hasegional cenicr for arms trdlTicking, sanctions evasions, and trade in dual use goods related to weapons of mass desiniction.focus on developing the island's offshoresector through corporate friendly policies intended to lure legitimate businesses to Cyprus also attracted firms and individuals involved in illicitiradc and illicit financial transactions.and corporate secrecy, little or no taxes, and simplified incorporalion procedures have made it easy for states of concern, terrorist groups, and organized crime groups to set up numerous from companies to facilitate illicit arms transshipments, acquiretechnologies, and launder funds. Commercial information indicates that the island's development of free ports and free trade zones in Limassol and tar-naca have been attractive to businesses seeking to transship illicit cargo because goods in transit are rarely inspected, according to industry journals,hips fromhipping lines call at Cyp-riot ports annually.
There are0 offshore firms registered in Cyprus, of whichhysical presence on the island-Greece
With its extensive Mcdiicrranean and Aegeannumerous islands, overland fxvder* with thend vibrant banking sector, Greece has emerged as an increasingly active hub forcnrninal activity. Greece is located along two spurs of the uradxuonal Balkans route for drugCrime syndicates from ihe Balkans- including ethnic Albanian crime groups -Western and Central Europe. Africa, and the former Soviet Union use Greek territory to smuggle drugs, arms, cigarettes, and illegal migrants to Western Europe. Italian criminal organizations control the illegal cigarette trade in Greece, accoiding to press re pons, and earn as much
Southeast Asian Drug-Trafficking Network*
Heroin and methamphctamineproduction inAlia it dominated by ethnic drug trafficking armies operating mostly in Burma's remote opium producing region The drug-trafficking armies had begun as insurgent gimpt and still claim to have an ethnic based social and political agenda, but thehave become primarily engaged in the production and trafficking of heroin and meihampheiamine and in other illicit and lucrative economicgem smuggling and illegalimber smuggling. Since its continuing crackdown on the pro-democracy movement beganhe military regime in Burma has reached agreements with most of these ethnic armies in remote regions which have allowed the regime to focus on prodemocracy threats in critical urban areas whileind eye to drug trafficking and other criminal activities.
With ihe breakup of the Mong Tal Army, which had been led by the notorious heroin kingpin Khun Sa.6esult of disruptions caused hy the arrests of high-level associatesoint US-Thai law enforcement operation. Thailand's closing of border checkpoints used by the trafficking group, andmilitary pressure, the United Wa Stole Army (UWSA) has become the largest drug prnducer in Southeast Asia. In addition to being the biggest regional producer of heroin, the UWSA is also the dominant producer of methamphetamlne. for which therearge market In Thailand.
Ethnic Chinese and Thai criminal networks inand Burmaajor role as broken,backers, and transporters in the Southeast Asian heroin trade. Operating bt major regional commenial centers like Bangkok. Hong Kong. Singapore, andandide array of interchangeable front companies and legitimate businesses, Chinese and Thai criminal networks also arrange financing and transportation of drugs, routing drugs thmugh many different pttrts largely by commercialtheir final destination.
0 million per year from rigarettc smuggling. Greek law enforcement, officials are particularly worried about the presence of AfjfJWWrJMWLUW.
UTtUUmil that are engaged in money laundering, extortion, and trafficking women for the sex industry.
to Greek police officials, iniemational crime syndicates operating in Greece take in as much asillion annually from their criminal operations.
enforcement of money-lauisdering laws has made Greece an attractive locale for moneyparticularly by Russian organized crime.
Southeast Asia
The export-oriented economies of Southeast Asiaboth opportunity and cover for international criminal activities, as wellarket for drugs,products, and other contraband Bangkok,and Kuala Lumpur are attractive locales for internaOonal cnminal activity because they are the region's largest commercial centers The high volume of land and maritime trade, particularly containerized shipping, extensive manufacturing industries, and breadth of financial activity facilitate contraband smuggling, money laundering, and violations ofand intellectual property rights, Pirma inarc major counterfeiters of US audio, visual, and software products. Nearly one-third of all the women and children victimized by trafficking nngs for the worldwide sex industry are from Southeast Asia. Singapore is an increasingly important hub for drug and other contraband smuggling because of its high-volume seaport
According to trade data, Singapore vies with Hong Kong as one of the worlds busiest container pons,3 million containers:ercent of all Southeast Asian maritime traffic destined for US west coast seaportsingapore nexus,to the US Customs Service. Singapore'sairport is Asia's busiest air cargo terminal
Investment' in the region's infrastructure developrnent by businessmen engagedide variety of illegal trade activities have facilitated contraband smuggling and money laundering. Unscrupulous businessmen in all of the region's countries, many of whom had long been involved In drug or contraband smuggling, exploited Southeast Asia's economic boom prior to
7 lo raise wealth and significant political influence. In Thailand and Singapore in particular, ihey took advantage of ambitious governmentfor economic growth and infrastructureto establish lucrative criminal enterprises alongside legitimate businesses. Some havesignificant wealth through dealings in narcotics, illegal gambling, lotteries, illegal logging,extortion, contraband smuggling, and armsMajor drug traffickers in Burma reportedly have become significant investors in infrastructure development, which can be used to facilitate both drug smuggling and money- laundering.
Opium poppy growing regions in remote areas of Burma and Laos make Southeast Asia the world'ssource region, after Southwest Asia, for illicit opium for the international heroinpium poppy cultivation is an important income-earner for the hill tribes residing in these impoverished regions, where ihe infrastrucmre for supporting legitimateactivity is either lacking or in poor repair.
Southeast Asia accounts for more than half of illicit opium poppy cultivation, according to the USnarcotics production estimates, despite poor growing weather70 thaireduced the size of the crop. Nonetheless, Burma alone accounted for aboutercent of the world's illicit opium cultivationn contrast to its high cultivation, Burma producedf the world total of illicit opium. Laos ranked thirdercent of illicit global production. Southeast Asia's opium production is substantially lower than Southwest Asia's only because opium yields arc about one-fourth those of Afghanistan.
Unskilled young males in or from theseespecially those who have migrated to urban areas where they have few joba prime source of recruits by drug trafficking and oiher criminal organizations. Many of the crews of fishing boats used to smuggle heroin through the Gulf of Thailand to major commercial maritimeports in theand Hong Kong,
formigrants from northeasternand sirrularly imrsoverished regions in Burma and Cambodia.
Thc social and political consequences of criminal activity base been considerable for all countries io thearge criminal underground largely immune from law enforcement and judicial actions because of bribes and favors bestowed on powerful politicians, bureaucrats, police, and military figures has helped undermine the credibility of Southeast AsianCriminal earnings, especially from the drug trade, underpin important new investments inAsia. Russian enme groups, for example, are involved in the tourism industry in Ban Phattha Ya, Thailand. Meanwhile, Southeast Asia's longtime roleajor conduit for Burma-pniducedboth heroin and, more recently,hasrowing drug addiction problem.
-hai are infected by HIV, someercent from heroin abuse, according to Bangkok's Ministry of Health.
In recent years, international criminal activity hasore significant problem for Indochina.esult of Thailand's intensified efforts against drug smuggling, traffickers primarily use southern Chinaransit route but have also increased their use of Cambodia and Vietnam us an alternativeroute. Opium poppy cultivation has become established in northern Vietnam, and Hanoi's efforts to improve the country's transportation and import/ export infrastructure are making Vietnam moreto drug traffickers and other criminals. Phnorn Penh's renewed emphasis on economic development has increased oc>purtunities for corrupt business eocre-preneurs like Teng Boonongtime reputed drug trafficker in Southeast Ana. According to thepress. Teng owns most of Kampongcountry's most important porta key transit point for Cambodian marijuana.
' Thailand, which in the past hudpicducer of opium.
no* accounts for lessercent of the region's total opium
production because at effective crop eradication efforts.
APPROVED lOrl RELEASE DATE:
Burma's Opium
China's increasing roleource area of interna-lional crimirutl activity, including greater worldwide influence of Chinese criminal syndicates, hasits emergencelobal economic power and Beijing's opening to foreignS law enforcement reporting indicates that, since the, more than half of the heroin produced in Burma now transits Yunnan Province and other regions of China on its way to drug markets in China itself and in North America and Australia Fujian Provinceajor base of operations for criminal brokers known as "snakchcads" who, using contacts around the world, orchestrate the movement of illegal Chinese immigrants to the United States. Canada.
Europe, Latin America, Asia, and Australia,textile works, factories, and high-techin Guangdong Province are major producers of pirated and counterfeit products; according to the International Intellectual Property Alliance. Chinaeading violator of US intellectual property rights.
Criminal activity flourishes in China despite extremely stnet penalties, including death, for many
crimes.
WPRIWDFOMtllWl WTt)AI7M1
Beijing'* economic reforms and priority given minternational trade and investment haveopportunities for both mainland and overseas Chinev organized crime syndicate*
Economic liberalization has allowed cnminallo establish front companies and lo invest in legitimate business enterprises. As in legitimategovernment officials and enlerprives are often enlisted as partners to help facilitate businessIn some cases, participation of Chinese authorities in cnminal business ventures helps shield them from investigations and prosecutions.
substantial improvements being undertaken or planned for mainland China's seaportincluding expanded capacity to handle largeships open more options for Chineseusing international tradeover for their operations, larger capacity ports allow them to diversify routes by transporting illicit cargoes, including drugs and arms, directly across (he Pacific to major seaports in the United States. Canada, or Panama without having to iransii Hong Kong,Singapore, or Japan. Moreover, technology improvements at the new portwith corrupt local customscnminals to move goods faster, cheaper, and often with less risk.
decline of some traditional Communis! social policies in China has given criminal groupsflexibility. The abolition of internal travelacilitates moving drugs, arms, and illegal migrants to coastal ports for smuggling out of ihe country, as well as the movement of contraband to big city markets inside China Moreover, the large "floatingof rural migrantsteady source of recruits for Chinese crime groups.
Widespread corruption, particularly at the local level, has contributed to increasing international criminal activity in China. Often lacking modem equipment and training in modem police inclics, China's police are ill-equipped to deal with the growing crimeIn some regions of China, local military units have supplemented the police in law enforcement operations, especially against smuggling networks. Corrupt officials in some Chinese Governmentand state-run business enterprises have been involved in illicit activities ranging from facilitating drug trafficking and alien smuggling, to providing arms to criminal groups in the black market, tostrategic materials particularly petroleumthe country.
The entrepreneurial stake of many Chinese officials in various business enterprises fully legitimate anditself to criminal activity for profit. Chinese arms factories under pressure to earn hard currency and attracted to easy money on the black market mayource of weapons for Chinese arms traffickers. Ephcdrinc and pscudoephednne produced in China for the world's legitimate pharmaceutical markets are also illegally exported or diverted to the international illicit drug-producing market, where these commodities are key components in theof mcihamphetamine; inin Shsanxi Province seizedetric Ions of cphedrine that wa* on its way to Burma.
These developments, lugclhcr with Beijing's policy of inviting overseas Chinese businessmen to trade and invest in China, have ullowed powerful Chinese triad criminal organizations from Hong Kong, Macau, and Taiwan to establish strong footholds on the mainland, especially southern China. The triads have set up
many varied businesses in Guangdong and Fujian rrovinces, the Shenzhen and Xiamen SpecialZones, and Beijing where thereignificant international business presenceubstantialof trade and financial transactions. Firmswith irrrport/export trade and manufacturing may be used as cover for drug trafficking, arms uafficking. alien smuggling, and the piracy and distribution of products protected by intellectual property rights. Entertainmentas gambling,nightclubs, karaokecater toelites and foreign businessmen are cash-intensive and provide excellent cover for money-laundering schemes.
Press reporting indicates (he Hong Kong triads have been cultivating Chinese officials since theo ease their way into mainland China.
Mainland Chinese crime groups exploitingcorruption have established strong ties of their own io Chinese officials and enhepreneurs. In Fujian Province. Chinese alien smuggling networks operate with the assistance of corrupt officials, local police, and customs officers. Through these activities and the establishment of interriational networks, mainland Chinese criminal syndicates may be eclipsing (he once-dominant role played by triad members from Hong Kong and Macau.
PoutJcal and Economic Impact
Chinese authorities are increasingly concerned about the impact of criminal activity on Chinese society. Drug abuse and violent crime have become morechallenging China's police and socialand undermining Communist Party authority. The impact on the Chinese economy has beencriminal activities have cost the Chinesesizable losses to tax revenues, impeded industrial growth, and aggravated thetate-owned enterprises. The Chinese leadership is particularly focused on corruption
because the perception of widespread corruption at all levels of government and law enforcement isthe credibility and perforrtiance of Chinese leaders and law enforcement personnel.
Public concerns about corruptionactor in the social tensions leading uphe Tiananmenand crackdown on die
In the last year in particular, China has selectively investigated, prosecuted, convicted, and punished several high-level provincial officials for criminal corruption, including trade frauds. The dynamics of leadership politics and rivalries, however, have kept several high-level political and military leaders and their families safe from prosecution despite credible allegations of their involvement in criminal oractivities.
Heroin addiction has become an enormous problem since China became an uicreasingly importantroute for heroin produced in Burma.hen most Southeast Asian heroin transited Thailand, China had few problems with drugor addiction.0owever, the number of registered drug abusers in China increasedactor ofrom0, according to official Chinese statistics;estimates of drug addiction in China rangeo8 Chinese press article reported (hat addicts in China spendillion annually on illicit drugs.
' The rebaburty of some Chinese statistics is questionable,tor much of the data dealing with the societal consequence* of crime. In some cases. China docs ootha'c good dau coUrclion. vvhicli almost certainlythe tcalc of theie problems.eijing has waged an intensive publicity campaign toenccunge honesty and accuracy in reporting data.
'$ Southern China's Criminal Infrastructure
Inuavenous heroin use it contributing lo iHIWAIDS prohlciti in China, accounting foroercenl of HIV transmissions, according to Chinese press reporting Inhinese offi-cialt estimated there wereIV/AIDS cases in China, but this figure is probablygiven weaknesses in China's HIV/AIDSand monitoring system. The Chinese Academy of Preventive Medicine forecasts more0 if control efforts are not successful.
Contraband smuggling hasargetajor law enforcement crackdown beginning inhinese Premier Zhu Rongji in8 announced that rampant smuggling had reached unprecedented levels in terms of its scope and quantity of products. He also blamed smuggling for corrupting government officials, poisoning social morals,urge in other crimes. China's high tariffs and taxes, as well as nontariff barriers lo trade, make smuggling of foreign-produced automobiles, cigarettes, computer software and equipment, electronics, petroleumand other goods extremely lucrative for criminal groups and corrupt officials. Illegal imports, besides depriving the government of substantial customshave seriously disrupted China's key oil industry, as well as the country's computer, automobile, and cigarette sectors, according to press reports.crime syndicates, including Hongriad and mainland criminal groups, are heavilyhe smuggling of automobiles andinto China for Chinese consumers and forto foreign markets.
Local press reports8 indicated that the value of goods smuggled into China totalsannually. During the first eight monthshincve officials seized more0 million in smuggled goods that would haven customsood portion of China's capitalby one business industry journalillion forsaid to go toward smuggled goods.
China is also struggling lorowing black market in small arms, including military weapons, that are sold to criminal groups throughout Fast Asia. Increasing quantities of firearms have shown up inside
China, contributing to the crime problem andchallenging the firepower available to localpolice and security officers Chinese police in Guangdong and Uaoning Provinces have encountered crime gangs armed with military-style assauliortion of the weapons traded on China's black arms market are sold to cnminal groups in Hong Kong and Macau, adding lo Beijing's concern about crime and social order in both enclaves. Chinese authorities claim most of the arms come from Vietnam and that Vietnamese gunrunners dominate the trade, but many of the weapons trafficked in China probably are from police and military stocks or from Chinese amis factories.
Infrastructure development projects in China designed to attract and support foreign trade and investorsajor draw for investment by Chinese criminal groups. Some Chinese criminal syndicates try to profit from ambitiously planned infrastnscturc development projects in China by direct investment, offering loans, or arranging financing.
Chinese authorities report that organized crime groups target legitimate investors in large-scale scams. According8 press reports. Beijing closed downarge-scale investment scams eachnd in ihe last half8 ihe Chinese broke up pyramid schemes worth more
Hong Kong
As one of the world's leading commercial, financial, and transportation centers. Hong Kong has longub of criminal activiiy in Eaststatus that has not changed since China assumed sovereignly over the territoryhe massive volume of trade in containerized shipping through Hong Kong offers substantial opportunity for criminals lo smuggle all kinds of coniraband. including drugs and arms, and illegal migrants.
Handling someillion containers annually, according to Hong Kong Government data. Hong Kong vies with Singapore as ihe busiest container port in (he world.
Inong Kong Customsllegal Chinese migranis hiddenan lime container about lo be shipped lo Long Beach. California
The volume of traffic between Hong Kong and the Chinese mainland provides enhanced cover forcriminal transactitins.ccording to Hong Kong Government data, someehicles crossed the land border from China.
projected growth in Hong Kong'* international transportation connections is expanding the options available lo Chinese cnrninal syndicates fordrugs, arms, and other contraband products
Hong Kong's status as one of Ihe world's mostfinancial centers makes il vulnerable lo alicmpts to use its financial institutions for laundering illicit proceeds. Wide-ranging links lo the internationalcwimiuoity and the modem banking sector in Hong Kong provide extensive cover for money-laun denng operations and for financing illicit activities.
Daily foreign exchange turnover amounted loillion and iota! bank deposits0 billion ai (he time of Hong Kong's reversion lo Chinaccording to press reports,both the potential scope and the difficulty of moniionng illicit transactions.
Hong Kong is one of Last Asia's major sanctuaries for heroin drug profiis. Heroin traffickers launder proceeds through numerous businesses in Hong Kong dial are associated with Chinese triads.
Hong Kong's ethnic Chinese organized crime groups, commonly known as triads, control local cnrninal activity. As ihey did during the former British colonial rule, triad members continue to infiltrate and cultivate contacts in Hong Kong's civil service, politicalnews media, and stock exchange who can help protect or further their interests While ihey do not moTKipounB irocroarjcaia] smuggling and illicit financial transactions, triad members frequently help
broker deals and facilitate shipments of drugs, arms, and other illicit contraband through Hong Kong to overseas destinations.
Hong Kong's two largest triads,nd Sun Yce On. protect many of the retail businesses involved in manufaciunng and distributing counterfeit compact discs and arc engaged in buying, moving, and selling contrabanderies of raids against several compact disc faciories by Hong Kong authorities8 resulted in ihe seizure of moreillion pirated discs. Moreover. Hong Kong's lucrative film industry in widely regarded as controlled by ihe iriads.
As an international commercial and financial center. Hong Kong probably continues to attract bothand illicit business emcrprises from the Chinese mainland. Kelauvely simple procedures for registering companies allow cnmuials to establish frontparticularly export/import firms, to facilitate their auempl* at smuggling and money laundering. At the same lime, however, increasing direct interactions between southern China's major commercial centers and ihe international business community reduce the incentive for criminal groups or illicit bustrarssmen to move to Hong Kong's much stricter law enforcemenl ens iron men t
In stark conirast to much of the test of China. Hong Kong has made major headway against corruption, primarily because of its strong and effective anticor-ruption agency, deeply entrenched common lawstrong rule of law tradition, and welland well equipped law enforcemenl bodies. Over the years. Hong Kong has developed strong legal and financial systems to counter money laundering. It is substaurually in compliance with the standards set by the FATF. and Hong Kongeader in the regulation and supervision of its financial sector. Nevertheless, despite recent legislative improvements, banking and other financial instilutions in Hong Kong continue io operate with loopholes that can be exploiled bycriminals, including the lack of mandatory
reporting for currency deposits exceeding certainlight bank secrecy laws, low taxation rates, the absence of controls on money flows into and out of Hong Kong, and the availability of undergroundnetworks.
Macau
Since Macau's reversion to Chinese administrationrganized crime continues to have substantial influence over the enclave's economy. Organized crime groups still dominate Macau's gaming industry, the primary engine of the economy. In addition to the substantial revenues they generate of their own accord, gambling and prostitution rackets in Macau are used by local and other crime groups for money laundering.
business tycoon Stanleyeputedcrime figure, controls the gaming monopoly that has the sole license for casino gambling in Macau.ccording to press reports, Ho's gaming monopolyet profit of about SlOOrrtillion.
Contributing to and exploiting pervasive corruption and lax law enforcement in Macau before the colony's handover to China, triad criminal groups alsoor had substantial influence in many legitimate business enterprises, including manufacturing plants, some of which were used to cover for criminalWith easy access to Hongore open border with the mainland, and few extradition or mutual legal assistance treaties with otherMacau had alsoransit route for arms traffickers and alien smuggling groups.
wars to control gaming parlors, loan-sharking, protection rackets, and prostitution rings werein Macau before the handover.
Local and national Chinese law enforcementhave been working to diminish the power ofcrime in Macau since its reversion to China. Although triad involvement in casinos anderious problem, there hasarked decline in organized-crime-related violence in Macau; there were only seven murders in Macau in the firstonthsompared tourders the previous year.
weakness of Macau laws to combat money launderingerious problem.
Taiwan
Organized crime is deeply entrenched in Taiwan's business and political sectors. Large ethnic Chinese criminal syndicates such as the United Bamboo and Four Seasfollowed the ruling Kuom-ingtang party from the mainland to Taiwan in the lateTaiwanese criminal gangs havestrong influence in Taiwan's local communities. Criminal groups are extensively involved in feeding off Taiwan's generally strong economy. Theyhave been involved in direct extortion ofmoney from construction firms, engage in bid-rigging for public works projects, and have tried to manipulate the island's stock market,
gangs were said7 to beoercent of southern Taiwan's budget for publiccontracts, according to press reporting.
Although the organized crime problem in Taiwan is largely domestic, Taiwan-based criminal groups use the island's extensive international trade and financial links to further their illegal activities overseas. According to world trade data, the port of Kao-hsiung handlesillion containers annually, the third largest volume after Singapore and Hong Kong,it vulnerable to narcotics and contrabandthrough Taiwan to other international destinations. Shipping and other businesses in Taiwan, some influenced by organized crime, that havesubsidiaries and partners in major commercial centers in other countries, particularly Panama and elsewhere in Latin America, are believed to be used as fronts for smuggling, illicit transactions, and money laundering.
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Increasing indirect trade between China and Taiwan.
and Beijing's policy of encouraging urvestment by Taiwan busirsrssmcn. probably is contributing to growing contacts between Taiwan and mainlandcriminal syndicates. Some Taiwan-based triads have links to Hong Kong and China, includingfronl companies or investing in specificventures.hinese authorities discoveredmethamphctaminc drugin Hunan Province.
Vote buying has provided criminals significantwiihin Taiwan's political system, especially at the local level. Members of crime groups themselves seek, and often win. public office, which allows (hem access to lucrative public contracts and often limited immunity from prosecutionhance to cleanse criminal reputations.
Political corruption and the ties of former ruling party politicians to organi/cd crime continue lo be potent political issues in Taiwan. Taiwan's newwho woo election in0 Largely on an anlicoiruptiun. clean government platform, has pledgedake (his one of his highest domestic pri -oritics
Ethnic (htne.se Criminal Networks
The international criminal ihreal posed by ethniccriminal networks has become more complex as enme groups originating in mainland China have joined (he tiaditional triad societies of Hong Kong. Macau, and Taiwan in expanding (heir networks far beyond China's borders. While the powerful triads, which trace their origins to Chinese secret societies inentury', arc the largest o! the Chinese cnrninal associstions. they continue in operateraditional practices and their criminal activities arc largely focused on more traditional extortion, gambling, drug trafficking, gunrunning. and alien smuggling enterprises. The upstart Chinese criminal groups from mainland China, on the other hand, are more loosely organized, (heir members moreand (heir criminal operations often moreThese groups arc also extensively involved in international drug trafficking, alien smuggling, arms
trafficking, and money laundering, bui (hey have also moved more aggressively than the triads into more sophisticated and highly profitable areas of credit card fraud, theft of computer chips, software piracy, and Other intellectual property violations
Both the mads and crime groups originating inChina have established relationships wilh ethnic Chinese crime groups in countries throughout the Pacific Rim, Europe, and the Western Hemisphere. Using traditional Chinese practices of networking, ethnic Chinese crime groups relyroad criminal fraternity' that can broker contacts in any country where therearge erhruc Chinese community and help facilitate transnational criminal activity
* Chinese organized crime has strong roots in Chinese elhnic enclaves around ihe world, laical Chinese crimeanging from street gangs to more formally structured groups modeled after, orwith, traditionalareinvolved in local rackets like gambling, loan sharking, narcotics distribution, prostitution, and business rilorlsoa
While ihey are closed and secretive lo outsiders,criminal organizations generally have few qualms about cooperating wilh other elhnic criminal groups in profitable joint ventures. ft* example, in the United Stales. Canada, and Europe. Chinese organized crime groups have worked with Italian and Dominican criminal organizations in trafficking heroin
Europe and North America are major targets forcriminal networks. Although ethnic Chinese groups are noi as powerful as Italian or Russiancrime in Europe, (hey have long-cs(ahlished footholds in Ihe Chinese communities of severalnations from which ihey appear lo conduct mos( of their illegal operations. International Chinesecrime groups are particularly strong in thethe United Kingdom, and Germany. Since (he. Chinese criminal organizations have also established themselves in Central EuTOpe. which hasajor conduit for moving illegal Chinese immigrants lo Western Europe
Triads Versusriminal Croups Most triad societies arc based in Hong Kong, Taiwan, or Macau, hot their influence spans international boundaries with member* located in virtually every country thatizable Chinese community. Triads, which collectively have an estimated worldwide(hiii exceedsre fluid associations of ethnic Chinese criminals and quasi-lcgituiuiteinvolved in an array of criminal enterprises. Most Hong Kong triads have evolved into loose-knit groups operating and cooperating with each other on the basis of personal introductions and mutualTriad leaders do not dictate to member* what criminal activities they should pursue and generally do not receive monetary benefits unless they are directly involved with the actual criminal enterprise.
Hong Kong police estimate there areriad societies operating in Hong Kong.Hong Kong's largest tnad. Sun Yee On. is the only onerue hierarchical structureriad, still one of ihe most powerful. i< comprised of more than IS loosely affiliated groups.
In addition to their traditional criminal enterprises. Hong Kong tnads have diversified more inio sophts-ticated white collar crimes. Recent Hong Kongfigures suggest increased triad involvement in high-icch computer cnmcs and cnminal activities such as possible manipulation of the stock and futures markets. Using connections in mainland China and taking advantage of the different legal systems in Hung Kong and the Guangdong region of southern China, the Hong Kong Triads have also increased their cross-border criminal activities.
The major triadsnd Sun Yee On. both based in Hong Kong, and the Uniied Bamboo Gang, based in Taiwan, have autonomous branches extendingthat help to facilitate transnational criminal activities. In. Hong Kong triadsthcii presence and relationships in Westernincluding by making various investments in legitimate businesses,edge against (he political, economic, and law enforcement uncertainties of Hong Kong's reversionhinahe two largest Hong Kongnd Sun Yee On, have made substantial property investments in Canada this
decade.eportedly is the fastest growing triad in Canada. The FBI also reports thereresence in the United States.
It is not unusual for different triad groups, both in Hong Kong and abroad, lo work together where therepecific opportunity for mutual profit. Hong Kong police, however, maintain thai there is no international triad network or centralized control over cross border activities, such as drug trafficking or alien smuggling, between mainland China and Hong Kong. Most cooperation in such cnminal enterprises is mote ad hoc collusion, according to Hong Kong authorities.
Criminal groups from mainland China, typified by the Big Circle Gang and the Fuk Chang Gang, have cells operating in countries around the world (hat cooperate with one another on an ad hoc basis to conduct far-reaching criminal schemes. These criminal cell*operate autonomously with no known central authonty controlling them. Cell leaders use their extensive ctaiicctioris to organize often very complex criminal operations thatigh degree ofAnd planning. The coordinated efforts of members in various countries enable them to carry out international drug trafficking, arms trafficking, alien smuggling operations, as wellariety of more sophistic aicd financial fraud crimes.
US and Canadian law enforcement reportingthe Big Circle Gang, which is the dominant organized crime group in China, hashort time become one of the most active Asian criminalin the world. By the, the Big Circle Gang had established cnminal cells inthe United States, and Europe, It is extensively involved in drug trafficking, alien smuggling,theft and trafficking, and various financial,property rights, and high tech enmes Big Circle Gang cells are also highly sophisticated in their use of technology to thwart law enforcement investigations, according lo US law enforcement. Since first appearing in the United States in the early
. Big Circle Gang members have been delected in New York. Boston. Seattle. Sanand It's Angeles.
" The Fuk Ching Gang is most notorious for alien smuggling, including the Golden Venture tragedy off New York
Chinese Criminal Threat to the United States
The United Statesrowing threat from Chinese organized crime groups that are using Canadaase from which to conduct cnminal activities that impact our country. Members of ethnic Chinesegroups from China. Hong Kong. Taiwan, and Macau have exploited Ottawa's immigration policies and entrepreneur program to enter the country and become Canadian residents, which makes it easier for them to cross into the United Slates. Canada hasateway for Chinese criminal activity clirected at the Uniied States, particularly heroin traf ficking. credit card fraud, and software piracy
The two largest Hong Kongnd Sun Yee On. increased their presence and made substantial property investments in Canada during,embers from Hong Kong and Macau have emigrated to Canada during this time, and Sun Yee On triad members have settled in Toionto.and Vancouver., whichhapter in Toronto, also has been tiedew York and other US cities. Sun Yee On members are involved in trafficking heroin and methampheiamine, as well as alien smuggling, to the United States, where the triad has ties to New York's Tung On Gang.
The most active Asian criminal group operating in Canada, however, is the Big Circle Gang. The BigGang is responsible for importing much of the Southeast Asian heroin entering Canada much of which is then smuggled into ihe Unitedthe source for many of the counterfeit credit cards used in North America.
oforporate extortion, often by threatening to disrupt corporate shareholders meetings, has been generally tolcraled by Japanese society, despite the economic influence it has given organized crime. Their role in local communities has sometimes placed the yakuzaetter position than the government to respond lo civic emergencies, such as when they responded more quickly and efficiently than theGovernment in bringing relief aid to victims of6 earthquake in Kobe. The yakuza have also benefitted fiom historically weak anti-crimeand limited law enforcement investigativeBy adhering to rules of conduct that preclude violence against the police and innoceni civilians,crime syndicates traditionally have been able to operate largely in the open, including highlighting the location of their headquarters in local communities.
The yakuza were able to cash in on Japan's economic and real estate boom ino expand their profit-making activities beyond their traditionalarenas nl drugs, gambling, prostilution,ousing loan companies, jusen, that were uffiliatcd with major Japanese banks reportedlyortion of their loans, many of which were not repaid, to yakura-ucd firms as part of theboom in real estate in.esult, the yakuza were behind many of the problem loansto6 collapse of the juscn mortgage
One expert on Japanese crime believes that yakuza interests may have directly accounted forercent of the banking industry's bad loans, which heas high0 billion, and anercent of the bad loans may have been indirectly tied to yakuzahe president of acorporaTion assigned to help collect the bad debts staled8 that yakuza-affiliatedtied lo billions of dollars of bad debt were the most formidable obstacle to recovering those loans.
' One presshrnaicd the banking Industry's hid louii to betriluoa
Over the years, Japanese crime syndicates, known as
yakuza, have exploited their traditional roles in arbi-
truing disputes and loan collection to gain
measure oi puhhc acceptance Ihe]
UK
In some canes, the yakuza sought to block the dis-posal of real estate assets that underlie the bad loans.
Although information is limited, press accountsit is very likely that the yakuza have links toGovernrnent officials and have influenced some government decisions. Few of these incidents are widely publicized. Inowever, yakuza connections io sokaiya scandals involving major Japanese banks and similar related allegations against members of the powerful Finance Ministry were widely reported in Ihe Japanese media
Despite the longstanding tradition of tolerance for the yakuza. the Japanese have become less accepting of organized crime activities in recent years, primarily because of public concerns about increasing street crime and drug abuse, rather than the yakuza role in the financial crisis and banking scandals. "Anti-yakuza" legislation implemented in Ihend updateduch as recently implemented legislation allowing wiretaps in someationwide crackdown on sokaiya. appearsave helped curb some organized crime activities. Despite the yakuza. ethnic Chinese criminal gangs linked lo illegal immigration, drug smuggling, and arms trafficking are publicly perceived as the most serious cnrninal threats to Japan.
Japanese Yakuza
Takenhole, the yakuza arc among the worlds largest and most powerful criminal confedefabons-The yakuza are highly structured and criminally diverse organizations dun have thoroughly penetrated Japanese society, including the legitimate economic sphere, through their extortion-like practice ofhere are anakuza groups and subgroups based in Japan According to Japan's National Police Agency.ercent ofembers and associates of yakuzaarc affiliated with one of three groups' the Yamaguchi-tjumi, Sumiyoshi-Kai, and Inagawa-Kai. These groups control most organized criminal activity in Japan, including gun (rafficking, drug smuggling, alien smuggling, prostitution, illegal gambling,and white collar crime through infiltration of legitimate businesses.
specialists on Japanese organized crime have estimated the annual revenue of ihe yakuza atillion.
While most of their criminal operations are in Japan, yakuza groups haveresence ihrougbout Asia, Australia, and the Western Hemisphere The yakuza have used their intemafional networksto acquire narcotics, guns, or illegal immigrants particularly women for ptosiilution- for ihe Japanese market.
Yakuza groups acquire mosl of their heroin and mcthamphctamine from Chinese cnrninal groups in Taiwan and Hong Kong and may have established relauonships with South American traffickingfor cJjtaining cocaine.
China. Taiwan, and Russia are major sources offor the yakuza; Japanese police officials have estimated lhalercent of the illegal weapons seized each year come from overseas because of Japan's sulci gun control laws.
The yakuza also rely on their mternationalfor illegal aliens to work in the prostitution, entertainment, and construction enterprises they control in Japan. The Yamaguchi-Cumi group, whichffiliated gangs throughout Japan, runs extensive prostitution rings that prey on women from latin America. Russia, and Southeast Asia
Some of Ihe Chinese migrants smuggled into Japan continue onhe United States, but there is only fiagmentary evidence indicating that yakuza groups are directly involved in smuggling illegal aliens into this country.
Although most yakuza cnrninal relationship- overseas arc used lo facilitate their own cnrninal activities, some yakuza families arc establishing mure longtcrro alliances with other international enme organizations. The Russian connection appears lo be particularly important to yakuza groups;2 the Japanese press reported that the head of the Yamaguchi-Gumi
North Korea's Hole in International Drug Trafficking
A large share of the inethamphelamine consumed in Japan comes fnm North Korea, according to media reports; more thanercent of the mitluimphet-amine xrited in Japan9 came from North Korea There have been regular reports fnm many
North Korea has engaged in drugto Japan, Russia, anda criminal state enterprise to raise badly needed revenue. Over the years, customs and police officials of many countries have apprehended North Korean persons employed as diplomats or in quasi-official capacities at North Korean state trading companies trying to smuggle drugs produced elsewhere.
had announced ha intention to establish workingwith the Russian mafia. Russia hasajor source of firearms and prostitutes, and asource of drugs, for the Japanese yaku/a. The establishment of regular flights between majorand Russian cities and relaxed travel restrictions arc likely to facilitate long-term ties between Russian and Japanese crime groups.
Yakuza Threat to the Ihi ltd States
One of the most significant threats posed by Japanese organized crime groups is their investment inbusinesses in foreign countries to launderfrom their criminal operations in Japan. The yakuza reportedly have invested heavily in US and Canadian real estate, ranging from golf courses to hotels. By playing the stock market, yakuza gioups base also laundered cnminal proceeds through US financial institutions, according to US law
Japanese criminal activity in the United States has primarily involved fraud and money-laundering activity.
Africa
Porous borders, ample routes for smuggling drugs, weapons, explosives, and other contraband, andpolice and security forces make Sub-Saharan Africa an inviting operational environment forcnminals. drug traffickers, and terrorists. Major Sub-Saharan cities with extensive cornmercial.and sea and air transportation links to Europe, the Middle East, and Asia are hubs for internationalactivity, particularly by Nigerian criminal syndicates. These include Nairobi and Mombasa in Kenya, Addis Ababa in Ethiopia, Abidjan in Cote d'l voire, Johannesburg in South Africa,gos in Nigeria
Nigeria
Nigeria is at the center of international cnminalcoming from Africa. Powerful and sophisticated criminal syndicates based in Nigeria have extensive networks that reach into the Western Hemisphere. Europe. Russia and the NIS, Southeast and Southwest Asia. Australia, and Africa. With Nigeria an historical trading crossroads Inith in Africa and along maritime routes between East and West, the internationaloperations of Nigenan syndicates are the legacyistory of moving capital and commoditiesio-
Nigerian criminal syndicates centered in Lagos, many of which have global networks, operate with virtual impunity in an crrviionmeni of pervasive ccxruption Decades of mostly military rule in Nigeria havethe problem, ruining the Nigerian economy and nearly bankrupting the Nigerian Government Moreover, decades of gross economicwith which the newly elected civilianhas just begun lo grapple, have left not only private citizens but also government and lawofficials and junior and noncommissionedofficers with great incentivengage in criminal activity to make ends meet. Under the recent military regime, many of Nigeria's political and militarygovernment bureaucrats, and business elitesaccepted and demanded bribes or kickbacks in
The Inagawa-Kai yakuza crime group, whichin drug and arms trafficking,frauds, and money laundering,heavily in Hawaii and the states on theof the UnitedFOR RELEASE
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return for facilitating profitable businesswhether in the lucrative oil sector, competitivecontracts, or the drug trade.
Corruption and resource constraints base madelaw enforcement investigations andagainst the crime borons very difficult in Nigeria. Corruption extends to all levels of the military, which has dominatedigeria fee mast years since indeperidence. Likewise, cisilian politicians and bureaucrats have engaged in massive corruplion. whelhcr during periods of civilian or military rule. Nigerian sea and airports are rife with corruption, and borders arc porous to criminals, terrorists, and illegal migrants The decades-long history of corruption and mismanaged exchange rates has also benefited the money-laundering activities of Nigerian criminal
Past Nigerian regimes have typically tried to cast the drug trafficking and financial frauds committed by Nigerian criminal syndicates as victimless dimes that are driven by demand in Western countries. Anticor-ruption campaigns mounted by military and civilian governments alike have yet to alter the culture ofin Nigeria. Nevertheless, some Nigerian elites, including in the military, have come to recognize that pervasive enme and corruption in Nigeria havethe economy, contributed to social and political tensions, and undermined relations with majortrading partners, including Ihe United States and West European countries Widespread fraud has caused Nigeria to lose billions of dollars in business and foreign investment, according to press reporting. These factors have caused many Nigerian elites torack down on corrupt officials and criminal activity, and the new civilian government seems much mote inclined to take up this challenge.
Nigeria's President Ohasanjo, elected in Ihe aftermathighly corrupt military regime, has pledgedreforms to cul down on pervasive corruption and to crack down on criminal activity, particularly drug orafneking. The country's history of wsriesprcad corruption, however, and the influence of powerful crime barons make effective follow-through on these promises highly problematic.
South Africa
ajor locus of maritime trade and air traffic between Asia. Europe, ami the Western Hemisphere. South Africa is emergingignificant hub ofcriminal activity. The lifting of international trade sanctions with Ihe end of arsartheid has made South Africa readily accessible to internationalwhose operations lake place within theof legitimate commercial business activities. South Africa's modern airports andcontainer potts at Durban. Cape Town. Portand Eastattractive to criminals smuggling narcotics and other contraband South Africa's well-developed business connections lo ihe West and political connections in some slates ofcan be used by criminals to broker illicitinvolving arms, controlled technologies, or strategic comnwdities. Pen cnrninal organizations. South Africa also has the advantageodern financial system linked lo financial marketswhich facilitates money laundering. And, as happened in Russia, cnrninal organizations recruit professionals with skills well suited to competing in the modem business environment who were pushed aside or sidelined by the political and economic changes taking place in South Africa.
With the increase in international travel and business since the apartheid government turned over powerhe scope of organized crime in South Africa has evolved from generally small-scale operations centered in localities lo nationwide syndicates South African police officials have identifiedrganized crime groups operating throughout the country, with at leastaving internationalaccording to press reportslmost half ofroups were reported to be primarily involved in drug trafficking, and approximatelyroups were associated with financial crimes Foreign organized crime groups, primarily Nigerian, Russian, and Chinese syndicates, have established bases of
operations in South Africa since theariety of illegal activity, including drug tralTicking and other contraband smuggling, poaching andin endangered species, rnooey laundering, and financial crimes.
* The South African police estimatedH that more thansian, Italian. Nigerian, and Russian crime [Moupshe country werefor direct and indiirct losses of government revenue totaling more thanillion annually.
The international drug trade hasanicularly serious problem for South Africa. Nigerian traffickers arc finding South African air and seaports to begateways for transshipping both cocaine andinto the West European market South Africa's growing role in the international drug trade has increased its domestic addiction problem, especially for cocaine, which Nigerian traffickers have mude widely available at low prices.
South African authorities are most alarmed by the presence and activities of Nigerian. Indian, and Rus Man cnminal organizations lhcy arc becomingby growing numbers of Chinese triad criminal groups operating in South Africa. Nigerian cnminal groups have established cells in expatriatein South Africa's major ciimmercial centers, while Indian criminal organizations operate within thesubstantial South Asian population. Russian criminals have exploited legiumate businessin South Africa lo launder money and reportedly engage in money laundering, arms smuggling,theft rings, and illicit strategic commodities transactions, including in gold and Other minerals
The dramatic increase til criminal activity in .South Africa initially caught the govern mem unprepared. Violent crime and drug abuse have grownsince the early loofh. Inouthpolice estimated thai there wereillion illegal firearms in the country. Efforts toorganized crime are undermined by widespread corruption in the police and the lack of tough laws. This environment has conmbuted to the nse of ethnicbased vigilante gangs, panicularly among the Muslim minority, that have taken the law into their own hands,
Alarmed by these develop menu, the South African Government has begun taking measures to improve its antienmc legislation and enforcement capabilities.outh Africa passed the Prevention ofCrime Act. which is similar to the US racketeer-influenced corrupt organization (RICO) slaluie, and which also contains anti-money laundering
East Africa
ong tradition of contraband smuggling, the countries along Africa's Indian Ocean coast are emerging as significant transit points for international drug traffickers, particularly in the Southwest Asian heroin trade. The large volume of cargo handled by major East African seaports in Mombasa, Kenya, and Dar es Salaam. Tanzania, probably hides substantial amounts of contraband trade, including dnigs, coming from the Middle hast, Pakistan. India, and Southeast Asia In addition, Nairobi and Addis Ababa are major international air hubs in the region.
increasing amount of Southwest Asian heroin is appeanng in Kenya, some reportedly en route to Chicago and New York.
Trade and customs agreements among ihe Eastcountnes are probably widely exploited bycriminals and traffickers, including to move drugs and contraband into southern Afnca. This route is used by South Asian criminal organizationsmethaqualooe. also known as mandrax,primarily in India lo the lucrative South African market. The terrorists who bombed the US Embassies in Kenya and Tanzania8 look advantage of lax border control* in the region and immigrationto move materials and personnel into place.
afehaven for terrorist groups.
As countnes along the traditional routes used forSouthwest Asian hashish and heroin base given more emphasis to drug interdiction. East Africa
has become more attractiveansshipmenl point ool only because of its inter national transportation and commercial connections to the rest of the world but also because of lax law enforcement capabilities.with regional crises and substantial domestic problems, including high local crime rates. East Afri can governments so far have not given priority tointernational criminal activity, and Ihey lack the resources to do so effectively. In addition, inicma-Dooal criminals and drug traffickers routinely bribe customs and law officials to ignore contraband trade
Allegations of official complicity in drug trafficking through Kenya have increased in the last year, given impetusulti-ton seizure of hashish ininembers of parliament and high-ranking police and administrative officials have been linked to facilitating or protecting thai ship-meni.
Nigerian Criminal Enterprises
Worldwide, there arc hundreds of Nigenan criminal cells located pnmanly in major metropolitan centers in North America. Europe, and Asia. Recent eslimalcs suggest that moreigerian crime cells are operating in at leastountries. Nigerian criminals take advantage of large West African ethnic communi ties in these cities to establish the infrastructure needed toide range of criminalforemost among litem drug trafficking andschemes to defraud individuals, businesses, andreap billions of dollars in illicit proceeds Nigcnan crime groups also facilitate illegal immigration of Nigcnan nationals to rnetropolitan areas around the world, whom they then use for filling high-risk, tow-level roles in drug trafficking, and are involved in trafficking women and children to Europe, especially Italy. The United Stales and Britain are Ihe pnmary targets of Nigerian cnrmrul activity, with Nigerian crime cells elsewhere in ihe worlddnigs or providing financial and logistical support.
Betweennd JO percent of the heroin seized al US international airports in recent years was taken from couriers employed by Nigenan trafficking groups, according Io US Customs data.
arge number of Nigerian criminal groups operating overseas appear to be small and auiono-mous, many others belong to large criminal syisrhcates based in Nigeria. The smaller groups frequently pool resources and are able to tap inio highly fluidin countries around ihe world to facilitate their criminal operations. Many Nigerian crime groups in countries around the world appear to be compart-mcnied cells of larger syndicates controlled by crime barons based primarily in Lagos. The barons, some of whom have substantial economic and political clout in Nigeria, oversee the day-lo-day operations of aof crime cells deployed worldwide to undenakc oride range of criminal activities.
Drug Irjfficking
Nigenan cnrninal syndicates are among the world's most active traffickers in Asianto Ihe Uniiedarc increasingly trafficking South American cocaine lo various regions in Africa and throughout Europe. Producing no heroin of Iheir own, Nigerian traffickers have well-establishedin Southeast and Southwest Asian countries to acquire the drug. The steady and virtually uninlcr-nrptcd flow of Nigenan-conirolled heroin from these source regions is facilitated by criminal cells in transit countries along the way. Nigerian traffickers typically smuggle only small quantities of drugs, using both express mail services and thousands of individualin an erf cm to overwhelm market countryand law enforcement capabilities and to lessen the cost of any seizures. They lend io avoid sending drug couriers on direct flights from thug-producing and key transit countries to market countries, relying insteadidely diverse number of routesairports throughout Asia. Africa, and Latin
* Using techniques and concealment methods similar io those used io smuggle heroin from Asia. Nigerian criminal syndicates dominate transatlantic cocaine shipments between Brazil and Africa, from where the drug is transshipped to markets in South Afnca and Europe.
In planning their drug courier runs, Nigerianmake careful study of customs and security procedures in producer, transit, and market country air and sea potts. They readily adapt to international law enforcement measures against them. Nigerian traffickers, for example, are now recruiting "low profile" couriers who are less likely to draw the attention of international customs agents. These include Caucasians, women (often withnd the elderly. To avoid scrutiny at US international airports. Nigerian traffickers sometimes deliver drugs to Canada or Mexico for overlandinto the United States.
Financial Fraud Schemes
In addition to their significant role in narcoticsNigerian criminal syndicates are involvedide vanely of financial fraud schemes that tatgetcitizens as well as businesses, particularly in the United Slates and the United Kingdom. The most notorious of these are advance fee scams, in which thousands of unsolicited letters and faxes based on fraudulent representation are sent by Nigerianto businessmen worldwide with the promise of great profits at the cost of upfront cash investment. The letters and faxes set forth simple irrvesimew schemes, promises of "easylaborateand extraoidinanly low nsk. They provide detailed instructions for establishing linked bank accounts and exchange of authorization letters and account numbers to give the appearance of legitimacy, then require various transaction fees before anycan be released. Victims of Nigerian fraud schemcv may be strung along for months or yearstransactions fees and taxes before realizing they are being conned.
S victims reported several hundreddollars of losses to Nigerian advance fee frauds, according to US law enforcement These figures do not include losses to victims from outside the United States. In addition, many people do not report being victimized by advance fee fraud schemes because of fear or embarrassment.
During one six-week periodS postal authorities destroyed0 advance feethai had arrived in New York's JFK Interna tional Airport.
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Nigerian criminal cells worldwide also specialize in sophisticated schemes laigcting banks and financial institutions through credit card and check fraud,loan and mortgage frauds; insurance companies through fraudulent claims for automobile accidents, personal injuries, and life insurance; and government entitlement programs through false or appropriated identifications and theft from legitimate recipients. Illicit funds raised through financial fraud schemes are often used lo capitalize narcotics trafficking The pen ctrauon of government bureaucracies in manyhas enabled local Nigerian cells to defraud government entitlement programs.
South America
As the exclusive source of cocaine for the worldSouth Americarimary locus of thedrug trade. Colombian traffickers are responsible for producing most of the world supply of finished cocaine, and they have establishednetwork* throughout the Western Hemisphere Analysis of cocaine flows data from US detection and monitoring assets and data on cocaine use elsewhere in the world show lhat most of the cocaine produced in Colombia is for the US market. Colombia. Venezuela, and Ecuador are the primary staging areas for drug exports destined for the United State-.
In the last decade, however, international criminal activities linked to Soulh America have expanded beyond Ihe drug trade and become more muiiifacetcd. The continent's increased commercial andlinks lo Europe and Africa, as well as to thebasin and the United States, have attracted an increased presence of foreign criminal organizations. Greater regional economic integration has helped South America emergeignificant source ofproducts for the international market. Money launderers are exploiting the region's weak enforce ment against illicit transactions to move and shellcr criminal proceeds.
OS
The power and influence of criminal organizations have eroded good governance, diverted attention and resources away from more pressing political andproblems, and skewed the economies of many South American countries. Throughout the region, the activities of local criminal mafias have become apolitical, as well as law enforcement, concern. Crime groups in many countries have suborned local police officers and other public officials to safeguard their illegal activities.
Colombia
The drug trade in Colombia has helped fuel decades of violence, corruption, political strife, and, particularly in recent years, insurgency. Columbian drug profits sinceave bought power and influence at the highest levels of the government, judiciary, and financial institutions. Government leaders have faced daunting obstacles, including bribes, threats, violence, and other (aclics, as they to control dnig-irafficking operations. The level of violence and narco-terrurism reached its apex in diendhen countless police were killed byajor presidential candidate was assassinated, the headquarters of Colombia's lead investigative agency was destroyedigh-casualty bombing, and anwas destroyed in flight.raffickersupport may have been influential in the victory of President Samperlose election. Bogota'sefforts since thearrests of key traffickers, increased interdiction, and recent extradition of three traffickers to face dmg-trafficking charges in the Unitedreduced much of the overt influence exercised by powerful trafficking organizations, but Colombian traffickers have adapted lo slay atop the worldwide cocaine trade
The dramatic increase in coca cultivation inless thanercent of the Andean total4 toercent in(he primaryof the current crisis.
The United Slates is committed to substantialfor Plan Colombia. Bogota's response to the crisis developed in close collaboration withCentral to Plan Colombia's success will be crippling the drug trade by substantially reducing coca cultivation and the processing and movement of cocaine and heroin within three years.
Of particular significance in Colombia's current crisis, surging drug production is providing substantial resources to insurgent and paramilitary groups that threaten the country's stability. In more than half of Colombia's national territory, the FARC and ELN rebel groups or the paramilitaries have free rein.and protecting coca cultivation in the areas it controls, the FARC has emergedajor player in the drug trade throughout Colombia, particularly in the south where cultivation increases have been the greatest. The substantial revenues raised by the FARC through its involvement in the drug trade have increased the ability of the insurgents to operate freely throughout the country and to finance growingof armed combatants.
US Government analysts estimate that the FARC could potentially earn nearly half of its totalfrom taxing the drug trade Other illicitwhich include ludnappings. robberies, and other crimes, account for most of the rest.
riaramilitary involvement in drugis also increasing. The leader of the most notorious paramilitary group stated publicly thatercent of his budget comes from the drug trade.
Along with guerrilla attacks against economic targets, the drug trade hasajor factor in Colombia's economic difficulties. The black-market peso exchange used extensively by Colombian traffickers, through which drug proceeds in the United States are exchanged for trade goods thai are smuggled into Colombia, has caused the contraband import industry to capture more thanercent of the country's retail market. Contraband trade goods financed largely by cocaine profits entering the Colombian marketplace were estimated to be as highillionhe value of Colombia's legal imports9 wasillion, according to the former Colombian trade minister.
imports from Panama, whose robust financial and commercial sectors make it an outlet in the black-market peso exchange, are now dominated
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by contraband. The Colombian comptroller's office reports that3 billion worth of reexport goods entering Colombia from Panama's Colon Free Zone0 million was recorded as legal commerce
money transmitters have adapted tocaused by successful enforcementas8 Operation Casablanca, which targeted the Mexican financialto US regulatory efforts, such as the Geographic Targeting Order in New York, to continuedrug proceeds through the black-market peso exchange.
Colombia is also the world leader in the production of counterfeit US currency. Ongoing investigations in Colombia indicate that drug trafficking andare Uiuted; the same courier networks are often used for trafficking drugs and counterfeit US dollars. Many of the crime groups involved in producing and trafficking counterfeit currency originated from areas controlled by the FARC and ELS.
illion in counterfeit US currency seized or passed in the United States and abroad was manufactured in Colombia.
The Andes
Along with Colombia, the other Andean countries are integral to the Soulh American drug trade. Peru and Bolivia are major sources of coca for the cocaine trade; Venezuelaajor transshipment avenue for drug shipments destined for US and European markets through the Caribbean; and Ecuador's harbors and seaports have become more important as Colombian traffickers make greater use of eastern Pacific(outes to move cocaine to Mexico and on to the United States. Bolivia and Peru in recent years have had success in attacking the large coca economies in their countries through alternative development,eradication, and forcible eradication of coca crops. Although both countries have achievedreductions in their cocathan half in both countries5ccording to US Governmentcoca constituencies remain strong. In Bolivia, powerful unions supporting
their coca growing constituencies continue to stage protests and blockades to impede the government's eradication efforts. In Pern, there are indicationsebound in coca leaf prices is causing some farmers to return to coca cultivation.
and Venezuela are most vulnerable to coca cultivation spreading to their countries if theGovernment is successful in meeting its goal of substantially reducing drug crops and crippling the drug trade.evelopment would also increase the incentive for traffickers and farmers in Peru and Bolivia to grow more coca.
The role of foreign crime groups has been mostin Bolivia, whose reputation as one of the world's most corrupt countries is attractive tocriminals. In recent years. Bolivia has been rockedorruption scandal involving ticsicilian Mafia crime group has to high-level military, police, and political leaders. Pervasive corruption has also contributed to Boliviaajor staging area for thousands of US-bound migrants from China and the Middle East.
Brazil and the Southern Cone Expanding trade relations within the region and between South America and the rest of the world have helped make Brazil and the Southern Cone countries major venues for international contraband smuggling and economic crimes. Modern manufacturingin several South American countries have opened the door to illegal duplication of CDs, videos, andillegal production of these products is centered in Brazil and Argentina, whose governments have toughened their IPR laws. Growing consumerism and middle class prosperity in the largest South American countries has made them an important market for drugs, pirated or counterfeit products, and other illicit contraband.
and trademark infringements in Argentina and Brazil cost US firms SSOO million in lost sales annually, according8 estimate by theIntellectual Property Alliance.
Evolution of Ihe Colombian Drug Trade
Colombia's drug-trafficking organizations are the most powerful and influential in South America. Prior to the incarceration of Its top leadersiolombia's tali drug mafia was believed by-several international crime experts to be the world's most profitable criminal organization. Although the setbacks suffered by Call traffickers have ended their dominance. Colombian traffickers not only continue to meet mast of the world's cocaine demand, but have become the largest supplier of heroin available in the United States. Nevertheless, the disruptions caused to Colombian trafficking operations have allowed rival groups in Peru and fiouWo to increase their share of the international cocainein Europe and Southestablishing direct relationships with foreign criminal organizations.
Despite the dismantling of the Call cartel in the, the continuing shift in coca cultiiation from Peru and Bolivia to Colombia that began then has increased the central role that Colombia plays in the Andean cocaine trade. Reinforced by substantially greater coca production in Colombia, Colombiancontinue to process most of theinished cocaine. Smaller, less powerful trafficking gn-ups have emerged since the powerful Call drug lords were imprisoned. While becoming less dependent on Peru and Bolivia for supplies ofcocaine base. Colombian traffickers have greater eipertise, more capital, and belter overseas networks thim emerging nvals from Peru and Bolivia. This new generation of Colombian trafficking groups maintains lower profiles, focuses on limited aspects of the drug trade, and forms more ad hoc alliames that make them more difficult law enforcement targets. In addition. Colombianhaw adjusted their routes and method* for moving cocaine.
International crime groups from outside the Western Herm'spherc involved in drug trafficking, particularly Italian. Russian, and Nigerian syndicates, have increased their presence in Brazil. Argentina, and
Paraguay to take advantage of these countries' well-developed transportation and commercial connections to Europe and Africa. Asian cnminal groups appear to be involvedetwork of smuggling andenterprises in the "tri-bordcr" region of Brazil. Paraguay, and Argentina. Some foreign criminalhave alsooothold in South America's money laundering, gambling, racketeering, alien smuggling and trafficking in women, and auto the It crimelocal crime groups dominate most criminalhe6 UN study estimatedillion is laundered through Brazil annually from drug trafficking and contraband trade.
The Southern Cone countnes have been hard pressed to cope with rising enme rates and criminal violence. Cnminalily is most severe in Brazil, where the illegal import of lircarms, used frequently to protect turf and resolve disputes with rival crime gangs, and rising street crime, kidnappings for profit, and dnighave exacerbated social tensions. Allegations of criminal corruption have contributed to politicalor crises in several countries, including Brazil, Argentina, and Paraguay
The Caribbean
The Caribbean has longajor transit route for cocaine, marijuana and more recently smallerof heroin moving from South America to (he United Stales and Europe It is also an avenue for smuggling illegal migrants and other contraband, including arms. The Caribbean's vast stretches of open water and thousands of islands andnumerous for law enforcvnicnl lo effectivelyafford drug traffickers and other smugglers many and varying transshipment routes. The Bahamas alone hasslands and moreays.
About one third of the cocaine entering the United States transits the Canbbean, according to USestimates.
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a is the largest exporter of marijuana in ihe Caribbean and has vv ell established network* of crime gangs wilh ties io both Colombia and the United Slalcs.
Puerto Kkorimary target of drug-trafficking flows in the Caribbean because of its central location astride ihe ihree major trans Caribbean smugglingirectly from South America, taough the Hispaniola countries of Haiti and the Dominican Republic, and through ihe Lesser Antilles islandnd iu attractivenessoint of entry into the United Suies. Puerto Ricoajor commercial transit center in the Caribbean, with moreons of cargo handled in San Juan alone each year. Once drug shipments or any contraband have been smuggled into Puerto Rico, they have entered the United States and can be moved to the mainland by commercial ships and planes generally not subject lo US Customs inspections.
Colombian traffickers are the promincnl driving force in moving drugs through theDominican trafficking groups dominate the transportation of cocaine and heioin from Puerto Rico to live US mainland, Their lies to Colombian tiaffk'kers. direct conneciions lo the Dominicanprimary staging area for druginto Puertoassociations with Dominican criminal cells in major US easternmarkets make them uniquely positioned lo perform this role.
Drug traffickers and other international criminals also use offshore financial service centers in the Caribbean lo launder their proceeds Caribbean-based offshore and onshore banks, oust companies, mtcrnational business corporations, casinos, and Internet gaming establishments are used by drug traffickers andand Italian organized crime groups Io launder illicitly derived funds Many Caribbean financialwhich were once characterized by strictly enforced bank secrecy legislation, have passed strong legislation that criminalizes money laundering related lo drug trafficking and other crimes. Nonetheless, Panama and four Caribbean countries account for
one-third of the IS countries and lemioncs listed by the FATF as non-cooperaiing in combating money-laundering
Interna*tonal criminal activity in the Caribbean has inculcated an crrvironment of widespread corruption, and most Caribbean island nations have weak law enforcemenl capabilities. Because Caribbeanhave economics reliant on financial services or tourism and gambling, they are particularly vulnerableigh-level criminal influence. Faced with fewalternatives to these industries and iheamounts of illicit money that typically help lo sustain ihem, few Caribbean islands have the resources or legislative framework to fight money laundering through internet gaming esublishnsents and effectively control economic citizenshipPowerful local criminals also rely on bribes and strong-arm tactics to supplement their economic clout
Central America
The Central American isthmusajor corridor io Mexico for the movement of US-bound illegal aliensignificant avenue for drug shipments ll is also an avenue for arms shipments of weapons slocks from previous conflicts in Guatemala. El Salvador, andto Colombia. Alien smugglers and druglake particular advantage of the all-weather Pan-American Highway thai runs the length of ihe isthmus from Panama into Mexico, bypasses virtually all of the region's major international airports, and is withinilometers of most of Central America's major seaports on Ihe Pacific Coast To improve their odds of vuccess. smugglers otien fan out from the highway when approaching border points and cross in remote locations where inspeclion is mote lax orAirlines operaiing in Central America have extensive routes to South America, offering attractive options for drug traffickers and alien smugglers alike. The many miles of unpatrolled Caribbean coastline in Central America, as well as several commercialhave long been inlegral to maritime druginto the region. Guatemala is the primary staging
Cuba: Emerging Criminal Hub in Ihe Western Hemisphere?
Economic and,esser extent, political change in Cuba may make theajor hub for criminal activity in the near future. As the Cuban economy becomes more liberalized and tourism increases, international organized crime groups would probably
view Cuba as an attractive location for criminalparticularly if the Communist regime collapses and restrictions on travel are lifted. There are many favorable conditions in Cuba that couldfacilitate Ihe penetration and growth of organized crime.
Cuba's geographic position astride Caribbean sea lanes between South America and the United Stales and its close proximity to US shores make it ideally situatedotential hub for contraband smuggling. Its seapons alreadyignificant volume of commercial maritime trade with South America, Europe, and Africa.
Drug traffickers in the past have flown through Cuban airspace to make airdrops to Florida and The Bahamas.S, Colombian authoritiesetric-ton shipment of cocaine bound for Spain via Cuba, indicating the possibility that Colombian drug traffickers have been using Cubaransshipment hub.
area for moving both drug* and illegal migrants into Mexico, from where they are smuggled across ihe US border.
ositionrossroads between theand Pacific Oceans and between North and South America, and its modern and vibrant international trade and financial sectors, makes it one of the most attractive sectors for criminal activity in the Western Hemisphere.ajor hub of commercial activity. Panama has long been an important transit site for drugs smuggled in commercial rnantimc cargo and a
major offshore center for laundering criminalModern seaports adjacent lo Ihe Colon Free Zone and ai the Pacific end of the Panama Canallarge volumes of containerized and bulk cargo and are important terminals for transshipping Colombian cocaine in and out of Panama. Trafficker perietration of ihe shipping industry, corrupt port and Colon Free Zone authorities, and extensive use of front companies facilitate drug shipments. Drug traffickers and other criminals give significant priority to courtingand government officials, as well as executives in the financial sector.
As illegal migration from Latin Arnerica to the United Slates has increased. Panama's accessibility from South America has helped makeey transit poini for regional alien smugglers. According to USdata,0 northboundincluding Ecuadorians, Peruvians, Colombians. Dominicans, Chinese, andPanama annually on their way to the United States. Dozens of alien smugglers are entrenched in the country, where they exploit porous borders, corrupt officials, and lax inspections by immigration authorities and airlines.
The huge volume of financial transactions handled by Panamanian banks has madeignificantmoney-laundering cenler. Panamas dollar-based economy, robust offshore banking andsector, and extensive use of cash in ihe loosely regulated Colon Free Zone allow money laun-derers to conceal the origin of their funds.
The value of the import/export trade turnover in the Colon Free Zone alone is estimated by trade journalsillion annually The amount of moneyin the Colon Free Zone has been estimated4 billion annually, much of it through the black-market peso exchange.
Money-laundering investigations in Panama remain hampered by their complexity, the amount of time and resources required, and by inadequate anti-money-laundering legislation, which requires prosecutors to
lie money laundering diioctly lo drugnclusion on the multilateral FATF rHmcoupcralivc listhe new Panamanian administration has passed new legislation expanding ihe list of predicate crimes and pennming Panama's financial analysis unit to share information with other countnes.
After Mexico. Central America is by far the largest source of illicit migration to the United Stales. The US Government estimates thatS-bound migrants originate from or transit through Central America annually before entering Mexico en route to the US border. This is equivalent to about two-thirds ofon-Mexican illegal migrants who enter the United States each year.
llegal migrants being smuggled through Central America on their way to the United States arc native to the region. Most are fromHonduras, and El Salvador, which have large immigrant communities in the United States thatull factor by verifying the availability of jobs, providing housing upon US arrival, andremittances to family members considering immigration.
Because alien smuggling networks are able lowith virtually no constraints in the region.America itajor gateway into Mexico and on to the United States for illegal aliens from outside the region. The US Government estimates thatS-bound migrants fromrom South America.
romrom India, and the remainder from other Asian, African, and Middle EasternCentra! America each0 Chinese passing through Central America and Mexico account for about one-third of the00 illegal Chinese migrants estimated by the US Government to have heen smuggled into Ihe United States
The Central American countries, along with Mexico, the Dominican Republic, and Colombia, are primary source countries for women and children trafficked throughout Latin America and to Western Europe, especially Spain
Most US-bound illegal migrants from outside the region arrive in Central America by air, mostly on flights from Soulh America. Several of theirlines regularly carry illegal migrants. Smugglers take advantage of corrupt employees, lax controls, and the extensive air service offered throughout theby these airlines. Many Chinese migrants are brought to Central Amcnca hy freighters; the USestimates that several thousand Chinese arrive by boai directly into the Central American region each year.
Alien smugglers in Central America rely on the Pan American Highway as the main route for transporting their clients into Mexico lis ready access to the coast and to mternatiooal airports helps facilitate the erfi-cieot movement of US-bound illegal migrants corning from South America or Asia Boats are some times used by smugglers to bypass pan of their overland journey', particularly across (he Golfo dc Fonseca between Nicaragua and El Salvador and beiweenand Mexico.
In the last four years, neatly one-third of the South American cocaine iraniported to Mexico to beacross the US southwest border transited through Central American countries, according to USestimates. Central America's importance has grown as drug flows to Mexico through the western Caribbean to the Yucatan Peninsula have declined in recent years because of increased maritimeefforts- Panamanian sea and air ports are pivotal entry points for drugs entering Central America, but South American traffickeis also deliver cocaine by
boat lo remote beaches and harbors on both the Pacific and Caribbean coastlines. Colombian traffickers own rnost of the cocaine transiting Central America but rely on regionalanitations to arrange and coordi-nale overland transportation of drug shipments to Mexico.
Poorly policed border* and corrupt officials, some at the highest levels of government and law enforcement, are routinely exploited by drug traffickers and alien smugglers operating in Central America. Relatively low pay and standards of living lor law enforcement officers and overburdened police and judicial systems allow drug traffickers considerable room for rruuieu-vcring. Corruption involving alien smuggling is pai ticularly widespread, because most officials perceive they are committing no crimes against their ownsince the migrants are only transiting en route lo the United States. Corrupt officials in the Central American countries accept handsome bribes to assist alien smugglers by providing legitimateactively facilitating the movement of US-bound illegal migrants through airports arid border crossings, orlind eye to such activities.
While most Central American governments are instages of boosting Iheir antidrug efforts, they are generally reluctant lo deal wim the problem of alien smuggling through their countries Instead, press reports show thai the regions governments tend to view the flight of poor citizens to the United Stalesay to relieve pressure on their economies anda source of revenue for families in the form of remittances. Moreover, US-bound migrants from within and outside Central America may be seen as helpfulbeir economies because Ihey fill hotels, buy food, clothing, and supplies, and use transportation services.
Central American Allen Smuggling Networks
There arc no major organizations or cartels thator dominate alien smuggling through Central America or any particular country.S-hound migrants thai arc estimated to move through Central America are handled by several hundredsmugglers who cooperate in loosely linked networks stretching across themall number have extensive networks throughout Central America. Most smugglerspecificone or twowhich ihey pass clients in other smugglers or guides known asalher lhan accompanying or having control over them for the full trip imo Ihe United States
S Government estimates lhai alien smuggling networks in Central America gcneraie up lo Siin gross annual revenue
Almost all Central American alien smugglers rely on widespread, illicit partnership* with agents in the travel industry to move their clients ncmhwurd. Travel agencies, many of which arc owned and operated by ihe smugglers themselves, arrange tickets and provide cover for groups of aliens moving through ihe region. Hotels and safchouses serve as rest .stops andpoints on each leyypical smuggling trip. Bus lines and rental cat companies provideAlien smugglers also depend on corrupt officials io obtain travel documents or lo facilitate theof US-bound illegal migrants across borders.
Some alien smugglers in Central Arnerica specialize in moving US-bound illegal migrants from Asia,China and India. Ihey serve largely as regionalassociates in Asia, Southand Ihe United Stales that oversee the movement of US bound illegal aliens through Central America. Unlike most of the other smugglers who organize alien smuggling runs on an ad hoc though frcoueni basis, ihcse specialists lend lo operate pipelines in
which people movement* are preplanned andCareful planning is essential because [hey must coordinate arrangements with the arrival of boats, from which their clients iirc often off-loaded offshore rather than in port, and flights carrying illegal migrants.
A rcgionwide law enforcement effort against alien smuggling inesulted in Costa Rica's arrest of Gloria Nino Canales. who headed one of Central America's largest migrant-smuggling networks.
Mexico
ilometer border with the United States, Mexico historically hasideaway for bandit*taging area for cross border smuggling. Terrain features ranging from the easily crossed Rio Grande to expansive stretches of remote, nigged, and inho*pitaMc desert along the US southwest border have long been used by migrants and contraband smugf lcrs to move back and forth across the border illegally. The urban sprawl ihat straddles both sides of the border in twin cities like San Diego-Tijuana and HI Paso-Juarez has complicated theddition, inadequate law enforcement coverage of remote regions allows criminals to fly small aircraft or land small boats in US territory urinoticcd. Multiple juris-dictions on both sides of the border further complicate organized, coherent efforts lo control the border.
Criminal activity across the US southwest border has been aided by the increased volume of legitimatecomparatively lower industrial wages that attract US manufacturing firms, and expandedtrade agreements. The substantially increasedof trade between the Uniied States and Mexico resulting from NAFTA, while greatly benefitingbusiness interests on both sides of the border, has also generated greater opportunity for traffickers smuggling drugs, as well as illegal migrants and other conliaband. across the US southwesttcn-sive legitimate commerce and traffic make the border between the United Stares and Mexico the busiest in the world.
The tremendous amount of legitimate commercial traffic thai crosses the borderaily basis makes effective interdiction an even morehen NAFTA went into effect, according to US Customs information, the number of commercial trucks legally crossing theborder has increased by more thanercent, and the number of nukars entering the United Stales has increased aboutercent.
According to USillion people,illion automobiles,illion trucks andcars entered the United States from Mexico throughfficial points of entryexico is the United Slates' second-largest trading partner, with more0 billion of legitimatetrade crossing the US southwest border each year.
Powerful Mexican drug-trafficking organizations exert considerable influence on the Mexican side of thewhere ihey use bribes and violence in effort* to corrupt or intimidate police officials and private busi-ncsvmen into allowing them to operate with limited constraint. They lake advantage of ihe tremendous volume oforder trade lo smuggle cocaine,marijuana, and methimpbetaminc into the United Stales
More than half of ihe cocaine smuggled inlo the Uniied States comes across the southwest border with Mexico.
Mexican traffickers have also come to dominate mcUiampoetaminc production and distribution in the Uniied States, which had been controlled by outlaw elements in US motorcycle gangs.
Besides drug smuggling, Mexican criminal groups are involved in illegal alien smuggling, product piracy, and cross-borderthe United Slates intostolen vehicles, firearms, tobacco, alcohol, and other contraband. Mexico hasey way station in the pipeline of illegal migrants, including large numbers fiom Asia, traveling from
Soulh and Central America to the United States.alsoroblem with businesses violating patent and trademark protections. From January toexican authorities4 million pirated goods, up6 million pirated items seized in all
Mexico it ihe top money-laundcnng country in Latin America. Mexican drug traffickers reportedlymuch of their profits in bulk cash shipments directly from die United Stales to Mexico and launder funds using money exchange houses along the US-Mexican border, Mexican banks, stocks andmarkets, and other financial institutions,funds have been used by Mexican cnminal kingpins to invest in Mexico.
Cross-border currency smuggling continues to be linked to both Mexican and Colombian drug money laundering, according to US law enforcement. There is evidence that dollar-denominated non-negotiable monetary instruments are being exported to Mexico from the United Statesay to avoid large bulk movement of paper currency across the border.
Despite progress in Mexico's nationalcontrol policies andecent law enforcement initiatives indicate there are continued problems involving Mexican financial insuiutions.
The power and influence of Mexican criminalarcigrufjcaal political and economic impact in Mexico. Law enforcement and pressclearly indicates that criminal violence -including between rival drug-traffickingfor profit, carjackings, and extortions have increased in rccenl years, making Mexico's rising crimeajor political issue. Drug violence has been3 killing of the Archbishop in Guadalajara, gunned down inbetween rival drug-rraffickingo killings of law enforcement officials, to small-scale massacres in vendettas by one drug trafficking or cnminal group against another
major concern is the potential threat posed byviolent drug traffickers based in Tijuana
Mexican Drug- Trafficking Organizations
The Mexican drug-trafficiing organizations thaicocaine movements through Mexico and are major distributors of cocaine, heroin, marijuana, and methamphetamine in the United States continue to grow. Powerful Mexican trafficking organizations receive up to half of each Colombian cocainemoving through Mexico as payment for asmuggling operation, according to DEA. They also appear lo hose increasedouiriehl purvhases of Colombian cocaine and have taken other measures to assert their independence from Colombian traffickers.
The Mexican drug trade is controlled by severaltrafficking organizations, most notably theFelix organization and elements of the Carrillo Fuentes organization, which split into jactums since the death of drug lord Amado Carrillo Fuenteshese drug trafficking organizations control most acquisition and transportation of drugs through Mexico and us trafficking across the IIS border. The Arellano Felix organization is considered by US law enforcement official* to be the most ruthless anddrug-trafficking organization in Mexico.
Mexican drug-trafficking organizations are most likely loaa-and-see attitude toward the new reform-minded aanunistration of President Fox.
and Juarez not only to Mexican rivals and law enforcemenl officers, but also to US enforcement officers operating on the US side of the border.
Widespread corruption associated with the drug trade has challenged the Mexican Government'* ability to operate effectively. Corruption has certainly impaired Mexico's ability to target major drug traffickers. In several high-profile cases, senior officials, including the former Mexican drug czar, and police officers have been implicated in drug-related corruption.
The fundamental change in Mexico's potilkulcaused by Vicente Fox's election followingear* of one-party rule presents an opportunity lo attack corruption. Fox has callednationalromised to launch an aggressive campaign against Mexico's drug traffickingions, and proposed changes to federal lawagencies that would restructure the country's antidrug forces. Nonetheless, rooting out corrupland reversing ingrained patterns of iiisiitutional corruption will be difficult and meet significant bureaucratic and political obstacles.
United State*
The same factors of size, population diversity,strength, modem business and transponaiion infrastructure, and legal protections that make the Uniteducrative target for internationalprovide an environment thai supports and sustains international criminal activity origlnaling In this coun try and extending well beyond US borders:
Continental breadth and extensive Atlantic and Pacific coastlines make the Unitedrading crossroads to Europe, Asia, and the rest of theadvantage exploited by international criminals as well as by legitimate commercial and financial businesses.
Both foreign and domestic crime groups arc able to mask their criminal networks and activities within the broad ethnic diversity of the US population.
With the world's largest and mostigh standard of living, the United States provides numerous opportunities for lucrativeventures.
International criminals operaling in lite United Slates also take advantage of the world's mosttelecommunications, transportation, andsystems, extensive legal protection of intellectual and real property rights; and policies and Laws thai promote the free exchange of ideas and products that have contributed to the US global dominance as an economic and commercial power.
Although the investigative and enforcementand effectiveness of US lawonsiderable threat to organized crime, international criminals using the United Statesase of operations gamble that the legal protection of individual liberies and due process in thisand the integrity of the US judicial system will reduce their exposure and risk.
The United Statesone of the world's leading sources of contraband luxury gcxxK. firearms, tobacco products, and alcohol smuggled and sold overseas. Both US and foreign enme groups operating in the United States are involved in rackets stealing cars and other high-priced items and illegally shipping them out of the country. International criminal groups profit from evading import and other (axes in countries of destination and selling them below retail price tounwilling to pay exorbitant markups and taxes in the legitimate marketplace. The smuggling of US-produced firearms to other countries isignifi-cani international problem; the United States is asource for criminal groups involved in the international smuggling of fircanns because there are fewer restrictions on manufacture and sale of firearms than in most other countries
The tieinendous volume of goods entering and leaving the United States in Icgilimmc trade provides criminal groups with unparalleled opportunities to smuggle contraband tlirough US ports to overseas destinations. In addition tooint of origin for contraband smuggled overseas, the United States is used by inter-nauooal criminalsransit country for contraband being shipped from one foreign destination to another Iniernational criminals know that containers arriving from the United Stales are less likely to arousein rnost destination countries. According to the US Customs Service, more lhanillion standard shipping containers entered the United Slates by man-time, rail, and Iruck transportosl of which
contained producis for the US markeL Somehowever, transited in bond to other countnes, cnminal* uansshipping contraband through US pom seek to hide the true country' of origin of contraband products and hope to avoid ngorou* US customs
Whik the United States is the world's leading importer of illicit drugs, it isajor source of illegalof which arc smuggled overseas. The United States is one of the world's leadingof marijuana, crack cocaine, and rnethamphet-aminc.
Latin American drug traffickers acquire many of the precursor chemicals they require for producing cocaine and heroin from US sources They rely on US chemical sources of supply because the distance and transportation required to ship often unstablearc shorter and more reliable than from otherMost of these chemicals are produced legally and cartoned overseas legally to legitimate users. Despite the enactment of sweeping US andchemical control regulations, however, many chemical shipments are diverted from licit channels for use in the manufacturing of illegal drugs. Drug traffickers establish front companies,btain dealer licenses for chemical transactions, or acquire precursors through corrupt officials incompanies.
In an effort to evade US bMenhcnon. foreign drug-trafficking groups typically import chemicals into neighboring countries in an attempt to disguise their purpose and destination, before diverting andthe chemicals to their drug-producing Ubora lories.
Despite strict regulations and cunrncy reporting requirements, the Untied Sl3ies continues lo be attrae-tive international criminals seeking tooney because of the cornplexity. strength, andof the US economy and financial system. Some international criminals exploit priviue or personal banking services lo establish accounts for money laundering purposes. The wide vanety of nonbank financial institution* that are more difficult for US law enforcement to monitor for illegal activity provide
laundcrrrs with many different options to dispose of criminal proceeds. These include brokers and dealers of securities, money order vendors, casinos, money transmitters, check cashiers, change bureaus, and the US Postal Service. Many fnicign crime groups,latin American dnig-trafficking organizations, use illicit proceeds to purchase consumer goods in the United Staies. which arc then exported to their home countries for sale in the local currency. Moreover, international money laundcrcis operating in the United Stales are increasingly using professional facilitators such as accountants, notaries, lawyers, real estatend brokers to mask the origin of tainted funds.
US Crime Croups Abroad
Some US crime groups have established cells andin foreign countries, and are engagedide range of criminal activities In many' cases, the US crime groups use their overseas networks to acquire drugs and other illicit contraband or to prey upon US businesses, as they do in the Uniiedw enforcemeni authorities in uther countries also report that US crime groups are involved in moneyextortion, prostitution, drug trafficking, firearms smuggling, car theft, street crimes, and contract murders
* The most notorious US crime groups operating overseas arc outlaw elements of motorcycle gangs, according to US law enforcement agencies. Some of the0 motorcycle gangs that have been identified as having outlaw elements by US law enforcement have worldwide chapters and are expanding into other countriesignificant rate. The increasing overseas presence of US motorcycle gangs, together with their cnminal members"in associate with other crime groups to further Iheir criminal ends, arc causing increasing concern among law enforcement authorities around the world. Law enforcement authorities in countnes where mcaorcycle gangs have establishedindicate that the motorcycle gangs areinvolved in organized crime and have
pajTicularly bad reputations for violence, property crimes, prostitution and extortion rackets, andin drugs and firearms.
According to US law enforcement agencies, the old est and largest organized crime group in the United Stales, La Cosa Nostra, has extensive interriational connection* La Cosa Nostra has been historically linked to the Sicilian Mafia and other Italianorganizations, particularly for smuggling heroin ud contraband into North America and firearms and cocaine to Canada and Europe. Some La Cosa Nostra members are involved in internationalactivities, and the crime group controlsoffshore casinos and Internet gambling sites. La Cosa Nostra's influence and control over certain labor unions in the United Stalesar-reaching iiTlpact on some international commerce Mcveover. La Cosaextortion and fraud scTtemes directed against US businesses may extend lo uSeir foreign operations. la Cosa Nostra launders illegal proceeds through offshore banks in ihe Caribbean, as well as through European and South American financial institutions and businesses Of particular concernLa Cosa Nostra involvement in illegal slock market fraud and stock manipulation, which affects international imestmetitr, and has theto destabilize US financial markets.
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Chapter IV
Consequences for US Strategic Interests
Consistent wilh (he priority of protecting the Uses, property, and livelihood of US citizens at home and abroad, the United Stalesundamental strategic inicrcsi in supporting democracy and free markets aiound Ihe world. These are critical factorsglobal political and economic stabilityworldwide criminal activity and the growing power and influence of organized crime groups arc significant threats to democratic institutions and free market systems in many countries and regions. Ernerging democracies engaged in wide-ranging reforms to meet these objectives, including ihe former Soviet Union and Eastern Europe, arc mostOrganized crime threatens democratic and free market systems, as well as vital US nnlional interests, by:
crime and societal problems. The
activities of organized crime groups underminevalues, lead to increased enme rates, and raise social expenditures. Crime groups seek io establish and enlarge local rrutrkets for drugs and other illicit contraband that cam substantial profits, whichlo police corruption and street crimes. The social consequences of these activities can be severe: they include drug addiction, violence,and financial fraud crimes, decreased respect for legitimate authorities, and increased medical and social welfare costs.
public officials. Although criminal groups rarely organize politically, they can and do gain considerable power over politicians andofficials through corruption and theinfluence they exercise. Criminal groups cultivate and rely on corrupt political elites,officials, and law enforcement and security' personnel io protect their operations and to provide cover for expanding their activities, often into the legitimate economy. They use their leverage totheir illicit operations from public scrutiny and law enforcemenl pressure; to push for legislative and
adininislmlivc regulations favorable to ihcir criminal business interests; and to gain insider access and information to government economic strategy and plans that give them an unfair advantage overbusiness competitors.
the integrity of democraticCorruption of public officials inevitably erodes the integrity of oenjocratic instituiions. including legislatures and judiciaries Criminalattempt to manipulate political and legal systems to their advantage. They use illicit proceeds to help fund Ihe campaigns of preferred candidates or lo buy votes in ihe legislature in efforts lo protcci their safely, freedom, and criminal operations.influence in the legal system may short -circuit law enforcement investigations, preempt prosecu-lion v. prevent com idiom. or preclude longDamage lo use lniegmv of democratic political and judicial institutions undermines their crcdibiliiy and erodes public support for democracy.
the legitimate economy. Through investments in legitimate enterprises, cnrninalcan gam substantial interests in. or even control over, critical sectors of the nationalCriminally controlled or influenced businesses have ready access to considerable amounts ofcapital to invest in productive enterprises, an advantage legitimate businessmen do not have. Such unfair competition may put legitimate business enlerpnvesompetitive disadsantagc. Criminal groups lend to invest more in high-volume cash flow businesses that provide good cover for money laundering or contraband smuggling. Business
enterprises influenced or controlled by criminal groups also put them in position to "steal" legitimate government and business revenue. Moreover,controlled by organized crime frequentlycost overruns or demand kickbacks in sectors such as public works projects.
Ike credibility of banking and financial
institutions. The use of banks and financialto launder money and for other illicit firtancial transactions undermines theit credibility. Poorly capitalized banks established by criminalweaken the banking system and may increase the likelihoodajor domestic financialeakened banking system increases the danger of domestic liquidity crises and can magnify the impact of foreign financial shocks on the economy. These developments can undermine confidence in afinancial system, leading to extensive capital flight and depriving the country of imestrnent resources. If the financial system is closelyinto global financial markets, the nsk ofcrisis spreading lo otherincreases.
support for democratic and freereforms. In countries wuh weak or developing democratic institutions or transitioning economics, like Russia, the NIS, and several in Eastern Europe, the intersection of organ! ted crime with corrupt political elites can erode the public credibility of reforms and prevent democratic and tree marketfrom being consolidated and institutionalized. The general public feels it has no stake in political and economic reforms when reforms appear toorganized crime, unscrupulous businessmen, and corrupt pouucians and government officials, rather than aiding citi/enc Kiting enmc and societalintensify public disillusionment. Loss of faithewly democratic goverrunent's ability to cope with the power and influence of cnminal networks and corrupt officials may result in stronger political support for antldemcxrratic hardliners.
some countries to become "safchavens" wherecan operate with virtual impunity. Criminal groups rely on safchavens av staging or transit areas for moving illicitdrugs, arms, and illegal immigrants -and for laundering, hiding, or mvesung their illicit proceeds. They also use these countries' financial and commercial sectors to arrange illicit financing of criminal activities and lo broker prohibited transactions, including those for regulated and proscribed materials and technologies of interest to states of concern or terrorist groups. Countries that limit extradition, do not recognize the relevance of some US laws, or that have no legalto deal with some criminal activities are often home to cnminals seeking to evade justice in the United States and other countries their criminal acts victimize.
Weak financial regulatory systems, lax enforcement measures, and high-level corruption arc key factors that make certain countries fiaiticularly altractive to international criminals as sufchuvens.
In some cases, state-sanctioned criminality andmay be so corrosive thai the country itself hasather lhan serve the public interest, die top leaders in such countries use the resources of the state solely to enrich themselves and keep themselves and their cronies in power Ruling their countnes asersonal businessklepiocratic leaders exploit the most profitable areas of the national economy for personal gain, often resulting in losses for the state treasury and sometimes impovenshing the country. Grots corruption aimed principally at enriching the political leadership leads to distorted economic decision making thatound economy. Kleptocralic governments also set the stage for social and political upheavals.
Nigeria under Abacha, /aire under Mobuto,under Sochano, and ihe Philippines underarc examples of kleptocralic slates. All of these
The Problemrimin.il Safchavens, Kleplocracies, and Failed States
Increasing power and influence of criminalover political and economic structures may cause
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leaders used their authority to exploit theircortomic resources for personal gain and demanded sizable kickbacks as the cost of doing business. They amassed tortunes worth billions of dollars, but also sowed the seeds that led to their downfall.
Unconstrained criminal activity may so corrupt and compromise the integrity of law cnforcemeiit and other government institutionsountryailed state- iacapabk of meeting many of the accepted standards and responsibilities of sovereign contnil over its territory. In failed states, government institutions responsible loi law enforcement,public older, or icgulating the financial sector have broken down to such an extent that they arc unable to maintain rule of law or to develop sufficient political motivation to act against criminal groups and activities operating in the country. Their governments are unable or unwilling to fulfill internationalthai would help prevent their countries from becoming major bases for global crime. The failure of institutions lo fulfill the public responsibilities expected of them and any substantial breakdown of the rule of law may lead to significant economicand political unrest that threatens both inter nal and regional stability.
The international scope of the global crime threatremium on bilateral and internationalto prevent organized crime, drug trafficking, and terrorist groups and other cnrninal networks from establishing secure bases of operations Withoutlaw enforcement throughout the international community, criminals will continue lo threaten US
interests, as well as those of other democratic and free market countries, simply by conducung their activities from, and through, those jurisdictions where law enforcement is weak The absence of effective law enforcement or political willingness to grapple with the problem in countries that are salchavens or failed states precludes effective counierdrug and law enforcement cooperation wilh the Umied Slates and other countries, stymies US efforts to enhancemeasures against money laundering, corrupt business practices, and IPR violations, andbroader US political and security interests
Increasingly, however, many governments incriminals are exploiting as safehavens areto realize the far-reaching consequences of international criminal activity in their countries. In particular, in an increasingly global economy where any one country's economic growth and prosperity areignificant degree dependeni on interna tional trade addrere c> merits recognize that criminal activity can undermine the credibility andof their country's financial and commercial sectors, which is bad lor business and ihe economy.
Chapter V
Future of International Crime
riven by globalization and the erosion of slate authority, the international criminal threat to US interests is most likely to be more diversified and impact even more directly on US strategic interests. The extent and magnitude of the problem will depend cm the global political and economic conditionsat the time, the extent and effectiveness of measures taken to reduce societal or systemicand the degree to which national lawand security institutions around the world develop appropriate cooperative mechanisms enabling them tointernational criminals will be ablethe parameters of nationaland legal jurisdktions. For example
A radical breakdown of the Communist system in China could intensify the influence of Chineseorganization' within China's rx>blical andsystems andafehaven for expanding cnminal operations abroad
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iccments to protect the security and integrity of electronic money transfer and financial transac Hons systems could make it more difficult fororganizations to defraud banks, financial institutions, or individuals or to manipulate financial and commodities markets.
Flexible bilateral and multilateral agreements thai allow US law enforcement agencies to pursueand time-sensitive investigative leads in foreign countries with minimal impediments could helpcriminal organizations from operating across international borders with virtual legal impunity.
Globalization and technological innovation willto change the nature of organized crime. While large criminalorganized crime groups like Solntsevo, Italian criminal groups like the Sicilian Mafia, ethnic Chinese criminal groupstriads, and others- will remain powerful players with worldwide networks, law enforcement agencies probably will also be forced to copeery large number of highly skilled criminal entrepreneurs whose activities can have farfASE
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Individuals or small groups empowered by high-tech computer skills and telecommunications capabilities may be the future wave of intranational crime. They would not require the infrastructure or protection of large criminal syndicates to mastermind andwide ranging and sophisticated schemes in Ihe commercial or financial arenas to gain substantial illicit revenues Through electronic theft ormanipulation of markets, individuals or small crime groups could cause substantial public and private-secior losses, potentially even undermining the intcgni) of the institutions they target andiiuiket stability.
for the same reasons, large organized crime syndicates may well be evenhe trend of greater cooperation among cnminal organizations al (he end ofentury may be replaced by one in which largeenmethey havenetworks and employ highly skilledable to produce or acquire, move, market, and distribute drugs and otherwithout any reliance oo outside criminalor crime groups.evelopment could mean the end of the dominance of latin American drug-trafficking "cartels" as olhcr criminal groups gain the ability to acquire and traffic cocaine from Latin America oo their own.
criminal world0 may be populated by large interactive networks of smaller, independentations who cooperate on the basis ofadvantage. Cnmc groups within thesewould specialize in specific activities, irading or selling expertise as befits uieir criminal interests or criminal joint vcoiurcv
Criminal jjroups are also most likely to takeof scientific and manufacturing advance* to produce new synthetic drugs or more high quality counterfeithigh-techthai may find their way into commercialor military programs. Successful
eradication efforts against narcotics crops may spur cnrninal organizations to exploit scientificadvances to produce synthetic heroin and cocaine for the illicit drug market.
Drug trafficking, alien smuggling, contrabandthe trafficking of women and children, and many other traditional criminal rackets will continue totaple of organized crime groups worldwide.owever, organized crime groups arc most likely toreater threat with regard to security issues that directly affect US strategic interests.
crime groups that have access toweapons arsenals mayar morerole in brokering illicit aims transactions for foreign armies, militias, or insurgencies, displacing the brokers and businesses that dominate today's gray arms market. They may alsoiable alternative to independent brokers and frontby establishing sophisticated acquisition,and financial networks to facilitate the evasion of US or international sanctions fry rogue regimes and terrorist groups.
far the threat of organized crime involvement in acquiring and trafficking nuclear, biological, or chemical weapons of mass destruction has been more potential than real. This potential may beby the end of the decade if the political andclimates in countries both possessing and seeking WMD capabilities changed lo makesuch transactions more practical and less risky.
International criminal groups will keep pace with changes in technology and die world economy to enhance their capability in traditionalime activities and to move into new criminal business areas. Advances in compuicr and financial technology will increase Ihe anonymity and speed of commercial and financial transactions, offering criminals more efficient and secure ways to smuggle illicit drugs and contraband, penetrate legitimate businesses, andand move money.
They also may be able io cause significantio financial systems. Criminal organizations may be capable of financially exploiting orgovernment, law ertforccment, banking, orcomputer systems they are able to peneuaie, undeimihmg public services and theof government and private institutions.
regional integration and worldwideof national economics will make it easier fur criminal organizations to Operate on anscale and blend their operations inioeconomic activity. Improvements in transportation infrastructures and modalities tointernational trade will increase the volume, speed, and efficiency' of smuggling and commercial transactions by international crime groups.
Many countries are likely to be at risk of organized crime groups gaining significant leverage or evenover political and economic systems. Criminal organizations arc likely to penetrate troubled baititing and commercial sectors. Unscrupulous politicians and political parties may align themselves with criminal organizations for financial and other support. Once in office, they arc likely to have difficulty constraining the activities of organized crime. Organized crime groups themselves may promote their own political agenda as the price of support
world0 may see the emergence ofstates" that are not merely safehavens for inter-national criminal activities, but support thematter of course. The involvement of "criminal states" in the community of nations couldinternational finance and commerce andeffective international cooperation against organized crime. Criminal stales" may also adopt the political agendas of states of concern andgroups, thereby weakening US political,and security interests around the world.
nternational criminal groups are most likely to be particularly proficient at exploitingnetworks upon which all modem government, puhlic, private, and financialjp'p^tjlJTiTj FOR RELEASE
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