US Names Bahamas As Major Criminal Hotspot
Dec 16, 2011 (Congressional Documents and Publications/Content Works via COMTEX) — Thank you for the opportunity to testify today on the Caribbean Basin Security Initiative and the increasing flow of illicit drugs through the Caribbean region.
As many others have said, drug trafficking routes and networks are like water running downhill, they will always seek the path of least resistance. And, like a balloon,when pressure is applied in one area the displaced operations pop up in another. The$139 million, two-year CBSI program, in anticipation of the pressure being applied in Mexico and Colombia, is aimed at making it simultaneously more difficult to traffic cocaine and other illicit drugs through the Caribbean.
According to the State Department the purpose of the CSBI money flowing into the Caribbean is to aid in:
- Maritime and Aerial Security Cooperation
- Law enforcement capacity building
- Border/Port Security and Firearms Interdiction
- Justice sector reform
- Crime prevention and at-risk youth
These are laudable and necessary areas of cooperation with the small and generally under-resourced countries of the Caribbean, and the program correctly anticipates the region’s growing importance as a transnational shipping route not only for drugs, but for human smuggling and other transnational organized criminal activities.
Of the 16 nations in the Caribbean, the U.S. government has identified four (the Dominican Republic, Haiti, Bahamas and Jamaica) as major transit countries, while many others, particularly in the Eastern Caribbean, continue to serve as significant transit points.
But there are several significant roadblocks for the CBSI achieving its goals, in addition to the traditional issues of corruption, weak institutions, lack of rule of law, and lack of resources to fight traffickers who are well-resourced. and have multiple unguarded points of entry across the region. I would like to address these in particular today, and also to stress they cannot be addressed outside of the broader regional context of Latin America. The two most significant roadblocks, in my opinion are:
1. The growing political and economic influence of Venezuela in the region, a significant drawback given that Venezuela is a growing and primary gateway for the flow of illicit narcotics into the Caribbean, and that senior members of its government have been sanctioned for their involvement with drug trafficking and designated terrorist entities;
2. The continuing existence of large offshore financial centers offering multiple services to a broad array of transnational criminal organizations, both regional and extra-regional, thereby allowing the profits of illicit activities to flow back to criminal organizations. As you are well aware, some of these TOC groups, particularly those operating out of Mexico, pose a significant national security challenge to the United States.
Venezuela’s Growing Role in the Region
In 2004, presidents Hugo Chavez of Venezuela and Fidel Castro of Cuba announced the formation of the Bolivarian Alliance for the Peoples of Our America (Alianza Bolivariana para los Pueblos de Nuestra America-ALBA), an alliance aimed at creating a political, economic, and military structure that explicitly excludes the United States, but allies with Iran and other regimes hostile to the United States.
The two authoritarian governments were soon joined by the leaders of Bolivia, Ecuador and Nicaragua, all espousing 21st Century Socialism. The leaders have other commonalities: they all offering material support to the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia-FARC), a designated terrorist organization by both the United States and European Union; and, there are senior leaders in all the countries who are deeply corrupted and involved in the drug trade. In 2008, the nation of Dominica joined ALBA and, in 2009, St. Vincent and the Grenadines, and Antigua and Barbuda joined Alliance.
The political intent of the union was made clear in a statement when the Caribbean nations joined, where the final declaration stated that…
“[We recognize] the strengthening of the ALBA and its consolidation as a political, economic, and social alliance in defense of the independence, sovereignty, self-determination, and identity of member countries and the interests and aspirations of the peoples of the South, in the face of attempts at political and economic domination.
This is worrisome on multiple fronts. If these were simply democracies seeking a different democratic path, it would not be troublesome. But when the most authoritarian governments in the region form an alliance that consistently utilizes the drug trade as an instrument of statecraft; allies itself with and facilitates the expansion of the influence of nations hostile to both the United States and its democratic allies; and, systematically reduces freedom of expression, political freedom, and the rule of law, the alliance cannot by viewed as benign.
Most of the Caribbean nations that have joined ALBA, or are considering joining, are in it for the cheap oil subsidies provided by Venezuela, a very real economic boon, particularly in a time when — except for the small amount of money for each country in the CBSI, and the humanitarian aid to Haiti –, U.S. aid in the region is shrinking, as is its regional diplomatic presence.
The reality is that the relationships with Venezuela in the region are dangerous and facilitate drug trafficking. As the most recent State Department report on drug trafficking patterns noted
Venezuela is a major drug-transit country. A porous western border with Colombia, a weak judicial system, inconsistent international counter narcotics cooperation, and a generally permissive and corrupt environment have made Venezuela one of the preferred trafficking routes out of South America to the Eastern Caribbean, Central America, the United States, Europe and western Africa.
The Congressional Research Service also found that
As U.S. counter-narcotics cooperation with Venezuela has diminished since 2005, Venezuela has become a major transit point for drug flights through the Caribbean–particularly Haiti and the Dominican Republic–into the United States as well as to Europe. Elsewhere in the Caribbean, the Bahamas continues to serve as a major transit country for both Jamaican marijuana and South American cocaine.
Declassified U.S. and Colombian reports on drug movements from the traditional drug producing countries such as Colombia, Peru and Bolivia show that the Caribbean is becoming a more important transport route, especially for those drugs that pass through the region to West Africa and then northward to Europe. The transshipment of drugs through West Africa is now several years established, but as U.S., UN, and West African drug experts can attest, the vast majority of the cocaine reaching those shores arrives on flights that originate in Venezuela.
In addition to the sea-lanes to the Caribbean islands and the west bound flights over the Eastern Caribbean, significant drug traffic transits the Caribbean through the air space between the Venezuela-Colombia corridor and the eastern Atlantic/Caribbean coast of Central America. Particularly hard hit are Honduras, Belize and Nicaragua.
As demonstrated by the extensive connectivity among the producing and transit regions, the concept of initiating a productive Caribbean Basin security initiative without having some strategy for closing the main door through which the drugs enter the region (Venezuela), is likely to be untenable. While the Caribbean is also a transit zone for cocaine leaving Colombia, there is a fundamental difference. The Colombia government, at great cost in life and national treasure, actively works to combat the trafficking and to drive it from its national territory.
The Chavez government in Venezuela, in contrast, aids and protects drug traffickers at the highest level. Perhaps the strongest public evidence of the importance of Venezuela to the FARC, which produces some 90 percent of the cocaine consumed in the United States, is the public designations of three of Chavez’s closest advisers and senior government officials by the U.S Treasury Department’s Office of Foreign Assets Control (OFAC).
OFAC said the three–Hugo Armando Carvajal, director of Venezuelan Military Intelligence; Henry de Jesus Rangel, director of the Venezuelan Directorate of Intelligence and Prevention Services; and, Ramon Emilio Rodriguez Chacin, former minister of justice and former minister of interior — were responsible for “materially supporting the FARC, a narco-terrorist organization.”
OFAC specifically accused Carvajal and Rangel of protecting FARC cocaine shipments moving through Venezuela, and said Rodriguez Chacin, who resigned his government position just a few days before the designations, was the “Venezuelan government’s main weapons contact for the FARC.” In November 2010, Rangel was promoted to the overall commander of the Venezuelan armed forces.
As legendary Manhattan district attorney Robert M. Morgenthau warned, as he left public service in 2009 after decades of prosecuting financial fraud cases,
And let there be no doubt that Hugo Chavez leads not only a corrupt government but one staffed by terrorist sympathizers. The government has strong ties to narco-trafficking and money laundering, and reportedly plays an active role in the transshipment of narcotics and the laundering of narcotics proceeds in exchange for payments to corrupt government officials.
One effect of this state tolerance for, if not sponsorship of, the FARC, is a broad network of FARC activities in the Caribbean,particularly in the Dominican Republic, in addition to Cuba and other ALBA nations. Among the most well-known of the FARC political faces in the region is Narciso Isa Conde, a Dominican national who publicly admits he has befriended the FARC for 40 years.
The existence of this network, integrated into the Continental Bolivarian Movement (Movimiento Continental Bolivariano-MCB) directly ties into the drug trafficking flows through the Dominican Republic and elsewhere, routes the FARC is working actively to exploit and expand.
While Cuba is not listed as a major drug transshipment center or money laundering haven, it also plays a crucial role with ALBA nations, providing growing support for intelligence and counter-intelligence, primarily aimed at the internal opposition to the ALBA governments. Through its close ties to, and control of, parts of the
Venezuelan intelligence apparatus, Cuban operatives enjoy greater access in the region than they have for at least two decades.
One of the reasons this is significant, additional to creating an environment in the Caribbean that is increasingly favorable to U.S.enemies (Iran) or potential enemies (China and Russia) is the strategic importance of the region to the United States.
Most of the crude oil the U.S. imports is transported by sea. About 64percentof U.S. energy imports are transported through the Caribbean before reaching the Gulf Coast. According to DOE data,”Nine out ofevery14barrelsofU.S.imported oil — from suppliers including Angola, Nigeria, Saudi Arabia, Chad, Russia, Kuwait and Ecuador — must pass through at least one of four principal sea passages in the Caribbean to reach U.S. refineries.”
This open oil traffic pattern has several important vulnerabilities because there are only a few safe lanes for the ships to move their cargo. According to a recent report, about14million barrels of oil a week arrive at the U.S.Gulf Coast refineries through the Windward Passage between Cuba and Hispaniola; the Mona Passage between Hispaniola and Puerto Rico; the Florida Straits north of Cuba; and, the Yucatan Channel between Cuba and Mexico,because those are the safest, calmest sea lanes.
Independent of the Gulf destination, nearly 2,000 tankers crossed the Panama Canal in 2007, or 16.9% of its traffic, Panama Canal Authority data show. Most went to U.S. ports. These tankers ship oil from places such as Saudi Arabia to refineries in places such as Long Beach, Calif., making the canal a critical — and vulnerable — choke point. Even some of Alaska’s oil has been known to cross the Panama Canal through the Caribbean on its way to the East Coast. Going both ways, 31 million long tons of petroleum and products were transported to the U.S. in 2007. With the widening of the canal by 2014, more traffic still is expected to pass.”
The Offshore Financial Havens of the Caribbean
One of the primary areas not addressed explicitly in the CBSI is the extensive use of offshore banking and corporate registries that are part of the lifeblood of drug trafficking organizations in particular, and of TOC groups in general. Terrorist groups also can and do use the anonymous accounts and registries to move money and avoid detection.
One can correctly assume that the driving force of most, if not all, of the TOC activity one observes is the desire to make profits and securely accumulate wealth. As ‘know your customer’ rules have grown more stringent in much of the world, many parts of the Caribbean continue to offer facilities that make hiding and moving ill- gotten gains relatively easy.
As Morgenthau noted, “For years I have stressed the importance of transparency in financial transactions. In the realm of preventing money laundering and terror financing, the concept of “know your customer” is the starting point in any scheme designed to detect suspicious transactions.”
Again, our own government has documented the anomalies that these anonymous jurisdictions continue to present. For example, according to the State Department, in the British Virgin Islands (BVI), with 22,00 people, as of September 2010, there were 456,547 active companies, 237 licensed banks and 2,951 mutual funds registered with the BVI Financial Services Commission (FSC). BVI’s unique share structure that does not require a statement of authorized capital as well as the lack of mandatory filing of ownership, pose significant money laundering risks.
As stated initially, on both the transportation side and money laundering sides of the illicit drug world, water will follow the path of least resistance. The lack of such basic standards as mandatory filing of ownership, and overall bank secrecy, is an open invitation to abuse by those who use these services to advance TOC activity.
The same basic scenario is played out across the Caribbean. Again the State Department notes that,
Antigua and Barbuda is a significant offshore center that despite recent improvements remains susceptible to money laundering due to its offshore financial sector and Internet gaming industry. Illicit proceeds from the transshipment of narcotics and from financial crimes occurring in the U.S. also are laundered in Antigua and Barbuda.
While these havens have long existed, and efforts to curtail their most egregious activities have been underway for decades, there is now a new factor aggravating an already dangerous situation – the presence of the Chavez government in Venezuela and its negligible enforcement efforts, both on interdicting cocaine and in the flow of money.
Venezuela continues to operate in the global financial market on behalf of Iran, Cuba and other nations that face U.S. and international sanctions. In addition, due to the endemic corruption in an economy that is orders of magnitude larger than its Caribbean neighbors, Venezuela offers multiple advantages to money launderers, some of which were enumerated in this year’s State Department report on money laundering:
Venezuela is one of the principal drug-transit countries in the Western Hemisphere. Cocaine produced in Colombia is trafficked through Venezuela to the Eastern Caribbean, Central America, the United States, Europe, and western Africa. In 2010, Mexican drug trafficking organizations gained an increased presence in Venezuela. Venezuela’s proximity to drug producing countries, weaknesses in its anti-money laundering regime, limited bilateral cooperation, and alleged substantial corruption in law enforcement and other relevant sectors continue to make Venezuela vulnerable to money laundering. The main sources of money laundering are proceeds generated by drug trafficking organizations and illegal transactions that exploit Venezuela’s currency controls and its various exchange rates.
Money laundering occurs through commercial banks, exchange houses, gambling sites, fraudulently invoiced foreign trade transactions, smuggling, real estate (in the tourist industry), agriculture and livestock businesses, securities transactions, and trade in precious metals. Venezuela is not a regional financial center and does not have an offshore financial sector, although many local banks have offshore affiliates in the Caribbean.
Radical Islamist Networks in the Caribbean
No successful terrorist attacks against the United States have originated in Caribbean. Yet there is a significant history of radical Islamist movements there, both organizationally and financially.
Trinidad,one of the principal suppliers of liquefied natural gas for the U.S.market, has a small but vocal Islamist community. In 1990, the Islamist group Jama’at al Muslimeen under the control of Imam Yasin Abu Bakr, attempted to establish the first Islamic state in the Western hemisphere. The coup failed, but the group remains active. In 2002 another Islamist group on the island, Waajihatul Islaamiyyah,openly supported Osama Bin Laden,al Qaeda and Jemmah Islamiyyah,the organization behind the Bali beachfront bombing that killed close to200people. A 2002 press release showed a keen awareness of the need to attack critical infrastructure, saying: “With our weapons we are going to reach you.We will reach you where you sleep, we will reach you where you take your baths, we will reach you where you take your meals and have your drinks, and even a glass of water you hold in your hand to drink may not be safe.”
While Jama’at al Muslimeen was largely viewed as a fringe group of little importance, its leader, Bakr has been implicated in advising those plotting the June 2007 failed attempt to blow up fuel tanks and buildings at JFK International Airport in New York. Two of those arrested in the plot were natives of Trinidad, and court documents said at least one of the men, Kareem Ibrhaim, was a member of Jama’at. He was arrested on an airplane bound from Trinidad to Venezuela, and said he was flying to Caracas to catch another flight to Tehran. n16 He flight to Iran was apparently arranged by Abdul Kadir, also convicted and sentenced to life in prison in the plot.
As the prosecution said after winning the case,
The evidence at trial established that Russell Defreitas, a naturalized United States citizen from Guyana, originated the idea to attack JFK Airport and its fuel tanks and pipelines by drawing on his prior experience working at the airport as a cargo handler. In 2006 and 2007, Defreitas recruited Kadir and others to join the plot during multiple trips to Guyana and Trinidad. Between trips, Defreitas engaged in video surveillance of JFK Airport and transported the footage back to Guyana to show Kadir and their co-conspirators. Kadir, a trained engineer with connections to militant groups in Iran and Venezuela, provided the conspirators with links to individuals with terrorist experience, advice on explosive materials, and a bank account through which to finance the terrorist attack.
Such a series of connections would not necessarily have been cause for deep concern if Latin America and the Caribbean were flourishing economically and moving toward the rule of law in democratic societies. But in the past five years the regional posture toward the United States has shifted significantly, growing increasingly hostile.
Registries (corporate, shipping or company) are valuable sources of information, when they are available. The more transparent the registry procedure, the less likely it is that the networks will seek to use it. Because of this, the more obscure registries are often preferred.
For example, many leaders of the Muslim Brotherhood (Al Ikwan al Musulman), n18 as well as the Bin Laden family, have maintained dozens of companies in Panama, where true ownership of accounts and companies are easy to hide and secrecy strictly enforced. n19 Many changed ownership, at least on paper, following the 9-11 attacks, making it impossible to know the true ownership structures at this point because Panama allows bearer shares, and lawyers can register the companies andserve on the boards without disclosing the true ownership structure. There are dozens of havens around the world that offer this service, including Liberia, where the bin Laden family also has maintained companies.
It is worth noting that the Brotherhood, whose legacy groups inside the United States have been convicted of supporting Hamas, for more than three decades has controlled a large Islamist banking structure in the Bahamas, and an offshore business structure based in Panama, indicating that radical Islamist groups were more familiar with operating in Latin America than is often understood.
Many of the banking structures were shut down in the immediate aftermath of the 9-11 attacks. The Treasury Department’s designation of the banks stated that one of the Bahamas’ institutions, Bank al Taqwa, wasa shell bank, with no real physical installations. The Treasury Department stated that the bank was used to funnel money to alQaeda, even after the attacks on U.S. soil. The bank also allegedly facilitated secure communications among al Qaeda cells, as well as the transportation of weapons. The key leaders of the bank, Yousef Nada, Ghalib Himmat and Idriss Nasreddin, were designated as terrorist financiers by the U.S. government and the United Nations.
In addition to working with al Qaeda, the banks were also the primary financial institution for Hamas, even after the organization had been declared a terrorist group by the United States. At one point the bank reportedly held more than US$60 million in Hamas funds.
This summer, the International Investment Corporation of the Gulf-Bahamas (IICG-B), a wholly owned subsidiary of Dar al Maal Al Islami (DMI), an Islamist banking structure heavily influenced by the Brotherhood, reached a non-prosecution agreement with the U.S. Department of Justice. In the agreement, IICG-B agreed to pay more than $30 million in fines and penalties for significant tax violations in the United States.
The CBSI could be a useful tool in helping Caribbean partners combat drug trafficking and the endemic corruption, violence and erosion of the rule of law that inevitably accompanies the emergence of TOC groups.
However, the Initiative, in my view, will have little impact as long as Venezuela and the ALBA nations in Latin America and the Caribbean continue to criminalize, and use TOC and drug trafficking as part of their statecraft, giving support and protection to drug trafficking, and designated terrorist organizations such as the FARC. With Venezuela and its allies opening key corridors for drug trafficking to the United States and Europe (via West Africa), as well providing sophisticated aid in laundering the hundreds of millions of dollars in illicit proceeds, any program -especially one this comparatively small – which does not deal with the source of the drug flow will likely do little to mitigate the problem. Thank you.
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