# **Chapter I**

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### **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.   ***A Global Forum on Fighting Corruption: Safeguarding Integrity         among Justice and Security Officials***
*In February 1999, the United States hosted the first global forum         to fight corruption among government officials responsible for upholding         the rule of law. Officials from 90 countries participated and agreed on         a declaration that calls on governments to adopt effective practices to         promote integrity and fight corruption among justice, security, and other         public officials and to assist each other in this regard through mutual         evaluation. As a result of this initiative, several nations--such as Romania         and South Africa--convened their own regional conferences in the past         year to continue the work on a more local level. The Netherlands, with         help from the United States, will host a follow-up global forum at the         Hague in May 2001. The Dutch anticipate officials from 135-to-140 countries         will attend.***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. 
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