Testimony
of Grant D. Ashley, Assistant Director, Criminal Investigative
Division, FBI
Before
the Subcommittee on European Affairs, Committee on Foreign
Relations
United States Senate
October 30, 2003
"Eurasian, Italian, and Balkan Organized Crime"
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, nuclear smuggling,
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 freedom's 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.S. 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 Sates 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 Direzione 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 (OCS) 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 & 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 operations. Albanian
OC groups have also formed partnerships with the Gambino,
Genovese, and Luchese LCN 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 apparent immediately. 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.
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