Europe's cocaine boom gives rise to new laundering schemes

The Wall Street Journal published an excellent article this week on the rise in cocaine smuggling to Europe and the role of the strong euro in fueling another lucrative illicit enterprise: euro laundering.

The article raises several interesting and important issues related to the global trade in cocaine:

• Due to the strength of the euro and increased demand for cocaine in Spain and Italy, Europe has become a more lucrative market for narcotraffickers;
• Consumption of cocaine has soared in Western Europe, much of which is smuggled through West Africa where governments struggle to combat poverty, weak law enforcement, and widespread corruption;
• Spain has become an important center for narcotraffickers intent on disguising the origins of currency gained through illicit activities;
• Consumption of cocaine is on the rise in Spain where today 3% of the population uses the drug, compared with 2.3% in the US; this, combined with reports that a kilo of cocaine in Spain now fetches upwards of $43,000 as compared to $12,000-26,000 in the US, gives the Spanish market the potential to rival, perhaps even surpass, the potency of the US market;
• Spain is an important entry-point for cocaine due to its long shoreline, its proximity to Africa and its shared language with Colombian and other South American traffickers;
• Cocaine bound for Europe first is shipped first to West Africa where it is then sent over land or by water into Europe through Spain. Then the ill-gotten gains (euros) are flown back to South America and laundered through casas de cambio or money exchange businesses. That cash is then exchanged (laundered) by sending the euros to the United States where they are exchanged for other forms of currency as part of a seemingly legitimate business transaction.

To learn more about this laundering process, check out the article "Cocaine Boom in Europe Fuels New Laundering Tactics" by Mark Schoofs and Paulo Prada.

Cocaine seizures drop as traffickers 'shift to semi-submersibles'

US officials say drug traffickers have shifted to semi-submersible craft and other smaller, harder-to-detect boats to elude surveillance, causing a sharp drop in cocaine seizures last year. Officials say seizures of cocaine flowing north out of South America plummeted from 257 metric tons in 2006 to 208 metric tons last year, the second year in a row they have fallen.

Traffickers’ success attributed to their adaptability
Officials who briefed reporters on condition of anonymity acknowledged that they were slow to pick up on the latest change in tactics by drug traffickers. They say their success in tracking and stopping high powered speed boats laden with cocaine forced drug traffickers to find new ways of slipping through the net of radars and air and naval patrols use to catch them. Authorities recognize that traffickers now send out more, less powerful boats with smaller loads of cocaine that blend in with other vessels. They also say that the use of semi-submersible boats is on the rise. "They are very hard to detect," said one official, who added that US authorities intercepted its first semi-submersible in November 2006. Others attribute the decrease in cocaine seizures to the hefty bribes being paid to officials to ensure the safe passage of cocaine shipments.

As supply increases, prices decline
The Belfast Telegraph published a story today about the arrival of cheap, heavily adulterated cocaine in Northern Ireland. The weak U.S. dollar has increased the volume of cocaine shipments from South America to Europe and the drug's declining street value has raised fears that more and more young people will be lured into cocaine use. Northern Ireland has been chosen as a desirable destination for cocaine distribution given the prevalence organized crime syndicates--a result which I suspect is mostly attributed to the unsuccessful demilitarization and reintegration of the IRA and other ex-combatants.

Drug seizures raise questions about drug trafficking trends

In his book Illicit (2005), Moises Naím argued that migrant smuggling and trafficking in persons was linked to the global drug trade and other well-organized transnational criminal networks. By exploiting the world's vast reserves of potential migrants, drug traffickers align with migrant smugglers and force their "clients" to carry small, valuable packages of narcotics. This flexible approach allows traffickers to move large quantities of goods without all the risk of losing them to anti-drug law enforcement efforts. By using this approach, several "small packages" quickly become a large shipment, and when the cargo is cocaine or heroine its resale value is infinitely greater than the fees paid to the laborers that carried the packages.

Listen to Moises Naím discuss his book Illicit on National Public Radio.

Given the recent large-scale seizures of cocaine in Spain, United States, Ireland, Peru, Colombia and elsewhere, could it be that traffickers are shifting away from sending the "small packages" Naím describes and towards the shipment of much larger cargos? Or are they simply willing to accept the obvious risks associated with this approach? If so, does this also mean that they possess vast reserves of "inventory" and are therefore willing to gamble with a few tons of cocaine here and there? This question comes to mind given the recent large drug busts. For instance:

• Peruvian police reported Sunday that they have confiscated 193 kg of cocaine in an anti-drug operation in the southern province of Ica. The cocaine packed in 180 small bags, worth over $1 million, was found on an empty bus on Friday. The driver was arrested on the spot, said the police.
• Dublin police report that cocaine worth an estimated 1.5 million euro has been seized by police.The raid was part of a series of investigations under Operation Thaw tackling distribution and supply of drugs in Coolock and Darndale. Searches at premises in Grove Lane, Coolock, took place. A gun magazine and ammunition, equipment for mixing cocaine, including a weighing scale and a substantial quantity of mixing agent, were also recovered.
• U.S. Border Patrol agents seized more than 400 pounds of cocaine from a pickup truck on the banks of the Rio Grande. Agency officials estimate the street value of the drugs at more than $15 million, according to a news release from the U.S. Border Patrol. Authorities searched the truck and found the bulk of cocaine. No arrests were made in connection with the seizure. The seizure marks one of several made in recent months. From Oct. 1, 2007 to New Year’s Eve, agents in the Rio Grande Valley Sector seized 1,473.75 pounds of cocaine, which has an estimated street value of more than $47 million, agency officials said.
• In early January, Colombian cocaine smugglers scuttled a U.S.-bound homemade submarine off the country's Pacific coast. It was the second time in a month that Colombian forces stopped an underwater craft which was then sunk by its crew members to destroy their incriminating cargo. In both cases, the smugglers quickly opened the hatches to sink the vessels before they could be boarded by authorities. Both submarines had the capacity to ship 10 to 12 tons of cocaine to the United States.
• In December, a South African court jailed two British men for 30 years for trafficking in cocaine and cannabis worth some 23 million US dollars, the SAPA news agency reported. The men had tried to have the drugs shipped from the nearby eastern city of Durban to Britain, the report said. The 150 kilograms of cocaine worth $21.3 million US dollars was intercepted in a container near Durban while the 8.1 tonne haul of cannabis, worth $1.6 million US was seized by the authorities in Britain at the port of Felixstowe.
  

Photo by Doomsday

Spanish police nab sailboat and cocaine cargo

Spanish police have seized 600 kilos (1,320 pounds) of cocaine on a sailboat in the Atlantic bound for Spain in a drugs operation that netted seven suspects, including three Europeans, police said Saturday.

The cocaine had been transferred to the British-registered sailboat off the coast of the island of Antigua in the Antilles, a police statement said.

Police, who had been following the sailboat since last month, intercepted it between the Portuguese islands of the Azores and Madeira and found on board 600 packets each containing a kilo of cocaine.

Three European crew members from France, Italy and Spain were arrested in the operation. Four others from Colombia, Venezuela and the Dominican Republic, picked up by police in Madrid, are suspected of being responsible for the drugs network, police said.

Anti-narcotics officials believe Portugal and Spain have become the main points of entry into Europe for cocaine coming from Latin America.

In related news, a man claiming to be a Catholic priest was arrested Friday at Amsterdam's Schiphol Airport after he was caught carrying 3.5 kilograms of cocaine under his robes, a spokesman for Dutch border police said.

Narco-submarines used for shipping tons of cocaine

On September 11, 2000, reports began to circulate regarding super-sized narco-submarine construction efforts underway in Bogota, Colombia, raising many incredulous eyebrows in the process. "They won't believe me in Washington," said Leo Arreguin, the surprised DEA director in Colombia, on stumbling upon the most spectacular findings of his career as an anti-narcotics agent. Arreguin had discovered a submarine 36 meters (118 feet) long and capable of transporting up to 15 tons of cocaine. "Never in my 32 years of police work have I seen something like this." According to police, the project was the result of efforts by Russian and Colombian mafias with ties to organized crime in the United States. Upon seeing the submarine, one Russian embassy official exclaimed, "This is technology from my country!"

Since 1994, traffickers have used mini-submarines to transport drugs, but Ismael Idrobo from the Colombian Naval Academy pointed out that never before had such a large vessel been discovered. Built in Bogota, the narco-submarine was to be dismantled into three sections and transported to Buenaventura, a seaside port located over 700 kilometers away. The vessel, weighing in at 150 tons, could have operated at depths of 100 meters (330 feet) and able to carry 10-15 tons of cargo while remaining submerged for over six hours at a time.

In 2003, the Spanish customs agency (SVA) reported that it suspected that mafias hailing from the northwest Spanish province of Galicia possessed submarines for carrying out their narcotics trafficking operations. At that time, the agency explained that Russian submarines had been up for sale and that narcotraffickers from various countries potentially could use them to evade counter-narcotics patrols. Then in 2006, Spanish police discovered a 10-meter long submarine near the Cies islands, close to the port city of Vigo. Not surprising, Vigo is an industrial city known for its long tradition of building submarines.

Since 2005, Colombia's navy has captured 18 homemade submarines. In November 2007, Colombian marines seized a makeshift submarine capable of smuggling up to 12 metric tons of cocaine through the Pacific to Central America. The vessel, under construction but nearly completed, was found in a rural area in south Nariño province and had enough space for four crew members. That same month, the Costa Rican Coast Guard announced that U.S. Coast Guards had seized a submarine carrying 3.5 tons of cocaine in the Pacific Ocean off Costa Rica and arrested three Colombians on board. In December, Colombian forces, backed by the U.S. Coast Guard, stopped an underwater craft that was then sunk by its crew members in order to destroy their incriminating cargo. Since then, another submarine was discovered on January 4. In both cases, the smugglers opened the hatches to sink the vessels before they could be boarded by authorities. Each of these submarines had the capacity to ship 10 to 12 tons of cocaine to the United States.

In 2008, look for more discoveries of these narco-submarines off the coast of Guinea-Bissau, the worlds' fifth poorest country and an increasingly important transit hub for Colombian narcotics smuggled to Europe.

War profiteers "don't want war to end"

The following article about Salvatore Mancuso, a demobililized paramilitary commander and former leader of the AUC, illustrates how transnational criminal enterprises not only rely on shady characters such as smugglers, traffickers, and dealers (STDs) but also on the complicity of legitimate actors including governments, politicians, military personnel, foreign contractors, and multinational corporations.

ITAGUI, Colombia, August 14 (Reuters) -- Colombia's cocaine trade is much bigger than the government says and will continue to grow on stronger European and Asian demand unless a coherent anti-drugs plan is adopted, a jailed warlord said.

Salvatore Mancuso, once feared throughout northern Colombia for his cocaine-financed paramilitary war against leftist rebels, says Colombia is not serious about cracking down on the drug trade that fuels the four-decade-old insurgency.

Vested interests -- from politicians and military officers who collude with drug smugglers, to contractors connected to a multibillion-dollar U.S. anti-narcotics program, to companies that sell chemicals used to process cocaine -- don't want the war to end, he said. "As long as there is a conflict in Colombia, all this will flourish," Mancuso told Reuters on Monday at a maximum security prison in the mountains outside Medellin.

The ex-leader of the 2,500-member Northern Bloc militia said he ordered a study that shows Colombia produces 960 tonnes of cocaine a year, more than 50 percent above official estimates, and the trade will remain strong as the U.S. cocaine market holds steady and demand grows fast in Europe and China.

Mancuso said he is trying to persuade the U.S. government to listen to his plan for ending the drug trade in this Andean country, but has had little luck so far. He said the U.S.-backed program of fumigating coca plants used to make cocaine is haphazard and that sprayed areas are often retaken by the rebels and replanted. "First we need all-out coca eradication. Second a coherent plan for security and a state presence in these rural areas," Mancuso said. "Then there has to be social and economic development for each community." This would include construction of roads allowing farmers get their legal crops to market. Click here to here the full text.

Photograph courtesy of AFP

Pablo Escobar: Violence, Cocaine, and Wealth

Written by Maggie Sullivan

Pablo Escobar: violence, cocaine, and wealth. These are the first words that come to mind when I think about the man who was named seventh-richest in the world by Forbes magazine in 1989 and who was considered by many to be the most brutal drug kingpin until his death on December 2nd, 1993.

In the late 1980s, American law enforcement and intelligence organizations were involved in a major initiative with Colombian authorities to track down and bring to justice Medellin cocaine trafficker Pablo Escobar. I just finished reading “Killing Pablo” by Mark Bowden, a book that recounts this game of cat and mouse involving both the Colombian and US governments.

I was surprised to read that contrary to popular belief, Escobar did not actually offer to pay off the Colombian debt of $10 billion in exchange for a pardon by the government. This is not to say that he did not bribe his way through Colombia, paying officials to look the other way whenever he shipped cocaine out of the country and convincing the government to let him build his own prison complete with a Jacuzzi, big screen televisions, and a bar.

And while Pablo Escobar did become one of the world’s most wanted man by both the Colombian and US governments, he was also very well-liked in his hometown of Medellín. He cultivated his Robin Hood image by supporting the construction of homes for the poor, sports complexes, and other community restoration projects.

As time passed, the cocaine industry grew and generated much greater profits. At one point Escobar might have been able to "make amends" with the Colombian government, however he eventually became deeply involved in an industry that ultimately led to the outright declaration of war between the Colombian government and the Medellín cartel. And as previously mentioned, the US played a significant role in this war. The US government, including the Central Intelligence Agency, Drug Enforcement Administration (DEA), and the State Department played a crucial role in the pursuit of Pablo Escobar by providing the Colombian government with training, equipment, and intelligence.

Whether or not US officials were present when Escobar was killed is still a matter of debate. However, what is certain is that US support played an undeniably important role in the search and assassination of Pablo Escobar.

The decline of the Medellin Cartel and rise of the Cali Mafia

So what did Escobar’s death signify for the cocaine industry? Did it result in the end of the so-called "war on drugs?" The answer is no. Instead, it signified the death of the Medellín cartel. And rather than destroy the Colombian cocaine industry, Escobar’s death merely shifted the balance of power from the Medellin Cartel to the Cali Mafia and it increased involvement of the paramilitaries (a.k.a. "death squads") in the cocaine business. Few would argue that Escobar’s death ended the “drug war.” Instead, most would argue that it simply shifted the major players of the game.

Maggie Sullivan is a second-year MALD student at The Fletcher School and is focusing her studies on Development Economics and International Monetary Theory. She is currently in Colombia doing an internship with the United Nations Office on Drugs and Crime (UNODC).

Winning the "War on Drugs"

Written by Maggie Sullivan

Yesterday I had the opportunity to attend a press conference here in the United Nations Office on Drugs and Crime (UNODC) regarding the latest coca cultivation data. This conference was particularly interesting because of the perceived differences between the estimates of United States and Colombia regarding the (lack of?) progress on the “war on drugs.” The UNODC and Colombian Government’s official statistics show a reduction in total coca cultivation of 9%. However, the US numbers tell a different story: that there was no change in coca cultivation from 2005 to 2006. To explain this difference, it appears that the two governments have been using different methods to measure coca cultivation. According to Sandro Calvani, the representative here at the UNODC, there will be a meeting next week in Washington, D.C. in order to reach agreement upon setting a standard measuring method. In yesterday's press conference, Calvani emphasized the importance of international assistance in Colombia’s struggle against illicit drugs. This comes at a time when the US Congress has decided to change the direction of the aid package.

Regardless of whether total coca cultivation in Colombia has decreased, it has increased in Peru and Bolivia – which also means that the world supply remains unchanged. This is also called the “balloon effect.” The overall cultivation level does not really decrease, but rather it changes directions, similar to what happens when you squeeze a balloon.

Economic theory applies: as long as there is market demand, there will be supply.

Maggie Sullivan is a second-year MALD student at The Fletcher School and is focusing her studies on Development Economics and International Monetary Theory. She is currently in Colombia doing an internship with the United Nations Office on Drugs and Crime (UNODC).

"The best Plan Colombia ever"

There's hardly a dull moment when it comes to Colombian politics. First, this week President Uribe has been working to free from prison approximately 150 members of the FARC (see #35), a leftist insurgency determined to overthrow the Colombian government. Second, the U.S. Congress is debating a proposal to alter the way foreign aid is given to Colombia. The goal of this new proposal is to create the best Plan Colombia ever.

What is Plan Colombia?

Since 2000, the United States has provided anti-drug and anti-terrorism support to the government of Colombia through "Plan Colombia" at an expense of over $5 billion. The aid package has primarily consisted of military aid and drug-eradication assistance (80%) in addition to funding for humanitarian assistance (20%). This week, Congress has proposed reducing the percentage of military assistance to approximately 65% and increasing the level of humanitarian aid to 35%. The new Plan Colombia would increase aid for much needed alternative development projects as well as for programs intended to promote democracy, assist communities displaced by the conflict, and help demobilize paramilitaries and guerrillas.

Why the change of heart?

This new stance by Congress appears to be connected to two recent and unsavory revelations: First, a recent White House report suggests that Colombia is not actually winning the "war on drugs." According to a report released by the White House this week, coca production has increased steadily over the past few years despite massive (and expensive) efforts to eradicate the illicit crop used for the production of cocaine. Second, recent reports also suggest that President Uribe and his administration have maintained close ties with the United Self-Defense Forces of Colombia (AUC), an illegal armed group that appears on the U.S. State Department's list of foreign terrorist organizations (See #42).

Colombia's "Narco-Bubble"

Over the past year, the Colombian peso (COP) has increased in value more against the U.S. dollar than any other currency in the world. President Uribe argues that Colombia is winning the war on drugs, pointing out that the country has dismantled paramilitaries, weakened guerrillas, and reduced the narco-economy, however economic indicators tell a different story. The growing strength of the COP has seriously hurt the country’s exports and job market. And despite Uribe's claims of winning the drug war, the Financial Times reports that the steady rise in the peso is due to a massive influx of dollars from narco-trafficking.

The "new" Plan Colombia

In my view, the "new" Plan Colombia will directly assist those working to strengthen the Colombian peace process. First, funding for alternative development projects is needed by those whose primary source of income comes from the cultivation of illicit crops. Without these crops, many have no other livelihood options and therefore are resistant to giving up this guaranteed source of income. Second, the new Plan would provide much needed funding support for Colombia’s strained judicial system. The system currently burdened by the task of investigating and prosecuting thousands of demobilized paramilitaries and guerrillas. The funding would permit the hiring of much needed judges, prosecutors, and investigators to prosecute those individuals bearing the greatest responsibility for serious violations of international humanitarian law.

Based on my recent conversations with the prosecutors office, investigators conducting exhumations often are forced to take public transportation (taxis and buses) to the grave locations because they lack vehicles of their own. These are often in isolated areas controlled by paramilitaries or guerrillas where the security situation tends to get "a bit complicated." The fact that investigators must resort to using public transportation exposes them to greater security risks that could be mitigated by having access to their own private vehicles. It appears that the new Plan Colombia will provide much needed financial support for such purchases.