108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

THE THREATS POSED BY TRANSNATIONAL CRIMES AND ORGANIZED CRIME GROUPS

Frank J. Marine*

I. INTRODUCTION international commercial activity can also be used by criminal networks to improve This conference is especially important their own communications and to quickly and timely because in the 1990s, the carry out criminal transactions, especially problems to the world community posed by money laundering. transnational crimes and organized crime groups have increased significantly and are For example, through the use of likely to continue to increase in the near computers, international criminals have an future. There are several principal reasons unprecedented capability to obtain, that account for this unfortunate increase process, and protect information and in transnational and organized crime sidestep law enforcement investigations. activities. They can use the interactive capabilities of advanced computers and First, the increased volume of trade telecommunications systems to plot among nations, which of course has greatly marketing strategies for drugs and other benefited legitimate business interests, has illicit commodities, find the most efficient also generated greater opportunities for routes and methods for smuggling and criminals to criminally exploit such moving money, and create false trails for business and trade. law enforcement or banking security. The use of computers has enabled Colombian Second, the decrease in customs and drug traffickers in particular to keep more other regulatory barriers to international flexible and secure records of transactions travel and business has also had the and money laundering activities. unintended effect of aiding criminals International criminals take advantage of engaged in smuggling of narcotics and the speed and magnitude of financial other contraband. transactions and the fact that there are few safeguards to prevent abuse of the system Third, similarly, the proliferation of air to move large amounts of money without transportation connections and the easing scrutiny. of immigration, visa and travel restrictions in many counties to promote legitimate Fifth, international criminals are interests has also facilitated criminal becoming more sophisticated in their activity and the movement of criminals operations, using modern business across international borders. techniques and technology to facilitate their criminal activities and to thwart law Fourth, modern advanced enforcement efforts. Such organizations telecommunications and information also employ individuals with specific systems that are used in legitimate expertise to facilitate their criminal * Deputy Chief, Organized Crime and Racketeering activities, including transportation Section, Criminal Division, U. S. Department of specialists, computer experts, financial Justice, United States. experts to launder their money and manage

25 RESOURCE MATERIAL SERIES No. 54 business investments, and attorneys to II. DEFINITIONS identify loopholes in laws and regulations It is important to note that the concepts that enable criminal networks to launder of transnational crimes and organized money and establish front corporations and crime are different and distinct, even businesses. though they are interrelated and overlap. Sixth, unfortunately, consumption of As I use the term, “transnational crimes” illegal drugs has increased in some refers to serious crimes that either countries leading to greater problems posed significantly affect more than one country by trafficking in illegal narcotics. or are carried out across national borders and thus involve criminal activity in more Seventh, the breakup of the Soviet Union than one country. in 1991 and the related break up of the Soviet Bloc has led to the development of As I use the term “organized crime”, I many organized crime groups that have am not referring to a particular offense or recently engaged in substantial criminal crime. Indeed, in the United States there activities, especially effecting the European is no criminal offense designated community and the United States. “organized crime”; as in the United States it is not a crime “per se” merely to be a Eighth, the new governments that have member of an organized crime group. This emerged from the former Soviet Bloc are is so because in the United States criminal making significant advances, but still have offenses are defined by the specific conduct not yet had enough time to develop and that is made criminal, and not by the implement laws, regulations and business nature of the group that is committing the practices to adequately address the offense. Therefore, it is a crime for anyone problems of crime and public corruption to commit conduct that is made criminal posed by organized crime groups. regardless of whether the offender is or is not a member of an organized crime group. In sum, these and other recent developments and trends have contributed Moreover, United States law to growing transnational criminal activities enforcement does not use any particular and the expansion of organized crime rigid definition of “organized crime”. groups. The cost to the world community Rather, United States law enforcement caused by organized crime groups and uses an extended list of criteria or transnational crimes includes not only loss attributes that typically are shared by of billions of dollars, lose of life and physical organized crime groups. Thus, organized injuries, but also entails substantial public crime groups possess certain corruption. The combined effect of these characteristics which include but are not adverse consequences tends to undermine limited to the following : the security and stability of governments themselves. Indeed, the adverse (1)The groups have a hierarchical consequences of such criminal activities structure and continue over an can not be understated. It is therefore extended period of time and are self- essential that the international community perpetuating. That is, the continue to work together closely to address organization continues its illegal these very serious problems facing us all. affairs even after the death or imprisonment of some of its leaders

26 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

and members. of an organized crime group are that the group has a hierarchical structure, (2)Their illegal activities are continues its illegal activities over an conspiratorial. extended period of time, is self- perpetuating, and engages in diversified (3) In at least part of their activities, they criminal activities for profit. commit or threaten to commit acts of violence or other acts which are likely It is also noteworthy that while virtually to intimidate. all serious and sophisticated criminal activity involves some degree of (4) They conduct their activities in a “organization”, and some degree of joint methodical, systematic, or highly conspiratorial undertaking, such disciplined and secret fashion. organization, in my view, does not necessarily make such criminal activity (5) They insulate their leadership from “organized crime”. If that were the case, direct involvement in illegal activities then virtually all serious crimes would be by their intricate organizational considered “organized crime” because structure. virtually all serious crime involves “organization”. (6) They attempt to gain influence in government, politics, and commerce It bears emphasis that, in my view, the through corruption, graft and terms “transnational crime” and “organized legitimate means. crime” are not synonymous. Although organized crime groups may commit (7) They have economic gain as their transnational crimes, organized crime primary goal not only from patently groups also often engage in criminal illegal enterprises such as drugs, activities that mostly affect the country in gambling and loansharking, but also which they operate with little direct effect from such activities as laundering on other countries. Conversely, illegal money through and transnational crimes are not only investment in legitimate business. committed by organized crime groups, but are also committed by offenders who are As you can see by this criteria, United not members of recognized crime groups. States law enforcement uses the term “organized crime” to refer to organized I hope that the distinctions I am drawing crime groups that reflect these between transnational crimes and characteristics, and the term does not refer organized crime will become clearer as I to a particular offense or crime. discuss these concepts in more detail and illustrate my point by specific examples. I realize that others may define “organized crime” differently and I do not With these definitions in mind, I would mean to suggest that these criteria are the now like to briefly summarize the principal only criteria for defining or describing transnational offenses that in my view organized crime. Rather, I am only stating affect the United States and many other that these are the criteria that federal law countries. By no means does the list enforcement uses in the United States. necessarily contain all transnational crimes, however, I would like to focus on By way of emphasis, the key attributes the principal ones in my view. Then, I

27 RESOURCE MATERIAL SERIES No. 54 would like to briefly describe the principal methamphetamine, an illicit drug organized crime groups that are operating associated with particularly violent in various countries that also have impact aberrant behavior, in their lifetime. on many countries. Every day, some 8,600 young try an illegal drug for the first time. III. TRANSNATIONAL CRIMES • In 1995, United States citizens spent A. Drug Trafficking approximately $57 billion dollars on The worldwide illicit narcotics industry drugs—including $38 billion to is one of the greatest threats to social purchase cocaine and $10 billion on stability and welfare in the United States. heroin from overseas sources. The In addition to the terrible human cost of economic costs to society are even addiction and associated health concerns- greater; in 1990, the total costs of including HIV and AIDS-endured by users drug abuse—including health care of illicit narcotics, drug abuse has a costs, lost productivity, and the costs significant impact on the social fabric that of crime—were estimated to be $67 affects all Americans. Drug abuse billion, of which $46 billion was undermines family cohesion and has a related to crime and criminal justice. terrible daily and often lifelong effect on the lives of children across the country. • Drug use costs United States citizens Drug abuse also promotes antisocial roughly $17.5 billion per year in behavior and disrespect for laws and health-related costs, according to a institutions. The drug trade brings with it recent estimate. The annual death- high levels of street crime and violence by related costs of drug abuse account addicts needing to pay for drugs and by for an additional $3.2 billion. At least drug groups fighing for turf. $6.3 billion of these costs are estimated to be from AIDS The economic costs to United States transmission driven by drug use. citizens are high—lost productivity at the work place, medical care, spending for drug • Drug use has a significant effect on rehabilitation and social welfare programs, work place productivity. Drug users and in the financial and personnel are times more likely to be late for resources required by federal, state, and work, 10 times as likely to be absent, local law enforcement agencies and judicial and five times more likely to file and penal systems to deal with drug- worker’s compensation claims. They related crimes. are responsible for 40 percent of all industrial fatalities and incur • According to the most recent publicly medical costs three times as high as available survey data, about 13 their drug-free coworkers. million Americans—6.1 percent of the total population—used drugs on a • There is a strong correlation between casual, monthly, basis in 1996. The drug abuse and crime. In 20 of 23 survey data indicates that in 1995 cities in 1996 in a program sponsored there were approximately 3.3 million by the National Institute of Justice, chronic users of cocaine and some more than 60 percent of adult males 810,000 heroin addicts in the United arrested for crimes tested positive for States. It is estimated that nearly 5 at least one drug. In 1995, almost million Americans have tried 255,000 people were incarcerated in

28 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

state prisons and nearly 52,000 in southwestern border and southeastern federal prisons for drug offenses, United States. about 60 percent of federal prison population was there for drug-related Colombian drug organizations are crimes. historically familial-based organizations involved in cocaine trafficking and, to a To put it mildly, these costs in money and lesser extent, the trafficking of marijuana. human suffering from use of, and Distribution in the United States is trafficking in, illegal drugs are deplorable. directed by sophisticated organized structured groups. Cocaine wholesale-level There in no doubt that the United States distribution and money laundering has a serious problem with the degree of networks comprised of multiple cells illegal drug use. Unfortunately, other function in a number of major metropolitan countries are also experiencing an increase areas. These organizations are fully in illegal drug use. For example, it is equipped with the most up-to-date estimated that in the Peoples Republic of technology, including personal computers, China the number of registered drug pagers, and facsimile machines for use in abusers increased between 1990 and 1995 their daily operations. United States from 70,000 to 520,000. In Pakistan the operations are coordinated on a daily basis heroin addict population is estimated to by key figures in Colombia. Primary United have grown from virtually none in 1980 to States bulk cocaine distribution centers two million. Likewise, the use of cocaine include southern California, southern and other illicit drugs has substantially Florida, southern Texas and New York City. increased in Russia and other countries of the former Soviet Bloc since the breakup Recent cases indicate that Colombian of the Soviet Union. drug organizations are increasingly using gangs operating in Mexico to provide drug This demand for illegal drugs drives the smuggling services. The terrible violence supply. Regarding the supply, Southeast associated with these drug cartels is well Asia remains the greatest source region for known. The violence and corrupting heroin in the world, accounting for 60 influence of these drug cartels is so percent of the world’s production. Burma significant that they constitute direct is the world’s largest producer of illegal threats to the stability of governments in opium and heroin, accounting for Central and South American countries approximately 50 percent of the world’s where they operate. illicit production. Laos is also a large producer of opium and marijuana. Other Recently, Nigerian organized crime countries in Asia are transit routes for illicit groups have become major suppliers of opium and heroin, including Thailand, heroin to regions in the United States. Vietnam, Cambodia and the People’s Cases that have been prosecuted indicate Republic of China. that Nigerian drug organizations typically smuggle only small quantities of drugs at Colombia continues to lead the world in a time using thousands of couriers, rather cocaine production. Extensive drug cartels than smuggling large bulk shipments as use Mexico and Central America as staging do other drug trafficking organizations. or transhipment areas for United States bound cocaine, which is smuggled into the Illicit drug trafficking clearly poses United States primarily through the formidable problems for the law

29 RESOURCE MATERIAL SERIES No. 54 enforcement agencies of the United States million illegal immigrants were smuggled and other countries. The Drug into Western Europe. Japan has also Enforcement Administration (DEA) and experienced an increase in illegal the Federal Bureau of Investigation (FBI) immigration from other Asian countries. are the principal federal law enforcement agencies in the United States responsible The vast majority of migrants who enter for combating illegal drug trafficking. Their the United States and other countries primary strategy involves the targeting of illegally are motivated by economic reasons the largest or major drug trafficking - they seek jobs and greater economic enterprises for investigation and opportunity. In some cases, the aliens are prosecution so that the enterprise itself can fleeing political persecution or are seeking be dismantled or disrupted. greater political freedom in other countries. Therefore, there are substantial In addition to attacking the suppliers of humanitarian concerns and issues related illicit drugs, it is also imperative to reduce to the global problem of alien smuggling. the demand for illicit drugs. However, alien smuggling also poses substantial problems for law enforcement The Director of National Drug Control in the United States and elsewhere. Policy in the United States has implemented a comprehensive five year According to the Immigration and strategy designed to reduce the demand for Naturalization Service of the United States illicit drugs which includes: educational (hereinafter INS), approximately five and advertising programs to educate million illegal aliens reside in the United children and parents about the harmful States. By reside, I mean persons who have effects of drugs, to persuade people to reject remained in the United States for more illegal drug use; and to increase drug than 12 months. Therefore, this five million treatment and rehabilitation efforts to help does not include many, perhaps hundreds people refrain from using illegal drugs. of thousands, of temporary illegal migrants who may come to the United States to work B. Alien Smuggling for several months and then return to their Sophisticated alien smuggling networks home country, and does not include aliens traffick in “human cargo”. Alien smuggling who stay a short period of time beyond the is fast becoming a global problem as legal limits of their admission. INS residents of many countries, particularly estimates that about 54 percent of these Mexico, the Peoples Republic of China, five million illegal aliens are from Mexico. India, Pakistan and other counties seek new homes and economic opportunities in Although Mexico by far is the largest Canada, Japan, the United States, Western source of illegal aliens in the United States, Europe and other countries. According to other countries such as El Salvador, a United Nations Study, in 1994, the profits Guatemala, Honduras and Haiti are also turned from smuggling illegal aliens across principal sources of illegal migration in the international borders approached $9.5 United States. Moreover, Central and billion. South America are increasingly serving as transit zones for aliens from other areas, The United States is not alone in including Asia and Eastern Europe. Alien experiencing a serious problem with illegal smuggling networks and routes have been immigration. In the last two years, established throughout Central America to estimates indicate that more than half a move local migrants, as well as illegal

30 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS aliens from other areas. Tactics used by often force the alien to work illegal alien smuggling organizations run the gambling or prostitution businesses, or gamut of all available means of sweatshops in the garment industry until transportation including large boatloads of the smuggling fees are paid. migrants, air travel of a few individuals to large groups of alleged tourists, to Similar harmful consequences stem from commercial buses, trucks and vans. smuggling operations involving migrants from Central and South America. For The smuggling of aliens from the example, unsafe and overloaded vehicles People’s Republic of China to the United have contributed to accidents resulting in States has posed particular problems for death and injuries. United States law enforcement. Between 1991 and 1997, the United States Navy and The costs to the United States associated Coast Guard interdicted a total of 43 ships with illegal migration is substantial. To carrying over 4,000 migrants, mostly from address alien smuggling and related the Fujian province in the People’s Republic matters, the Immigration and of China. A series of prosecutions in Boston, Naturalization Service’s overall budget has New York, Honolulu, San Francisco and more than doubled within five years from Hawaii has established that an Asian $1.5 billion in fiscal year 1993 to $3.1 billion organized group known as the Fuk Ching in fiscal year 1997. gang that operates primarily in New York and California was responsible for much A November 1997 report by the United of smuggling of boatloads of aliens from the States General Accounting Office indicates People’s Republic of China. that illegal immigrant families receive over one billion dollars in welfare payments and The dangers involved in such smuggling Food Stamps alone. One state, California, ventures are highly significant. The alone spends about $830 million each year prosecutions I mentioned established that to incarcerate illegal aliens who have been in many instances the boats were jailed for criminal acts. The financial costs overcrowded, unsanitary, lacked adequate associated with United States interdiction food and supplies and were unsafe. In one and deportation procedures are also high. tragic incident in 1993, a ship, the Golden For example, the costs exceeded $7 million Venture, carrying over 100 aliens from the to deport 158 migrants and 11 crew Peoples Republic of China ran aground off members seized in a boat carrying the coast of New York City and 10 aliens migrants from the Peoples Republic of died as a result. China destined for Hawaii in May, 1995. I would imagine that other countries are In addition, these prosecutions have experiencing similar problems and costs established that the aliens and their related to the global prolems arising from families are exploited if the alien is illegal migration. successfully smuggled into the United States. The smuggling fee of $20,000 to To address these problems, the United $30,000 per alien is clearly beyond the States has recently nearly doubled the size means of a Peoples Republic of China of INS border patrol agency. United States migrant to pay. Consequently, the law enforcement working with the Coast smugglers have threatened, kidnapped, Guard and Navy and other agencies has and assaulted aliens and their family increased its efforts to interdict boatloads members to collect the smuggling fees and of illegal aliens and to repatriate them.

31 RESOURCE MATERIAL SERIES No. 54

Criminal penalties for alien smuggling 1993 study on transfer pricing have been increased, a mandatory concluded that the United States was minimum of three years’ imprisonment deprived of at least $30 billion—and upon conviction for smuggling an alien for possibly as much as $100 billion—in financial gain. For example, in January tax revenue that year as a result of 1998, the ship’s captain and two crew tax evasion or money laundering members convicted of smuggling a boatload through transactions between United of over 100 aliens from the People’s States firms and their foreign Republic of China were sentenced in Boston partners. to 12, 10 and 8 years in jail. INS also continues to work with other countries to The infrastructure for laundering identify alien smuggling networks and to criminal proceeds, all of which must be standardize entry and documentary placed and “legitimized” in the legal requirements for international travel to economy, is extensive and worldwide. minimize the risks of counterfeit Banks, nonbank financial institutions — documents. which include brokerage houses, commodities dealers, currency exchange C. Money Laundering services, and casinos — and other Money laundering is designed to prevent legitimate businesses are part of the money governments and law enforcement laundering network. Investment in agencies from knowing the source of illegal legitimate business enterprises provides proceeds and from tracing the money to its cover for criminal activities, as well as a sources. The primary motive of professional plausible source of wealth and income to criminals is to obtain financial profits from deny it was obtained illegally. Use of front their varied criminal activities. Thus the companies to launder illegal proceeds and criminal activities that drive the need to to finance illicit transactions are launder money are very broad, ranging widespread by criminals worldwide. from laundering illegal proceeds from drug trafficking and racketeering enterprises to The international banking and financial white collar crimes such as commercial and system is routinely used by launderers to bank frauds, bribery and tax evasion. legitimize and transfer illicit proceeds. Once illicit proceeds are in the • The amount of funds generated international banking system, electronic around the world by illegal activities transfers of funds makes it difficult to track requiring legitimization is on the how laundered money flows. Tens of order of hundreds of billions of dollars thousands of banks worldwide are annually; most estimates place the connected to electronic funds transfer amount of money being laundered systems. The flow of illicit money, however, annually between $300 billion to is only a tiny fraction of the trillions of $500 billion. dollars that move daily through the international financial system, more than • In addition to drug trafficking $1 trillion moves daily through the United proceeds, substantial amounts of States-based Clearing House Interbank money are transferred abroad to be Payments System (CHIPS), which handles laundered or otherwise hidden, nearly all international dollar transfers. In costing the United States most cases, banking and other financial Government tens of billions of dollars institutions probably serve more as annually in tax revenue losses. A avenues of opportunity for launderers

32 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS rather than willing participants. occurred outside the United States.

Foreign banking systems that offer bank The expansion of computer technology and corporate secrecy, or where there is throughout the world has also led to weak enforcement or an absence of increased opportunities for transnational regulations against illicit financial criminals to gain access to confidential activities, are most appealing to information and to use the interactive international criminals seeking to launder capabilities of advances in computers and illicit proceeds or to stockpile funds in telecommunications systems to facilitate secret accounts and shell companies. fraudulent schemes and the movement of Criminals also take advantage of illicit money other assets. corruption in many banking sectors, both to place money into banking systems and E. Bank Fraud and Threats to the economy, and to hamper any International Banks and investigation of illicit financial activities. Financial Institutions The use of banks and other financial D. Financial Fraud institutions by international criminals to Wide-ranging and complex financial launder money, finance illicit transactions, fraud schemes by international criminal or facilitate fraud schemes can undermine organizations are stealing billions of dollars their credibility, with significant annually from United States citizens, repercussions for the international businesses, and government programs. financial system. Financial institutions Financial fraud crimes have become more rely on their credibility in international prevalent in recent years as criminal financial transactions—including loans, organizations take advantage of the investments, large fund transfers, and significantly greater amounts of personal managing stock and equity funds—and the and corporate financial information now failure of a large institution can affect available and the ability to access that global makets. Allegations that a financial information through computer technology. institution is involved in criminal activity The Association of Certified Fraud raises the possibility that its services and Examiners estimated financial losses from business practices are corrupt, scaring fraud perpetrated by domestic and away investors and customers. international criminals in the United States at more than $200 billion per year. Efforts by some countries to develop A 1995 survey of personal fraud modern banking systems can be greatly victimization estimated the annual inhibited by involvement in their tangible costs associated with fraud burgeoning financial sectors. In cash-and- schemes to be $45 billion. credit-scarce countries like Russia, for example, criminal groups can gain Credit card fraud is another major influence over banks and access to loans financial fraud that crosses international for their enterprises simply by threatening borders. Chinese gangs in the United to withdraw their funds from the bank. States particularly have been adept at Criminal organizations that acquire control carrying out a wide variety of credit card or significant influence in banks or other fraud, including counterfeit credit cards. financial institutions sometimes use them Major credit card issuers estimate fraud to make loans to front companies that are losses to have been in excess of $2 billion not repaid, which can undermine the dollars in 1996, about one-third of which credility and solvency of the banks,

33 RESOURCE MATERIAL SERIES No. 54 sometimes forcing the international companies were alleged to have offered financial community to come to the rescue. bribes for 180 contracts valued at $80 billion. The collapse of Latvia’s Bank Baltija in August 1995—the largest commercial bank I. Illegal Arms Trafficking in Latvia at the time of this failure— International criminal networks that illustrates the threat posed by criminal are—or could be—used for illegal arms control of financial institutions. Criminals trafficking and brokering deals and used the bank to make loans to their own smuggling sensitive materials and front companies, which were not repaid, technologies related to weapons of mass and defrauded accounts of as much as $40 destruction threaten interests of the million. This massive fraud caused the United States and many other countries. bank to fail, provoking a major financial Although United States prosecutions of crisis in Latvia. such cases have been relatively few in number, they have been significant. F. Counterfeiting Counterfeiting of United States currency For example, in 1997, a group of and the currencies of other nations remains individuals connected to employees of a long standing problem, especially with state- run arms companies in the People’s improvement in copying and production Republic of China were convicted in technologies. California of smuggling 2,000 AK47s and other arms into the United States. G. Transnational Crimes Involving Intellectual Property J. International Car Theft Rings Counterfeiting and other forms of A relatively recent and significant copyright, trademark, and patent criminal activity carried out by Russian infringement and sale of pirated products and Asian organized crime groups involves distort international trade, undermine the extensive networks to steal luxury cars by legitimate marketplace, and cause hijacking or through fraud in the United extensive losses of revenue to both domestic States. The cars are then smuggled out of and foreign industries. The illegal the United States for sale in foreign duplication of United States films, compact countries in Asia and Europe. disks, computer software computer software, pharmaceutical, and clothing K. Prostitution trademarks major—sectors of United Asian and Russian organized crime States export earnings—causes annual to groups are also significantly involved in United States companies of up to $23 obtaining women from Asia and former billion. Soviet Bloc countries to work in the United States as prostitutes. Often the women are H. Corrupt and Criminal Business brought to the United States through Practices fraudulent visas and passports under false Companies in the United States and promises of assistance to obtain legitimate other countries are victimized by the global employment. However, the women are problem of corrupt business practices, forced into prostitution until they pay the including commercial bribery to obtain organized crime figures substantial lucrative business and government amounts of money under threats of contracts. In a three-year period between physical harm and under threats to expose May 1994 and April 1997, foreign business their illegal alien status to the authorities.

34 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

In my view, these are the principal, but The same is true for Asian organized by no means all, transnational offenses crime groups operating in the United that adversely affect the United States and States. Thus far, the evidence indicates other countries, and they pose formidable that Asian organized crime groups in the problems to the global law enforcement United States primarily operate in and are communities. I would next like to briefly controlled in the United States without discuss the principal organized groups substantial ties to foreign organized crime operating in the United States and other groups. However, there are notable countries. exceptions, such as their involvement in alien smuggling, money laundering, IV. ORGANIZED CRIME GROUPS narcotics trafficking and trafficking in stolen cars which are transnational crimes A. United States—Based Organized with substantial ties to criminal associates Crime Groups in countries outside the United States. As I stated earlier, United States There may be other exceptions as well. authorities use a multi-faceted criteria to Having said that, it remains generally the identify a group that constitutes “organized case that for the most part Asian organized crime”. To briefly repeat, the central factors crime groups in the United States consist are whether the group has a hierarchical of relatively small groups of various ethnic structure, is self-perpetuating and Asians that lack the structure, long term continues over time and engages in continuity and breadth of activities as does diversified criminal activities for profit. the LCN. The evidence thus far indicates that the principal criminal activities of Under these criteria, La Cosa Nostra, these ethnic Asian organized crime groups commonly referred to as the LCN, is the in the United States include home invasion most significant organized crime group robberies and burglaries, robberies and operating in the United States. The LCN extortion of businesses, other extortions, is a nationwide criminal organization gambling, credit card and other fraud and divided into approximately 24 families that related crimes of violence that are focused operate in the major cities in United States. on the particular communities in the Five families exist in New York City and United States where the gang members 19 other LCN families are centered in other live or operate. large cities in the United States. However, for most part, the LCN’s criminal activities B. The Boryokudan are focused in the United States and to I am sure most of us are familiar with some extent in Canada and have little the Boryokudan, which are large organized direct effect on other countries. Of course crime groups operating in Japan. However, there are some notable exceptions thus far the evidence does not indicate that including, but not limited to, the LCN’s the Boryokudan poses a substantial threat involvement in narcotics trafficking, money in the United States. Indeed, over the past laundering and stock frauds which are 15 years there have only been three or four significant transnational crimes. But, these federal prosecutions in the United States are exceptions to the general proposition involving criminal activities in the United that the LCN’s criminal activities, States by the Boryokudan. especially the LCN families outside of New York City, involve matters largely confined C. Triads to the United States. Again as you may know, Triads are relatively large criminal organized crime

35 RESOURCE MATERIAL SERIES No. 54 groups operating in Hong Kong, the impact on the United States through their People’s Republic of China and Taiwan. extensive drug distribution and money However, thus far the evidence indicates laundering networks. that Triads, as such, do not pose a substantial threat to United States law F. Russian Organized Crime Groups enforcement. Various Triad members have United States law enforcement agencies been prosecuted in the United States, use the term “Russian Organized Crime” mostly for drug trafficking, and there is to refer not only to organized crime groups evidence that Triad members have used operating in Russia, but rather the term their Triad affiliations to facilitate their more broadly encompasses two general criminal activities in the United States. components: First, Russian organized However, thus far the evidence does not crime refers to organized crime groups indicate that Triads are firmly entrenched operating in or headquartered in countries in the United States and does not indicate in Eastern Europe and Asia that were that Triads have cells operating on an formerly part of the Soviet Union and the ongoing basis in the United States. Soviet Bloc, which for example would Probably, the greatest threat in the United include Russia, Poland, Hungary, Georgia, States posed by Triads involves their drug Armenia, Kazakhstan, Ukraine and others. trafficking activities. And second, Russian organized crime refers to organized crime groups operating in the D. Italian Organized Crime Groups United States that have a nexus to the The principal organized crime groups countries that formerly comprised the operating in Italy are the Sicilian Mafia or Soviet Bloc. Siclian Cosa Nostra, the Camorra based in Naples, the ‘Ndrangheta based in Calabria 1. Outside the United States and the United Sacred Crown based in I would like to first discuss the Russian Puglia. Although, these organized crime organized crime groups operating in or groups engage in transnational crimes which are centered in the former Soviet affecting Europe and elsewhere, thus far Bloc countries. The collapse of the Soviet the evidence does not indicate that these Union and the Soviet Bloc in 1991 created groups engage in significant criminal a vacuum of authority. As new governments activities in the United States. In the mid began grappling with the awesome to late 1980’s there were several important problems of developing laws, regulations prosecuions in the United States of Sicilian and business practices to govern emerging Mafia members and associates for drug private businesses, economic activities and trafficking and money laundering offenses. greater political freedom, criminals have Since then, there has not been evidence in exploited both the new economic and the public record that Italian organized political opportunities and the absence of crime groups have a significant presence comprehensive legal structures. In in the United States, although there particular, Russia’s efforts to privatize the continues to be some drug trafficking and economy, that is—the sale of state-owned money laundering prosecutions of persons industries to the private sector, has been tied to Italian organized crime. fertile ground for criminal exploitation.

E. South American Drug Cartels In 1993, Russian President, Boris Yeltsin As I previously stated, South American declared that crime was “the number one Drug Cartels, such as the Cali and Medillin threat to national security.” Figures for drug cartels, continue to have a significant 1994 from the Russian Ministry of the

36 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

Interior, commonly referred to as the MVD, arises from the looting and illegal export indicate that there are over 8,000 criminal of natural resources and other assets, often groups in Russia with approximately carried out with the assistance of corrupt 100,000 members. These criminal groups government officials. operate in over 50 countries, they are firmly entrenched in the Former Soviet Union and A recent prosecution in the United Soviet Bloc countries, and are expanding States illustrates this. In January 1998, a to the United States, the Caribbean, South Russian emigre was covicted in San America, Israel and the Middle East. Francisco, California, on tax charges. The charges arose from an investigation into “Thieves-In-Law” represent the “old- an elaborate scheme to sell in the United guard”of these Russian organized crime States approximately $180 million in gems groups. The MVD estimates their and precious metals obtained from the membership to be roughly 750 to 800. Russian Federation, with the assistance of Thieves-In-Law is a loosely organized corrupt officials in the Russian Federation. group of elite criminal leaders whose roots The gems were supposed to be processed stem from organized gangs in former Soviet in the United States, but the conspirators prisons. Thieves-In-Law are selected by sold the gems and used the money to buy their prison peers for membership, observe expensive residences, real estate, cars and strict codes of conduct, engage in ritual other assets. Several officials of the cermonies and sport physical markings. In Russian Federation have been charged these respects the society of Thieve-In-Law with corruption offenses in Russia. are similar to traditional organized crime groups such as the Sicilian Mafia and the There are many other examples of LCN in the United States. corrupt capital flight from former Soviet Bloc countries. In the United States, there There are at least 20 to 25 major Russian have been numerous investigations of organized crime groups operating in or highly suspicious wire transfers of centered in the former Soviet Bloc substantial sums of money, in some cases countries. These are relatively large in the millions of dollars to hundreds of organizations, with key membership millions of dollars, from entities in former ranging from several hundred to 1,000 Soviet Bloc countries to entities in United active criminals. They have a hierarchical States where there is no apparent structure and are devided into brigades or legitimate explanation for these transfers crews of members. These criminal of money. Although some of these cases enterprises engage in a wide variety of have led to successful prosecutions, many criminal activities, including murder, remain unsolved because of the difficulty extortion, kidnapping, trafficking in drugs to trace the money and to determine the and weapons, money laundering, ultimate believed illiegal sources of the prostitution, fraud, theft and related public money in the countries outside the United corruption. States.

I would like to briefly discuss a few of Other kinds of fraud carried out by these criminal activities. Perhaps the Russian organized crime groups also are greatest threat to the stability of the becoming more prevalent. For example, in Russian Federation and other new 1996, a group in Los Angeles was convicted govenments of the former Soviet Bloc that for a $4 million fraud against the is linked to Russian organized crime groups Government of Kazakhstan on a contract

37 RESOURCE MATERIAL SERIES No. 54 to sell Cuban sugar to Kazakhstan. organized crime activities in the United Advance payments were made by the States. There are two general categories government of Kazakhstan to the of Russian organized crime groups conspirators in the United States, but the operating in the United States. The first sugar was never delivered. Indeed, the category consists of the traditional large fraud was quite brazen since it is not lawful organized crime groups based in Russia for companies in the United States to sell and other countries of the former Soviet Cuban sugar to anyone. Similar contract Bloc that I have just discussed. Some of fraud schemes have involved false promises these groups are trying to establish a in the delivery of meat, alcohol, petroleum foothold in the United States, and are and other products. carrying out criminal activities in the United States through associates living in As previously stated, in the 1990’s the United States. narcotics consumption increased in Russia and other former Soviet Bloc countries. The Ivankov organization centered in There is evidence that Russian organized New York City illustrates the first category. crime groups are responsible for much of Vyacheslav Ivankov operated an illegal the drug trafficking and have formed organization in New York City involving alliances with South American drug extortion of an illegal organization in New trafficking organizations and Italian York City involving extortion and fraud, organized crime groups to handle and the organization had direct ties to distribution of narcotics in the former Russian organized crime groups outside Soviet Bloc countries. the United States. In 1996, Ivankov was convicted on extortion charges in the Russian organized crime groups have United States and sentenced to nearly to been deeply involved in arms trafficking nearly 10 years in jail. with the assistance of current and former corrupt government and military officials. Another case illustrates the first Several recent prosecutions in the United category. In January 1997, Ludwig States, including a pending indictment in Fainberg was indicted in Miami, Florida, Florida of a Russian emigre Ludwig on federal charges involving drug Fainberg, involved efforts sell illegal arms trafficking efforts to smuggle cocaine from allegedly obtained from Russia. Ecuador to St. Petersburg, Russia and for the interstate transportation of stolen Some of these cases have also involved property. The conspirators were also offers to sell nuclear grade weapons attempting to purchase a Russian diesel materials. However, thus far there have submarine to be used to smuggle drugs. been no cases in the United States in which nuclear grade weapons materials have In another drug case, in December 1997, been delivered. But, given the significant Oleg Kirillov, a Russian organized crime dangers inherent in trafficking in nuclear leader based in Russia, was indicted in a grade weapons materials, the United federal court in Miami, Florida, for States will, of course, continue to vigorously conspiring to export cocaine from the investigate possible cases of such United States to Russia. trafficking. The second category of Russian 2. In the United States organized crime groups in the United Next, I will briefly discuss Russian States commonly referred to as

38 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

“fraudsters”, are emigres from the former perpetrated by a Russian organized crime Soviet Bloc countries living in the United enterprise was the massive medical States who engage in various kinds of insurance fraud conducted by the fraudulent and other criminal activities. Smushkevich brothers in Southern Fraudsters are smaller, less centralized California in the late 1980’s. Michael and and less hierarchical groups of criminals David Smushkevich were emigres from than the first category of more traditional Lithuania who together with their spouses organized crime groups. Moreover, while and eight associates, embezzled private fraudsters may have some ties to Russian insurers and the United States government organized crime groups centered outside of over one billion dollars. The brothers the United States, for the most part the operated mobile health care diagnostic fraudsters criminal activities are “home laboratories. Patients were solicited by grown”, that is, they focus on activities in telephone to receive supposed “free” the United States with little or no direction examinations at their mobile clinics. The from groups outside the United States. patients were asked to sign forms giving the clinics the rights to their insurance United States authorities are still not benefits. The bills were then submitted to sure how much of Russian organized crime insurers claiming that doctors had ordered activity in the United States falls within the tests. At its peak, the operation the first or second category. Russian involved 500 companies. organized Crime activity in the United States is a recent development, and we still There are numerous other prosecutions have a lot to learn. Thus far, the evidence and investigations involving Russian indicates that most Russian organized fraudsters’ carrying out similar health care crime criminal activity in the United States fraud schemes to defraud state and federal falls within the second category, that is governments. In addition to such fraud, fraudsters centered in the United States money laundering by Russian fraudsters with little or no direction from Russian in the United States is a very significant organized crime groups outside the United problem. As I mentioned earlier, there are States. But, our assessment may change numerous cases involving suspicious as we learn more about fraudsters’ transfers of hundreds of millions of dollars activities. from former Soviet Bloc countries to the United States that are under investigation. A few cases illustrate the activities of As you can see, Russian organized crime is Russian fraudsters. A series of successful a very recent phenomenon that poses prosecutions in the late 1980s and 1990s, increasing threats to the United States and in Los Angeles, New Jersey, New York and many other countries. Philadelphia established that Russian fraudsters formed an alliance with United V. CONCLUSION States LCN members to defraud state In conclusion, it is clear that governments of many millions of dollars in transnational crimes and organized crime diesel fuel excise taxes. The conspirators groups’ criminal activities are very carried out their scheme through extortion comprehensive and pose formidable of businessmen and through establishing problems for the global community. sham gasoline companies that evaded the Therefore, I am sure that you will agree payment of the excise fuel taxes. that it is imperative that we all continue to work closely together to combat these The most notorious fraud scheme worldwide problems.

39 RESOURCE MATERIAL SERIES No. 54

UNITED STATES RESPONSES TO THE THREATS POSED BY TRANSNATIONAL CRIME AND ORGANIZED CRIME GROUPS

Frank J. Marine*

I. UNITED STATES DOMESTIC LAW organized crime activities. Such perfection ENFORCEMENT RESPONSES simply does not exist in the real world. But, I firmly believe that working together we In my first paper I described the nature can substantially reduce the threats posed of the principal transnational crimes and by the adverse consequences of criminal organized crime groups affecting the activities. United States and other countries, and the substantial threats to the world community II. INVESTIGATIVE TECHNIQUES arising from these criminal activities. I would now like to discuss some of the 1. Electronic Surveillance investigative techniques and prosecutive The single most important law tools and strategies that law enforcement enforcement weapon against organized has used with some effectiveness in the crime by far is electronic surveillance. United States to combat such criminal Virtually all the major federal United activities. I hasten to add, however, that States prosecutions against the leadership while I believe that these tools have been and members of the La Cosa Nostra (LCN) effective in the United States, they may not over the past 20 years have involved be transplanted easily into other countries. electronic surveillance. Electronic As we all know, there are differences among surveillance is likewise becoming an the countries of the world regarding their equally important weapon against Asian history, size in population and territory, and Russian organized crime groups. geographical location, political, social and economic systems, cultural values and The reasons are obvious. First, there is social structure that greatly influences the nothing as effective as proving the crime appropriate policies and procedures through the words of the defendant adopted by any particular country to themself. There are often credibility address criminal activities and other problems with co-conspirators as witnesses problems. Therefore, I do not mean to since they are criminally involved and suggest that the approaches of the United received some form of a deal or States are the only ways, nor do I mean to consideration for their testimony. Whereas suggest they are the best ways. Rather, it electronic surveillance evidence provides is for each country to decide for itself on objective reliable evidence of crimes appropriate course of action to combat through the statements of the participants criminal activities. themselves. Moreover, electronic surveillance enables law enforcement to Equally, I do not mean to suggest that learn of conspirators plans to commit law enforcement is capable of completely crimes before they are carried out, which eliminating transnational crimes and enables law enforcement to surveil the activities , such as delivery of contraband * Deputy Chief, Organized Crime and Racketeering and conspiratorial meeting, or to disrupt Section, Criminal Division, U. S. Department of and abort the criminal activities as Justice, United States.

40 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS approriate. In that regard, electronic must establish why such other surveillance is particularly helpful in investigative techniques appear to be preventing crimes of violence from unlikely to succeed if tried, or will be too occurring. dangerous to try.

Indeed, electronic surveillance is In executing the electronic surveillance, especially helpful in transnational crimes the government must “minimize” the because it enables law enforcement to interception of innocent conversations. intercept conspirators in the United States That is, the government must take discussing their crimes with their criminal reasonable steps to assure that only associates in countries outside the United conversations relevant to the crimes under States. Without such electronic investigation are intercepted and that surveillance, it would be very difficult for innocent conversations are not intercepted. United States law enforcement to obtain In practice, the monitors must turn off the evidence of such conspiratorial planning recording machines when conversations against the co-conspirators operating are not discussing matters relevant to the outside the United States. crimes under investigation.

Although electronic surveillance is Such court-authorized electronic extremely valuable, it is also a very surveillance is limited to 30 days, the 30- sensitive technique because of legitimate day period may be extended for additional concerns for a person’s privacy interests. 30-day intervals provided that all the Accordingly, United States law imposes requirements are met every 30 days and significant restrictions on electronic approved by the judge. surveillance. First, electronic surveillance is authorized to obtain evidence of only 2. Undercover Operations some specific serious offenses listed in the When it comes to organized crime governing statute. To obtain electronic control, undercover operations are second surveillance, agents and government only to electronic surveillance; indeed, the attorneys must submit an affidavit to a two techniques often go hand-in-hand. United States district court judge which contains specific facts establishing In undercover operations, law probable cause to believe that subjects of enforcement agents may portray the electronic surveillance are committing themselves as criminals such as drug certain specified offenses and that it is dealers, fences for stolen merchandise, likely that relevant evidence of such crimes money launderers or even hitmen willing will be obtained by the electronic to commit murder for hire. Through such surveillance. Thus, the government must undercover operations, law enforcement obtain the approval of a neutral agents are able to infiltrate the highest independent judge to conduct electronic levels of organized crime groups by posing surveillance. as criminals because other real criminals will discuss their criminal plans with the Moreover, before electronic surveillance agents to get their assistance in committing is permissible, the government must crimes. establish probable cause to believe that investigative techniques other than The agents also gain the confidence of electronic surveillance have been tried and criminals, who will in turn often reveal failed to obtain the sought evidence, or we their past criminal activities to the agents,

41 RESOURCE MATERIAL SERIES No. 54 as well as plot with the agents to engage avoid harm to the public, our Department in additional ongoing criminal activities. of Justice has set up Undercover Review Combined with eavesdroping, the Committees, comprised of senior undercover approach provides prosecutors and investigators, to review, comprehensive coverage of the targets’ day- approve, and control all sensitive to-day activities. But this technique also undercover operations. To be approved, an carries the potential for problems and undercover proposal must: requires exceptional preparation. For one thing, there is always the physical safety i. Be in writing; of the undercover agent to consider. To prevent the premature disclosure of his or ii. Contain a full factual description of her identity , the agent must be provided the suspected criminal activity and with a fully substantiated past history the participants therein; (called “backstopping”) and careful briefings of the targets’ modus operandi. iii. Set out in detail the proposed Every conceivable scenario that might undercover scenario, the expertise of make the targets suspicious of or hostile the undercover team, the duration of to the agent must be considered in advance. the project (not to exceed six months And the undercover agent themself must unless extended), and the anticipated undergo careful testing (including, if legal issues (such as entrapment) ; necessary, psychological profiling) to and ensure that s/he possesses the intangible qualities whereby they will “fit” iv. Evaluate the risk to the agents and comfortably into the new identity. the public.

Another danger in undercover Regarding such dangers, when law operations involves potential danger — enforcement learns of potential crimes of either physical or financial — to the public. violence, law enforcement authorities are Undercover techniques need wide public required to take necessary steps to prevent support to be successful. The quickest way the violence from occurring, which could to lose public support for undercover include warning the potential victim or operations is to operate them in a way that arresting the subjects who pose a threat or victimizes the public. Unlike ending the undercover operation. eavesdropping, which is relatively passive, undercover operations frequently deal with Undercover operations are especially - and sometimes intentionally mislead — essential and are very successful in the public. For example, suppose there is narcotics trafficking cases because an undercover business selling products to traffickers always need customers to sell the public while advertising itself their contraband. Agents, posing as buyers, unofficially to criminal as a place where can obtain direct and substantial evidence stolen property can be taken. Not only against the drug traffickers by buying their could the government be liable for any product. Likewise, long term undercover defects in the products it sells to the public, operations are essential to infiltrate it might be indirectly responsible for organized crime groups that continue their encouraging thieves to steal property by illegal activities over many years. For virtue of supplying them with an outlet. example, FBI agent Joseph Pistone worked undercover for six years as a jewel thief In order to balance these concerns and under the alias Donnie Brasco to infiltrate

42 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS the highest levels of the Bonanno LCN lenient treatment regarding charges family in New York City. This undercover pending against them or likely to be work led to the convictions of many LCN brought against them. In many cases leaders and members. A recent film - confidential informants are themselves “Donnie Brasco” was made about his highly engaged in criminal activities which successful undercover work. enables them to provide valuable direct evidence of criminal activities by their 3. Informants criminal associates. Confidential Another critical law enforcement informants frequently provide the technique involves the use of confidential information that enables law enforcement informants. I am a big fan of sherlock officials to obtain judicial warrants Holmes, and as a law enforcement official, authorizing electronic surveillance. Many would love to think that we could solve successful prosecutions of the LCN organized crime problems using our leadership have involved information deductive reasoning powers to sift through supplied by confidential informants who intricate clues and arrive at the correct provided information for many years about conclusion “who done it” , like the famous the leadership of the LCN; indeed some of Sherlock Holmes. Unfortunately, Sherlock the informants have been made members Holmes is fiction. In reality, we do not solve of the LCN. Incriminating evidence by organized crime cases the Sherlock Holmes informants who deal directly with the LCN way. Rather, we solve such crimes through leadership is simply invaluable to break electronic surveillance, undercover through the layers of insulation that the operations and also through the third most leadership uses to conceal their activities. important tool, — the use of confidential informants. However, there are high risks associated with the use of informants. Sometimes, When United States law enforcement informants do not fully disclose their own uses the term confidential informant, we criminal activities, or they falsely implicate refer to an individual who is not willing to their enemies in crimes, or they engage in testify and who provides information or unauthorized criminal activities. In that assistance to the authorities under a latter respect, under United States law, law promise that we will try to keep their enforcement may authorize informants to identity confidential. We cannot absolutely participate in some forms of non-violent guarantee such confidentiality because in criminal behavior that would otherwise be relatively rare circumstances courts may illegal, if they were not acting as conclude that due process, or concerns of informants with authority to engage in the fundamental fairness, require that a activities. For example, depending on the confidential informant’s identity be circumstances, in order to protect an disclosed to a defendant charged with a informant’s cover and to enable them to be crime where the informant can provide in a position to obtain incriminating evidence that could exculpate the evidence against others, informants may defendant. Absent such a rare case, we are be authorized to participate in illegal able in most cases to keep an informant’s gambling, trafficking in stolen property, identity confidential. and other non-violent crimes. Therefore, it is important for law enforcement to closely Confidential informants are typically monitor the activities of informants to motivated to provide information to the minimize the danger that the informant authorities in exchange for money or would use their association with law

43 RESOURCE MATERIAL SERIES No. 54 enforcement to shield their own crime such as an LCN family, or an Asian unauthorized criminal activities. or Russian organized crime group.

On balance, however, experience teaches In one sense the RICO statute did not us that as a general rule, the benefits from actually create a new offense because the use of informants greatly outweigh the murder, arson, extortion, and all sorts of risks. But, we must be ever vigilant of the business crimes (to name a few of RICO’s risks. 46 predicate offenses) were already made criminal when RICO was enacted in 1970. III. PROSECUTION TECHNIQUES But RICO was still a dramatic legislative AND WEAPONS initiative because it permitted many of these generically different crimes to be 1. The RICO Enterprise Theory of charged in a single indictment, even, in a Prosecution single count, so long as those crimes were Obviously, the goal in every organized part of a defendant’s patttern of acts that crime case is to convict the highest levels related to the enterprise. of a crime organization. To do so, prosecutors need the proper tools. First and In addition, there are some features of foremost, prosecutors need an “enterprise” RICO that are particularly effective in or “racketeering” statute designed organized crime cases. For example, as long specifically for this purpose. as one of the predicate crimes alleged against a defendant occurred within the Several countries already have enacted last 5 years before the indictment is such legislation. Italy, for example, has an brought, the next previous crime in the anti-Mafia statute; Japan, our host country, pattern of racketeering need only be within recently enacted statutes derected against 10 years of the most recent crime. The third the Boryokudan. Officials from Russia, most recent crime need only have occurred Great Britain, and from several countries within 10 years of the second act and so in Eastern Europe have recently shown on. The reach-back feature of RICO, interest in “enterprise” legislation. An therefore, can extend 15 or 20 years or more “enterprise” statute in this context is one into the past. (Except for statutes like that explicitly prohibits participation in a RICO, indictmnts in the United States crime group through specified unlawful generally cannot allege crimes that activity. occurred more than five years prior to the date of indictment). In the United States, the most famous of all anti-racketeering laws is called RICO, RICO’s reach is not only long, it is broad. an acronym for the Racketeer Influenced As noted, the predicate crimes which and Corrupt Organizations Statute. In qualify as RICO predicates run the gamut general, it provides heavy penalties (up to from several forms of violence, robbery, life imprisonment under certain murder, extortion to fraud, securities circumstances) when a defendant conducts offenses, most forms of vice (gambling, (or conspires to conduct) the affairs of an extortion, obscenity, prostitution, etc.), and enterprise through a pattern of specified illicit investment in legitimate businesses. acts known as “predicate” crimes. An Were it not for RICO, most United States “enterprise” can include anything from a judges would prohibit the prosecution of corporation, to a labor union, to a group of such diverse crimes in a single case, individuals working together to commit especially if 10 or more defendants were

44 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS charged. Instead, the court would most In the early 1980s, as already noted, the likely require a series of smaller trials, Federal Government (primarily the FBI) which is exactly what crime groups hope made a determined effort to infiltrate the for, because they understand that the best secret headquarters of LCN bosses, way to conquer a prosecution is to divide listening to their plans and reconstructing it. In a series of smaller trials no one jury their crimes. In turn, Federal prosecutors gets to see the entire picture. Organized agreed to bring more and more complicated crime, by contrast, is a picture composed RICO charges. As a result, more successful of many crimes, all linked by a single chain- cases against organized crime bosses have of-command to the same enterprise. Any been brought in the last 15 years than in effective prosecution of a crime family the prior 80 years. In fact, prosecutors would thus necessitate proof of these many discovered that RICO worked equally well crimes in a single trial. RICO permits this. whether the defendants were mobsters RICO allows the jury to see the entire charged with murders and extortions, or pattern of crimes committed by an public officials charged with taking bribes. organized crime group. In bringing a typical RICO prosecution, for example, we Naturally, due to their sensational may charge six or more racketeers with revelations, RICO mob cases received perhaps a dozen of even more predicate extensive media coverage. At this point it crimes covering a decade. In each alleged is clear that control of organized crime in predicate crime, some, but usually not all, the United States would be inconceivable of the defendants are named. In some without RICO. In addition, RICO was the cases, RICO indictments have charged key charge against panamanian dictator numerous defendants with committing Manuel Noriega and the Philippines’ more than 50 offenses as part of a pattern President Ferdinand Marcos. RICO cases of racketeering activity. have also been brought against hundreds of police officers, judges, and public officials As powerful as RICO is, very few RICO for official misconduct, and against prosecutions were actually brought against terrorist groups, radical hate groups, street organized crime until the early 1980s even gangs, stock manipulators, and drug though RICO was adopted in 1970. Part of cartels. the reason was that RICO has always been a very complicated and powerful We are now successfully using RICO to instrument; it took nearly 15 years for attack newly emerging organized crime Federal prosecutors to feel comfortable groups such as Asian and Russian enough-about RICO to make it the organized crime groups, just as we did centerpiece of mob prosecutions. Another against the LCN. reason was that the investigative techniques necessary to build a suitable Like any powerful tool, RICO could be RICO case, such as electronic surveillance abused. To protect against potential and undercover operations, were not abuses, the Organized Crime and routinely used against organized crime Racketeering Section (OCRS) has a special bosses in the 1970s. To be sure, there were unit of attorneys who carefully review all a lot of investigations and prosecutions of proposed RICO indictments for legal and racketeers for street crimes, but these cases factual sufficiency. The unit also ensures rarely pierced the insulation behind which in every case that RICO is necessary; when big organized crime bosses hid. other, less powerful statutes would do just as well, the use of RICO charges is not

45 RESOURCE MATERIAL SERIES No. 54 approved. perspective, supervising prosecutors in Washington, DC are able to maintain the 2. Organized Crime Strike Force focus of efforts against the LCN and to see Units to it that relevant information developed As I previously stated, the LCN is the by one Strike Force office gets to another number one organized crime problem in the office in another part of the country that United States. The LCN is an extensive may need it. nationwide criminal organization. Therefore, it was essential to attack the Moreover, because the supervisors in LCN through a closely coordinated Washington, DC, are aware of all LCN nationwide effort. However, law investigations and prosecutions in the enforcement is very fragmented and United States, they are able to reduce decentralized in the United States. The duplication of efforts and coordinate United States Department of Justice at the investigations and prosecutions conducted federal level is divided into 94 different by more than one office. United States Attorneys offices throughout the country that operate with considerable The creation of these Strike Force Units independence of the main Justice proved to be invaluable. Over the past 25 Department located in Washington, DC. In years, the vast majority of all the major addition, there are literally hundreds, convictions of LCN bosses and members perhaps over 1,000 state, county and city were obtained by these Strike Force Units. prosecutors’ offices and police departments Although the LCN remains strong in the that have criminal jurisdictions that are metropolitan New York City area where totally independent of the federal roughly 80% of the LCN members operate, Department of Justice. This fragmented the LCN has been substantially weakened prosecutorial authority makes nationwide in other parts of the United States - coordination difficult. These difficulties are particularly in San Francisco, Los Angeles, made even greater when you factor in the Kansas City, Milwaukee, St. Louis, and large territorial size of the United States other cities. and its relatively large population of over 260 million people. Although the Strike Force Units were initially created to combat the LCN, their To improve coordination of federal efforts mission was expanded in 1990 to combat to attack organized crime, in the late 1960s Asian and Russian organized crime groups. the Department of Justice created 24 In 1990, the Attorney General of the United specialized prosecutive units called States adopted a national strategy to Organized Crime Strike Forces, located in coordinate the federal attack against then the cities where the 24 LCN families were newly emerging organized crime groups most active. These Strike Force Units were operating in the United States. The Strike staffed by career prosecutors who were Force approach became the centerpiece of experienced in electronic surveillance, that national strategy since it had been so undercover operations, and long term successful against the LCN. The Strike proactive investigations. Moreover, these Force Units were well equipped to handle prosecutors are only allowed to work on the new challenges because of their organized crime matters. To assure that experience, and also because the Strike they work only on organized crime matters Force Units were already located in the and to assure that the Strike Force cases cities where the Russian and Asian are properly coordinated from a national organized crime groups were most active.

46 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

Not surprisingly, the Russian and Asian 3. Witness Security organized crime groups are active in the Another valuable asset of the same large cities as the LCN. prosecutor’s arsenal has been the federal witness security program. Because of the To implement this national strategy, the violent nature of organized crime, witness Attorney General created the Attorney intimidation is a significant problem. To General’s Organized Crime Council, the address that program, in 1970 the members of which are the heads of the Department of Justice created the federal Federal Bureau of Investigation, the Drug witness security program. Witnesses are Enforcement Administration (DEA), the admitted to the program when they are Division of Enforcement of the Securities able to supply significant evidence in and Exchange Commission, the Secret important cases and there is a perceived Service, the Marshals Service, the Customs threat to their security. Once in the Service, the Postal Inspectors, and the program, the witness and his or her family Internal Revenue Service. The Council are given new identities, relocated to meets as necessary, and at least once another part of the United States where annually, to set the official priorities of the the danger to their security is lessened, and Federal Government’s organized crime are given financial assistance until the program, which currently are LCN, Asian, witness is able to secure employment. and Russian organized crime. In order to set these priorities, each agency and the Since the beginning of the witness country’s 94 top Federal prosecutors (called security program, 6,816 witnesses have United States Attorneys) are required each been admitted into the program along with year to file written plans assessing the 8,882 family members for a total of 15,698 problems posed by organized crime groups persons in the program. The average cost in their districts and for attacking is $75,000 per witness per year and organized crime groups in their districts. $125,000 per family per year. The Department of Justice’s Organized Crime and Racketeering Section then As you can see, the program is very reports its analyses of these plans to the costly, but the results have made it worth Council. The most important feature of this the cost. Since 1970, over 10,000 system is control. It obligates the regional defendants have been convicted through prosecutors and agents to keep constant the testimony of witnesses in the program. pressure on La Cosa Nostra and Asian and Last year, 208 convictions were obtained Russian crime groups, and prevents them and 2 million dollars was seized. from succumbing to periodic temptations to assign prosecutors and agents to non- The vast majority of protected witnesses, organized crime cases. about 97 percent, have criminal records. However, the recidevist rate for witnesses Implementing this national strategy has in the program is 21 percent, which is half enabled the Federal Government to the rate of those released from prison. coordinate its nationwide efforts against organized crime groups and to keep the 4. Forfeiture pressure on them to prevent them from It cannot be overstated that making expanding their corrupt influences on money is the primary goal of organized society. crime and transnational criminal activities. Therefore, it is imperative to take the profit out of crime. Strong forfeiture laws do just

47 RESOURCE MATERIAL SERIES No. 54 that. Forfeiture is a criminal penalty for the complexity of United States forfeiture many offenses in the United States. law. To some extent I have generalized and Generally speaking, upon conviction for an oversimplified United States forfeiture law offense that carries forfeiture as a penalty, which is complex, so as not to detract our a defendant may be ordered to forfeit all attention from the main point I am trying profits or proceeds derived from the to make. That is, that criminal and civil criminal activity, any property, real or forfeiture laws are powerful weapons in the personnel, involved in the offense, or prosecutors’ arsenal to take the profit out property traceable to the offense such as of crime. property acquired with proceeds of criminal activity. For example, if a defendant uses 5. Money Laundering a residence or car to distribute drugs, that Strong money laundering laws go hand- property is subject to forfeiture. Thus, a in-hand with forfeiture laws to be powerful convicted defendant may be ordered to weapons against criminal activities. Under forfeit all proceeds of the criminal activity United States money laundering laws, it including money and other forms of is a crime to knowingly conduct a financial property. transaction with the proceeds of certain specified unlawful activity set forth in the In addition to criminal forfeiture, civil statute, with either the intent to promote forfeiture laws also allow the government the specified unlawful activity or with the to obtain property used in criminal intent to conceal the specified unlawful activities. The principal difference between activity. The term transaction is broadly criminal and civil forfeiture is that criminal defined to include “a purchase, sale, loan, forfeiture is limited to a convicted pledge, gift, transfer, delivery, or other defendant’s personal interest in property disposition” and “with respect to a financial subject to forfeiture, whereas civil institution includes a deposit, withdrawal, forfeiture focuses on the property itself. transfer between accounts, exchange of currency, loan, extension of credit, For example, suppose a defendant purchase or sale of any stock, bond, repeatedly used a house to sell drugs, but certificate of deposit, or other monetary s/he did not have an ownership interest in instrument, use of a safe deposit box, or the house. If convicted of drug dealing, that any other payment, transfer, or delivery by, house is not subject to criminal forfeiture through, or to a financial institution, by because the defendant did not own the whatever means effected.” house. However, a civil forfeiture law suit could be brought against the house as a As you can see, the money laundering defendant, even if the owner of the house statute covers nearly every imaginable type was not engaged in criminal activity. The of transaction. Moreover, the penalties for house, nonetheless, is subject to civil money laundering include forfeiture which forfeiture because it was repeatedly used greatly enhances law enforcement’s efforts to facilitate criminal activities, and the to take the profit out of crime. owner did not take adequate steps to prevent their house from being used for For example, in one recent case in criminal activities. Boston, defendants were convicted of laundering $136 million in drug proceeds There are various defenses to such civil for Colombian drug traffickers. The forfeiture, such as the “innocent owner defendants received the cash drug defense”, but I do not want to digress into proceeds, and used it to buy money orders

48 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS cashiers checks, or gold to conceal the uniform throughout the federal system. illegal source of the cash; this constituted First, federal parole was abolished. money laundering. The defendants argued Therefore, a sentence of 10 years in jail that they should only be required to forfeit means a defendant will not be paroled at a the 5% laundering fee (or roughly $7 shorter time and the defendant will million) that they charged the drug actually serve 10 years in jail, with some traffickers since the $136 million belonged modest reduction for good behavior while to the drug traffickers. The court rejected in jail. Other changes involved substantial this argument and held that the restrictions on the discretion of judges in defendants were liable for forfeiture of the imposing sentences. Pursuant to the entire $136 million that they laundered. changes, sentences are now determined by application of a complex numerical Other examples of money laundering weighing system. Under the formula, illustrate the breadth of the statute. For specific numbers are assigned to relevant example , proceeds of fraud that are factors such as the type of offense, the deposited in bank accounts or other nature of the underlying circumstances, financial institutions which is commingled the defendant’s role in the offense and the with legitimate money in accounts under defendant’s criminal history. The numbers the names of nominees constitutes money are added up and the defendant is laundering subjecting, under some generally sentenced to a guideline range circumstances, the entire amounts in the according to the resulting number. Again, accounts to forfeiture, including the money I am oversimplifying complex legal obtained legally as well as the crime provisions. proceeds. The end result of these reforms has been In many cases, not just organized crime that more defendants have been sentenced cases, money laundering violations coupled to prison for longer terms. According to data with forfeiture have proven to be powerful from the Department of Justice’s Bureau weapons to take the profit out of crime. of Justice Assistance, the state and federal prison population in the United States rose 6. Sentences 50 percent from 1990 to 1997, and has been Finally, I would like to briefly discuss increasing 6.5 percent annually. The state United States sentencing laws. Fair and federal prison population in the United punishment upon convictions of crimes to States is now 1.7 million prisoners. During protect society is obviously the ultimate the last 25 years, the federal and state goal of all prosecutions. Perhaps most inmate population has increased six fold important is the protection afforded by from 200,000 in 1972. incapacitating the convicted criminal through incarceration. To be sure, The increases in the length of jail imprisonment substantially reduces, but sentences and the number of defendants does not totally eliminate, opportunities for imprisoned has been one important factor criminals to continue their their illegal contributing to the reduction of serious activities. crime in the Untited States. According to the FBI’s Uniform Crime Reports released In 1987, the United States Federal in 1997, between 1992 and 1996, overall Government adopted a comprehensive crime in the United States dropped 10.3 change in its sentencing laws to make percent, violent crime droped 16.3 percent, punishment more definite and more murder dropped 20.4 percent, robbery

49 RESOURCE MATERIAL SERIES No. 54 dropped 23.2 percent, aggravated assault law enforcement agencies, are involved in dropped 12.1 percent and property crime an active program to negotiate modern dropped 9.3 percent. treaties in order to replace old, outdated instruments, to create extradition treaties I recongnize that this drop in crime is where none previously existed, and to due to a number of factors and not just ensure that new crimes are covered by putting more people in jail for longer extradition treaties. periods of times. But career criminals do not just commit the one crime they are In the past five years the United States convicted for, rather they commit many has entered into new extradition treaties crimes each year. Therefore, it seems to me with Spain (1993), the Bahamas (1994), that putting more career criminals in jail Jordan (1995), Malaysia, Bolivia (1996), for longer periods of time will prevent them Philippines (1996), Hungary (1997), from committing those crimes which Switzerland (1997) and Hong Kong (1997). significantly contributes to a reduction in United States extradition treaties with the crime. following countries are pending approval of the United States Senate: Antigua and I would now like to turn my discussion Barbuda, Barbados, Cyprus, Dominica, from the principal aspects of the United France, Grenada, Luxembourg, Poland, St. States domestic responses to transnational Kitts and Nevis, St. Vincent and the crimes and organized crime to what we are Grenadines, Spain, and Trinidad and doing together with other countries in the Tobago. international arena to combat such criminal activities. The United States is also pursuing efforts to secure extradition without a IV. UNITED STATES RESPONSES treaty. We encourage the international IN THE INTERNATIONAL ARENA community to work together to deny safe havens to international criminals through 1. Extradition procedures consistent with domestic and It is imperative that international international law. criminals be denied a safe haven. International extradition treaties remain 2. Mutual Legal Assistance Treaties the most effective legal mechanism to (MLATS) obtain the return of international fugitives. In light of the international nature of In 1990, the United States sought the transnational and organized crime extradition of 1,672 accused or convicted activities, it is also essential to be able to criminals. By 1996, that number had timely obtain the testimony of witnesses, jumped to more than 2,894, including bank records, other financial records and numerous fugitives wanted for murder, other evidence from foreign countries, and major drug trafficking offenses, money in some cases from several different laundering, multi-million dollar financial countries, and for the United States to give scams, and other serious crimes committed similar assistance to other countries. against the United States. Therefore, Mutual Legal Assistance Treaties have become important tools to The United States is currently party to address international criminal activities. over 104 such extradition treaties. The United States Departments of State and Barely 20 yeays ago, the United States Justice, with appropriate input from other entered into its first MLAT. Today, there

50 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS are 19 MLATs in force that extend to 23 against United States nationals committed countries. In the 104th Congress, the overseas. Where offenders are identified, Senate gave its consent to five additional these officials also work to locate, MLATs with Austria, Hungary, Korea, the apprehend, and return the perpetrators of Philippines, and the United Kingdom. The such crimes through extradition, expulsion number of United States made or other lawful means. They also facilitate approximately 928 requests for mutual the arrest and extradition of international legal assistance in criminal matters. In fugitives located in the United States and 1996, that number had increased to wanted abroad. approximately 1,644 requests. The need for a major United States law The United States Department of State enforcement presence abroad is well and Justice have worked together in documented. For example, in 1996 and negotiating 14 additional MLATs that will 1997, foreign offices of the United States require ratification by the Senate, Customs Service handled over 3,850 cases. including agreements with Australia, Hong Moreover, there is often a direct tie between Kong, and Poland. The United States also the work of these overseas offices and has signed a multilateral MLAT with the domestic criminal investigations. For Organization of American States (OAS), example, over 80 percent of the 7,068 cases which potentially could create MLAT pending in FBI Legal Attache offices relations between the United States and overseas at the end of 1996 originated from the 33 other member states of OAS. United States FBI field offices. Also, the number of cases worked by FBI agents in Where there is no MLAT in force, the the new Moscow Legal Attache office grew United States is hopeful that law from 20 in July 1994, to 289 through July enforcement agencies will be able to 1997 — a fifteen-fold increase. In their first exchange information and provide mutual year, the new Customs Service offices in assistance in ways that are fully consistent Moscow and in Pretoria, South Africa, with the laws of the countries involved. handled over 50 and 30 cases, respectively. Such joint cooperation is essential to A substantial number of these cases involve effectively combat the international fugitives from United States courts, crimes criminal activities of sophisticated committed abroad against United States criminals who seek to exploit the nationals, and other serious violations of difficulties inherent in international United States criminal laws. investigations. The United States would like to expand 3. Expanding the Presence of United its law enforcement presence in other States Law Enforcement Agents countries to work with the host countries Abroad to respond to this growing need. For Tough United States laws that protect example, the FBI hopes to establish new United States citizens and interests abroad FBI offices in 24 foreign nations and to will be of little value if the United States expand existing offices in an additional 23 does not establish an investigative and law countries. Similarly, the Customs Service enforcement infrastructure to pursue hopes to open 11 new offices in Europe, violations of these laws. United States law Asia, Australia, and the Americas, enforcement officials stationed abroad complementing 26 existing offices. The work shoulder to shoulder with their DEA hopes to augment its already sizeable foreign counterparts to investigate crimes presence with further expansion into the

51 RESOURCE MATERIAL SERIES No. 54

Newly Independent States from the former International Law Enforcement Academy Soviet Bloc, Latin America and other (ILEA) in Budapest, Hungary. This current and emerging centers of drug trade. academy offers law enforcement officers These expansions will bolster United from Eastern and Central Europe an eight- States law enforcement abilities to arrest week personal and professional and punish fugitives who have committed development program modeled after the crimes against the United States, to FBI’s National Academy in Quantico, dismantle international organized crime Virginia near Washington, DC. The United rings, and to strengthen law enforcement States is working with other countries to and judicial systems around the globe. establish a similar training academy in Asia. To complement the increasing number of United States law enforcement In addition, United States law personnel overseas, it would be helpful to enforcement officials participate in a wide expand the Department of Justice’s cadre variety of other training and technical of overseas attorneys. Their role includes assistance with other countries concerning, facilitating requests for extradition and among other matters, fraudulent document mutual legal assistance, providing detection, alien smuggling, border control substantive legal guidance on international enforcement, narcotics trafficking, law enforcement and treaty matters, and organized crime, money laundering and increasing cooperation between United asset forfeiture. Such training is mutually States and foreign prosecutors. In 1990, the beneficial to the United States and other United States handled approximately participating countries because we are able 2,208 extradition and 1,784 mutual legal to learn about each others’ problems and assitance requests both to and from the develop strategies and techniques to United States. By 1996,those numbers had address these problems. It affords a nearly doubled, jumping to 3,963 valuable opportunity to work together to extraditions and 3,407 mutual legal address common law enforcement assistance requests. Furthemore, problems and issues of mutual concern. The approximately 25 percent of all extradition United States is also working with the requests and 9 percent of all mutual legal Ukraine and other countries to develop assistance requests were in support of state prosecutors’ units modeled after the United and local prosecutors. This increasing States Organized Crime Strike Force caseload requires United States attorneys Units. in other countries to respond to requests for information, and to facilitate the 5. Coordination with International transfer of fugitives and evidence to and and Multilateral Organizations from the United States. Currently, the (1) The United States is currently working Department of Justice has prosecutors in together with the G8 nations and the Brussels, Mexico City, Paris, and Rome. United Nations in the initial stages of The planned expansion includes additional developing an international crime attorneys in Manila, Brasilia, Athens, and convention addressing transnational Asia. and organized crime activities.

4. International Training (2) The G7/P8 Senior Experts’ Group on In 1995, the United States working with transnational organized crime has Russia, Hungary and other countries in produced 40 recommendations to Eastern Europe established the combat transnational organized crime,

52 108TH INTERNATIONAL SEMINAR VISITING EXPERTS’ PAPERS

inventories of international analysis, we have no other choice but to conventions and institutions relating to cooperate, or else sophisticated transnational crime and inventories of international criminals who do not member countries’ relevant domestic recognize international boundaries will criminal laws. triumph.

(3) The United Nations International Drug Control program (UNDCP) is currently developing a global program on money laundering that includes a model money laundering statute and legal and technical assistance and training for Southeast and Southwest Asia. Similarly, the United States, Japan, and other countries created the Financial Action Task Force (FATF) to address international money laundering.

(4) The United States also continues to work with many countries on bilateral efforts to combat transnational and international organized crime criminal activities.

(5) Finally, the United States and over 170 other countries have long worked with the International Criminal Police Organization (INTERPOL) which facilitates a broad range of bilateral and multilateral police-to-police cooperation.

V. CONCLUSION There is no doubt that the world community shares substantial common problems posed by transnational criminals and organized crime groups. Therefore, we must continue to work closely together to develop new techniques, as well as to implement approaches that have proven to be successful, in our common fight against such international criminal activities . We must share information and cooperate to identify, investigate and prosecute the most significant international criminals and organized crime groups. In the final

53