Organized Crime: An Evolving Challenge for
U.S. Law Enforcement
Jerome P. Bjelopera
Analyst in Organized Crime and Terrorism
Kristin M. Finklea
Analyst in Domestic Security
December 23, 2010
Congressional Research Service
7-5700
www.crs.gov
R41547
CRS Report for Congress
P
repared for Members and Committees of Congress
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 law enforcement to combat them. They have adopted
more-networked 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 technology-
driven fraud into their capabilities. Their operations can harm U.S. citizens without ever having a
physical presence in the country. These illicit activities include cyber intrusions into corporate
databases, theft of individual consumer credit card information, fencing of stolen merchandise
online, and leveraging technology to aid in narcotics smuggling. 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 consolidated attack resulting in the physical loss of life,
they are far-reaching—impacting economic stability, public health and safety, as well as national
security. One challenge facing law enforcement is that the federal investigation of organized
crime matters has not historically been a centralized effort, and there 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 federal agencies and little consensus exists regarding the scope of the problem, the
measurable harm caused by these groups, or how to tackle them. As such, Congress may exert
oversight regarding the federal coordination of organized crime investigations. Policymakers may
also debate the efficacy of current resources appropriated to combat organized crime.
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Organized Crime: An Evolving Challenge for U.S. Law Enforcement
Contents
Introduction ................................................................................................................................ 1
Conceptualizing Organized Crime............................................................................................... 2
Agency Definitions ............................................................................................................... 2
Hazy Boundaries............................................................................................................. 3
Statutory Definition............................................................................................................... 7
Organized Crime Adapting to Globalization ................................................................................ 8
Borders as Opportunity .........................................................................................................8
Copycats and Smugglers ................................................................................................. 9
Drug Trafficking ........................................................................................................... 13
Money Laundering........................................................................................................ 14
Organized Crime and Technological Change ....................................................................... 16
Mass Marketing Fraud .................................................................................................. 16
Cyberspace, Electronic Information, and Organized Crime............................................ 18
Online Identity Theft and Sophisticated Credit Card Fraud ............................................ 19
Organized Retail Crime and Online Fencing.................................................................. 20
Bulk Narcotics Smuggling and Technology ................................................................... 21
Exploitation of Ethnic Diaspora Communities ..................................................................... 24
Changing Structures ............................................................................................................ 26
Network Models ........................................................................................................... 27
Corruption .......................................................................................................................... 29
“Ground-Level” Exploitation of Private Businesses....................................................... 29
Big Business and Organized Criminals.......................................................................... 30
Corruption of Public Officials ....................................................................................... 32
Organized Crime, a “National Security” and “Public Security” Concern.................................... 33
Issues........................................................................................................................................ 35
Revisiting the Organized Crime Definition.................................................................... 35
Congressional Commission ........................................................................................... 35
Incentives for Investigating Organized Crime................................................................ 36
Coordination of Domestic Efforts.................................................................................. 37
Figures
Figure 1. Definition of Organized Crime: An Issue for Federal Policy ......................................... 6
Contacts
Author Contact Information ...................................................................................................... 39
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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 as the illicit
world rapidly evolves in response to these changes. 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 Organized criminals see international borders as opportunities while
law enforcement views them as obstacles. Criminals have expanded their range of tools and
targets as well.
Potentially compounding matters, there is no clear definition at the federal level of what
constitutes organized crime, which can make it difficult to measure the scope of this problem and
devise a cohesive federal response. There also appears to be a fragmentation of efforts among
federal agencies charged with combating organized crime itself or issues related to it, such as
drug trafficking, copyright violation, cybercrime, human trafficking, and health care fraud.
Further 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.
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.”
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. (Hereafter, Intelligence Committee Futures Working
Group, Futures.)
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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
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.
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 inherently leads 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 also makes it difficult to measure its impact. Without a clear
indication of what constitutes organized crime, analysts face methodological and conceptual
problems in estimating the harm it causes.2
Agency Definitions
In April 2008, the Department of Justice (DOJ) released its Overview of the Law Enforcement
Strategy to Combat International Organized Crime (Overview). The document included an
expansive definition of international organized crime as
self-perpetuating associations of individuals who operate internationally 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. There
is no single structure under which international organized criminals operate; they vary from
hierarchies to clans, networks and cells, and may evolve to other structures. The crimes they
commit also vary. International organized criminals act conspiratorially in their criminal
activities and possess certain characteristics which may include, but are not limited to:
A. 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;
B. They exploit differences between countries to further their objectives, enriching their
organization, expanding its power, and/or avoiding detection and apprehension;
C. They attempt to gain influence in government, politics and commerce through corrupt as
well as legitimate means;
2 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.
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D. They have economic gain as their primary goal, not only from patently illegal activities
but also from investment in legitimate business; and
E. They attempt to insulate both their leadership and membership from detection, sanction,
and/or prosecution through their organizational structure.3
The definition was formulated for the purposes of the strategy and clearly focuses on international
criminal organizations, but it suggests key principles undergirding DOJ’s understanding of
organized crime, which shares self-perpetuating structure, illegal profit as a motive,
violence/intimidation, and corruption as key techniques. DOJ states in its Overview that the
definition can encompass drug trafficking organizations and street gangs, even though the groups
are not the focus of the strategy.4 Further, the definition of international organized crime in the
document was not necessarily created for purposes outside this strategy.
The Federal Bureau of Investigation (FBI) has a similar, if shorter, definition of organized crime.
Unlike DOJ’s Overview, the FBI’s definition is not limited to international groups:
The FBI defines organized crime as any group having some manner of a formalized structure
and whose primary objective is to obtain money through illegal activities. Such groups
maintain their position through the use of actual or threatened violence, corrupt public
officials, graft, or extortion, and generally have a significant impact on the people in their
locales, region, or the country as a whole.5
This definition’s breadth is tempered by the ethnic or geographic focus applied to the FBI’s
organized crime programs. It appears that the FBI’s conceptualization of organized crime
emphasizes a criminal group’s ethnicity or geographic origins. The agency divides its Organized
Crime Section based at headquarters into three Units, and the FBI prioritizes its organized crime
cases based on these ethno-geographic groupings:6 (1) the Cosa Nostra,7 Italian organized crime,
and racketeering; (2) Eurasian/Middle Eastern organized crime; and (3) Asian and African
criminal enterprises.8
Hazy Boundaries
These agency definitions hold little sway over what is practically investigated as “organized
crime” by federal agencies. For example, FBI and the Drug Enforcement Administration
(DEA)—both DOJ components—investigate activities and groups that can be viewed as
“organized crime” but are not conventionally conceived as such—rendering the concept of
organized crime rather hazy. Although its definition of organized crime potentially encompasses
3 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.
4 Ibid.
5 FBI, “Organized Crime Glossary,” http://www.fbi.gov/hq/cid/orgcrime/glossary.htm.
6 Department of Justice, Office of the Inspector General, Audit Division, Follow-up Audit of Federal Bureau of
Investigation Personnel Resource Management and Casework, Audit Report 10-24, April 2010, p. 51,
http://www.justice.gov/oig/reports/FBI/a1024.pdf.
7 The five most powerful Cosa Nostra groups are the historically New York-based Bonanno, Colombo, Gambino,
Genovese, and Lucchese crime families. See Selwyn Raab, Five Families: The Rise, Decline, and Resurgence of
America’s Most Powerful Mafia Empires, (New York: Thomas Dunne Books, St. Martin’s Press, 2005).
8 FBI, “How We’re Organized to Combat Organized Crime,” http://www.fbi.gov/hq/cid/orgcrime/aboutocs.htm.
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all crimes committed by structured groups for profit, the FBI does not investigate or view drug
trafficking organizations (DTOs) as “organized crime,” even though many DTOs exhibit a high
degree of internal structure and not only traffic in illegal drugs but are involved in human and
weapons smuggling, money laundering, extortion, kidnappings for ransom, and murder, among
other crimes. Even the geographic or ethnic focus of Mexican or Colombian DTOs does not
qualify them as organized crime for the FBI. The agency also distinguishes gangs from organized
crime.
Similarly, the DEA investigates DTOs but not organized crime in general. Yet, DEA and Bureau
of Alcohol, Tobacco, Firearms, and Explosives (ATF) representatives have referred to Mexican
DTOs as the “greatest organized crime threat to the United States.”9 Also, the DEA spearheads
the Organized Crime Drug Enforcement Task Force (OCDETF) Program, which targets—with
the intent to disrupt and dismantle—major drug trafficking and money laundering organizations.10
DTOs are the primary focus of OCDETF operations while other major organized crime groups
that focus on a range of crimes other than drug trafficking, and are engaged in significant money
laundering activities, are not leading targets of OCDETF investigations.
Structured groups engaged in activities such as health care fraud, cyber intrusions, identity theft,
mass marketing fraud, copyright violations, human trafficking, and alien smuggling are not
necessarily viewed as organized criminals by U.S. federal agencies. In fact, investigative
programs within the federal government have been developed to combat each of these individual
criminal activities without specifically characterizing them as “organized crime.” However,
groups committing such illicit deeds can easily fit under most definitions of organized crime,
especially if they engage in violence, threats of violence, or corruption alongside their other
illegal activities.
Not only is there a disconnect between the definition and investigation of organized crime among
federal agencies, but this disconnect exists with respect to the prosecution of organized crime
cases as well. Organized crime, DTOs, and gangs are prosecuted separately, through the
Organized Crime and Racketeering Section (OCRS), the Narcotic and Dangerous Drug Section
(NDDS), and the Gang Unit, respectively. DOJ has indicated, however, that although drug
trafficking organizations and gangs are not considered part of international organized crime for
program purposes, they are indeed organized crime threats.11 Also, citing similarities in the
prosecution of organized crime and gang cases, DOJ has announced consolidation of 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.12 However, this
9 Statement of William McMahon, Deputy Assistant Director for Field Operations, Bureau of Alcohol, Tobacco,
Firearms and Explosives and Anthony P. Placido, Assistant Administrator for Intelligence, Drug Enforcement
Administration, before the U.S. Congress, House Committee on Homeland Security, Subcommittee on Border,
Maritime, and Global Counterterrorism, Combating Border Violence: The Role of Interagency Coordination in
Investigations, 111th Cong., 1st sess., July 16, 2009, in reference to the U.S. Department of Justice’s National Drug
Intelligence Center (NDIC), 2009 National Drug Threat Assessment, December 2008.
10 Other federal agencies that participate in the OCDETF Program include the FBI, Immigration and Customs
Enforcement (ICE), the Bureau of Alcohol, Tobacco and Firearms (ATF), U.S. Marshals, Internal Revenue Service
(IRS), U.S. Coast Guard (USCG), the 94 U.S. Attorneys Offices, DOJ’s Criminal and Tax Divisions, and state and
local law enforcement agencies. For more information on OCDETF, see http://www.justice.gov/dea/programs/
ocdetf.htm.
11 Remarks by DOJ officials at the NIJ Conference 2010, panel on International Organized Crime: Recent
Developments in Policy and Research, June 14, 2010.
12 Jerry Markon, “Gangs, Organized Crime, Will be Focus of New Justice Department Unit, Crackdown,” Washington
(continued...)
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consolidation will not include the prosecution of DTOs. DOJ may continue, at some point in the
future, to harmonize its policies regarding organized crime groups, DTOs, and gangs in order to
place DOJ more in line with its international partners. This alignment may further aid in
multilateral investigations and prosecutions of transnational criminal organizations. For instance,
some nations, such as Mexico, have defined organized crime as including drug trafficking
organizations.13 Further, the United Nations (UN), through the United Nations Convention
Against Transnational Organized Crime, has defined a transnational organized criminal group as
a structured group of three or more persons, existing for a period of time and acting in
concert with the aim of committing one or more serious crimes or offenses established in
accordance with this Convention [the United Nations Convention Against Transnational
Organized Crime], in order to obtain, directly or indirectly, a financial or other material
benefit.14
Of note, the UN definition of organized crime presents a view of organized crime as having an
adaptable structure rather than the rigid hierarchical structure that previously governed more-
traditional organized crime groups such as the Cosa Nostra.
As illustrated in Figure 1, a federal, policy-driving definition of organized crime may be helpful
in clarifying the roles of U.S. law enforcement agencies in combating this threat. Such a
definition could help clarify the (1) harm imposed by organized crime, (2) federal resources
dedicated to combating it, (3) federal agencies responsible for fighting it, and (4) extent to which
organized crime poses both public and national security threats to the United States. Currently,
the federal government does not appear to have a clear definition of organized crime. Therefore, it
may be more difficult for policymakers to exercise both legislative and oversight responsibilities
in order to bolster the federal government’s abilities to counter organized crime.
(...continued)
Post, July 12, 2010.
13 Mexican Embassy to the United States, May 25, 2010, http://portal.sre.gob.mx/usa/index.php?option=news&task=
viewarticle&sid=297.
14 United Nations Office of Drugs and Crime, UN Convention Against Transnational Organized Crime, United
Nations, New York, 2004. In this definition, a “structured group” is “a group that is not randomly formed for the
immediate commission of an offence and that does not need to have formally defined roles for its members, continuity
of its membership or a developed structure.” Serious crimes include “conduct constituting an offence punishable by a
maximum deprivation of liberty of at least four years or a more serious penalty.”
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Organized Crime: An Evolving Challenge for U.S. Law Enforcement
Figure 1. Definition of Organized Crime: An Issue for Federal Policy
Source: U.S. Department of State, Trafficking In Persons Report 2006, June 2006, p. 13, http://www.state.gov/
documents/organization/66086.pdf; U.S. Department of Justice, National Drug Intelligence Center, National Drug
Threat Assessment 2009, Product No. 2008-Q0317-005, December 2008, p. 9, http://www.usdoj.gov/ndic/pubs31/
31379/31379p.pdf; U.S. Department of Justice, Office of the Inspector General, Fol ow-up Audit of Federal Bureau
of Investigation Personnel Resource Management and Casework, Audit Report 10-24, April 2010, p. 52,
http://www.justice.gov/oig/reports/FBI/a1024.pdf; U.S. Department of Justice, Drug Enforcement Administration,
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FY2011 Performance Budget, Congressional Budget Submission, pp. 50, 52, http://www.justice.gov/jmd/
2011justification/pdf/fy11-dea-justification.pdf. Graphic created by CRS Graphics.
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),15 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)16 provisions, organized crime is
described in terms of an “enterprise” and a “pattern of racketeering activity.”17 The predicate
offenses for racketeering include a host of state and federal crimes listed in 18 U.S.C. § 1961.
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.18 Moreover, the statutory provisions offer
limited guidance regarding criminal organizations and the nature of their operational structure.
This report applies much of the UN definition 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 an international dimension to them
(which is a requirement under the guidelines of DOJ’s “Overview of the Law Enforcement
Strategy to Combat International Organized Crime”), but they directly impact U.S. persons,
businesses, and/or interests. While this conceptualization is broader than the definitions of
organized crime used by U.S. law enforcement agencies, 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.
15 Omnibus Crime Control and Safe Streets Act of 1968, as amended (P.L. 90-351)
16 18 U.S.C. § 1961-1968. It was enacted as Title IX of the Organized Crime Control Act of 1970 (P.L. 91- 452).
17 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.
18 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.
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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 accounts for between 2% and 5% of world GDP.19
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.20 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.21 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.
Borders as Opportunity
Modern organized criminals prey upon weaknesses in international transportation and customs
security regimens.22 And border policing efforts struggle to keep pace with the expansion of
international commerce. 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 hide 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.23 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
19 Moisės Naím, Illicit: How Smugglers, Traffickers, and Copycats are Hijacking the Global Economy (New York:
Anchor Books, 2006) p. 16. (Hereafter: Naím, Illicit.)
20 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.
21 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. (Hereafter: Chatterjee, The Changing Structure.)
22 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.
23 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,
http://www.bts.gov/publications/americas_container_ports/2009/pdf/entire.pdf.
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to smuggle their fake goods into the United States. As Moisės Naím has succinctly put it, most
illicit trade involves copycats, smugglers, and traffickers.24 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.25 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.”26
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.27
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.28
Counterfeiting and pirating goods29 involves the violation of intellectual property rights (IPR),30
24 Naím, Illicit, pp. 1-8.
25 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. (Hereafter,
Treverton et al., Film Piracy.)
26 U.S. 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.
27 Treverton et al., Film Piracy.
28 Treverton et al., Film Piracy, p. 3; Deputy Assistant Attorney General Criminal Division U.S. 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, U.S. Department of
Justice, Prepared Testimony “Protecting Intellectual Property Rights in a Global Economy: Current Trends and Future
Challenges,” December 9, 2009, p. 2, http://oversight.house.gov/images/stories/Hearings/Government_Management/
Intellectual_Property_Rights/Draft_DAAG_Weinstein_testimony_OMB_CLEARED_with_new_date.pdf.
29 U.S. Government Accountability Office (GAO), Intellectual Property, p. 5 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.”
30 U.S. Government Accountability Office (GAO), 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 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
(continued...)
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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.31
Between FY2005 and FY2008, the yearly domestic value32 of IPR-related law enforcement
seizures of contraband in the United States leaped from $93 million to $273 million. In FY2009,
the domestic value of seizures dropped 4%.33 This is likely due to the global recession. Products
originating in China—both Mainland China and Hong Kong—accounted for over 85% of these
IPR seizures in FY2008 and FY2009.34 Two 2010 operations in the United States together netted
$240 million in counterfeit materials. The hauls included fake Rolex watches, Coach handbags,
pirated DVDs, and fake pharmaceutical products. Much of the material came from China.35
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,36 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
(...continued)
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).”
31 U.S. Government Accountability Office (GAO), 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.
32According to U.S. Customs and Border Protection, “domestic value” is the “cost of seized goods, plus the cost of
shipping and importing the goods into the U.S. and an amount for profit.”
33 U.S. Customs and Border Protection, “Yearly Comparisons: Seizure Statistics for Intellectual Property Rights (FY
2005-FY2009),” January 2010, http://www.cbp.gov/xp/cgov/trade/priority_trade/ipr/seizure/seizure_stats.xml; U.S.
Customs and Border Protection, U.S. Immigration and Customs Enforcement, “Intellectual Property Rights Seizure
Statistics: FY 2009,” October 2009, p. 2, http://www.cbp.gov/linkhandler/cgov/trade/priority_trade/ipr/seizure/
fy09_stats.ctt/fy09_stats.pdf; U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement,
“Intellectual Property Rights Seizure Statistics: FY 2008,” January 2009, p. 2, http://www.cbp.gov/linkhandler/cgov/
trade/priority_trade/ipr/seizure/fy08_final_stat.ctt/fy08_final_stat.pdf.
34 U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, “Intellectual Property Rights
Seizure Statistics: FY2009,” October 2009, p. 12, http://www.cbp.gov/linkhandler/cgov/trade/priority_trade/ipr/pubs/
seizure/fy09_stats.ctt/fy09_stats.pdf; U.S. Customs and Border Protection, U.S. Immigration and Customs
Enforcement, “Intellectual Property Rights Seizure Statistics: FY2008,” January 2009, p. 13, http://www.cbp.gov/
linkhandler/cgov/trade/priority_trade/ipr/pubs/seizure/fy08_final_stat.ctt/fy08_final_stat.pdf.
35 Keith Johnson, “U.S. Seizes Big Batches of Fake Goods,” Wall Street Journal, April 26, 2010.
36 See “Stolen American Autos Clog the Mexican Market,” New York Times, February 5, 1922,
http://query.nytimes.com/mem/archive-free/pdf?res=9D0DE5D71130EE3ABC4D53DFB4668389639EDE.
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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.37
In June 2010, law enforcement officials announced indictments of 17 participants in an alleged
scheme that pilfered 450 cars annually in New York, New Jersey, and Connecticut. According to
law enforcement officials, the group, described as a “steal to order” outfit by New York State
Attorney General Andrew Cuomo, filled specific requests from U.S. customers and others in
Senegal and netted up to $25,000 per car. The group supposedly relied on specialists who could
reprogram car keys to match a vehicle’s specific code, exporters, and two car dealership
employees, among others. The ring allegedly stored vehicles in four Bronx, NY, garages and
loaded those destined for Senegal into shipping containers, concealing the cars behind furniture.38
Human Smuggling and Trafficking
Criminal organizations are taking advantage of an unprecedented era of international migration,
including illegal migration to the United States.39 However, since 2007 illegal immigration to the
United States has declined.40 This may be attributable, in part, to dwindling job opportunities
resulting from the global recession and increased immigration enforcement activity along the U.S.
Southwest border.41 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 money-
generating activities to include human and weapon smuggling, counterfeiting, kidnapping for
ransom, and extortion—bring unauthorized immigrants across the border and into the United
States.42 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.”43 At the start, Ping’s smuggling ring brought small numbers of villagers to the United
37 Eva Dou, “New-York Based Theft Ring Shipped Hot Cars to Senegal,” Associated Press, June 30, 2010.
38 Ibid; Rob Sgobbo, Joe Jackson, and Brendan Brosh, “U.S. to Senegal Car Theft Ring Busted, Attorney General
Andrew Cuomo Says,” New York Daily News, June 30, 2010.
39 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.
40 Jeffrey S. Passel and D'Vera Cohn, U.S. Unauthorized Immigration Flows Are Down Sharply Since Mid-Decade,
Pew Hispanic Center, Report, Washington, DC, September 1, 2010, p. i, http://pewhispanic.org/files/reports/126.pdf.
41 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.
42 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.
43 Department of Justice, “Sister Ping Sentenced to 35 Years in Prison for Alien Smuggling, Hostage Taking, Money
(continued...)
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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.44
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.45
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.46
However, as the Government Accountability Office (GAO) has noted, estimates regarding the
global scale of human trafficking are questionable;47 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.
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.48 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.49 DOJ has also reported an uptick in Asian organized crime
(...continued)
Laundering, and Ransom Proceeds Conspiracy,” press release, March 16, 2006, http://www.justice.gov/usao/nys/
pressreleases/March06/sisterpingsentencingpr.pdf.
44 Ibid.
45 Department of Justice, “Hudson County Bar Owner Pleads Guilty to Role in International Human Smuggling Ring,”
press release, September 12, 2006, http://www.justice.gov/usao/nj/press/files/pdffiles/medr0912rel.pdf.
46 Department of State, Trafficking In Persons Report 2006, June 2006, p. 13, http://www.state.gov/documents/
organization/66086.pdf.
47 Government Accountability Office (GAO), 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.
48 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.
49 Department of Justice, “Four Defendants Sentenced to Prison in Human Trafficking Ring,” press release, April 28,
(continued...)
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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.50
Drug Trafficking
In the last decade, cocaine has become a truly global commodity dependent on 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.51 And some of the Mexican Gulf Cartel’s
smuggling activity involving European markets has used the United States as a transshipment
point.52
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.53
While the story of globalized drug smuggling impacting the United States often revolves around
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. Because of the ease of international communications, travel, and transportation networks
inherent in globalization, drug trafficking groups need not be directly tied to the large cartels to
have significant worldwide reach. Even relatively small groups can forge far-flung supply and
transportation links.
The FBI’s operation Black Eagle tracked a small Albanian network of alleged criminals based in
northern New Jersey who were indicted in March 2009.54 The network purportedly had domestic
ties to Chicago, Detroit, and Texas, as well as international links to Macedonia and Albania. At
one point, the group of opportunists supposedly conspired to smuggle 100 kilograms of heroin
from Albania to the United States. According to the FBI, the group planned to use a Balkan front
company to conceal the heroin in containerized shipments of furniture bound for the United
(...continued)
2010, http://www.justice.gov/usao/gan/press/2010/04-28-10.pdf.
50 Comments by DOJ officials at the 2010 National Conference on Human Trafficking, May 3–5, Arlington, VA.
51 Mark Townsend, “How Liverpool Docks Became a Hub of Europe’s Deadly Cocaine Trade,” The Guardian, May
16, 2010.
52 Michele M. Leonhart, DEA Acting Administrator, “Prepared Remarks: Project Reckoning Press Conference,”
September 17, 2008, http://www.justice.gov/dea/speeches/s091808.html.
53 National Drug Intelligence Center, National Drug Threat Assessment, February 2010, p. 29, http://www.justice.gov/
ndic/pubs38/38661/38661p.pdf.
54 Federal Bureau of Investigation, Newark Division, “Federal Agents Shut Down International Smorgasbord of
Crime,” press release, March 18, 2009, http://newark.fbi.gov/pressrel/pressrel09/nk031809.htm.
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States. The heroin was purportedly to come from Afghanistan, likely via Turkey and into Albania.
There was no clear cut leadership in the loosely knit group. The heroin deal was going to be one
last score before some of the criminals “retired,” according to the FBI. They were also likely
involved with stealing and selling pharmaceuticals, illegal gambling, dealing ecstasy, and theft of
retail goods.55
In another case involving a relatively small group, Phuong Thi Tran pleaded 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.56
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
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.57 It is impossible to
determine with any accuracy how much money 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.58 Annually, perhaps between $20 billion and $25 billion in bank
notes is smuggled across the Southwest border into Mexico.59 How much of this is profit and then
laundered is unclear.60 While bulk cash smuggling is an important means by which criminals
move illegal profits from the United States into Mexico, they have increasingly turned to stored-
55 Federal Bureau of Investigation, “Inside the FBI: Albanian Organized Crime,” November 27, 2009,
http://www.fbi.gov/inside/archive/inside112709.htm.
56 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.
57 Brian Seymour, “Global Money Laundering,” Journal of Applied Security Research, vol. 3, no. 3-4 (2008), pp. 374-
375. (Hereafter, Seymour, “Global Money.”)
58 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.
(Hereafter, Blair, “Annual Threat Assessment.”)
59 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.
60 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,
http://wilsoncenter.org/topics/pubs/Money%20Laundering%20and%20Bulk%20Cash%20Smuggling.%20Farah.pdf.
(Hereafter, Farah, Money Laundering.)
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value cards61 to move money. 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 moving
across the border.62 Aside from bulk cash smuggling and stored-value cards, Mexican traffickers
move 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.”63
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.64
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.”65 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.”66
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.67 Most U.S.
states do not require owner information when companies are formed or even on annual or
biennial reports.68 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
61 A stored value card looks like a debit or credit card, but stores value directly on the card using magnetic strip
technology.
62 Legislation has been introduced in the 111th Congress (H.R. 5127) that would, among other things, classify stored
value cards as monetary instruments in order to require individuals to declare to Customs over $10,000 that they are
carrying on a stored value card.
63 Farah, Money Laundering, 23.
64 Seymour, “Global Money,” pp. 375-376.
65 U.S. Government Accountability Office (GAO), Company Formations: Minimal Ownership Information Is Collected
and Available, GAO-06-376, April 2006, p. 1, http://www.gao.gov/new.items/d06376.pdf. Hereafter GAO, Company
Formations.
66 Jennifer Shasky Calvery, Senior Counsel to the Deputy Attorney General, United States 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, http://www.justice.gov/ola/testimony/111-1/2009-06-18-dag-
shasky-incorporation.pdf. (Hereafter, Shasky, “Examining State Business.”)
67 GAO, Company Formations, p. 1.
68 GAO, Company Formations, p. 13.
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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
transactions.69 Both Mexico’s Sinaloa Cartel and alleged Eurasian organized crime figure Semion
Mogilevich have likely used U.S. shell companies to launder money.70
Organized Crime and Technological Change
Organized criminals have expanded their technological “toolkits.” They have adapted to
incorporate technology-driven fraud into their capabilities.71 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,72 which debuted in the mid 1990s.73 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.74
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.75
69 Shasky, “Examining State Business,” pp. 4-5; Seymour, “Global Money,” p. 375.
70 Jennifer Shasky, Senior Counsel to the Deputy Attorney General, United States 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, http://hsgac.senate.gov/
public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=88d1a5fb-7312-4e9e-92b2-8558ccd44f22. Legislation
has been introduced in the 111th Congress (S. 569, H.R. 6098) that would establish uniform requirements for states
regarding beneficial ownership of public corporations and limited liability companies.
71 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. (Hereafter, CISC, 2010
Report.)
72 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.
73 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.
74 George Anastasia, “Officials Charge Man Who Allegedly Ran Mob Gambling Website,” Philadelphia Inquirer, May
29, 2010, http://www.philly.com/inquirer/local/nj/
20100529_Officials_charge_man_who_allegedly_ran_mob_gambling_website.html.
75 International Mass-Marketing Fraud Working Group (IMMFWG), Mass-Marketing Fraud: A Threat Assessment,
June 2010, p. 3. (Hereafter, 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.
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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.”76 “Boiler room” scams, one iteration of
the 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-and-true 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.77 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.78
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.79 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.80
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
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.81 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
76 IMMFWG, Mass Marketing Fraud, p. 14.
77 Ibid.
78 Chad Bray, “FBI Raids Alleged Boiler Room,” Wall Street Journal, June 10, 2010, http://online.wsj.com/article/
SB10001424052748703890904575297220025441524.html.
79 Federal Bureau of Investigation, “Common Fraud Schemes,” http://www.fbi.gov/majcases/fraud/fraudschemes.htm.
80 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.
81 Harvey Glickman, “The Nigerian ‘419’ Advance Fee Scams: Prank or Peril?,” Canadian Journal of African Studies,
vol. 39, no. 3 (2005), pp. 463-476.
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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.82 The spamming
networks involved often have short lives focusing on specific schemes.83 Recent estimates
suggest that AFF networks may have swindled over $2 billion from U.S. companies and citizens
in 2009.84 In February 2006, three men were arrested in Amsterdam for running an AFF scam that
enticed U.S. victims into believing they were helping charities distribute money. The fraud netted
more than $1.2 million. The three pleaded guilty to conspiracy and wire fraud.85 Estimates
indicate that today’s AFF networks only need to dupe 1% of the people or businesses they reach
to turn a profit.86
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.87 While this is a helpful distinction to draw for discussion
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, in selected data breaches investigated by Verizon and the U.S.
Secret Service (USSS) involving businesses around the globe during 2009, 85% of compromised
computer records were attributed to organized crime. As 94% of all compromised records in this
study were in the financial services sector, many of those records targeted by organized criminals
were likely from financial organizations as well.88
82 Edward Fokuoh Ampratwum, “Advance Fee Fraud, ‘419,’ and Investor Confidence in the Economies of Sub-
Saharan Africa (SSA) ,” Journal of Financial Crime, vol. 16, no. 1 (2009), pp. 68-69.
83 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.
84 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.
85 Jeremy Kirk, “Three Spammers Sentenced in U.S. for Advance Fee Fraud,” Network World, April 3, 2009,
http://www.networkworld.com/news/2009/040309-three-spammers-sentenced-in-us.html.
86 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.
87 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
Cyberspace: A Typology,” Trends in Organized Crime, vol. 11, no. 3 (September 2008), pp. 271.
88 Wade Baker et al., 2010 Data Breach Investigations Report: A Study Conducted by the Verizon RISK Team in
Cooperation with the United States Secret Service, Verizon, July 2010, pp. 2-15, http://www.verizonbusiness.com/
resources/reports/rp_2010-data-breach-report_en_xg.pdf.
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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.
Some organized crime groups have stolen money from victims on intenet auction sites such as
eBay. For example, on March 13, 2010, Georgi Boychev Georgiev, a Bulgarian national pleaded
guilty in U.S. federal court to laundering money for a transnational criminal network involved in
eBay fraud. The scam did not physically exist in the United States, but it accrued more than $1.4
million from U.S. victims in 2005 and 2006. The network posted fraudulent advertisements on
eBay and used a ruse dubbed “eBay Secure Traders” to bilk people out of cash that was wired
directly into Eastern European bank accounts.89 In another case from April 2010, Romanian law
enforcement, the FBI, and USSS cooperated in the dismantling an alleged eBay fraud ring that
purportedly involved 70 individuals from what have been described in media sources as three
different organized cybercrime groups. According to news reports, the scheme included hijacking
the eBay accounts of legitimate consumers and then using the hijacked accounts to stage fake
sales of non-existent merchandise on eBay. Fraudsters purportedly scammed bidders from Spain,
Italy, France, New Zealand, Denmark, Sweden, Germany, Austria, Canada, Switzerland, and the
United States, generating $1 million in profits since 2006.90
Eurasian criminals in California are engaging in identity theft in which they leverage
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.91 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.92 Losses approached $1.5 million.93 In 2009, Las Vegas authorities also
uncovered a skimming scheme complete with a credit card manufacturing lab.94 This crew used
skimmers that captured information from magnetic strips on credit cards as well as pin numbers
using a camera.95
89 Department of Justice, “Foreign National Pleads Guilty for Role in International Money Laundering Scheme
Involving More than $1.4 Million in Losses to Victims,” press release, May 13, 2010, http://www.justice.gov/opa/pr/
2010/May/10-crm-568.html.
90 Angela Moscaritolo, “Romanian Police, FBI Break Up 70-Strong eBay Fraud Ring,” SC Magazine, April 7, 2010,
http://www.scmagazineus.com/romanian-police-fbi-break-up-70-strong-ebay-fraud-ring/article/167554/.
91 Paul Teetor, “Russian or Armenian Mob Used ‘Model Employee’ Con at PCH Arco,” LA Weekly, June 18, 2009.
92 Lawrence Mower, “ID Theft Operation Outlined,” Las Vegas Review-Journal, December 8, 2008.
93 “Eurasian Organized Crime Task Force Members Arrest 12 Individuals Following Federal Credit Card Fraud and
Identity Theft Charges,” States News Service, December 9, 2008.
94 “Three Arrested in Credit Card Forgery Ring,” KTNV ABC, March 26, 2009, http://www.ktnv.com/Global/
story.asp?S=10065205.
95 “18 Month Credit Card Fraud Ring Leads to Three Arrests,” KTNV ABC, March 25, 2009, http://www.ktnv.com/
(continued...)
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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.96 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.”97 ORC involves a host of retail crimes
ranging from retail, manufacturing, distribution, and cargo theft to gift card fraud, receipt fraud,
and ticket switching.98 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.99
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.100
(...continued)
Global/story.asp?S=10072664.
96 U.S. 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.
97 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.
98 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.
99 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).
100 National Retail Federation, 2009 Organized Retail Crime Survey, 2009, p. 8.
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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 September 2010,
at least 10 defendants, including the owners of pawn shops implicated in the scheme, had pleaded
guilty to roles in this organized retail crime ring.101 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
co-conspirators 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.102 Colombian traffickers likely co-opted experts from the
legitimate world to develop this technology. Most often, semisubmersibles are used to move
product from coastal areas to boats waiting on the open seas. 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 account for 27% of the maritime movement of
cocaine toward the United States, themselves are not immune to capture.103 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 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
101 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.
102 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,
http://wilsoncenter.org/topics/pubs/
Drug%20Trafficking%20Organizations%20in%20Central%20America.%20Dudley.pdf.
103 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.
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cocaine on a 10-day voyage. This vessel represented a large improvement over the
semisubmersibles that have been regularly seized from traffickers since 2006.104
Mexican drug traffickers have increasingly relied upon ultralight aircraft105 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
2007.106 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 co-
conspirators were arrested.107
Cross-Border Tunnels
Mexican drug traffickers rely on the use of underground, cross-border tunnels to smuggle drugs
from Mexico into the United States. Tunneling, while not in and of itself a new tool—having been
used for hundreds of years during conflicts and for escapes—has increased not only in prevalence
but in sophistication.108 Early 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. These interconnecting tunnels
may 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. The most extensive of such tunnels discovered to date was
found in January 2006 in Otay Mesa, CA. This tunnel, stretching nearly three-quarters of a mile
in length and traveling over 85 feet below the surface of the earth, resulted in the seizure of more
than two tons of marijuana.109 It had lighting, ventilation, and groundwater drainage systems.
104 Drug Enforcement Administration, “DEA Intel Aids in Seizure of Fully-Operational Narco Submarine in Ecuador,”
press release, July 3, 2010; Chirs Kraul, “Ecuador Police Seize 100-foot Narco-Submarine 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, http://www.fbi.gov/publications/leb/2010/march2010/
smuggling_feature.htm; U.S. Southern Command, “The Self-Propelled Semi-Submersibles Threat,” February 20, 2009,
http://www.southcom.mil/appssc/factFiles.php?id=83.
105 The Federal Aviation Administration (FAA) does not classify ultralights as “aircraft.” For the FAA definition of an
ultralight, see the Code of Federal Regulations (CFR) Title 14, Section 103, http://ecfr.gpoaccess.gov/cgi/t/text/text-
idx?c=ecfr&sid=77f64066b8e425c01339f918e6e9f291&rgn=div5&view=text&node=14:2.0.1.3.16&idno=14.
Legislation has been introduced in the 111th Congress (H.R. 5307) that would include ultralights in the definition of an
aircraft in order to increase law enforcement’s abilities to prosecute drug smuggling cases.
106 Agence France-Presse, “Mexican Drug Traffickers Using Tiny Planes for US Market,” MSN News, September 2,
2010, http://news.ph.msn.com/business/article.aspx?cp-documentid=4311772.
107 U.S. Customs and Border Protection, “Ultralight Plane Crashes in Arizona, Smugglers Apprehended,” press release,
May 30, 2009, http://www.cbp.gov/xp/cgov/newsroom/news_releases/archives/2009_news_releases/may_2009/
05302009.xml.
108 Ken Stier, “Underground Threat: Tunnels Pose Trouble from Mexico to Middle East,” Time, May 2, 2009.
109 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,
(continued...)
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More recently, in November 2010, the San Diego Tunnel Task Force—created in 2003 as a
partnership between the U.S. Immigration and Customs Enforcement (ICE), DEA, and the U.S.
Border Patrol working along with state law enforcement and Mexican counterparts—uncovered a
600-yard tunnel 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.110
U.S. law enforcement uses various tactics and simultaneously faces numerous challenges in
detecting these cross-border tunnels. About 125 tunnels have been discovered since the 1990s—
primarily in Arizona and California—and more than 75 of these have been found since 2006.111
One such method of tunnel detection is the use of ground penetrating radar (GPR).112 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.113 Rather, tunnels are more effectively discovered as
a result of human intelligence and tips rather than technology.
(...continued)
http://www.justice.gov/dea/pubs/pressrel/pr012606.html.
110 U.S. Drug Enforcement Administration, “Tunnel Task Force Discovers Cross Border Tunnel, 30 tons of Marijuana
Seized in Investigation,” press release, November 3, 2010, http://www.justice.gov/dea/pubs/states/newsrel/2010/
sd110310.html.
111 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.
112 For more information, see http://www.geophysical.com/militarysecurity.htm.
113 Ken Stier, “Underground Threat: Tunnels Pose Trouble from Mexico to Middle East,” Time, May 2, 2009.
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Exploitation of Ethnic Diaspora Communities
Criminal organizations structured along ethnic lines sometimes base their operations in immigrant
communities. They use these enclaves to provide cover for their dealings and occasionally also
exploit their ethnic compatriots. Historically, criminal groups have burrowed into local ethnic
communities, but now this is enhanced by the fact that they can leverage Internet connectivity and
extensive, international transportation linkages
Organized Crime and
from localities around the globe. A number of
Health Care Fraud
recent cases highlight these issues.
Acting Deputy Attorney General Gary G. Grinder
recently stated that “the emergence of international
In October 2010, a total of 73 individuals were
organized crime in domestic health care fraud schemes
indicted in the largest single Medicare fraud
signals a dangerous expansion that poses a serious threat
ever charged.118 As described by DOJ, the
to consumers”114 The health care system as well as both
Mirzoyan-Terdjanian organization, an
public and private assistance programs have been targets
Armenian criminal group, ran fake clinics in
of individual scammers and organized criminals alike.
Criminals steal the identities—or create fake identities—
25 states, but had its leadership based in Los
of medical providers, clinics and businesses, and patients.
Angeles and New York City,119 two areas with
According to the most recent data, in FY2009 U.S.
large immigrant populations from the former
Attorneys opened 1,014 health care fraud investigations,
Soviet Union, (e.g., Glendale, in the Los
encompassing 1,786 defendants.115 Aside from the
Angeles region, is home to 200,000 Armenian
Mirzoyan-Terdjanian organization recently indicted by
DOJ, other criminal networks—Eurasian and Nigerian
Americans). According to the president of the
groups—involved in large-scale health care fraud in Los
Los Angeles chapter of the Armenian-
Angeles have recently been caught by U.S. law
American Chamber of Commerce, this
enforcement. According to news reports, organized
community is exploited by a handful of
crime has turned to targeting Medicare and Medicaid for
profit.116 It is very likely that the groups in Los Angeles
criminals who were “raised under communist
favored stealing doctor and patient identities for
rule in the former Soviet republic of Armenia,
fraudulent billing over more violent and less lucrative
where exploiting a corrupt government was
criminal activity. One expert has suggested, “[Health care
seen as fair game.”120
fraud is] lucrative and it’s safe for them [organized
criminals]. Why rob a bank and risk getting shot when
you can click a mouse and bill Medicare or Medicaid,
Members of the Mirzoyan-Terdjanian group
basically lie on some forms and make millions of dollars
allegedly billed Medicare for more than $163
doing so.”117
million in fraudulent medical services. They
114 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.fbi.gov/
news/pressrel/press-releases/organizedcrime_101310. (Hereafter, DOJ press release, “Seventy-Three Members.”)
115 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 2009, May 2010, p. 1, http://www.justice.gov/dag/pubdoc/hcfacreport2009.pdf.
116 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/index.html.
117 NPR, “Organized Crime Muscles In On Health Care,” January 16, 2010, http://www.npr.org/templates/story/
story.php?storyId=122645717.
118 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. (Hereafter, DOJ press release, “Manhattan U.S.
Attorney”; DOJ press release, “Seventy-Three Members.”)
119 DOJ press release, “Seventy-Three Members.”
120 Thomas Watkins, “Armenian Organized Crime Grows More Complex,” Associated Press, October 16, 2010,
http://news.yahoo.com/s/ap/20101016/ap_on_re_us/us_armenian_crime_2.
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reaped about $35 million in profits. 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
unneeded treatments, just stolen patient identities. The whole doctor-patient interaction was a
mirage. But the money was real, while it lasted.121
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.”122 Kazarian had reputedly
lied to federal authorities to obtain asylum after emigrating to the United States in 1996.123 In the
course of the scheme, Kazarian mediated disputes for the Mirzoyan-Terdjanian group and
allegedly threatened to assault and kill an associate. 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.124
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.125 The victims of this scheme likely trusted the brothers as immigrants who had ties to
the United States and were willing to help others start new lives in the country.
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.126 The defendants recruited women from China to work in the United
121 DOJ press release, “Manhattan U.S. Attorney.”
122 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, http://www.scribd.com/full/39274052?access_key=key-
7m8lpi9tq05hn86c111. (Hereafter, United States vs. Armen Kazarian.)
123 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.
124 United States vs. Armen Kazarian.
125 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.
126 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/
(continued...)
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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.127
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, and presumably policymakers, are 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.128
As discussed elsewhere, 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.129
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 networks.130 Criminals conduct more
(...continued)
kc101409.htm.
127 IMMFWG, Mass Marketing Fraud, p. 15.
128 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. (Hereafter, Garzón,
Mafia & Co.)
129 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. (Hereafter: Williams,
“Transnational Criminal Networks.”)
130 Scott H. Decker and Margaret Townsend Chapman, Drug Smugglers on Drug Smuggling: Lessons from the Inside
(Philadelphia: Temple University Press, 2008), pp. 34-36.
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business offshore because of the efficiencies offered by the Internet and advances in the world’s
transportation and communication infrastructures.131 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.132
Networked structures shield organized criminals from law enforcement efforts.133 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.134
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.135 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.136
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.137 Prison gangs, for instance, are highly structured, and both national- and regional-level
131 Stephen Aguilar-Millan et al., “The Globalization of Crime,” The Futurist, November/December 2008, p. 42.
132 Chatterjee, The Changing Structure. pp, 2, 7-8.
133 Carlo Morselli, Inside Criminal Networks (New York: Springer, 2009), p. 71.
134 Williams, “Transnational Criminal Networks,” pp. 64-75.
135 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.
136 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. (Hereafter,
Kenney, From Pablo to Osama.)
137 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.
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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.138 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.139
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.”140 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.141 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.142
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.143 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
138 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, http://tomdiaz.wordpress.com/2009/04/17/barrio-
azteca%E2%80%93border-bad-boys-linked-to-mexican-drug-trafficking-organizations-%E2%80%94-part-three/. See
also the U.S. Department of Justice website at http://www.usdoj.gov/criminal/gangunit/gangs/prison.html.
139 Garzón, Mafia & Co. pp. 23-24.
140 Intelligence Committee Futures Working Group, Futures, p. 2.
141 Kenney, From Pablo to Osama, p. 132-133.
142 Ibid.
143 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.
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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
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.144
Corruption
Some criminal networks co-opt or attract participants from the licit realm to use their specialized
skills. 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: grass-roots, 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
144 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.
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.
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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 is helping prosecute Victor
Kaganov in connection with an illegal money transmitting business he allegedly
ran in Oregon. 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.150 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
146 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 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.
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period] will enhance the ability of state or state-allied actors to undermine competition in
gas, oil, aluminum, and precious metals markets.151
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.152 Prior to the global financial crisis, he possessed a $28 billion
fortune and was the ninth-wealthiest person in the world.153 He obtained a U.S. visa in 2005, but
it was revoked soon thereafter.154 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 DHS.155 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.156 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.157 The IPO occurred in January 2010 on the Hong Kong stock
exchange.158
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.159 These suspicions recently
resurfaced and involved his daughter, Pansy, and a casino venture in Macau. Pansy and Nevada-
based MGM Resorts International (MGM)160 jointly operate the MGM Macau, which opened in
December 2007.161
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.
151 Blair, “Annual Threat Assessment,” p. 44.
152 Gregory L. White and Diana Cimilluca, “Some Bankers Cool on Hot Rusal IPO,” Wall Street Journal, November 9,
2009, http://online.wsj.com/article/NA_WSJ_PUB:SB125755269536534861.html. (Hereafter, White and Cimilluca,
“Some Bankers.”) Evan Perez, Gregory L. White, “FBI Lets Barred Tycoon Visit U.S.,” October 30, 2009,
http://online.wsj.com/article/NA_WSJ_PUB:SB125685578903317087.html. (Hereafter, Perez and White, “FBI Lets
Barred Tycoon.”)
153 “The World’s Billionaires: #9 Oleg Deripaska,” Forbes.com, March 5, 2008, http://www.forbes.com/lists/2008/10/
billionaires08_Oleg-Deripaska_UCP9.html.
154 Perez and White, “FBI Lets Barred Tycoon.”
155 White and Cimilluca, “Some Bankers”; Perez and White, “FBI Lets Barred Tycoon.”
156 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/oleg-
deripaska-us-visa-rusal.
157 White and Cimilluca, “Some Bankers.”
158 “Aluminum giant RusAl raises $2.24 bln with Hong Kong IPO,” RIA Novosti, January 22, 2010, http://en.rian.ru/
business/20100122/157651607.html.
159 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,
http://online.wsj.com/article/SB10001424052748704743404575127673757750744.html.
160 Formerly MGM Mirage.
161 Tom Mitchell, “Spotlight on MGM Mirage’s ‘Wild Card,” Financial Times, March 19, 2010.
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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.162 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.163 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.”164 In March 2010, MGM decided to sell its interest in the Borgata
rather than sever ties with Pansy Ho.165
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 pleaded 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.166
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 have risen from 245 in FY2006 to more
162 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. (Hereafter, DGE, “Report.”)
163 DGE, “Report,” pp. 70-71.
164 DGE, “Report,” p. 71.
165 Wayne Parry, “NJ: Asian Casino Boss Has Mob Ties in China,” Associated Press, March 17, 2010.
166 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.
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than 770 (projected) for FY2010.167 In FY2009 alone, the DHS Inspector General opened 839
investigations of potential corruption regarding DHS employees. Of the 839 investigations, 576
worked for CBP, 164 for ICE, 64 for U.S. Citizen and Immigration Services (CIS), and 35 for the
Transportation Security Administration (TSA).168 While none of these figures establish exactly
how many of these corruption cases are attributable to organized crime, 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. For instance, in 2009 available resources
allowed CBP to polygraph 10%–15% of applicants applying for border patrol positions, and of
those who were polygraphed, about 60% were found unsuitable for service.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, pleaded 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
167 Ceci Connolly, “The Inside Woman,” Washington Post, September 12, 2010, http://www.washingtonpost.com/wp-
dyn/content/article/2010/09/11/AR2010091105087.html. (Hereafter, Connolly, “The Inside Woman.”)
168 See testimony by Thomas M. Frost, Assistant Inspector General for Investigations, U.S. Department of Homeland
Security 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.
169 See 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, http://www.ice.gov/pi/nr/1008/100826elpaso.htm.
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.
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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
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, the scope of these threats cannot be fully evaluated without a clearer
understanding of the scope of organized crime.
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, http://wilsoncenter.org/topics/pubs/
Combating%20Organized%20Crime.%20Bailey.pdf.
174 FBI, “Top Ten Fugitives: Global Con Artist and Ruthless Criminal,” October 21, 2009, http://www.fbi.gov/page2/
oct09/mogilevich_102109.html. (Hereafter: 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_fbi-
wire-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.
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Issues
Revisiting the Organized Crime Definition
Currently, there is no statutory definition of organized crime. RICO179 provisions describe
organized crime in terms of an “enterprise” and a “pattern of racketeering activity.”180 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
organized crime.181 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
179 18 U.S.C. § 1961-1968. It was enacted as Title IX of the Organized Crime Control Act of 1970 (P.L. 91- 452).
180 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.
181 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.
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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.
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,
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.182
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 program183 and the Edward Byrne Memorial Justice Assistance Grant (JAG) program184—
through which state and local law enforcement assistance is available for a variety of purpose
182 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. (Hereafter, IPI, Transnational
Organized Crime.)
183 For more information on COPS, see CRS Report RL33308, Community Oriented Policing Services (COPS):
Background, Legislation, and Funding, by Nathan James; as well as CRS Report R40709, Community Oriented
Policing Services (COPS): Current Legislative Issues, by Nathan James.
184 For more information on JAG, see CRS Report RS22416, Edward Byrne Memorial Justice Assistance Grant
Program: Legislative and Funding History, by Nathan James.
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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.185 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 system186 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.
Coordination of Domestic Efforts
As mentioned, the federal investigation of organized crime matters has not historically been a
centralized effort, and there is no single agency charged with investigating organized crime.187 As
a byproduct, there also has not been a uniform definition of organized crime to guide
investigators and prosecutors. Each agency has jurisdiction over an organized crime case based
on the criminal violations. For instance, organized crime cases built around drug trafficking
offenses are generally investigated by the DEA, whereas those cases built around human
trafficking cases are typically investigated by the FBI or 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
185 IPI, Transnational Organized Crime.
186 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.
187 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.
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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.188 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 the 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
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”189 against organized crime. On the prosecution end, DOJ
has already announced a proposed consolidation of 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.190 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.191
The OIG found that EPIC’s users value its products, but that EPIC could benefit from
188 In the FY2011 Budget Request, the Administration requests an additional $15.0 million for the Department of
Justice to combat organized crime. $7.6 million of this is requested for funding DOJ staffing of the IOC-2. There were
no specific funds requested for the other agencies contributing to the IOC-2.
189 NCTC mission statement, available at http://www.nctc.gov/about_us/about_nctc.html.
190 Ryan J. Reilly, “Gang Unit, Organized Crime Section to Merge,” Main Justice, July 12, 2010.
191 U.S. 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.
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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.192 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.
National Strategy to Combat Organized Crime
One component of federal coordination to combat organized crime may be a national strategy to
outline not only what the federal government considers to be the major organized crime threats,
but how best to combat them. DOJ officials have indicated that the National Security Council is
working to create such a strategy, possibly modeled after the National Security Strategy released
on May 27, 2010.193 The strategy may include recommendations on protecting Americans from
organized criminals, protecting financial markets, preventing corruption, increasing public
outreach, and partnering with the private sector.194 There have been reports that this strategy may
be rolled out by the end of 2010. Subsequently, Congress may evaluate the legislative options and
its oversight role to best assist the federal government in partnering with the private sector,
educating the public, and helping law enforcement combat organized crime.
Author Contact Information
Jerome P. Bjelopera
Kristin M. Finklea
Analyst in Organized Crime and Terrorism
Analyst in Domestic Security
jbjelopera@crs.loc.gov, 7-0622
kfinklea@crs.loc.gov, 7-6259
192 U.S. 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.
193 The White House, National Security Strategy, May 27, 2010, http://www.whitehouse.gov/sites/default/files/
rss_viewer/national_security_strategy.pdf.
194 Remarks by DOJ officials at the NIJ Conference 2010, panel on International Organized Crime: Recent
Developments in Policy and Research, June 14, 2010.
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