[Senate Hearing 108-403]
[From the U.S. Government Publishing Office]
S. Hrg. 108-403
COMBATING TRANSNATIONAL CRIME AND CORRUPTION IN EUROPE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPEAN AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
OCTOBER 30, 2003
__________
Printed for the use of the Committee on Foreign Relations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee BILL NELSON, Florida
NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West
JOHN E. SUNUNU, New Hampshire Virginia
JON S. CORZINE, New Jersey
Kenneth A. Myers, Jr., Staff Director
Antony J. Blinken, Democratic Staff Director
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SUBCOMMITTEE ON EUROPEAN AFFAIRS
GEORGE ALLEN, Virginia, Chairman
GEORGE V. VOINOVICH, Ohio JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska PAUL S. SARBANES, Maryland
JOHN E. SUNUNU, New Hampshire CHRISTOPHER J. DODD, Connecticut
LINCOLN CHAFEE, Rhode Island JOHN F. KERRY, Massachusetts
(ii)
?
C O N T E N T S
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Page
Ashley, Mr. Grant D., Assistant Director, Criminal Investigative
Division, Federal Bureau of Investigation, Washington, DC...... 27
Prepared statement........................................... 28
Lee, Dr. Rensselaer W., III, president, Global Advisory Services,
McLean, VA..................................................... 50
Noble Ventures, ``The Experience of One American Company in
Romania,'' statement submitted for the record by Charles N.
Franges, president............................................. 59
Pifer, Hon. Steven, Deputy Assistant Secretary of State, Bureau
of European and Eurasian Affairs, U.S. Department of State,
Washington, DC................................................. 6
Prepared statement........................................... 8
Responses to additional questions for the record from Senator
Lugar...................................................... 63
Schrage, Mr. Steve, Deputy Assistant Secretary of State, Bureau
of International Narcotics and Law Enforcement Affairs, U.S.
Department of State, Washington, DC............................ 14
Prepared statement........................................... 17
Shelley, Dr. Louise I., professor and director, Transnational
Crime and Corruption Center, American University, Washington,
DC............................................................. 42
Prepared statement........................................... 45
Swartz, Mr. Bruce C., Deputy Assistant Attorney General, Criminal
Division, U.S. Department of Justice, Washington, DC........... 22
Prepared statement........................................... 24
Voinovich, Hon. George V., U.S. Senator from Ohio, opening
statement...................................................... 4
(iii)
COMBATING TRANSNATIONAL CRIME AND CORRUPTION IN EUROPE
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THURSDAY, OCTOBER 30, 2003
U.S. Senate,
Subcommittee on European Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:41 p.m., in
room D-419, Dirksen Senate Office Building, Hon. George Allen
(chairman of the subcommittee), presiding.
Present: Senators Allen and Voinovich.
Senator Allen. Good afternoon. I thank all who are
interested in this hearing of the European Affairs
Subcommittee. We will be examining the issue of combating
transnational crime and corruption in Europe I want to thank
all the witnesses in the first panel and the second panel for
being with us today. I'm glad to be joined by my colleague who
is a leader and knowledgeable and experienced insofar as this
issue is concerned. He was a key leader in bringing this issue
to the attention of the subcommittee and I am happy to open
this hearing.
Transnational crime is a term that unfortunately is quite
familiar to Europeans and Americans today. It's crystal clear
to us all here how the criminal elements in Europe and also in
other parts of the world affect our daily lives. We need to
work together to fight crime such as narcotics trafficking,
terrorism and corruption.
Today more than ever, crime and corruption cannot be
classified as just something here in the United States or in a
European nation. It is a phenomenon that crosses geographical
borders just as easily as e-mail messages over the Internet.
And I would like to say here at the outset that the United
States considers Europe as our closest allies in the struggle
against organized crime and corruption on all levels and in all
areas of law. Law enforcement officials in the United States
stress the close cooperation that exists between law
enforcement agencies in Europe.
The purpose of this hearing is to examine these bilateral
efforts and to hear suggestions from experts in the field on
how we can make them even more effective in combating this
criminal activity. But I would also like to say that we in the
United States recognize the homegrown problems we face with
organized crime and corruption. We have never been shy here in
the United States about admitting our own problems. But the
difference between American and European societies compared
with other societies that are not as free is that European and
American societies are built upon the foundation of law and
order and the rule of law. Our citizens insist that law
enforcement officials expose crime and corruption to the light
of day and punish the criminals.
Hopefully we can use our institutions and expertise to help
the newly independent countries avoid the mistakes and the harm
caused by criminal activity and corruption in those countries.
The prevalence of any sort of criminal activity or corruption
in the country clearly would inhibit its ability to get
investment in that country, thereby inhibiting its ability to
attract jobs, as well as obviously affect the quality of life
of its own citizens. And so while we're looking at emerging
nations whether in Central Europe, Southeastern Europe, Eastern
Europe, or wherever it may be in the world, if you don't have a
safe place in which to do business where the rule of law and a
concept of property rights and basic security is assured,
you're simply not going to get investment.
It's no different here in the United States. If you have a
high crime area, no one is going to want to put a business in
that community. No one will want to shop or work in a place
where they are worried about criminal activity.
And so, this crime is beyond random robberies. We're going
to be examining more than random robberies and those sorts of
things that happen from time to time.
The criminal elements that we're talking about, whether in
the United States or Europe, are dynamic, they are large, they
are ever changing their patterns and their methods of
operation. And for this reason, we must be fluid in possibly
looking at ways to improve our capabilities. To meet this
challenge we have created a multitude of bilateral and
multilateral initiatives, each focusing on its own particular
specialized area of crime.
We are honored today to have before the European Affairs
Subcommittee representatives from the top United States
agencies directing these initiatives, as well as
representatives from academia and the private sector. We
welcome two representatives from the Department of State,
Ambassador Steven Pifer, Deputy Assistant Secretary of the
European and Eurasian Affairs Bureau. We also have Deputy
Assistant Secretary Steve Schrage, from the Bureau of
International Narcotics and Law Enforcement.
We have two representatives from the Department of Justice,
Grant Ashley from the Criminal Investigative Division of the
FBI, and Bruce Swartz, Deputy Assistant Attorney General of the
Criminal Division.
From American University, we welcome Dr. Louise Shelley,
who is the director of the Transnational Crime and Corruption
Center. And an especially warm welcome to the president of
Global Advisory Services from McLean, Virginia, Dr. Rensselaer
Lee III.
I thank all our witnesses for appearing today. I know we
look forward to reading and hearing and learning from your
expertise and your insight on these issues and these problems
facing us in the area of transnational crime and corruption.
Your ideas certainly will be helpful to us in how we might
address and combat these challenges.
With that I want to thank my colleague again, the respected
and knowledgeable Senator Voinovich for his leadership,
foresight and vision in recognizing the importance of this
issue and preparing for this hearing. I will ask Senator
Voinovich to take over as chair of this subcommittee hearing
because unfortunately something came up, and I can't be in two
places at the same time.
So I thank our witnesses, and I turn the gavel over to you,
Senator Voinovich, Mr. Chairman, for this subcommittee hearing.
Senator Voinovich [presiding]. Thank you very much,
Senator. I just want to thank you and thank Senator Lugar and
Senator Biden for allowing us to convene this hearing on what
are certainly many challenges in the world today. I believe
it's crucial that we raise awareness of these serious problems
and discuss U.S. efforts to combat them. And I am hoping, Mr.
Chairman, that perhaps as a result of this hearing and the
testimony that we receive today that we might be able to
elevate the problem to a higher priority in our government than
it is today, because I really feel that crime and corruption
pose even greater dangers today in the countries that are out
there than terrorism, and much of this organized crime provides
the money for terrorist activity, and unless we do something
about it, we are, I think, going to be in deep trouble and I
would hate to see some of these efforts being undermined by
organized crime. I think that the assassination of Prime
Minister Djindjic is an indication of what's going on, so I
appreciate the fact that you called this hearing today and I
will try to do a good job of running it.
Senator Allen. I know you will. Please excuse me.
Senator Voinovich. I would like to continue. As the United
States continues to engage in the global campaign against
terrorism, the danger of organized crime and corruption in many
parts of the world have become even more pronounced. While many
of these problems are not new, such as the illicit trade of
diamonds, drug smuggling, trafficking of weapons and human
beings, the urgent need to confront them is heightened in the
aftermath of the terrorist attacks against our country on
September 11.
The problems of organized crime and corruption serve not
only to undermine efforts to promote democratic reforms and the
rule of law in many developing countries, but they provide a
stream of revenue, as I mentioned to Senator Allen, for illicit
activity with the potential to do grave harm to the people of
the United States and the world at large. These activities have
the potential to bankroll terrorist organizations such as al-
Qaeda, and it's crucial that we do all that we can to put an
end to crime that provides financial resources to terrorists.
As the United States encourages democratic reforms in parts
of Europe, including the Balkans, and as Europe's new
democracies look to join transatlantic institutions, including
NATO, it's crucial that the U.S. Government have a coordinated
approach for combating organized crime and corruption in
Europe, and to interface with our allies so that we have a
multinational network that can combat a formidable organized
crime syndicate in Europe and countries that were part of the
former Soviet Union.
As our witnesses will testify, the problems of organized
crime and corruption are pervasive and have the potential to
seriously impact U.S. national interests. They significantly
impeded our efforts to promote stability, security and the rule
of law in Europe and elsewhere, and they are very dangerous if
left unchecked.
Just as we are a leader in the global war against
terrorism, I believe we must also be a leader in the effort to
combat transnational crime. We should identify those members of
the international community who are engaged in the fight
against organized crime and corruption, and coordinate and
collaborate with them to maximize time, effort and resources.
This is a shared responsibility, and we should look to work
together to improve our progress in this area.
We should also look to strengthen our efforts to promote
democratic reform and the rule of law in Europe's new
democracies. These efforts go hand in glove with the fight
against organized crime and corruption, for without the
presence of the rule of law and a judicial system with
necessary infrastructure, including a criminal code, well-
trained prosecutors and judges who are paid a decent wage so
that they are not subject to being corrupted, our efforts are
going to be less than fruitful.
This was evident to me when I was in Bulgaria in May of
2002. I remember talking, I spent an hour and a half with an
FBI agent who working with the police officers in Bulgaria had
arrested nearly 90 people for human trafficking, and I recall
how frustrated he was that they were never prosecuted.
I believe this hearing is an important step toward
highlighting the issue of transnational crime and its impact on
our national interests. While we often spend time on specific
issues that are tied to organized crime, such as human
trafficking or the illicit drug trade, I believe it is
imperative that we look at the big picture and identify the
common themes tied to many of these problems. We should also
discuss what the U.S. Government is doing to combat
transnational crime and corruption, and how we might improve
upon our efforts in this regard.
[The opening statement of Senator Voinovich follows:]
Opening Statement of Senator George V. Voinovich
This afternoon, we are gathered to discuss the dangers of
transnational crime and corruption in Europe. I would like to thank the
Chairman, Senator Lugar, the Subcommittee Chairman, Senator Allen, and
Senator Biden for allowing us to convene this hearing. While there are
certainly many challenges in the world today, I believe it is crucial
that we raise awareness of these serious problems and discuss U.S.
efforts to combat them.
In my opinion, transnational crime and corruption pose an even
greater danger to many developing countries in Europe than terrorism,
with the potential to seriously undermine efforts to promote long-term
stability, security and prosperity for many citizens of Europe. Unless
these problems are addressed at the highest levels, they will continue
to threaten future progress and modernization. The tragic assassination
of Serbian Prime Minister Zoran Djindjic last March illustrates the
dangerous nexus between organized crime, corruption and political
reform.
As the United States continues to engage in the global campaign
against terrorism, the dangers of organized crime and corruption in
many parts of the world have become even more pronounced. While many of
these problems are not new--such as the illicit trade of diamonds, drug
smuggling, and the trafficking of weapons and human beings--the urgent
need to confront them is heightened in the aftermath of the terrorist
attacks against our country on September 11, 2001.
The problems of organized crime and corruption serve not only to
undermine efforts to promote democratic reforms and the rule of law in
many developing countries, but they provide a stream of revenue for
illicit activity with the potential to do grave harm to the people of
the United States and the world at large. These activities have the
potential to bankroll terrorist organizations such as al-Qaeda, and it
is crucial that we do all that we can to put an end to crimes that
provide financial resources for terrorists.
As the United States encourages democratic reforms in parts of
Europe, including the Balkans, and as Europe's new democracies look to
join trans-Atlantic institutions, including the NATO Alliance, it is
crucial that the U.S. Government have a coordinated approach for
combating organized crime and corruption in Europe, and to interface
with our allies so that we have a multinational network that can combat
a formidable organized crime syndicate in Europe and countries that
were part of the former Soviet Union.
As our witnesses will testify, the problems of organized crime and
corruption are pervasive and have the potential to seriously impact
U.S. national interests. They significantly impede our efforts to
promote stability, security and the rule of law in Europe and
elsewhere, and they are very dangerous if left unchecked.
Just as we are a leader in the global war against terrorism, I
believe we must also be a leader in the effort to combat transnational
crime. We should identify those members of the international community
who are engaged in the fight against organized crime and corruption,
and coordinate and collaborate with them to maximize time, effort and
resources. This is a shared responsibility, and we should work together
to improve upon our progress in this area.
We should also work to strengthen our efforts to promote democratic
reform and the rule of law in Europe's new democracies. These efforts
go hand in glove with the fight against organized crime and corruption,
for without the presence of the rule of law and a judicial system with
necessary infrastructure--including a criminal code, well-trained
prosecutors and judges--our efforts will be less than fruitful.
This was evident to me when I was in Bulgaria in May 2002. I
remember talking to an FBI agent who, working with police officers in
Bulgaria, had arrested nearly 90 people, and how frustrated he was that
they never were prosecuted.
I believe this hearing is an important step toward highlighting the
issue of transnational crime, and its impact on our national interests.
While we often spend time on specific issues that are tied to organized
crime, such as human trafficking or the illicit drug trade, I believe
it is imperative that we look at the big picture and identify the
common themes tied to many of these problems. We should also discuss
what the United States Government is doing to combat transnational
crime and corruption, and how we might improve upon our efforts in this
regard.
As we continue this discussion, I would like to welcome two
distinguished panels of witnesses here this afternoon. We will first
hear from witnesses from the Departments of State and Justice, and the
Federal Bureau of Investigation, including:
Ambassador Steven Pifer, who serves as Deputy Assistant
Secretary at the Bureau of European and Eurasian Affairs at the
State Department;
Mr. Steve Schrage, who serves as Deputy Assistant Secretary
in the Bureau of International Narcotics and Law Enforcement
Affairs (INL) at the State Department;
Mr. Bruce Swartz, who serves as Deputy Assistant Attorney
General in the Criminal Division at the Department of Justice;
and
Mr. Grant Ashley, who is Assistant Director in the Criminal
Investigative Division at the Federal Bureau of Investigation.
I look forward to their testimony regarding the U.S. Government's
efforts to combat transnational crime and corruption. As we move
forward in the fight against organized crime and corruption abroad, I
believe it is important that we have a coordinated approach, and that
we develop a strategic plan, and I am glad that they have agreed to be
here this afternoon.
I would also like to welcome:
Dr. Louise I. Shelley, who is the Director of the
Transnational Crime and Corruption Center at the American
University in Washington; and
Dr. Rens Lee, who is President, Global Advisory Services in
McLean, Virginia.
Both Dr. Shelley and Dr. Lee have extensive experience in the
issues of organized crime and corruption, and I look forward to hearing
their thoughts on the scope of the problem and efforts underway to
combat these destabilizing trends.
Senator Voinovich. As we continue this discussion, I
welcome our witnesses here today and think the chairman has
done a good job of introducing you, and I think we should get
started. And I will start with Mr. Pifer. Ambassador Pifer, we
are delighted to have you here.
STATEMENT OF HON. STEVEN PIFER, DEPUTY ASSISTANT SECRETARY OF
STATE, BUREAU OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT
OF STATE, WASHINGTON, DC
Ambassador Pifer. Mr. Chairman, thank you very much for the
opportunity to appear here today to talk about the problem of
transnational crime in Europe, and I will speak to you from the
perspective of Russia and Ukraine. Mr. Chairman, I believe that
both you and Senator Allen captured a very good description of
the problems that we face with crime and corruption in the
former Soviet Union. With your permission, I will submit a
written statement for the record and just summarize that
statement in some brief oral remarks.
Senator Voinovich. I would like to point out that I would
like all of you to summarize your statements in 5 to 7 minutes
and then we will open it up for questions, and of course your
written testimony will be part of the record.
Ambassador Pifer. Thank you, sir. I would divide the crime
and corruption threat into two parts. First of all, it's in the
United States' interest that the countries of the former Soviet
Union develop stable economies, because that's going to
contribute to the sort of more stable and more secure Europe
that we seek. Organized crime and corruption frustrate the
development of a stable and secure Europe that we hope to see
in the future.
The second threat is more of a direct threat, and that is
as organized crime increasingly engages in transnational
activities, it comes to the shores of the United States, so we
have over the last years increasingly made work on fighting
corruption and on combating crime a part of our engagement
strategies with the countries of the former Soviet Union. The
strategy that we apply has many pieces, and it's very much a
multiagency strategy. I'm very glad today here that we have
three of the agencies but not certainly all of the agencies of
the U.S. Government that engage in dealing with the problem of
transnational crime and corruption overseas.
I would note five prongs of our strategy to deal with this
problem. First of all, we seek to expand the rule of law and
law enforcement programs with a particular focus on criminal
justice reform and on enhancing capabilities of the law
enforcement agencies overseas to cope with modern crime.
Second, we provide judicial and law enforcement training,
and in the process we want to introduce modern crime fighting
techniques, but also introduce a respect for human rights and a
sense of professional integrity.
Third, we want to promote strong and positive working
relationships between U.S. law enforcement agencies and their
counterparts overseas.
Fourth, we wish to institutionalize cooperation through law
enforcement agreements.
And fifth, we want to promote eventual integration of the
countries of the Balkans and the former Soviet Union into
multilateral and regional institutions.
In pursuit of this strategy, we have a variety of policy
tools. First of all, we use law enforcement working groups.
Earlier this month Mr. Swartz and I chaired via digital video
teleconference, a meeting of the U.S.-Ukraine Law Enforcement
Working Group. We brought together on the American side the
Department of State, the Department of Justice, FBI, the Drug
Enforcement Agency, with our Ukrainian counterparts, to talk
about the sorts of issues on which we could cooperate to combat
crime.
A second tool is mutual legal assistance treaties. These
provide institutional ways for us to cooperate, dealing with
things such as collecting evidence and such.
A third set of tools are multilateral efforts and there are
a variety here. I mentioned the Financial Action Task Force.
These groups work to create better tools to deal with the money
laundering problem.
The United Nations Office on Drugs and Crime has been
increasingly involved in the former Soviet Union and recently
has been working very closely with us to cope with the problem
of narcotics coming out of Afghanistan.
The Organization for Security and Cooperation in Europe
[OSCE] is very engaged in promoting the reform of legal systems
and also training of judges and prosecutors. We have in the
Balkans, in Bucharest, an anti-crime center which coordinates
regional efforts against transnational crime. We think that has
been a very successful effort, and we hope to replicate that in
the countries of Georgia, Ukraine, Uzbekistan, Azerbaijan and
Moldova. We are hoping to establish a virtual law enforcement
center in Baku that will promote among those five countries
cooperation and coordination among law enforcement entities.
And finally we have bilateral assistance. Since 1995 with
the Freedom Support Act, we have provided over $160 million to
promote legal reform and also efforts against crime, and this
includes $21 million in fiscal year 2003 alone.
The problem is as you said, it's a pervasive problem, a
very serious problem, but we can point to some examples of
success. I would just cite, given the shortness of time, two
examples here.
On the question of trafficking in persons, when I served in
Kiev 5 years ago in 1998, we were struggling to promote basic
awareness of the problem. In the last 5 years, we have worked
very closely with the Ukrainians and gave them more of an
awareness of the problem. We've helped them shape new laws
against trafficking. We have helped promote institutional
lionks between police organizations and nongovernmental
organizations, and we have begun to see results. In the last
year Ukrainian prosecutors opened 169 cases involving
trafficking, more than twice as many as in 2001, and those
cases have resulted in 41 prosecutions and 28 convictions to
date.
A second area of success is money laundering, and I will
cite case with the success of Russia. We worked with Russia and
the Financial Action Task Force to promote a financial
committee that investigates and ensures that suspicious money
transfers in Russia are investigated. And the Russians have
improved their legislation and their practice to a point where
this year they were accepted as a full member in the Financial
Action Task Force.
Mr. Chairman, transnational crime remains a real threat to
the former Soviet Union and the Balkans, but it is also a
threat to American interests there. Progress is being made, but
we must continue to work counter-crime issues as a very
important part of our agenda with those countries. Thank you
again for the opportunity to be here, and I will be happy to
take your questions.
[The prepared statement of Ambassador Pifer follows:]
Prepared Statement of Hon. Steven Pifer, Deputy Assistant Secretary of
State, Bureau of European and Eurasian Affairs, U.S. Department of
State, Washington, DC
Mr. Chairman, members of the Subcommittee, thank you for the
opportunity to address the impact of transnational crime on U.S.
priorities in Europe. I will focus my remarks today on Russia and
Ukraine--two countries that are key to our efforts to combat
transnational crime.
I would like to discuss briefly the historical context that has
given rise to crime and corruption in the former Soviet Union following
the collapse of the USSR and focus on some of the steps that the
Russian and Ukrainian governments are taking to cope with these
problems. I would also like to describe the strategy and some of the
policy tools that the U.S. Government brings to bear to address these
challenges.
HISTORICAL CONTEXT
Along with the positive and historic possibilities created by the
collapse of the Soviet Union, the early 1990's were marked by an
increase in criminal activities in the region, in large part because of
a vacuum in institutions resulting from the breakup. The process of
privatization of vast state resources often took place in the absence
of any effective legal or regulatory structure, and many valuable state
assets were privatized in ``insider transactions.'' As a result,
property rights were unclear, and disputes over property rights often
could not be resolved in courts of law. Insiders and organized crime
took advantage of this situation to take control of major assets, often
having to pay no more than a small fraction of their true value.
Privatization took place roughly simultaneously with the
development of small-scale private businesses. Again, because of the
absence of an effective legal and regulatory system governing the
activity of private enterprises, these businesses were ripe for
extortion by street gangs. In order to protect themselves, small
businesses often had to turn to other gangsters to provide a ``krysha''
(roof) of protection. Consequently, gangsters gained control of many
small businesses and accumulated capital, which they frequently used to
acquire larger businesses during the privatization process. They often
then used these businesses to make more money and to acquire public
status, which they then used to obtain political office.
Organized crime figures and groups have in some cases been linked
with key government and business figures. Unfortunately, organized
crime increasingly exercises both political and economic power, and
there are numerous reports of corruption among government officials and
members of legislative bodies. Corruption weakens the ability of a
government to conduct normal business; it undermines political
processes, allows the trafficking of illegal drugs and terrorist
activities, impedes trade and investment, and hampers participation in
the global economy. It is difficult to get an accurate picture of how
widespread this problem is. The situation is very opaque, and we often
have little more than anecdotal glimpses. The proliferation of
organized crime groups has had reverberations in the United States,
where many of the same organized crime groups that plague Russia and
Ukraine now have a foothold.
We wish to see Russia and Ukraine develop as modern states, with
democratic institutions and prosperous market economies, and we have
since the end of the Soviet Union urged political and democratic
reforms in these directions. We recognize the reform path will be, in
both countries, a difficult and lengthy process. In order to succeed on
this reform path, political leaders and law enforcement agencies will
have to come to grips with and seriously tackle the problems of
organized crime and corruption.
RUSSIA--REFORMS
To address organized crime, corruption and other threats to
continued democratic and economic development, the Russian government
has passed impressive legislation in the past several years.
In June 2002, the Russian Duma (parliament) passed a new Code of
Criminal Procedure of the Russian Federation. The new Code
substantially changes the previous Soviet-era criminal justice system.
It establishes a more adversarial system of justice, extending jury
trials for significant crimes nationwide and giving defense counsel a
greater role in the proceedings.
The Code also strengthens the powers and independence of the
judiciary by requiring the approval of judges for search and arrest
warrants and for the pretrial detention of defendants. Additionally, it
broadens the rights of criminal defendants by requiring, among other
things, the review of pretrial detention within 48 hours after arrest.
After the introduction of the new Code the number of criminal cases
opened by the Procuracy declined by 25 percent; the number of suspects
placed in pretrial detention declined by 30 percent; and the courts
rejected 15 percent of requests for arrest warrants. Judges released
some suspects held in excess of allotted time when the government
failed properly to justify its request for extension, and the Supreme
Court overturned some lower court decisions to grant pretrial detention
considered inadequately justified.
Human rights advocates reported that the strict new limits on time
held in police custody without access to family or lawyers, and the
stricter standards for opening cases, have discouraged abuse of
suspects by police as well. As a result of the passage of the new Code,
83 of 89 regions in Russia have introduced jury trials, 713 jury trials
have taken place during the first nine months of this year, resulting
in 614 convictions and 99 acquittals. This system should reduce the
potential for corruption.
UKRAINE--REFORMS
Ukraine has also taken significant steps in recent years to address
deficiencies in its judicial system. Its ability to attract investment,
and thus to sustain its recent economic growth, will depend on
continued progress towards development of a legal infrastructure that
protects investors' legal and contractual rights.
In 1999, the State Executive Service was established as a special
department in the Ministry of Justice to execute court decisions. Its
powers include enforcement of judgments in civil cases; decisions in
criminal and administrative courts involving monetary compensation; and
judgments of foreign courts, the Constitutional Court, and other
authorities.
Legislation enacted in the past three years to regulate the court
system and improve the administration of justice has brought Ukraine's
legal framework more into line with the Constitutional requirements for
an independent judiciary. Enactment in 2002 of the Law on the Judicial
System of Ukraine and the Law on Enforcement of Foreign Court Decisions
are hopeful signs, although these still need to be fully implemented.
The Law on the Judicial System created an independent State Judicial
Administration as well as a new appellate body, the Court of Cassation.
Ukraine also enacted a new Criminal Code in 2001. The law also
established a Judicial Academy to train new judges and continue the
education of sitting judges.
Other legislative changes enacted in 2001 curtailed prosecutors'
authority. The Procuracy no longer may initiate new criminal cases; its
powers are limited to the observance of laws by law enforcement
agencies only. In May 2001, the Constitutional Court ruled that
citizens may challenge court actions by the prosecutors and
investigative agencies, as well as government actions regarding
national security, foreign policy, and state secrets.
While there has been significant progress in criminal justice
reform in Russia and Ukraine, both governments must continue to make
strides towards fully utilizing their justice systems to fight
transnational crime.
POLICY TOOLS
The U.S. Government would, of course, like Russia, Ukraine and all
of the states of Europe and Eurasia to have the capacity to enforce
their laws in accordance with international standards while employing
up-to-date practices. While recognizing that the responsibility for
fighting organized crime and corruption lies first and foremost with
the countries themselves, the U.S. Government has increasingly made
efforts to fight money laundering, narcotics and trafficking in persons
a central element of our engagement with Russia, Ukraine and the other
states of the former Soviet Union.
The U.S. strategy for combating transnational crime in the former
Soviet Union has five prongs: 1) expand rule of law and law enforcement
programs with an emphasis on criminal justice reform and enhancing the
capabilities of law enforcement agencies at all levels, 2) provide
judicial and law enforcement training that introduces modern crime-
fighting techniques while also promoting concepts of respect for human
rights and professional integrity, 3) promote the development of
working relationships among U.S. and regional law enforcement
counterparts, 4) institutionalize cooperation through law enforcement
agreements (MLATs), and 5) promote the eventual integration of these
countries into multilateral and regional institutions.
To implement this strategy, we have several policy tools:
Law Enforcement Working Groups with both Russia and Ukraine were
established to provide high-level policy oversight and to serve as
ongoing fora for the coordination of bilateral anti-crime efforts.
Earlier this month I co-chaired a meeting of the U.S.-Ukraine Law
Enforcement Working Group via digital video conference. We addressed
four transnational crime threats: 1) intellectual property rights
enforcement, 2) counternarcotics efforts, 3) money laundering and 4)
trafficking in persons. Representatives of many Ukrainian government
agencies took part, which gave us the ability to engage the full
spectrum of Ukrainian entities dealing with these crime issues. We
engaged at a substantive level, noting the progress that has been made
on these issues and the areas where continued progress is necessary.
Mutual Legal Assistance Treaties (MLATs) are not a traditional
policy tool; the purpose of an MLAT is to improve U.S. law enforcement
abilities, by enabling U.S. authorities to obtain evidence and other
types of law enforcement assistance from other countries. Conversely,
foreign governments can use the MLAT to request assistance from the
United States. Rule of law therefore is generally a consideration for
the State Department and the Senate before a treaty is concluded; we do
not want to create international legal obligations to provide
assistance to criminal prosecutions in countries that do not respect
the rule of law.
That said, an MLAT, by creating formal and regular bases for law
enforcement cooperation, can help support other efforts towards
promotion of rule of law. The dialogue and cooperation that is
resulting from the MLATs with Russia and Ukraine advance the
regularization and improvement of our joint law enforcement efforts. In
the long term, these MLATs further the rule of law and help Russia and
Ukraine regularize their law enforcement efforts overall. Having this
kind of regularized process for seeking and obtaining evidence will
help strengthen Russian and Ukrainian institutions and encourage the
rule of law in these countries.
Our experience with the Ukraine MLAT has been particularly
positive. Under the MLAT, the U.S. Government has sent the Ukrainian
government requests in cases involving fraud, money laundering,
homicide, computer crime, interstate transportation of stolen property,
racketeering, corruption, and embezzlement. Each request has been
executed promptly and thoroughly. In one high profile example--the
prosecution of former Ukrainian Prime Minister Pavel Lazarenko--Ukraine
has handled numerous requests with exemplary professionalism. According
to Justice Department records, we have conducted more formal
depositions in Ukraine in connection with that case than in any other
country in connection with any other case.
The U.S.-Russia Counterterrorism Working Group serves as a forum
for cooperation on transnational crime issues linked to the Global War
on Terror. For example, through the working group our two countries
promote counternarcotics activities that will reduce the trafficking of
illicit drugs through Central Asia to major markets. These activities
are aimed at identified needs on the ground, including our recent
agreement to work together to develop a narcotics-detecting canine
program in Central Asia.
Multilateral efforts to address transnational crime have also been
successful. For example:
The international Financial Action Task Force (FATF), with the U.S.
Government as an active participant, has begun to tackle the problem of
money laundering in Ukraine and Russia. As a result of improvements in
its legislation and overall practices against money laundering, Russia
was admitted to FATF. Under the threat of sanction from FATF, Ukraine
finally passed new legislation earlier this year to deal better with
the money laundering problem. I will come back to these cases in more
detail.
The United States, along with many member states of the European
Union, is a major contributor to projects managed in Central Asia by
the United Nations Office on Drugs and Crime (UNODC). UNODC, for
example, established a senior level Drug Control Agency (DCA) in
Tajikistan several years ago, and is now in the process, thanks to a
U.S. contribution, of replicating that success in the Kyrgyz Republic.
We have also contributed to a number of other diverse UNODC-managed
projects, from assisting border control between Turkmenistan and
Afghanistan, to providing video surveillance equipment for a major
bridge crossing on the Uzbek-Afghan border, to helping the Uzbek
prosecutor's office in archiving on a web site legal materials for the
prosecution of narcotics cases across the country.
The Organization for Security and Cooperation in Europe is
expanding its work in law enforcement and prison reform in Eurasia. In
Ukraine, for example, the OSCE is supporting rule of law development
through a project to train the staff of the Office of the General
Prosecutor. We are also encouraging efforts to cooperate regionally,
based on the successful Bucharest Anti-Crime Center for Southeast
Europe. A similar effort is underway with the GUUAM states (Georgia,
Ukraine, Uzbekistan, Azerbaijan and Moldova), which aims at the
creation of a virtual law enforcement center to strengthen regional
cooperation among those states' law enforcement agencies. We are
supporting this effort and are exploring the possibility of a second
center in Central Asia.
Bilateral assistance is vital to our anti-crime strategy. Our
assistance program targeting Russia, Ukraine and the other states of
the former Soviet Union is the FREEDOM Support Act (FSA). FSA
assistance and exchanges have played and are playing a key role in
helping the governments of states such as Russia and Ukraine make
progress to deal with crime and corruption issues. We greatly
appreciate the strong support that Congress has provided since the
breakup of the Soviet Union for the transition to democracy and market
economies of the states that emerged from Communism.
Since the start of the Anti-Crime Training and Technical Assistance
program with FSA funding in 1995, we have allocated roughly $166
million to the states of the former Soviet Union for reforms, training
and capacity-building in the areas of law enforcement and
counternarcotics. Close to one-half of that total has been allocated to
our efforts in Russia and Ukraine, given their size and importance in
the region, and the potential role that Russia can play as a model of
reform for all of the former Soviet states. An increasing proportion of
our assistance will now go to the states of Central Asia, given the
role they play as ``front-line'' states in the fight against terrorism
and heroin smuggling out of Afghanistan. Congress, in fact,
specifically appropriated $22 million in Fiscal Year 2002 for law
enforcement and counternarcotics efforts in Central Asia.
With regard to Russia, an important step forward was made in
September 2002, when the United States and Russia signed our first
bilateral agreement on law enforcement assistance. Under that
agreement, over $4 million in funds have been allocated to start a
series of new projects. These will provide training and equipment to
Russian units fighting drug trafficking along Russia's southern border
with Kazakhstan and training and equipment to improve narcotics
searches and seizures at key ports in the south of Russia and in areas
that drugs transit in the northwest region of the country. Projects on
fighting Internet child pornography and trafficking in persons will be
started. Support to the new financial unit set up to combat money
laundering will be provided, as will assistance to help implement the
new criminal procedure code and the U.S.-Russia Mutual Legal Assistance
Treaty. A further $4.7 million in Fiscal Year 2003 funds will be
allocated to such projects in Russia to maintain the momentum we have
achieved.
We have made a major transition in our assistance programs in the
last few years. In the past, most of our assistance went to training,
much of it provided at the U.S.-led International Law Enforcement
Academy in Budapest. Today, our FSA assistance has evolved and is
focused on comprehensive, multidisciplinary institution-building,
including major legal reforms, creating new forensics laboratories,
setting up financial intelligence units to fight money laundering,
helping introduce investigative methods that would eliminate the use of
torture, creating ``vetted'' counternarcotics units, and more.
We are, of course, limited in what we can do by two things: the
limits on the assistance we can provide and the political circumstances
in the recipient countries. We cannot do it all. We continue to engage
the European Union and its member states to increase their support for
anti-crime and legal reform efforts.
PROGRESS
There are three areas of major progress in the battle against
transnational crime I would like to highlight today. All three of these
areas, trafficking in persons, money laundering and counternarcotics,
are linked with organized crime.
Trafficking in Persons:
We have seen a concerted and welcome effort to combat trafficking
in persons from our European partners this year. Russia and Ukraine
have both shown some improvement, but at different paces and to varying
degrees.
Our efforts to counter the Trafficking in Persons problem focus on
three areas: prevention of trafficking; protection of the victims (and
potential victims); and prosecution of those who perpetrate this crime.
Progress on trafficking can be accomplished in a number of ways:
legislation and amendments to criminal codes can be passed; public
awareness of the trafficking in persons problem can be increased; and,
most importantly, prosecution numbers can rise. In the State
Department's Trafficking in Persons report from last year, the Bureau
of European and Eurasian Affairs had eight countries in Tier 3, the
lowest tier. Today, there are none.
Russia
Russia has begun to turn the corner on combating human trafficking.
There is increasing recognition at the top of the problem. On October
27 President Putin said ``trafficking in people is part of organized
crime, it is one of the most serious and vital world problems.''
The UN has cited Russia as the largest source country for
trafficked women throughout Europe. Making use of substantial U.S.
technical assistance, the Duma Committee on Legislation drafted
aggressive anti-trafficking legislation that would criminalize human
trafficking and all related crimes. The legislation would also provide
protection for victims and witnesses in human trafficking cases and
mandate government-funded public awareness campaigns designed to raise
awareness of the dangers of human trafficking.
An omnibus criminal code amendment bill is pending before the Duma
that includes the anti-TIP criminal articles that were originally put
in the anti-TIP law. It appears that the criminal code amendments are
also going through some unwelcome changes, according to our Embassy in
Moscow, which closely follows this issue. Passage of the anti-TIP
articles included in the President's Omnibus Criminal Code Reform Bill
will require a concerted effort by key Duma members to gain the support
of government agencies and regional governments. Currently, the
Russians are using older and weaker laws to go after traffickers; last
year Russia prosecuted some traffickers under lesser laws. We hope--and
it will be important--to see convictions rise with the new legislation.
Ukraine
Ukraine is another large source country for trafficking victims to
all parts of Europe and around the globe. The Ukrainian government has
a comprehensive action plan for each government ministry to support
public awareness, education, and prosecutions. The police opened 169
trafficking cases last year alone, double the number opened in 2001,
and followed up with 41 prosecutions and 28 convictions. The Ministry
of Internal Affairs has established 27 special anti-trafficking units
at the national and oblast levels.
The Ukrainian anti-trafficking NGO community and police across the
country have developed vital linkages that have resulted in
prosecutions. We have seen political will on the part of the Ukrainians
to engage on the trafficking issue but must continue to work with them
to ensure further progress, and to ensure that such progress is not
impeded by corruption.
Money Laundering:
Russia
In the last two years, Russia has made substantial strides in
combating money laundering. On February 1, 2002, Russia's new financial
investigation unit, the Financial Monitoring Committee (``FMC''), began
operation. The FMC is responsible for collecting suspicious activity
reports from banks and coordinating all of Russia's anti-money
laundering and counterterrorist financing efforts.
In 1997, Russia passed amendments to the Criminal Code
criminalizing money laundering. In 2002, additional amendments were
passed, strengthening the 1997 legislation and criminalizing all
financial transactions designed to conceal the source of any illegal
proceeds.
Largely as a result of the passage of broad anti-money laundering
legislation and the FMC's successful monitoring work, in 2002, Russia
was removed from the international Financial Action Task Force (FATF)
Non-Cooperative Countries and Territories list. In 2003, following
further progress, Russia was admitted to FATF. This was a major
achievement. Since beginning operation, the FMC has received over a
half million suspicious transactions reports. However, according to
FATF, few criminal money laundering cases have been successfully
prosecuted, and more needs to be done in this area.
Ukraine
The U.S. Government also engages with Ukraine on money laundering
issues through FATF. In September 2001, FATF placed Ukraine on its Non-
Cooperative Countries and Territories list, citing inadequacies in
Ukraine's anti-money laundering regime. In November 2002, Ukraine
passed a comprehensive anti-money laundering law, but FATF's Europe
Review Group found it deficient in a number of areas and not in
compliance with international standards.
In December 2002, FATF called on its members to impose counter-
measures against Ukraine. The U.S. Government, in response, designated
Ukraine a jurisdiction of money laundering concern under Section 311 on
the USA PATRIOT Act. Following consultations between FATF and the
Ukrainian government, and with assistance from our Embassy in Kiev, the
Ukrainian Rada passed amendments to the anti-money laundering law, the
criminal code, and the banking law that brought Ukraine's anti-money
laundering law into compliance with international standards. At its
mid-February plenary, FATF rescinded its call for counter-measures.
Early this month, Ukraine submitted to FATF an implementation plan;
that plan must now be vetted by FATF's Europe Review Group. Until full
and satisfactory answers are provided to the FATF review group, no
decision will be taken by the FATF to undertake an on-site visit--the
penultimate step prior to recommendation for removal from the FATF Non-
Cooperative list. Ukraine's work with FATF nonetheless is an example of
success--fundamental reforms, combined with close international
scrutiny, resulting in real progress.
Counternarcotics:
Russia
The flow of Afghan heroin into and across Russia has increased
tremendously. While overall seizures have yet to increase noticeably,
we are now seeing instances of seizures of roughly 50 to 60 kilograms
of heroin at a time.
Russia is a party to the 1988 UN Drug Convention and other UN
agreements on combating drug trafficking. In 1998, the Russian
government enacted the Law on Narcotics and Psychotropic Substances,
which criminalized the purchase and possession of drugs and stiffened
penalties for large-scale trafficking. More recently, the Russian
government has taken additional steps that show promise for future
progress in this area with the support of U.S. assistance programs.
In March 2003, President Putin took primary responsibility for the
investigation of narcotics trafficking away from the Ministry of
Internal Affairs and reassigned it to the newly formed ``State
Committee for the Control of Narcotics and Psychotropic Substances,''
known by its Russian acronym, GKN. GKN is still in the start-up
process, so it is too early to evaluate its effectiveness. However,
most observers view its creation, and the appointment of a close
political ally of President Putin, Viktor Cherkessov, as its director,
as signs that President Putin intends to take the war on drugs very
seriously.
At the same time, Russian law enforcement authorities have come to
support the use of drug demand reduction programs as a complement to
their efforts to reduce the supply of drugs.
The U.S. Drug Enforcement Agency is also seeing hopeful signs of
growing cooperation between Russian law enforcement and a new counter-
narcotics Special Investigative Unit created and vetted by the DEA in
Uzbekistan. Such bilateral cooperation will be an important component
of any successful effort to halt the flow of drugs out of Afghanistan.
Ukraine
The Ukrainian Government takes effective steps to limit illegal
cultivation of poppy and hemp. Ukraine is a party to the 1988 UN Drug
Convention, and it follows the provisions of the Convention in its
counternarcotics legislation. Combating narcotics trafficking continues
to be a national priority for law enforcement bodies, although a lack
of financial resources seriously hinders Ukrainian efforts. Corruption
is also a problem, although it has rarely been linked to drug
enforcement. Coordination between law enforcement agencies responsible
for counternarcotics work has improved, but still remains a problem
because of a lack of resources, some tendencies to resist interagency
cooperation and sharing of information, and regulatory and
jurisdictional constraints.
The National Counter-narcotics Coordinating Council, established in
1994 within the Cabinet of Ministers to coordinate the efforts of
government and public organizations to combat drugs, is responsible for
a counternarcotics program for the period through 2008. The main
objective of the program is to make qualitative changes in the national
strategy for combating narcotics. Although many of the measures in
previous national counternarcotics plans (1994-1997, 1998-2000) were
constrained by lack of funding, the Ministry of Internal Affairs is
giving a high priority to counternarcotics actions and is providing
overall support to the maximum extent available.
CONCLUSION
Transnational crime is a real threat to stability in the countries
of the former Soviet Union as those countries move to develop more
modern political and economic structures. However, in the last decade,
with U.S. assistance, progress has been made in institutionalizing the
rule of law, and developing criminal justice systems, especially in
Eurasia.
While challenges remain, my colleagues will attest to the
strengthened capacity of their law enforcement counterparts, and the
strong law enforcement networks that have developed. Strengthening the
capacity of countries such as Russia and Ukraine to deal with today's
transnational crime problems, as well as improving bilateral and
multilateral cooperation to counter these threats, will remain major
parts of the U.S. agenda with these countries. We have made progress,
but the challenges remain serious and will require our continued
attention. Thank you.
Senator Voinovich. Thank you very much.
Mr. Schrage.
STATEMENT OF STEVE SCHRAGE, DEPUTY ASSISTANT SECRETARY OF
STATE, BUREAU OF INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT
AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC
Mr. Schrage. Thank you, Mr. Chairman, good afternoon. I am
extremely pleased to be back today appearing before a
subcommittee of the Foreign Relations Committee after having
served as counsel for the late Senator Paul Coverdell on
Foreign Relations Committee issues during the 1990s. I have
never known someone who was as committed to confronting the
devastating impact of international terrorists and criminal
organizations, including the drug cartels that Senator
Coverdell regarded as posing a greater threat than the Mafias
that plagued our own nation decades ago.
He also held a special place in his heart for this region,
having led the Peace Corps into many of the countries we are
discussing here today almost before the dust from the fall of
the Berlin Wall had settled. He did this because he believed
that our outreach to the people emerging from the bankruptcy of
communism would be critical, not only given the special
relationship we have with Europe but also as an example for the
world of how trading totalitarian controls for freedom, liberty
and democracy could lead to a new and better day. As a former
Senate staffer working closely with this committee on these
issues, I'm honored to be back here today, and I hope to build
on and deepen the partnership with the Senate, which has also
played a leading role.
I know that Senator Coverdell would be proud of the focus
this subcommittee is showing, and our successes in these areas.
As you have expressed, it is important that these successes and
the new U.S. challenges in Iraq and Afghanistan do not obscure
the great challenge which remains in areas that are critical to
U.S. interests today. For example, the wide range of criminal
activity engaged in by Russian organized crime groups likely
exceeds in scale and economic impact that of the Cali Cartel at
the height of its power. The threat of destabilizing
Afghanistan is linked to this area. Interpol estimates that
over 70 percent of the heroin trafficked in the U.S. arrives
via the Balkans route or one of its many tributaries.
Conservative estimates put the number of trafficked women in
and through Europe in the tens of thousands. It's against this
daunting background that I offer my testimony today.
The Bureau of International Narcotics and Law Enforcement
Affairs or INL is just one part of the team that is working on
these threats. It's a testament to the administration's
interest in these issues that we also have my colleagues here
to address questions related to the politics and specific
situations in the region, and from the Department of Justice
and FBI to address operational and DOJ matters. For this
reason, I will focus on three areas of relevance to my bureau,
its roles and responsibilities, the programs and initiatives it
helps manage in the region, and some of the key lessons
learned.
I think it would be useful to begin by describing the role
of INL, an acronym that may be less familiar to the
subcommittee than EUR or the FBI, and we view this mission as
both critical to your efforts to fight transnational threats
and essential to help nations such as those emerging from
Communist rules to build secure and prosperous democracies.
INL is responsible for developing policies and managing
over $1 billion in programs to combat transnational criminal
threats and to strengthen the rule of law in emerging
democracies. The bureau has special authorities that allow it
to fund a full range of programs and activities necessary to
address these issues, ranging from training a new police force
in Iraq, to negotiating U.N. conventions against corruption and
transnational crime, to funding so-called soft-side education
and alternative development for coca farms.
INL works closely in a partnership with EUR and state and
regional bureaus. It is different from these bureaus in that it
has a large group of civil service employees, many with
extensive law enforcement and military backgrounds, and law
enforcement detailers who provide expertise and enable us to
deepen our relationships to both U.S. and foreign law
enforcement agencies. These law enforcement agencies,
especially the Department of Justice and FBI, who are here
today, are also critical efforts in all that we do.
Overall, much of our focus is in helping to coordinate U.S.
international law enforcement cooperation and assistance to the
many parts of the U.S. Government working with foreign law
enforcement in these areas so we act as a team. Our work in
Europe and the former Soviet Union has been in close
partnership with the State Department's EUR bureau, which was
granted special authorities and coordination responsibilities
under the Freedom Support Act and the SEED Act, as well as with
DOJ, the FBI and other law enforcement agencies. In these
areas, INL manages over $90 million in programs, and leads or
co-chairs several important policy initiatives and mechanisms.
It is often useful to divide these up as bilateral, by helping
nations to develop and strengthen their own institutions, and
those that focus multilaterally on building groups of nations
and bringing them together to a more unified front.
Bilaterally we manage over $86 million in law enforcement
assistance in the region. Through this, we seek to encourage
strategic thinking, long-term planning, build on previously
funded efforts, and complement assistance provided by other
entities. These initiatives address the broad cross-cutting
section of areas including money laundering and terrorist
finance, trafficking in persons, border controls, anti-
corruption, police development, and assistance in judiciaries
and prosecutors.
While it would take a great deal of time to detail all of
its programs in the vast area covered by this hearing, some of
the examples would include police assistance projects in places
such as Albania and Hungary, broader efforts to build new and
effective civilian police forces in areas emerging from
conflict such as Kosovo and Bosnia, and finally resident legal
advisors or RLAs from the Justice Department, to work in
countries such as Romania and Russia to give them constant on-
the-ground advice. These bilateral initiatives help support our
other global and multilateral efforts, as well as those such as
the SECI Center funded directly by the EUR.
I would like to begin this discussion by highlighting an
institution that started in this region and has been seen as a
model here and abroad. The International Law Enforcement
Academies, ILEAs focus on bringing together mid to senior law
enforcement officials and other judicial officials from
countries around the region for both basic and specialized law
enforcement training. This process raises the professionalism
of these officers and just as importantly builds critical
networks between countries in the region with U.S. law
enforcement.
ILEA Budapest opened in 1995 and since then over 2,500 law
enforcement officers from over 25 countries in Europe and from
countries comprising the former Soviet Union have successfully
completed the core 8-week program. Also, since 1996, more than
4,000 criminal justice officials have participated in
specialized training programs.
While the Department of State funds the ILEA, I want to
note that it's truly a cooperative effort, with over 16 U.S.
law enforcement agencies participating as well, involving
concluded settlements from the participating nations and from
Western European agencies as trainers.
In the interest of time, I will skip over some of these
areas, since I know I'm going over that time right now, and
just highlight quickly a couple of the other areas that we work
in.
Some of the other areas, as Ambassador Pifer noted, are
based on specific threats such as money laundering, terrorist
finance and financial transactions, Council of Europe's
MoneyVal, and other areas where we offer indirect assistance.
And anticorruption in this region where we work with the
Council of Europe's Group of States Against Corruption, GRECO,
the Stability Pact SPAI initiative has set high standards as
well as doing individual programs targeted at the recruiting
country's capacity.
And finally, we work very closely with our European
partners to partner with them as you mentioned to confront
these together. Prime Minister Blair called a London conference
in November of 2002, which I attended with DAG Swartz as well
representing the U.S., with a representative from the EUR
bureau. And also in addition, we work very closely with our G-8
partners to fight international crime and terrorism and other
issues.
I will skip over some of the lessons learned that are
discussed more in depth in my statement that's submitted for
the record in the interest of time.
But in closing I would like to thank Senator Voinovich and
others for inviting us to speak with you today. Based on my
background and prior experience, I strongly believe we must
work closely with Congress in addressing the issues you raise
today. I also believe that our fundamental mission of building
solid law enforcement structures in these nations and enhancing
their capacity to be a vital part of an international net of
law enforcement is as critical as ever. It is the essential
foundation both for achieving security for our own people and
for cementing the great progress that has been achieved in the
region in the wake of the cold war. Thank you.
[The prepared statement of Mr. Schrage follows:]
Prepared Statement of Steven Schrage, Deputy Assistant Secretary of
State, Bureau of International Narcotics and Law Enforcement Affairs,
U.S. Department of State, Washington, DC
Thank you Mr. Chairman. Good afternoon. I'm extremely pleased to be
here today appearing before a Subcommittee of the Foreign Relations
Committee, after having served as counsel for the late Senator Paul
Coverdell on Foreign Relations Committee issues during the 1990s. I
have never known someone who was as committed to confronting the
devastating impact of international terrorist and criminal
organizations, including drug cartels that Senator Coverdell regarded
as posing a greater threat than the Mafia presence our own nation
struggled with decades earlier.
He also held a special place in his heart for Europe, having led
the Peace Corps into many of the countries we are discussing here today
almost before the dust had settled from the fallen Berlin Wall. He did
this because he believed that our outreach to the people emerging from
the evils of Communism would be critical, a reflection of the special
relationship we have with Europe and an example to the world of how
trading totalitarian controls for freedom, liberty and democracy could
lead to a new and better day. As a former Senate staffer working
closely with the Committee on these issues, I am honored to be back
here today and hope to build on and deepen the Administration's
partnership with the Senate, which has always played a leading role to
help advance these issues.
I know that Senator Coverdell would be proud of this Subcommittee
for holding this hearing and of our country's successes in these areas.
Yet neither these successes nor new U.S. commitments in Iraq and
Afghanistan should obscure the remaining great challenges to U.S.
interests in Europe. For example, the wide range of criminal activity
engaged in by Russian organized crime groups likely exceeds in scale
and economic impact that of the Cali Cartel at the height of its power.
Interpol estimates that the same drug producers that are destabilizing
Afghanistan are responsible for nearly 80% of the heroin trafficked
from Afghanistan into Europe, arriving via the Balkans route or one of
the many new ``tributaries'' of this old smuggling route. Conservative
estimates put the number of women trafficked globally between 800,000
and 900,000. The numbers on this are very elusive, particularly in
Europe. We look forward to the CIA estimates on regional breakdowns
that are due in January.
It is against this daunting backdrop that I offer my testimony
today. As I mentioned and as is reflected in the line-up of today's
panel, the Bureau of International Narcotics and Law Enforcement
Affairs, or INL, is just one part of the team working on these threats.
In this light, I will focus on three areas: INL's roles and
responsibilities, programs and initiatives in the region, and some key
lessons learned. I will defer to my European Bureau colleague for
questions on political implications and other regional issues and to
the Department of Justice and FBI representatives on operational
matters.
ROLE AND MISSION OF THE INL BUREAU
I think it would be useful to begin by describing the role of INL
and outlining why I believe INL's mission is critical to your efforts
both to fight transnational threats such as crime and terrorism in
Europe and around the globe, and to help nations such as those emerging
from communist rule build secure and prosperous democracies.
INL is the Bureau in the State Department that is responsible for
the development of policies and the management of over one billion
dollars in programs globally to combat transnational criminal threats,
including drugs, and strengthen the rule of law and relevant
institutions in emerging democracies. INL has special authorities that
allow it to fund a full range of programs necessary to address these
problems, ranging from training the new police force in Iraq and
Afghanistan, to negotiating global UN conventions against corruption,
drug trafficking, and transnational crime, to leading the G8's Lyon
Group in coordinating policies in our fight against international
crime, to funding so called ``softside'' education and alternative
development projects targeted at those involved in the production of
narcotics.
INL works in close partnership with EUR, other bureaus of the State
Department, and with the U.S. interagency. INL is different than
traditional State Department Regional Bureaus in maintaining a large
group of civil service employees, including many with extensive law
enforcement and military backgrounds, and officials detailed from key
law enforcement agencies who can provide expertise and deepen our ties
to foreign agencies to help advance U.S. goals. Overall, much of INL's
work focuses on helping coordinate U.S. international law enforcement
policy, cooperation and assistance so that the many parts of the U.S.
Government working with foreign law enforcement and justice systems can
act as a team.
INL INITIATIVES IN EUROPE
INL's work in Europe and Eurasia is done in close partnership with
the State Department's EUR Bureau, the Department of Justice, the FBI
and other law enforcement agencies. In particular, EUR was granted
special authorities and coordination mandates by the Congress under the
Freedom Support Act and the Support for East European Democracy or SEED
Act. In these areas INL funds or manages over $90 million (FY 03 SEED/
FSA and FY 2002 FSA Supplemental) in programs and leads or co-chairs
several important policy initiatives or mechanisms that are critical in
this fight. In describing these programs and initiatives, it is often
useful to divide them into two categories, those that focus bilaterally
in helping nations develop and strengthen their own institutions and
rule of law and those that are focused on bringing groups of nations
together to address these threats as a more united front.
BILATERAL PROGRAMS AND INITIATIVES:
Through its over $86 million in law enforcement bilateral
assistance in the region, INL encourages strategic thinking and long-
term planning and attempts to build on previously funded efforts,
complement the assistance provided by other USG agencies/departments
and other donors (particularly the European Union and the United
Nations), and promote input from host governments, NGOs and the private
sector. INL bilateral initiatives address a broad cross-section of law
enforcement and criminal justice sector thematic areas including:
counternarcotics; demand reduction; money laundering; financial crime;
terrorist financing; smuggling of goods; illegal migration; trafficking
in persons; domestic violence; border controls; document security;
corruption; cyber-crime; intellectual property rights; law enforcement;
police academy development; and assistance to judiciaries and
prosecutors.
While it would take a great deal of time to detail all of INL's
programs in the vast area covered by this hearing, some of our key
programs in this region relate to our work in the following areas.
LAW ENFORCEMENT ASSISTANCE PROJECTS
A key part of INL's mission is to work with the Department of
Justice in developing foreign law enforcement institutions to build the
rule of law where most of the citizens of these nations will see it
operating in their day-to-day lives. Key initiatives in this area are
under way in the following countries.
Albania. INL funded a Department of Justice project to train
Albanian police and prosecutors in modern investigative and
prosecutorial techniques focused on disrupting and dismantling
organized criminal enterprises. This project is linked to other, broad
DOJ OPDAT/ICITAP assistance projects in Albania focused on
modernization of the National Police, enhancing the capabilities of the
prosecution service, and establishing international standards of border
security at three major ports-of-entry.
Hungary. The Organized Crime Task Force (OCTF) was created as a key
element of a six-point assistance plan in 1998. INL start up funding
allowed the FBI to provide significant levels of training and technical
assistance to the Hungarian OCTF. FBI agents have been assigned to
Hungary to work side-by-side with their Hungarian National Police
counterparts. In fact, DOJ/OPDAT and the FBI are jointly bringing
members from the Hungarian OCTF and prosecution service to the United
States in December to receive intensive training and insight into
organized crime task forces and how they operate in this country.
International Civilian Policing (CIVPOL). Some areas of the Balkans
are emerging from post-conflict situations that left basic institutions
essentially destroyed. Establishing, restructuring and rebuilding basic
policing functions in these areas has required efforts that go far
beyond the police assistance described above. In areas such as Kosovo
and Bosnia, the United States has worked with the United Nations and
the Organization for Security and Cooperation in Europe (OSCE) to
rebuild a stable police force that can serve as a backbone for
establishing the rule of law in these areas. The Kosovo police program
involves our assistance in both training a new police force and in
providing U.S. police officers that, as part of a multi-national UN
CIVPOL force, provide interim public security and serve as mentors
alongside the new Kosovo Police Service as it assumes its law
enforcement responsibilities. This important program has been
recognized as a model for establishing civilian security in post-
conflict situations and much of the knowledge has been applied to other
areas of the world, to include our efforts in Iraq.
RESIDENT LEGAL ADVISOR PROGRAMS
Another key part of INL's mission is working with our Department of
Justice colleagues to provide Resident Legal Advisors or RLAs to
countries to give them continuous, on the ground advice in how to
establish appropriate legal institutions necessary for their own
security and to confront transnational threats. INL RLA programs are
active in Albania, Azerbaijan, Bulgaria, Bosnia Herzegovina, Georgia,
Macedonia, Moldova, Romania, Russia, Serbia Montenegro/Kosovo, and
Uzbekistan. Two brief examples of their work include:
Romania. The RLA program in Romania recently donated specialized
investigative equipment (listening and communications devices) and
provided training to the National Anti-Corruption Prosecutor's Office
(PNA) in order for the PNA to more effectively investigate and
prosecute corruption cases, particularly public corruption cases
involving organized criminal activity.
Russia. The RLA in Moscow helped to introduce significant legal
reforms and positive changes to the criminal procedure code, and we are
now engaged in an effort to expand that process to include the states
of Central Asia.
MULTILATERAL INITIATIVES:
While a key focus of our bilateral programs is to strengthen the
internal ability of nations to confront criminal threats, other key
initiatives and programs bring nations together in the realization that
we will never effectively counter transnational criminal organizations
unless we are able to effectively work across boarders and
jurisdictions to address common threats. I should note that INL also
works closely with initiatives such as the Southeast European
Cooperative Initiative's (SECI's) Anti-Crime Center in Bucharest,
Romania. INL strives to make sure that our bilateral and multilateral
initiatives are complementary to the important role of SECI in
combating transnational crime.
ILEA Budapest
I would like to begin this discussion by highlighting an
institution that was born in this region and that has made great
strides in the global fight against crime--the International Law
Enforcement Academies or ILEAs. ILEAs are being looked to at the
highest levels in the United States and around the world as a model for
advancing our common fight against international crime and promoting
the rule of law that is essential for development and prosperity.
ILEAs--which focus training primarily on mid-to-senior-level law
enforcement and other judicial officials--serve our interests in
several critical ways. They establish and expand the long-term liaison
relationships among law enforcement officials that are critical to
combating international crime; they support democracy and stress the
rule of law in international and domestic police operations; and they
raise the professionalism of officers involved in the fight against
crime.
Several fundamental precepts--such as respect for human rights and
the rule of law, adoption of high ethical standards, and the promotion
of international law enforcement cooperation--are emphasized throughout
the ILEA program. The focus of instruction is not solely on the
acquisition of technical skills, it also includes the development of
leadership and management skills to deal with challenges facing law
enforcement throughout the world.
ILEA Budapest opened in 1995 and since then over 2,500 law
enforcement officers from 25 countries in Central Europe and the
countries comprising the former Soviet Union have successfully
completed the core eight-week program during more than 42 iterations.
ILEA Budapest offers an entire week of instruction on organized crime
during each 8-week core program. The FBI is the lead for this block of
instruction and presents the enterprise theory of investigation,
whereby police are taught to view the structure and behavior of
organized crime as somewhat akin to that of a corporation, as an
effective methodology to combat organized crime. The FBI helped
spearhead the creation of the ILEA program and under the leadership of
Director Dale Wegkamp of the FBI, ILEA Budapest has earned admiration
and spawned similar programs around the globe.
The ILEAs also play host to focused regional seminars and
specialized training programs. Over 4,000 criminal justice officials
have participated in specialized training programs since 1996. One such
specialized program, presented by the Justice Department's Office of
Overseas Prosecutorial Development, Assistance and Training (OPDAT),
focuses on organized crime and is designed to familiarize prosecutors
and investigators with the special problems involved in pursuing
organized crime cases and to provide practical exposure to specialized
investigative tools.
Another offering from OPDAT is the money laundering seminar that is
designed to familiarize law enforcement personnel, policymakers, and
legislators with Financial Action Task Force (FATF) standards governing
money laundering; and developing and using legislation, investigative
techniques and prosecutorial tools in fighting money laundering, bank
fraud, terrorist financing, and other complex financial crimes.
ILEA Budapest has also seen the successful introduction earlier
this year of a pilot course taught, in coordination with the State
Department's Office of the Coordinator for Counterterrorism (S/CT), by
the Department's Bureau of Diplomatic Security, Office of Anti-
Terrorism Training and Assistance (DS/ATA) entitled ``Police Role in
Combating Terrorism.'' This course focuses on the role of police as the
first responders to terrorist incidents. Additionally, the ILEA hosts a
``Weapons of Mass Destruction'' course conducted by trainers from the
Department of Defense's Defense Threat Reduction Agency (DTRA). This
course targets senior-level officials involved with border security,
customs, emergency response and frontier police operations in a WMD
environment.
While the Department of State funds the ILEA, I want to note that
16 U.S. law enforcement agencies participate in the ILEA program. It is
a cooperative and interagency program in every sense of the word. In
addition to the strong partnership with Hungary, other participating
nations are key in making this program a success. Nations and
organizations such as the Ireland, Germany, Italy, Great Britain,
Canada, Russia, INTERPOL, and the Council of Europe have also provided
instructors to ILEA Budapest. Overall, this program is an example of
what can be achieved by working together.
As I mentioned earlier, the success of ILEA Budapest, has spawned
new ILEAs in Southeast Asia, Africa, and a graduate academy in the
United States. Plans are underway to expand their reach even further
geographically, and by using new technologies such as the Internet to
link ILEA graduates around the globe, to explore using this ILEA
network to more effectively confront cross-border crime. INL is also
looking at adding courses focused on combating the threats posed by
international networks that traffic persons for purposes of commercial
or sexual exploitation.
MONEY LAUNDERING-TERRORIST FINANCING
Many of our other multilateral efforts are focused on special areas
of emphasis, such as money laundering, where experts in a specific
field work to establish standards and specialized institutions. Through
participation in the Financial Action Task Force (FATF), INL plays an
important role in formulating global anti-money laundering policies,
and since 9-11, standards designed to thwart the financing of
terrorism. For more than a decade, INL has designed, funded and
coordinated the USG's interagency bilateral training and technical
assistance programs that have assisted countries in former communist
states in Europe in constructing viable anti-money laundering and
terrorist financing regimes.
Globally, INL co-leads with the counter-terrorism (S/CT) bureau of
the State Department a group that oversees the provision and
implementation of our critical money laundering and terrorist financing
assistance to key states. INL also funds and participates in the
Council of Europe's anti-money laundering organization, MoneyVal.
MoneyVal is comprised of 24 member states, conducts semi-annual plenary
meetings to discuss international standards and their implementation
and undertakes multilateral mutual evaluations of anti-money laundering
regimes.
CORRUPTION
Another key area where INL plays a major role is working to combat
corruption and coordinate U.S. law enforcement assistance efforts. INL
is working on both a diplomatic and programmatic level to encourage and
help European governments take effective action to address corruption
problems. The most notable European multilateral effort involves the
Council of Europe's Group of States Against Corruption (GRECO), whose
members now include 34 European countries and the United States.
Through GRECO, experts from the U.S. and other member countries have
over the past three years made on-site visits to evaluate anti-
corruption efforts of member states and provide constructive advice on
how such efforts can be improved.
The U.S. also participates actively in and funds the Anti-
Corruption Network for Transition Economies, which includes the nations
of Eastern Europe, Russia, and the Trans-Caucasus. The Stability Pact
has an anti-corruption arm--the Stability Pact Anti-Corruption
Initiative (SPAI). SPAI provides a forum for Balkan member states to
meet and develop anti-corruption strategies. INL has worked closely
with SPAI to develop sustainable project plans.
LONDON CONFERENCE
In November of 2002, Prime Minister Blair called a conference to
rally the nations of Europe and their partners to address the issue of
organized crime in the Balkans. I, along with representatives from the
EUR bureau and the Department of Justice, represented the United
States. The U.S. and the EU continue to work to implement the resulting
action plans from this UK-hosted, international conference focused on
developing national and regional capacity in the Balkans to combat
organized crime, including through witness protection. We are also
working closely with the EU and other European institutions to develop
a Balkan regional witness protection strategy.
G8--LYON GROUP
As seen in the London Conference, our efforts in Europe also go
beyond helping nations build the capacity to confront transnational
threats. They extend to teaming with other committed nations to
coordinate policies to more effectively protect our citizens and attack
criminal conduct. In 1995, the nations of the G8 formed the Lyon Group
to coordinate their efforts against international crimea INL has
chaired the delegation, which includes strong representation from the
Department of Justice as well as experts from law enforcement agencies
outside of Justice. In the years since, the group has done important
work in the areas of combating cyber crime and other high-tech crimes,
setting international standards and identifying best practices in a
variety of areas, including transportation security; and enhancing law
enforcement cooperation against transnational crime and terrorism,
including identifying and removing obstacles to cooperation and
facilitating information sharing.
In the wake of September 11th, the Lyon Group has worked closely
with the G8's Roma Group on counter-terrorism to ensure coordination in
critical law enforcement efforts that are vital to our fight against
terrorism. INL and S/CT co-chair the delegation to these meetings.
LESSONS LEARNED:
Importance of Regional and International Cooperation
Advancing our shared fight against crime by promoting the rule of
law and fostering international law enforcement cooperation is a pre-
eminent objective of U.S. foreign policy and of the international
community of nations. To achieve proper coordination, we work closely
with other program implementers--European bilateral implementers, the
EU, the UN and its agencies, and more specialized groups such as the
International Organization for Migration (IOM) and the OSCE--to share
information about our programs and make sure our efforts are
complementary. The rule of law and effective law enforcement form a
foundation on which commerce and investment, economic development, and
respect for human rights can be built.
Today, advances in technology have broken down barriers between
nations and unprecedented opportunities exist for organized crime and
other transnational threats. In confronting international crime, it is
important that we extend internationally a web of effective law
enforcement to eliminate safe havens and gaps in jurisdictions that
allow criminal threats to fester and grow. While targeted intelligence
and operations may remove specific terrorist, drug trafficking, or
organized crime groups, unless we address the environments that allow
them to thrive, we will have at best created a void that can be filled
by others.
Importance of Interagency Coordination
In meeting its mission of coordinating law enforcement assistance
efforts, INL has built bridges between different agency efforts as well
as between the law enforcement community and the overall diplomatic
mission of the State Department. It is our experience that the most
progress is seen in countries when the various strengths of different
agencies can be brought to bear as part of a unified strategy, with a
strong recognition and respect for the great expertise brought to bear
by U.S. law enforcement officials.
Project Based Programs--Focused on Integrated Country Strategies
INL moved aggressively, following a GAO report on assistance to
Russia, to institute a project based approach to programs. INL no
longer considers stand-alone training courses in our bilateral programs
unless they form part of broader, sustainable projects that strive for
lasting impact. INL now signs Letters of Agreement (LOA) with host
governments that detail not only the various projects and funding
levels in our assistance programs but the obligations of the host
government. For example, our LOA standard provisions exempt assistance
projects from host government taxation, establish agreed upon methods
of monitoring and evaluation, make contingent our assistance on host
government adherence to human rights standards, and vet participants
for past involvement in human rights abuses and narcotics trafficking.
Country Strategies Linked to Crosscutting International Strategies
In confronting threats that cross many borders and jurisdictions
around the world, it is often critical that our efforts in different
bilateral programs be coordinated so that we focus on areas that will
have the greatest impact in promoting U.S. objectives. In this sense,
country or regional strategies must also be coordinated with our
overarching goals and objectives.
In closing, I want to thank the Chairman for inviting me to speak
with you. Based on my background and prior experiences, I strongly and
deeply believe that we must work closely with the Congress in
addressing the issue of transnational crime in Europe. I also believe
that the fundamental mission of building solid law enforcement and rule
of law structures in these nations and enhancing their capacity to be a
vital part of a net of law enforcement across the globe, is an
essential foundation for achieving security for our people and
cementing the great progress that has been achieved in this region in
the wake of the Cold War.
Thank you.
Senator Voinovich. Thank you.
Welcome back. Mr. Swartz.
STATEMENT OF BRUCE C. SWARTZ, DEPUTY ASSISTANT ATTORNEY
GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE,
WASHINGTON, DC
Mr. Swartz. Thank you, Mr. Chairman, and thank you for the
invitation to the Department of Justice to testify today on the
topic of transnational organized crime. As you noted, Mr.
Chairman, at the outset, this is a problem that the United
States cannot afford to ignore. It cannot afford to ignore it
both in its own right the effects that are already beginning to
be felt in the U.S., but also with regard to its more extended
effects.
As my colleagues have noted, the destabilization that
results from organized crime can lead to consequences not only
with regard to commerce, the effects on business, the effects
on citizens of other countries, but can create conditions that
will foster terrorism in the future. We simply cannot afford to
let organized crime succeed in these states. It's also a
problem, as my colleagues have noted, that must be dealt with
in cooperation, in cooperation inter-agency in the United
States, cooperation bilaterally with our law enforcement
partners in Europe, and multilaterally, particularly with the
European Union.
As Ambassador Pifer noted, and as my colleague Deputy
Assistant Secretary Schrage just noted, the State Department
and the Department of Justice work extremely closely together
with regard to rule of law and technical assistance programs in
European countries and in the former Soviet Union. In
particular, we have sent approximately at the current time 15
Federal prosecutors to serve as resident legal advisors in
Central Europe or Eurasia. Those resident legal advisors serve
to help create new laws, to help advise nations with regard to
rule of law issues, and help create conditions that have made
possible expanded law enforcement relationships in many of
these countries.
In particular, I note the work that was done in Russia with
regard to the Russian criminal code, which in turn led the
Senate to recognize that it was appropriate to move forward on
advice and consent with regard to the Russian Mutual Assistance
Treaty.
In addition, as you noted, Mr. Chairman, it is critical in
these countries, and we recognize that it is not enough to
simply work on prosecution or police, they must go hand in
hand. And the Department of Justice, again, through working
with the Department of State through the ICT program, the
International Criminal Training program, seeks to ensure that
criminal training of police takes place as well so we can
cooperate and create a rule of law system that will effectively
lead not only to arrests but to prosecutions.
Bilaterally, our job is to ensure that we are working
closely with our European partners on dealing with these
organized crime issues, for while it is true that organized
crime, particularly Balkan organized crime, was primarily felt
in Europe, now we are beginning to see effects in the United
States as well, direct effects in terms of our citizens being
victims of that type of criminal activity. In that regard, the
Department of Justice Criminal Division works extremely closely
with our colleagues in the FBI, and my colleague Grant Ashley
will discuss that as well. But we have with us today two of the
leaders in that, the head of our organized crime racketeering
section prosecutorial group, Bruce Orr, and W.K. Williams from
the FBI.
I must say that Mr. Orr and Mr. Williams really have
recognized at an early stage the critical nature of the
organized crime problem in its international dimension and
together have launched an initiative to travel to other
countries, to make it clear to them that we stand ready to work
with them bilaterally on particular cases and to try and work
across state lines to deal with these issues.
We also have a number of other elements within the Criminal
Division of the Department of Justice that are deeply engaged
in this issue on a bilateral basis. Our Office of International
Affairs every day deals with mutual assistance in extradition
matters that directly involve organized crime issues. We also
have a number of Federal prosecutors that have been closely
involved in the Office of International Affairs in Rome,
Brussels, London, and in Paris, with one expected to be in
Moscow as well. Those individuals, unlike our resident legal
advisors, can work on operational matters and particular cases,
not simply the broader issues. They also serve to coordinate
with the critical FBI program which has done so much to aid the
United States in fighting organized crime.
Finally, a number of other sections in the Criminal
Division, the computer crimes section, the fraud section in
particular, are involved in organized crime work.
Multilaterally as well, particularly as the European Union
increasingly moves to what they refer to as third pillar
justice and human affairs issues, we find that organized crime
is a central topic. As I'm sure the chairman is aware, in June
of this year, Attorney General Ashcroft signed the first treaty
between the United States and the European Union on law
enforcement issues, addressing this topic of mutual legal
assistance and extradition treaty. That treaty involved both
extradition and mutual legal assistance as important provisions
that let us deal with organized crime. In particular, the
extradition treaty modernizes many of our older extradition
treaties, and the mutual legal assistance treaty provides for
joint investigative teams and greater access to bank accounts.
We expect both of these to be important tools.
Europol, the European police organization set up under EU
auspices, we've worked closely with Europol to try and develop
organized crime strategies. Members of Mr. Orr's organized
crime group met with Europol representatives only last month in
fact to discuss this very issue.
We are involved as well, as my colleagues have noted, with
the OSCE with regard to the SECI center and more generally with
regard to the Transnational Organized Crime Convention, which
is now pending before many countries and has been signed by the
United States.
We thank you again for the opportunity to discuss this
important issue, and I would welcome any questions you might
have. Thank you.
[The prepared statement of Mr. Swartz follows:]
Prepared Statement of Bruce C. Swartz, Deputy Assistant Attorney
General, Criminal Division, U.S. Department of Justice, Washington, DC
Good morning, Mr. Chairman and Members of the Subcommittee. I am
grateful to have the opportunity to address you today, and to explain
the critical role played by the Department of Justice--in partnership
with the Department of State--in the fight against transnational
organized crime.
During the past several years, the world has witnessed an
unprecedented global expansion of organized crime groups. These
organizations range from those focused predominantly on particular
areas of crime, such as Colombian drug cartels, to those engaged in a
broad range of criminal enterprises, such as Eurasian and Balkan crime
groups. Technological advances allowing for easier communications and
travel have resulted in multi-national cooperation among crime groups
that had historically remained isolated and independent.
Europe has been particularly hard-struck by the expansion of
criminal organizations. The freedoms that resulted from the fall of
totalitarian regimes in the east and the opening of borders within the
European union have been exploited not only by legitimate businesses,
but also by well organized and ruthless organized crime syndicates that
have spread their tentacles across Europe. Most of these groups have
shown an uncanny ability to adapt to their new environments by creating
niches in new, or previously unexploited, areas of crime, and by
successfully integrating with home-grown criminal organizations.
Transnational crime syndicates also have mastered the manipulation of
the social, economic and legal systems of the west. They hide behind
political freedoms and privacy rights and frequently move their members
and criminal proceeds from country to country in an effort to outstrip
the sharing of information among national police forces. It has been a
difficult task for law enforcement authorities in Europe and the United
States to keep pace with these groups in light of the freedom of
movement that they enjoy.
In many former communist countries in the Balkans, Eastern Europe
and the former Soviet Union, organized crime and its associated public
corruption has reached epidemic proportions. A World Bank sponsored
study by the Indem Foundation concluded that a $38 billion is spent
annually in Russia on bribes. The Russian interior ministry recently
estimated that criminal groups have used Russian banks to illegally
transfer $9 billion out of Russia so far this year. European police
organizations have estimated that Balkan organized crime groups control
upwards of 70% of the heroin market in major European nations, and are
rapidly taking over human trafficking, prostitution and car theft
rings.
Nor is the United States immune from the rise of European organized
crime groups. The United States, with its open society and free
markets, has become an increasingly attractive target for foreign-based
organized crime. Criminal gangs from the Balkans, Eastern Europe and
the former Soviet Union are involved in all types of criminal activity
in the United States, from drug trafficking to organized burglary and
home invasion robbery rings, from money laundering and securities fraud
to traditional organized crime gambling and extortion rackets.
The Department of Justice has taken on the multi-faceted challenge
of coordinating much of our response to transnational organized crime
groups, from working on specific investigations and prosecutions
against the most significant and dangerous transnational crime figures
to helping to formulate policy in cooperation with the Department of
State. The day-to-day activities of Criminal Division prosecutors and
Assistant United States Attorneys in this area are extensive. I will
attempt to broadly outline some of the most significant roles played by
the Division.
Criminal Division attorneys play a leading operational role by
handling or directly assisting in the majority of complex international
investigations and prosecutions brought in the United States. Our
prosecutors work closely with U.S. investigators, including special
agents from the FBI, DEA, and the Department of Homeland Security, to
navigate the complexities of international and domestic criminal law.
This is particularly true where agents are investigating international
criminal organizations with an eye towards prosecution in the United
States.
Criminal Division attorneys have developed particular expertise in
this area. They regularly work with agents on complex international
cases that require extensive cooperation with foreign law enforcement
authorities, and coordination among many U.S. law enforcement agencies
and United States Attorney's Offices. Department attorneys work closely
with Federal agents from the initial stages of these investigations to
formulate and implement investigative and prosecutive strategies. As is
common in the U.S. system, Department attorneys become deeply involved
in these investigations, developing an expertise that parallels and
complements the knowledge of the lead investigative agents.
Prosecutors from the Department of Justice handling international
cases also interact frequently with their foreign counterparts in
justice ministries. In many European countries, prosecutors or
investigating magistrates play a supervisory role, directing and
controlling the actions of their national police forces in particular
investigations. European prosecutors and investigating magistrates
frequently view U.S. prosecutors as their peers in the U.S. system.
This enables Department attorneys to further the interests of the
agents with whom they work by negotiating and coordinating
investigative decisions and evidence sharing issues with their foreign
counterparts.
Criminal Division attorneys handle a broad range of evidence
sharing issues, from the issuance of mutual legal assistance treaty
requests and letters rogatory, to the facilitation of informal
evidence-sharing and cooperation. They also regularly coordinate
different phases of multi-national investigations and prosecutions with
their foreign counterparts. By understanding the complex rules
governing discovery in various nations, Department attorneys play a
critical role in counseling U.S. agents on timing and strategy issues
in such cases. Criminal Division attorneys also handle international
arrest issues by working with U.S. law enforcement agents to draft and
submit provisional arrest warrant requests, INTERPOL red notices and
extradition requests.
Criminal Division attorneys also play a crucial role in
facilitating the necessary flow of information and evidence among both
domestic and foreign law enforcement agencies. The Department of
Justice has access to information from many different sources, both
domestic and international. This includes information frequently
obtained by Department attorneys serving or traveling abroad, such as
Office of International Affairs trial attorneys and trial attorneys
from the Division's litigating sections. Combining the Division's
expertise in transnational crime with this wide access to information,
Division attorneys are able to identify critical evidentiary links and
facilitate the broader sharing of information among U.S. and foreign
law enforcement agencies. Moreover, due to their reputation among
domestic law enforcement agencies as central and neutral advocates of
the interests of the United States, Department attorneys frequently are
able to facilitate the sharing of information and cooperation among
various federal agencies that might otherwise not even know of their
common interest in particular targets.
Litigators from various sections of the Criminal Division are
uniquely situated to handle international investigations. As they are
authorized by law to appear and conduct investigations in any Federal
District Court, they are not limited by the geographical boundaries of
United States Attorney's Offices. Thus, Department attorneys frequently
pursue leads and coordinate investigations that affect several
different Federal districts--a task which would be much more difficult
for an Assistant United States Attorney.
In the organized crime area, this ability to coordinate is greatly
enhanced by the fact that, by special Justice Department regulation,
all organized crime prosecutions in the 21 organized crime strike
forces across the country are directly supervised by the Organized
Crime and Racketeering Section (OCRS) in the Criminal Division in
Washington, D.C. OCRS is therefore in the unique position of being able
to coordinate the nationwide prosecutive attack on domestic and
international organized crime groups and present a single point of
contact for organized crime cases to our prosecution counterparts in
other parts of the world.
Criminal Division attorneys benefit from other built-in advantages
when working international cases. For example, being based in
Washington, D.C., Department attorneys have the benefit of easy access
to the headquarters of various Federal law enforcement agencies. They
also are able to quickly and easily exchange information with law
enforcement attaches to various embassies, and with the Europol
liaisons stationed in Washington, D.C.. Finally, through general venue
provisions such as those contained in title 21, Criminal Division
prosecutors are frequently able to centralize the prosecution of
multinational and multi-district investigations in Washington, D.C.
The Criminal Division also coordinates with the Department of State
and with other components in the Department of Justice and various
Federal law enforcement agencies to help formulate U.S. foreign policy
on law enforcement issues in Europe. This requires coordination not
only with respect to law enforcement policies in Western Europe, but
also regarding the development and implementation of programs to
encourage the Eastern European and Eurasian countries, including EU
accession states, to develop workable legal frameworks that will enable
them to respond to the threat of organized crime while respecting the
rule of law. Working with the Department of State, experienced Criminal
Division attorneys regularly coordinate with EU and Council of Europe
entities to implement and improve mechanisms to combat organized crime.
Along with the Department of State, the Department of Justice also
plays a direct role in coordinating with the EU and other international
organizations to provide technical training and assistance to
developing European and Eurasian nations. Through its OPDAT resident
legal advisors and ICITAP program managers, the Department provides
essential aid and educational guidance on myriad criminal justice
issues throughout the Balkans, Eastern Europe and the former Soviet
Union. From the development of organized crime task forces to the
assistance in legislative drafting, the Criminal Division plays a
crucial role in promoting stability and establishing the rule of law
throughout the region. Division employees often provide assistance and
training in conjunction with law enforcement officials from Western
Europe. While they work to improve the legal systems in these
countries, these Criminal Division representatives develop valuable
expertise in understanding the legal and cultural systems throughout
Europe and Eurasia, enabling them to provide expert guidance and advice
to prosecutors and agents in the United States.
The Balkans provide a particularly good example of the Criminal
Division's training and assistance strategy. Working through the Office
of Overseas Prosecutorial Development, Assistance and Training
(``OPDAT'') and International Criminal Investigative Training
Assistance Program (``ICITAP''), the Criminal Division has emphasized
the development of national task forces which can work both
independently as well as with foreign counterparts, including the
United States, and international organizations in the fight against
transnational organized crime. OPDAT and ICITAP assist host countries
in fostering team-building approaches to detect, investigate and
prosecute organized crime, including multi-functional and multi-
jurisdictional task forces. Additionally, the Criminal Division has
provided assistance to the Southeastern Europe Coordinating Initiative
(SECI) based in Bucharest, Romania, which provides regional
coordination on transborder investigations and encourages the
development of special task forces in the member countries. OPDAT and
U.S. Federal law enforcement agencies, such as the FBI, DEA and Secret
Service, have assisted in the development and establishment of these
SECI-based task forces. Following the SECI example, certain Eurasian
countries are developing a transborder law enforcement organization
under the auspices of Guam, a regional entity composed of Georgia,
Ukraine, Uzbekistan, Azerbaijan and Moldova. The Criminal Division,
through ICITAP, currently is providing assistance to Guam as it
develops this mission.
The Criminal Division also works closely with Europol to develop
stronger international cooperation on criminal matters. Again, due to
their unique position within the U.S. law enforcement community and
their broad access to information, Division attorneys are able to
identify and focus upon particular areas where cooperation with Europol
will be fruitful. By leveraging the benefits of Europol, such as their
access to information throughout the EU and their strong analytical
assets, the Criminal Division is attempting to foster greater
information exchange with agents in the United States. At the same
time, the Criminal Division is hoping to use the information it obtains
from Europol to identify priority international targets for
investigation, understanding that the best way to encourage
international cooperation is by developing concrete cases that will
lead to joint investigations and prosecutions.
While mentioning Europol I should also mention the work of the
USNCB, the American part of INTERPOL. A Criminal Division attorney
serves as counsel for the USNCB and plays an important role in
INTERPOL's mission of international law enforcement cooperation and
sharing police information among INTERPOL's 181 member countries. The
attorney also serves on several INTERPOL committees developing policy
for INTERPOL and plays a primary role in the USNCB's job as a point of
contact for Europol.
In summary, the Criminal Division focuses on the issue of
transnational crime in several ways, giving the Division the unique
ability to meld the various functions it serves to achieve the final
goal of successfully attacking organized crime. The Department
understands that forging strong investigative and diplomatic relations
is crucial. Whenever possible, we must coordinate our investigations,
so that investigative and prosecutive steps taken in the us in pursuit
of domestic strands of an international criminal network will not
conflict with, and will instead enhance, similar steps taken in Europe.
This can be achieved only through building close working relationships
with our investigative and prosecutive colleagues in other countries.
It also requires a thorough understanding of each others' laws and
procedures so that we can make the cases come together and actually
work. This job can only be tackled by U.S. agents, diplomats and other
experts working closely together with Department prosecutors, from the
Office of International Affairs, the Office of Prosecutorial
Development, Assistance and Training, the United States Attorneys'
Offices and litigating sections like the Organized Crime and
Racketeering Section.
CONCLUSION
The Department appreciates the interest of the Committee in this
matter. I am prepared to answer any questions the Committee may have.
Senator Voinovich. Thank you very much.
Mr. Ashley.
STATEMENT OF GRANT D. ASHLEY, ASSISTANT DIRECTOR, CRIMINAL
INVESTIGATION DIVISION, FEDERAL BUREAU OF INVESTIGATION,
WASHINGTON, DC
Mr. Ashley. Thank you, Mr. Chairman, good afternoon. I
appreciate the opportunity for the FBI to present comments
regarding Eurasian organized crimes, a topic that is of great
interest to committee and high in priority to the FBI.
We are developing a variety of anticrime efforts both here
in the United States and abroad to combat these dangerous
threats. One of the more effective ways to fight international
crime is by building cooperative partnerships between the U.S.
law enforcement and our overseas counterparts. Without these
relationships there cannot be a commonality of purpose, or an
open communication which is required for success. More and more
of these bridges are being built and the successes are already
evident.
A number of Russian and Eurasian organized crime groups and
criminal enterprises are operating in the United States, the
most significant being the Solntsevskaya criminal enterprise.
These enterprises may be broadly categorized as structured
criminal organizations like the powerful Solntsevskaya and
Ismailovskaya enterprises. Both these groups are present in the
United States and are attempting to gain a foothold in our
country. They are engaged in extortion, kidnaping, drug
trafficking, murder, prostitution, and a number of frauds.
The FBI currently has 245 ongoing cases dealing with
Eurasian organized crime. In addition to the criminal activity
we have cited above, the Eurasian organized crime enterprises
have been identified in cases involving white slave
trafficking, prostitution, hostage taking, transportation of
stolen property for export, insurance fraud which is generally
staged auto accidents, and medical fraud involving false
medical claims, engagement in counterfeiting, credit card
forgery and murder.
During 1998, Russian organized crime suspects were arrested
in Chicago for violation of visa fraud. The investigation
determined that young females from Latvia were being recruited
to the United States and held against their will. These women
were forced to work at topless adult entertainment
establishments which were owned and operated by Russian
organized crime figures.
I would like to discuss one of our efforts, which I believe
to be one of the most innovative approaches to cooperative law
enforcement that you will find anywhere in the world. I'm
speaking of the joint FBI-Hungarian National Police Organized
Crime Task Force that's operating out of Budapest, Hungary.
During 1999 it became imperative that the United States adopt a
new approach to bring about broader cooperation in the
international law enforcement community, as well as have a
strategy for implementing approaches that would benefit both
the United States and its international partners. Given the
threat situation, Budapest, Hungary seemed to be the logical
place to initiate this strategy.
Currently four FBI agents and 7 elite officers from the
Hungarian National police are assigned to this task force and
are collocated in Hungarian National Police space. These agents
can acquire direct real time information and intelligence,
which provides support for ongoing investigations of criminal
activity throughout the country. As a result of the cooperation
of the Hungarian National Police, the FBI has been able to
develop intelligence involving Eurasian organized crime
activities throughout Europe impacting the United States. This
allows agents to thwart these organized criminal enterprises
before they reach or become firmly established in the U.S. as a
result of this cooperation, criminal activities impacting the
U.S. have been identified.
The success of the Budapest task force has encouraged other
foreign law enforcement counterparts to seek expansion of this
concept to address the threat of transnational criminal
enterprises at the source country before a nexus to the United
States exists.
The Balkan Organized Crime Initiative consists of
addressing organized criminal activity emanating from the
following nations: Slovenia, Croatia, Serbia-Montenegro,
Bosnia-Herzegovina, Albania, Kosovo, the former Yugoslav
Republic of Macedonia, and Greece. It is a relatively new
program but a very high profile endeavor on the part of the FBI
and is a major focus. Balkan organized crime, specifically
Albanian organized crime, is an emerging organized crime
problem with international ramifications and has been
identified and is being addressed in 12 FBI field offices
throughout the United States.
I appreciate the interest of this committee and with your
permission I would like to place a more detailed statement in
the record and answer any questions you may have.
[The prepared statement of Mr. Ashley follows:]
Prepared Statement of Grant D. Ashley, Assistant Director, Criminal
Investigation Division, Federal Bureau of Investigation, Washington, DC
Good morning Mr. Chairman and members of the Subcommittee on
European Affairs. On behalf of the Federal Bureau of Investigation
(FBI), I would like to express my gratitude to the subcommittee for
affording us the opportunity to participate in this forum and to
provide comment to the subcommittee on issues related to Eurasian
organized criminal enterprises, a topic that is of great concern to the
FBI as well as to this committee. It is our belief that the
international growth of these very dangerous, criminally diverse and
organized groups and their emergence in the United States has caused a
significant expansion of our crime problem. The FBI and DOJ are taking
an aggressive stance in addressing these organized criminal
enterprises, domestically and internationally, to help other nations
battle these groups and to prevent them from becoming entrenched in the
United States.
Organized criminal enterprises are no longer bound by the
constraints of borders. Such offenses as terrorism, organized crime,
computer crime, and drug trafficking have spilled from other countries
into the United States. Regardless of origin, these and other overseas
crimes directly impact U.S. national security and the interests of our
citizens. Eurasian organized crime, because of its size, wealth and
international reach, poses some of the greatest threats in this regard.
We have developed a variety of anti-crime efforts both here and
abroad to combat these dangerous threats. One of the most effective
ways to fight international crime is by building investigator-to-
investigator and prosecutor-to-prosecutor bridges between American law
enforcement and our overseas counterparts. Without these relationships,
there cannot be the commonality of purpose and open communication
required for success. More and more of these bridges are being built,
and successes are flowing from them.
We are using a number of approaches to develop cooperative law
enforcement programs with other countries. For example, our Legal
Attache program works closely with a large number of foreign police
forces, forming a sort of distant early warning system to alert us to
new and emerging crime threats. Interpol's United States National
Central Bureau, to which the FBI has detailed four special agents and
the criminal division one trial attorney, also plays an important role
in coordinating with our European counterparts on a wide array of
organized crime issues. Similar programs at other U.S. law enforcement
agencies also render invaluable service in forging close bonds with our
foreign counterparts and allowing us early identification of foreign
criminal enterprises attempting to expand to the United States.
Training is another powerful tool. The FBI, DOJ's Criminal Division,
and other department components, in coordination with the Department of
State, assist our foreign law enforcement counterparts through training
here and abroad. Finally, the FBI's cutting edge technique for
addressing transnational European organized crime is the joint FBI/
Hungarian National Police Organized Crime Task Force. I will provide
additional details on the task force and our broader efforts at
cooperation and coordination later in my testimony.
DESCRIPTION OF THE THREAT
The subject of the committee's hearing today covers crime groups
categorized by the FBI under three distinct labels--Eurasian organized
crime, Italian organized crime and Balkan organized crime. I will
discuss the problem primarily in terms of Eurasian organized crime
first.
EURASIAN ORGANIZED CRIME
``Eurasian organized crime'' is the term applied by the FBI, to the
phenomenon of organized crime associated with persons originating from
Russia, Eastern and Central European countries, as well as the other
independent states created following the collapse of the Soviet Union.
Most members of Eurasian organized crime groups in the United States
originated in the territories of the former Soviet Union, particularly
in Russia, the Ukraine, and to a lesser degree from the Baltic States,
principally Lithuania and Latvia.
The fall of communism was one of freedoms greatest triumphs over
oppression. However, the breakup of the old Communist states and the
economic and social upheaval that followed in the 1990s also created
fertile ground for the rapid rise of sophisticated, ruthless organized
crime groups in many former Communist countries.
In many of those countries organized crime and its attendant public
corruption have reached epidemic proportions. To cite but one example,
the Russian Interior Ministry recently estimated that over half of the
Russian economy, including significant portions of its vast energy and
metallurgical sectors, is controlled by organized crime. The Russian
Interior Ministry recently estimated that, in a country where by some
accounts over half the population earns less than $70 a month, in this
year alone criminal groups in Russia have used Russian banks to
illegally transfer $9 billion out of the country. Similar sobering
statistics can be cited for many other countries in the region. In
these countries the reality is that organized crime and corruption have
become an accepted fact affecting almost every aspect of daily life.
The end of the cold war also provided significant, unintended
opportunities for organized crime groups and criminal enterprises in
former Communist countries to expand internationally to Western Europe
and beyond. Evidence that organized crime activity from these areas is
expanding and will continue to expand to the United States is well-
documented. Criminal groups from the Balkans, Eastern and Central
Europe and the former Soviet Union are involved in all types of
criminal activity in the United States, from drug trafficking and human
trafficking to burglary and home invasion robbery rings, from money
laundering and securities fraud to traditional organized crime gambling
and extortion rackets.
The FBI and DOJ prosecutors have many years of successful
investigative and prosecutorial experience in the battle with la Cosa
Nostra and other organized criminal enterprises here in the United
States. We view organized crime as a continuing criminal conspiracy
having a firm organizational structure, a conspiracy fed by fear and
corruption. This definition also applies to the Eurasian organized
crime threat facing Europe and Russia and now the United States.
A number of Russian/Eurasian organized crime groups and criminal
enterprises operate in the United States. They may be broadly
categorized as falling into two types. The first type may be more aptly
called ``fraud and other types of crimes, all designed to obtain money,
perpetrated by Russian-speaking individuals.'' In this fraud/financial
crime area, we often see what appear to be crimes of opportunity,
sometimes perpetrated by a few individuals or by loosely-structured
groups. The second type, structured organized crime groups, like the
powerful Russian Solntsevskaya and Ismailovskaya criminal enterprises,
have members here in the United States and are attempting to get a
foothold in the U.U. These groups, when they resort to extortion,
kidnaping, drugs, murder, prostitution and fraud for their main sources
of revenue, are sometimes easier to identify, collect evidence against
and ultimately convict and incarcerate. On the other hand, when well-
organized groups deploy their full resources in money laundering or
other complex white collar schemes such as stock market manipulation,
health care fraud, and insurance fraud, they can be very difficult to
detect and prosecute.
The genesis of Eurasian organized crime in the United States dates
to the 1970's when significant numbers of Soviet emigres first arrived.
Most of the estimated 100,000 emigres who entered the United States
during the 1970's and 1980's were Soviet Jews fleeing religious
persecution and political dissidents. A very small cadre of criminals
within this otherwise law-abiding emigre population constituted the
base of domestic Eurasian organized crime enterprises operating in the
United States. The dissolution of the Soviet Union in 1991 fostered
another wave of emigration to the United States, with thousands of
emigres taking advantage of the lifting of travel restrictions to flee
dismal economic conditions in the former Soviet Union. While the vast
majority of these individuals in this wave were also hard-working and
law-abiding, this exodus resulted in an increased presence in the
United States of both domestic and foreign-based Eurasian organized
crime enterprises. This emergence of foreign-based Eurasian organized
crime enterprises following the advent of capitalism and privatization
in the former Soviet Union after 1991 has changed the scope of the
threat posed by Eurasian organized crime enterprises from a localized
problem to one of international proportions. In the 1990's, Eurasian
organized crime enterprises emerged as national and global threats.
The FBI currently has 245 ongoing cases dealing with Eurasian
organized crime. Fraud, transnational money laundering, extortion, drug
trafficking and auto theft are the most frequent violations cited in
FBI Eurasian organized crime cases. Most significantly, nearly 60
percent of all FBI cases targeting Eurasian organized crime involve
some type of fraud. In addition to the violations cited above, Eurasian
organized crime enterprises have been identified in cases involving
white slave trafficking/prostitution, hostage taking, extortion of
immigrant celebrities and sport figures, transportation of stolen
property for export, insurance (staged auto accidents) and medical
fraud (false medical claims), counterfeiting, credit card forgery, and
murder.
Examples of significant Eurasian organized crime cases abound. In
1991, the U.S. Attorney's office in Los Angeles charged 13 defendants
in a $1 billion false medical billing scheme that was headed by two
Russian emigre brothers. On September 20, 1994, the alleged ringleader
was sentenced to 21 years in prison for fraud, conspiracy,
racketeering, and money laundering. He was also ordered to forfeit $50
million in assets, pay more than $41 million in restitution to
government agencies and insurance companies victimized by the scheme.
The first significant Eurasian organized crime investigation
involving a major underworld figure in the United States concerned
Vyacheslav Ivankov, one of the most powerful international Eurasian
organized crime bosses. Ivankov led an international criminal
organization that operated in numerous cities in Europe, Canada, and
the United States, chiefly New York, London, Toronto, Vienna, Budapest,
and Moscow. The investigation was initiated in 1993 after the FBI was
alerted to Ivankov's presence in the United States by the Russian
Ministry of the Interior (MVD).
In June 1995, Ivankov and five others were arrested by the FBI. In
July 1996, Ivankov was found guilty on numerous counts of extortion and
conspiracy and in January 1997, the Eastern District of New York
sentenced Ivankov to 115 months of incarceration and 5 years of
probation.
ITALIAN ORGANIZED CRIME
The second organized crime threat afflicting Europe and poised to
attack the United States is composed of Italian organized crime (IOC)
groups. The best known of these groups is the Sicilian Mafia, but other
significant Italian organized crime groups include the Neapolitan
Camorra, the Calabrian 'ndrangheta and the Puglian Sacra Corona Unita.
Long dominant in some of the lesser-developed regions of Italy, there
are increasing signs that elements of these criminal organizations are
attempting to expand their reach beyond Italy's borders.
For example, pending investigations reflect that there continues to
be a nexus between the United States' domestic la Cosa Nostra (LCN)
families and the Sicilian Mafia. Travel by senior United States LCN
members to Sicily has been noted on several occasions. Elements of
Italian organized crime continue to traffick drugs to and from the
United States and launder their money from criminal activity in the
United States, and members/associates of the Neapolitan Camorra are
engaged in the sale of counterfeit consumer goods in the New York/
Newark metropolitan area, Chicago, Los Angeles, and San Diego.
In cooperation with our Italian law enforcement counterparts, we
continue to attempt to identify and target members of traditional IOC
groups engaged in criminal activity in both countries, as well as to
identify and locate fugitives from our respective criminal justice
systems.
The Direzione Investigativa Antimafia (DIA) has advised that with
respect to traditional organized crime activity in Italy, the Calabrian
'ndrangheta has evolved from kidnapings for ransom to drug trafficking
and the systemic corruption of public officials to gain lucrative
municipal contracts. The Neapolitan Camorra is reportedly developing a
more ``entrepreneurial mentality'' and is expanding its criminal
activity beyond its traditional extortion rackets to the smuggling of
counterfeit and non-taxed cigarettes. It is further reported that the
Camorra is attempting to interject itself into the legitimate economies
of Eastern Europe. The Puglian Sacra Corona Unita is allegedly taking
advantage of its geographic proximity to the Balkans to align itself
with Balkan organized criminal groups engaged in arms and cigarette
smuggling, trafficking in humans, and alien smuggling.
Through the auspices of and in coordination with the FBI's office
of the Legal Attache in Rome, operational relationships continue to be
developed between FBI special agents and U.S. Federal prosecutors and
their counterparts in Italy, to include investigative magistrates, the
Italian national police, the Drezione Investigativa Antimafia,
Carabinieri and Guardia d'finanza.
In conjunction with the cross border initiative with Canada, the
Royal Canadian Mounted Police and the FBI have identified IOC
enterprises criminally active in both countries, and are working
jointly to address these criminal enterprises as I speak.
BALKAN ORGANIZED CRIME
The Balkan Organized Crime (BOC) Initiative, which consists of
addressing organized criminal activity emanating from Slovenia,
Croatia, Serbia-Montenegro, Bosnia-Herzegovina, Albania, Kosovo, the
Former Yugoslav Republic of Macedonia (FYROM), and Greece, is a
relatively new program, and a very high profile endeavor on the part of
the FBI's Organized Crime Section (OSC) and DOJ's Organized Crime and
Racketeering Section (OCRS). Balkan organized crime is an emerging
organized crime problem with transnational ramifications that has been
identified and is being addressed in 12 FBI divisions throughout the
United States.
Balkan organized crime groups, particularly those composed of
ethnic Albanians, have expanded rapidly over the last decade to Italy,
Germany, Switzerland, Great Britain, and the Scandinavian countries,
and are beginning to gain a foothold in the United States. In the last
year or two, European nations have recognized that Balkan organized
crime is one of the greatest criminal threats that they face. European
police organizations now estimate that Balkan organized crime groups
control upwards of 70% of the heroin market in some of the larger
European nations, and are rapidly taking over human smuggling,
prostitution and car theft rings across Europe.
Domestically, Albanian organized crime groups have been involved in
murders, bank and ATM burglaries, passport and visa fraud, illegal
gambling, weapons and narcotics trafficking, and extortion. In New York
City, the Albanians have actually challenged the LCN for control of
some traditional criminal activities which have historically been the
mainstay of LCN family operations. Albanian OC groups have also formed
partnerships with the Gambino, Genovese, and Luchese LCM families to
facilitate specific crimes.
While the Albanian organized crime groups have a well-deserved
reputation in underworld circles for extreme violence, they are also
knowledgeable about United States sentencing guidelines. For example,
rather than rob a bank at gun-point with employees and customers
present, and potentially receive a long sentence, we have seen them
burglarize the bank after hours by smashing into unguarded ATMs through
brute force.
AN INNOVATIVE SOLUTION: THE JOINT FBI/HUNGARIAN NATIONAL POLICE
ORGANIZED CRIME TASK FORCE
The Department and the FBI are working hard at many different
levels to improve law enforcement cooperation between countries and
engineer multi-national cases that attack the most dangerous
transnational criminal enterprises operating between Europe and the
United States. I would like to begin my discussion of our efforts by
talking about one of the most innovative approaches to cooperative law
enforcement to be found anywhere in the world--the joint FBI/Hungarian
National Police Organized Crime Task Force in Budapest, Hungary.
The events that triggered the need for this task force arose from
the collapse and fragmentation of the Soviet Union. As I previously
noted, following the collapse, organized crime exploded throughout
Russia, the new republics, and Eastern Europe. By the mid-1990s, the
Moscow-based Solntsevskaya criminal enterprise emerged as the largest
and most powerful Russian organized crime group. In 1995, one of the
strongest Solntsevskaya factions, led by Semion Mogilevich, established
its headquarters in Budapest, Hungary. Budapest was attractive to such
groups because, among other things, it maintained a stable,
sophisticated banking system, as well as contact with Western
countries. Mogilevich employed the safe haven in Hungary to direct his
criminal operations against the United States.
During 1999 it became imperative for the United States to adopt a
new approach to bring about broader cooperation in the international
law enforcement community, as well as a strategy for implementing an
approach that would benefit the United States and its international
partners. Given the situation, Budapest, Hungary seemed to be the
logical place to initiate this new strategy.
The U.S. and Hungarian Governments accordingly agreed to set up a
joint task force where FBI and Hungarian National Police officers would
work side-by-side to investigate organized crime cases. Currently, four
FBI agents and seven elite officers from the Hungarian National Police
are assigned to the task force.
The impact of the task force was immediately apparent. The
Ukrainian-born Mogilevich fled Budapest for Moscow. The enhanced
assistance provided by the task force enabled United States prosecutors
from the Philadelphia Organized Crime Strike Force to obtain
indictments charging four subjects, including Mogilevich, with money
laundering, securities fraud, and rico conspiracy.
With Eastern Europe as the center of the intelligence base, FBI
agents can acquire evidence in direct, ``real time.'' With the
cooperation of the Hungarian National Police, FBI agents have been able
to develop intelligence involving Eurasian organized crime networks
throughout Europe. This allows agents to thwart Eurasian organized
criminal enterprises before they reach the United States.
The task force has established itself as the most elite
investigative unit in Hungary. Members employ sophisticated
investigative techniques regularly used by the FBI and other U.S.
investigative agencies but previously unknown in Hungary. As a result,
organized crime investigations have been initiated throughout the
world, as well as in a number of FBI field offices throughout the
United States. The success of the Budapest task force has encouraged
other foreign law enforcement counterparts to seek expansion of this
concept to address the threat of transnational criminal enterprises at
the source countries where links to the United States exist.
CONCLUSION
We appreciate the interest of the committee in this matter. I am
prepared to answer any questions the committee may have.
Senator Voinovich. Thank you, Mr. Ashley. I have just been
informed that I have to excuse myself and go vote, so we will
take a little break and then continue with the questioning.
[Recess.]
Senator Voinovich. The hearing will come to order. The
first thing I would like to discuss, Mr. Ashley, you were
talking about some of these foreign operations here in this
country, the Russians in Chicago, and I have heard about them
in New York and New Jersey. Have we seen a marked increase in
the involvement of foreign organized crime operations entities
in the United States in the last several years?
Mr. Ashley. Yes, Senator. Not only have we seen an increase
in the amount of the activity but the complexity of their
crimes and the true transnational nature of the crimes is
becoming more apparent.
Senator Voinovich. In other words, they are operating, it
sounds to me like the old-time Cleveland Mafia, you know, shake
downs, all the rest of that stuff that they do. And now they
are, I was just thinking on the way over here, we are exporting
a lot of our jobs overseas and they are importing all of their
crime organizations here.
Mr. Ashley. We see basically two types of criminal activity
that these groups are engaged in. Some of the localized, the
extortion, the shake downs that they historically use, and the
extreme violence which they are well known for. And then the
more enterprise-related crimes that bleed over into western
Europe, the United States, Baltic, and all these areas, and
that's where the human trafficking, the drug trafficking, money
laundering, weapons trafficking, all these types of very
sophisticated crimes come in.
Senator Voinovich. So the Ukraine, from what I understand,
is a big source of human trafficking, which they start there
and they just line up these folks and then they figure ways to
get them into the United States.
The question I would like to ask all of you is, do you have
the resources here in the United States to deal with this? If
it's escalating, it appears that more effort needs to be put
out to make sure that it doesn't continue to spread, and I
would like your comment on that.
Mr. Ashley. Senator, I'm a little uncomfortable to put
myself in the position of estimating the Director's need for
the resources of the FBI, but I can say that the problem is
getting greater, the challenges to all law enforcement in the
U.S. as well as overseas is going to stretch our available
resources even more so.
Senator Voinovich. Is part of the problem the fact that
more and more resources are going to deal with terrorism and as
a result of that, there is some moving away from resources that
would ordinarily be engaged in dealing with criminal
organizations from overseas?
Mr. Ashley. We had a program approved by the House and
Senate that did move some criminal resources. It's also
important to note that these cases are very resource intensive.
If we're going after the right transnational organizations and
using the right techniques, there will be extensive wire taps,
undercover activity, financial transaction investigation, a lot
of overseas work, and they take a lot of time and money.
Senator Voinovich. This is a side line, another area I have
been working on for quite a few years, and that is the issue of
human capital and resources, and you might be interested in
knowing that we're looking at all law enforcement outside of
homeland security in terms of the pay scale and the rest of it.
We're hearing from some of your agents around the country who
complain that their locational pay is so inadequate they have
to live 60 miles out of town. A lot of what we're talking about
here has got to do with people and with homeland security, you
know, they are part of a new personnel system. But they're
looking at that and I think it's important that we look at
what's happening in the other law enforcement areas so we don't
have this inconsistency there in terms of pay and so on, so
that we can attract the people that you can and keep them on
board.
In terms of the United States, I'm really interested in the
organizational structure here, because I will be candid with
you, and I have been briefed a couple of times confidentially
about what's going on, and the fact of the matter, is it
frightens me how organized these people are. And I think to
myself, if we're going to do anything about this, it's really
going to take some good organization, and the issue is, are you
all organized here?
Is there coordination here among whatever resources you
have, do you think going on, and I know it's a difficult
question to answer, but in the United States, do you think that
there is enough communication going on between the various
agencies that are responsible for dealing with the people that
have come here?
Mr. Ashley. Senator, I do believe that the coordination
between the Federal agencies as well as the other partners in
this in the United States is nothing short of exceptional.
Yesterday, I had Department of Justice, other Federal agencies
and other investigators involved with the Budapest project in a
coordination meeting to ensure that everything we do is toward
the stated objectives, fully coordinated on a national and
international basis. It is the future threat for the United
States and that's the only way we can operate effectively.
Senator Voinovich. So would you all agree with me?
Mr. Swartz. Mr. Chairman, if I may add, and I fully concur
in Mr. Ashley's statement. I think from a law enforcement point
of view, the coordination is outstanding. The Criminal
Division, as I noted, has an organized crime and racketeering
section, which in turn supervises 21 organized crime strike
forces in the U.S. attorney's offices. And again, thanks to the
work of Mr. Orr and Mr. Williams, I think it's fair to say that
there is no matter on which we are not working directly
together in this contest.
Similarly with regard to the international aspect, as my
colleagues at the State Department have said, they are people
we work with regularly on these cases.
Senator Voinovich. So in the United States, it seems that
the coordination, you have these task forces now locally where
there is a lot more coordination going on between you and local
enforcement, so, that's good.
Ambassador Pifer.
Ambassador Pifer. Mr. Chairman, I also view this from
another perspective from my experience in Ukraine, so I think
there is really a need for coordination in the field. Under the
auspices of our country team in Ukraine, we brought in a range
of State Department sections but also other agencies to address
the crime and corruption problems. For example, we had legal
attaches working with their counterparts on specific legal
cases. We also had a regional legal advisor who was doing
various programs with Ukrainia law enforcement agencies in
terms of providing equipment and training. We have various
international development programs that were designed to attack
crime from another area, programs to basically improve the
judiciary and more broadly, civil society.
We also looked at crime and criminal issues with our public
affairs section, ensuring that who do we want to send to the
United States on exchange programs that would expose them to
anti-corruption techniques and then bring those folks back. But
we have very good coordination within the embassy and we want
to make sure that the kind of coordination is replicated in the
field, and I think that's the case in most of our areas.
Senator Voinovich. Mr. Schrage.
Mr. Schrage. One of the reasons INL was created was to
serve as a central point for much of the international law
enforcement and we work very closely to help coordinate efforts
to help obtain the unified front in this battle. We work
extremely close and think we do, as everyone here said, see a
lot of each other, we coordinate priorities and how we move
forward in these areas.
Senator Voinovich. The coordinator in the United States is
who, who coordinates it? Is that the Attorney General?
Mr. Swartz. Mr. Chairman, the Attorney General coordinates
certainly the prosecution for organized crime matters within
the United States, obviously Director Mueller and our other law
enforcement agencies within the Department of Justice.
Senator Voinovich. And is the State Department also
involved because of their relationship with some of these
countries and so on?
Mr. Swartz. It is certainly closely coordinated with State
when it has international implications. I have met with
Ambassador Pifer on many occasions on these matters, so
consistent with our obligations, yes, we do try and coordinate
case matters when necessary. And then multilaterally, I think
it's fair to say internationally, we work directly with State
Department and we share responsibility there on policy issues.
Senator Voinovich. Ambassador Pifer, you said that you're
impressed with what they are saying. Take the Ukraine for
example. Is our Ambassador to the Ukraine in that office
responsible for coordinating among those agencies? In other
words, for example, I know many FBI agents may be on board and
maybe even some CIA agents and so on and so forth, but that's
being run by the Ambassador, is that how that works?
Ambassador Pifer. Sir, I cannot speak for my successor, but
when I was in Kiev I had a practice of meeting once every 2
weeks with my legal attache, whether we had a fire or not. The
idea was to make me think about for at least 20 minutes the
sorts of issues he had to worry about. And when I was there,
the Ambassador had the authority and responsibility as the head
of the country team for the coordination. What I normally did
was ask my deputy chief of mission to hold regular meetings to
ensure all the pieces were moving in the same direction.
And I very much suspect that my successor is doing
something similar, Ambassador Herbst, who as part of his
briefing process was very much made aware of some of the crime
and corruption problems in Ukraine.
Senator Voinovich. Does the State Department have either
public or confidential lists of the countries and the problems
that are there, and where the infrastructure in the area of the
criminal justice areas is important at that particular time,
and a priority list so that there is a master plan of where we
are vulnerable and where we need to do work and how we're doing
and so on?
Mr. Schrage. We do have prioritization processes or lists
for country specific threats. For example, I briefed the
Congress quite a bit about terrorist financing and money
laundering, and I believe as you pointed out, in terms of
personnel resources, some of the critical limits we face aren't
always just dollars, it's the personnel to address some of
these matters. I look at the threats related to terrorist
financing and my office alone, I co-chair a process where we
look around the world to look at the priorities, where we need
to go to bolster our activities.
Senator Voinovich. That's the threat assessment, saying
we're vulnerable, and worked through your embassy, I suppose?
Mr. Schrage. We work through the embassy but we also work
through the interagency group and representatives from the
Justice Department, Treasury, NSC, from all the agencies
involved, to come up with a unified strategy and plan.
Senator Voinovich. I was a big promoter of expansion of
NATO to include Bulgaria and Romania, and we made it very clear
to those folks that they needed to take action to combat
corruption and promote the rule of law. Is there any document
which shows whether or not they have made any progress in those
areas? Who keeps track of that? Is that the State Department?
Ambassador Pifer. That's our tracking that we would have at
the country desk based on the reports it gets from the embassy,
but also with close coordination with INL, to make sure the
problem was being managed better, or whether we need to feed
new resources. As part of our assistance effort, we have an
assistance coordinator who is in charge of the Freedom Support
Act and also the SEED programs, but they also look for programs
that INL works. We try to solve problems in a coordinated way,
and we try to respond to what's going on. For example, there
may be more resources devoted to the counter-narcotics problem
in Central Asia because we see increasing flows of narcotics
coming out of Afghanistan, but we have a multitasked effort.
Senator Voinovich. Has there been an increase, not to get
away from this subject, but has there been an increase in this
activity in Afghanistan?
Ambassador Pifer. My sense is, and please don't quote me,
the problem on our part has certainly gotten increased
attention. Over the last 2 years we've had an Afghanistan
focus, and there's a specific group that looks at counter-
narcotics, and we get cooperation there.
Senator Voinovich. It's a little hard to understand because
we have troops over in Afghanistan, and if the problem is
greater today than it was before, what's the reason?
Ambassador Pifer. I am not able to compare numbers with,
say, 3 years ago, but it is certainly very important.
Senator Voinovich. Well, it gets back to the coordination
now. So you are working with this individual desk, so you have
some idea of where you need to build infrastructure, you have
an idea where you need to put some resources--you have some
problems with organized crime going on there with threat
assessments coordination is important.
The next issue is on a bilateral basis, how much
coordination do you do with other countries? For example,
you've got the OSCE, somebody mentioned that they are in the
business of building infrastructure, particularly
infrastructure to promote the rule of law. Is there any
interface with the OSCE? Does anybody coordinate with their
efforts or perhaps another one of our allies that may have an
interest there? How does that work?
Ambassador Pifer. Well, speaking from my experience in
Ukraine, and I have no reason to believe that they have done
away with this practice, our Agency for International
Development mission in Kiev regularly had a donors meeting
where we would bring together not just our contributing
organizations, but also the European Union, and we would engage
with countries that also had bilateral programs. We would bring
in the World Bank, the IMF, those types of groups. And the idea
there was let's look at the range of the assistance programs
we're doing in Ukraine, and are there areas where we're
duplicating efforts, and are there areas where we have left
critical problems uncovered. So there was some coordination, it
was certainly not as effective as within the U.S. Government,
but there was some effort to make sure we were working in a
very coordinated way.
Senator Voinovich. But that's bilateral U.S.-Ukraine
interaction, and then you look around for other organizations
that are there to see if you can work with them.
Ambassador Pifer. Right. And there are other examples. For
example, looking at the narcotics problem and the issue of
Central Asia, because we worked very closely with the United
Nations Office on Drug and Crimes, and provided some assistance
to them to help strengthen their presence for their work in
Central Asia. Tajikistan established a fairly good drug
enforcement agency, and we have been working with the United
Nations Office on Drugs and Crime to take that model and
replicate it in Kyrgyzstan, because we think there is a good
model, it seems to work, and the focus here is aiding the host
nation to gain the capacity to deal with this narcotics issue.
Senator Voinovich. So you have the U.N. involved in that?
Ambassador Pifer. Yes, sir.
Senator Voinovich. I know that Erhard Busek now has control
of the Stability Pact, and you also put SECI underneath his
jurisdiction. What kind of coordination is going on between
SECI and the Stability Pact in terms of what you're doing over
there?
Ambassador Pifer. Mr. Chairman, could I get back to you? I
think there is close coordination, but in specifics, I think it
would be better if I got back to you.
Mr. Swartz. I can comment briefly on our experience over
there. We have met with Stability Pact representatives in
regard to what steps can be taken to strengthen SECI. We also
have our representative in Brussels from the Department of
Justice Criminal Division and he has been involved in some of
the SECI entities such as the anticorruption issue. In
addition, our organized crimes representatives have attended
meetings, most recently the ministerial.
Senator Voinovich. One of the things that seems to bother
me is that they have lots of meetings over there, groups,
everybody is going to meetings. The issue is, who really looks
at, sits down and looks at the local operation over there? You
have the United Nations, you have OSCE, you have SECI, the
Stability Pact, the United States. You know, if the people that
we're dealing with are organized and do franchising in places
and have this thing really organized, what are we doing to
develop the same kind of an organization that can counteract
it? Understanding that we can't do it all by ourselves in the
United States, who should be the person in your opinion that's
sitting down in a room looking at what everyone is doing, an
orchestra leader? We've got all these people out there in
sections of the orchestra, and how do we orchestrate this
thing?
For example, Richard Monk was in from the OSCE, and I
happen to know a lot about what they're doing with building
police capacity, because I have a former state trooper that I
get e-mails from often. He used to work with the OSCE in
Kosovo, and I knew more about what was going on sometimes than
I think the State Department knew what was going on. Now they
picked him up, and he works with Richard Monk and the OSCE in
Vienna. But they have five people in that operation and they're
going into countries and trying to build a police force, and I
think to myself, are you the only ones that are doing that? Is
the United States involved in your efforts here? Does the left
hand know what the right hand is doing here?
Mr. Swartz. Mr. Chairman, I think that's a very valid
inquiry, one that we certainly try to work at both from the
Department of Justice and Department of State perspective. We
were recently involved in a conference call from London, which
was an attempt really to bring together the various groups. The
position we've taken at the Department of Justice on this is
that as you say, meetings are good, but we need to try where we
can to develop some cases, investigations and prosecutions, and
some practical programs such as witness protection programs. We
will continue to work closely with State to push that issue
forward, particularly in the EU context. I can't say that we've
reached the stage of having a division of responsibilities but
it is certainly one of the items that we are concerned with,
and State may be able to add to that.
Mr. Schrage. I just wanted to add that there are a number
of different groups and there are a number of many different
players, and we work very closely with those. For example, we
worked very closely through the London conference to come up
with action plans to help coordinate assistance. Again, where
the rubber meets the road is going to be trying some of these
people and seeing that it has moved forward and actually
results in real results. In addition, we are now quoting the
efforts of the G-8 in something called the CTAG, the Counter-
Terrorism Assistance Group that was set up during the last
presidency of the G-8. It's led by the SIG group at the State
Department, but many of the efforts that have been brought are
involved with the law enforcement efforts, and we're looking
with the major donors to look and see that we're not
duplicating efforts. So I think there are numerous efforts
underway in different organizations bringing different
strengths, and we're trying to look across all those different
area and make sure that these assets are managed in an
effective manner. The EUR has special authorities and interests
in terms of mutual assistance but also in terms of having more
operational authority in terms of developing assistance
programs, so we work very closely with the special region. INL
looks both at the EUR and globally to see which pieces of this
fit together well and how we can work with different partners.
Senator Voinovich. But you don't know whether the State
Department has someone who was looking across the field to see
what was going on? For example, somebody mentioned the SECI
operation in Bucharest. From what I understand, you know, that
doesn't have staff to undertake a lot. Does anyone do an
analysis of whether or not they're doing the job they're
supposed to be doing and whether or not they have the resources
to do it? If we really wanted to do something about this
problem and get organized against organized crime, then what
entity in the Federal Government should be the one that brings
these people to the table and says look, we need to get serious
about this, and we have everybody doing these separate things,
and we have to somehow bring this together so we can do a
better job.
Ambassador Pifer. Mr. Chairman, the answer may be a little
more ad hoc than I think your question suggests you would like.
In terms of would you like to see a master mind concerning the
U.S. Government effort, I think we would have a difficult time
identifying that person. But what I can assure you is that when
we get to specific issues, be it SECI or the organized crime
problem in Russia, we do try to work in an organized way and
ensure that we don't duplicate efforts. We're talking and we're
working with our colleagues in INL, our counter-terrorism
officers are reaching out to the Department of Justice and
other agencies, because we are mindful that our ability to
tackle this problem is going to be strengthened if it is done
in a coordinated way. So it tends to be more ad hoc and geared
toward the specific issue and specific problem, as opposed to
having a one size fits all structure.
Senator Voinovich. Do you think it would be a good idea if
someone sat down and looked at what everyone is doing and look
at the resources that they have and how they are coordinating
with each other, and trying to really figure out how you could
put together a very vibrant operational effort that would
maximize resources and improve the job?
Ambassador Pifer. I think we're trying to do that now, but
I'm not sure it would lead to a single structure.
Senator Voinovich. That probably would come out of the
State Department and get the Justice Department involved, get
John Ashcroft involved and get Colin Powell involved. Who else
would be involved sitting at a table and looking at this, what
other Federal agencies?
Mr. Swartz. I think those would be the two leading
agencies, particularly because we're dealing with the
international foreign relations aspect and the law enforcement
side.
Senator Voinovich. Do you know if there is ever a meeting,
given all of the things in the Justice Department and the State
Department, do they ever have big meetings and look at what's
going on?
Mr. Swartz. Certainly in the context of the EU, which
involves a meeting with our EU counterparts every 6 months. We
regularly have meetings with Deputies and Assistant Secretaries
to discuss these issues. We have meetings with Principal Deputy
Assistant Secretary Charlie Ries from EUR to discuss ongoing
issues, and which has actually provided some useful concrete
results such as the extradition and mutual assistance treaties.
We have tried back in the last month, as I mentioned, sent one
of our prosecutors to Europol to see whether we might use
Europol as a point of entry for an EU-wide approach, at least
with regard to intelligence sharing. But we really--it's an
ongoing problem.
Senator Voinovich. What's the jurisdiction of Europol?
Mr. Swartz. Europol is not a law enforcement agency per se
in terms of operational efforts and it's a fledgling
organization, but it does have jurisdiction for gathering
information insofar as EU member states are concerned with
respect to organized crime, narcotics and terrorism. It would
be in our interest to allow shared data, personal data in
regard to law enforcement investigations.
Senator Voinovich. In terms of organized crime and
terrorism, how much of an impact does organized crime have on
our ability to deal with terrorists? I mean, this country is
very concerned about terrorism now, and so the issue then
becomes, how does that interface with organized crime? Is it
worse? Does organized crime enhance terrorists, and can you
show linkages between terrorism and organized crime?
Mr. Ashley. Senator, I don't know that there has been a
linkage between organized crime and terrorism established, but
something that does concern all of us is the terrorism threat.
The transnational threat is that the organized crime looks to
break down the government through corruption and essentially
negate the rule of law, and I think it's a pretty safe
assumption beyond that, that in that environment that is going
to certainly increase the terrorist threat to the United
States. But with respect to actually drawing a straight line
between organized crime and terrorism, I have not seen it at
this point.
Mr. Swartz. Mr. Chairman, if I may add, certainly in some
of our prosecutions involved in Colombia, for example, it does
appear that in some instances you may find situations in which
terrorist groups engaged in organized crime either because they
are changing into organized crime entities or there is an
interaction, but I fully agree with Mr. Ashley that the risk is
both that organized crime helps foster failed states, which in
turn promote a breeding ground for terrorists, but also provide
transit rooms for the terrorist threat, so even if the
organized crime members are not terrorists. So on both of those
grounds we see that as a risk in its own right and possibly
leading on to terrorist actions as well.
Mr. Schrage. If I could just add to the comments from the
FBI, the programs that we make are focused on the idea that all
these type of threats swim in the same type of swamp, which is,
we try to build fundamental rule of law and international nets
of law enforcement that catch a lot of threats which are
terrorists or criminals. Whether these are per se terrorist
groups, I would defer again to the intel community and the law
enforcement community, but in terms of links, we have a lot of
concerns and recognize that these terrorist groups are willing
to use whatever means necessary to raise money for their
illicit purposes. So the things that we put in place, whether
it's for money laundering, whether it's anticorruption, whether
it's things related to border security, have a broader impact
and I think are a fundamental bedrock of all these areas.
Senator Voinovich. Ambassador Pifer, do you want to add
anything?
Ambassador Pifer. I would just say, for example, that we
address money laundering as a crime problem and put in stronger
institutions for investigating and stopping money transfers.
That also works against terrorism and we tried to promote that
idea. I made reference in my opening comments to this virtual
law enforcement center that the five GUUAM countries are
setting up, and we have talked to them about it. There is a
vehicle to promote law enforcement cooperation, counter-
narcotics, counter-terrorism, but we see this as all parts of a
problem that stronger law enforcement cooperation can attack in
the same way.
Senator Voinovich. Well, from my perspective looking at the
big picture, it seems to me if you're looking at the United
States of America, first of all, we need to pump up the
resources that we have dealing with these international crime
operations that are operating in the United States, because if
they're growing, it means we're not doing something that we
should be doing, so I think that's No. 1. And then we should
identify the linkages out there to wherever they are and focus
our attention on those areas that are feeding that operation,
and some of those are very very sophisticated and well
organized.
Second of all, I observe that you feel that in respect to
individual countries, you're doing a pretty good job on a
bilateral basis, but it seems to me that the communication in
various regions, are those various embassies coordinated with
each other and talking with each other in terms of what's going
on here and there?
And the last thing, of course, is the relationship with all
the other agencies and organizations that are out there, and
would you all agree that it might be in the interest of
everybody for someone to really look at all the resources that
we have and prioritize in an effort to figure out how we can
better utilize those resources? That will help us identify
areas where we need to put more resources, whether it's us or
the United Nations or the EU, because the EU's biggest effort
is what, through the OSCE, is in terms of crime and organized
crime?
Mr. Swartz. They also act directly in picking some of the
accession countries through advisors that have been paired up
with member countries. They do operate with the OSCE and for
the last several years have focused on the accession countries,
but also had some security problems from the Balkan states as
well.
Senator Voinovich. Well, I hope they're doing better with
some of those tables and initiatives than the one that's
supposed to be providing money to those people for
infrastructure projects, because you remember after the war
with Serbia, there were all kinds of promises made about money
being made available and if somebody went back and revisited
the issue, they would find out that a lot of that money wasn't
forthcoming. I hope the resources are on the table that Mr.
Busek is referring to.
Anybody want to make any last comments?
Mr. Schrage. I just want to make one comment and that would
be there is a distinction between operational efforts and
assistance efforts. In terms of assistance efforts, INL looks
across the world in terms of where we need specific types of
law enforcement assistance, and attempts to craft a regional
strategy in that area, but also pieces like the SET piece, we
supplement that and work with all the agencies and with the
regional bureaus as well as with our partners internationally.
In terms of operational effort, that's more toward the law
enforcement entities and they will be coordinate with the
Ambassadors but not coordinate directly when there is an issue
of broad policy matters.
Senator Voinovich. Well, I would like to thank you very
much for coming. I'm comforted that there seems to be a little
more coordination than I anticipated, and that's good. And like
I say, I'm hoping that somehow through my involvement with the
OSCE and even with the NATO parliamentary assembly we can try
to boost this thing up to the point where it gets a lot more
attention. I think we really need to do this. Thank you very
much.
And the next panel, I'm going to run out and come back, and
I apologize for making you wait.
[Recess.]
Senator Voinovich. I want to thank you very much for coming
today and I'm pleased that you were here so that you had an
opportunity to hear the testimony of the first panel, because I
was watching the expressions on your faces and it was
interesting. So, Dr. Shelley, we'll start with you.
STATEMENT OF DR. LOUISE I. SHELLEY, PROFESSOR AND DIRECTOR,
TRANSNATIONAL CRIME AND CORRUPTION CENTER, AMERICAN UNIVERSITY,
WASHINGTON, DC
Dr. Shelley. In our discussions in the previous panel there
was focus primarily on parts of the former Soviet Union and
Eastern Europe on the problem of organized crime. I think we
need to pay much more attention to organized crime because it's
just front line and center in Western European thinking. You
can't turn on the news, you can't conduct research analysis,
without people thinking about what a major foreign policy issue
this is.
Senator Voinovich. Is that in Western Europe?
Dr. Shelley. Western Europe, yes. Even in the interviews by
the European press with some Foreign Ministers they discuss
organized crime as a major part of their foreign policy agenda,
including talk about immigration. It's part of the European
Union presidency. And when you were asking earlier about
European Union financing for it, there is a lot going on
through Pillar III of the European Union and a lot more
intellectual attention.
As an academic, and I can comment on some of the other
issues because of some of the research I've done----
Senator Voinovich. Let me ask you something, the Pillar III
is out of the EU?
Dr. Shelley. Yes.
Senator Voinovich. Who heads that up right now?
Dr. Shelley. You mean the European presidency or the
European Parliament? It's the European presidency. Crime
issues, immigration issues, human smuggling, it's a priority of
the Italian presidency. I talk often to the Italian Embassy
here in this period of the presidency on some of these issues.
And there are things that I felt in the discussion that was
just held where the focus was on the operations side. We have,
I think, a significant problem in addressing the transnational
crime issue that is very different from the way the Europeans
are addressing this issue. In Europe, the EU and individual
countries, are investing very significant resources at the top
universities in trying to analyze what the organized crime
problem is in all its dimensions. The Europeans are addressing
everything you mentioned when you introduced the hearing and
many, many other crime areas including financial crime,
ordinary crime, involvement of diaspora communities, human
smuggling, human trafficking, drugs, the linkage between
organized crime and terrorism.
There is a large analytical effort going on by some of the
best minds in Europe. When I go visit and attend conferences
with my European colleagues, some are interacting with members
of the law enforcement community and intelligence communities
in their countries. This research is being made available for
the kind of strategic analysis that countries are doing to find
out what's going on. And we're not----
Senator Voinovich. So the point is from your perspective,
this analysis that I talked about our country doing in terms of
the whole smorgasbord out there, you think that's happening in
Europe?
Dr. Shelley. It's definitely happening. In fact, if you
think about intellectual academic studies, there are very few
areas in which I would say Europe is ahead of us. In the area
of transnational crime Europe, I would say is close to a decade
ahead of us in producing scholarship. It was a decade ago that
I had a sabbatical at one of the preeminent centers in Europe
and then research was just beginning. And that intellectual
trend is just magnifying itself, and it is creating a very
different type of approach to this problem than is going on
here. And some of the research addresses some of the questions
that you're asking; where is organized crime going? What are
its dimensions? What is its impact? And I sometimes have joked
that I have my monthly commute to Europe because there are so
few Americans working on the organized crime issue, and so few
to participate in this transatlantic dialog. I can't even go to
all the meetings. In Europe it is analysis that is driving
policy. Maybe thee is not enough in the Balkans as I wrote in
my testimony. There is a weakness in how western Europeans are
engaging with scholars from Eastern Europe.
In examining linkages between organized crime and
terrorism, European analysts have found those links in Western
Europe. They found parts of al-Qaeda funding themselves through
counterfeiting, credit card fraud, illegal document production,
so these terrorism-organized crime links exist there. In
research we're doing with scholars in the Black Sea region,
we're finding trafficking of nuclear materials. You know, this
is a very, very serious problems. And if you're doing the
analysis that we're doing, you will find that you need to think
about the transnational crime problem differently than we're
thinking about it.
For example, I heard today discussions about Eastern
Europe, I heard discussions about the Balkans, but we're not
focusing enough on the Black Sea. And this insight reflects
back to the Ambassadors who are working with our research
center, because they have had briefings in the transnational
crime area. These retired ambassadors feel a compelling need to
address transnational crime and corruption in their retirement.
We don't know enough about the Black Sea region as I wrote in
my testimony--Bulgaria, Romania, and the problems that link the
regions of the former Soviet Union with Eastern Europe, with
its proximity to Iraq. There is a lot more to look at in the
areas of transnational crime and corruption that comes out of
analysis and looking at trends, and seeing where you need to
focus.
If we talk about coordination of law enforcement in that
region, some of the people the United States is working with
are very corrupt law enforcement. If our efforts at
coordination amount to promoting coordination among some of the
criminals, then this is not something the United States should
be fostering. We need to be thinking much much more
strategically about how we're assisting--how we are promoting
assistance, who we are assisting and how we're doing it.
Furthermore, on this issue of terrorism and the balance
between terrorism and organized crime, one of the things that I
think is causing a gap between the United States and Europe is
the over-emphasis that we're placing on the issue of terrorism.
We are ignoring the issue of organized crime, which is
affecting European security in all the different ways that I
outlined in my testimony. And it's one of the things that they
are finding particularly difficult in engaging with us on.
Europeans wonder why there is this over pre-occupation with
terrorism. Why not focus more on organized crime? And organized
crime, as I outlined in my testimony touches every aspect of
European society, economics, politics. We know that corruption
in Western European systems has led to problems of political
and economic development.
When we talk about the problems of the links between
organized crime and terrorism, the only people that I know who
said that they've broken these links are some of the Italian
prosecutors who went to the Cosa Nostra in Sicily and appealed
to their nationalism. They told them the criminals they were
dealing with in Albania were not just criminals but terrorists.
And that's the only case I have ever heard of in which these
organized crime-terrorism links have been broken. That is
because the Cosa Nostra is a traditional crime group which
responds to appeals to nationalism and not one of the more
flexible crime groups one sees in the Balkans or coming out of
the former Soviet Union, that provide transport services,
communications, money laundering services to terrorists. In
Europe, with its highly developed communications and transport
networks, is providing a meeting place of lots of organized
crime and some of that is involved in money laundering to our
country, and manipulation of our stock market. There are very
serious implications of this transnational crime that are
affecting our allies that we need to pay much much more
attention to.
In August I visited NATO and had some very high level
meetings. At NATO we discussed the attention that NATO is
recently paying to the crime issue and how it needs to pay
more. It's becoming much more of a strategic issue for our
allies.
Organized crime is segmenting itself in its activities to
capitalize on Western European markets. These activities are
helping to fund and encourage organized crime in Latin America,
and also providing funding for activity from Afghanistan.
Europe is providing a market for the organized crime groups
emanating from areas where we have strategic interests and
providing financial support for those groups.
I'll be glad to answer any questions you might have.
[The prepared statement of Dr. Shelley follows:]
Prepared Statement of Dr. Louise I. Shelley, Professor and Director,
Transnational Crime and Corruption Center, American University,
Washington, DC
STRATEGIC IMPLICATIONS OF EUROPEAN ORGANIZED CRIME FOR THE U.S.
The European Organized Crime and corruption problem has the
following strategic implications for the United States. These
implications can be classified as military-strategic, political,
economic, and social.
1) There are important links between terrorism and organized
crime--i.e. members of Al Qaeda network funded their activities
in Spain through organized crime activity.
2) Undermines U.S. peacekeeping in the Balkans and stability
in the Balkan region.
3) Undermines NATO alliances as corruption and organized
crime in accession countries threaten military security and can
block or undermine NATO action.
4) The expansion of the European Union to include countries
which have serious organized crime problems means that the
criminals will be able to move more freely within Europe and
possibly have greater access to the United States.
5) Threatens the integrity of U.S. security markets--Italian
prosecutors in Palermo have documented the investment of the
Italian mafia in American stock markets.
6) European drug markets also threaten the United States.
The enormous increase in Colombian drug sales in Europe
enhances their revenues, thereby undermining U.S. efforts to
combat Colombian drug trafficking. The European market of drugs
from Afghanistan is undermining efforts to stabilize the
situation in Afghanistan and to develop an economic and
political system not based on a drug economy.
7) Human trafficking and smuggling are major social,
political problems for Europe that have numerous implications
for the United States. Among these is the rise of neo-fascist
groups as a backlash against illegal immigration. Slavery has
reemerged as a contemporary problem because of the rise of
human trafficking.
8) Organized crime contributes to the spread of HIV, AIDS,
tuberculosis and drug-related infections.
9) Money laundering in Europe has spillover effects to the
United States because the money shifts both ways. This leads to
the expansion of the resources of the criminals and also to
helps fund terrorism.
10) Organized crime undermines investment in accession
countries and affects Americans who invest in the region.
11) Foreign assistance in the countries of the Stability Pact
is undermined by the very pervasive problem of organized crime.
12) Organized crime is a major foreign policy concern of our
allies in Europe and therefore needs to be of concern to us.
The organized crime problem is a serious concern to the
Europeans and outweighs their concern about terrorism. Many
European countries have faced serious problems of terrorism for
the past several decades. The problems of organized crime,
which touch so many aspects of their lives, seem of equal if
not greater significance.
EUROPEAN ANALYSES OF THEIR ORGANIZED CRIME PROBLEM
Different sectors of the European community have invested
significant financial and human resources to understand the breadth and
depth of their organized crime and corruption problem. At the present
time, major intellectual centers in many of the larger European
countries have on-going groups or research centers devoted to this
topic. In addition, there are many EU funded activities that complement
those at the national level. The following assessment of the crime
situation in Europe is based on the reading of reports done by the
European Union, the Council of Europe and Europol. Furthermore,
valuable reports have been provided at the regional and national level.
These include state reports in Germany, a three volume document of the
National Assembly in France on human slavery addressing trafficking,
Italian Parliament's Anti-Mafia Commission and the Dutch organized
crime report. The European Union helps support research centers and
projects in Spain and Italy, and national funding and private
foundation funding is provided to leading researchers to address this
problem. The author recently participated in a significant multi-
national research team, hosted at the Max Planck Institute in Freiburg
Germany, to provide national case studies of organized crime in over a
dozen countries in Europe. Major research centers and universities in
many European countries now have scholars working on organized crime.
The investment of European national and European Union funds in
research and analysis in this area is in the range of several millions
of dollars annually. Research is being conducted by top researchers and
distinguished young people are working in the field. This contrasts
sharply with the situation in the United States where there are few
research and analytical centers either in academia, think tanks or
government to address these issues. We are approximately five to ten
years behind our European colleagues in this field today. To put this
gap in perspective, at the American Society of Criminology meetings in
which 2000 people attend, there is only one panel at which American
researchers present on organized crime. At the three year old European
Society of Criminology, established in part so that Europeans could
address problems not addressed by their American colleagues, 20 percent
of the panels deal with organized crime and corruption, even though the
meeting is one-quarter the size of the American one. Organized crime
issues are central to the European crime research agenda.
Analysis on organized crime in Europe is not done in isolation.
Researchers work closely with law enforcement and intelligence. Many of
them are provided access to the law enforcement data needed to conduct
their analysis. They have created an analytical community in some
European countries such as the Netherlands, Italy and more recently in
France where there is interaction between research and practice.
The weakness of the European research on organized crime is that it
is mostly domestically based. There is insufficient understanding of
the problems of organized crime in the former socialist countries and
the accession countries to the European Union and NATO. Insufficient
bridges have been established with scholars from these countries and
insufficient efforts have been made to foster research in this area.
Therefore, the Europeans are aware of many of the aspects of the crime
problem in Western Europe but do not understand enough and have not
developed sufficient strategies to deal with this problem in an
expanded Europe.
THE SCOPE OF THE ORGANIZED CRIME PROBLEM IN EUROPE
At the present time, there is organized crime within every European
country. Apart from Italy, there is little that is indigenous organized
crime that has developed in Europe. Most of the organized crime has
accompanied immigration either within Europe or from other parts of the
world. The break-up of the former Soviet Union, the collapse of the
Berlin Wall and the decline of border controls has led to an enormous
increase in organized crime within the last fifteen years.
Location
The organized crime and corruption problems are most severe in the
European countries with large economies, those that are closest to the
Balkans, Eastern Europe and the Mediterranean and those with
significant ports. Some countries in Europe have the full range of
organized crime activities whereas others are the focus primarily of
money laundering activities, receiving the profits from crimes
committed in other regions. The Netherlands, which has been at the
forefront in the past decade of identifying the variety of organized
crime within its borders, has found over one hundred different ethnic
groups operating on Dutch territory involved in a very wide range of
offenses. The reasons that this country has attracted so many crime
groups are its vibrant economy, excellent transport links, borders that
are easy to cross and a law enforcement community that was not focused
on these issues until the mid-1990s. The perpetration of organized
crime is facilitated by the presence of large diaspora communities
within the Netherlands. Members of the local business and professional
communities help facilitate this organized crime by providing legal
services and assisting in transport. The pattern of the involvement of
diaspora communities and the provision of facilitating services by
members of the national community is a pattern common throughout Europe
but has been better documented in the Dutch case. Italy has four major
organized crime groups of its own and outside of Sicily, where the
mafia controls the territory completely, there are many diverse crime
groups operating on Italian territory and in conjunction with the local
crime groups.
The Groups and their Links
The crime groups in Europe originate from all parts of the world
including Africa--in particular, North, South and West Africa--China
and Southeast Asia, the Indian subcontinent, Middle East, Eastern
Europe and the former Soviet Union, and Latin America (particularly in
cases connected with the drug trade). These groups intersect in
numerous ways. Groups from the former Yugoslavia provide women to
brothel keepers in Western Europe. A triangle trade developed between
the Balkans and Italy in the 1990s involving drugs, arms and people.
The Colombians bring drugs through Spain into Europe and some of these
are distributed by Italian organized crime groups. Russians launder
money for the Colombian cartels in France. Tamil tigers from Sri Lanka
move drugs in Western Europe through diaspora communities. Nigerian
drug traffickers use Russian women as drug couriers within Western
Europe. There are numerous permutations and complex crime operations
that involve many different crime groups in different phases of the
operation.
THE CRIME GROUPS' ACTIVITIES
The major problems of organized crime which have been identified in
Europe include the following:
1) Drug Trade
There are several important trends contributing to a rise in drug
trade. First is the rise in the synthetic drug trade which has grown
because of significant production capacity and trade from Eastern
Europe. Heroin sales have increased from Afghanistan and Pakistan and
the increased drug flows from this region flow to Western Europe often
through the Balkans. Cocaine flows into Europe through its entry point
in Spain, from where it is distributed throughout Europe.
2) Illegal Immigration
The rise in illegal immigration both for labor and for sexual
trafficking is a great concern in Europe. There is extensive reportage
in the mass media on these problems, including on the high fatality
rate for individuals who attempt to be smuggled and die in transit. The
illegal immigrants come from Asia, Africa, Latin America and the former
socialist countries. Their illegal entry into Europe is aided their
fellow countrymen often working in cooperation with domestic crime
groups and facilitators. For example, in the case of the 58 smuggled
Chinese who died en route between continental Europe and England, the
truck driver was Belgian.
Many legislative hearings have been held, and bilateral and
multilateral initiatives started to attempt to stem the flow of illegal
immigration. For example, Italian authorities have worked with the
Albanian government to stop the speed boats that transported smugglers
and traffickers across the Adriatic. The Italian government is working
with the Nigerian government to stem trafficking of Nigerian women into
Italy.
3) Rise in Human Trafficking and Child Exploitation
A major shift has occurred in the countries of origin of the women
who are trafficked into Europe for sexual exploitation. Before the
1990s, many of the women originated in Asia. In the last decade, these
women have been largely replaced by African, Eastern European women and
women from the countries from the former Soviet Union. Into Spain, flow
women particularly from the Caribbean and South America. African and
Balkan crime groups are particularly active in this trade and have
replaced many other crime groups in this area. Women from Moldova,
Romania and Ukraine are particularly victimized and many have found
themselves in brothels in the Balkans frequented by peacekeepers.
There has been much attention paid to this problem by civil society
and/or the government in the Netherlands, Italy, Belgium, Germany,
France and Great Britain, which are among the countries where the
problem is most pronounced. There has not been enough done in most
countries in Europe on victims' assistance, prosecution of crime groups
or reduction of demand.
Child exploitation continues through the dissemination of child
pornography and child trafficking rings. A child trafficking ring
involving Chinese children transiting through Italy was broken by law
enforcement and there have been major scandals in Belgium connected
with rings exploiting children that have implicated government
officials and law enforcement
4) Arms Trade and Trade in Weapons of Mass Destruction (WMD)
The problem of weapons trafficking was most acute at the height of
the Balkan conflict but the problem is far from over. A diverse range
of crime groups, including those from Italy, the Balkans and the former
Soviet Union, are particularly active in this trade. The Black Sea
region figures strongly in this conflict and weapons from there are
shipped to conflicts in Africa. The German authorities in the mid-1990s
reported some cases of trafficking in nuclear materials. Those concerns
exist but are much stronger in the Black Sea region, where law
enforcement personnel have arrested shipments of trafficking in
radioactive materials.
5) Organized Crime Groups' Contribution to a Wide Range of More
Conventional Crimes
Organized crime groups from Europe and Eastern Europe are very
involved in the theft of expensive automobiles and their shipment to
the former socialist countries. This has been a particular problem in
Germany, Italy and Poland, where many Eastern European crime groups
operate. In many countries there has been a rise of burglaries, pick
pocketing and lower level crimes tied to organized crime. These crime
groups also engage in extortion, usury and racketeering. Those
especially vulnerable to these crimes are the immigrant communities in
Europe. This phenomenon has been particularly well documented by Dutch
researchers but this problem exists in many other countries in Europe
as well.
6) Environmental Crime
The trafficking in waste and hazardous waste has been a significant
activity of Italian organized crime. There have been efforts to dispose
of this waste in African countries and there has been dumping of this
material in the Mediterranean Sea and on Italian farmland. This crime
has aroused significant concern among Italian civil society. There is
also a problem in trafficking in endangered species.
7) Computer and IT Crime
Computer and information technology (IT) related crime is a major
problem for Europe with its extensive use of the Internet, computer
systems and all forms of technology. Several years ago a Russian
criminal entered the computer system of a British bank to steal ten
million dollars. Attempts by Nigerian citizens to commit economic fraud
against European citizens by means of the computer also present a
problem.
8) Counterfeiting, Credit Card and Document Fraud
The counterfeiting of documents, airplane tickets and documents for
a variety of functions is an increasingly frequent activity of
organized crime in Europe. Credit card numbers are stolen particularly
by Middle Eastern and post-socialist crime groups. This form of
organized crime has been documented as financing terrorism and helping
terrorist operatives. Stolen and forged passports aid travel by
criminals and terrorists. Al Qaeda operatives in Spain financed their
activities by forging tickets and cheating on credit cards.
9) Financial Crime and Money Laundering
A broad range of organized crime activity falls under this
category, from significant financial frauds, the development of front
companies and a wide range of money laundering activities. The
possibility of depositing large sums of money obtained through
corruption, tax evasion, and organized crime activity provides for a
large unregulated economy that facilitates the movement of money for
terrorist activity. A wide range of instruments are used to launder
money including real estate, import-export firms, banks and stock
markets. Italian prosecutors tracing the assets of Italian organized
crime groups have found their investment in both domestic and U.S.
stock markets. The privatizations that occurred in East Germany and the
accession countries of Eastern Europe have led to the transfer of state
assets to organized crime groups which have become major investors in
their economy.
THE IMPACT OF ORGANIZED CRIME IN EUROPE
The rise of organized crime in Europe affects many aspects of daily
life, security, economic life and the overall development of Europe.
Many aspects of the organized crime problem are central elements of the
foreign policy agenda of Europe, pillar III of the European Union
devoted to justice and legal issues and the foreign and domestic
policies of countries within Europe.
Daily Life and Human Rights
There is a rise in the sense of personal insecurity because of the
growth of organized crime. There are large losses to property through
increased thefts of personal property, automobiles and cybercrime. The
rise in drug use, particularly among unemployed youth, is a concern to
European authorities. It has enormous health costs for society, a
deleterious impact on youth and its profits fuel and sustain organized
crime. The presence of illegal immigrants results in significant labor
violations and the presence of ateliers and sweatshops. The rise in
human trafficking is contributing to the spread of venereal disease,
HIV and related medical problems. Environmental crime is resulting in
serious health risks to citizens particularly in the Mediterranean.
Illegal immigration is seen as a serious problem for a variety of
reasons:
1) There are serious violations of human rights of trafficked
women and those who are smuggled and are presently working in
conditions of slavery.
2) The arrival of these immigrants is a serious threat to the
social welfare systems of individual countries. In Europe,
unlike in the United States, there are not strong advocates of
immigration suggesting that legal and illegal immigrants
contribute to the economy. Rather, this illegal immigration is
largely viewed as an economic drain on Western European
society.
3) European prisons are increasingly occupied by a very high
percentage of foreigners and some of these are illegal
immigrants. Therefore, they are seen as contributing to
problems of crime and social order.
4) There are certain sectors of European society who see the
rise of illegal immigration as a threat to national identity.
This has fueled xenophobia in certain countries and contributed
to a backlash against all immigrants.
Security Issues
There are many areas in which the rise of organized crime affects
security. This includes such conventional problems as the trafficking
of arms to rogue states, insurgents and terrorist groups. But it also
includes many other ways in which organized crime undermines European
security and the NATO alliance.
The intimidation of law enforcement in both Western and Eastern
Europe undermines state capacity to move against organized crime. The
corruption of different branches of the legal system by organized crime
undermines the integrity of state and regional security.
Peacekeeping efforts in the Balkans are undermined by the failure
to understand that organized crime is embedded in the communities where
our peacekeepers are stationed. Peacekeepers who frequent brothels are
placing additional resources in the hands of organized crime groups,
making it more difficult to control their rise and influence in the
area.
The expansion of the European Union and NATO bring the problems of
organized much closer to the security agenda of these organizations. It
is in this area that there needs to be more attention to the linkage
between transnational crime and terrorism. In the past year, organized
crime involvement in WMD and other non-proliferation issues has become
of much greater concern to NATO.
Democratization
Organized crime and corruption are major impediments to
democratization in Eastern Europe because they are so deeply embedded
in the societies and the political systems of the country. The recent
murder of the prime minister of Serbia by organized crime groups
brought home the enormous impact that these groups have on the
political processes in their countries and their ability to undermine
the possibilities for reform. The presence of organized crime groups
within the government at all levels in the Balkans, their infiltration
into the legal system and their ability to influence the adoption of
laws undermines democratization. The enormous resources of organized
crime groups have a corrupting influence on governments in all
countries in Eastern Europe and to a lesser extent in some of the
western European countries.
Economic Development
Organized crime and corruption are enormous deterrents to economic
investment. This was first seen in Sicily, where foreign investors
withdrew because they and their investments were threatened. This
problem continues in many of the accession countries and also in the
other socialist countries. Those countries in need of investment
capital cannot receive legitimate investment because they cannot
compete in a criminalized economy. In many countries in Eastern Europe,
organized criminals are major investors in banks, real estate, and
stock and commodities markets. The presence of significant investment
by organized crime groups from the former USSR in the accession
countries, in anticipation of these countries' new role in Europe,
brings these problems even closer to Western Europe.
The Italian experience of using seized mafia assets for economic
development provides a model for economic development for Eastern
Europe. TraCCC, the research center that I direct, has supported
delegations from Russia, Ukraine and Georgia to visit Sicily to look at
this strategy and also to provide ideas for the Sicilians on how to
make their practices more applicable to the accession countries.
RECOMMENDATIONS
1) Develop more initiatives in the Black Sea region
This region will be of critical importance in the coming decade to
Europe and to the strategic interests of the United States. It deserves
more research, analysis and assistance in addressing the problems of
organized crime and weapons smuggling, in particular.
2) Develop more research and analysis
The United States is behind Europe in the area of organized crime
research. It is unusual for our country not to be at the critical edge
of research in an area of strategic importance. We must work to do the
following:
a) Develop research through grants, fellowships and through
cooperation with our European colleagues who are leading in
this area;
b) Develop law enforcement programs and strategies based on
this applied research;
c) Provide support in this area through the U.S. military,
Department of Justice, the intelligence community and NATO
efforts in this area; and d) Develop Fulbright Scholars program
and other research programs in the area of organized crime with
European partners.
3) Work in partnership with our European colleagues to develop analysis
and human capacity in addressing organized crime in accession
countries
Senator Voinovich. Thank you.
Dr. Lee.
STATEMENT OF DR. RENSSELAER W. LEE III, PRESIDENT, GLOBAL
ADVISORY SERVICES, McLEAN, VA
Dr. Lee. Thank you very much, Senator, for inviting me to
this hearing.
Picking up on one of Louise's main points, since the events
of 9/11, fighting international terrorism has taken on a very
high place on the U.S. national security agenda, clearly
surpassing the fight against international organized crime. But
organized crime, like terrorism, poses continuing threats to
democratic institutions and global stability, although
sometimes in ways that are insidious and not immediately
apparent.
I would like to discuss today three reasons why our
international counter-crime efforts should receive a higher
priority than they do now, even while we continue to emphasize
the terrorism and its manifestations abroad, and I will use
examples from both Europe and other areas.
It's clear that organized crime corrupts, subverts the
nation building process from transitional states in which the
United States has a strategic interest. In the former
Yugoslavia where you have national resistance movements, they
rely heavily on smuggling various commodities, heroin,
cigarettes and the like to break international embargoes and to
gain weapons for self defense. But now the continuing presence
of these criminal organizations in these emergent nations
prevents the consolidation of political authority and in some
cases the achievement of full statehood.
Elsewhere in the world, in Iraq you have the epidemic of
free flowing violence, car jackings, kidnapings,
assassinations, sponsored by criminal organizations that are
demonstrably resistant to any kind of government authority,
further delegitimizes the U.S. occupation forces and provokes
nostalgia for the Saddam Hussein regime.
In Afghanistan, where U.S. forces are also deployed, the
massive opium/heroin trade which is that country's top export
fuels the separatist pretensions of regional warlords enabling
them to buy advanced weaponry and to support their own
territorial fiefdoms.
Second, the global expansion of organized crime is
causally, I think, related to the growth in international
terrorism. This does not mean the terrorists and criminals are
necessarily in cahoots, that they plan together or they have
alliances with each other. Sometimes they hate each other. For
example, in Colombia, you have military forces fueled largely
by or funded largely by cocaine exporting organizations compete
with Marxist guerrillas for territory control and assets.
Terrorists are able to tap into established criminal
networks in various ways. They buy goods or services from the
criminals, sometimes for resale. They make use of criminals'
transportation and money laundering services. Criminals are
prime movers in building large illicit empires, but some of
their wealth and know how inevitably gravitate to politically
motivated groups such as freedom fighters, revolutionaries, and
of course terrorists.
A third point that I would strongly emphasize here is that
organized crime in its transnational guises greatly increases
the risk of proliferation of weapons of mass destruction. This
is especially the case because some states which had WMD
programs have experienced political or economic upheavals or
authority crises of some sort. For example, the collapse of the
Soviet Union and the associated birth of criminality and
corruption in the Soviet successor states precipitated a new
and disturbing form of transnational crime, the illegal export
of radioactive materials. Since the early 1990s a flood of
radioactive contraband has flowed westward and more than 400
cases of trafficking such material were recorded by the
International Atomic Energy Commission, and 20 seizures of
highly enriched uranium of mostly Russian origin. Most of these
involved minuscule amounts, nowhere near enough to build an
atomic bomb, but I think what is seized may be only a small
fraction of what has been pushed into international smuggling
channels, and most of the smugglers caught appeared to be
carrying samples of merchandise to be shown to a potential
buyer. Overall, the prevailing impression that I have is a lot
of this stuff could have escaped from the control of government
and be circling around the globe looking for a potential buyer,
or already may have fallen into the hands of our adversaries.
There is no hard evidence of this, but an unverified Arab
news report from 1998 claims that bin Laden's emissary
negotiated with representatives of Russia's Chechnyan Mafia to
obtain 20 Russian tactical nukes in exchange for $30 million
and two tons of Afghan opium. Well, I don't believe this story
and one of the reasons I don't is had he had those weapons, he
would have used them by now. But a couple of aspects of this
story, I think merit our attention.
We know that al-Qaeda has connections with the Chechnyan
separatists, so a liaison is not out of the question. It also
is not unlikely that al-Qaeda, lacking direct access to Russian
facilities, would employ the Chechnyan criminal diaspora or
some other sympathetic Islamic criminals in its weapons
procurement efforts.
Speaking of Islamic criminals, criminals would like to turn
our attention away from Europe to address the dangers of the
organized crime situation developing in Iraq, which I think has
been underemphasized, and received insufficient attention.
Under Saddam Hussein, Iraq had what amounted to state sponsored
organized crime, a sophisticated smuggling apparatus designed
to circumvent U.N. sanctions, import needed supplies, and
generally to keep the regime afloat economically. Well, now the
regime is gone but the networks are alive and well and
operating on a broad front, trafficking in oil, small arms,
cultural artifacts, narcotics and women, but this may not be
all. It's not inconceivable that Iraqi organized criminals
could have obtained access to Iraq's stockpiles of chemical and
biological weapons or for that matter, to products of its
prewar nuclear weapons program. These weapons, as we know, have
proved elusive. Isn't it possible that in the chaos surrounding
the U.S. invasion and the collapse of the Saddam regime, that
some of them were looted and sold to the highest bidder,
whether it's a neighboring state or some malevolent subnational
entity. Iraqi criminals could work through well established
channels and contacts to smuggle lethal weapons to the other
mideastern states, to the Balkans, to Central Europe or to
anywhere in the world. Thank you.
Senator Voinovich. Well, what would your observations be in
regard to the questions I asked about the capacity here to deal
with the growing threat of international crime syndicates in
the United States? Do you have any insight into that in terms
of, the answer was yes, it's growing.
Dr. Lee. The answer is yes, they're growing. I think this
is largely a function of immigration, of wholesale immigration
of people from some parts of the world where you have extensive
criminal organizations, and in the case of the former Soviet
Union these criminal organizations have been exported wholesale
to the United States, you know, taken up root in major American
cities. I think this is really coming on the back of this mass
immigration, and the criminals also maintain links with parent
organizations or counterpart organizations in their home
countries, so it's not just we who has the problem. Again, as
you emphasized over and over again in the hearing, that
requires some coordinator who is looking at all these different
aspects of the problem and can see their international
linkages.
Senator Voinovich. How about resources? I know you had a
comment, the resources seem to be not as significant as they
should be?
Dr. Lee. I share this feeling. There are many parts in the
world where I think the struggle against organized crime has
taken a back seat to the war against terrorism, sometimes I
think with very painful and long-term consequences for the
countries involved. One example is Afghanistan. We have had to
make compromises with certain people that are not of the
highest social standing in that country as part of our
consensus building efforts to remove the Taliban and al-Qaeda
in that country, but I don't think that we can--I can't
conceive of a successful nation building in that country until
this huge opium/heroin traffic is brought under some kind of
control.
And I see the same thing over and over again, putting lots
of resources into seizing terrorist funds, $136 billion in
terrorist funds have been seized since 9/11, but are we seizing
funds of Colombian cocaine exporters, the Russian Mafia, the
Mexican Mafia, what are we doing on some of these other fronts?
This I think is a question of resources.
Dr. Shelley. I wanted to add something. The National
Institute of Justice has just done a major survey of American
law enforcement and how many law enforcers are dealing with
problems of organized crime and international organized crime
within their jurisdictions. And the vast majority of them are
now saying that they are encountering this in their work.
Senator Voinovich. Is there a report on that?
Dr. Shelley. Yes, there is a report on that and you could
obtain it from them. But if you want to see what the dimensions
are, what the trends are, there's almost nothing you can read
on this. We're just not intellectually or logistically prepared
for what the new challenges are, because if something arrives
on our doorstep then we react to it. We don't have a long-term
strategy. There is much more going on. I was just discussing
with somebody from the IT area, that organized crime has been
growing in terms of information technology because the
criminals don't even need to be based on American territory to
be affecting our critical infrastructure or economic
infrastructure through the Internet. And so as the crime is
globalized, there are just many, many more ways we have to
react to it. And the resources of the criminals are growing
because so much of it is in off-shore accounts and they are
able to hire extremely good specialists. And we have a great
problem also of people facilitating this crime, of organized
crime retaining top specialists.
I've read investigations that revealed this trend. For
example, a Chinese trafficking ring that brought hundreds and
hundreds of people into the Washington area, was being helped
by a Harvard educated man who provided them with false asylum
claims. So there are people within our country with great
educations that are helping to facilitate transnational crime.
Senator Voinovich. So, your conclusion is that it's a
growing problem and we are not allocating resources that we
should to deal with it, and so it's a threat to our country
from that point of view.
Dr. Shelley. And the kind of resources that we're
allocating. I couldn't agree with you more on the types of
questions you were asking. They are not coordinated, there are
not enough analyses of strategy, how we're going to interact
with our allies on these issues. There needs to be a lot more
strategic thinking.
And we're not training enough young people. Neither are we
providing the sort of education or training for diplomats who
are on the front lines dealing with these issues in lots of
countries. We're not doing enough work with the military on
these issues. I mean, there wasn't enough thinking before the
invasion in Iraq on what we were dealing with in organized
crime. We did not think of how 100,000 former security
apparatus members were going to do as criminals in the future.
I mean, we need to be thinking about transnational crime in
every area of our domestic and international policy and it's
not receiving that kind of attention.
Senator Voinovich. Well, just to emphasize what you said,
for example, the sanctions we had against Serbia, what that did
is put Milosevich into business. He controlled the whole black
market and the network is there. And then I have read Ken
Pollack's book on the case for invading Iraq. If you read that
book, you can see how Saddam Hussein over the years had been
co-opting and compromising, sold in sanctions, he was
developing ways to get out, in and back and forth, and it had
to be an enormous amount of pay-offs. Now he's gone, but the
same people that were doing it are still there. Is that what
you're saying? So what do you do, how do you deal with that
problem?
In Afghanistan we are seeing more heroin flowing out of the
country. So the emphasis of the military over there, they
should be cracking down on this illegal stuff that these people
are doing, but you're saying we probably are being compromised
because we don't want them to get mad at us, and we have these
warlords who are doing fine, and as soon as they are able to
make a lot of money, the chance of them coming up with some
kind of national army and dealing with that problem is going to
continue, and we are going to see a continuation of a situation
that has been there forever. Is that it?
Dr. Lee. That's an excellent statement, and that's my
position also. Eventually we're going to have to make a painful
choice of perhaps even sending the U.S. military after the drug
trade, possibly after major heroin traffickers. The other side
of this is we have to give Afghan farmers some other means of
making a livelihood. Again, I would say that I can't see nation
building in Afghanistan having the remotest chance of success
until we get this heroin and opium monster under control.
Senator Voinovich. I just think about the nation building
from Bosnia, how well we're doing and how long have we been
there, since----
Dr. Lee. Actually, the Taliban did a fairly decent job of
this; this was one of their few redeeming features, that they
controlled opium trafficking.
Senator Voinovich. I would like to move to the coordinated
effort between the various organizations. As I mentioned, SECI
and the Stability Pact, and the United Nations, and you say
that Pillar III of the EU is involved. You mentioned that there
was a lot of strategic stuff going on, but beyond the strategic
analysis, how much is happening, how many resources are being
put into doing something about the analysis? Is it happening?
Dr. Shelley. In the last year I have been to OSCE meetings,
met with members of the Stability Pact, met with EU people, and
all of these seem to be parts of an orchestra that are not
being coordinated, there is no central conductor. There's a lot
of duplication and a lot of competition for resources among
these organizations, and so that's one of the greatest
problems. I find that a lot of what is going on in Western
Europe is thinking about how transnational crime issues are
affecting them, not how they have to engage with people in the
Balkans, or in Eastern Europe in a cooperative way. It's more
an impassioned concern with what are the crime issues and how
we can combat them. But they have to work with the source
countries on a lot of these problems and work together in some
kind of fashion.
Senator Voinovich. So what you're seeing is that they're
analyzing how this is impacting them, but that the emphasis
would be, correct me if I'm wrong, just like right now, we're
saying how do we deal with the threat, the immediate threat to
our country is the big issue there, and the effort of going
beyond that to the bigger picture of how do we coordinate with
other people to deal with this because these networks are not
just country wide, there's Italian, Russian, Albanian, and so
they are very well coordinated country wide and they are
multinational organizations. And you're saying that this is
mostly their own national concerns without looking at the big
picture of how do we work to deal with this big network.
Dr. Shelley. Absolutely, that's a good diagnosis of it.
Senator Voinovich. And they don't understand that they need
to go beyond that. I guess maybe as evidence of that is the
pittance that is being provided to the group that's trying to
deal with organized crime in terms of the European Union, is it
the job of the Stability Pact and SECI? For instance in the
Balkans, is there anybody else doing anything? I know that OSCE
have people there now doing work in human trafficking, but what
are the instruments that the Europeans are using to deal with
this problem?
Dr. Shelley. They are also using part of the Council of
Europe. But their problem, as I was saying, is partially in
their development of experts and they're not doing enough long-
term coordination and human capacity building in the regions.
They are doing even less than we are in that area. There are
some European assistance programs that are working with civil
society and some of these groups are trying to work against
trafficking, working against drug problems, providing shelters.
But there is just not enough long-term engagement with
colleagues from former socialist countries and a very, very
long reaction time. It's a very top heavy procedure and it
takes years to move on some of these issues in the European
Union.
Senator Voinovich. So, I was impressed with, for example in
the Ukraine, the coordination that goes on by the State
Department through their embassy. They get information that we
have a problem and they come, they get involved to try to do
something about it. Is any other country doing as much as we
are in that regard in terms of providing assistance to help
build rule of law? You talk about U.S. Embassies in other
countries than in the Ukraine, all these people there that are
doing their thing. But is anybody else doing anything?
Dr. Shelley. Let me give you an example of what they're not
doing. I work with researchers in Ukraine, building human
capacity in the computer crime area and in the Black Sea
region. This year at the European Society Criminology meetings,
there would not have been much presence from Ukraine, Russia,
Georgia, if we had not supported some of our researchers to
travel there. At these meetings I talked to some of the
European Union officials there and the president of the
society, and said this is a disgrace. Americans are funding
people from Eastern Europe to come to Helsinki for a European
meeting. He said ``why are we not doing it?'' You know, we have
specialists working on transnational crime in European
countries, and they are not doing this outreach. So there isn't
that much.
Senator Voinovich. So in a way, if we got involved with the
Europeans, they are doing so much, you say, in terms of
analyzing the data, doing an analysis of how this is permeating
our society, but in terms of creating infrastructure rule of
law in countries they are not doing very much.
Dr. Shelley. That's correct.
Senator Voinovich. And they don't have much in terms of
resources for multinational efforts to deal across the various
countries.
Dr. Shelley. They are doing more with the Stability Pact
than in other areas, but other than that, there is----
Senator Voinovich. Do you have a feel for what SECI is
doing?
Dr. Shelley. Well, I don't think SECI is doing very much.
In terms of the Stability Pact, I've met some of those people
that you talked about doing the law enforcement training and
the Europeans are more involved in that than some other areas,
but it's still not very much. The Europeans are working much
more through the United Nations and funding some of the
programs through the United Nations structure.
Senator Voinovich. Is the United Nations program any good?
Dr. Shelley. They're having a terrible crisis. You know,
the past director was recently removed for corruption.
Senator Voinovich. The person charged to work on organized
crime was removed for corruption?
Dr. Shelley. Yes.
Senator Voinovich. If I was going to go to an OSCE meeting
and start talking to some of my colleagues, the effort that
we're making in some of those countries through our embassies
would probably be a benchmark. In other words, if we're doing
this with our resources, what are you doing in terms of dealing
with the infrastructure in x country that's exporting crime
into Europe. So they're just not doing that?
Dr. Shelley. That's correct.
Senator Voinovich. So somebody has to be the orchestra
leader or someone must call attention to this. One of the
things I'm very involved with is antisemitism, and a couple
years ago we got the OSCE, we got a resolution, we insisted
that we have a separate meeting on antisemitism, we did our
best to put pressure on the State Department to call for a
special meeting on antisemitism by the OSCE. They had a meeting
this year and we're trying to follow up on that to make sure it
becomes institutionalized with the OSCE, and that the resources
are there and so on and so forth. But someone needs to shove
this problem of organized crime along and get it up on a
priority list, get people talking about it and try to get
things to happen. And from your perspective, that's not
happening right now in terms of the United States, we're
spending our time on terrorism. But in your opinion, we are
ignoring the, or not ignoring but not putting as many resources
into dealing with the organized crime issue, which you think
contributes to the problem of terrorism. If not brought under
control, this could even escalate the issue of terrorism
because the criminals know how to make money, in terms of
funding the terrorism organizations, in terms of moving
weaponry, they can use those highways that are already all over
Europe today. Any comment on that?
Dr. Shelley. I agree.
Dr. Lee. I would certainly agree with that. I think we have
to understand that the terrorism and organized crime are
essentially different animals, they come from different places,
they have different motivations, and very often the
relationship between terrorism and organized crime is not
symbiotic, it's actually hostile. And we have seen this in
Colombia and other parts of the world.
Senator Voinovich. Well, it's hostile because the
terrorists want to take over the government in a kind of
political way and the organized crime guys want to take it over
so they can make as much money as they can.
Dr. Lee. Right. And some terrorists would like to
redistribute power and wealth to someone else, so there are
different motivations and very often, I think that the bigger
the organized crime group or organization, the more likely it
is that its members are going to feel that they have a stake in
the society and you know, look disparagingly upon Marxist
terrorist groups. But on the other hand, organized crime, you
know, they have these networks, these transportation networks
as you mentioned, financial money laundering networks, other
types of services that these terrorists can also find and use
for their own purposes. So, the growth of organized crime is
certainly going to contribute to the growth of international
terrorist activity.
Senator Voinovich. Just for the record, we have all agreed
that international crime organizations are increasing their
business here in the United States, it's becoming more
pervasive. Would you say that compared to 5 years ago that
organized crime is more organized today in Europe and the
former Soviet Union than they were 5 years ago?
Dr. Shelley. I say we are in a growth industry, those of us
who study this problem. The links are better, the organizations
are more sophisticated, types of specialists they have working
for them are very very good.
Senator Voinovich. Do people like Putin understand that
these organizations present a threat--the question is, does he
have a relationship with them or does he look at them as
undermining his leadership and what he wants to achieve in the
Russian Federation?
Dr. Lee. I think he's certainly trying, you know, by
installing a lot of his KGB colleagues in key administrative
posts and by giving them a very high profile. The arrest of
Mikhail Khodorkovskiy, I think was meant partly as a slap in
the face of organized crime. Certainly Khodorkovskiy has a
background of questionable activities in that area. I see
organized crime as less free-wheeling today than it was in the
Yeltsin era.
Senator Voinovich. So basically, he realizes that organized
crime is not good?
Dr. Lee. I think he does, but he's moving very slowly and
cautiously, but I think he's moving in the right direction on
that front.
Dr. Shelley. Well, I must say, I woke up this morning and
the head of the Kremlin administration was resigning and some
commentator was saying this was something that was against
business. But in some of my organized crime work and analysis
and speaking with law enforcement people, I know that that
person has very strong links to organized crime tentacles in
all parts of the world. there was no mentioning of what we have
been analyzing today. It was described namely as a conflict in
the Kremlin as opposed to mentioning that some people in the
Kremlin administration are corrupt.
Senator Voinovich. That is good, because the point is we
get back to the priorities, you know, where you can deal with--
I asked them about threat analysis and we're doing what we
possibly can, but the fact of the matter is we need to have
good leaders in those countries who are not corrupted. Take for
example in Italy today, there are some real genuine efforts to
deal with the Mafia. For years they just let it go, let it go,
let it go, and now you have people saying no, we have to do
something about this, and that's really important.
Serbia with Prime Minister Zoran Djindjic there before his
assassination, and he was a fine man, but there were
allegations that he wasn't so clean, so you have a new group in
there to purge that and to get the judges, get the prosecutors
and develop that infrastructure. That is also very important.
You can talk about international organizations and everything
else, but like for instance, Bulgaria and Romania, the Prime
Minister of Bulgaria was talking about corruption and he said
corruption is just part of the way things go here. I mean it
was like, you know, aren't you upset about it, what are you
going to do about it? Well, that's just the way things are. And
I don't think he's corrupt, but the fact is that there has to
be a higher priority given to our efforts to try to get good
people in leadership positions in those countries, wouldn't you
say?
Dr. Shelley. Absolutely.
Senator Voinovich. Well, I have kept you here long enough.
Do either one of you want to make a final comment?
Dr. Shelley. The Russians have an expression that the fish
rots from the head, so you have to really be careful about who
is at the head. I think that's really important. Ignoring crime
and corruption issues in the interest of what we think as
temporary stability just never guarantees stability. To put up
with high level corruption, fixing elections, saying that's
promoting stability, it is not in our long-term interests.
Senator Voinovich. Well, I thank you very much. The United
States of America has an enormous amount on its plate, and I
think we need to get our European friends involved in this too
because they are as vulnerable or more vulnerable than we. And
I thank you very much. I really enjoyed your testimony and am
honored you were here to spend some time with us. Thank you.
The hearing is adjourned.
[Whereupon, the subcommittee adjourned, to reconvene
subject to the call of the Chair.]
----------
Additional Statement Submitted for the Record
Prepared Statement of Charles N. Franges, President of Noble Ventures,
Inc.
``THE EXPERIENCES OF ONE AMERICAN COMPANY-NOBLE VENTURES-IN ROMANIA''
Mr. Chairman, Members of the Committee, thank you for the
opportunity to provide this Committee with testimony about the
important issues you are raising in this hearing.
My name is Charles N. Franges and I am President of Noble Ventures,
Inc. I am pleased to present this testimony to the Senate Foreign
Relations Committee. I applaud the Subcommittee's efforts to
investigate the issue of corruption in Europe and Eastern Europe.
In June 2000, I was part of a group that purchased the CSR Resita
steelworks in Romania. The following testimony was prepared by my staff
and I and is meant to serve as a description of our firm's experience
in Romania, how corruption impacted our ability to operate and an
analysis of the impact that corruption has on economic activity in a
country such as Romania.
Personal Background Information
I was born and raised in Bethlehem, Pennsylvania, the home of
Bethlehem Steel Corporation. Shortly after high school in 1966, I
entered the U.S. Army. I served for four years and upon discharge held
the rank of Infantry Captain.
I served in the Republic of Vietnam in 1967 and 1968, first as a
platoon leader in the 4th Infantry and secondly as commander of the 1st
Brigade Long Range Recon Patrol (LRRPs) unit in the tri-border area of
the central highlands. I received numerous awards for my service
including three awards of the Bronze Star, three awards of the Cross of
Gallantry, one Purple Heart and the Combat Infantry Badge.
After my discharge and utilizing G.I. Bill benefits, I attended and
graduated from Rider University with a degree in Accounting and
Economics.
After graduation, I accepted a position in the Bethlehem Steel
Management Training Program. I was employed by Bethlehem Steel for
eleven years serving in positions in accounting, strategic business
planning, operational management and business development at six (5)
different plants and at the home office. While at Bethlehem I also
attended and completed the Executive Management Course provided to
Bethlehem by the Harvard University Business School.
I later became a principal in a consulting firm specializing in
strategic planning and adaptive reuse of underperforming assets. My
clients included large firms such as Copperweld Steel Corporation and
numerous municipalities such as the cities of Aliquippa and Midland,
Pennsylvania.
During this period, I also became involved as a principal of Noble
Ventures, Inc. along with Mr. John G. Roberts. Mr. Roberts, with whom I
worked at Bethlehem Steel, is one of the most highly respected steel
executives in the world.
During my tenure to date with Noble Ventures, we have worked in
Poland at the massive Huta Katowice steel works and on acquisition
projects at Bethlehem Steel and finally in Romania. Most of my time
since 1997 has been devoted towards the Romania project.
Overview:
The following represents my experiences, observations and analysis
of the current state of affairs concerning Romanian privatization
efforts and Romanian government operating practices.
Under communism there were two broad classes of citizen, those in
regime positions and those who were not. The current situation is
broadly the same.
Those in power are able to enhance their personal position in
several ways and also are obligated to support the party requirements.
This is a complicated subject to deal with, but I will try to simplify
the matter by using examples.
At the higher levels, when a party wins political control they get
to place people in key positions like the head of privatization. Mr.
Ovidiu Musetescu won this position in the current government. Mr.
Musetescu also holds a high level position in the party and part of his
responsibilities is to raise support funds.
As head of the privatization agency, he exercises almost total
control over virtually all state owned businesses. He picks people to
serve on the board of directors of all these firms. He picks the top
management of these companies. Most importantly, he has the power to
replace you if you don't tow the line.
The Romanian economy has operated and continues to operate on a
very sophisticated domestic barter system. The system reeks of
manipulation and camouflaged skimming.
The tricks of barter manipulation developed over time in Romania
and have expanded to foreign trade transactions as well. All it takes
is a willing off-shore party and it is very simple to implement because
that is the way business has been conducted for years inside Romania.
For example, I personally discovered a highly questionable
situation at CSR on a domestic transaction that was later discovered to
have occurred as well on an export transaction. CSR shipped product to
a domestic customer. The customer said 30% of the shipment was
defective. CSR modified their invoice to reflect the adjusted tonnage.
The defective material was never inspected nor was it ever returned to
CSR. It disappeared forever in the accounting records, but not
physically. We found that this now unrecorded product was processed by
the customer and sold as prime product.
The same circumstances were discovered on a subsequent export
transaction. The potential benefits are huge. Knowing that large
portions of shipments will be erroneously rejected allows for proceeds
from the sale of these rejected products to be easily sheltered from
any transaction reporting in Romania. It allows for artificially
raising reported prices, allowing for the avoidance of possible dumping
complaints as well.
Thousands of tricks have been reportedly used to skim funds from
economic activity in Romania. However, logic suggests the impact of
this purported corruption must surface somewhere. I knew where to look
to test the potential impact of corrupt practices these circumstances
suggest.
I knew that if one is draining revenue from a company, sooner or
later the company ends up technically insolvent. That is in normal
conditions.
In Romania, State-owned companies report losses or manipulate
figures to show marginal profits/solvency. In order to achieve solvency
for these enterprises, the government, in an effort to support the poor
workers, allows the company to not pay social taxes for example. As
time passes, the company owes so much to government agencies that in
any normal business climate the company would be shut down. But, the
power brokers don't want that to happen and convince the government to
continue subsidizing operations in order to help the poor workers
survive. In return, the employees should not expect any increase in
wages despite double-digit national inflation. And by the way, the
workers should be beholden to the barons and union leaders who saved
their workplaces.
In any event, state companies end up with balance sheets loaded
with state debt. There is no funding to allow for capital investments
or increases in wages. The companies operate in an atmosphere of
constant desperation agreeing to almost anything for just another days
worth of material and energy so the employees get another day at their
``workplaces''.
Being at a workplace is absolutely critical to the average citizen/
employee. It has been bred in them. A designated workplace allows a
citizen/employee to build credits in the pension, social security and
medical benefits systems. You are in deep trouble if you don't have a
workplace. If you don't have a workplace you could end up on the street
a beggar. It happens often, so it is a real fear to be reckoned with.
As a result of the excess labor in most complexes, the union leaders
and local party bosses use this threat of no working place to stifle
and silence opposition. Loyalty to the union (and party in most
communities) is your safest way to ensure a working place when the
downsizing begins. In our facility, black lists were posted on the
front gates, management supporters were beaten and intimidated and
refused their share of the government aid distributed by the union.
I believe the evidence clearly supports my analysis. Summarizing a
few of the facts:
Virtually all state owned companies are technically insolvent. All
owe the state huge amounts of money associated with taxes and social
benefit tariffs. The sad aspect to this situation is that once you
adjust the companies balance sheets for these questionable state debts
most of these firms are not only viable, they are highly competitive
given all the key attributes these firms typically possess.
Romania's relative performance has been dismal. None of the
governments that have been in power have made progress. Coalition
governments with short-term prospects for political survival have
allowed continued manipulation and control by the vested interests that
feed the party coffers. Paradoxically, the current government has more
control of the legislative and executive branches than any other
government since 1990 yet remains one of the most allegedly corrupt
governments in all of Eastern Europe.
Despite all of the allegations in Romania, no significant
corruption figure has been investigated, yet alone prosecuted. It is no
wonder that this is the case since there is no practical independence
between the judiciary and the executive branches in Romania. The
Ministry of Justice controls the General Prosecutor and what prosecutor
in their right mind is going to bring charges against one of his/her
fellow party members who happen to be a Minister? A recent
constitutional amendment vote included a clause to create an
independent prosecutor in recognition of this problem.
Lawsuits in the thousands stack up at the Ministry of
Privatization. Most relate to failures in honoring contractual
obligations.
The bottom line is Romania started on the road to democracy with a
substantial manufacturing and agriculture based economy with a huge
positive trade balance. Since then the balances have disappeared and
all economic sectors have retreated substantially.
The privileged have thrived. It doesn't take a rocket scientist to
see it. Mansions are popping-up all over the suburbs of Bucharest and
the resort areas in the mountains and on the Black Sea.
I also feel that Romania should be leading all others in economic
growth and national prosperity given the comparable vastness of the
country's assets. For example, Romania has huge agriculture properties,
oil and Black Sea frontage. The people are highly educated and capable.
Romania is in the shape it is because the corrupt underworld that
developed long before the Revolution is alive, well and still doing
business at unprecedented levels. The theme most commonly expressed in
the press, on the street and in the factories is the crooks continue
being crooks, Ministers remains in their positions, referendum votes
are still a farce and the masses continue to live hungry, fearful,
suspicious and in utter despair.
Noble Ventures Experience
One could write a book concerning the experiences of Noble Ventures
in Romania. We were the victims of the failure of the Romanian
Government to honor their contractual obligations, intimidation,
physical assault, and government-organized expropriation. These
conditions are the basis of our ICSID lawsuit against Romania that is
currently proceeding to final resolution.
The most effective way and maybe the only way that the current
corrupt system can be challenged and exposed for what it really means
to the Romanian public is by a demonstration of the benefits of a
legitimate operation.
Noble Ventures plan and likelihood of success represented the
alternative to the status quo. If we were allowed to perform, the
company would have succeeded, the workforce would have appreciated the
rewards from honest work and Resita could have become an example for
others to follow. One article in a leading daily newspaper titled 'An
American in Resita' basically outlines that our biggest problem was our
refusal to pay bribes.
Significance of CSR mill:
The CSR Resita mill was founded in 1771 and has a storied history
in the annals of steel making in Europe. CSR was leased by the Austro-
Hungarian Empire from a prominent Jewish family, the Aushnit family,
for almost 80 years and provided the majority of the rail for the vast
network spanning the empire. During WWII, Hermann Goering owned 35% of
the shares and CSR provided military munitions for the Nazi war
machine. The town of Resita with almost 120,000 persons is heavily
dependent upon the operation of this mill. CSR itself employed almost
15,000 persons at one time. In addition, CSR was the primary tax
contributor to the city and district budgets. CSR is the only Black Sea
producer, outside of Ukraine and Russia, of large diameter round
billets. These billets are the primary material for large diameter
seamless pipes/tubes used for high-pressure oil/chemical pipelines and
installations.
CSR directly facilitated the well-being of the Caras-Severin
district community, a number of large industrial complexes dependent
upon CSR production and indirectly those local communities and provided
military material for the Romanian military services and export
clients. Under Communism, CSR generated 'value' through its production
for which management was never accountable resulting in direct and
indirect organized siphoning of value for the privileged few.
For the purposes of this discussion we have divided the theft and
corruption discovered at CSR into three primary areas:
1. Internal manipulation
a. Management of CSR & union collaboration:
i. In the first several months of our assuming
control of management, we identified a complex network
of theft of finished product and raw materials that
occurred in the mill. Theft of product included
manipulation of steel output to produce separate
stockpiles of material, which was sold for cash
directly to clients. This business required collusion
between the executive management, union section leaders
and mill managers, transport sector and local railway
chiefs.
ii. Product was typically and deliberately
misclassified as lower grade steel resulting in lower
sales values for CSR.
iii. Scales were rigged allowing for manipulation of
weights for received material and for shipped finished
product.
After Noble Ventures discovered the extent of these problems
we took aggressive action to eliminate the possibility of
continuation.
2. Local/district manipulation
Local agents helped facilitate the theft of materials from the
plant, which were then resold back to the plant for profit.
Essentially, raw materials would go out in the morning and the next day
a local agent would appear with the same material that the Procurement
office would buy for the mill at high ``spot prices.''
In addition, CSR owned a large variety of commercial real estate,
which was rented at below market prices to local ``friends''. These
leases included properties for the local Ministry of Labor, the City
water company, the union, etc. Most significantly, assets were
subjected to 'green mail' or outright black mail by the unionists. In
one case we asked authorities to intervene to remove unionist
trespassers, they refused and permitted the trespassers from allowing
us from the site, a site to which we had clear title and rights.
Our management was repeatedly beaten and intimidated by the union.
One such case was the sequestration of our senior management in the
Company ``cantina'' with 600 workers for more then ten hours. A
videotape shows union members pulling a U.S. manager off a table and
beating him. This clip aired on the national news, penal charges were
filed and not one person was arrested. On a number of other occasions,
management was surrounded in its offices by, in some cases, as many as
3,000 workers who were breaking into the offices. Despite repeated
requests for protection, the police did nothing to intervene.
The government failed to respect the rule of law by allowing the
union to run rough shod over the entire City by blocking European Union
highways, staging unauthorized demonstrations, etc. The punishment for
this activity: no arrests, no fines.
As a private company you would expect management had the right to
negotiate with the union. Not so in Resita! The union would threaten a
social protest and run into the waiting arms of the local
administration who would then bring in the national Ministers. The
government would attempt to ``intervene for the sake of social calm,''
but would then sit on the side of the unionists. When the union is
aware that the government will not enforce the labor code, collective
bargaining agreement or the penal code of the country, it makes it
impossible for any investor to manage effectively.
3. National manipulation
Romania's economy historically has been highly dependent upon heavy
industry for which the steel complexes were designed to provide the
material to keep the industrial engine running. These industrial
complexes generated high value products used both domestically and for
export to generate hard currency. This hard currency and control of
these complexes is controlled by the government since most large
enterprises have remained majority owned by the State. Therefore the
State appoints the Board of Directors and management of these
companies.
Romania is not a land of PACs or lobbyists. It is a land where the
ruling party manages the levers of power by controlling the primary
drivers of the economy: banking, steel, oil and gas and electricity.
In addition, most of these complexes were labor intensive and
therefore social pressures were controlled at a local level through
strong collaboration between the unions and the political
establishment. Following Ceausescu's fall in late 1989, the political
establishment continued its reliance on unions to control the social
situation during the last ten years of democratic change and painful
economic transition.
In conclusion it is my opinion that corruption is very broad based
in Romania. It goes without saying. It is accepted and in fact is
sometimes presented as an all-together reasonable practice since wages
are so low and access to cash so highly limited, that people have to
steal to survive.
I also believe that in Romania the impact has been most severe when
compared to the experiences of other countries in the region (i.e.
Poland and Hungary). I believe this is the case because the population
of Romania has been so much more controlled and indoctrinated under
Ceausescu than others in the region and therefore will not protest
their miserable conditions as they might in the other countries. The
powers-to-be can get away with it so they do.
Until the Romanian national leadership attacks corruption, exposing
and prosecuting major perpetrators, the citizenship will not believe,
honest investors will remain hesitant to invest and bribes and pay-offs
will remain the order of the day in the Romanian economy.
If the controlling political entities remain reluctant to take
action because of their implication in the corruption network
themselves, then maybe the only way to affect change will be from
external influences. From the international community in the form of
the European Union, IMF, World Bank and democratic institutions such as
this honorable committee of the United States Senate.
In any event, I believe, given a level playing field, the Romanian
economy could easily become the strongest in the region. I also
believe, given its strategic location, it is in our best interest to do
all we can to ensure a stable social/economic condition prevails in
Romania.
During my time in Romania, I came to respect enormously the
Romanian people, their history and culture and their basic decency.
They deserve a better system than what is currently in place and I hope
with the help of the international community and new and courageous
leadership, Romania can become a better place to live, work, raise a
family and enjoy the blessings of freedom and real democracy.
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Responses to Additional Questions for the Record
Responses of Hon. Steven Piper, Deputy Assistant Secretary of State,
Bureau of European and Eurasian Affairs, U.S. Department of State, to
Additional Questions for the Record from Senator Richard G. Lugar
Question 1. How are U.S. State Department programs that address
crimes and trafficking across borders, such as those involving drugs,
weapons or terrorists, being coordinated and integrated into each
country's assistance program plan? Are the embassies involved?
Answer. Our assistance funds for these purposes in the European and
Eurasian region are coordinated in various ways, depending on the
account under which funds are appropriated by the Congress, the nature
of the criminal activity involved and those USG law enforcement and
security agencies charged with combating it. In each case, however, the
EUR Bureau's Office of the Coordinator for Assistance (EUR/ACE) and our
U.S. Embassies in the region ensure that these processes are integrated
into country assistance plans.
Narcotics Trafficking
EUR/ACE reviews these counter-narcotics and law enforcement
assistance programs to ensure that they are consistent with the
strategies developed by our embassies and the State Department's Bureau
for International Narcotics and Law Enforcement Affairs (INL) and that
they propose an effective use of funds with clear objectives and sound
budgets. EUR/ACE also reviews program implementation as a basis for
further funding. EUR/ACE works with INL, other offices and bureaus of
the State Department, and with the Departments of Justice, Defense and
Homeland Security to ensure that the country assistance plans also
serve overall policy objectives for the region.
At this time, one of the key objectives of these programs in the
EUR region is to build, through our assistance for training, equipment
and reforms, basic counter-narcotics and law enforcement capabilities
that are still lacking or are inadequate in most of the states in
transition from communist rule. While taking advantage of opportunities
to encourage and assist law enforcement cooperation on a regional
basis, we are mindful of the need for a strong foundation of such
capabilities in each individual country if criminal activities that
cross borders are to be successfully attacked. Much of our assistance
for counternarcotics and law enforcement efforts is therefore allocated
to bilateral programs at this time as we seek to build up those
capabilities.
Before determining the allocation of law enforcement assistance for
both bilateral and regional efforts, we assess the state of each
country's law enforcement and counter-narcotics intelligence,
enforcement and drug interdiction capabilities; the need for
appropriate legislation to authorize new, modern methods of
investigation and prosecution and adoption of those new procedures in
each country; and the degree to which each country's government is
willing and able to support U.S. law enforcement operations in the EUR
region and/or engage in regional cooperation with its neighboring
states.
Helped by the appropriation of $22 million for drug interdiction
and law enforcement reform in Central Asia, a part of the Operation
Enduring Freedom supplemental for Fiscal Year 2002, EUR/ACE has
undertaken to allocate resources through INL to each country across the
former Soviet region in a manner that will best support existing or new
operations across the region by U.S. law enforcement agencies,
particularly those operations of our U.S. Drug Enforcement
Administration. Examples include: a new, DEAvetted-and-overseen,
counter-narcotics unit that has been established in Uzbekistan with our
assistance; new Drug Control Agencies that are being created and
maintained under programs administered by the United Nations Office on
Drugs and Crime (UNODC) with U.S. funding support in Tajikistan and the
Kyrgyz Republic and that are intended to create a foundation for those
countries' expanded cooperation with DEA; a counter-narcotics border
program that has been initiated on Kazakhstan's southern border that
stretches from China to the Caspian Sea; and, using assistance funds,
the DEA is to oversee equipment and training that will soon be provided
for selected counter-narcotics units on Russia's border with
Kazakhstan. While all of the funds allocated in the above examples are
provided to individual countries to build up their counter-narcotics
and law enforcement capacities, the projects involved will easily lend
themselves to greater cooperation across the region.
Counter-terrorism
Counter-terrorism assistance funds are provided by the Congress
under the Nonproliferation, Anti-Terrorism, De-mining and Related
Programs (NADR) account, and support the Antiterrorism Assistance (ATA)
program, the Terrorist Interdiction program and regional workshops for
senior level police. They are coordinated by the State Department
Coordinator for Counterterrorism (S/CT). S/CT provides policy guidance
on such programs, and, to ensure coordination of those programs in the
EUR region, works closely with the Bureau for Diplomatic Security (DS),
which implements the programs, the EUR Bureau and our embassies in the
region to ensure that counter-terrorism programs and assistance are
integrated into program plans for each country.
EUR/ACE and INL also work to support our counter-terrorism efforts
through the allocation of counter-narcotics and law enforcement
assistance funds appropriated for the EUR region under the SEED Act and
FREEDOM Support Act. An example of that is a program that is now being
funded for the Kyrgyz Republic to help create a new passport and
document control system in that country. Kyrgyz passports are
susceptible to counterfeiting by those who may engage in criminal
activities in the Central Asian region and beyond. The document control
project, while technically a law enforcement effort, will certainly
have a positive impact on our efforts to support the Kyrgyz Republic in
fighting terrorist organizations while it works to apprehend those
using falsified documents to engage in drug trafficking or other
criminal activities that cross borders.
WMD Proliferation
EUR's Assistance Coordinator, together with EUR's Office for Policy
and Regional Affairs (EUR/PRA), ensures interagency consultation on our
various assistance programs targeted at preventing the proliferation of
items and technology related to weapons of mass destruction in the EUR
region. The Office of the Coordinator convenes regular, country-
specific, interagency meetings, the goal of which is to ensure that USG
objectives and strategies with respect to such WMD nonproliferation
programs are coordinated amongst the several interagency implementers.
Those meetings also rely on and take into consideration information and
guidance received from our embassies.
Question 2. Who is responsible in the State Department for
coordinating these programs and plans? Are Regional Bureaus in charge
of assistance priorities in their countries or are functional Bureaus,
such as the Bureau for Nonproliferation (NP) and the Bureau for
International Narcotics and Law Enforcement Affairs (INL), in charge of
those priorities?
Answer. The Bureau for European and Eurasian Affairs follows the
guidance of the Secretary and Deputy Secretary and utilizes a specific
Policy Coordinating Committee (PCC) process for broad policy issues
having to do with the EUR region. The Assistant Secretary of the EUR
Bureau chairs the PCC on Europe, which is structured to respond
flexibly to important policy issues in the region, and, as necessary,
can take up issues of law enforcement and counter-narcotics assistance
in key sub-regions in Europe and Eurasia, including Southeast Europe
and Central Asia.
The EUR Bureau utilizes an additional assistance coordination
mechanism, embodied in the form of the Office of the Coordinator of
Assistance to Europe and Eurasia (EUR/ACE). The Coordinator's office
has the statutory authority to coordinate all USG assistance to the
states of Eastern Europe and the former Soviet Union. On behalf of the
EUR Bureau, EUR/ACE coordinates closely with INL, NP, and other bureaus
with global responsibility for policy and programs to combat narcotics,
crime, proliferation and other forms of criminal activity, to ensure
that funds appropriated under different accounts and managed by
different agencies are complementary and not duplicative.
Such coordination takes several practical formats:
Coordination meetings are held several times each month that
bring all relevant agencies and offices together. Each such
meeting usually focuses on a specific country;
Semi-annual program and budget reviews are held with U.S.
Government entities that manage FREEDOM Support Act (FSA) and
SEED Act funds for law enforcement programs; and
Approximately four to five country reviews are held yearly
that assess the effectiveness of all U.S. Government assistance
in a given country, including our law enforcement and security
programs.
In addition, EUR/ACE compiles an annual report to Congress on the
use of U.S. Government assistance in SEED and FSA-assisted countries.
That report contains a country-by-country assessment on security and
law enforcement activities, as well as detailed budget information.
Compilation of this report is used as a management tool to identify
performance issues and improve coordination.
EUR/ACE also participates in the PCC process and consults with
other EUR offices and with our embassies in the region, ensuring that
the objectives and allocation of our law enforcement and security-
related assistance take into consideration embassy views and
priorities. The following example is illustrative: NP and INL are
responsible for managing their respective programs and each relies on
program advisors and contractors stationed at EUR embassies to help
implement and coordinate NP and INL programs in each country. EUR/ACE
ensures, however, that the NP and INL program and performance plans are
considered within the larger context of the range of U.S. Government
assistance to those countries and across the region, including
assistance for counter-narcotics and law enforcement training and
reform programs, nonproliferation, defense and border security
programs, and other programs. EUR/ACE also maintains regular contact
with Ambassadors in those countries to obtain their views on the
program performance of NP and INL. This mechanism ensures program
effectiveness and reduces the possibility of duplication of assistance.
Finally, our embassies use their Country Teams to ensure coordination
of U.S. assistance efforts with the host country.
Question 3. Who has the authority to allocate law enforcement
assistance resources by country to ensure priorities are consistent
with U.S. policy?
Answer. The State Department's Bureau for International Narcotics
and Law Enforcement Affairs (INL) holds the authority to allocate such
assistance to countries around the world. In accordance with the SEED
and FREEDOM Support Acts, however, the European and Eurasian Bureau's
Office of the Coordinator for Assistance (EUR/ACE) holds the authority
over the allocation of funds that are administered by INL for law
enforcement assistance in the European and Eurasian region.
In the allocation of funds for law enforcement assistance in the
EUR region, EUR/ACE acts on the basis of proposals from EUR embassies
that take into account competing needs and objectives for assistance
programs. These proposals are reviewed in Washington with INL. INL's
input in this process reflects its expertise and responsibilities in
overseeing and managing the many implementers of our law enforcement
assistance, including agencies of the Departments of Justice and
Homeland Security, international organizations such as the United
Nations Office on Drugs and Crime, and, on occasion, non-governmental
organizations.
Consultations with INL continue throughout the year to review
programs in depth and gain INL's perspective on funding allocations,
not only for each of the countries but for regional projects as well
(such as the International Law Enforcement Academy in Budapest). INL's
input on its regular interaction with other donors of law enforcement
assistance in the region, such as the Organization on Security and
Cooperation in Europe (OSCE) and the European Union (EU), also provides
valuable insight on those ways in which U.S. law enforcement assistance
can be allocated in order to leverage other donors' assistance or to
address challenges overlooked by such donors.
Within each Embassy there is also a Law Enforcement Working Group
that assesses key law enforcement challenges and the degree of
receptivity on the part of the host government to our possible
assistance initiatives. (The Law Enforcement Working Group is composed
of U.S. personnel working on law enforcement assistance, including law
enforcement representatives at the post--especially those from the
Departments of Justice and Homeland Security--and other U.S. personnel
working on related issues.) We have found the input of those on the
ground in our Embassies--our Ambassadors and their Law Enforcement
Working Groups--invaluable in our decision-making on allocations of law
enforcement assistance.
As an example: A program now being started by INL in Uzbekistan
with FREEDOM Support Act funding will address the alleged use of
torture and abuse by police in that country during investigations. A
coordinated process led by EUR/ACE brought together personnel from INL
and the State Department's Bureau on Democracy, Human Rights and Labor
(DRL) to design programs that would address this issue, an issue of
importance to the Congress as well as to the Department of State. The
resulting suggestions were then forwarded to our Embassy in Tashkent
for review by our Ambassador and his Law Enforcement Working Group,
which advised EUR/ACE and INL on the program it felt most appropriate.