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Funding the Drug War in Puerto Rico

The federal government has put its money where its mouth is to fight drug traffic through Puerto Rico. Local DEA and FBI staffs have been increased by 181% and 46%, and tough new tactics introduced.


August 3, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

Not in my back yard!

U.S., local, and regional agencies join forces to fight off drug traffickers that have moved operations from the mainland to Puerto Rico and the Caribbean.

Like roaches scurrying to a new spot when you spray in one place, drug traffickers have shifted their focus to Puerto Rico.

This is a result of federal efforts to stamp out drug traffic on the southwest and southeastern borders of the mainland U.S.

"During the past decade a public safety crisis has developed in Puerto Rico…Up to 30% of all cocaine entering the U.S. is transshipped through Puerto Rico," said U.S. Attorney General Janet Reno in a 1998 report. "Part of the problem flows from Dominican illegal alien smuggling operations that now use similar routes for drug transportation. It is well established that Dominican illegal aliens are directly linked to Colombian drug cartels and are entrenched in many of Puerto Rico’s 310 public housing projects."

In response, the federal government dramatically increased the size of its Federal Bureau of Investigation (FBI) and Drug Enforcement Administration (DEA) staffs in the region. Since 1996, the DEA Caribbean Division has seen its staff increase by 181%, while the FBI also has hiked its staff by 46% and doubled its local budget to $3 million. DEA officials declined to provide local budget data.

Meanwhile, the number of FBI agents alone grew almost 53% from 116 in fiscal year 1996 to 177 in fiscal 2000, and the cadre of DEA special agents ballooned 227% from 40 in 1996 to 131 in 2000.

"The increase was directly related to the use of Puerto Rico as a transshipment point through the Caribbean into the U.S.," said FBI Special Agent in Charge Marlene Hunter. "We were given a mandate to take on those kinds of problems very aggressively with that additional staffing."

While stateside reports have repeatedly fingered Puerto Rico as being an enabler behind the U.S.’s insatiable appetite for drugs, federal agency heads on the island say the Caribbean in general–and Puerto Rico in particular–is merely a pawn in the life-and-death game of trafficking drugs.

About 92% of all criminal activity in Puerto Rico–including murder, assault, robbery, rape, carjacking, and gang violence–is related to drug traffic, according to federal officials.

A resistant plague

The problem, according to federal officials, is that once drug shipments enter the U.S. border, i.e., Puerto Rico, they are broken up into smaller quantities and distributed to different drug organizations through a sophisticated network that is virtually impossible to dismember.

Officials agree that between 100 to 150 metric tons of cocaine move through Puerto Rico each year, reaching an average of about 142 metric tons in fiscal years 1998 and 1999. Only 19%, or 27 metric tons, were seized. The amount moving through Puerto Rico represents about 27% of the 520 metric tons of cocaine produced around the world, according to Hunter.

"Approximately 30% of what comes through here stays here in Puerto Rico for local consumption, while 70% goes on to the U.S. mainland or Europe," she added.

A metric ton of cocaine, which officials said roughly equals 2,200 pounds, would fill up a dump truck. "You’re looking at every year, 142 dump trucks full of cocaine coming into Puerto Rico," said Brooks.

So far this year, federal officials believe 74,000 pounds of cocaine, 9,000 pounds of marijuana and 22 pounds of heroin have come in through the Caribbean. Of the total cocaine moved through the region, the Feds have seized 35% of the cocaine, or 26,300 pounds, according to Brooks.

"That’s pretty consistent over the past two years. In 1999, we seized 25,000 pounds and in fiscal 1998 we seized 30,000 pounds," he added, noting that the U.S. Coast Guard (USCG) seized 74% of the total cocaine confiscated thus far.

Puerto Rico accounts for about 24% of the 111,000 pounds of cocaine that were seized in the U.S. last year. And while 41 drug trafficking vessels have been seized across the U.S., 13 of them, or 32%, were captured in Puerto Rico, according to Brooks.

"Almost half of the USCG vessel seizures in the U.S. are here," he said. "This gives you an indication of the significance of the effort."

Shifting priorities

The bad news is that while more resources have been funneled to the island to fight drug smuggling, officials believe that the amount of cocaine moving through Puerto Rico to the U.S. may have increased to 40%. The reason for this, they note, is that law enforcement forces have been successful in damming up the flow of drugs into the U.S. through the southwest border with Mexico and through the Miami-Tampa area.

"We have to understand that Puerto Rico is a very strategic area for not only Colombian but also Dominican drug traffickers. Why? Because it’s the southernmost point of entry into the U.S. and once it gets here, it’s in the U.S. You might as well say it’s in Los Angeles, Chicago, Miami or New York," said Michael Vigil, Special Agent in Charge of the DEA Caribbean Division.

Federal officials are quick to point out that most Dominicans residing in Puerto Rico are law-abiding citizens who are not involved in the shady businesses of some of their countrymen. Dominican Republic officials also have cooperated with federal efforts to dismantle drug trafficking organizations, they say.

But U.S. officials have found that the Dominican Republic and, increasingly, Haiti, have become havens for the Colombian drug cartels.

"Dominican drug traffickers are in charge of approximately 90% of all smuggling and transportation operations in the Caribbean," said Hunter. "And they’re coordinating their operations with their Colombian suppliers. They’re the middlemen for the Colombians. It’s the Dominicans moving it for the Colombians, and increasingly Haitians."

In Haiti, federal officials say, drug traffickers are taking advantage of the lack of local government financial resources and infrastructure, and its inability to address the problem. Not only does Haiti lack the laws and law enforcement capabilities to combat drug syndicates, but the hemisphere’s poorest nation just can’t compete against the billion-dollar, drug-syndicate budgets, Vigil said.

"[Drug traffickers are] very sophisticated. They use satellite communications, encrypted communications; they use submarines and semi submersibles," Vigil noted. "They are so structured that they would rival any Fortune 500 company."

A global problem

The Caribbean is not just being used as a springboard for moving drugs into the U.S. but now also to Europe. Last month, Dutch Navy ships in the region helped capture a boat carrying 2,360 kilos of cocaine and another vessel transporting 3,080 kilos of cocaine. Both were tied to a Colombian-run organization operating out of Portugal and Spain, Vigil said.

"The last two busts we had were both bound for Europe," confirmed USCG Capt. Arthur E. Brooks, recently appointed to head that agency’s operations in the Caribbean. "The eventual destination was Spain and the European Union, and it’s been a growing trend to see large drug shipments going to Europe, consistent with the maritime movement through Puerto Rico."

Vigil, who recently won the National Association of Police Organizations Top Cops Award for his regional efforts to stymie the drug trade, said a multi-country outlook is key in developing a strategy to counter drug traffickers. Last year, Vigil developed Operation Columbus, which earned him the Top Cop Award, involving officers from 15 Caribbean, South and Central American countries and yielding 1,300 arrests and more than 900 kilos of cocaine, among other contraband.

"The drug problem is global in nature and as such we have to look at global solutions to this scourge that is really impacting not just the U.S. but a lot of countries," Vigil said. "As far as I’m concerned, it’s easier if we fight the drug war outside of U.S. borders and it’s important that we look at the global picture. In my opinion, this takes less effort and less resources, and we can significantly seize a lot more drugs."

Meanwhile, the local price of cocaine during 1999 fluctuated from $14,000 to $24,000 per kilo (there are 2.2 pounds per kilogram). The street value of the approximately 7,000 pounds of cocaine seized so far this year totals $360 million, the USCG chief said.

"Obviously, when we have a lot of success, the price goes up because the availability is down," Hunter said.

Concomitant social evils

The drug trade, like the four horsemen of the Apocalypse, is accompanied by crime, violence, and corruption. The latter–especially corruption among law enforcement and other public officials–is one runaway horse the Feds are hoping to corral.

"The corruption angle is one that we believe has an impact," Hunter said. "I have recently made the decision to add an additional corruption squad to our operations."

Intelligence gathered by federal agencies in Puerto Rico shows that corruption among a number of police officers and public officials allows drug organizations to be more effective than they would normally be, she said.

"I certainly don’t want to cast doubts or a negative light on all of the wonderful police officers that are doing their jobs," Hunter noted. "But when you have a force of that size [18,000 officers], it goes with the territory. It’s a phenomenon that exists in New York and Los Angeles. Every major police department has that problem."

Within the next month, the FBI will set up a squad of about 10 agents, which Hunter hopes will be boosted by personnel from the Puerto Rico Justice Department Special Investigations Bureau (NIE by its Spanish acronym), to target police and public corruption related to the drug trade.

"Our intelligence has indicated that this is an area that needs attention," Hunter said. "We believe this is a contribution that the FBI can make in conjunction with the NIE that will have a major impact."

Corruption also affects the white-collar sector, where federal officials are targeting money laundering. This year, Puerto Rico was named a High Intensity Financial Crimes Area (Hifca) along with three other U.S. areas; Los Angeles, New York-Northern New Jersey, and the U.S. southwestern border with Mexico.

"Money laundering is always attached like a remora to the shark in that [drug traffickers] have to find ways to launder the significant profits that they generate in drug traffic," Vigil said.

Cooperation is key

Local and federal officials point to the initiative known as High Intensity Drug Trafficking Area (Hidta) as the quintessential example of how to successfully join federal, state, and local forces.

In 1996, Puerto Rico was branded as a Hidta, a U.S.-wide effort that falls under the purview of Drug Czar Barry McCaffrey. With a $9 million budget in Puerto Rico, the Hidta is made up of the DEA, FBI, Puerto Rico Police Department, and other federal and local agencies. Hidta operates by assigning one agency to lead a certain anti-drug operation and to have supervisory management responsibility over personnel from all agencies assigned to that sting, Hunter said.

"One of the things I look at here is not only cooperation and collaboration on the part of countries in the Caribbean but I look at need for that type of cooperation between federal and local agencies here in Puerto Rico because they all have different areas of expertise and resources," said Vigil. "I don’t think one single agency can win this war against drugs."

One of Hidta’s greatest assets is an intelligence coordination center run by the FBI, which is fed by all involved agencies. Last year, Puerto Rico’s center won recognition as the best intelligence initiative of its kind in the U.S., Hunter said.

"It’s like with every crime problem," she said. "The first step is to know all about it and be extremely knowledgeable about what the problem is."

By knowing what everyone is doing, and by compiling all the data gathered, the agencies also can pool resources and avoid duplicating efforts.

"I think the agencies are making a difference and it’s important that there be a deterrent threat to control and minimize the impact of drugs locally and nationally," Brooks said. "I think as we get better and better in cooperating, as well as in technology and sensors, it will become harder and harder for drug traffickers to do their job."

More defendants, less prosecutors

But while the DEA and FBI have registered boons in staffing and resources, which have helped them nab drug traffickers and dismantle drug organizations, the U.S. Attorney’s Office in Puerto Rico, charged with prosecuting the cases that are successfully brought before the courts, remains understaffed.

This is so much so, that both U.S. Attorney Guillermo Gil and Executive Assistant U.S. Attorney (AUSA) Rosa Emilia Rodriguez, are prosecuting drug-related cases, as are the heads of the civil and criminal divisions. "We need more prosecutors and more support staff," Rodriguez said, adding that Puerto Rico is among the top U.S. jurisdictions in drug trafficking cases.

Because the Feds are not just targeting the little people, but are netting the fat cats as well, drug cases tend to involve many defendants. While in 1996, drug cases handled by the Organized Crime and Drug Trafficking Task Force (OCDETF) at the U.S. Attorney’s Office involved 86 defendants, cases in 1998 yielded 258 accused, Rodriguez said.

A survey of hours worked by federal prosecutors in fiscal 1999 showed a total 18,822 hours were logged by the two assigned OCDETF prosecutors and secretaries, and other prosecutors who pitched in throughout the year. "That amount of hours is enough to justify six additional prosecutor positions and one additional secretary," Rodriguez said.

Feds allocate $750,000 to counter local money laundering


This year, federal officials in Puerto Rico will get approximately $750,000 in additional funds to air the dirty laundry of drug traffickers laundering money in Puerto Rico with a view to running them out of town.

"We want to eradicate drug-related financial crimes by attacking the pocketbooks of those who benefit," said Assistant U.S. Attorney Desiree Laborde, who coordinates the anti-money laundering initiative in Puerto Rico. "If we recover the money and properties, and we prosecute and imprison the culprits, we will create a deterrent so that money isn’t laundered, or at least not laundered in Puerto Rico."

Money laundering is the process whereby drug dealers, and other criminals, try to hide the paper trail leading to the money’s origins. To do so, they use various stratagems, including purchasing luxury items, real estate, lottery tickets, and the like, or by depositing the money in banks or using money remitting companies.

"We can catch them because they use legal methods to hide the illegality," said Rosa Emilia Rodriguez, Executive Assistant U.S. Attorney in Puerto Rico.

Technically, all drug proceeds must be laundered, and in Puerto Rico, money laundering is mostly tied to the import and distribution of drugs, Laborde said. "It used to be routine to have people take money out of Puerto Rico in their bodies. But now you see people using banks and money remitters to move money out of Puerto Rico to different accounts."

International Monetary Fund officials estimate the global volume of laundered money is between 2% to 5% of the world’s gross domestic product–about $600 billion.

In 1999, San Juan was identified by the U.S. Department of Justice (DOJ) as one of four High Intensity Financial Crimes Areas (HIFCA) along with the southwestern border with Mexico, Los Angeles, and New York-Northern New Jersey. This upcoming fiscal year, all four areas, chosen because of the volume of financial transaction reports that raised red flags about possible illegal activity, will share a $2.5 million pot.

The capital city became a Hifca because of 566 Suspicious Activity Reports (SARs) filed by island banks in fiscal year 1999–which totaled $627.7 million–San Juan banks were responsible for filing only 8%, or 45 of the SARs–worth a meager $2.4 million.

Situations that merit the filing of a SAR include when a small business that shouldn’t be generating large amounts of cash makes hefty deposits repeatedly, or when a business gives an address as their location but no such establishment is found there.

"How come San Juan banks, which are the most active ones, are filing less than 10% of the SARs?" asks Laborde.

One explanation, said Puerto Rico Banks Association (PRBA) Executive Vice President Arturo Carrion, may be that money launderers are staying out of San Juan where they would be more easily caught. "That’s my opinion and it’s speculative," he said, adding that SARs are more subjective than other reports and take more effort.

Other financial documents monitored by the Feds included the Currency for Monetary Instrument Reports (CMIR), which must be filed by everyone leaving or entering Puerto Rico with cash in excess of $10,000. "Puerto Rico is 9th among U.S. jurisdictions for inbound CMIRs and 8th in the nation for outbound CMIRs," Laborde said.

In fiscal 1999, San Juan logged 217,122 Currency Transaction Reports (CTR), which banks must file for deposits or transactions of $10,000 or more. This compares to 878,460 in the New York-Northern New Jersey area and 348,243 in Los Angeles.

"Although less than others, the San Juan numbers are still way off the wall," Laborde said. This is apparent considering that the metropolitan area’s 1.9 million people are much less than Los Angeles’ 17 million inhabitants and the approximately 25 million people who live in the New York-Northern New Jersey area.

Concomitant with the designation of San Juan as a Hifca, the PRBA established an anti-money laundering committee, presided over by association President Victor Galan, which has established direct contact with federal officials.

"We meet monthly for orientation meetings and the group is comprised of banking officials designated by presidents from all island banks," Carrion said.

As part of those efforts, the PRBA in June sponsored a two-day training workshop on money laundering, which included participation by some 350 bank officials. "We also have training pending from the federal prosecutors at a more basic level to branch personnel," Carrion said.

But it’s not just entry-level officials that the Feds have in their sights. The goal is to identify and prosecute entire money-laundering operations, from top to bottom. "In the past, we have prosecuted the heads of money laundering operations in Puerto Rico," Laborde said. "That’s what we’ve done and that’s what we intend to keep on doing, regardless of the professional title or public position they hold."

Two assets make San Juan particularly vulnerable to money laundering operations. For one, it has the most developed transportation infrastructure and one of the largest banking centers in the Caribbean. Plus, it provides the closest port of entry to the U.S. from South America, federal officials said.

HIFCA includes the FBI, the Drug Enforcement Administration (DEA), the Internal Revenue Service and U.S. Customs. The Puerto Rico Justice Department’s Special Investigations Bureau (SIB), the Treasury Department, the Commissioner of Financial Institutions, and the Police Department round out the local effort, Laborde said.

"We’re adding to our staff several financial analysts specialized in money laundering," she added. "We’re looking not just at the person who’s laundering the money but also those who are helping him. There are financial institutions, such as banks, credit unions and money remitting businesses that aren’t complying with the Bank Secrecy Act requirements."

Prior to the HIFCA initiative, the U.S. Attorney’s Office in Puerto Rico had already handled several large money laundering cases on the island related to the drug trade. In one instance, a drug organization had laundered $12 million in less than two years and the government seized about seven properties, including luxury apartments. Another case involved an Old San Juan business for faxes and phone cards that acted as a front for money laundering operations.

"That was a pure front," Laborde said. "They had a back room where they counted drug money. These are businesses that appear to be legal but are used largely for people to take drug money there. They take it inside pizza boxes, stoves, suitcases, plastic bags, and backpacks. Then they go to the back room, and count the cash."

The money is then deposited in a bank account and wired to different parts of the world, such as Africa, Europe, and South America. Banks must be on the lookout suspicious activities including large cash deposits mostly in small bills, especially those crammed into night deposit boxes and accounts that register wire transfers every 24 hours. "From one account, the account holder was sending wire transfers in a period of 24 hours to over 300 companies located around the world," Laborde said.

Part of the Hifca effort is reaching out to and recruiting the help of banking and financial institutions in Puerto Rico, said Marlene Hunter, FBI special agent in charge.

"Recently, a banking official told me they instituted a program whereby all their branch managers were told to become more well acquainted with customers, to provide better services," Hunter said. "One particular branch manager was doing a very effective job and was calling up each of the customers, especially ones with a lot of money in the bank."

Meeting some reticence on the part of one customer, the branch manager decided to drive by the business and introduce himself. When he arrived, he found a boarded up warehouse and was greeted by security personnel who escorted him away and told him he was not welcome there.

"He comes back and reports that and they closed the accounts," Hunter said. "So these are ways that when we all decide in the community that we do not want the drug trafficking and the related violence that goes with it, sometimes there may be a financial price tag."

This Caribbean Business article appears courtesy of Casiano Communications.
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