David Carey Testimony 1/31/96

Testimony Before the House International Relations Committee on International Organized Crime by David Carey, Director, DCI Crime and Narcotics Center on 31 January 1996

On behalf of the Deputy Director for Intelligence, I would like to thank the committee for the opportunity to address the threat that international organized criminal groups pose to US national security interests and explain what the Intelligence Community is doing to improve collection and analysis on this issue. My remarks will focus on three elements of the threat--trends in transnational criminal activity; the impact of crime and corruption on political and economic stability in foreign countries; and expanding international networks and cooperation among criminal organizations.

First, trends.

Transnational criminal activities are growing in every region of the world as organized criminal groups take advantage of the lowering of political and economic barriers, societies in transition, and modern telecommunications, technology, and business practices that facilitate legitimate international commerce. Indeed, organized crime groups are moving aggressively into the legitimate economies of many countries as business owners, undermining opportunities for legitimate entrepreneurs and foreign investors, including US businessmen.

Drug trafficking mafias in many countries are increasingly sophisticated and flexible in their operations and are expanding production and trafficking routes. Although cocaine and heroin will remain major narcotics threats, the production and distribution of new drugs are becoming a significantly greater problem.

The smuggling of illegal aliens is a thriving business worldwide. Alien smuggling rings in Latin America and Asia are not as highly organized as drug trafficking groups, but they work in close association with other smugglers and corrupt public officials.

Although organized crime groups appear to be only peripherally involved in the gray arms market--which is dominated by freelance brokers, corrupt exporters, and import front companies--conflicts in the Balkans and in the former Soviet Union have encouraged Italian and Russian criminal organizations in particular to expand their involvement in arms trafficking.

As criminal organizations grow in sophistication and expand their networks, they could become increasingly involved in supporting proliferation and terrorist activities. Their networks and mechanisms for illicit financial deals could also make them greater players in international sanctions violations.

The growing complexity and connectivity of the international financial system offer significant new opportunities for criminal organizations to hide the source of illicit funds, to invest in legitimate enterprises, and to engage in more sophisticated financial fraud schemes. Although there has been no reliable information to date that any criminal group has attempted to manipulate international financial or commodities markets, the potential threat and implications are significant.

Next, impact.

Although criminal groups rarely organize politically, they can and do gain considerable power over political and economic systems through corruption, intimidation, and the economic influence they exercise. Public perceptions that government cannot cope with the power and influence of criminal organizations or provide citizens and legitimate businesses security from criminal predators can erode support for national institutions and economic and political reform.

Nowhere is this more apparent than in Russia, where Russian media polls consistently indicate that Russians regard organized crime as their country's most serious problem, with many believing the "mafiya" has more power than the political leadership or bureaucracy. The intermingling of the political, economic, and criminal sectors that dominate Russian society undermines the credibility of political and economic reform and encourages support for hardline, antidemocratic, antireform politicians. Russian criminal groups have significant influence in strategic sectors of the economy--like the oil and metal industries--through high-level political corruption and protection. They are infiltrating financial institutions, disrupting privatization programs, and deterring foreign investment. Not only is this hurting the Russian economy but also organized crime is making it more difficult for US businessmen to operate in Russia. The Russian military's criminal connections threaten the security of nuclear weapons and materials and continue to sap military preparedness.

Finally, expanding criminal networks and cooperation.

The problem of international organized crime is much more urgent than in the past because criminal organizations are becoming increasingly sophisticated and international in the scope of their activities. Russian criminal organizations are expanding their power and influence outside the borders of the former Soviet Union. Foreign criminal organizations--particularly Russian and Italian crime groups--are taking advantage of the political and economic transition in central and eastern Europe to establish new bases for money laundering and for transnational criminal activities like drugs, arms, and alien smuggling. Nigerian criminal cells in countries around the world are engaged in narcotics trafficking and significant financial fraud activities.

Meanwhile, criminal organizations are increasingly cooperating to broaden the reach and scope of their activities. The Colombian drug mafia and Italian organized crime groups have long collaborated in developing the West European cocaine market. Russian and Italian criminal organizations are cooperating in narcotics trafficking in Eastern and Central Europe. Asian and Latin American criminal groups cooperate in facilitating the transit of illegal aliens into the United States. Cooperation among criminal groups that is now primarily tactical in nature may become more comprehensive, with groups sharing information, services, resources, and markets according to the principles of supply-and-demand and comparative advantage.

For these reasons, the Intelligence Community is enhancing collection and analysis programs in order to provide national-level policymakers and the US law enforcement community with the best information and assessments of the international organized crime threats to the United States and its interests overseas. The Intelligence Community is focusing collection on the structure and networks of organized crime groups and on the political and economic implications of the problem. The CIA has reorganized the DCI Counternarcotics Center into the DCI Crime and Narcotics Center to focus analysis on international organized crime. The CNC is the Intelligence Community's focal point for interaction with the US law enforcement agencies with the aim of providing actionable intelligence on specific foreign criminal organizations.

I will now be happy to answer any questions you might have.

Thank you.

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