Kingpins and Corruption TARGETING TRANSNATIONAL ORGANIZED CRIME IN THE AMERICAS AEI WORKING GROUP ON TRANSNATIONAL ORGANIZED CRIME IN THE AMERICAS JUNE 2017 AMERICAN ENTERPRISE INSTITUTE Kingpins and Corruption TARGETING TRANSNATIONAL ORGANIZED CRIME IN THE AMERICAS AEI WORKING GROUP ON TRANSNATIONAL ORGANIZED CRIME IN THE AMERICAS JUNE 2017 AMERICAN ENTERPRISE INSTITUTE © 2017 by the American Enterprise Institute. All rights reserved. The American Enterprise Institute (AEI) is a nonpartisan, nonprofit, 501(c)(3) educational organization and does not take institutional posi- tions on any issues. The views expressed here are those of the author(s). Contents Executive Summary ...................................................................................................................................................................... 1 I. US Policy Tools for Combating Transnational Organized Crime ................................................................................ 5 II. Colombia: Securing Genuine Peace ................................................................................................................................... 11 III. Venezuela: A State Destroyed by Crime and Corruption .......................................................................................... 18 IV. Confronting the Iran-Hezbollah Threat in the Western Hemisphere .................................................................... 26 V. The Criminalized State in Latin America ......................................................................................................................... 32 VI. Instability and Gangs in the Northern Triangle ........................................................................................................... 37 VII. Modernizing Security Cooperation with Mexico ....................................................................................................... 42 AEI Working Group on Transnational Organized Crime in the Americas ................................................................ 49 Acknowledgments ....................................................................................................................................................................... 50 Notes ............................................................................................................................................................................................... 51 iii Executive Summary ransnational organized crime resides at the a series of effective policy prescriptions for Congress Theart of nearly every major threat confronting and the Trump administration. The report’s seven the Americas today, whether it is the deadly opioid sections present an overview of tools available to the crisis hurting US communities, the catastrophic col- government and spotlight transnational organized lapse of oil-rich Venezuela, or debilitating gang vio- crime threats that demand more attention and action lence throughout Central America, which spills over from US authorities. into the streets of American cities. These crises can be traced to criminal networks that garner billions • The US government has the means and legal from the production of illicit drugs, human traffick- framework to counter transnational organized ing, and extortion. crime. However, effectively implementing such These organizations relentlessly attack democratic policy will require strong political will and the institutions and the rule of law, stunting economic proper allocation of resources. growth and stifling legitimate commerce and invest- ment. Their criminal networks, largely bankrolled by con- • As Colombia begins implementing its peace sumers of illicit drugs in the United States and Europe, accord with the Revolutionary Armed Forces respect no borders and operate with virtual impunity in of Colombia (FARC), dissident guerrillas and countries ravaged by corruption and violence. the country’s other organized criminal groups Disrupting those transnational operations requires threaten to undermine this major undertaking. international cooperation, and for decades, US aid and These dissidents’ deep ties to demobilized FARC diplomacy has prioritized this partnership. Regret- leaders and the cocaine trade, their international tably, political developments have undermined the connections, and their historical control over a willingness or capability of key states in the Western significant portion of the FARC’s financial assets Hemisphere to effectively implement efforts against demand special attention. transnational organized crime. Now, more than ever, the United States must work • Venezuelan government officials are actively with regional allies to restore the hemispheric coali- involved in international crime and using state tion against transnational organized crime. US poli- resources, including military assets, to support cymakers can lead the way by applying asymmetrical illicit activities such as money laundering and tools, such as financial sanctions targeting transna- drug smuggling. These officials also have collab- tional organized crime kingpins and corrupt officials, orated with extra-regional actors such as Iran and working to enhance local enforcement capabili- and Hezbollah, incorporating them into their ties and promote economic development. Such pro- criminal networks. active engagement signals US resolve to confront the transnational organized crime threat and levels the • Iran has gradually increased its official profile playing field for states that lack the resources to con- and influence in Latin America in recent years. front these powerful syndicates. Connections to Lebanese Shi’a expatriate com- This report focuses on the threat posed by trans- munities enable Iran and its proxy Hezbollah to national organized crime in the Americas, elucidating operate clandestinely in the region. Hezbollah’s 1 KINGPINS AND CORRUPTION integration into the region’s existing transna- • To ensure the prospects for peace in Colom- tional criminal networks poses a severe threat to bia, the US government should target, seize, US and regional security. and repurpose illicit funds hidden abroad by the FARC. It should ensure that these funds are • The adaptability, endurance, and ruthlessness of devoted to the successful implementation of the gangs in Central America make them a unique peace agreement. At the same time, it should transnational criminal threat that destabilizes support Colombia’s security forces seeking to the region. Gangs such as MS-13 are working deny criminal groups the opportunity to fill the to diversify their criminal activity, integrating void left by the FARC’s eventual demobilization. themselves into drug trafficking operations and even political activity, with mixed results. • US policymakers should continue applying sanc- tions against key Venezuelan officials whose • Corrupt officials in Central America actively criminal activities help sustain the authoritarian participate in and support a larger network of regime. Sanctioning officials such as Diosdado international illicit financing and smuggling. In Cabello would further expose the regime’s ram- El Salvador, Farabundo Martí National Libera- pant criminality and undercut its oppression of tion Front leader José Luis Merino acts as the the Venezuelan people. country’s primary “fixer,” using his influence and international connections to finance and • Latin American states that lack counterterror- launder money for drug traffickers and corrupt ism legal frameworks could benefit from US Venezuelan officials. assistance in developing a legislative agenda to address this problem. The US government can • Despite concerted government efforts, violence also expand its own legislation, including the and associated mortality rates have spiked in Hezbollah International Financing Prevention Mexico in recent years. New approaches and Act of 2015, to better target terror groups oper- honest recognition of underlying causes by both ating in Latin America. the United States and Mexico are required to effectively confront the threat. • To dismantle criminalized state structures, the US should target their key enablers, includ- ing Salvadoran kingpin José Luis Merino, with Key Findings and Recommendations financial investigations and sanctions. It should also support the anticorruption efforts of attor- • Key enforcement mechanisms and policy neys general and advocate for adopting interna- options available to the US government to tionally backed anticorruption bodies. counter transnational organized crime remain underused and under-resourced. The US gov- • The United States can help address the roots ernment should reevaluate the allocation of of the gang problem in the Northern Trian- resources involved in countering transnational gle countries of Central America by helping organized crime in the Americas. It should also them overhaul their overcrowded and unse- more aggressively use enforcement mechanisms cure prison systems and coordinating with them at its disposal (such as sanctions and criminal on deporting and reintegrating gang members. prosecution) to degrade threat networks and It also should work with local governments to promote regional security and development address underlying causes of proliferating gang cooperation. membership and violence. 2 EXECUTIVE SUMMARY • Fighting transnational organized crime in Mex- countering transnational organized crime based ico is a complicated task that requires ade- on a recognition