Organized Crime An Evolving Challenge for U S Law Enforcement Updated January 11 2013 Congressional Research Service https crsreports congress gov R41547 Organized Crime An Evolving Challenge for U S Law Enforcement Summary In the last two decades organized crime has grown more complex posing evolving challenges for U S federal law enforcement These criminals have transformed their operations in ways that broaden their reach and make it harder for police to combat them They have adopted morenetworked structural models internationalized their operations and grown more tech savvy They are a significant challenge to U S law enforcement Modern organized criminals often prefer cellular or networked structural models for their flexibility and avoid the hierarchies that previously governed more traditional organized crime groups such as the Cosa Nostra Fluid network structures make it harder for law enforcement to infiltrate disrupt and dismantle conspiracies Many 21st century organized crime groups opportunistically form around specific short-term schemes and may outsource portions of their operations rather than keeping it all “in-house ” Globalization has revolutionized both licit and illicit commerce Commercial and technological innovations have reduced national trade barriers widened transportation infrastructure and bolstered volumes of international business The Internet and extensive cellular telephone networks have fostered rapid communication Integrated financial systems which allow for easy global movement of money are exploited by criminals to launder their illicit proceeds Estimates suggest that money laundering annually accounts for between 2% and 5% of world GDP Simultaneously borders are opportunities for criminals and impediments to law enforcement Organized criminals have expanded their technological “toolkits ” incorporating technologydriven fraud into their capabilities They can harm U S citizens without ever having a physical presence in the country via crimes such as cyber intrusions into corporate databases theft of individual consumer credit card information fencing of stolen merchandise online and money laundering Further criminal organizations—which have historically burrowed into and exploited local ethnic communities—can now rely on Internet connectivity and extensive international transportation linkages to target localities around the globe Since the terrorist attacks of September 11 2001 there has been a shift in law enforcement attention and resources toward counterterrorism-related activities and away from traditional crime fighting activities including the investigation of organized crime Although the effects of organized crime may not be seen in a large-scale attack they are far-reaching—impacting economic stability public health and safety and national security In July 2011 the Obama Administration issued its Strategy to Combat Transnational Organized Crime It addresses the fact that federal investigation of organized crime matters has not historically been a centralized effort Regardless there still is no single agency charged with investigating organized crime in the way the Federal Bureau of Investigation FBI has been designated the lead investigative agency for terrorism Further resources to tackle this issue are divided among many federal agencies As such Congress may exert its oversight authority regarding the federal coordination of organized crime investigations via the 2011 strategy Policymakers may also debate the efficacy of current resources appropriated to combat organized crime Congressional Research Service Organized Crime An Evolving Challenge for U S Law Enforcement Contents Introduction 1 Organized Crime Adapting to Globalization 2 Borders and Organized Crime 3 Copycats and Smugglers 3 Drug Trafficking 7 Money Laundering 8 Organized Crime and Technological Change 11 Mass Marketing Fraud 11 Cyberspace Electronic Information and Organized Crime 13 Online Identity Theft and Sophisticated Credit Card Fraud 14 Organized Retail Crime and Online Fencing 15 Bulk Narcotics Smuggling and Technology 16 Exploitation of Ethnic Diaspora Communities 18 Changing Structures 21 Network Models 22 Corruption 24 “Ground-Level” Exploitation of Private Businesses 24 Big Business and Organized Criminals 25 Corruption of Public Officials 27 Organized Crime a “National Security” and “Public Security” Concern 28 Conceptualizing Organized Crime 29 Transnational Organized Crime Defined 30 Statutory Definition 34 Issues 35 Defining Organized Crime in Statute 35 Congressional Commission 36 Incentives for Investigating Organized Crime 36 Implementing the National Strategy to Combat TOC 37 Figures Figure 1 Transnational Organized Crime Strategy 34 Contacts Author Information 39 Congressional Research Service Organized Crime An Evolving Challenge for U S Law Enforcement Introduction In the last two decades organized crime has grown more complex posing evolving challenges for U S federal law enforcement This is largely because these criminals have transformed their operations in ways that broaden their reach and make it harder for law enforcement to define and combat the threat they pose Globalization and technological innovation have not only impacted legitimate commerce but they have simultaneously revolutionized crime In response to these forces organized criminals have adopted more-networked structural models internationalized their operations and grown more tech savvy Criminals have become more elusive They see international borders as opportunities while law enforcement views them as obstacles Criminals have expanded their range of tools and targets as well Meanwhile law enforcement “plays by yesterday’s rules and increasingly risks dealing only with the weakest criminals and the easiest problems ” according to the Strategic Alliance Group a partnership of seven law enforcement agencies from five nations 1 Motivated by money organized crime fills needs not met by licit market structures and or exploits businesses consumers and nations for profit Organized criminals have capitalized on commercial and technological advances that have bolstered communication and international business They use innovative methods of moving illegal proceeds around the world Some nations have also witnessed the creation of ties between powerful business figures politicians and criminals Modern organized criminals may prefer cellular or networked structural models for their flexibility and avoid the hierarchies governed by elaborate initiation rituals that were favored by their predecessors Fluid network structures make it harder for law enforcement to infiltrate disrupt and dismantle conspiracies Many 21st century organized crime groups opportunistically form around specific short-term schemes Further these groups may outsource portions of their operations rather than keeping all of their expertise “in-house ” In July 2011 to address these and other issues the Obama Administration issued its Strategy to Combat Transnational Organized Crime 2011 Strategy It described transnational organized crime TOC as a strategic threat to national security laid out a definition of TOC and set forth five policy objectives and six categories of priority actions in an attempt to devise a cohesive federal response to transnational organized crime 2 Complicating all of this since the terrorist attacks of September 11 2001 9 11 there has been a shift in law enforcement attention and resources more toward counterterrorism-related activities and away from traditional crime fighting activities—including the investigation of organized crime This report provides an analysis of how organized crime has capitalized on globalization by using borders as opportunities relying on fast-paced technological change and adapting its organizational structures It illustrates how these transformations can impact U S persons businesses and interests The report includes a discussion of how U S law enforcement 1 These law enforcement agencies include the U S Federal Bureau of Investigation FBI Drug Enforcement Administration DEA Immigration and Customs Enforcement ICE the United Kingdom’s Serious Organised Crime Agency SOCA the Australian Crime Commission and Australian Federal Police the New Zealand Police and the Royal Canadian Mounted Police See SOCA “SOCA Working in Partnership Worldwide ” http www soca gov uk about-soca working-in-partnership international-partnerships Intelligence Committee Futures Working Group Crime and Policing Futures Strategic Alliance Group March 2008 p 2 Hereinafter Intelligence Committee Futures Working Group Futures 2 For details see Strategy to Combat Transnational Organized Crime July 2011 http www whitehouse gov sites default files Strategy_to_Combat_Transnational_Organized_Crime_July_2011 pdf Hereinafter Strategy to Combat Transnational Organized Crime Congressional Research Service 1 Organized Crime An Evolving Challenge for U S Law Enforcement conceptualizes organized crime in the 21st century and concludes by examining potential issues for Congress including the extent to which organized crime is a national security threat partly to be tackled by U S law enforcement agencies congressional oversight regarding the federal coordination of organized crime investigations and the utility of current resources appropriated to combat organized crime This report employs a broad conceptualization of organized crime in its narrative discussion of criminal activity In other words the analysis includes groups engaged in sustained criminal enterprises such as—but not limited to—drug traffickers mafia families smugglers violent gangs and fraudsters These operations may or may not have a transnational dimension to them which is a requirement under the guidelines of the 2011 Strategy but they directly impact U S persons businesses and or interests While this conceptualization may be broader than the definition laid out in the 2011 Strategy it incorporates a range of criminality that may inform Congress in future legislation impacting organized crime The cases and examples discussed in this report are not intended to set definitional boundaries for organized crime Organized Crime Adapting to Globalization Organized crime targeting the United States has internationalized and its structures have flattened The popular image of mobsters employing elaborate initiation rituals and strict codes of conduct to control crews that assail their own communities is outmoded Today nimble adaptive loosely structured small groups with global reach harm consumers businesses and government interests on a daily basis Commercial and technological innovations are behind this transformation They have helped to reduce national trade barriers widen transportation infrastructure and bolster volumes of international business Smugglers have taken advantage of growing international commerce to hide illicit trade The Internet and extensive cellular telephone networks have fostered rapid communication simultaneously revolutionizing licit and illicit commerce For example integrated financial systems allow for easy global movement of money Estimates suggest that money laundering annually equals between 2% and 5% of world GDP 3 Criminal organizations targeting the United States operate in many of the world’s nations Areas wracked by social disorder inadequate policing and poor governance offer opportunities for organized crime to take root 4 These groups exploit diaspora communities in the United States as cover for their operations situating elements of their global operations among immigrant enclaves Organized crime groups are becoming more entrepreneurial or market focused reacting to changes in both illicit and licit economies 5 Of course they are still heavily involved in activities such as narcotics trafficking and money laundering which have been greatly impacted by globalization but organized criminals are increasingly involved in less “traditional” high-tech operations encompassing identity theft counterfeiting of goods and various types of fraud Moisės Naím Illicit How Smugglers Traffickers and Copycats are Hijacking the Global Economy New York Anchor Books 2006 p 16 Hereinafter Naím Illicit 4 Intelligence Committee Futures Working Group Futures p 5 See also United Nations Office on Drugs and Crime UNODC The Globalization of Crime A Transnational Organized Crime Threat Assessment Vienna UNODC 2010 p 221 5 Jharna Chatterjee The Changing Structure of Organized Crime Groups Royal Canadian Mounted Police 2005 pp 2 7-8 http dsp-psd pwgsc gc ca Collection PS64-9-2005E pdf Hereinafter Chatterjee The Changing Structure 3 Congressional Research Service 2 Organized Crime An Evolving Challenge for U S Law Enforcement Borders and Organized Crime Modern organized criminals prey upon weaknesses in international transportation and customs security regimens 6 Border policing efforts have attempted to keep pace with the expansion of international commerce Organized criminals attempting to smuggle goods people or information across borders also face enhanced border security regimens resulting from the terrorist attacks of 9 11 Regardless specialized criminal networks smuggle items such as narcotics counterfeit goods stolen goods and bulk cash as well as humans around the world and into the United States They have hidden their contraband within the growing volume of legitimate global trade Prior to the global recession between 1995 and 2008 the volume of global containerized traffic tripled 7 Drug traffickers move large loads of cocaine eventually destined for U S markets from South America to Mexico via containerized shipping International counterfeiters use containers to smuggle their fake goods into the United States As Moisės Naím has succinctly put it most illicit trade involves copycats smugglers and traffickers 8 While individuals can and do engage in these activities a good deal can be attributed to organized crime Copycats and Smugglers Criminal groups engage in counterfeiting and smuggling across and within the borders of the United States This activity includes a wide range of products and influences the lives of everyday Americans U S businesses and government Counterfeiting and Piracy Counterfeiting highlights the nexus between globalization and the modernization of organized crime Although it is difficult if not impossible to determine how deeply immersed organized criminals are in this activity at least one study has suggested serious involvement 9 Further in a recent speech before the International Intellectual Property Summit Attorney General Holder reinforced the need for the international law enforcement community to combat “the international networks of organized criminals now seeking to profit from IP intellectual property crimes ”10 In areas such as film piracy counterfeiting does not necessarily involve high entry costs or large legal penalties when compared to more conventional criminal activity such as drug trafficking 11 It is also potentially very lucrative With little infrastructure—a high-speed Internet connection scanner and copier and off-the-shelf software—criminals around the globe can easily imitate the branding and packaging that accompanies products let alone copy the products themselves 12 For more on this see Naím Illicit Melvyn Levitsky “Transnational Criminal Networks and International Security ” Syracuse Journal of International Law and Commerce vol 30 no 2 Summer 2003 pp 227-240 7 Research and Innovative Technology Administration Bureau of Transportation Statistics America’s Container Ports Freight Hubs That Connect Our Nation to Global Markets Department of Transportation June 2009 pp 7-8 8 Naím Illicit pp 1-8 9 See for example Gregory F Treverton et al Film Piracy Organized Crime and Terrorism RAND Corporation Santa Monica CA 2009 p 27 http www rand org pubs monographs 2009 RAND_MG742 pdf Hereinafter Treverton et al Film Piracy 10 Department of Justice “Attorney General Eric Holder Speaks at the International Intellectual Property Summit ” press release October 18 2010 http www justice gov iso opa ag speeches 2010 ag-speech-101018 html 11 Treverton et al Film Piracy 12 Treverton et al Film Piracy p 3 Deputy Assistant Attorney General Criminal Division Department of Justice Jason M Weinstein Statement Before the United States House of Representatives Committee on Oversight and Government Reform Subcommittee on Government Management Organization and Procurement Department of 6 Congressional Research Service 3 Organized Crime An Evolving Challenge for U S Law Enforcement Counterfeiting and pirating goods13 involves the violation of intellectual property rights IPR 14 essential to creative and high-tech industries particularly reliant on copyrights trademarks and patents to protect innovation Counterfeiting and piracy potentially harm legitimate businesses and consumers sapping profits and brand value and flooding markets with inferior and even dangerous products masquerading as legitimate goods Aside from enforcement outlays the activity also costs governments tax revenue and may slow economic growth by driving down incentives to innovate 15 In FY2011 the domestic value16 of IPR-related law enforcement seizures of contraband in the United States was $178 9 million a 5% drop from the previous year 17 Federal officials attributed the decline to “a shift toward using international mail express courier and consolidated shipping services to import counterfeit and pirated goods ”18 Products originating in China—both Mainland China and Hong Kong—accounted for 80% of these IPR seizures 19 Justice Prepared Testimony “Protecting Intellectual Property Rights in a Global Economy Current Trends and Future Challenges ” December 9 2009 p 2 13 Government Accountability Office Intellectual Property Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods GAO-1-423 April 2010 p 5 http www gao gov new items d10423 pdf Hereinafter Government Accountability Office Intellectual Property The Government Accountability Office offers the following definition “‘Pirated copyright goods’ refer to any goods that are copies made without the consent of the right holder or person duly authorized by the right holder ‘Counterfeit goods’ refer to any goods including packaging or bearing without authorization a trademark that is identical to a trademark validly registered for those goods or that cannot be distinguished in its essential aspects from such a trademark and that thereby infringes the rights of the owner of the trademark in question According to the U S Food and Drug Administration FDA ‘counterfeit drugs’ are defined under U S law as those sold under a product name without proper authorization where the identity of the source drug is knowingly and intentionally mislabeled in a way that suggests that it is the authentic and approved product ” 14 Government Accountability Office Intellectual Property p 5 The Government Accountability Office defines intellectual property IP as “any innovation commercial or artistic or any unique name symbol logo or design used commercially IP rights protect the economic interests of the creators of these works by giving them property rights over their creations ” The report describes copyright as “ a set of exclusive rights subsisting in original works of authorship fixed in any tangible medium of expression now known or later developed for a fixed period of time For example works may be literary musical or artistic ” The report defines trademark as “ a ny sign or any combination of signs capable of distinguishing the source of goods or services is capable of constituting a trademark Such signs—in particular words including personal names letters numerals figurative elements and combinations of colors as well as any combination of such signs—are eligible for registration as trademarks ” Patents are “ e xclusive rights granted to inventions for a fixed period of time whether products or processes in all fields of technology provided they are new not obvious involve an inventive step and have utility are capable of industrial application ” 15 Government Accountability Office Intellectual Property U S Chamber of Commerce “Protecting Intellectual Property ” pp 9-15 http www uschamber com IP htm IPR infringement may also have some positive effects for consumers who may derive benefit from the lower costs of pirated goods Industry may also eventually generate more sales as consumers possibly develop interest in purchasing legitimate versions of cheaper counterfeit products they have sampled 16According to Customs and Border Protection “domestic value” is the “cost of the infringing merchandise when it was last purchased including all duties fees broker’s charges profit unloading charges and U S freight charges to bring the property to the importer’s premises ” See U S Customs and Border Protection Intellectual Property Rights Fiscal Year 2011 Seizure Statistics p 6 http www cbp gov linkhandler cgov trade priority_trade ipr ipr_communications seizure ipr_seizures_fy2011 ctt ipr_seizure_fy2011 pdf Hereinafter Customs and Border Protection Intellectual Property Rights 2011 17 Ibid 18 In FY2011 the number of seizures increased by 24% from FY2010—see Ibid For quotation see http www cbp gov xp cgov trade priority_trade ipr ipr_communications seizure 19 Customs and Border Protection Intellectual Property Rights 2011 Table 6 Congressional Research Service 4 Organized Crime An Evolving Challenge for U S Law Enforcement Auto Theft Rings Another example of organized criminals viewing borders as opportunity involves auto theft Although international automobile theft has existed almost as long as cars have been around 20 the integration of worldwide markets and expansion of international shipping have greatly impacted it by facilitating international transport of stolen automobiles Assessing the level of such activity is very difficult since few metrics for it exist Regardless today’s international automobile theft rings benefit from the high levels of cargo container traffic ushered in by globalization These groups profit by stealing vehicles in the United States and shipping them abroad where they are sold Such illicit operations react to global demand for luxury vehicles and in some instances are extremely responsive to market forces They trawl large U S metropolitan areas that have assortments of vehicles and rely on rail or port facilities to move stolen vehicles abroad 21  In 2011 the Department of Justice DOJ brought a civil suit against a money laundering network with ties to Mexican drug traffickers and the terrorist group Hezbollah The scheme reportedly involved used auto sales in the United States The December 2011 suit targeted the Lebanese Canadian Bank LCB and two Lebanese exchange houses—the Hassan Ayash Exchange Co and Ellissa Holding—regarding more than $300 million that was allegedly part of a money laundering operation 22 DOJ also asserts that the money laundering network’s U S operations included about 30 U S automobile buyers and a shipping firm 23 In essence the network reportedly comingled criminal proceeds held by LCB and the two exchange houses with other monies and transferred these funds to U S automobile buyers The cash transfers supposedly paid for used car purchases in the United States According to DOJ the cars were then shipped to and sold in West Africa and some of the profits returned to Hezbollah via LCB accounts and the exchange houses 24 Human Smuggling and Trafficking Criminal organizations are taking advantage of an unprecedented era of international migration including illegal migration to the United States 25 However since 2007 illegal immigration to the United States has declined 26 This may be attributable in part to dwindling job opportunities See “Stolen American Autos Clog the Mexican Market ” New York Times February 5 1922 http query nytimes com mem archive-free pdf res 9D0DE5D71130EE3ABC4D53DFB4668389639EDE 21 Eva Dou “New-York Based Theft Ring Shipped Hot Cars to Senegal ” Associated Press June 30 2010 22 Drug Enforcement Administration “Civil Suit Exposes Lebanese Money Laundering Scheme for Hizballah ” press release December 15 2011 http www justice gov dea pubs pressrel pr121511 html Hereinafter Drug Enforcement Administration “Civil Suit ” In February 2011 the Department of the Treasury identified LCB as a “Primary Money Laundering Concern” under Section 311 of the USA PATRIOT Act for its ties to reputed Lebanese drug trafficker Ayman Joumaa and to Hezbollah Treasury also stated that “U S government information” indicated Hezbollah received support from Joumaa’s criminal activities See Department of the Treasury “Treasury Acts to Protect the U S Financial System from Bank with Ties to a Global Narcotics Trafficking and Money Laundering Network and Hizballah ” press release February 10 2011 http www treasury gov press-center press-releases pages tg1057 aspx 23 Drug Enforcement Administration “Civil Suit ” 24 Ibid Jo Becker “Beirut Bank Seen as a Hub of Hezbollah’s Financing ” New York Times December 13 2011 http www nytimes com 2011 12 14 world middleeast beirut-bank-seen-as-a-hub-of-hezbollahs-financing html pagewanted all 25 Naím Illicit p 89 Jackie Turner and Liz Kelly “Intersections Between Diasporas and Crime Groups in the Constitution of the Human Trafficking Chain ” British Journal of Criminology vol 49 no 2 March 2009 p 184 26 Jeffrey S Passel and D'Vera Cohn U S Unauthorized Immigration Flows Are Down Sharply Since Mid-Decade 20 Congressional Research Service 5 Organized Crime An Evolving Challenge for U S Law Enforcement resulting from the global recession and increased immigration enforcement activity along the U S Southwest border 27 Nonetheless criminal organizations continue to capitalize on the desire of unauthorized immigrants to enter the United States Networks of human smugglers and others— including Mexican drug trafficking organizations DTOs that have broadened their moneygenerating activities to include human and weapon smuggling counterfeiting kidnapping for ransom and extortion—bring unauthorized immigrants across the border and into the United States 28 In one well-known case Cheng Chui Ping—also known as “Sister Ping”—sentenced in March 2006 had led an international human smuggling ring that was responsible for smuggling Chinese villagers to the United States between the early 1980s and April 2000 In a 2006 press release DOJ described her as “one of the first and ultimately most successful alien smugglers of all time ”29 At the start Ping’s smuggling ring brought small numbers of villagers to the United States via aircraft using fake immigration documents She turned from exclusive reliance on air transit to include the use of maritime shipping as her operation matured This way Ping likely exploited increasing volumes of international seaborne cargo engendered by globalization to mask her illegal movement of human beings She eventually developed the capability to smuggle hundreds of victims at a time via cargo ships where the villagers could be stashed below the deck until they reached their U S destination and eventually paid her exorbitant smuggling fees 30 Criminals who smuggle individuals into the United States may also turn the smuggling into a trafficking situation by increasing the immigrants’ debts owed once they have been smuggled to the United States The smugglers traffickers may then require their victims to work for a period of time to pay off the debts 31 Organized crime exploits individuals through both labor and sex trafficking In 2006 the FBI reported that human trafficking generates about $9 5 billion for organized crime annually 32 However as the Government Accountability Office GAO has noted estimates regarding the global scale of human trafficking are questionable 33 as such any estimates regarding the proceeds generated through these crimes may not be representative of their true scope These criminal organizations target both U S citizens and foreign nationals who are drawn to visions of better lives in the United States Pew Hispanic Center Report Washington DC September 1 2010 p i http pewhispanic org files reports 126 pdf 27 Miriam Jordan “Illegal Immigration to U S Slows Sharply ” Wall Street Journal September 1 2010 http online wsj com article SB10001424052748703882304575465742670985642 html mod googlenews_wsj 28 Also while some drug trafficking organizations may not be directly involved in human smuggling they may tax the smugglers who wish to use the established drug trafficking routes For details on Mexican cartels and human smuggling see David Luhnow and Jose De Cordoba “Mexican Military Finds 72 Bodies Near Border ” Wall Street Journal August 26 2010 http online wsj com article SB10001424052748703632304575450761550490920 html#articleTabs%3Darticle Josh Meyer “Drug Cartels Raise the Stakes on Human Smuggling ” Los Angeles Times March 23 2009 http articles latimes com 2009 mar 23 nation na-human-smuggling23 29 Department of Justice “Sister Ping Sentenced to 35 Years in Prison for Alien Smuggling Hostage Taking Money Laundering and Ransom Proceeds Conspiracy ” press release March 16 2006 http www justice gov usao nys pressreleases March06 sisterpingsentencingpr pdf 30 Ibid 31 Department of Justice “Hudson County Bar Owner Pleads Guilty to Role in International Human Smuggling Ring ” press release September 12 2006 32 Department of State Trafficking In Persons Report 2006 June 2006 p 13 33 Government Accountability Office Human Trafficking Better Data Strategy and Reporting Needed to Enhance U S Antitrafficking Efforts Abroad GAO-06-825 July 2006 http www gao gov new items d06825 pdf Congressional Research Service 6 Organized Crime An Evolving Challenge for U S Law Enforcement International borders often play a central role in the dynamics involved in forced labor and sex trafficking In many instances victims likely perceive borders and border security regimens as insurmountable barriers via legitimate means requiring them to turn to illicit methods of transit offered by traffickers Organized criminals prey on victims’ powerful desires to live or work in other countries While the following two cases may not have been prosecuted by DOJ as traditional “organized crime ” the networks involved highlight some of the dynamics involved in labor and sex trafficking In August 2010 federal law enforcement announced an indictment of six individuals for participation in an alleged conspiracy to exploit Thai nationals through forced labor in the United States The defendants allegedly enticed workers to the United States by offering opportunities for lucrative jobs Once in the United States the approximately 400 Thai workers had their passports confiscated were threatened with economic harm and deportation and were forced to work on farms in Washington and Hawaii 34 In another case four individuals from the United States Mexico and Guatemala were sentenced in April 2010 for involvement in a sex trafficking organization that targeted young Mexican women They lured these women to the United States on the promise of better lives or legitimate employment Once the women were brought to the United States they were instead physically threatened beaten intimidated and forced to engage in commercial sex 35 DOJ has also reported an uptick in Asian organized crime groups becoming involved as pimps or brokers in domestic human sex trafficking Although the increase is noted for Asian organized crime groups involvement in sex trafficking is certainly not limited by ethnic or geographic origin these criminals collaborate with other non-Asian groups to further their sex trafficking enterprises 36 In September 2012 the Obama Administration expanded its anti-trafficking efforts including training and guidance to federal prosecutors judges and law enforcement 37 Drug Trafficking In the last decade cocaine has become a truly global commodity reacting to illicit market fluctuations Traffickers now can leverage wide international distribution networks to ride out pressures or changes that may make their traditional illicit markets less hospitable According to media reports some Colombian and Mexican cocaine suppliers have shifted sizeable amounts of product using containerized shipping—hiding their illicit material within the daily globalized flow of legitimate seaborne international commerce 38 And some of the Mexican Gulf Cartel’s smuggling activity involving European markets has used the United States as a transshipment point 39 Department of Justice “Six People Charged in Human Trafficking Conspiracy for Exploiting 400 Thai Farm Workers ” press release September 2 2010 http www justice gov opa pr 2010 September 10-crt-999 html For another case involving forced labor see Department of Justice “Uzbek Man Sentenced for Role in Multi-National Racketeering and Forced Labor Enterprise ” press release May 9 2011 http www justice gov opa pr 2011 May 11crt-589 html 35 Department of Justice “Four Defendants Sentenced to Prison in Human Trafficking Ring ” press release April 28 2010 http www justice gov usao gan press 2010 04-28-10 pdf 36 Comments by DOJ officials at the 2010 National Conference on Human Trafficking May 3–5 Arlington VA 37 See http www whitehouse gov the-press-office 2012 09 25 fact-sheet-obama-administration-announces-effortscombat-human-trafficki 38 Mark Townsend “How Liverpool Docks Became a Hub of Europe’s Deadly Cocaine Trade ” The Guardian May 16 2010 39 Michele M Leonhart DEA Acting Administrator “Prepared Remarks Project Reckoning Press Conference ” September 17 2008 34 Congressional Research Service 7 Organized Crime An Evolving Challenge for U S Law Enforcement When it comes to the internationalization of cocaine markets not all the news involves the growth of supply however Global demand for cocaine has partly impacted U S bound supplies of the drug Cocaine availability levels in the United States have decreased since 2006 Diversion of cocaine to European and Latin American markets by Colombian and Mexican drug cartels has fueled this downturn in availability as have coca eradication efforts large seizures law enforcement pressure on Mexican cartels and violent inter-cartel rivalries 40 While the story of globalized drug smuggling impacting the United States often revolves around big Colombian and Mexican cartels specializing in drugs such as cocaine marijuana heroin and methamphetamine criminal groups trafficking narcotics come in all sizes and handle a variety of drugs Also partly because international communications travel and transportation networks are readily exploitable large-scale Latin American drug trafficking organizations are not the only ones to have significant worldwide reach   In November 2012 U S Immigration and Customs Enforcement ICE announced the extradition of a reputed criminal syndicate leader from Albania to the United States According to ICE Arif Kurti led an organization with hundreds of members that allegedly imported tens of thousands of kilograms of hydroponic marijuana into the United States from Canada and Mexico The group also supposedly smuggled the drug ecstasy MDMA 3 4-methylenedioxy-Nmethylamphetamine into the United States from the Netherlands and Canada as well as cocaine from Mexico Colombia Venezuela and Peru Additionally ICE asserts that Arif’s network diverted prescription pills such as oxycodone The group is said to have distributed the narcotics throughout the United States Canada and Europe 41 In another case Phuong Thi Tran pled guilty in February 2010 for her involvement in what has been described in press reports as an Asian drug trafficking ring that smuggled ecstasy pills and other drugs into the United States from Canada where they were manufactured Tran who lived in Canada is originally from Vietnam and served as the group’s ringleader She oversaw an operation that smuggled millions of ecstasy pills into the United States between 2002 and 2008 when she was arrested 42 Money Laundering Making ill-gotten gains appear legitimate is critical to the success of organized criminals For many criminals the movement of money—either as bulk cash or digital transactions—across Office of National Drug Control Policy “Survey Shows Significant Drop in Cocaine Production in Colombia ” press release July 30 2012 http www whitehouse gov ondcp news-releases-remarks survey-shows-significant-drop-incocaine-production-in-colombia Office of National Drug Control Policy “Update New Data Show Cocaine Market Remains Under Significant Stress ” press release June 16 2011 http www whitehouse gov sites default files ondcp press-releases 20110617_new_data_show_cocaine_market_remains_under_significant_stress pdf National Drug Intelligence Center National Drug Threat Assessment February 2010 p 29 41 Immigration and Customs Enforcement “Alleged Leader of Ethnic Albanian Organized Crime Syndicate Extradited to the US to Face Drug and Money Laundering Charges ” press release November 20 2012 http www ice gov news releases 1211 121120newyork htm 42 Department of Justice “Ringleader of International Drug Trafficking Ring Pleads Guilty for Role in Drug Smuggling Case ” press release February 24 2010 http www justice gov usao pae News Pr 2010 feb tran_guilty_plea_release pdf Troy Graham “Woman at Center of Asian Drug-Trafficking Ring Gets Nearly Six Year Term ” Philadelphia Inquirer August 25 2010 http www philly com inquirer local 20100825_Woman_at_center_of_Asian_drug-trafficking_ring_gets_nearly_six-year_term html 40 Congressional Research Service 8 Organized Crime An Evolving Challenge for U S Law Enforcement international borders plays an integral role in this process They use many techniques to launder money often exploiting legitimate financial structures to mask the illegal origins of their profits Money laundering includes three fundamental steps 1 placement the introduction of illicit funds into licit financial systems 2 layering the movement often international of illicit funds through a variety of business structures to obscure its origins and 3 integration the use of illicit funds that at this stage appear legitimate in lawful business transactions 43  In June 2012 DOJ announced an indictment charging 14 defendants including Miguel Angel Treviño Morales Treviño for laundering millions of dollars in drug trafficking proceeds in the United States The scheme purportedly involved the racing of quarter horses 44 According to DOJ since 2008 Trevino—a leader within Los Zetas a Mexican drug trafficking organization—oversaw the operation which funneled money to his brother José in the United States The indictment filed in the case asserts that José laundered drug proceeds by pretending to be a legitimate quarter horse breeder He purchased trained and raced horses relying on front companies to conceal the origin of the money used to fuel these efforts 45 It is impossible to determine with any accuracy the amount of money that is laundered by organized criminals whose operations impact the United States However U S government estimates suggest that Mexican and Columbian drug trafficking organizations earn between $18 billion and $39 billion annually from sales in the United States 46 Annually perhaps between $20 billion and $25 billion in bank notes is smuggled across the Southwest border into Mexico 47 How much of this is profit and then laundered is unclear 48 Bulk cash smuggling is an important means by which criminals move illegal profits from the United States into Mexico but drug traffickers have also turned to stored-value cards49 to secretly transport their illegal earnings With these cards criminals are able to avoid the reporting requirement under which they would have to declare any amount over $10 000 in cash crossing the border 50 Aside from bulk cash smuggling and stored-value cards Mexican traffickers move Brian Seymour “Global Money Laundering ” Journal of Applied Security Research vol 3 no 3-4 2008 pp 374375 Hereinafter Seymour “Global Money ” 44 American Quarter Horses are often raced over short distances and used at timed events at rodeos See http aqha com About Content-Pages The-American-Quarter-Horse Breed-Characteristics aspx 45 United States vs Miguel Angel Trevino Morales et al Indictment in the U S District Court for the Western District of Texas filed May 30 2012 Department of Justice “Federal Grand Jury in Texas Indicts Los Zetas Leader in Money Laundering Scheme ” press release June 12 2012 http www fbi gov sanantonio press-releases 2012 federal-grandjury-in-texas-indicts-los-zetas-leader-in-money-laundering-scheme 46 Dennis C Blair Director of National Intelligence “Annual Threat Assessment of the US Intelligence Community for the Senate Select Committee on Intelligence ” Office of the Director of National Intelligence February 2 2010 p 31 Hereinafter Blair “Annual Threat Assessment ” 47 William Booth and Nick Miroff “Stepped-Up Efforts by U S Mexico Fail to Stem Flow of Drug Money South ” Washington Post August 25 2010 http www washingtonpost com wp-dyn content article 2010 08 25 AR2010082506161 html 48 For a discussion of estimates see Douglas Farah Money Laundering and Bulk Cash Smuggling Challenges for the Mérida Initiative Woodrow Wilson International Center For Scholars Mexico Institute and University of San Diego Trans-Border Institute Working Paper Series on U S -Mexico Security Cooperation Washington DC May 2010 p 6 Hereinafter Farah Money Laundering 49 A stored value card looks like a debit or credit card but stores value directly on the card using magnetic strip technology 50 Current federal regulations regarding international transportation only apply to monetary instruments as defined under the Bank Secrecy Act A stored value card is not however considered a monetary instrument under current law 43 Congressional Research Service 9 Organized Crime An Evolving Challenge for U S Law Enforcement and launder money by using digital currency accounts e-businesses that facilitate money transfers via the Internet online role-playing games or virtual worlds that enable the exchange of game-based currencies for real currency and “mobile payments through cell phones that provide traffickers with remote access to existing payment mechanisms such as bank and credit card accounts and prepaid cards ”51 Organized criminals also use the globalized international financial system in the layering stage of money laundering The United States is impacted by this from at least two directions Criminals operating abroad can exploit U S structures to launder money while those operating domestically can wash their illicit profits abroad in an attempt to avoid U S law enforcement Large financial markets such as New York where criminal activity is potentially hidden within voluminous legitimate business are used by criminals Criminals use banks and businesses to launder money in offshore locations with strict privacy laws such as Panama the Cayman Islands or the Isle of Man In these locales law enforcement struggles to determine the true ownership of assets 52 International or domestic shell companies can be used for money laundering They are legal entities that have no independent operations or assets of their own and largely exist only on paper Shell companies have legitimate purposes for example “they may be formed to obtain financing prior to starting operations ”53 Regardless DOJ has identified U S -based shell companies as especially difficult to investigate because “lax company formation laws allow criminals to form them quickly and cheaply and obtain virtual anonymity ”54 One study has suggested that establishing a shell company is “easier in the U S than in the rest of the world ”55 Organized criminals likely rely on the veneer of legitimacy conferred by U S -based shell companies which in many instances allow criminals to conceal their ownership 56 Most U S states do not require owner information when companies are formed or even on annual or biennial reports 57 Individuals can distance themselves from the actual formation of specific shell companies by using company formation agents registered agents to establish them Shell companies enable criminals to move money around the globe through legitimate bank accounts without attracting law enforcement scrutiny With relative ease a criminal organization can open multiple shell companies worldwide and systematically distance ill-gotten gains from their criminal origins leaving behind a hard-to-untangle web of accounts legitimate corporations and and thus is not subject to these international transportation regulations The Financial Crimes Enforcement Network FinCEN has proposed to amend the definition of a monetary instrument to include stored value prepaid access devices See Department of the Treasury Financial Crimes Enforcement Network “31 ” 76 Federal Register 64049 October 17 2011 51 Farah Money Laundering 23 52 Seymour “Global Money ” pp 375-376 53 Government Accountability Office Company Formations Minimal Ownership Information Is Collected and Available GAO-06-376 April 2006 p 1 http www gao gov new items d06376 pdf Hereinafter GAO Company Formations 54 Jennifer Shasky Calvery then-Senior Counsel to the Deputy Attorney General Department of Justice Statement Before the United States Senate Committee on Homeland Security and Governmental Affairs Hearing “Examining State Business Incorporation Practices A Discussion of the Incorporation Transparency and Law Enforcement Assistance Act ” June 18 2009 pp 1-2 Hereinafter Shasky “Examining State Business ” 55 Michael Findley Daniel Nielson Jason Sharman Global Shell Games Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies Centre for Governance and Public Policy Griffith University n d p 17 http www anzsog edu au magma media upload ckeditor files Global_Shell_Games_CGPP pdf 56 GAO Company Formations p 1 57 GAO Company Formations p 13 Congressional Research Service 10 Organized Crime An Evolving Challenge for U S Law Enforcement transactions 58 Both Mexico’s Sinaloa Cartel and alleged Eurasian organized crime figure Semion Mogilevich have likely used U S shell companies to launder money 59 Organized Crime and Technological Change Organized criminals have expanded their technological “toolkits ” They have adapted to incorporate technology-driven fraud into their capabilities 60 Their operations can harm U S citizens without ever having a physical presence in the country Organized crime groups engage in a wide variety of tech savvy mass marketing frauds Even traditional arenas of criminal activity such as illegal gambling have been transformed by the Internet For example illegal gambling has been a staple in the Cosa Nostra’s criminal diet for decades In recent years they have branched out into Internet gambling 61 which debuted in the mid-1990s 62 Operation Heat an investigation by the New Jersey Division of Criminal Justice led to the arrest of Brian Cohen who allegedly facilitated the Lucchese family’s offshore gambling activities According to law enforcement officials the family earned billions of dollars via offshore Internet activity that included a website and a Costa Rican wire room that handled transactions both managed by Cohen 63 Mass Marketing Fraud The International Mass-Marketing Fraud Working Group defines mass marketing fraud as Fraud schemes that use mass-communications media—including telephones the Internet mass mailings television radio and even personal contact—to contact solicit and obtain money funds or other items of value from multiple victims in one or more jurisdictions 64 Mass marketing fraud involves a wide range of criminal activity that has been transformed by globalization and technological change It can be perpetrated by individuals small groups or sophisticated criminal enterprises Parsing out exactly how much of this activity can be attributed to organized criminals is tricky but experts suggest that “fraudulent mass marketing operations are increasingly transnational interconnected and fluid ”65 Shasky “Examining State Business ” pp 4-5 Seymour “Global Money ” p 375 Jennifer Shasky Senior Counsel to the Deputy Attorney General Department of Justice Statement Before the United States Senate Committee on Homeland Security and Governmental Affairs Hearing “Business Formation and Financial Crime Finding a Legislative Solution ” November 5 2009 p 1 Legislation was introduced in the 111 th and 112th Congresses 111th—S 569 H R 6098 112th—S 1483 H R 3416 that would have established uniform requirements for states regarding beneficial ownership of public corporations and limited liability companies 60 Criminal Intelligence Service Canada CISC 2010 Report on Organized Crime May 2010 p 12 http www cisc gc ca annual_reports annual_report_2010 document report_oc_2010_e pdf Hereinafter CISC 2010 Report 61 For information on unlawful Internet gambling see CRS Report RS22749 Unlawful Internet Gambling Enforcement Act UIGEA and Its Implementing Regulations by Brian T Yeh and Charles Doyle 62 On the advent of Internet gambling see David G Schwartz Roll the Bones The History of Gambling New York Gotham Books Penguin Group USA 2006 pp 488-494 63 George Anastasia “Officials Charge Man Who Allegedly Ran Mob Gambling Website ” Philadelphia Inquirer May 29 2010 64 International Mass-Marketing Fraud Working Group IMMFWG Mass-Marketing Fraud A Threat Assessment June 2010 p 3 Hereinafter IMMFWG Mass Marketing Fraud The IMMFWG includes law enforcement regulatory and consumer protection agencies from Australia Belgium Canada the Netherlands Nigeria the United Kingdom and the United States Europol is also involved 65 IMMFWG Mass Marketing Fraud p 14 58 59 Congressional Research Service 11 Organized Crime An Evolving Challenge for U S Law Enforcement  In December 2012 DOJ announced arrests in Romania the Czech Republic the United Kingdom and Canada related to what the department described as an “international organized crime cyber fraud ring” that bilked victims of more than $3 million 66 DOJ asserts that the criminal network tricked U S consumers into sending it money by creating false advertisements for non-existent merchandise that the network’s operatives posted on websites such as eBay com and Cars com Some of the individual instances of fraud allegedly perpetrated by the group entailed sham sellers with elaborate back stories—phony auto dealerships fake websites fraudulent documents such as certificates of title and authentic looking invoices from online payment services such as PayPal for example 67 “Boiler room” scams one type of mass marketing fraud with a long history entail groups of fraudsters making high-pressure deceptive merchandise pitches and misleading service offers to unwitting customers around the world Recently criminals have innovated based on tried-andtrue boiler room schemes by outsourcing some activity to specialists internationalizing their operations and adopting sophisticated concealment strategies for their communications capabilities and locations  The Cosa Nostra and other organized criminals use boiler rooms 68 In June 2010 the FBI raided an alleged boiler room operation involving Anthony Guarino a purported Bonnano family soldier According to law enforcement officials the boiler room hoodwinked elderly investors into buying shares of companies and 40% of the money taken in was handed over to the boiler room operators as commissions 69 Technology Transforms Advance Fee Fraud AFF Since the 1970s technological advancements have revolutionized advance fee fraud AFF operations—a form of mass marketing fraud used by criminal organizations and individual fraudsters Today these schemes often involve criminals appealing for money via unsolicited spam emails These emails typically request an initial cash payment from recipients The initial cash payment supposedly facilitates the disbursement of a much larger sum of money to the email recipients 70 The later sum never arrives A recent AFF email scam attempting to dupe people into believing they had been contacted by the FBI’s Detroit Field Office asked email recipients to forward $14 300 in return for the release of over $18 million to their accounts In one of the emails associated with this scheme the fraudsters suggest that “the International clamp down on Terrorist sic ” has frozen the larger pot of money 71 Also known as “419 scams” after a section in the Nigerian criminal code the broad outlines of the modern version of AFF originated in Nigeria during the 1970s and early 1980s and perhaps Department of Justice “International Organized Crime Cyber Fraud Ring Responsible for Millions of Dollars in Fraud Dismantled ” press release December 5 2012 http www fbi gov newyork press-releases 2012 internationalorganized-crime-cyber-fraud-ring-responsible-for-millions-of-dollars-in-fraud-dismantled utm_campaign emailImmediate utm_medium email utm_source new-york-press-releases utm_content 159203 67 Ibid 68 IMMFWG Mass Marketing Fraud p 14 69 Chad Bray “FBI Raids Alleged Boiler Room ” Wall Street Journal June 10 2010 70 Federal Bureau of Investigation “Common Fraud Schemes ” http www fbi gov majcases fraud fraudschemes htm 71 Federal Bureau of Investigation Detroit Division “Scam E-Mail Letter Claiming To Be Associated with FBI Detroit SAC Arena ” press release May 25 2010 http detroit fbi gov pressrel pressrel10 de052510 htm 66 Congressional Research Service 12 Organized Crime An Evolving Challenge for U S Law Enforcement even earlier AFF’s original incarnation may stretch back to the 1500s in the “Spanish Prisoner” scheme Wealthy English business owners were asked to help pay for a rescue mission to save someone held captive in Spain In return they would supposedly receive part of the vast alleged reward payment Of course it never came 72 In the late 1970s and early 1980s Nigerian fraudsters became known for mailing unsolicited letters requesting monetary assistance in transferring frozen or hidden funds out of West African countries When fax machines became commonplace perpetrators quickly reached many more victims with less effort The Internet and email further revolutionized AFF operations Today these schemes are global emanating from many other countries 73 The spamming networks involved often have short lives focusing on specific schemes 74 Recent estimates suggest that AFF networks may have swindled over $2 billion from U S companies and citizens in 2009 75  In July 2011 six defendants were sentenced for running an AFF scam that tricked U S sweepstakes participants into believing that they had won substantial cash prizes This money would have purportedly been sent to the victims once they paid the required taxes and fees Ultimately there was no lottery prize and the fraud netted about $2 million 76 Estimates indicate that today’s AFF networks only need to dupe 1% of the people or businesses they reach to turn a profit 77 Cyberspace Electronic Information and Organized Crime As the history of AFF may indicate organized criminals have adapted to the digital age by becoming expert at stealing information stored and shared electronically Many are adept at manipulating and defrauding victims in the virtual world All of this covers a range of activity including cyber intrusions into corporate databases the theft of individual consumer credit card information and a wide variety of fraudulent online activity The criminal groups operating in cyberspace can be broken into two categories 1 part-timers—those who leverage digital information to enhance other activities and 2 full-timers—those who solely commit and specialize in online or digital crimes 78 While this is a helpful distinction to draw for discussion Harvey Glickman “The Nigerian ‘419’ Advance Fee Scams Prank or Peril ” Canadian Journal of African Studies vol 39 no 3 2005 pp 463-476 73 Edward Fokuoh Ampratwum “Advance Fee Fraud ‘419 ’ and Investor Confidence in the Economies of SubSaharan Africa SSA ” Journal of Financial Crime vol 16 no 1 2009 pp 68-69 74 Matthew Zook “Your Urgent Assistance Is Required The Intersection of 419 Spam and New Networks of Imagination ” Ethics Place and Environment vol 10 no 1 March 2007 pp 66-70 75 Jeremy Kirk “Advance Fee Fraud Scams Rise Dramatically in 2009 ” Compuworld January 28 2010 http www computerworld com s article 9149890 Advance_fee_fraud_scams_rise_dramatically_in_2009 76 Federal Bureau of Investigation “Six Defendants Sentenced in Manhattan Federal Court for Their Involvement in a Multi-Million-Dollar Lottery Telemarketing Fraud Scheme ” press release July 1 2011 http www fbi gov newyork press-releases 2011 six-defendants-sentenced-in-manhattan-federal-court-for-their-involvement-in-a-multi-milliondollar-lottery-telemarketing-fraud-scheme 77 Blaise J Bergiel Erich B Bergiel and Phillip W Balsmeir “Internet Cross Border Crime A Growing Problem ” Journal of Website Promotion vol 3 no 3 4 2008 p 135 78 This parallels the first two elements in Kim-Kwang Raymond Choo’s three-part typology of criminal activity in cyberspace The typology includes “ 1 traditional organized crime groups which make use of ICT information and communications technologies to enhance their terrestrial criminal activities 2 organized cybercrime groups which operate exclusively online and 3 organized groups of ideologically and politically motivated individuals who make use of ICT to facilitate their criminal conduct ” See Kim-Kwang Raymond Choo “Organized Crime Groups in 72 Congressional Research Service 13 Organized Crime An Evolving Challenge for U S Law Enforcement purposes it is difficult to attribute specific volumes of criminal activity to each category of actors General statistics suggest that organized criminals from both categories play a large role in online data theft For instance a study of 855 data breaches involving businesses around the globe in 2011 noted that “Organized criminals were up to their typical misdeeds and were behind the majority of cases ”79 They accounted for 83% of all breaches committed by actors outside of the targeted business or organization 80 Online Identity Theft and Sophisticated Credit Card Fraud Organized criminals are involved in stealing the identities of online consumers and have engaged in technologically advanced credit card fraud These illicit ventures pilfer from the bank accounts of ordinary citizens and often cast a wide net to maximize the number of victims Eurasian criminals in California have engaged in identity theft in which they leveraged technological savvy old-school organized crime strategies and Internet connectivity to reap thousands of dollars in profits In 2009 in the city of Redondo Beach in Southern California Armenian or Russian criminals allegedly targeted a gas station with an Armenian owner exploiting their own ethnic group They placed one of their crew members as an employee at the station where he implanted high-tech skimming devices at gas pumps to steal customer credit card information victimizing more than 1 000 individuals including Redondo Beach police officers The employee quit work and the group made off with more than $300 000 from people’s accounts 81 Another case this time in the Las Vegas area in 2008 involved an alleged Armenian criminal group that reportedly skimmed more than 1 000 credit and debit cards using insiders at restaurants bars and smoke shops In some instances the crew manufactured its own cards using stolen information 82 Losses approached $1 5 million 83 In 2009 Las Vegas authorities also uncovered a skimming scheme complete with a credit card manufacturing lab 84 This crew used skimmers that captured information from magnetic strips on credit cards as well as pin numbers using a camera 85 Cyberspace A Typology ” Trends in Organized Crime vol 11 no 3 September 2008 pp 271 79 Verizon RISK Researching Investigating Solutions Knowledge Team 2012 Data Breach Investigations Report 2012 p 3 http www verizonbusiness com resources reports rp_data-breach-investigations-report-2012_en_xg pdf The Australian Federal Police Dutch National High Tech Crime Unit Irish Reporting and Information Security Service the United Kingdom’s Police Central e-Crime Unit and United States Secret Service were involved in the study as well 80 Ibid p 20 81 Paul Teetor “Russian or Armenian Mob Used ‘Model Employee’ Con at PCH Arco ” LA Weekly June 18 2009 82 Lawrence Mower “ID Theft Operation Outlined ” Las Vegas Review-Journal December 8 2008 83 “Eurasian Organized Crime Task Force Members Arrest 12 Individuals Following Federal Credit Card Fraud and Identity Theft Charges ” States News Service December 9 2008 See also Department of Justice “Men Sentenced for Credit Card Fraud Conspiracy ” press release June 10 2011 84 “Three Arrested in Credit Card Forgery Ring ” KTNV ABC March 26 2009 85 “18 Month Credit Card Fraud Ring Leads to Three Arrests ” KTNV ABC March 25 2009 Additionally in February 2011 DOJ announced an indictment charging 29 defendants tied to an organized crime group called “Armenian Power” or “AP ” DOJ noted “Among the conspiracies charged in the racketeering indictment is a bank fraud and counterfeit credit card scheme that victimized hundreds of customers of 99 Cents Only Stores throughout Southern California AP members allegedly caused more than $2 million in losses when they secretly installed sophisticated ‘skimming’ devices to steal customer account information at cash registers and then used the skimmed information to create counterfeit debit and credit cards ” See Department of Justice “Armenian Power Organized Crime Group Targeted in Federal Indictments That Allege Racketeering Offenses Including Bank Fraud Schemes Kidnappings and Drug Trafficking ” press release February 16 2011 http www fbi gov losangeles press-releases 2011 la021611 htm For another case involving skimming see Department of Justice “Rancho Cordova Man Arrested for Identity Theft Congressional Research Service 14 Organized Crime An Evolving Challenge for U S Law Enforcement In March 2010 Albert Gonzalez the leader of the largest identity theft and retail hacking ring prosecuted by the United States was sentenced to 20 years in prison 86 Through “wardriving”—a technique in which individuals drive around in a car with a laptop computer and search for unsecured wireless networks—the ring hacked into credit card payment systems at retailers including TJX Companies BJ’s Wholesale Club OfficeMax Boston Market Barnes Noble and Sports Authority and stole more than 40 million credit and debit card numbers Gonzalez also provided malware to hackers to aid them in evading anti-virus programs and firewalls in order to access companies’ networks and payment systems The conspirators located in the United States Ukraine and Estonia laundered their illicit proceeds through banks in Eastern Europe Organized Retail Crime and Online Fencing While not necessarily viewed as “organized crime” by U S law enforcement agencies as its name implies organized retail crime ORC or organized retail theft bears some of the hallmarks of organized criminal activity ORC typically refers to large-scale retail theft and fraud by organized groups of professional shoplifters or “boosters ”87 ORC involves a host of retail crimes ranging from retail manufacturing distribution and cargo theft to gift card fraud receipt fraud and ticket switching 88 The organized crime rings resell illegally acquired merchandise in a variety of fencing operations such as flea markets swap meets pawn shops and more recently online marketplaces Most stolen merchandise is sold to a low-level fence commonly called a “street fence ” Street fences will either sell these goods directly to the public or will sell the merchandise to mid-level fences who run “cleaning operations” that remove security tags and store labels as well as repackage stolen goods so they appear as though they came directly from the manufacturer This “cleaning” may even involve changing the expiration date on perishable goods such as over-the-counter medication and infant formula Globalization and technological innovation have allowed more and more transactions to take place online rather than face-to-face This holds true for retail crime where thieves have turned to “e-fencing”—using the Internet and online marketplaces as means to fence ill-gotten goods 89 This has increased criminals’ anonymity global reach and profitability Online markets allow criminals to easily distribute stolen goods across the nation and around the globe E-fencing has also proven to be more profitable to criminals than has fencing at physical locations While criminals may profit about 30 cents on the dollar 30% of the retail price by selling goods at physical fencing locations they can make about 70 cents on the dollar via e-fencing 90 A criminal network based in Baltimore serves as an example of an operation that integrated traditional as well as more technologically advanced fencing techniques As of April 2011 at least and Trafficking in Counterfeit Credit Card Information ” press release April 21 2011 http www justice gov usao cae news docs 2011 04-21-11AvagyanIndictment html 86 Department of Justice “Leader of Hacking Ring Sentenced for Massive Identity Thefts from Payment Processor and U S Retail Networks ” press release March 26 2010 http www justice gov opa pr 2010 March 10-crm-329 html 87 A “booster” is someone who steals merchandise and then sells it to a fence for a profit A “fence” is someone who knowingly buys illegally obtained goods from a booster and then sells the goods for a profit For more information on ORC see CRS Report R41118 Organized Retail Crime by Kristin M Finklea 88 Ticket switching involves means by which criminals alter the UPC bar codes on merchandise so that the items ring up differently–significantly below the original price–at check-out 89 King Rogers “Organized Retail Theft ” in Retail Crime Security and Loss Prevention An Encyclopedic Reference ed Charles A Sennewald and John H Christman Elseiver Inc 2008 90 National Retail Federation 2009 Organized Retail Crime Survey 2009 p 8 Congressional Research Service 15 Organized Crime An Evolving Challenge for U S Law Enforcement 13 defendants including the owners of pawn shops implicated in the scheme had pled guilty to roles in this organized retail crime ring 91 In this conspiracy boosters stole products including over-the-counter medications health and beauty aids gift cards DVDs and tools from retailers such as Target Safeway Wal-Mart and Kohl’s Several pawn shops bought these stolen goods from boosters cleaned them and then transported them to other locations for resale Some coconspirators used online marketplaces such as eBay and Amazon com to fence the stolen goods In all the case involved about $20 million in stolen goods Bulk Narcotics Smuggling and Technology Technological advances have transformed cocaine and other narcotics trafficking In the early 1990s Colombian traffickers—moving narcotics to the United States and elsewhere around the globe—began experimenting with semisubmersible maritime smuggling vessels which at first were likely too impractical costly and risky to operate Hybrids of traditional submarines and boats these craft have small above-water profiles—about 18 inches Increased law enforcement seizures of cocaine shipments carried by more traditional surface vessels encouraged traffickers to adopt semisubmersible technology 92 Colombian traffickers likely co-opted experts from the legitimate world to develop this technology Semisubmersibles can have their cargo “unloaded in shallow waters or transported to shore by small boats ”93 They have been interdicted in both the Eastern Pacific and the Caribbean 94 While their current use likely responds in part to interdiction pressures it also reflects the global availability of expertise designs and materials Vast illicit global cocaine markets have also made such endeavors possible producing huge profits for traffickers that are then tilled into technology to circumvent law enforcement But semisubmersibles which according to figures provided by the U S Coast Guard in 2010 accounted for 27% of the maritime movement of cocaine toward the United States themselves are not immune to capture 95 Since 2006 law enforcement has regularly seized semisubmersible cocaine smuggling vessels from Colombian drug traffickers on the high seas or in clandestine shipyards hidden in coastal mangrove swamps The Drug Trafficking Vessel Interdiction Act of 2008 P L 110-407 enhanced the federal government’s ability to prosecute traffickers operating Department of Justice “Pawn Shop Owner Sentenced to Prison in Scheme to Launder $20 Million in Proceeds of Stolen Merchandise ” press release April 12 2011 http www fbi gov baltimore press-releases 2011 pawn-shopowner-sentenced-to-prison-in-scheme-to-launder-20-million-in-proceeds-in-stolen-merchandise Department of Justice “Pawn Shop Owner Pleads Guilty in Scheme to Launder $20 Million in Proceeds of Stolen Merchandise Admitted Laundering Millions of Dollars in Proceeds of Stolen Over-the-Counter Medicines Health and Beauty Aid Products Gift Cards DVDs Tools and Other Items ” press release September 3 2010 http baltimore fbi gov dojpressrel pressrel10 ba090310a htm 92 “Colombia Captures Drug Trafficker Who Pioneered Use of Submarines ” Fox News Latino March 18 2012 http latino foxnews com latino news 2012 03 18 colombia-captures-drug-trafficker-who-pioneered-use-submarines Steven S Dudley Drug Trafficking Organizations in Central America Transportistas Mexican Cartels and Maras Woodrow Wilson International Center For Scholars Mexico Institute and University of San Diego Trans-Border Institute Working Paper Series on U S -Mexico Security Cooperation Washington DC May 2010 p 17 93 Michael S Schmidt and Thom Shanker “To Smuggle More Drugs Traffickers Go Under the Sea ” New York Times September 9 2012 http www nytimes com 2012 09 10 world americas drug-smugglers-pose-underwater-challengein-caribbean html pagewanted all 94 Rear Admiral Charles Michel Director Joint Interagency Task Force South Testimony before the House Subcommittee on Border and Maritime Security House Committee on Homeland Security June 19 2012 http www hsdl org view did 713514 95 Rear Admiral Vincent Atkins U S Coast Guard Testimony before the House Subcommittee on Homeland Security on Department of Homeland Security Air and Marine Operations and Investments April 19 2010 http www dhs gov ynews testimony testimony_1271690315007 shtm 91 Congressional Research Service 16 Organized Crime An Evolving Challenge for U S Law Enforcement submersible and semisubmersible vessels by making it a federal crime to operate embark on or conspire to operate these vessels in international waters with the intent to avoid detection In early July 2010 police in Ecuador seized a fiberglass submarine designed to operate fully submerged at a depth of 65 feet The diesel-powered twin-screw sub a marked step forward in technology was likely intended to transport cocaine on the high seas and could carry 10 tons of cocaine on a 10-day voyage This vessel represented a large improvement over the semisubmersibles that have been regularly seized from traffickers since 2006 96 Mexican drug traffickers have increasingly relied upon ultralight aircraft97 to smuggle drugs across the Southwest border into the United States These small planes can fly as low as tree level and are less easily detected than the larger aircrafts that were used by the traffickers prior to 2007 98 While some traffickers may land the ultralights on the U S side of the border to pass off drug loads to distributors others attach drop baskets that can carry over 300 pounds of marijuana or other drugs These drop baskets release packages of drugs that will fall to the ground when a lever in the aircraft is activated and then local gangs or traffickers can pick up and distribute the drugs In May 2009 a low-flying ultralight aircraft carrying about 275 pounds of marijuana estimated to be worth $220 480 crashed in Yuma AZ The pilot escaped but two suspected coconspirators were arrested 99 Cross-Border Tunnels Mexican drug traffickers use underground cross-border tunnels to smuggle drugs from Mexico into the United States Tunneling while not in and of itself a new phenomenon having been used for hundreds of years during conflicts and for escapes has increased not only in prevalence but in sophistication 100 Early drug tunnels were rudimentary “gopher hole” tunnels dug on the Mexican side of the border traveling just below the surface and popping out on the U S side as close as 100 feet from the border Slightly more advanced tunnels began to rely on existing infrastructure which may be shared by neighboring border cities such as the tunnel shared by Nogales AZ in the United States and Nogales Sonora in Mexico Some of these interconnecting tunnels tap into storm drains or sewage systems in order to move drugs even further than smugglers could move them by digging tunnels alone The most sophisticated tunnels can have rail ventilation and electrical systems In January 2006 in Otay Mesa CA a tunnel stretching nearly three-quarters of a mile in length and traveling over 85 feet below the surface of the earth Jim Popkin “Authorities in Awe of Drug Runners’ Jungle-Built Kevlar-Coated Supersubs ” Wired Magazine March 29 2011 http www wired com magazine 2011 03 ff_drugsub all 1 “DEA Intel Aids in Seizure of Fully-Operational Narco Submarine in Ecuador ” press release July 3 2010 Chirs Kraul “Ecuador Police Seize 100-foot NarcoSubmarine Being Built Secretly ” Los Angeles Times July 6 2010 http www latimes com news nationworld world la-fg-ecuador-narco-sub-20100706 0 162212 story Douglas A Kash and Eli White “A New Law Counters the Semisubmersible Smuggling Threat ” Federal Bureau of Investigation March 2010 U S Southern Command “The Self-Propelled Semi-Submersibles Threat ” 97 To enhance law enforcement’s ability to investigate and prosecute cases involving drug smuggling via ultralights the Ultralight Aircraft Smuggling Prevention Act of 2012 P L 112-93 among other things amended the Tariff Act of 1930 defining aircraft as including ultralight vehicles For the Federal Aviation Administration definition of an ultralight see the Code of Federal Regulations CFR Title 14 Section 103 http ecfr gpoaccess gov cgi t text textidx c ecfr sid 77f64066b8e425c01339f918e6e9f291 rgn div5 view text node 14 2 0 1 3 16 idno 14 98 Agence France-Presse “Mexican Drug Traffickers Using Tiny Planes for US Market ” MSN News September 2 2010 99 U S Customs and Border Protection “Ultralight Plane Crashes in Arizona Smugglers Apprehended ” press release May 30 2009 100 Ken Stier “Underground Threat Tunnels Pose Trouble from Mexico to Middle East ” Time May 2 2009 96 Congressional Research Service 17 Organized Crime An Evolving Challenge for U S Law Enforcement was discovered where more than two tons of marijuana was seized 101 The tunnel had lighting ventilation and groundwater drainage systems In November 2010 the San Diego Tunnel Task Force—created in 2003 as a partnership between ICE DEA and the U S Border Patrol working along with state law enforcement and Mexican counterparts—uncovered a 600-yard passageway stretching from Tijuana to Otay Mesa About 30 tons of marijuana with an estimated street value of about $20 million were seized in the United States and Mexico 102 About a year later the task force unearthed two other tunnels in Otay Mesa within a two-week period One of them stretched 612 yards and had electric rail cars lighting reinforced walls and wooden floors 103 In July 2012 three drug smuggling tunnels were uncovered along the Southwest border in less than a week 104 U S law enforcement uses various tactics and simultaneously faces numerous challenges in detecting these cross-border tunnels More than 150 tunnels have been discovered since the 1990s105—primarily in Arizona and California—and more than 75 of these have been found since 2006 106 One such method of tunnel detection is the use of ground penetrating radar GPR 107 However this technology is limited by factors including soil conditions tunnel diameter and tunnel depth Law enforcement may also use sonic equipment to detect the sounds of digging and tunnel construction and seismic technologies to detect blasts that may be linked to tunnel excavation U S officials have acknowledged that law enforcement currently does not have technology that is reliably able to detect sophisticated tunnels 108 Tunnels are more effectively discovered as a result of human intelligence and tips rather than technology Exploitation of Ethnic Diaspora Communities Criminal organizations structured along ethnic lines sometimes base their operations in immigrant communities 109 They use these enclaves to provide cover for their dealings and occasionally also exploit their ethnic compatriots Historically criminal groups have burrowed into their immediate surroundings but now this is enhanced by the fact that they can leverage Internet connectivity and extensive international transportation linkages from localities around the globe A number of recent cases highlight these issues U S Drug Enforcement Administration “DEA ICE Uncover ‘Massive’ Cross-Border Drug Tunnel Cement lined passage thought to link warehouses in Tijuana and Otay Mesa ” press release January 26 2006 http www justice gov dea pubs pressrel pr012606 html 102 U S Drug Enforcement Administration “Tunnel Task Force Discovers Cross Border Tunnel 30 tons of Marijuana Seized in Investigation ” press release November 3 2010 103 Immigration and Customs Enforcement “Highly Sophisticated Cross-Border Drug Tunnel Discovered Near San Diego ” press release November 15 2011 http www ice gov news releases 1111 111130sandiego htm 104 Elliot Spagat and Jacques Billeaud “Drug Tunnels Discovered Between U S -Mexico Border Contained Railcar System Tons Of Pot ” Huffington Post July 13 2012 105 Statement of James A Dinkins Executive Associate Director Homeland Security Investigations U S Immigration and Customs Enforcement before the U S Congress Senate United States Senate Caucus on 101 Congressional Research Service Organized Crime and Health Care Fraud In 2010 then-Acting Deputy Attorney General Gary G Grindler stated that “the emergence of international organized crime in domestic health care fraud schemes signal ed a dangerous expansion that poses a serious threat to consumers ”110 The health care system as well as both public and private assistance programs have been targets of individual scammers and organized criminals alike Criminals steal the identities—or create fake identities—of medical providers clinics and businesses and patients In FY2011 federal prosecutors “filed criminal charges in 489 cases involving 1 430 defendants ”111 News reports suggest that organized crime has turned to targeting Medicare and Medicaid for profit 112 It is very likely that some groups favor stealing doctor and patient identities for fraudulent billing over more 18 Organized Crime An Evolving Challenge for U S Law Enforcement In October 2010 a total of 73 individuals were violent and less lucrative criminal activity One expert indicted in the largest single Medicare fraud has suggested “ Health care fraud is lucrative and it’s safe for them organized criminals Why rob a bank ever charged 114 As described by DOJ the and risk getting shot when you can click a mouse and Mirzoyan-Terdjanian organization an bill Medicare or Medicaid basically lie on some forms Armenian criminal group ran fake clinics in and make millions of dollars doing so ”113 25 states but had its leadership based in Los Angeles and New York City 115 two areas with large immigrant populations from the former Soviet Union e g Glendale in the Los Angeles region is home to 200 000 Armenian Americans According to the president of the Los Angeles chapter of the Armenian-American Chamber of Commerce this community is exploited by a handful of criminals who were “raised under communist rule in the former Soviet republic of Armenia where exploiting a corrupt government was seen as fair game ”116 Members of the Mirzoyan-Terdjanian group allegedly billed Medicare for more than $163 million in fraudulent medical services They reaped about $35 million in profits 117 The case involves the stolen identities of both doctors and Medicare beneficiaries and the creation of at least 118 spurious medical clinics across at least 25 states all part of a largely “virtual” operation FBI Assistant Director in Charge Janice K Fedarcyk described the organization as completely notional There were no real medical clinics behind the fraudulent billings just stolen doctors’ identities There were no colluding patients signing in at the clinics for International Narcotics Control Illegal Tunnels on the Southwest Border 112th Cong 1st sess June 15 2011 106 Michael Thurston “Record drugs haul seized from US-Mexico border tunnel ” AFP November 4 2010 http www google com hostednews afp article ALeqM5jQ20K1Iy7AaXLBGtqiAxnfkCMTGQ docId CNG a14f67109bad6c916ff3ce51f338a2d8 3b1 107 For more information see http www geophysical com militarysecurity htm 108 Ken Stier “Underground Threat Tunnels Pose Trouble from Mexico to Middle East ” Time May 2 2009 109 Klaus von Lampe “Re-Conceptualizing Transnational Organized Crime Offenders as Problem Solvers ” International Journal of Security and Terrorism vol 2 no 1 2011 p 9 Hereinafter von Lampe “ReConceptualizing ” 110 Department of Justice “Seventy-Three Members and Associates of Organized Crime Enterprise Others Indicted for Health Care Fraud Crimes Involving More Than $163 Million ” press release October 13 2010 http www justice gov opa pr 2010 October 10-dag-1140 html Hereinafter DOJ press release “Seventy-Three Members ” 111 It is unknown however how much of this is attributable to organized crime For data see Department of Health and Human Services and Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2011 February 2012 p 1 https oig hhs gov publications docs hcfac hcfacreport2011 pdf 112 Allan Chernoff Sheila Steffen “Organized Crime’s New Target Medicare ” CNN October 24 2009 http www cnn com 2009 CRIME 10 22 medicare organized crime 113 “Organized Crime Muscles in on Health Care ” NPR January 16 2010 http www npr org templates story story php storyId 122645717 114 Department of Justice “Manhattan U S Attorney Charges 44 members and Associates of an Armenian-American Organized Crime Enterprise with $100 Million Medicare Fraud ” press release October 13 2010 http newyork fbi gov dojpressrel pressrel10 nyfo101310 htm Hereinafter DOJ press release “Manhattan U S Attorney” DOJ press release “Seventy-Three Members ” 115 DOJ press release “Seventy-Three Members ” 116 Thomas Watkins “Armenian Organized Crime Grows More Complex ” Associated Press October 16 2010 117 In December 2011 one of the group’s leaders Robert Terdjanian pled guilty to charges related to the case See Bruce Golding “Swan Song for Gangster ” New York Post December 20 2011 http www nypost com p news local manhattan swan_song_for_gangster_T3KqaxeuQkAVNhHjioXmaJ Congressional Research Service 19 Organized Crime An Evolving Challenge for U S Law Enforcement unneeded treatments just stolen patient identities The whole doctor-patient interaction was a mirage But the money was real while it lasted 118 The indictment in the case also linked Armen Kazarian to the scheme Arrested in Los Angeles Kazarian an Armenian residing in the United States had substantial influence in the criminal underworld as a vor v zakone a Russian term meaning “thief-in-law ”119 Kazarian had reputedly lied to federal authorities to obtain asylum after emigrating to the United States in 1996 120 In the course of the scheme Kazarian mediated disputes for the Mirzoyan-Terdjanian group and allegedly threatened to assault and kill an associate In July 2011 Kazarian pled guilty to racketeering in the case 121 The indictment suggests that members of the organization many of them Armenian nationals or immigrants sent criminal proceeds to Armenia purchasing real estate and operating businesses with the funds 122 In June 2010 DOJ charged five Ukrainian brothers with extortion and conspiring to engage in a pattern of racketeering activity This far-flung operation based out of Philadelphia and Ukraine had allegedly trafficked about 30 Ukrainians into the United States via Mexico exploiting them in cleaning crews operating in stores private residences and office buildings in Pennsylvania New York New Jersey Maryland and Washington DC According to DOJ the brothers failed to pay their victims threatened them with violence physically abused them and housed them in overcrowded quarters One of the brothers is accused of raping a trafficked woman on several occasions 123 The victims of this scheme likely trusted the brothers as fellow immigrants who had ties to the United States and were willing to help others start new lives in the country DOJ press release “Manhattan U S Attorney ” The indictment describes a thief-in-law as “a member of a select group of high-level criminal figures from Russia and the Former Soviet Union who receives tribute from other criminals offers protection and uses his recognized position of authority to resolve disputes among criminals including through threats and instances of violence ” See United States vs Armen Kazarian Davit Mirzoyan Robert Terdjanian et al Indictment in the U S District Court for the Southern District of New York filed October 13 2010 Hereinafter United States vs Armen Kazarian 120 Michael Wilson William K Rashbaum “Real Patients Real Doctors Fake Everything Else ” New York Times October 13 2010 http www nytimes com 2010 10 14 nyregion 14fraud html _r 1 scp 1 sq Real%20Patients %20Real%20Doctors %20Fake%20Everything%20Else st cse United States vs Armen Kazarian 121 Department of Justice “Leader of Armenian Organized Crime Ring Pleads Guilty in Manhattan Federal Court to Racketeering ” press release July 8 2011 http www justice gov usao nys pressreleases July11 kazarianarmenpleapr pdf 122 United States vs Armen Kazarian 123 Department of Justice “Five Brothers Charged in Human Trafficking Scheme that Smuggled Young Ukrainian Migrants ” press release June 30 2010 http www justice gov opa pr 2010 June 10-crt-765 html Nathan Gorenstein “5 Brothers Charged with Human Trafficking ” Philadelphia Inquirer June 30 2010 http www philly com philly news breaking 97508149 html cmpid 15585797 United States v Omelyan Botsvynyuk et al Indictment in the U S District Court for the Eastern District of Pennsylvania n d http www justice gov usao pae News Pr 2010 Jun botsvynyuk_indictment pdf In October 2011 two of the brothers Omelyan and Stepan Botsvynyuk were convicted “of conspiracy to violate the Racketeer Influenced and Corrupt Organizations RICO Act in connection with a human trafficking scheme ” At the time of the duo’s trial two other brothers were in Canada awaiting extradition and the remaining sibling was a fugitive See Department of Justice “Brothers Convicted in Human Trafficking Scheme ” press release October 12 2011 http www fbi gov philadelphia press-releases 2011 brothers-convicted-in-humantrafficking-scheme Michael Matza “Trial Set to Begin for Botsvynyuk Brothers in Human-Trafficking Case ” Philadelphia Inquirer September 13 2011 http articles philly com 2011-09-13 news 30149728_1_t-visa-programhuman-trafficking-immigrant-rights-groups For more information see Department of Justice “Second Ukrainian Brother Sentenced to the Maximum for Human Trafficking Operation ” press release July 17 2012 http www fbi gov philadelphia press-releases 2012 second-ukrainian-brother-sentenced-to-the-maximum-for-humantrafficking-operation 118 119 Congressional Research Service 20 Organized Crime An Evolving Challenge for U S Law Enforcement In another case at least five Chinese citizens involved in operating Asian massage parlors in Kansas were sentenced between April and October of 2009 for their roles in exploiting Chinese women in the United States 124 The defendants recruited women from China to work in the United States as masseuses They then confiscated the women’s identification documents and used these documents to fraudulently wire proceeds from illegal activities back to China They forced the women to work for 14 hours every day locked them inside the massage parlors to sleep at night and forced them to perform sexual services for the male patrons of the massage parlors West African criminal networks specializing in AFF operate in many nations including the United States where members have assimilated into local ethnic communities Many West African fraudsters based outside of their home countries direct proceeds back to organizations in their homelands More recently it appears that some of these diaspora-based criminals are operating independently and retaining their ill-gotten gains 125 Changing Structures The traditional image of organized crime involves elaborate hierarchies behavioral codes and initiation rituals Some criminal organizations like the Cosa Nostra retain a strong element of hierarchy However in the last 20 years the criminal underworld has likely moved away from rigid hierarchical organizational structures and toward decentralized and more flexible “network” models One scholar has argued that the public is still wedded to hierarchical archetypes particularly when conceptualizing how smugglers operate Still infused with images of cartels and syndicates—rigid top-down organizations—we are not accustomed to thinking of flexible even unchartable networks of intermediaries that operate across many borders and provide different services Some are permanently linked and others vary in their composition activities and geographical scope depending on markets and circumstances Thus brokers and agents with access to multiple suppliers conveyors and buyers are more significant in the drug trade than are old-fashioned “kingpins ” For all these brokers expanding into new product lines legal or illegal is just a logical business step 126 As discussed elsewhere in this report criminals much like legitimate businesses have internationalized their operations particularly in the last two decades The fast movement of people goods and information stimulated by globalization and technological change has encouraged decentralization and outsourcing Networks are especially suited for this type of environment 127 Global businesses and criminal organizations now give critical roles to individuals or groups outside of an organization’s core that are often physically separated by thousands of miles In some cases such as Colombian drug trafficking organizations law enforcement successes against criminal hierarchies may have encouraged the adaptation of Federal Bureau of Investigation “Leader of Asian Massage Parlor Scheme Sentenced for Coercing Prostitution Money Laundering Identity Theft ” press release October 14 2009 http kansascity fbi gov dojpressrel pressrel09 kc101409 htm 125 IMMFWG Mass Marketing Fraud p 15 126 Naím Illicit pp 219-220 For a similar discussion that also cites Naím see Juan Carlos Garzón Mafia Co The Criminal Networks in Mexico Brazil and Colombia Washington DC Woodrow Wilson International Center for Scholars Latin American Program English translation of 2008 Spanish ed 2010 pp 33-34 Hereinafter Garzón Mafia Co 127 Phil Williams “Transnational Criminal Networks ” in Networks and Netwars ed John Arquilla David Ronfeldt Santa Monica CA National Defenses Research Institute RAND 2002 pp 77-78 Hereinafter Williams “Transnational Criminal Networks ” 124 Congressional Research Service 21 Organized Crime An Evolving Challenge for U S Law Enforcement networks 128 Criminals conduct more business offshore because of the efficiencies offered by the Internet and advances in the world’s transportation and communication infrastructures 129 In the underground economy these changes have encouraged the abandonment of exclusivity implied by the elaborate codes of behavior ethnic bonds and rigid hierarchy that once typified organized crime 130 Networked structures shield organized criminals from law enforcement efforts 131 Beyond its immediate duties one element or node in a network can have little understanding of the entire network’s criminal activity It is possible for a network to operate without a single constituent part knowing the entire scheme In larger networks with clear cut leaders layers of peripheral nodes likely do not know who directs them Disruption of peripheral network elements by law enforcement may alert core players to shut down the enterprise 132 Network Models Illicit networks broadly follow two models “Hub and spoke” networks involve peripheral nodes tied to a leadership core Core players initiate schemes settle conflicts and provide guidance to others In this model activity moves from core to peripheral players while the peripheral entities do not interact with one another “Chain” networks involve the flow of information or movement of criminal goods from node to node in linear fashion without a discernable center of gravity or central command 133 They often lack obvious individual focal points for policing efforts Networks can quickly adapt to changing market conditions or the elimination of nodes by law enforcement by quickly recruiting replacement specialists Unlike hierarchies such as the Cosa Nostra networks have few membership requirements initiation rituals or loyalty tests These organizations can also shift allegiances easily opportunistically drawing in participants for specific tasks 134 Blurring of Forms Some powerful criminal groups that still favor traditional hierarchical structures featuring distinct lines of authority simultaneously exhibit networked characteristics as well especially a flattening of leadership arrangements and outsourcing of some activities to criminals outside their immediate command and control structures For example in the United States hierarchical Mexican drug cartels rely on networks to handle aspects of trafficking Violent U S gangs transport wholesale quantities of narcotics into the United States and procure weapons for some cartels 135 Prison gangs for instance are highly structured and both national- and regional-level 128 Scott H Decker and Margaret Townsend Chapman Drug Smugglers on Drug Smuggling Lessons from the Inside Philadelphia Temple University Press 2008 pp 34-36 129 Stephen Aguilar-Millan et al “The Globalization of Crime ” The Futurist November December 2008 p 42 130 Chatterjee The Changing Structure pp 2 7-8 131 Carlo Morselli Inside Criminal Networks New York Springer 2009 p 71 132 Williams “Transnational Criminal Networks ” pp 64-75 133 Mette Eilstrup-Sangiovanni and Calvert Jones “Assessing the Dangers of Illicit Networks Why al-Qaida May Be Less Threatening Than Many Think ” International Security Fall 2008 pp 12-13 134 For networked structures among Colombian drug traffickers see Michael Kenney “The Architecture of Drug Trafficking ” in From Pablo to Osama Trafficking and Terrorist Networks Government Bureaucracies and Competitive Adaptation University Park PA Pennsylvania State University Press 2007 pp 25-47 Hereinafter Kenney From Pablo to Osama 135 National Gang Intelligence Center National Gang Threat Assessment Emerging Trends 2011 n d pp 26-28 Congressional Research Service 22 Organized Crime An Evolving Challenge for U S Law Enforcement prison gangs have formed alliances with Mexican DTOs For example the Barrio Azteca prison gang—operating primarily in southwestern Texas and southeastern New Mexico—has partnered with the Juárez cartel and generates much of its money from smuggling marijuana heroin and cocaine across the Southwest border 136 Similarly one author of a broad study of criminal organizations in Mexico Brazil and Colombia has noted that these groups embody characteristics of what he dubs the “Godfather Model”—rigid hierarchy—and the “Facebook Model”—dynamic network 137 Advantage Networks Challenge Law Enforcement The shift to networked structures may suggest that criminals are more elusive than ever as the illicit world evolves rapidly while law enforcement “plays by yesterday’s rules and increasingly risks dealing only with the weakest criminals and the easiest problems ”138 According to one study when combating agile drug cartels a number of impediments hobble law enforcement officials Most broadly the hierarchical authority embodied in bureaucratic structures complicates the decision-making process 139 Additionally law enforcement potentially faces interagency coordination problems that further complicate and decelerate decision making comprehensive legal and bureaucratic constraints to action and ambiguous incentive structures that undermine some agents’ willingness to share information—and others’ commitment to winning the war on drugs 140 Yet another challenge for law enforcement investigating more-networked organized criminal groups may arise from constraints in extraterritorial jurisdiction While some criminal actors in a network may conduct business offshore or overseas and federal law enforcement does have extraterritorial jurisdiction to investigate and prosecute individuals who criminally violate U S interests abroad this jurisdiction does not necessarily cover all crimes committed by organized crime groups 141 Further jurisdictional issues can present substantial diplomatic and practical challenges for law enforcement Disadvantage Networks Have Exploitable Weaknesses Some of the strengths suggested by network structure can also be interpreted as weaknesses Their inherent compartmentalization potentially impedes efficient information sharing as key players keep peripheral actors in the dark about important aspects of complex schemes This suggests that highly networked organizations more effectively engage in simpler criminal conspiracies Decentralization can undermine the development of strategy and slow down decision making It may also encourage excessive risk taking by peripheral actors who are not http www fbi gov stats-services publications 2011-national-gang-threat-assessment 2011-national-gang-threatassessment-emerging-trends National Gang Intelligence Center and National Drug Intelligence Center National Gang Threat Assessment 2009 January 2009 pp 11-12 http www fbi gov publications ngta2009 pdf 136 Ibid p 28 Barrio Azteca members are also involved in other crimes such as extortion kidnapping and alien smuggling For more information see Tom Diaz “Barrio Azteca—Border Boys Linked to Mexican Drug Trafficking Organizations—Part Three ” April 17 2009 137 Garzón Mafia Co pp 23-24 138 Intelligence Committee Futures Working Group Futures p 2 139 Kenney From Pablo to Osama p 132-133 140 Ibid 141 See the Omnibus Diplomatic Security and Antiterrorism Act of 1968 Title XII of P L 99-399 For more detailed information regarding the United States extraterritorial jurisdiction as well as the specific crimes included in this jurisdiction see CRS Report 94-166 Extraterritorial Application of American Criminal Law by Charles Doyle Congressional Research Service 23 Organized Crime An Evolving Challenge for U S Law Enforcement controlled by hierarchical roles rooted in rules enforced by the organization Decentralization possibly also nurtures challengers who compete with core leaders and foster organizational instability 142 Maintaining networks also likely requires “time-consuming” effort geared toward “building and fostering relationships ”143 Corruption Some criminal networks co-opt or attract participants from the licit realm using their specialized skills to provide “logistical advantages ”144 These skills are especially valuable in a globalized high tech era in which technology is critical in overcoming geographical barriers that once slowed international trade Corrupt individuals maintain their status in above-board business or governmental jobs providing criminals with clean assets closely guarded information specialized access sensitive information or resources Corrupt licit-realm actors also potentially lend criminal enterprises a sense of legitimacy 145 Because of globalization it is likely harder to disprove a criminal’s claims that he is a legitimate businessman especially if the proof lies overseas or in multiple jurisdictions The efforts of organized criminals to draw into their organizations legitimate persons can be described from three broad perspectives ground-level private sector criminal infiltration of businesses co-optation of powerful business leaders and public corruption “Ground-Level” Exploitation of Private Businesses Non-executive employees or self-employed individuals can provide criminal organizations with highly specialized capabilities in our highly networked age The possibilities for co-opted private sector specialists are plentiful The three examples below suggest this  Viktar Krus operated a network that illegally brought foreign workers into the United States He relied on legitimate facilitators such as Beth Ann Broyles an Illinois immigration attorney who prepared fraudulent immigration petitions for the organization Broyles claimed that she initially did not know that she was involved in criminal activity When she eventually discerned that she was Broyles rationalized her participation by believing that she was actually somehow assisting immigrants She was among two dozen co-defendants who worked in Krus’s network Additionally Krus likely relied on bribing hotel employees to inflate the number of workers they needed to hire Between 2003 and 2008 he used at least 10 shell companies and evaded millions of dollars in taxes while bringing in 3 800 immigrants many illegally to work in the service sector and industrial jobs in the Norfolk VA region and elsewhere around the United States He grossed $34 million forced people to live 12-15 to an apartment garnered fees from their wages and charged legitimate businesses $10 Mette Eilstrup-Sangiovanni and Calvert Jones “Assessing the Dangers of Illicit Networks Why al-Qaida May Be Less Threatening Than Many Think ” International Security Fall 2008 pp 16-33 143 von Lampe “Re-Conceptualizing ” p 9 144 Ibid 145 CISC 2010 Report p 15 http www cisc gc ca annual_reports annual_report_2010 document report_oc_2010_e pdf See also Carlo Morselli and Cynthia Giguere “Legitimate Strengths in Criminal Networks ” Crime Law and Social Change 2006 pp 185-200 142 Congressional Research Service 24 Organized Crime An Evolving Challenge for U S Law Enforcement   per hour for their labor Krus received a seven-year prison sentence for conspiracy tax fraud visa fraud and money laundering 146 According to DOJ the Tran organization a criminal group that cheated approximately 27 casinos in the United States and Canada out of more than $7 million bribed card dealers and supervisors at casinos to advance its scheme In what has been dubbed “the largest cheating ring of all time ”147 corrupt dealers rigged their shuffles during mini-baccarat and blackjack games The group also used technologically advanced tools such as hidden transmitters and custom software to predict the order in which cards would reappear during games 148 The organization began its operations in 2002 and the initial indictment was returned against the group in May 2007 149 DOJ’s Organized Crime and Racketeering Section helped prosecute Victor Kaganov in connection with an illegal money transmitting business he allegedly ran in Oregon In March 2011 Kaganov pled guilty to operating an illegal money transmitting business 150 DOJ has not publicly linked Kaganov who was indicted in March 2010 to any organized crime figures However Kaganov purportedly opened multiple shell corporations in Oregon on behalf of Russian clients He used the shells to shuttle more than $172 million via more than 4 200 wire transactions “in and out of the United States to more than 50 countries ” according to DOJ 151 His supposed criminal activity highlights services that organized criminals could potentially use to launder money Big Business and Organized Criminals In his Annual Threat Assessment for 2010 then-Director of National Intelligence Dennis Blair noted that government organized crime intelligence services and big business figures are growing increasingly close in their interactions He stated an increasing risk from Russian organized crime is that criminals and criminally linked oligarchs powerful Eurasian businessmen who rose to power in the immediate post-Soviet Tim McGlone “Lawyer Sentenced for Part in Immigration Fraud Ring ” The Virginian-Pilot January 26 2010 McGlone “Belarus Man Gets 7 Years for Illegal Workers ” The Virginian-Pilot July 18 2009 http hamptonroads com 2009 07 belarus-man-gets-7-years-illegal-workers McGlone “Prosecutors Tie Illegal Workers to International Crime Syndicate ” The Virginian-Pilot January 17 2009 McGlone “Illegal-Immigrant Network Supplied Region and Beyond ” The Virginian-Pilot January 14 2009 Bureau of Immigration and Customs Enforcement “22 Charged with Massive International Visa Scheme ” press release January 13 2009 For similar examples involving Eurasian organized criminals see Alexander Sukharenko “The Use of Corruption by ‘Russian’ Organized Crime in the United States ” Trends in Organized Crime vol 8 no 2 Winter 2004 147 Liz Benston “As Baccarat Grows in Popularity So Does Cheating ” Las Vegas Sun August 30 2010 http www lasvegassun com news 2010 aug 30 baccarat-grows-popularity-so-does-cheating 148 Department of Justice “Former Mohegan Sun Card Dealer Sentenced to Prison for Involvement in Cheating Conspiracy ” press release April 7 2010 http newhaven fbi gov dojpressrel pressrel10 nh040710 htm Department of Justice “Leader of Casino-Cheating Criminal Enterprise Sentenced to 70 Months in Prison for Targeting Casinos Across the United States ” press release March 15 2010 http www justice gov opa pr 2010 March 10-crm-265 html 149 Department of Justice “Eight More Individuals Charged in Casino-Cheating Conspiracy ” press release September 18 2009 http www justice gov opa pr 2009 September 09-crm-999 html 150 Department of Justice “Tigard Man Pleads Guilty to Operating Illegal Money Transmitting Business ” press release March 1 2011 151 Department of Justice “Tigard Man Indicted in Connection with Illegal Money Transmitting Business Shell Corporations Created by Defendant to Move Millions of Dollars in and out of United States ” press release March 3 2010 http portland fbi gov dojpressrel pressrel10 pd030310 htm 146 Congressional Research Service 25 Organized Crime An Evolving Challenge for U S Law Enforcement period will enhance the ability of state or state-allied actors to undermine competition in gas oil aluminum and precious metals markets 152 However based on open source information it is often difficult to determine with any degree of certainty whether oligarchs or other powerful international entrepreneurs with interests in U S markets or investors have criminal connections Russian billionaire Oleg Deripaska exemplifies this difficulty According to unnamed U S federal officials cited in news reports Deripaska has struggled to maintain a U S visa because of his alleged ties to organized crime 153 Prior to the global financial crisis he possessed a $28 billion fortune and was the ninth-wealthiest person in the world 154 He obtained a U S visa in 2005 but it was revoked soon thereafter 155 According to press reporting in 2009 the FBI set up two U S visits by Deripaska for undisclosed reasons on a limited entry permit from the Department of Homeland Security DHS 156 Claims of criminal connections have publicly dogged him for years But Deripaska has never been convicted of a crime and has strongly denied all accusations 157 His difficulty getting a U S visa may have kept some U S bankers from participation in an initial public offering IPO involving his aluminum company UC Rusal 158 The IPO occurred in January 2010 on the Hong Kong stock exchange 159 Like Deripaska Stanley Ho a billionaire casino magnate from Macau has routinely denied accusations of ties to organized crime According to media reports U S officials have long suspected Ho had links to Chinese criminal groups known as triads 160 These suspicions resurfaced in 2009 and 2010 involving his daughter Pansy and a casino venture in Macau At the time Pansy and Nevada-based MGM Resorts International MGM 161 each controlled half of the MGM Macau which opened in December 2007 162 Blair “Annual Threat Assessment ” p 44 Gregory L White and Diana Cimilluca “Some Bankers Cool on Hot Rusal IPO ” Wall Street Journal November 9 2009 Hereinafter White and Cimilluca “Some Bankers ” Evan Perez Gregory L White “FBI Lets Barred Tycoon Visit U S ” October 30 2009 Hereinafter Perez and White “FBI Lets Barred Tycoon ” 154 “The World’s Billionaires #9 Oleg Deripaska ” Forbes com March 5 2008 http www forbes com lists 2008 10 billionaires08_Oleg-Deripaska_UCP9 html 155 Perez and White “FBI Lets Barred Tycoon ” 156 White and Cimilluca “Some Bankers” Perez and White “FBI Lets Barred Tycoon ” 157 John Helmer “Deripaska in ‘Russian Mafia’ Probe ” BusinessDay May 14 2010 http www businessday co za articles Content aspx id 108965 Misha Glenny Robert Booth and Tom Parfitt “US Refused Oligarch Visa Over Alleged Criminal Associations ” The Guardian October 31 2008 http www guardian co uk world 2008 oct 31 olegderipaska-us-visa-rusal 158 White and Cimilluca “Some Bankers ” 159 “Aluminum giant RusAl raises $2 24 bln with Hong Kong IPO ” RIA Novosti January 22 2010 http en rian ru business 20100122 157651607 html 160 Neil Gough “Triads Thrive in Ho’s Casinos US Report Says ” South China Morning Post March 19 2010 Alexandra Berzon and A D Pruitt “MGM Mirage Knew Ally Was Unfit ” Wall Street Journal March 17 2010 161 Formerly MGM Mirage 162 In July 2012 it was reported that MGM held 51% and Pansy Ho held nearly 27% of the venture’s stock which was publicly offered on Hong Kong’s stock exchange in 2011 Howard Stutz “Ties to Pansy Ho Could Damage MGM Resorts Plans for Maryland Casino ” Las Vegas Review-Journal July 23 2012 http www lvrj com blogs stutz Ties_to_Pansy_Ho_could_damage_MGM_Resorts_plans_for_800_million_Maryland_casino html Fox Hu “Pansy Ho Raises $1 5 Billion in MGM China IPO at Top of Range ” Bloomberg May 26 2011 http www bloomberg com news 2011-05-27 mgm-china-prices-h-k-ipo-shares-at-hk-15-34 html Tom Mitchell “Spotlight on MGM Mirage’s ‘Wild Card ’” Financial Times March 19 2010 152 153 Congressional Research Service 26 Organized Crime An Evolving Challenge for U S Law Enforcement Pansy Ho’s co-ownership of MGM Macau emerged as an issue for New Jersey gaming regulators because MGM also possessed a 50% share in Atlantic City’s Borgata Hotel Casino and Spa According to New Jersey law MGM had to prove “by clear and convincing evidence its ‘good character honesty and integrity’ on a continuing basis” to maintain its 50% share in the Borgata 163 In essence the company and its partners had to be found suitable to operate in New Jersey It appears that MGM’s direct ties to the Ho family were troubling to New Jersey regulators In May 2009 the New Jersey Division of Gaming Enforcement DGE published a report based on its own investigation of MGM’s partnership with Pansy Ho in Macau The DGE report recommended that both Pansy and Stanley Ho be found “unsuitable persons” by the New Jersey Casino Control Commission 164 The DGE noted the elder Ho’s “continued business ties to persons associated with organized crime” and his daughter’s “direct substantial and continuing business and financial ties to her father ”165 In March 2010 MGM decided to sell its interest in the Borgata rather than sever ties with Pansy Ho 166 Corruption of Public Officials Organized criminals corrupt public employees especially individuals who have sensitive jobs In many cases criminals seek people who have skills particular access to information or job responsibilities that lend themselves to specific schemes For example some criminals whose operations depend on personal identification documents seek to inveigle employees with unique access to such information and smugglers lure people charged with protecting borders into their operations In August 2010 Vitaly Fedorchuk was sentenced to 46 months in prison for leading a criminal organization in the Cleveland OH area that fraudulently procured Ohio driver’s licenses and identification cards for foreign nationals To do so Fedorchuk’s group relied on Sonya Hilaszek a corrupt employee at the Deputy Registrar’s Office in Parma OH She also pled guilty in the case and received a prison sentence of 33 months DOJ accused Hilaszek of producing documents for between 300 and 500 individuals The criminal group charged foreign nationals—many were from Ukraine or Uzbekistan and in the United States illegally—between $1 500 and $3 000 for the documents Fedorchuk’s group also allegedly cooperated with criminals in Ukraine to fraudulently obtain non-immigrant visas from the U S Embassy in Kyiv They purportedly relied on corrupt Ukrainian nationals employed by the Embassy and charged $12 000 per visa 167 Mexican drug traffickers corrupt employees of federal agencies charged with protecting the Southwest border The number of cases involving corruption at Customs and Border Protection CBP reported by the DHS Office of Inspector General rose from 245 in FY2006 to 731 in FY2011 168 While the figures do not establish exactly how many of these corruption cases are 163 State of New Jersey Department of Law and Public Safety Special Report of the Division of Gaming Enforcement to the Casino Control Commission on Its Investigation of MGM Mirage’s Joint Venture with Pansy Ho in Macau Special Administrative Region People’s Republic of China Redacted May 18 2009 p 1 http www state nj us casinos home info docs MGM dge_%20report_redacted pdf Hereinafter DGE “Report ” 164 DGE “Report ” pp 70-71 165 DGE “Report ” p 71 166 Wayne Parry “NJ Asian Casino Boss Has Mob Ties in China ” Associated Press March 17 2010 167 Department of Justice “Three More Sentenced as Part of Bureau of Motor Vehicle Fraud Ring ” press release August 19 2010 http cleveland fbi gov dojpressrel pressrel10 cl081910a htm Patrick O'Donnell “Parma Clerk Issued Illegal Licenses FBI Charges ” Cleveland Plain Dealer October 30 2009 168 Testimony by Charles K Edwards Acting Inspector General U S Department of Homeland Security before the Congressional Research Service 27 Organized Crime An Evolving Challenge for U S Law Enforcement attributable to organized criminals suborning CBP employees they do suggest a growing challenge for federal law enforcement focused on combating smuggling and trafficking groups along the border In an attempt to prevent corruption federal investigation and law enforcement agencies may vet potential employees Typically “CBP finds 60 percent of applicants subjected to a polygraph exam ineligible for employment because of prior drug use or criminal histories ”169 Two cases highlight the potential for corruption by organized crime along the Southwest border In May 2010 Martha Garnica a former CBP technician and officer pled guilty to corruption and drug and alien smuggling charges 170 She played a significant role in smuggling operations for the Ciudad Juarez-based La Linea criminal organization 171 In another case Jose Raul Montano Jr was sentenced to 140 months in prison for bribery cocaine trafficking and alien smuggling while assigned as a CBP officer at the Brownsville Gateway Port of Entry POE in Brownsville TX He allowed Mexican drug traffickers and alien smugglers to illegally transport drugs and people into the United States At the POE Montano permitted vehicles containing illicit shipments to pass—without inspection—through the lane he worked In return Mexican criminals bribed him By the time of his arrest in April 2009 he received between $8 000 and $10 000 per vehicle 172 Organized Crime a “National Security” and “Public Security” Concern Clearly organized crime can be seen as a public security concern largely endangering people businesses and property In fact in 1995 the National Intelligence Council NIC produced a National Intelligence Estimate NIE on international organized crime that emphasized just this However the U S intelligence community’s view of international organized crime has shifted critically in the intervening years In early 2010 the NIC issued a second NIE on the topic While according to DOJ officials most of the salient issues in the 2010 NIE are consistent with those discussed in the 1995 NIE a key difference emerged The 2010 NIE argues that international organized crime has evolved into a national security concern as well 173 DOJ officials have described these national security threats in five broad categories 1 penetrating or U S Congress House Committee on Oversight and Government Reform Subcommittee on Government Organization Efficiency and Management 112th Cong 2nd sess August 1 2012 http www oig dhs gov assets TM OIGtm_CKE_080112 pdf Hereinafter Edwards Testimony See also Ceci Connolly “The Inside Woman ” Washington Post September 12 2010 http www washingtonpost com wp-dyn content article 2010 09 11 AR2010091105087 html Hereinafter Connolly “The Inside Woman ” 169 Edwards Testimony See also testimony by James F Tomsheck Assistant Commissioner Office of Internal Affairs Customs and Border Protection before the U S Congress Senate Committee on Homeland Security and Governmental Affairs Ad Hoc Subcommittee on State Local and Private Sector Preparedness and Integration New Border War Corruption of U S Officials by Drug Cartels 111th Cong 1st sess March 11 2010 170 Immigration and Customs Enforcement “Ex-CBP Employee Receives 20 Years in Drug Alien Smuggling Corruption Case ” press release August 26 2010 171 Connolly “The Inside Woman ” 172 Department of Justice “Former CBP Officer Sentenced to Prison for Bribery Cocaine Trafficking and Alien Smuggling ” press release March 31 2010 http sanantonio fbi gov dojpressrel pressrel10 sa033110 htm 173 Remarks by DOJ officials at the National Institute of Justice Conference 2010 panel on International Organized Crime Recent Developments in Policy and Research June 14 2010 For this report “public security threat” means threats to people businesses or property and “national security threat” means threats to government sovereignty and economic stability This differentiation is based on John Bailey Combating Organized Crime and Drug Trafficking in Mexico What Are Mexican and U S Strategies Are they Working Woodrow Wilson International Center For Scholars Mexico Institute and University of San Diego Trans-Border Institute Working Paper Series on U S -Mexico Security Cooperation Washington DC May 2010 p 3 fn 2 Congressional Research Service 28 Organized Crime An Evolving Challenge for U S Law Enforcement influencing state institutions—particularly in those states with weak governance 2 threatening the global economy by infiltrating financial and commercial markets driving out legitimate businesses and using a variety of illegal business practices 3 engaging in cybercrimes across a range of fraudulent activities impacting individuals businesses and global trust systems 4 partnering with terrorist organizations and insurgent groups such as the Revolutionary Armed Forces of Colombia FARC Taliban and Hezbollah and 5 expanding the reach of drug trafficking such that DTOs ally with other criminal organizations—regardless of ethnic background—and with local drug distributors Alleged Eurasian mob boss Semion Mogilevich embodies both the public and national security dimensions of organized crime In October 2009 the FBI placed Mogilevich on its Ten Most Wanted Fugitives list 174 He is wanted for leading a financial scheme that defrauded investors of $150 million between 1993 and 1998 The company that he allegedly controlled at the heart of the operation YBM Magnex was based in Newtown PA and was incorporated in Canada 175 Mogilevich was also likely involved in laundering money through YBM Magnex and a network of offshore companies 176 By purportedly swindling investors Mogilevich ran an operation that harmed members of the public More broadly—and involving national security interests—the FBI and DOJ have suggested that the reputed mob boss also has his hands in Eastern European natural gas markets and that he uses his ill-gotten gains to influence “governments and their economies ”177 Russian law enforcement arrested Mogilevich in January 2008 on tax evasion charges but released him in July 2009 on an oath not to flee 178 Although analysts have assessed organized crime as being a threat to both public security as well as a national security these threats cannot be fully evaluated without a clearer understanding of the scope of organized crime Conceptualizing Organized Crime One of the primary challenges in conceptualizing organized crime is that it is usually not thought of as a specific crime but rather as a large number of illicit activities committed by groups of individuals who are often so loosely connected that the members themselves do not know who their criminal associates may be This has historically led to a lack of consistency in the way different groups—scholars policymakers various federal law enforcement agencies and nation states—view what constitutes organized crime and think about how to combat it The inconsistent conceptualization of organized crime has also made it difficult to measure its impact 179 FBI “Top Ten Fugitives Global Con Artist and Ruthless Criminal ” October 21 2009 http www fbi gov page2 oct09 mogilevich_102109 html Hereinafter FBI “Global Con Artist ” 175 FBI “Philadelphia Fugitive Placed on the FBI’s ‘Ten Most Wanted Fugitives’ List ” press release October 21 2009 http philadelphia fbi gov pressrel pressrel09 ph102109a htm Jeanne Meserve “FBI Mobster More Powerful than Gotti ” CNN October 24 2009 http articles cnn com 2009-10-21 justice mogilevich fbi most wanted_1_fbiwire-fraud-semion-mogilevich _s PM CRIME 176 Williams “Transnational Criminal Networks ” p 70 177 FBI “Global Con Artist ” Attorney General Michael B Mukasey “Attorney General Michael B Mukasey Delivers Remarks at the CSIS Forum on Combating International Organized Crime ” April 23 2008 Political Congressional Transcript Wire 178 “Russian Court Releases Reputed Crime Boss ” The Associated Press July 27 2009 179 This report focuses on U S agency and federal statutory definitions of organized crime For a discussion of scholarly definitions see CRS Report R40525 Organized Crime in the United States Trends and Issues for Congress by Kristin M Finklea 174 Congressional Research Service 29 Organized Crime An Evolving Challenge for U S Law Enforcement The 2011 Strategy laid out the federal government’s first broad conceptualization of “transnational organized crime ” focusing on it as a national security concern 180 To what extent this definition will drive Administration policy is unclear In evaluating the 2011 Strategy policymakers may exercise their oversight authority regarding both the adequacy of the Administration’s definition of transnational organized crime as well as its utilization in driving counter-crime policies Transnational Organized Crime Defined The 2011 Strategy offers the following definition of organized crime Transnational organized crime refers to those self-perpetuating associations of individuals who operate transnationally for the purpose of obtaining power influence monetary and or commercial gains wholly or in part by illegal means while protecting their activities through a pattern of corruption and or violence or while protecting their illegal activities through a transnational organizational structure and the exploitation of transnational commerce or communication mechanisms There is no single structure under which transnational organized criminals operate they vary from hierarchies to clans networks and cells and may evolve to other structures The crimes they commit also vary Transnational organized criminals act conspiratorially in their criminal activities and possess certain characteristics which may include but are not limited to In at least part of their activities they commit violence or other acts which are likely to intimidate or make actual or implicit threats to do so They exploit differences between countries to further their objectives enriching their organization expanding its power and or avoiding detection apprehension They attempt to gain influence in government politics and commerce through corrupt as well as legitimate means They have economic gain as their primary goal not only from patently illegal activities but also from investment in legitimate businesses and They attempt to insulate both their leadership and membership from detection sanction and or prosecution through their organizational structure 181 As the term “transnational organized crime” TOC may suggest any definition of it should detail three elements 1 “transnationality ” 2 organization and 3 crime While the above TOC definition and more generally the 2011 Strategy’s text hit on all three elements key gaps in understanding the Administration’s framing of TOC remain Transnationality The strategy’s definition addresses the concept of “transnationality” in the broadest terms suggesting that TOC is transnational because it operates transnationally At least three factors— none of which are discussed in the definition—may determine how transnational a group is residence product provenance and supply chain complexity 182 180 Strategy to Combat Transnational Organized Crime p 5 Strategy to Combat Transnational Organized Crime p ii This definition originally appeared in Department of Justice Overview of the Law Enforcement Strategy to Combat International Organized Crime April 2008 p 2 http www justice gov ag speeches 2008 ioc-strategy-public-overview pdf 182 von Lampe “Re-Conceptualizing ” pp 4-5 discusses the “nature of what crosses the border ” This is subsumed by product provenance in this report von Lampe also describes “directionality ” which is part of supply chain complexity in this report 181 Congressional Research Service 30 Organized Crime An Evolving Challenge for U S Law Enforcement Regarding residence a transnational criminal group’s members can reside in multiple countries clearly making it a transnational network However if all members reside in a single country but a seemingly minor aspect of the group’s activities is situated outside this home country is the criminal network still considered transnational   Does controlling a bank account in one country while committing crimes in another make a network transnational Can a group be considered transnational simply if its communications concerning criminal activity are routed outside of its home country via international communications networks In terms of product provenance it seems clear that illicit trade whether it involves people goods services or information from one country to another is a transnational activity However can a domestically based group be considered transnational if the illicit product it handles in the United States had a foreign origin but the group played no role in getting it across international borders  A street-level cocaine dealer may have never directly colluded with foreign criminals but the cocaine he retails originated abroad Does this automatically make him part of a transnational criminal network 183 Supply chain complexity is also likely a prominent feature of TOC This involves managing the routes that illicit products take  Does the complexity of a group’s supply chain factor into measurement of how transnational the group is This complexity can include elements such as the number of borders a product crosses as well as the resources a group expends to move a product These resources can include money used for things such as bribing public officials protecting illicit routes from other criminals the acquisition and retention of technical expertise and the development of tools and infrastructure to maintain the route e g shell companies front companies drug smuggling semi-submersibles cross-border smuggling tunnels These factors suggest a broader question does the level of transnationality inherent in a network impact how the U S government views it as a threat In other words if one network is more transnational than another is it a greater concern Would an organized crime group with transnational ties necessarily be a larger threat than a criminal network based solely in the United States Organization The TOC definition includes almost any form of organization This is reflected in the strategy’s emphasis on the organizational fluidity of TOC 184 As this may suggest the definition lacks precise baselines for the concept of “organization ” Two baselines seem central here The first involves routine In essence to qualify as “organized” does a network have to routinely cooperate If so what constitutes routine cooperation The second baseline is size How small is “organized”—can it be as basic as two individuals collaborating Low thresholds for these two baselines—allowing TOC to include groups as small as two individuals who do not routinely interact—may render the concept of “organization” meaningless In other words with low 183 The product that a transnational criminal group moves across borders should also likely factor in the threat it poses to national security A group trafficking firearms may pose a higher threat to national security than an alien smuggling organization or vice versa How the strategy ranks these threats is unclear 184 Strategy to Combat Transnational Organized Crime p 3 Congressional Research Service 31 Organized Crime An Evolving Challenge for U S Law Enforcement thresholds almost any criminal activity that does not involve a sole operator could be defined as “organized ” In an attempt to clarify matters the definition suggests that transnational criminal groups are “self-perpetuating ” but the definition does not explain what this concept entails Seemingly any group not construed and controlled by some external authority or environmental condition is “self-perpetuating ” Crime The TOC definition in the 2011 Strategy broadly describes some of the activities transnational groups can engage in to turn profits and protect themselves—violence exploiting the “differences between countries ” and gaining influence in legitimate sectors Going beyond the definition the strategy’s text lays out 10 areas of illicit activity in which TOC poses “a growing threat to national and international security ”185 These 10 areas encompass a wide swath of federal law enforcement activity 1 Penetration of State Institutions Corruption and Threats to Governance 2 Threats to the Economy U S Competitiveness and Strategic Markets 3 Crime-Terror-Insurgency Nexus 4 Expansion of Drug Trafficking 5 Human Smuggling 6 Trafficking in Persons 7 Weapons Trafficking 8 Intellectual Property Theft 9 Cybercrime 10 The Critical Role of Facilitators 186 It is unclear what sway the 2011 Strategy’s definition will hold over what is practically investigated as “transnational organized crime” by federal agencies This is because these 10 areas touch on a range of U S law enforcement activity that involves many federal agencies including numerous components of both DOJ and DHS The 10 areas clearly enumerate crimes such as drug and weapons trafficking However the areas can subsume other illegal activity For example many crimes related to financial fraud and identity theft potentially fall under “Cybercrime ” “Intellectual Property Theft ” or “Threats to the Economy U S Competitiveness and Strategic Markets ” In the past numerous investigative programs within the federal government have been developed to combat crimes subsumed by the 10 areas without specifically characterizing them as “organized crime ” Complicating things neither the definition nor the 2011 Strategy lays out a methodology for somehow differentiating among transnational criminal actors in terms of the potential impact of their crimes—namely the threat they pose to U S national security or public interests Without a methodology establishing thresholds based on severity vastly different criminals potentially fall under the strategy’s purview A 15-year-old gang member and his friends who illegally download Hollywood movies from a foreign website is arguably a much different target for law enforcement than a powerful international mobster with vast economic resources and an army of 185 Strategy to Combat Transnational Organized Crime pp 5-8 Ibid “Facilitators” are “semi-legitimate players such as accountants attorneys notaries bankers and real estate brokers who cross both the licit and illicit worlds and provide services to legitimate customers criminals and terrorists alike ” See Ibid p 8 186 Congressional Research Service 32 Organized Crime An Evolving Challenge for U S Law Enforcement foot soldiers However the strategy potentially targets both A threat assessment rubric could guide federal efforts thus narrowing the number of groups or individuals targeted by the strategy While the 2011 Strategy does not articulate a threat assessment methodology two items suggest that Administration efforts supporting the strategy involve some calculation of threat First an interagency “Threat Mitigation Working Group” has been given the responsibility of identifying transnational networks “present ing a sufficiently high national security risk ”187 Whether or not the networks identified by this working group will be the only ones targeted by efforts embraced under the strategy is unclear Second transnational criminal groups were listed in an annex to a new executive order issued in conjunction with the 2011 Strategy 188 The order established a sanctions program “to block the property of and prohibit transactions with significant transnational criminal networks that threaten national security foreign policy or economic interests ”189 While it is unclear exactly how or why these groups were chosen presumably some calculation of threat was involved 190 The Definition 2011 Strategy and Key Questions Because the strategy’s TOC definition is broad it may be difficult to ascertain answers to a number of questions critical to policymaking see Figure 1 First how much harm is imposed by transnational organized crime Second how many federal resources are directly and indirectly dedicated to combating TOC Third which federal agencies are primarily responsible for fighting TOC Fourth how are threats prioritized by the new strategy Are national security concerns weighed against other concerns such as public security when targeting specific transnational groups Without clear answers to these questions it may be difficult for Congress to exercise both legislative and oversight responsibilities in order to bolster the federal government’s abilities to counter organized crime 187 Ibid p 1 Executive Order 13581 “Blocking Property of Transnational Criminal Organizations ” 76 Federal Register 4475744759 July 24 2011 189 Strategy to Combat Transnational Organized Crime p 1 190 The original transnational criminal groups listed were the Brothers’ Circle Camorra Yakuza and Los Zetas In October 2012 Mara Salvatrucha MS-13 a violent gang was added 188 Congressional Research Service 33 Organized Crime An Evolving Challenge for U S Law Enforcement Figure 1 Transnational Organized Crime Strategy Key Issues for Policymakers Source CRS Statutory Definition There is no current statutory definition of organized crime The Omnibus Crime Control and Safe Streets Act of 1968 as amended P L 90-351 191 had at one point defined organized crime as “the unlawful activities of the members of a highly organized disciplined association engaged in supplying illegal goods and services including but not limited to gambling prostitution loan sharking narcotics labor racketeering and other unlawful activities of members of such organizations ” This definition—repealed in the Justice System Improvement Act of 1979 P L 96-157 —appears to be even broader than DOJ’s or the FBI’s conceptualizations Similarly in the Racketeer Influenced and Corrupt Organizations RICO 192 provisions organized crime is described in terms of an “enterprise” and a “pattern of racketeering activity ”193 The predicate offenses for racketeering include a host of state and federal crimes listed in 18 U S C §1961 191 Omnibus Crime Control and Safe Streets Act of 1968 as amended P L 90-351 18 U S C §1961-1968 It was enacted as Title IX of the Organized Crime Control Act of 1970 P L 91- 452 193 As defined in 18 U S C §1961 an “‘enterprise’ includes any individual partnership corporation association or other legal entity and any union or group of individuals associated although not necessarily a legal entity ” and a 192 Congressional Research Service 34 Organized Crime An Evolving Challenge for U S Law Enforcement Although RICO does not define organized crime it provides a definition for an “enterprise ” It does not however describe those attributes of a criminal enterprise that distinguish it from a legal enterprise In addition this provision describes organized crime more in terms of the illegal activities committed by conspirators rather than in terms of the criminal organization As such these statutory provisions could encompass the activities of not only organized crime groups but of terrorist groups and corrupt businesses as well Largely describing organized crime as a list of crimes may help in the effective prosecution of these groups but it provides little aid in developing an understanding of the groups themselves 194 Moreover the statutory provisions offer limited guidance regarding criminal organizations and the nature of their operational structure Issues Defining Organized Crime in Statute Currently there is no statutory definition of organized crime RICO195 provisions describe organized crime in terms of an “enterprise” and a “pattern of racketeering activity ”196 The U S Code does not however provide guidance and information surrounding the nature of criminal organizations and their operational structure There also appears to be a divergence between the RICO provisions and what federal law enforcement—namely the FBI—considers to be organized crime For instance patterns of racketeering activity specified under RICO indicate that criminal organizations may be engaged in a host of crimes including but not limited to an act or threat involving murder kidnapping gambling arson robbery bribery extortion dealing in a controlled substance and other illegal activities Although drug trafficking is included in RICO’s predicate offenses law enforcement does not necessarily consider drug trafficking or DTOs to be within the purview of organized crime investigations One reason for this may be that federal law enforcement tends to segment investigations more on the basis of the criminal violation than on the basis of the criminal actor While legislating a federal definition of organized crime may not necessarily solve this disconnect with law enforcement it might lead to changes in the way law enforcement views and investigates organized crime A second statutory issue that Congress may consider is that of organized crime in the U S Criminal Code For instance while there is a Chapter 113B in Title 18 that deals specifically with terrorism and related crimes there is no centralized section that speaks specifically to “‘pattern of racketeering activity’ requires at least two acts of racketeering activity” to occur within 10 years of one another for a criminal organization to be prosecuted for racketeering Racketeering is defined as any number of violations including an act or threat involving murder kidnapping gambling arson robbery bribery extortion or dealing in a controlled substance See 18 U S C §1961 for a comprehensive list of the predicate offenses for racketeering 194 Frank E Hagan ‘“Organized Crime’ and ‘organized crime’ Indeterminate Problems of Definition ” Trends in Organized Crime vol 9 no 4 Summer 2006 p 127 See also James O Finkenauer “Problems of Definition What Is Organized Crime ” Trends in Organized Crime vol 8 no 3 Spring 2005 pp 63-83 195 18 U S C §1961-1968 It was enacted as Title IX of the Organized Crime Control Act of 1970 P L 91- 452 196 As defined in 18 U S C §1961 an “‘enterprise’ includes any individual partnership corporation association or other legal entity and any union or group of individuals associated although not necessarily a legal entity ” and a “‘pattern of racketeering activity’ requires at least two acts of racketeering activity” to occur within 10 years of one another for a criminal organization to be prosecuted for racketeering Racketeering is defined as any number of violations including an act or threat involving murder kidnapping gambling arson robbery bribery extortion or dealing in a controlled substance See 18 U S C §1961 for a comprehensive list of the predicate offenses for racketeering Congressional Research Service 35 Organized Crime An Evolving Challenge for U S Law Enforcement organized crime 197 Yet organized crime has been described as a leading threat to U S security Though the lack of centralization of organized crime-related statutes may not impact law enforcement’s abilities to investigate and prosecute organized crime it is indicative of the approach by which the federal government views it And as mentioned the harm caused by organized crime may not be clearly estimated without a common understanding of what defines organized crime Building on this accurately gauging the public and national security threat posed by organized crime may be complicated without a solid notion of the harm it routinely causes Congressional Commission Beginning in the 1950s congressional concern about organized crime has resulted not only in legislative efforts to combat it but in commissions and in various series of hearings aimed at gathering information on the scope of organized crime One of the first such efforts was the Senate Special Committee to Investigate Organized Crime in Interstate Commerce in 1950 and 1951 led by Senator Kefauver Another example of such congressional attention is the series of Senate hearings on organized crime in 1958 and 1963 led by Senator McClellan There was also the 1967 Commission on Crime in the United States led by Attorney General Katzenbach More recently and particularly since the terrorist attacks of September 11 2001 congressional attention has shifted away from traditional crime fighting—including organized crime—toward counterterrorism Of the more recent hearings involving organized crime topics focus has primarily been on threats posed by the DTOs in Mexico While this is one of the most visible organized crime threats—not only are some of the actors exceedingly violent but this violence is seen directly along the U S Southwest border—it is likely not the sole serious organized crime threat to the United States As discussed numerous other organized crime groups though perhaps not as violent commit crimes that impact the economic stability public safety and domestic security of the United States As such one option that Congress may ultimately consider is the convening of a congressional commission to evaluate the scope of organized crime Such an evaluation might help policymakers determine whether they have provided law enforcement with the appropriate tools to combat today’s threats posed by organized crime It may also result in a clarification of how the federal government defines organized crime and consequently how investigative efforts at the federal level are organized The Administration has also proposed a legislative package related to the 2011 Strategy 198 In light of this Congress may consider exploring the issue of transnational organized crime more extensively Incentives for Investigating Organized Crime While the effects of certain high-profile crimes—such as terrorism—are readily seen the aftermath of organized crime is not always as striking nor does it produce the same negative visceral reactions Some argue that this may be one reason for the shift in law enforcement attention and resources more toward counterterrorism-related activities and further away from traditional crime fighting activities since the terrorist attacks of September 11 2001 However 197 Some may consider 18 U S C §1951-1968 Chapters 95 and 96 Racketeering and RICO respectively to be a primary portion of the Code addressing organized crime 198 U S Department of Justice “Statement of Assistant Attorney General Lanny A Breuer before the Senate Judiciary Subcommittee on Crime and Terrorism ” press release November 1 2011 http www justice gov criminal pr testimony 2011 crm-testimony-111101 html Congressional Research Service 36 Organized Crime An Evolving Challenge for U S Law Enforcement although the effects of organized crime may not be seen in a consolidated attack resulting in the physical loss of life the effects are far-reaching As mentioned organized crime impacts economic stability public health and safety and national security Consequently some experts argue that there should be some form of incentive as well as disincentive to entice law enforcement to target more monetary and manpower resources toward investigating organized crime 199 One such form of incentive that Congress may consider is federal grants to state and local law enforcement for training and technical assistance to investigate and prosecute organized crime There are several grant programs—such as the Community Oriented Policing Services COPS grant program200 and the Edward Byrne Memorial Justice Assistance Grant JAG program201— through which state and local law enforcement assistance is available for a variety of purpose areas However these purposes do not directly specify as a purpose area the use of funds for combating organized crime Therefore policymakers may consider a specific grant program providing not only funding but technical training and assistance Other suggestions that experts have put forward involve the use of negative peer reviews to incentivize law enforcement around the world to focus resources toward combating organized crime 202 As discussed various state and federal law enforcement agencies investigate organized crime in the United States As such one option Congress may consider could be to direct the formation of a domestic peer review system203 for law enforcement agencies charged with investigating organized crime Participation in some form of peer review system could be tied to law enforcement assistance and grant funding eligibility Implementing the National Strategy to Combat TOC Congress may wish to consider oversight of the national strategy’s implementation by federal law enforcement agencies In part the strategy involves many law enforcement agencies their investigative resources and their intelligence collection efforts A critical issue may be the coordination of these activities Coordination of Domestic Efforts As mentioned the federal investigation of organized crime matters has not historically been a centralized effort and even with the 2011 Strategy there is no single lead agency charged with 199 International Peace Institute Transnational Organized Crime Task Forces on Multilateral Security Capacity IPI Blue Papers No 2 2009 http www ipinst org media pdf publications toc_final pdf Hereinafter IPI Transnational Organized Crime 200 For more information on COPS see CRS Report RL33308 Community Oriented Policing Services COPS Background and Funding by Nathan James as well as CRS Report R40709 Community Oriented Policing Services COPS Current Legislative Issues by Nathan James 201 For more information on JAG see CRS Report RS22416 Edward Byrne Memorial Justice Assistance Grant JAG Program by Nathan James 202 IPI Transnational Organized Crime 203 Peer review systems are used in a variety of academic professional and government settings to evaluate an individual or organization’s work or policies The work or policies are open to examination by other experts and equivalent entities For instance the Office of Management and Budget OMB has promulgated guidelines for federal regulatory agencies to follow peer review requirements prior to disseminating influential scientific and statistical information See Office of Management and Budget “Guidelines for Ensuring and Maximizing the Quality Objectivity Utility and Integrity of Information Disseminated by Federal Agencies Republication ” Vol 67 No 36 Federal Register February 22 2002 Congressional Research Service 37 Organized Crime An Evolving Challenge for U S Law Enforcement investigating organized crime 204 Specific agencies have had jurisdiction over an organized crime case based on the criminal violations involved For instance organized crime cases built around drug trafficking offenses have generally been investigated by the DEA whereas those cases built around human trafficking cases are typically investigated by ICE However many organized crime cases may involve offenses that fall under the jurisdiction of multiple investigative agencies For example organized crime groups involved in crimes ranging from counterfeiting and financial institution fraud to identity crimes computer crimes and money laundering may be investigated by the U S Secret Service USSS FBI ICE and any number of other federal state and local law enforcement agencies As a result of structuring organized crime investigations around the alleged crimes it is not always clear which agency will take the lead on a particular case This can lead to inter-agency conflicts and if case information is not effectively communicated between agencies each agency involved may not have a comprehensive view of the case There are however several law enforcement fusion centers such as the Organized Crime Drug Enforcement Task Force OCDETF Fusion Center OFC the International Organized Crime Intelligence and Operations Center IOC-2 and the El Paso Intelligence Center EPIC that are charged with consolidating and disseminating intelligence on various organized crime matters Additionally different agencies across federal state and local levels participate in these centers For instance the OFC assimilates information for the OCDETF Program which targets major drug trafficking and money laundering organizations Federal agencies that participate in the OCDETF Program include the DEA FBI ICE Bureau of Alcohol Tobacco Firearms and Explosives ATF U S Marshals Internal Revenue Service IRS U S Coast Guard USCG 94 U S Attorneys Offices and DOJ’s Criminal and Tax Divisions These federal agencies also collaborate with state and local law enforcement In May 2009 DOJ announced the creation of the IOC-2—housed at the OFC—which brings together the FBI ICE DEA IRS ATF U S Secret Service U S Postal Inspection Service USPIS U S Department of State Bureau of Diplomatic Security U S Department of Labor Office of the Inspector General and DOJ’s Criminal Division in partnership with the 94 U S Attorneys’ Offices and the U S Department of the Treasury Office of Terrorism and Financial Intelligence Unlike the OFC the IOC-2 has yet to be funded It is charged with analyzing and resolving conflicts in information on a host of organized crime cases not solely those that center on drug trafficking EPIC was originally established as an intelligence center to collect and disseminate information relating to drug alien and weapon smuggling in support of field enforcement entities throughout the Southwest border region Following 9 11 counterterrorism also became part of its mission Though these crimes are not exclusively committed by organized crime groups they may be and thus EPIC is involved in combating organized crime EPIC is jointly operated by the DEA and U S Customs and Border Protection CBP and other participating agencies include ICE USCG U S Secret Service Department of Defense DOD Department of the Interior FBI ATF U S Marshals Service Federal Aviation Administration National Drug Intelligence Center NDIC IRS National Geospatial-Intelligence Agency Joint Task Force-North Joint Interagency Task Force-South Texas Department of Public Safety Texas Air National Guard and El Paso County Sheriff’s Office In evaluating the most effective means to share organized crime intelligence Congress may consider several options One option may include increasing support for intelligence fusion 204 For a discussion of federal law enforcement efforts to combat organized crime see CRS Report R40525 Organized Crime in the United States Trends and Issues for Congress by Kristin M Finklea Congressional Research Service 38 Organized Crime An Evolving Challenge for U S Law Enforcement centers such as the OFC IOC-2 and EPIC Another option could involve the creation of an interagency organization similar to the National Counterterrorism Center NCTC but centered around organized crime Such an organization would be responsible for “analyzing the organized crime threat sharing that information with … partners and integrating all instruments of national power to ensure unity of effort”205 against organized crime On the prosecution end DOJ has already consolidated the Organized Crime and Racketeering Section OCRS the Criminal Division’s gang unit and the National Gang Targeting Enforcement and Coordination Center GangTECC into a single Organized Crime and Gang Section 206 This harmonizes the prosecution of organized crime and gang cases which DOJ has cited as being similar One non-legislative option that Congress may consider regarding the coordination of federal law enforcement efforts to combat organized crime is enforcing its oversight over existing fusion centers In June 2010 the DOJ Office of the Inspector General OIG issued a review of EPIC 207 The OIG found that EPIC’s users value its products but that EPIC could benefit from improvement in fully developing the National Seizure System and coordinating the High Intensity Drug Trafficking Area HIDTA program consistently coordinating with intelligence organizations across the country maintaining and analyzing current information from all available sources and creating objective performance measures by which to evaluate its programs among other things Similarly in November 2009 the OIG reviewed DOJ’s anti-gang intelligence and coordination centers 208 As a result of the review the OIG determined that the National Gang Intelligence Center had not created a gang information database as had been directed by Congress Author Information Jerome P Bjelopera Specialist in Organized Crime and Terrorism Kristin M Finklea Specialist in Domestic Security 205 NCTC mission statement available at http www nctc gov about_us about_nctc html Ryan J Reilly “Gang Unit Organized Crime Section to Merge ” Main Justice July 12 2010 207 Department of Justice Office of the Inspector General Review of the Drug Enforcement Administration’s El Paso Intelligence Center I-2010-005 June 2010 pp ii-iii http www justice gov oig reports DEA a1005 pdf 208 Department of Justice Office of the Inspector General A Review of the Department’s Anti-Gang Intelligence and Coordination Centers I-2010-001 November 2009 http www justice gov oig reports FBI i2010001 pdf 206 Congressional Research Service 39 Organized Crime An Evolving Challenge for U S Law Enforcement Disclaimer This document was prepared by the Congressional Research Service CRS CRS serves as nonpartisan shared staff to congressional committees and Members of Congress It operates solely at the behest of and under the direction of Congress Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role CRS Reports as a work of the United States Government are not subject to copyright protection in the United States Any CRS Report may be reproduced and distributed in its entirety without permission from CRS However as a CRS Report may include copyrighted images or material from a third party you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material Congressional Research Service R41547 · VERSION 6 · UPDATED 40