Drugs and Crime. Class Overview. Illicit Drug Supply Chain. The Drug Supply Chain. Drugs and Money Terrorism & the International Drug Trade DRUG GANGS

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1 Drugs and Crime Drug Trafficking & Distribution Class Overview The Drug Supply Chain Cultivation Production Transportation Distribution Drugs and Money Terrorism & the International Drug Trade Illicit Drug Supply Chain Cultivation Production Transportation PEASANT FARMERS MILITIAS, CARTELS, SOME GOVERNMENTS Source Country to U.S. Border Area Over the Border (Smuggling) Intra-U.S. Distribution DRUG GANGS Regional & Local Distribution Networks Street-Level Dealers 1

2 Major Drug Producing Countries 2006 Afghanistan Bahamas Bolivia Brazil Burma Colombia Dominican Republic Ecuador Guatemala Haiti India Jamaica Laos Mexico Nigeria Pakistan Panama Paraguay Peru Venezuela Per Capita GDP $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $36,300 $10,000 $5,000 $- $9,000 $6,600 $3,700 $700 Afghanistan Colombia Guatamala Mexico United States Alternative Development Viewed by U.N. as comprehensive and permanent solution to illegal drugs Focus on rural development in context of sustained national economic growth Recognizes socio-cultural characteristics of target communities Requires support of national governments 2

3 Some Definitions Drug Trafficking: Commercial exchange of illegal drugs including the equipment and substances involved in producing, manufacturing and using these drugs Interdiction: Efforts by government to enforce laws governing trafficking and to deter and eradicate the exchange of such illegal goods. Economics of Drug Trafficking: The Price of Cocaine 400 pounds of coca leaves: $ paid to Peruvian farmers One pound of refined cocaine exported from Colombia $1,500-2,500 Wholesale cost in U.S. $15,000-20,000 Retail value (small doses) $40,000 CARTELS Definition of Cartel: Group of enterprises or countries that collectively attempt to affect market prices by controlling production and marketing. Advantages of Cartels Vertical Integration Shared Infrastructure Higher Profits (bigger piece of the pie) 3

4 The Colombian Drug Trade 1970 s: Primarily marijuana production, emergence of cocaine cartels 1980 s-90 s: More lucrative cocaine industry and rise of Medillin and Cali cartels Today: Continued thriving cocaine industry Largest producer of heroin consumed in United States Colombia (continued) Progress: 1990 s arrests, Escobar killing, and break-up of major cartels Project Colombia: $7.5 billion international effort at crop eradication & alternative development Problems & Issues Rebel armed forces involved in drug trafficking Governmental human rights policies undermining alternative development efforts Mexican Drug Trade Mexican drug trade pre-dates Colombia s by several decades Drug trafficking deeply embedded in political power structures, especially in northwestern states Mexican cartels control majority of drugs entering U.S. Colombian cocaine Mexican heroin Marijuana Methamphetamine 4

5 Cocaine Trafficking Control centralized in Colombia w/ Colombian cells operating at major U.S. distribution points Increasing role of Mexican groups working in concert with Colombian organizations to provide cross-border transportation 65% of cocaine entering U.S. comes through Southwest border Caribbean (i.e. Jamaica) increasingly serving as trans-shipment shipment point Dividing the Pie East coast wholesale operations primarily Colombian and Dominican w/ some Mexican role, and increasing Jamaican role West and Midwest regions w/ more Mexican control Level of associated violence decreased since peak in 1980 s Heroin Trafficking Through early 90 s, U.S. heroin emanated from multiple markets (Asia, South America, Mexico) During past decade, shifted to Colombian heroin (eastern U.S.) and Mexican black tar heroin (western U.S.) Colombian importation heavily dependent on use of mules carrying between 500g -1 kg Dominican groups controlling retail sales in many eastern regions Marijuana Trafficking Market once heavily dominated by Colombian-grown and Mexican-grown marijuana Trends over past 20 years: Substantial Mexican importation continues Increase in domestic-grown product Increase in Canadian-grown product (e.g. BC- Bud ) Higher potency 5

6 Methamphetamine Trafficking DEA clampdown on domestic meth labs creating opportunity for Mexican operations Since 2002 Significant increases in Mexican production and importation Lab operations shifted from northwestern border areas to interior of Mexico Major POE s shifted to Arizona and Texas Associated eastward shift in U.S. meth usage patterns Follow the Money: Overview of Money Laundering Money Laundering Process used by drug traffickers to introduce drug proceeds into legitimate financial market Estimated at between 2% and 5% of world s GDP (about $6 billion annually) Intercepting flow of laundered $$ viewed by law enforcement as critical interdiction tool 6

7 How Money Laundering Works: Three-Stage Process Placement of Proceeds Movement of $ from scene of crime to less suspicious and accessible place (i.e. bank account) Layering Multiple transfers of funds to conceal linkages to illegal sources Use of offshore banks Integration Conversion of illegal proceeds into apparently legitimate business earnings False invoices, real estate or loan deals, etc. Black Market Peso Exchange Largest money laundering system in Western Hemisphere Based on synergy of interests Drug traffickers Private bankers Smugglers of U.S. goods Small businesses Colombian citizens who want U.S. goods (such as cigarettes) Terrorism & Drugs 7

8 Major Drug Producing Countries 2006 Afghanistan Bahamas Bolivia Brazil Burma Colombia Dominican Republic Ecuador Guatemala Haiti India Jamaica Laos Mexico Nigeria Pakistan Panama Paraguay Peru Venezuela Some Political Factors Associated with the Drug Trade Roles and responses of ruling national governments Economic status of population Agendas of rebel groups outside of political mainstream Expectations of international community What do Terrorists Want? Political instability Power and control Money 8

9 Drug Trafficking and Terrorism: Potential Links Cash Chaos and Instability Corruption & Intimidation Cover and Common Infrastructure Competition for Enforcement Resources Cash Potential sources of terrorist funds Complicit governments ( state-sponsored terrorism) Private donors Illicit activities Drug trade Extortion Cash Does drug trafficking supply cash for terrorist organizations? Mechanism Taxes on growers Taliban profited greatly from opium trade before coming to power Drugs may be central to funding other worldwide terrorist groups, especially in South America Issues How much cash is really being made? What are conditions that allow terrorist groups to profit from drug trafficking? 9

10 Chaos and Instability Drug trade sustaining violence among traffickers and with public authorities Friction between local growers and government/military authorities Traffickers actions can deliberately weaken governments (i.e. Medillin in Colombia) Corruption and Intimidation Large-scale trafficking generally involving corrupt contacts between traffickers and officials Embedded corruption practice spillover into terrorist groups Intimidation as complement to corruption ( plata o plomo ) Cover and Common Infrastructures Terrorists using drug trafficking as cover for themselves, movements, or contraband Illicit drug markets facilitating terrorist actions by supporting service providers Money launderers Providers of cloned cellphones Makers of false identification documents 10

11 Competition for Law Enforcement Resources Drug enforcement may divert attention and resources from anti-terrorism efforts, and vice versa But at same time. May be synergies of effort Border security Airport & customs security 11