Chapter I

Contents

Global Context of International Crime

Implications of a Changing World

Growing Global Reach of Organized Crime Groups

Greater Sophistication of Criminal Organizations

Insurgency and Extremist Group Involvement in Organized Crime Activities

Corruption and the Political-Criminal Nexus

Institutional Shortcomings

Global Context of International Crime

Implications of a Changing World

Law enforcement officials around the world have reported a significant increase in the range and scope of international criminal activity since the early 1990s. The level and severity of this activity and the accompanying growth in the power and influence of international criminal organizations have raised concerns among governments all over the world--particularly in Western democracies--about the threat criminals pose to governability and stability in many countries and to the global economy. International criminal networks have been quick to take advantage of the opportunities resulting from the revolutionary changes in world politics, business, technology, and communications that have strengthened democracy and free markets, brought the world's nations closer together, and given the United States unprecedented security and prosperity:

• Post-Cold War landscape. The end of the Cold War resulted in the breakdown of political and economic barriers not only in Europe but also around the world. This change opened the way for substantially increased trade, movement of people, and capital flows between democracies and free market countries and 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 to superpower rivalry in other regions of the world, encouraging movement toward peace and more open borders. These developments have allowed international criminals to expand their networks and increase their cooperation in illicit activities and financial transactions.
• Economic and trade liberalization. Increasing economic interdependence has both promoted and benefited from reforms in many countries opening or liberalizing state-controlled economies with the intention of boosting trade and becoming more competitive in the global marketplace. Criminals have taken advantage of transitioning and more open economies to establish front companies and quasi-legitimate businesses that facilitate smuggling, money laundering, financial frauds, intellectual property piracy, and other illicit ventures. Multilateral economic agreements reducing trade barriers in North America, Europe, Asia, and other regions of the world have substantially increased the volume of international trade. In the United States, the volume of trade has doubled since 1994, according to the US Customs Service, and will double again by 2005. Criminal groups have taken advantage of the high volume of legitimate trade to smuggle drugs, arms, and other contraband across national boundaries.

The advent of intermodal commercial shipping-- including standardized cargo containers, computerized cargo tracking, and automated cargo-transfer equipment--enables shippers to securely and efficiently transfer containers delivered by sea to other ships for onward shipment or to commercial railroads and trucks for overland transportation. Criminals are able to exploit the complexity of the intermodal system to hide drugs or other contraband or to conceal the true origin and ownership of cargo within which contraband is hidden.

• Technological advances. The last decade has presented revolutionary advances in information and communications technologies that have brought the world closer together. Modern telecommunications 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-art communications equipment greatly facilitates international criminal transactions--including making deals and coordinating the large volume of illicit trade. In addition to the reliability and swiftness of the communications, this also affords criminals considerable security from law enforcement operations. According to US law enforcement agencies, many international crime groups and drug traffickers use a combination of pirated and encrypted cellular phones 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 interactive capabilities of advanced computers and telecommunications systems to plot marketing strategies for drugs and other illicit commodities, 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 and magnitude of financial transactions and the fact that there are few safeguards to prevent abuse of the system to move large amounts of money without scrutiny. More threateningly, some criminal organizations appear to be adept at using technology for counterintelligence purposes and for tracking law enforcement
activities.

• Globalization of business. The revolution in modern telecommunications 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. International criminals are attracted to major global commercial and banking centers where they take advantage of gateway seaports and airports, the high volume of international trade, the concentration of modern telecommunications 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 and governments of facilitating commercial and financial transactions and rapid transshipment of products.
• Explosion in international travel. With the breaking down of international political and economic barriers and the globalization of business, there is more freedom of movement, and international transportation of goods and services is easier. The proliferation of air transportation connections and easing of immigration and visa restrictions in many countries to promote international commerce, especially within regional trade blocs, have also facilitated criminal activity. In the past, more limited travel options between countries and more stringent border checks made crossing national boundaries difficult for international criminals. Now, criminals have a great many choices of travel routes and can arrange itineraries to minimize risk. Border controls within many regional economic blocs--such as the European Union--are often nonexistent.

In 1999, some 395 million people entered the United States overland from Mexico and Canada, 76 million people arrived on more than 928,000 commercial airline and private flights, and 9 million arrived by sea, according to the US Customs Service. In addition, 135 million vehicles--including automobiles and commercial trucks--crossed US borders with Mexico and Canada, and more than 200,000 merchant and passenger ships and other maritime vessels docked at US seaports or US coastal harbors. US seaports handled more than 4.4 million shipping containers and 400 million tons of cargo in 1999. US Customs is able to inspect only about 3 percent of the goods entering the United States, a figure that will drop to about 1 percent in the next five years as the volume of trade continues to grow. This tremendous volume of traffic and trade into the United States provides international criminals tremendous opportunity to smuggle contraband--including drugs and counterfeit products--into the country, as well as to illegally export firearms, stolen 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 or performed a few 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 were significant impediments to international criminal activity. For many organized crime groups, their international criminal activities were more regional than global. For those with a more worldwide presence, their operations were mostly confined to countries with a large ethnic expatriate population.

Graphic
Total Persons Entering the United States, 1990-99

Graphic
Maritime Containers Entering US Commercial Seaports, 1990-99

Graphic
International Commercial Flights and Persons Entering the United States By Air Transport, 1990-99

The dynamics of globalization, however, particularly the reduction of barriers to movement of people, goods, and financial transactions across borders, have enabled international organized crime groups to expand both their global reach and criminal business interests. International organized crime groups are able to operate increasingly outside traditional parameters, take 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 War, organized crime groups from Russia, China, Italy, Nigeria, and Japan have increased their international presence and worldwide networks or have become involved in more transnational criminal activities. Most of the world's major international organized crime groups are present in the United States.

 

General Characteristics Common to Organized Crime Groups Organized crime is defined by US law enforcement as a "continuing and self-perpetuating criminal conspiracy, having an organized structure, fed by fear and corruption, and motivated by greed." Organized crime groups often have a family or ethnic base, but members usually identify more closely with the organization than they do with blood relatives. They typically maintain 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 world have allowed organized crime groups to become increasingly active worldwide. The ability of organized crime groups to adapt to these changes and their use of improved transportation and communication technology have hindered law enforcement efforts against them. Most organized crime groups have the following characteristics in common: Seeking financial gain. A business must profit to survive, and organized crime functions in much the same way. Greed and the quest for profits probably dictate more 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 sustains 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 same ethnic background. The purpose of this preference is twofold. First, 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 pursuit of a common goal or scheme, whether economic, societal, or political. Pursuing corruption of government officials. Most organized crime groups have been enormously successful in their illegal ventures because they have successfully corrupted those persons charged with investigating and prosecuting them. In fact, some of these groups have so thoroughly and utterly corrupted those officials that it is no longer possible to distinguish between the two. Hierarchical structure. Generally, organized crime groups maintain a structure with defined leadership-subordinate roles, through which the group's objectives are achieved. Criminal diversity. Typically, organized crime groups engage in more than one type of crime. Organizational maturity. In most cases organized crime groups have some permanence and do not depend on the continuing participation of one or a few individuals for their existence. Multijurisdictional activities. Usually, organized crime groups operate or have influence over large areas of a region, country, or countries.

Greater Sophistication of Criminal Organizations

International criminal networks--including traditional organized crime groups and drug-trafficking organizations--have taken advantage of the dramatic changes in technology, world politics, and the global economy to become more sophisticated and flexible in their operations. They have extensive worldwide networks and infrastructure to support their criminal operations; they are inherently flexible in their operations, adapting quickly to challenges from rivals and from law enforcement; they have tremendous financial resources to draw upon; and they are completely ruthless. International criminals spare no expense to corrupt government and law enforcement officials in foreign countries that serve as their bases of operation or as critical avenues for transshipment of drugs, arms, 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 protecting their interests from rivals and law enforcement alike. Criminal violence--contract killings, vendetta murders, kidnappings, bondage, even occasional small-scale massacres--has increased with competition for illicit markets and resources, and it often has spilled over into society at large.

Globalization has bred a more 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 to obtain whatever access, know-how, and technology they may need or desire. Many criminal groups employ individuals with specific expertise to facilitate their operations. As a result, they are able to quickly identify and adapt to market changes.

• Major drug smuggling and other international criminal groups use transportation specialists and legal experts to research commercial flows and to learn about tariff laws and administrative procedures in the world's major commercial ports. With such information, they are able to exploit international air, sea, and land shipping to move drugs, arms, other 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-laundering mechanisms, to manage investments, and to establish fronts that can be used as covers for smuggling and fraud schemes. This has allowed criminal groups to increasingly diversify their financial operations on a global 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 drug-trafficking organizations, for example, are also involved in counterfeiting; Nigerian and Asian crime groups engage in alien smuggling; Russian and Asian crime groups traffic women for worldwide sex industries; and Russian, Asian, Nigerian, and Italian criminal syndicates engage in sophisticated, high-tech financial crimes. Many of the larger criminal organizations have established business-like structures to facilitate and provide cover for their operations, including front companies, quasi-legitimate businesses, and investments in fully legitimate firms.

Much more than in the past, criminal organizations are 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 sharing information, services, resources, and market access according to the principle of comparative advantage. By doing so, they can reduce their risks and costs and are better able to exploit illicit criminal opportunities. Although most cooperation between criminal organizations so far has been largely tactical--such as collaborating in smuggling ventures, arranging illicit financial transactions, or laundering money--the potential for broader alliances to undertake more complex criminal schemes in an increasingly global economy is significant. The willingness and capability of large, well-established international organized crime groups to move into new areas and develop mutually beneficial relationships with local criminal groups is unprecedented.

Insurgency and Extremist Group Involvement in Organized Crime Activities

One of the more significant developments since the end of the Cold War has been the growing involvement of insurgent, paramilitary, and extremist groups--whose crimes are primarily against the state--in criminal activities more associated with traditional organized crime groups and drug-trafficking syndicates. Although various insurgent and extremist groups had been involved in traditional criminal activities before, particularly the drug trade, their role typically was more a subsidiary one of extorting or offering protection to drug trafficking and crime groups operating in areas they controlled. Partnerships that some of these insurgent or extremist groups had with drug traffickers and other criminal organizations were often fleeting, but sometimes longer-standing symbiotic arrangements based on a coincidence of interests. In either case, the relationship was often strained and marked by mutual suspicion and wariness. For example:

• In Peru from the late 1980s until the early 1990s, the extremist Sendero Luminoso insurgents profited from protecting coca fields and extorting drug traffickers operating in the Andean region they controlled.
• In Western Europe, members of the terrorist Kurdistan Workers' Party (PKK) in Turkey 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 regional insurgencies and extremist groups. Unable to rely on aid from state sponsors, many insurgent and extremist groups were forced to find alternative sources of funds to remain militarily relevant, and involvement in drug trafficking and other criminal activity became a priority as an independent source of revenue.

• In Colombia, since the late 1980s, Marxist insurgents have 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 Army (ELN) generate substantial revenue by taxing and protecting coca cultivation, cocaine processing, and drug shipments in the areas they control. The US Government estimates that 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 Independance of Angola (UNITA) in Angola and the Revolutionary United Front (RUF) in Sierra Leone raise most of the revenue to pay the costs of their insurgencies from mining and illegally exporting diamonds in the areas their forces control. For UNITA, exploiting the diamond industry became critical to its survival once Cuban and more limited Soviet aid dried up by the early 1990s. The RUF's principal external supporter, neighboring Liberia, receives payment in diamonds as the price for its troop, logistics, and material support.

Besides engaging in drug trafficking and other criminal activity to raise needed revenue, insurgent and extremist groups have other motivations for involvement. Among the most important is to advance their political objectives by isolating the regions they control from the national economy. By so doing, they deprive the government of the region's economic productivity--as is most notably the case with the diamond mines held by the insurgents in Angola and Sierra Leone--and increase the dependence of the local population on their control and authority. In some cases--such as in the drug-producing regions of Colombia, largely controlled by the FARC and rightwing paramilitary forces--insurgent and extremist groups support a widespread illegal economy or illicit activity that is the primary source of income for the local population.

With the substantial decline in state-sponsored support, many insurgencies and extremist groups reach out to criminal networks to acquire arms and supplies that cannot be obtained through more traditional or legitimate channels. Unlike insurgent groups, criminal groups are well-connected to outside gray arms merchants, transportation coordinators, money launderers, and other specialists who can provide the weapons and other logistics support once given by state sponsors. Organized crime groups are also more likely than armed illegal political, ideological, or religious movements to have stables of corrupt contacts in customs, immigration, and other law enforcement authorities to facilitate the smuggling of weapons and other contraband to extremist and insurgent groups. Armed groups are also turning to criminals to acquire high-technology items, like encryption software or global positioning equipment, that are otherwise unobtainable.

For some insurgent groups involved in criminal activity, the activity itself may eventually become their primary motivation. In Burma, for example, ethnic-based insurgent armies that were originally formed as national liberation movements supported by Communist China have become drug-trafficking armies. Particularly since Burma's military regime negotiated cease-fire agreements that leave them alone, insurgent armies like the United Wa State Army--the largest producer of heroin and methamphetamine in Southeast Asia--are 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 the 1970s.

Corruption and the Political-Criminal Nexus

While organized crime groups and other criminal networks have become more sophisticated in their operations and capabilities, corruption remains an indispensable tool of the criminal trade. Corruption is inherent to criminal activity; criminal groups corrupt society, business, law enforcement, and government. Beyond corrupting mid- and low-level law enforcement personnel and government bureaucrats to turn a blind eye or proactively facilitate their on-site criminal activities, crime groups seek to corrupt high-level politicians and government officials for a variety of reasons, including to:

• Gain high-level protection for themselves and their activities. Implicit alliances with senior officials in a position to head off or limit policy or law enforcement initiatives that could interfere with their criminal activities allow crime groups to operate in a relatively benign environment. In some circumstances, the relative power of their high-level political protectors may be the most important factor in how well or poorly a criminal group prospers.
• Gain insider information on national-level law enforcement investigations. Access to senior officials in a position to authorize or influence investigations 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 to target a rival 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 to legitimize their income and their role in society. Having advanced knowledge of government plans for privatization offerings or competitive bidding for development projects, for example, gives them a potential advantage over individuals and businesses without criminal ties. 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 their safety, such as extradition, or push for laws that would promote their interests--such as their ability to launder money, make illicit financial transactions, engage in illegal trade practices, or move contraband products.

Criminal groups are most successful in corrupting high-level politicians and government officials in countries that are their home base of operations. Countries with policies that favor government subsidies and foreign trade restrictions to protect domestic industries, foreign exchange controls, and state control of utilities and natural resources are particularly vulnerable to high-level corruption. Senior officials who have authority to 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 are routinely targeted by criminal groups or may themselves seek out a relationship with criminal interests. High-level politicians and government officials enter into corrupt alliances with criminal groups to:

• Avoid pressure and reprisals from criminal groups demanding favors. Politicians and officials who doubt the willingness or capability of their government to protect them from criminal threats are most vulnerable to the combination of lucrative bribe offers and intimidation.
• Use their public position or potential leverage for financial payoffs from criminal groups. Officials in a position to decide or influence law enforcement operations or investigations may demand bribes either to preclude government interference in the activities of criminal groups or to help facilitate their operations.
• Exploit 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 of criminal interests. For example, they may accept financial kickbacks for awarding contracts to business enterprises controlled or influenced by crime figures.
• Gain personal or political favors from criminal associations. In some cases, senior politicians and officials seek criminal associations to 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, they rely on criminal groups for information that can discredit political or bureaucratic rivals or to provide under-the-table campaign financing.

Corruption on a grand scale weakens social, political, and legal institutions and acts as a catalyst for further criminal activity--including drug and contraband smuggling, illegal migration, and the penetration of criminal groups into the legitimate economy. This is particularly true in countries that are making the difficult transition 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 severe for a country's economic performance. Corruption reduces incentives for investment because businessmen perceive whatever portion of an investment is claimed by corrupt officials as a tax. Corruption disrupts the productive allocation of talent and labor in society and distorts the composition of fiscal expenditure, since corrupt officials make key economic decisions that are often based on their own personal best 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 offset costly kickbacks or the firms involved are inefficient or incompetent. Finally, in countries that are recipients of foreign assistance, the diversion of foreign aid flows from their intended projects by corrupt officials reduces the effectiveness of international donor efforts.

• As a result of foreign aid diversion, many donor countries have focused increasingly on issues of good governance. In some cases where corruption has significantly eroded the ability of the recipient country to use the aid as intended, international donors have scaled back their assistance.

Institutional Shortcomings

The growth and spread of international crime have also fed off the many institutional shortcomings of countries around the world. Police and judicial systems in many countries are ill-prepared to combat sophisticated criminal organizations because they lack adequate resources, have limited investigative authorities, or are plagued by corruption. Many countries have outdated or nonexistent laws to address corruption, money laundering, financial and high-tech crimes, intellectual property piracy, corrupt business practices, or immigration. Moreover, many governments have been slow to recognize the threat posed by criminal activities and increasingly powerful organized crime groups. Criminals use these shortcomings--and their tremendous resources to corrupt and intimidate public officials and business leaders--to find safehavens for themselves, their illicit operations, and their tainted money.

• Countries that do not allow or limit extradition or mutual legal assistance, do not recognize the relevance of 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.

Graphic
International Crimes Affecting US Interests

The resourcefulness of organized crime groups worldwide in 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 outmaneuvered by crime syndicates using state-of-the-art technology. Technological sophistication gives crime groups more options to target or retaliate against the police, judicial, or government officials if law enforcement pressure becomes too threatening to their operations.

Law enforcement and security agencies increasingly may need to treat the security apparatus of sophisticated international criminal organizations the same as hostile intelligence services.

Finally, while globalization has allowed international criminals to operate virtually without regard to borders, governments and law enforcement agencies remain limited by national boundaries. National sovereignty concerns and jurisdictional restrictions are impediments to targeting criminal activities that cross international boundaries. Unlike criminals, governments and law enforcement agencies must respect other nations' sovereignty and legal statutes in law enforcement operations.