In the last two decades, globalization has internationalized
what was once regional or local organized crime. Transnational criminal networks have quickly taken advantage
of the Internet, cellular telephones, and other forms of advanced communications technology that have
revolutionized commerce. Globalization has enabled criminals to exploit and react quickly to changes in licit
and illicit economies.
States with weak criminal justice institutions and those
undergoing the transition from authoritarian rule can serve as fertile breeding grounds for TOC. For
example, many states experiencing recent transitions to democracy face serious organized crime challenges
that, in our increasingly interconnected world, now have global implications. Elsewhere the nexus between
weak and failing states and organized crime is growing. Parts of the world sitting astride important
smuggling routes or drug production zones—such as the Balkans, West Africa, the Horn of Africa, Southwest
and Southeast Asia, Mexico, and other parts of Latin America—are prone to high levels of illicit activity.
"Networked" Organizations
In the past, TOC groups typically featured rigid lines of authority and exerted control over economic
or geographic turf. Today, many transnational criminal organizations are loose networks of individuals or
groups that often cooperate on an ad hoc basis to share expertise, skills, and resources, while still
operating independently and often transcending national boundaries. The increasing prevalence of
decentralized and worldwide TOC networks allows criminals to more easily evade law enforcement and to more
quickly adapt to changing market conditions.
Due to their fluid nature, networks are difficult to
identify and target. They benefit from compartmentalization, which insulates them from internal conspiracies.
A network can operate without a single person knowing the details of the entire scheme. Peripheral nodes have
little knowledge of who directs them, and the disruption of marginal elements by law enforcement may act as an
early warning system for core players. There are no longer one or two major targets whose apprehension could
render a crippling blow to a criminal organization’s activities.
The Critical Role of Facilitators:
Blurring the Illicit and Licit Worlds
Transnational criminal organizations seek to exploit
legitimate players and their specific skills to further their illicit operations. For example, transnational
organized criminal groups have relied on lawyers to facilitate corrupt transactions, such as creating shell
corporations, opening offshore bank accounts in the shell corporation’s name, laundering funds through trust
accounts, and creating front businesses for their illegal activity and money laundering. In addition, TOC figures
have used lawyers to bring frivolous libel cases against individuals who expose criminal activities. Business owners
or bankers have been enlisted to launder money, and employees of legitimate companies have been used to conceal
smuggling operations. The range of licit-illicit relationships is broad. At one end, criminals draw on the public
reputations of licit actors to maintain facades of propriety for their operations. At the other end are “specialists”
with skills or resources who have been completely subsumed into the criminal networks.
- Arrested Russian organized crime figure Gennadiy Petrov used Spanish lawyers to purchase companies
and real estate in Spain to assist in the facilitation of his illicit activities, according to press
reporting.
- Russian arms broker Victor Bout was arrested in March 2008 for allegedly attempting to sell millions of
dollars worth of weapons to the Revolutionary Armed Forces of Colombia (FARC), a U.S. State Department-designated
foreign terrorist organization. In addition to providing support. For decades, Bout was alleged to have sold arms
to insurgent groups, often in violation of international sanctions.
- In Guinea-Bissau, drug trafficking organizations have corrupted and infiltrated government institutions to secure
a safe haven and to transship narcotics from Latin America to Europe and other parts of the world.
Growing TOC Activities in the Homeland
Transnational criminal networks are actively targeting U.S. businesses,
consumers, and government programs. Some crimes involve widespread transnational conspiracies while others are perpetrated by
largely U.S.-based groups with ties abroad. U.S.-based TOC networks make use of specialists who take advantage of international
borders as well as advances in technology, communications, and transportation systems.
Eurasian Criminals and Oligarchs Interested in U.S. Opportunities. Alliances
between organized criminals and oligarchs from the former Soviet Union threaten U.S. businesses and domestic markets. With their
international business connections, large coffers, and political ties, these quasi-legitimate business figures serve as attractive
force multipliers for organized criminals. Some Eurasian oligarchs with worldwide business interests have ties with major Eurasian
organized criminals. Industry officials in certain sectors like commodities fear that quasi-licit firms and individuals with major
organized crime ties are gaining market share.
Targeting U.S. Consumers and Public Sector Fraud. TOC groups target individual
U.S. consumers, using a variety of techniques to drain their bank accounts and steal their identities. In addition to traditional
“phishing,” advanced fee fraud schemes, and Internet auction fraud, criminals use more sophisticated techniques such as the remote
targeting of point-of-sale machines. Credit card fraud, for example, is estimated to cost consumers and businesses anywhere from
$10 billion to $20 billion per year. Counterfeiters prey on susceptible U.S. consumers through a broad array of tactics and
venues.
Public Sector Fraud. Transnational organized criminals are increasingly adept
at a range of public sector fraud, including frauds against the U.S. Government. Such crimes include food stamp and welfare fraud,
Medicare and Medicaid fraud, and government grant and loan program fraud. For example, in October 2010 seventy-three defendants
were charged, including a number of alleged members and associates of an Armenian-American organized crime enterprise, with various
health care fraud-related crimes involving more than $163 million in fraudulent billing to Medicare and insurance companies.
Smuggling: Borders as Opportunities. Transnational criminals prey upon
weaknesses and differences in international transportation and customs security regimes. Specialized criminal networks feature
prominently in the trafficking of narcotics, movement of contraband items, counterfeiting of goods, human trafficking, and smuggling
and trafficking of humans into the United States.
- Between 2005 and 2007, U.S. law enforcement identified several U.S.-based Uzbek criminal networks
engaging in human trafficking. The networks operated cleaning companies that exploited guest workers
for labor in cleaning companies that serviced national hotel and retail chains and moved operations
routinely to avoid detection.
- Mexican groups’ dominance over access to smuggling routes along the nearly 2,000-mile border with the
United States has been key to their ascendance. Human traffickers have also exploited the smuggling
routes across the United States-Mexico border to target undocumented migrants for labor trafficking or
sex trafficking. The cartels are currently active in an estimated 270 American cities.
Intellectual Property Theft. Transnational criminal
networks are increasingly active in stealing critical U.S. intellectual property, including through intrusions into corporate
and proprietary computer networks. Theft of this kind of property, ranging from movies to proprietary designs of high-tech
devices and manufacturing processes, causes significant business losses and erodes U.S. competitiveness in the world marketplace.
Between FY 2005 and FY 2010, the yearly domestic value of intellectual property right (IPR) seizures in the United States leaped
from $93 million to $188 million. Products originating in China accounted for 66 percent of these IPR seizures in FY 2010.
Cybercrime: The globally interconnected nature of the Internet creates
new opportunities for cross-border criminal activity, and transnational criminal organizations are increasingly adept at perpetrating
cybercrime within the United States and against U.S. citizens. Schemes range from scams and frauds initiated through email to highly
sophisticated attacks against U.S. corporations.
Five Key Threats to U.S. National Security
- TOC Penetration of State Institutions.
TOC penetration of governments is subverting the rule of law, democratic institutions, and
transparent business practices. The growing reach of TOC networks is pushing them to seek strategic alliances with state leaders and
foreign intelligence services, threatening stability and undermining free markets.
- In Russia and some Eurasian states, cooperation among the government, organized crime, intelligence services, and the private
sector is growing. The increasingly close link between Russian and Eurasian organized crime and oligarchs enhances the ability of
state or state-allied actors to undermine competition in gas, oil, aluminum, and precious metals markets, and thereby greatly enhances
the threat to U.S. national and economic security.
- In China and other parts of Asia, TOC corruption of government officials is aggravating an already difficult operating environment
for U.S. and international businesses. In countries with weak governance, including Afghanistan, many African states, Balkan states,
and some Latin American states where narco-trafficking is rampant, corrupt officials turn a blind eye to TOC activity.
- TOC Threat to the U.S. and World Economy.
TOC is increasing its subversion of legitimate financial and commercial markets, threatening
U.S. economic interests and raising the risk of significant damage to the world financial system. U.S. business leaders worry that U.S.
firms are being disadvantaged in the absence of multilateral curbs on TOC and corruption, particularly given the increasing flow of capital
to the emerging economic powers where rule of law is questionable. Estimates of harm are hard to assess, but the World Bank estimates that
the amount of bribery alone from the private sector to the public sector worldwide is about $1 trillion per year. This estimate does not
include the extent of embezzlement of public funds or misuse of public assets. A large portion of the bribery can be assumed to result from
TOC activities. Other forms of crime also have a substantial economic impact to economies and endanger the well-being and safety of people
and their communities around the world.
- TOC networks engage in bribery, fraud, violence, and corrupt alliances with state actors to gain the upper hand
against legitimate businesses. This will continue to damage the ability of legitimate businesses to compete and may
drive some legitimate players out of the market.
- Widespread, organized intellectual property theft causes significant near-term economic losses to American businesses
and, over time, threatens to undermine U.S. international economic competitiveness.
- TOC networks are flooding the world market with inferior and/or counterfeit products which are often times defective
and hazardous. TOC networks are likely to increasingly threaten industries that depend on intellectual property such as
technology, fashion, pharmaceuticals, computing, finance, entertainment, and publishing—all U.S. economic strengths.
These sub-standard products also threaten public health and safety on a worldwide basis, and the theft of U.S. trade
secrets is ever increasing.
- Corruption, weak enforcement, and a lack of transparency provide fertile ground for TOC activity in emerging market
countries, making them less appealing for investors.
- Coercive tactics and business practices employed by TOC most likely will further undermine transparency and
confidence in key energy, metal, and other sectors where recent acquisitions and investments have occurred.
- Growing Cybercrime Threat.
TOC networks are becoming increasingly involved in cybercrime, which
costs consumers billions of dollars annually, creates risks to
sensitive corporate and government computer networks, and undermines
worldwide confidence in the international financial system.
Transnational criminal organizations, through cybercrime, pose a
significant risk of potentially devastating damage to the world’s
financial and trust systems—banking, stock markets, e-currency, and
value and credit card services—on which the world economy depends.
Advances in information technology applications and the slow
adoption of defensive restrictions and technologies are making it
easier for criminals to succeed. Some estimates indicate that online
frauds perpetrated by Central European cybercrime networks have
defrauded US citizens or entities of approximately $1 billion in a
single year. Nigerian criminal groups have also become very sophisticated in defrauding
communities of billions of dollars and assets. In recent years, we have also seen instances where transnational cyber attacks
coincided with times of cross-border political tensions, and potential linkages between hackers and other cybercriminals and
state institutions are particularly worrying.
- Threatening Crime-Terror Nexus.
Terrorists and insurgents increasingly will turn to crime to generate funding and will
acquire logistical support from criminals, in part because of successes by U.S. agencies and partner nations in attacking other
sources of their funding. In some instances, terrorists and insurgents prefer to conduct criminal activities themselves; when
they cannot do so, they turn to outside individuals and facilitators. Proceeds from the drug trade are critical to the continued
funding of such terrorist groups as the Taliban and the Revolutionary Armed Forces of Colombia (FARC). Terrorist organizations
such as al-Shabaab and drug trafficking organizations such as the cartels based in Mexico are turning to criminal activities such
as kidnapping for ransom to generate funding to continue their operations. Some criminals could have the capability to provide
weapons of mass destruction (WMD) material to other terrorist groups, such as Hizballah and al-Qaida in the Islamic Maghreb,
though the strength of these drug links and support remain unclear. U.S. intelligence, law enforcement, and military services
have reported that more than 40 foreign terrorist organizations have links to the drug trade. Some criminal organizations have
adopted extreme and widespread violence in an overt effort to intimidate governments at various levels.
- Expansion of Drug Trafficking.
Despite demonstrable counterdrug successes in recent
years, illicit drugs remain a serious threat to the health, safety, security, and financial well-being of U.S. citizens. The
overwhelming majority of drugs now consumed in the United States are produced domestically or elsewhere in the Western Hemisphere,
and this pattern is likely to continue. Mexican drug trafficking organizations continue to consolidate their market share within
the Western Hemisphere and to expand their reach into the United States. In West Africa, Latin American cartels are exploiting
local criminal organizations to move cocaine to Western Europe. In addition, many of the well-established organized criminal
groups that have not been involved in producing narcotics—including those in Russia, China, Italy, and the Balkans—are now expanding
their ties to drug producers to develop distribution markets and trafficking networks. The expansion of drug trafficking is often
accompanied by dramatic increases in local crime, as the United Nations has detected in regions such as West Africa and Central
America.
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