II. The International Crime Threat to U.S. Interests

We must combat an unholy axis of new threats from terrorists, international criminals and drug traffickers. These 21st century predators feed on technology and the free flow of information and ideas and people. And they will be all the more lethal if weapons of mass destruction fall into their hands.

President Bill Clinton
January 27, 1998

International crime directly affects Americans in many ways. For example:

In 1995, Americans spent approximately $48 billion to buy cocaine and heroin, all of which originated from foreign sources. In 1996, more than 600,000 Americans were arrested for heroin or cocaine-related violations, and more than 60 percent of all adult male arrestees tested positive for drugs in 20 of 23 cities. Illegal drug use kills over 14,000 Americans annually and generates 225,000 hospital emergency room visits.

One billion dollars worth of stolen cars are taken out of the United States annually.

The illegal duplication and piracy of U.S. films, compact disks, computer software, pharmaceutical and textile products results in annual losses to U.S. companies of up to $23 billion.

Two thirds of all counterfeit U.S. currency detected in the United States is produced abroad.

At least several hundred U. S. organizations, corporations, financial institutions, government agencies and universities have suffered computer-related security breaches so far in 1998, resulting in losses totaling hundreds of millions of dollars.

These and other international crime threats will be a growing challenge in the years ahead as criminals continue to take advantage of the same factors that are feeding the rapid globalization of trade. The challenge is particularly acute because, unlike governments and law enforcement agencies, international criminals exploit national boundaries and are not constrained by national sovereignty. As articulated in the National Security Strategy, international crime today poses a direct threat to important U.S. interests whether occurring in this country or overseas.

Threats to Americans and Their Communities

American citizens living and working at home or abroad are primary targets for international criminal activities. In addition to the toll on individual American victims, international criminal activity undermines the safety and integrity of communities across the United States.

International Drug Trafficking

Drug trafficking is one of the greatest threats to Americans and their communities. International organized crime groups take advantage of sophisticated global transportation and communications links to funnel illicit drugs into the United States. They have increasingly demonstrated both innovation and technological sophistication in conducting their drug smuggling activities. Their ruthlessness and financial strength make them a potent threat.

Approximately 13 million Americans were current users of illegal drugs in 1996. Drug abuse exacts a terrible human toll in addiction and associated health costs. This abuse also undermines family cohesion, reduces workplace productivity and correlates strongly with other crime. In 1995, Americans spent approximately $57 billion on illegal drugs -- including $38 billion to buy cocaine and $10 billion on heroin, both of which are smuggled into the United States from countries in Latin America and Asia by international criminal organizations. Illegal drug use costs our society additional tens of billions of dollars each year. Approximately 60 percent of federal prisoners in 1995 were sentenced for drug violations. Researchers have found that one-fourth to one-half of men who commit acts of domestic violence also have substance abuse problems, many involving illegal drugs. In addition to the damage they do at home, international drug trafficking organizations ruthlessly protect their activities. They threaten and sometimes resort to violence against U.S. law enforcement officers and Americans working and living in drug producing or transit countries.

International Terrorism

As evidenced by the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland, the 1993 World Trade Center bombing in New York City, the 1995 Riyadh and the 1996 Khobar Towers bombings in Saudi Arabia, and the 1995 assassination of two U.S. nationals in Karachi, Pakistan, international terrorism is a significant threat to American lives and property, at home and abroad. In 1997, there were 123 terrorist attacks against U.S. targets worldwide, including 108 bombings and eight kidnappings.

International terrorists are adept at exploiting the advantages associated with reduced political and economic barriers to move people, money and material -- including arms and explosives -- across international borders. They are becoming more sophisticated in their use of computer and telecommunications technology to support their operations. Terrorists also use drugs trafficking and other criminal activities to finance their operations.

Illegal Immigration and Contraband Smuggling

The Immigration and Naturalization Service (INS) estimates there are 5 million undocumented aliens illegally in the United States, representing nearly 2 percent of the total U.S. population. This figure includes aliens who were smuggled into the United States, those who illegally entered on their own, and those who are in the country illegally because they have overstayed their visas.

The aliens who are smuggled into the United States are subject to use by drug traffickers as "mules" to carry illegal drugs and often treated as "human cargo" shipped into the United States in cramped, unhealthy and dangerous conditions. They suffer abusive treatment from their handlers en route and sometimes are held in enforced servitude, including prostitution and drug peddling, for years after their illegal arrival to pay off debts to their smugglers. Moreover, illegal immigration is often tied to document fraud, a criminal offense that facilitates the commission of many other international crimes, such as terrorism and drug trafficking.

Contraband smuggling across U.S. borders - including currency, stolen cars, firearms, cigarettes, alcohol and wildlife - is also a significant problem. Much of this trafficking is to evade import-export taxes imposed on legal international commerce, thereby allowing criminals to reap significant profits, often while undercutting legitimate businesses. Smuggling stolen vehicles out of the United States is a very profitable criminal venture. The National Insurance Crime Bureau, a private investigative organization, estimates that, of the 1.4 to 1.6 million automobiles stolen every year in the United States, 200,000 -- valued at approximately $1 billion -- are illegally transported out of the country. Trafficking in exotic species, a $5 billion dollar per year operation worldwide, threatens biodiversity and could expose unsuspecting Americans to deadly diseases.

Organized Crime Groups

Organized crime groups are threats to Americans and U.S. businesses around the world. They are active in drug trafficking, arms trafficking, extortion, intimidation and violence. Organized crime groups have increasingly displayed a willingness to cooperate and work together on joint criminal enterprises. This increased cooperation is facilitated by technological enhancements in communications and transportation and transcends ethnic and cultural lines. These groups and the disreputable business interests sometimes aligned with them use corrupt political connections, payoffs and intimidation to secure highly profitable deals at the expense of free and fair competition. American business persons are not immune to the strong-arm tactics, including extreme violence, used by criminal groups to protect their interests or resolve disputes.

Financial Fraud Against Individuals

Wide ranging and often complex financial frauds by international criminals are robbing Americans of billions of dollars annually. One of the most notorious fraud schemes is the advance fee fraud. Nigerian and other international criminals have sent thousands of unsolicited letters and faxes with fraudulent representations to individual Americans with the promise of great profits after paying up front cash fees. In 1996, Americans were bilked of at least $100 million in Nigerian advance fee scams alone. The total loss is probably significantly greater, however, because fear and embarrassment keep many victims from reporting this crime.

Threats to Business and Financial Interests

International criminals also victimize American businesses and financial institutions, resulting in lost opportunities, lost revenue and lost jobs.

Financial Fraud Against Businesses

Financial fraud crimes have become more prevalent in recent years as international criminals take advantage of the significantly greater personal and corporate financial information now available and readily exploitable through computer technology and access devices such as credit cards, debit cards and smart cards. As a result, financial losses to American businesses from insurance and credit card fraud are increasing. Major credit card issuers suffered fraud losses in excess of $2 billion in 1996, about one-third of which occurred because of international fraudulent activity. The Association of Certified Fraud Examiners estimates financial losses in the United States from fraud schemes by domestic and international criminals at more than $200 billion per year.

Money Laundering

Criminals launder money to prevent governments and law enforcement agencies from identifying the source of illicit proceeds, from tracing the funding for specific criminal activities, and from freezing or seizing criminals' financial assets. Some estimates place the amount of money laundered internationally at between $300 billion and $500 billion annually. In addition to proceeds from criminal activities like drug trafficking, substantial amounts of money are being transferred abroad to avoid U.S. taxes.

International criminals invest billions of dollars annually around the world to acquire legitimate businesses as fronts for criminal activity and money laundering. Criminal purchases and investments in legitimate business enterprises drive honest investors away and place legitimate business persons at a comparative disadvantage.

The use of banks and other financial institutions to launder money, finance illicit transactions, or conduct financial fraud also can undermine their solvency and credibility. For example, the collapse in 1995 of Latvia's largest commercial bank occurred because the bank had been controlled by a criminal group that used the bank to make bad loans to its front companies and defrauded the bank's accounts of as much as $40 million. That collapse provoked a major financial crisis in Latvia, contributed to a change in the government and forced Latvia to seek short term assistance from the International Monetary Fund.

High Tech and Computer Crime

International criminals have the resources and funding to utilize cutting edge technologies very effectively. Emerging new electronic payment systems -- known collectively as cybercurrency -- are particularly vulnerable to criminal penetration and theft because of the speed and anonymity of these transactions and the fact that, so far, they have been largely unregulated. Cybercurrency transactions also can be conducted via the Internet, often without leaving an audit trail. The implications for the international financial system could be severe if criminals acquire the capability to hack into global financial computer networks. For example, in 1994, individuals in St. Petersburg, Russia broke into a U.S. bank's electronic money transfer system. Once inside, they attempted to steal more than $10 million by making approximately 40 wire transfers to accounts around the world. Members of the gang have since been arrested in several countries, and most of the stolen funds have been recovered.

To make matters worse, hundreds of information system vulnerabilities are discovered every day. Most of those vulnerabilities are subsequently posted publicly, usually appearing first on the Internet. World Wide Web mailing lists routinely distribute vulnerability information and software that can be used to exploit vulnerabilities. More publicity usually follows through a succession of books, magazine and newspaper articles, electronic bulletin board messages, and a growing list of Web sites that are targeted at informing a global network of hackers, crackers, "phreakers," and potentially, members of terrorist organizations and foreign intelligence services about the latest methodology for staging cyberattacks. Although broad dissemination of vulnerabilities permits system owners and operators to identify and counter them, the heavy reliance of modern infrastructure systems on information technology nevertheless makes them critical assets highly vulnerable to cyberattacks, and even more vulnerable to cyberattacks accompanied by physical attacks on infrastructure systems.

Intellectual Property Rights Violations

The sale of pirated and counterfeit products and other forms of copyright, trademark and patent infringement costs U.S. companies significant revenue losses, undermines the legitimate marketplace, and distorts international trade. In Asia, Latin America, and Central and Eastern Europe in particular, business enterprises -- many of which operate legitimately in their countries -- are exploiting modern computer and manufacturing technology to make sophisticated copies of products protected by U.S. intellectual property rights laws. Although many countries have adopted laws which make their legal regimes consistent with international intellectual property rights standards, their enforcement mechanisms often are ineffective. Shortcomings in their legal and judicial systems typically allow infringers to operate unchecked. Illegal duplication, manufacturing and distribution of U.S. films, sound recordings, computer software, pharmaceutical and other products account for nearly $23 billion in annual losses to U.S. companies worldwide.

Industrial Theft and Economic Espionage

The theft of trade secrets, including research and development, production processes, corporate plans and strategies, and bidding information, undermines fair competition and results in significant losses for U.S. businesses. In many countries, industrial theft is an accepted business practice. Foreign companies also seek to outmaneuver or underbid U.S. companies, unlawfully tilting the playing field in their favor. Such activity becomes a form of espionage when foreign governments manage those companies or directly assist in theft of trade secrets. Technological advances, particularly in biotechnology, aerospace, and computer and information systems, have increased opportunities for industrial theft and economic espionage. The American Society for Industry Security, which conducts a comprehensive survey of industrial theft, estimates that theft of trade secrets by foreign competitors resulted in $18 billion in losses to the U.S. economy in 1997.

Foreign Corrupt Business Practices

American firms are also victimized by foreign corrupt business practices. While a recently signed international convention holds the promise that many more countries will halt this practice, the United States currently has the most effective laws in this area. Those laws prohibit U.S.-based companies and companies located in the United States from paying bribes to win foreign contracts. Many other countries have legal systems that permit or even encourage companies to offer bribes as a cost of doing business. Some of these countries allow tax deductibility of bribes. One study estimates that, from May 1994 to April 1997, foreign companies offered bribes for major contracts with a total worldwide value of at least $80 billion.


International criminals produce and use counterfeit U.S. currency and other counterfeit and fictitious financial instruments to make illicit transactions and to finance illegal activities. Of significant concern is the use of counterfeit U.S. money by international terrorist groups to fund their operations. Advanced design, copying and publishing technology is enhancing the capability of international criminals to produce high-quality counterfeit U.S. currency and financial instruments. For example, the percentage of counterfeit U.S. currency passed in the United States that was produced using inkjet color copiers has jumped from 0.5% in 1995 to 39% so far in fiscal year 1998. Most counterfeit U.S. currency is produced outside the country, with about two-thirds of all counterfeit currency detected here in fiscal year 1997 originating abroad.

Threats to Global Security and Stability

As we look ahead to the 21st century, it is increasingly evident that in order for American families, communities and businesses to enjoy safety and prosperity, there must be a level of stability and security not just in this country, but throughout the community of nations. International criminal activities threaten the stability of foreign countries, exacerbate foreign regional tensions, and jeopardize the lives, property and livelihood of Americans living, working and traveling overseas. Americans took over 164 million trips abroad in fiscal year 1997. International criminal activities may also trigger the necessity for a costly U.S. response to protect American interests. They invariably undercut our efforts to promote more cooperative solutions to global problems such as environmental pollution, world hunger and arms trafficking, while also preventing democratic processes and sound economic systems from being institutionalized.

Threats to Democracy and Market Systems

Increasing worldwide criminal activity and the growing power of organized crime groups in certain regions threaten many countries' democratic and free market systems. Using illicit proceeds from criminal activities as investment capital in legitimate businesses, criminals can gain substantial influence or even control over critical sectors of a national economy. To take one example, according to a 1993 study, organized crime groups controlled 20 percent of construction firms, nearly 20 percent of retail outlets, 25 percent of farm wholesalers, and 50 percent of the finance companies in Italy.

Through violent intimidation, corruption and economic influence, international criminals wield considerable power over governments to protect their illicit operations. The threat to Americans and U.S. businesses in countries where there is extensive criminal activity and corruption can be significant. Lawlessness or the absence of regulatory enforcement permitting free and fair competition leaves Americans with few means to protect their interests from criminal violence and intimidation and often effectively blocks American access to foreign markets.

In some countries with weak democratic institutions or market economies, the interaction of criminals with political elites hampers development of democratic processes and sound economic systems. It also reduces our ability to work with host governments in all respects, including in the fight against international crime.

Drug Production, Trafficking, and Consumption

In many drug source and transit nations, trafficking groups act with near impunity, maintaining power through bribery, threats, intimidation and murder directed against journalists, law enforcement officials, members of the judicial system and everyday citizens. In many countries, drug trafficking violence remains at levels corrosive to democratic institutions and the rule of law. Drug-related crime, violence, corruption and social decay in some cases threatens national, and even regional, stability.

Arms Trafficking

The availability of large numbers of cheap, high-quality, military-style weapons from Central and Eastern Europe and the Newly Independent States of the former Soviet Union (NIS) continues to fuel international arms trafficking. Although the illicit global arms trade has traditionally been dominated by independent brokers, Russian and Italian organized crime groups have tapped into this trade both to acquire more weapons for themselves and to profit from arms trafficking. In Latin America and the Caribbean, drug trafficking groups are major customers for illicit arms. The illegal arms trade also helps fuel regional conflicts around the world, increasing the threat to American soldiers who may be deployed in peacekeeping missions in troublespots such as Bosnia.

Sanctions Violations and Illicit Transfers

International criminals using front companies and other business organizations undermine U.S. sanctions aimed at isolating outlaw regimes. Iraq and other countries under sanctions have taken advantage of international criminal networks to facilitate clandestine shipments of embargoed products and execute financial transfers. The business organizations involved in sanctions violations have often been linked to other criminal activities, and many operate in the same "safe havens" as drug traffickers and other criminal groups. An increasing number of these organizations have become sophisticated enough to maintain relationships with several outlaw regimes.

Illicit transfers of controlled technology and U.S. Munitions List articles allow outlaw regimes to circumvent U.S. and international efforts to prevent them from increasing their military capabilities and developing weapons of mass destruction (nuclear, biological and chemical). Relying on networks of independent brokers and front companies to evade trade and financial sanctions, outlaw regimes spend tens of millions of dollars annually to procure sensitive and controlled equipment and technology.

Smuggling Materials for Nuclear, Biological and Chemical Weapons

The threat posed by smuggling materials used to make weapons of mass destruction is of particularly great concern. In 1994, there were four incidents where individuals were prevented by authorities in Germany and the Czech Republic from smuggling uranium and plutonium out of Eastern Europe. One case, in Prague, involved kilogram quantities of weapons-useable highly enriched uranium. Except for a small seizure of highly enriched uranium in mid-1995, there have been no subsequent confirmed seizures of weapons-usable nuclear materials. While so far these incidents have involved individuals or small groups taking advantage of opportunities presented by changing security environments, the growing sophistication and international connections of criminal procurement networks raise the specter of organized criminal groups' involvement in helping to broker, finance or facilitate the smuggling of nuclear warheads or weapons-useable nuclear materials stolen or purchased on the black market. In recent years, there have been growing indications of outlaw regimes, international terrorist groups, and organized crime groups intent on acquiring material for weapons of mass destruction.

Environmental Crimes

The tremendous costs of hazardous waste disposal, as well as restrictions on the production and sale of environmentally damaging chemicals, have contributed to significant growth in crimes affecting the global environment. In Europe, criminal organizations are taking increasing advantage of the multibillion dollar legal trade in recyclable materials to commingle or illegally export or dump toxic wastes. The lack of inexpensive, adequate and safe disposal options for radioactive waste is also attracting criminal activity. In the United States, the black market for chloroflourocarbons (CFCs), which deplete ozone from the atmosphere, is an extremely lucrative illicit business for international criminals. Between 10,000 and 20,000 metric tons of CFCs are smuggled into the United States each year.

Trafficking in Human Beings

Trafficking in human beings, especially women and children, across international borders for sexual exploitation and forced labor is an increasing crime problem as well as a grave violation of human rights. According to some estimates, each year between one and two million women and girls are trafficked around the world, with some 10,000 to 100,000 women trafficked from East to West for sexual exploitation. The U.N. Commission on Crime Prevention and Criminal Justice has reported a dramatic increase in the abduction of children for commercial purposes by organized crime syndicates. Women and children caught in these trafficking rings are often forced to become prostitutes or domestic workers and are kept in illegal and unsafe working conditions. Some are held in virtual slavery, often punctuated by the threat or use of violence. This growing exploitation is not only an affront to human rights but also contributes to the transmission of HIV and other sexually transmitted diseases. Traffickers prey on women from developing countries as well as from the NIS and from Central and Eastern Europe who feel desperate because of economic conditions and the lack of economic alternatives. Often these women are tricked into leaving their countries by false promises of a better economic life abroad. North America is a growing destination point for these women with the majority who come to the United States going to New York, Washington, D.C., Florida, California and Hawaii.

International Crimes Against Children

The dramatic rise in international crimes against children is a growing concern. International child pornography rings are operating in dozens of countries, peddling their illicit wares into our homes through the Internet and other global distribution networks. Modern technology has allowed these pornographers to store vast quantities of digital images on small and portable devices easily smuggled into the United States. Law enforcement agencies are also reporting an increase in international sex tourism in which adults - including people from the United States - travel to foreign countries to have sex with children. Typically, the children, some not even teenagers, have been sold by their families or kidnapped and forced into bondage.

Aggravating Factors

Law enforcement officials around the globe have reported a dramatic increase in the level and severity of international criminal activity over the past several years. This increase can be traced to a number of factors including technological advances, greater freedoms in the post-Cold War era and the globalization of business and social interaction. These advances are positive in themselves but need to be monitored closely to detect exploitation by criminals. Institutional shortcomings are also a factor contributing to this increase.

Technological Advances

The last decade of the twentieth century has presented Americans with unprecedented advances in information and communication technologies. While these advances have brought the world closer together, international criminals are taking advantage of these same advances to spread their reach into areas unimaginable a generation ago. Technological advances make it possible for a person in one nation to direct sophisticated criminal activity in another nation with little more than a computer, modem and telephone line. Computers also afford an unprecedented capability to obtain, process and protect information to sidestep law enforcement investigations. Enormous sums of money derived from international criminal activities can be laundered through the international financial system without crime bosses ever setting foot inside a bank. Today's international criminals also have an unprecedented capability to access and exploit personal and corporate information and financial records. This concentration of vast amounts of information in computers makes us much more vulnerable to information sabotage.

Changes in the Post-Cold War Landscape

A major result of the end of the Cold War has been the disintegration of many political barriers around the world. With this breakdown has come greater freedom of individual movement and easier international transportation of goods and services. Sixty million foreign passengers were processed at U.S. airports and pre-clearance stations in fiscal year 1995. These developments have allowed international criminals to operate and move more easily across national frontiers, expanding their networks and increasing their cooperation in illicit activities and financial transactions.

Moreover, as the countries of Central and Eastern Europe work to replace authoritarian systems with new, more democratic ways of governance, their ability to exercise effective internal control over criminal activities and their susceptibility to corruption will remain a serious concern.

Globalization of Business and Social Interaction

International criminals are taking full advantage of major global commercial and banking centers featuring gateway seaports and airports, high international trade volumes, concentrations of modern telecommunications and information systems, and extensive international involvement by leading financial institutions. Additionally, criminals are using a variety of techniques from old fashioned bribery to sophisticated technology to obtain or counterfeit passports and visas which are then used to further illegal operations.

Communications advances and increased air travel also have allowed crime syndicates to enter into joint ventures more easily, including those in countries as far apart as Russia, Colombia, Italy and Nigeria.

Institutional Shortcomings

The growth and spread of international crime has brought into sharp focus the many institutional shortcomings that aggravate the already significant threats these criminals pose. Police and judicial systems in many countries are ineffective, and many countries have outdated or nonexistent extradition, immigration, asset seizure, anti-money laundering, computer, and anti-corruption laws. Many countries have neither the resources nor the expertise to mount complex or sustained investigations of international crimes. Criminals use these shortcomings to find safe havens for themselves and their money, while governments and law enforcement remain constrained by national boundaries. Unless appropriately addressed through international cooperation, sovereignty issues and jurisdictional restrictions can impede targeting criminal activities that cross international boundaries.

Countries where international criminals operate with near impunity are a significant threat to U.S. national interests. Criminals rely on such safe havens as staging or transit areas for moving illicit contraband and for laundering, securing, hiding and investing their illicit proceeds. Countries that limit extradition, do not accept the validity of some U.S. laws, or have no laws to address some criminal activities are often ideal sanctuaries for criminals seeking to evade justice in the United States.


International crime affects all Americans. The drugs being sold on many of our street corners, the threat of terrorist bombs exploding in buildings where we work at home or abroad, the counterfeit bills passed at our businesses, the illegal aliens being abused in our midst, the fraudulent letters from abroad promising us false rewards, the credit cards used to defraud us, the cars stolen from us for illegal export and the layoffs at our companies victimized by intellectual property theft, economic espionage and foreign corruption can all be linked to international criminal enterprises.

While it is difficult to quantify the total impact of these international crimes on Americans, our ability to estimate financial costs is improving. The Office of National Drug Control Policy estimates that illegal drugs alone cost our society tens of billions of dollars each year, a significant percentage of which is attributable to abuse of cocaine and heroin -- both drugs produced abroad. Other international criminal activity is responsible for annual losses to Americans of an additional $400 billion according to conservative estimates. These estimates do not even begin to include the human costs in disrupted lives and misery.

In order to gain greater understanding of the scope and magnitude of the international crime problem, the Administration will prepare, on a priority basis, a comprehensive assessment of the threat posed by international crime to Americans and their communities, to American businesses and financial institutions, and to global security and stability. The new threat assessment, which will be completed within six months, will draw upon all available data and will be the product of a cooperative effort among all U.S. law enforcement, diplomatic and intelligence agencies.

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