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50–884 CC








JULY 15, 1998

Printed for the use of the Committee on International Relations

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BENJAMIN A. GILMAN, New York, Chairman
HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
EDWARD R. ROYCE, California
JAY KIM, California
TOM CAMPBELL, California
JON FOX, Pennsylvania
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
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RICHARD BURR, North Carolina
SAM GEJDENSON, Connecticut
TOM LANTOS, California
PAT DANNER, Missouri
BRAD SHERMAN, California
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
LOIS CAPPS, California
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
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Subcommittee on Africa
EDWARD R. ROYCE, California, Chairman
TOM CAMPBELL, California
JIM DAVIS, Florida
TOM SHEEHY, Staff Director
GREG SIMPKINS, Professional Staff Member
JODI CHRISTIANSEN, Democratic Professional Staff Member


    Mr. Tom Kneir, Deputy Assistant Director, Criminal Investigative Division, Bureau of Investigation
    Mr. Michael Horn, Chief of Foreign Operations, Drug Enforcement Administration
    Mr. Jack Blum, Attorney, Lobel, Novins & Lamont
    Mr. Phil Williams, Director, Center for international Security Studies, University of Pittsburgh
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Prepared statements:
Mr. Tom Kneir
Mr. Michael Horn
Mr. Jack Blum
Mr. Phil Williams

House of Representatives,
Subcommittee on Africa,
Committee on International Relations,
Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:07 p.m., in room 2255, Rayburn House Office Building, Hon. Edward R. Royce (chairman of the Subcommittee) presiding.
    Mr. ROYCE. [presiding] This hearing of the Subcommittee on Africa will now come to order.
    Around the world, economic and political barriers are being lowered. This is increasingly producing opportunities for students, tourists, and business people, and it is simultaneously fueling economic growth and development. These are positive results. However, among those taking advantage of opening societies are international criminal organizations who engage in the drug trade, gun smuggling, fraud, counterfeiting, and other financial crimes, and increasingly in computer crimes. This is a serious problem.
    Today it is estimated that international crime is a $1 trillion business. While the Mafia, cocaine cartels, and other criminal organizations may be better known, crime organizations are becoming big business in Africa too. When we do think of African criminal organizations, the ones that come to mind are the Nigerian drug cartels, which are among the most sophisticated in the world, and the various financial scams known as 419 fraud. Yet criminal enterprises in Africa are not limited to Nigeria. South African police estimate that their country is home to more than 190 criminal organizations, many of which are sophisticated and international in scope. Swaziland is becoming a haven for drug traffickers and for gun runners.
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    The United States is an open society, therefore vulnerable to international crime. More than 14,000 Americans die each year from illegal drug use. Two-thirds of all counterfeit U.S. currency found in circulation in this country is produced abroad. U.S. corporations lose more than $23 billion annually to illegal duplication of compact disks, computer software, pharmaceutical, and other goods. Unfortunately, African-based organized crime is part of this problem. Organized international crime is also potentially devastating to Africa. It attacks the foundation of government and it stunts economic development. It is no secret that many African countries are fragile, struggling to establish more democratic governments, and more open economies. Organized crime makes this a tougher task for governments, particularly those short of law enforcement resources.
    Many observers of international crime in Africa believe that it is critical to act now. Many of these organizations may not yet have taken root. If they have though, fighting them would be difficult and success would take decades. Africa would suffer, as would the United States. So if there is a window of opportunity open now, we need to act.
    Our hearing aims to better understand African crime cartels. Our government witnesses will discuss the nature and extent of drug and financial criminal operations in Africa, while our private witnesses will examine the impact of international crime on both the American and African continents. Our objective is to determine whether the U.S. Government is effectively combatting international criminal operations in Africa.
    Before we proceed, I want to recognize Mr. Menendez, our Ranking Minority Member, to make an opening statement, and then Mr. Alcee Hastings of the Committee.
    Mr. Menendez.
    Mr. MENENDEZ. Thank you, Mr. Chairman.
    A lot of positive things are happening in Africa, including the economic integration of African nations into the world economy. However, as nations move closer together in what is truly a world market, many African nations have simultaneously developed significant international crime organizations that participate in drug trafficking, diamond smuggling, money laundering, counterfeiting, document fraud, and the infamous 419 scam that our colleague, Congressman Markey, is going to address.
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    These crime syndicates have grown, and they thrive off an atmosphere, however unintentional it may be, that is conducive to their operation. Africa has emerged as a major intermediate transit point for drugs destined for markets in Europe and North America. Tanzania and Mozambique serve as transit points for heroin coming from the Far East. Angola and Namibia are transit points for cocaine coming from the Americas to the European market.
    The Nigerian crime syndicates have emerged as the primary organizers of these transhipments. Evidence even exists of alliances between the Colombian cartels and the Nigerian crime syndicates.
    South Africa is also struggling with the growth of international crime syndicates thriving on South Africa's geographic location. According to the South African police, more than 190 crime syndicates currently operate in South Africa. I would like to add that South Africa, unlike Nigeria, has been attempting to combat these organizations and has sought international support. I am hopeful that as Nigeria seeks to define its political future, its leadership will address this serious and growing problem.
    I think we need to address two things in this hearing. First, we need to understand the factors supporting the operation of international crime organizations in Africa. Second and most importantly, we need to look at ways to help African nations to combat crime and drug syndicates before they become truly unwieldy. The causes are multiple. They include poverty, government disorganization, low-paid and unpaid civil servants, lax banking laws, non-existent customs services, and insufficient and often corrupt law enforcement establishments. These factors have made Africa an ideal location for the operation of international crime and drug syndicates.
    While the situation is grave, African nations have begun to respond to the problem. The Southern Africa Development Community, SADC, has passed a rather comprehensive protocol on illicit drug trafficking. The protocol calls on member nations to take measures to reduce and eventually eliminate drug trafficking, money laundering, corruption, and illicit use and abuse of drugs through cooperation among enforcement agencies and demand reduction programs. Efforts like that of SADC are crucial to combatting international crime. African solutions to African problems are always more effective. Donor nations like the United States need to consider how we can best assist African efforts by providing technical assistance and training to governments and law enforcement agencies on methods to track and inhibit the operation of crime syndicates.
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    Last, while it's not the focus of this hearing, terrorism certainly falls into the category of international crime. We would be remiss not to mention Sudan and Libya's continued support for international terrorism and the threat those nations pose to their neighbors, the region, and U.S. interests.
    In conclusion, Mr. Chairman, let's recognize that it is in America's interest to help African nations combat this scourge before it gets out of control. It is in our interest because it impacts American businesses invested in Africa. It is certainly in our interest that we do our utmost to keep drugs off America's streets. We would be wise to work with nations on solutions before the problems become so entrenched that they become almost impossible to surmount.
    I appreciate your holding this hearing. I look forward to the testimony of our witnesses.
    Mr. ROYCE. Thank you, Mr. Menendez.
    Mr. Hastings.
    Mr. HASTINGS. Mr. Chairman, in the interest of time, I'll forego any opening statement. Maybe we can get our colleague Markey's testimony in. If you'll excuse me, I have a vote and I'll come back.
    Mr. ROYCE. Absolutely.
    Mr. HASTINGS. I'm not leaving because of you, Ed; it's in spite of you.
    Mr. ROYCE. Congressman Edward Markey represents Massachusetts' 7th District. He is a Member of the House Commerce Committee. His interest in financial services and consumer protection led him to introduce H.R. 3916, the Nigerian Advance Fee Fraud Prevention Act of 1998. I am pleased to say that I am an original cosponsor of that act, along with Mr. Payne, Mr. Campbell, Mr. Menendez, and Ms. McKinney of this subcommittee. Congressman Markey is with us today to discuss the elements of this timely legislation.
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    Mr. Markey.
    Mr. MARKEY. Thank you so much, Mr. Chairman. I want to commend you for calling today's hearing on combating international crime in Africa, and for allowing me the opportunity to testify. I want to thank you and Representative Menendez and the other Members of the Committee for being original cosponsors of my legislation.
    Last year I received an inquiry from one of my constituents expressing concerns about an apparently fraudulent solicitation he had received from Nigeria, offering him the opportunity to obtain a multi-million dollar windfall profit if he would merely assist the individual who had written him in processing a wire transfer of certain funds currently on deposit in a Nigerian central bank. I contacted the State Department regarding this matter. They informed me that the proposal my constituent had received was part of a so-called advanced fee fraud. Thousands of Americans are defrauded each year this way from Africa.
    The Department further informed me that these proposals are frequently sent in mass mailings to the United States and other countries and were designed to defraud the individual or company that receives the request; either the initial or subsequent letters request that the victim send an advance payment to guarantee a fictitious money transfer. According to the Department, after sending the payment, the victim invariably finds that the Nigerian partner does not respond to any further inquiries. A copy of this correspondence is attached to my statement.
    Now ordinarily when we have constituent requests, we take them and try to deal with the issue in a way that reflects the importance of the issue to the constituent. So you can imagine how I felt when I then personally received the first of four fraudulent solicitations from individuals that were directed at me personally from Nigeria in my office here in the Rayburn Building, targeting me as someone who should in fact participate in this scheme that my constituent had called me with his great concern just months before. This group of individuals claimed to be affiliated with the Nigerian Petroleum Corporation. These letters to me in my office are attached to my testimony.
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    These fraudulent solicitations offered me the opportunity to receive between 25 and 30 percent of certain funds which were claimed to be on deposit in Nigerian banks. The amounts which were claimed to be on deposit ranged from $25 to $35 million. All I had to do, according to these solicitations, was to provide my company's name, full address, and phone and fax numbers, along with my bank's name, account number, and fax numbers. Soon I would get the money. Soon I would get rich.
    Now you might think that no one would be so foolish or so naive to fall for such a transparently fraudulent scheme. Unfortunately, when my office contacted the Secret Service regarding the four fraudulent solicitations that I had received, they were informed that thousands of Americans, many of them senior citizens, have been defrauded by these or similar scams. Increasingly known as 4–1–9 or 419 frauds, after the section of the Nigerian penal code which addressed fraudulent schemes, these scams have reached epidemic proportions.
    It is my understanding that victims have been targeted in over 60 countries around the world. The perpetrators of these hoaxes don't discriminate when choosing their targets. Everyone from small to large corporations, religious organizations, and individuals, are all fair game. In fact, some of your offices may have already received solicitations similar to those which were sent to my office.
    So what is the actual scam? The success of the fraud does not actually require the victim to transmit a bank account number, although many victims foolishly provide one. Even if the victim merely provides a letterhead, the con artist may use it to forge letters of recommendation to the American Embassy for travel visas, to con other perspective victims, or to perpetrate a so-called identity fraud, in which the con artist assumes the identity of the victim in order to attempt to carry out unauthorized cash withdrawals from the victim's bank accounts.
    In other variations on the 419 con, the victims are pressured into sending money for unforeseen taxes, fees to the Nigerian Government, or attorney or other fees. These fees can reach hundreds of thousands of dollars. The perpetrators often allege that the victim must travel to Nigeria in order to complete the transaction. If the victim is unable to do so, the con artist may demand more money from the victim for power of attorney fees and other associated taxes. If the victim is willing to travel to Nigeria, the fraudster may falsely inform them that they do not require a visa to enter the country, when in fact a visa is required to the Nigerian Government. The fraudster may then bribe airport officials to bypass immigration and use the victim's illegal entry into the country as leverage to coerce the victim into coughing up additional funds.
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    Violence and threats of physical harm may also occur. Indeed, I have been informed that to date, 15 foreign businessmen and two U.S. citizens have been murdered in Nigeria in connection with the 419 scam.
    Mr. MENENDEZ. [presiding] Mr. Markey, on that sad note, I would have you know that we both have 3 minutes to get to the floor.
    Mr. MARKEY. I recommend that the Committee adopt immediately my bill to solve all these problems.
    Mr. MENENDEZ. We'll be happy to make sure——
    Mr. MARKEY. I will include the rest of my testimony in the record, without objection.
    Mr. MENENDEZ. As you know, I think you have strong support on the Committee in view of everybody's cosponsorship. Thank you for bringing it to our attention.
    We'll have the Committee in recess until the chairman returns.
    Mr. ROYCE. [presiding] We'll reconvene at this time.
    In our next panel, we have two Administration representatives from agencies on the front lines of the fight against organized crime. Thomas Kneir is Deputy Assistant Director of the FBI's Organized Crime Drug Branch in the Criminal Investigative Division. Mr. Kneir has worked for the FBI in a variety of capacities since 1969, including service in the field and in the sections dealing with government fraud and public corruption.
    Michael Horn is Chief of the Office of International Operations for the Drug Enforcement Administration. He joined the DEA's predecessor agency, the Bureau of Narcotics and Dangerous Drugs, in 1968. Since that time, he has held a number of senior positions, including country attache in both Malaysia and Turkey.
    Mr. Kneir.
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    Mr. KNEIR. Thank you, Mr. Chairman, Members of the Committee. I appreciate the opportunity to appear today to discuss the increasing threat of international crime committed by African nationals. I would ask that I be able to summarize my testimony and that the full text be placed into the record.
    The most significant identified international African crime group having an impact on the United States are the West African Nigerian criminal groups commonly referred to as Nigerian criminal enterprises. During the past 15 years, the Nigerian criminal enterprises have exploited financial institutions, insurance companies, government entitlement programs, and individual citizens of the United States. Law enforcement officials in the United Kingdom, Canada, Germany, Australia, South Africa, Russia and other countries have also experienced high crime rates attributable to the Nigerian criminal enterprises.
    These criminal enterprises are involved in a myriad of criminal endeavors, not limited but to include drug trafficking, especially heroin and cocaine, financial crimes, money laundering, counterfeiting and altered documents. The Nigerian criminal enterprises are seldom if ever engaged in drug trafficking to the exclusion of other types of crimes. A typical Nigerian criminal enterprise organization in the United States will operate in a small inter-related cell and have international contacts of Nigerian criminal enterprises operating in other foreign countries.
    We see a lot of white collar crime involved in this, in utilizing false documents to gain new identities and then to take these new identities to go out and to get open bank accounts, to incorporate businesses, to start getting government entitlement programs, particularly in the healthcare fraud. In Houston, Texas, about 75 percent of the counterfeiting of checks are due to the Nigerian criminal enterprises at this time.
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    We have a number of ongoing cases throughout the United States involving Nigerian criminal enterprises that have obtained stolen checks from U.S.-based companies and created fraudulent pay stubs. These checks and pay stubs are then sent overseas and negotiated overseas, which then takes time to work its way back through the banking system and back to the company to show that it was a fraudulent document. Some of the counterfeiting that's done by these enterprises are very, very good, so it takes a little while for these schemes to come to the surface.
    The Nigerian criminal enterprises are also known to associate with criminal enterprises in other foreign countries. For years the enterprises have had a presence in Southeast and Southwest Asia, particularly in Thailand and Pakistan, where they have established and maintain contacts with narcotics distributors, to obtain heroin for distribution in the United States, Europe, and other countries. The Nigerian criminal enterprises are also present in South America, particularly in Brazil and Colombia to negotiate cocaine and heroin purchases.
    To address this increasing problem the FBI and representatives from all the Federal law enforcement agencies launched the Nigerian Strategy. In September 1996, Attorney General Reno had senior representatives of the law enforcement agencies that are involved in the enforcement of many of the crimes to get together to come up with a unified strategy. From this, the Nigerian Criminal Enterprise Initiative was created. This strategy will address Nigerian crime to establish regional Nigerian crime task forces and a data base to share information. The participating agencies agreed to utilize a multi-agency task force concept to address the Nigerian criminal enterprise criminal problem domestically. It was agreed to utilize the existing U.S. Secret Service West African task forces to facilitate and coordinate the effort.
    One of the main things that came out of this initiative was an effort to share information among agencies. We are going to use the anti-drug network, which is a vehicle to exchange our intelligence regarding the agencies because a lot of times what we have seen is these organizations move so fast and change names so often that we have to be able to exchange our information. This is one of the key steps for this thing.
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    I realize the red light is on. I am almost out of time. But I would just like to end by saying because of the fluid nature of the Nigerian criminal enterprises, law enforcement agencies of the U.S. Government recognize that a cooperative multi-agency approach is the most effective means of investigation. These criminal enterprises operate in small inter-related cells, committing a variety of crimes, including some below Federal prosecutive guidelines if addressed as a single violation. What we are going to try to do in this initiative is to operate these task forces to look at the whole organization and to try to use the criminal enterprise theory of investigation and prosecution. Thank you very much.
    [The prepared statement of Mr. Kneir appears in the appendix.]
    Mr. ROYCE. Thank you, Mr. Kneir.
    Mr. Horn.
    Mr. HORN. Chairman Royce, Members of the Committee, I appreciate the opportunity to appear before the Committee today to discuss narcotics trafficking in Africa. It is important to demonstrate at the outset why the threat posed by international drug syndicates is so serious and why the United States needs cooperative law enforcement programs in Africa in order to successfully counter drug trafficking in the United States.
    Drug trafficking by Nigerian and other West African-based criminal syndicates operate in over 60 nations. The criminal activities of these groups range from drug trafficking to financial fraud. In Thailand, over 700 Nigerian nationals are currently in prison for heroin trafficking. In Colombia, authorities are arresting growing numbers of Nigerian nationals for cocaine trafficking. In Ecuador, Brazil, Nigerian trafficking organizations are becoming more active. Nigerian crime syndicates even operate in the United States, as drug enforcement investigations show that the heroin markets in several U.S. cities, notably Chicago, are substantially controlled by Nigerian organizations.
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    For over the past 5 years, Africa's role as a drug transit continent has arisen significantly. Poverty, civil conflict, corruption, and the lack of training and resources available to law enforcement on the continent have all contributed to this increase. Drug traffickers often take advantage of these conditions to recruit individuals as drug carriers, offering them more money for a single smuggling trip than they are likely to earn in maybe 10 or 20 years. The situation is exacerbated by the fact that several African countries are involved in civil conflicts, have forced them to use scarce resources to focus on security issues rather than drug law enforcement. Corruption is also a significant problem in Africa as law enforcement officials are poorly paid and lack even the most basic benefits. Without proper training and resources, Africa law enforcement faces an almost impossible task when pitted against sophisticated drug syndicates.
    Nigerian criminal enterprises defy traditional definitions, as they tend to be loosely structured, highly fluid, and ever-changing. The organizational structure varies widely, from organized criminal alliances to freelance entrepreneurs. More often than not, the foundations for these groups follow along family, tribal or village ties. While a degree of structure is clearly identifiable within many of these networks, the relationships do not rival the organizational structure of La Cosa Nostra or the Colombian and Mexican organized crime syndicates.
    Nigerian traffickers have developed global smuggling routes. These routes usually originate in Thailand or Pakistan, where heroin may be purchased at wholesale prices. The heroin is then easily transported through Europe and Africa with routes terminating in America's major cities.
    In recent years, Nigerian traffickers have expanded their operations by smuggling South American cocaine into Europe where prices are higher and profit margins greater than those in the United States. As the proliferation of these Nigerian couriers has increased, law enforcement has responded with greater scrutiny. The prevalent use of fraudulent documents by couriers has made identifying and apprehending these individuals extremely problematic. Nigerians employ a vast army of couriers with a variety of backgrounds. Nigerian traffickers recruit Westerners, women with children, families, college students, and individuals traveling abroad who will not attract the attention of law enforcement authorities.
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    The average pay for couriers is $3,000 to $5,000 per trip, depending on the amount of the drugs being smuggled and the courier's past success. Nigerian traffickers will rarely have a courier transport heroin from the source country to the destination. Instead, one courier will transport the heroin partway, for example, to Europe, while another courier will be utilized to transport the shipment to another destination. For some operations even a third courier may be used to transport the drugs into the United States. This allows the organization and its members a greater degree of insulation as couriers rarely know the other couriers employed on the routes or their final destination.
    In addition, it allows narcotics to be transported into the country from locations which do not arouse suspicions, since no record of source country travel is evident. Flights sometimes can contain Nigerian organizational members who may supervise or report on the couriers and their activities. Often couriers are not aware of individuals monitoring their travel.
    In a few instances, Nigerian heroin traffickers have recruited disabled individuals to smuggle heroin from West Africa to the United States. Intelligence obtained from one DEA investigation indicated the Nigerian trafficking organization recruited disabled people to smuggle heroin in to the United States. This organization solicited invitations from supporting events such as the Special Olympic Games, and then secured a visa for the courier to travel. None of the couriers participated in the sporting events, but instead would deliver the heroin to the United States and then return to Nigeria.
    Air travel still remains vital to Nigerian smuggling ventures. Nigerians have tailored their smuggling techniques to limit detection and to take advantage of the profitability of smuggling heroin, which is far more valuable than similar amounts of cocaine.
    In the 1990's, Nigerians lost large quantities of heroin and dozens of couriers annually to law enforcement operations. In an effort to insulate their trafficking operations, Nigerian traffickers in 1996 began mailing heroin in one or two kilogram quantities from Southeast Asia and Pakistan to the United States. The use of express mail service has become a popular heroin trafficking method.
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    Nigerian traffickers are most active in U.S. cities with established populations such as Chicago, Atlanta, Dallas, Houston, Newark, New York City, and the Baltimore-Washington metropolitan area. Chicago is a primary hub of heroin trafficking activity. Between 1993 and 1996, Nigerian-controlled couriers were arrested with 272 kilograms of heroin either in Chicago or en route to Chicago. In one joint DEA-FBI-U.S. Customs investigation code named Operation Global Sea, 20 Nigerian heroin traffickers were arrested and convicted of conspiracy to import and distribute 168 kilograms of heroin into the United States.
    South Africa increasingly has become a transit point for cocaine from South America. Nigerian traffickers are responsible for most of the increase in cocaine available in South Africa since they control an estimated 90 percent of the cocaine which either transits through or remains in the country.
    DEA remains committed to targeting arresting the most significant drug traffickers operating in the world today. In order to meet this goal, it is essential that we have trustworthy and competent agencies in Africa working side by side with us. With the assistance of our domestic state and local partners and our counterparts abroad, DEA will continue to investigate cases for prosecution against these Nigerian criminal syndicates.
    Thank you for the opportunity to testify today, Chairman Royce. I will be happy to respond to any questions you or the other Members may have.
    [The prepared statement of Mr. Horn appears in the appendix.]
    Mr. ROYCE. Thank you, Mr. Horn.
    Right now there are 152 U.S. law enforcement agents stationed in Latin America. There are 119 in Southeast Asia and Australia, but there are only 19 stationed in Africa. Does this distribution accurately reflect the danger posed by international crime from the respective regions or has this use of resources been dictated by other factors? That is the first question I have.
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    Mr. KNEIR. To answer that, I think probably it has been other factors, but I would have to agree that is not an adequate number of law enforcement personnel in Africa to do the job. Right now the FBI only has representatives in Egypt, South Africa, and Nigeria. Those in Nigeria are there right now only on a TDY basis and are not yet permanent. But, to answer that, I think we see that as a growing problem.
    Mr. ROYCE. Mr. Kneir, in your testimony you described the Nigerian Criminal Enterprises Initiative. How do we assess the ultimate value of that in fighting Nigerian organized crime? What are the benchmarks for success?
    Mr. KNEIR. Right now a working group task force is trying to come up with those benchmarks. I think what they will come up with and it's a work in progress, but what we have to do is to do a better job at addressing the entire organization. We have had a number of cases that have been prosecuted in the United States regarding Nigerian criminal enterprises, not all of which that went into the Federal court. As you know, at many times in many states, if you are prosecuted locally, sometimes it becomes a revolving door, probation or very short jail sentences and back on the street.
    What we want to do, much like we have done with other types of organized crime, is to wrap up these organizations in maybe RICO type of prosecutions or CCE drug cases to maximize the sentences and to have more impact.
    Mr. ROYCE. Let me ask about the 419 fraud. The FBI and the Secret Service have established a program to target the advanced fee fraud program that we have seen emanating from Nigeria. What has the program accomplished besides tracking attempts to defraud U.S. citizens? Because I think each of us has examples of citizens who have come to us about the problem and we have tried to dissuade them—hopefully effectively. It's amazing, though, just how much of this is in circulation.
    Mr. KNEIR. I have yet to receive my first 419 letter, but I know many people who have. There have been some unique approaches to try to lure, as opposed to lure U.S. citizens to Nigeria, there have been some attempts to lure the subjects of these cases to other places than Nigeria to address it.
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    Also the Group of Eight, the Lyon Group, has looked at Nigerian groups through their transnational organized crime subgroup; this year the chair is Great Britain. It is being looked at on an international basis. While we were in London last year or in fact it was earlier this year, at Heathrow Airport probably enough letters to probably fill your entire desk area had been basically plucked out of the system because they had fraudulent stamps. These letters were basically going all over the world. That was just 1 day at Heathrow. So you can imagine the scope of this thing. Again, through the Group of Eight, there are some projects ongoing to try to take a more proactive investigative approach to this problem.
    Mr. ROYCE. Let me just ask you this: Given the publicity that this 419 fraud has received around the world, why do so many Americans and others continue to fall victim to this scam?
    Mr. KNEIR. You know that's probably a $64,000 question, but let me just start by saying, if you look at the 419 concept, first of all, there has to be a lot of larceny in the heart of the victim. What you are doing, it sounds like to me, is conspiring with an individual in Nigeria to take money out of the coffers of the country. I don't know. I don't know why anybody would get involved.
    Mr. ROYCE. My time has expired.
    Mr. Hastings.
    Mr. HASTINGS. Greed. The focus of this hearing, and I thank you, Mr. Chairman and the witnesses and other panelists as well, for having this hearing. I can say to you maybe mine is more of a statement than just a question, but I do not wish to lay any accusing fingers here. I have an exacting concern. I don't believe that in this forum that we get to the root of these problems nor maybe even get to a position whereby from a policy standpoint we may be able to pass legislation that will impact in the area that these gentlemen have as their responsibility.
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    You, Mr. Chairman, pointed to the fact of the number of agents that are placed in Latin America and Asia, and the paucity of agents, 19 in Africa. Mr. Horn would know this better than do you and I. I only cite it for the reason that last week I was at the Organization for Security and Cooperation in Europe. I met the agent that covers the Nordic state, one person. I asked him, I said, who does this work here? He said, You are looking at him. You know, he's a fine gentleman and obviously has enormous capabilities, but there is no way in the world that one individual can cover the North Sea.
    Mr. Horn knows, for example, that there is no agency in all of the ''stans.'' We can talk about Africa until we are blue in the face, and as much drugs run through Afghanistan, Khazakstan, Uzbekistan, Kurdistan, Turkmenistan, and it's a growing problem and we don't have anybody there. We aren't helping this man and his agency to develop the kinds of personnel that are needed.
    Mr. Horn, I guess my question is what would—it's not always throwing money at a problem; everybody says, that answers it, but I don't believe in Africa or anywhere else that you can do the job that you need to do if you don't have the necessary personnel. There is no way in the world I wouldn't get burned out if I was one of your agents just with the sheer weight of work. You don't have the real tools; the computer is always slower than the ones of the bad guys. They have the heavy armaments. Do you hear what I am saying?
    Mr. HORN. Yes, sir.
    Mr. HASTINGS. Africa just falls into that category, but it is patently obvious that it is a serious problem. But how much do you need in the way of added personnel realistically to be able to make a more serious dent than you do? And you and Mr. Kneir and all of you an enormous job for all of us in the world. But it comes up short because I don't think you have enough people. I think Congress owes some responsibility in that regard.
    Mr. HORN. Yes, sir. I agree with much of what you said. The good news in Copenhagen is we are adding another agent there. His wife is having triplets now. That's why he is not there right now. We have a proposal to open an office in Tajikistan. We also have a proposal to open an office in Warsaw, which will help the Baltic states. Like the FBI, we have three offices in Africa, Cairo, Pretoria, and Lagos.
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    The uniqueness with the Nigerian situation is sometimes Africa is not the best place to attack the problem. The Global Sea Operation, a joint DEA-FBI-Customs operation that took place a couple years ago, relied very heavily on intelligence we got from our offices abroad. Surprisingly or possibly not surprisingly, given the number of Nigerians in jail in Thailand, most of our intelligence came from Thailand, Singapore, Vietnam, and Western Europe. Very little of it came from Africa. So we are attacking the problem where it exists overseas.
    Our philosophy as far as establishing the offices overseas, very generally speaking, has direct impact on the United States.
    Mr. HASTINGS. Mr. Chairman, my time is up. I have another round.
    Mr. ROYCE. We are going to let you start the second round.
    Mr. HASTINGS. OK. I just have one additional question then. That is, with our focus today being Nigeria, I am curious in light of Mr. Abacha's death and then Mr. Abiola's death, and now with an obviously new regime, is there any opportunity for us or do we seize upon the state of flux that they are in to try to establish some different level of cooperation than we may have had with Abacha in control or that we might have had had Abiola been ensconced as an elected leader. Is there an opportunity? If so, are we exploiting it?
    Mr. HORN. It is probably too early to answer that question, but I hope we are exploiting it. I think what we have to help Nigerians with is we have to help them with better training, more sophisticated techniques, and try and promote regional cooperation in Africa, to make them part of the solution to some of their own problems.
    Mr. HASTINGS. In all fairness, how do we do that when on this side we are saying we sanction you? Then on this side we say, but we want to help train you, you know. I always look at things from the standpoint of what I would do if I was in that position. I would say, well, fine, you know, I don't want your help if you don't want my import-export, my ability to travel to your country, et cetera.
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    Mr. HORN. I am not qualified to answer that question.
    Mr. HASTINGS. Thank you, Mr. Chairman.
    Mr. ROYCE. Thank you, Mr. Hastings.
    Let me ask you a question, Mr. Horn. Your observation that at one time Nigerian drug organizations were involved in clearly defined areas—as you have testified—now, Chicago, New York—how is this affecting the level of violence we see in the American drug market? Because it seems the operations are moving into areas that traditionally have been managed by other drug cartels. Has that created friction and violence in the American drug market?
    Mr. HORN. Among the cartels themselves, I have not seen that, although I will make the observation that I think the level of violence among the drug traffick generally tends to be at the lower levels; at the retail level is where you see the most violence.
    Mr. ROYCE. Which African countries are most effectively combatting African crime cartels?
    Mr. HORN. South Africa has been very effective. West Africa, Ghana, we would probably give high marks to.
    Mr. ROYCE. What steps are they taking, South Africa and Ghana, in terms of their——
    Mr. HORN. They have stricter laws and there appears to be better training and possibly slightly more professional police forces.
    Mr. ROYCE. I see. I am going to ask Mr. Chabot if he has any questions.
    Mr. CHABOT. Yes. Just a couple of questions. Mr. Kneir, the International Narcotics and Law Enforcement Affairs Bureau at the State Department controls the budget of in excess of $200 million. These funds go to the government agencies combatting drug trafficking, but also to universities for studies on drug use and other issues.
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    How effective has this system been in providing necessary resources to make a fight against drugs as successful as possible?
    Mr. KNEIR. I think that it probably goes beyond monies for just drugs. It goes for other types of organized crime also. I think the experience that we have had with the Law Enforcement Academy at Budapest is a good example of how training law enforcement can work very, very effectively. We have trained a lot of people through a joint effort with other agencies at Budapest. We are starting to reap a lot of benefits from that today.
    It is going to take training a core of basically the up and coming officials of these countries in their law enforcement to make a difference in Africa.
    Mr. CHABOT. And just one follow-up question here. The FBI's regional police training academy in Budapest has been a model promoting regional crime fighting and helping to develop vital cop-to-cop relations, but also helping our law enforcement agencies fight Russian-speaking crime. Would an ICA in South Africa help as well?
    Mr. KNEIR. I'm sure it would. If it was as successful as what we have seen out of our experience in Budapest, training the new up and coming officials of the police forces and then maintaining contact. That is how things will actually get done.
    Mr. CHABOT. OK. Thank you. I yield back the balance.
    Mr. ROYCE. Well, I again want to thank you gentlemen for your testimony today. We are trying to promote political and economic development in Africa. Crime cartels are an impediment to that where they exist in many African states. So we want to acknowledge your work, working cop-to-cop, to use the language of my colleague in trying to combat crime. Thank you again for making the trip up here to testify today.
    We will now go to our third panel.
    Mr. HORN. Thank you.
    Mr. KNEIR. Thank you, Mr. Chairman.
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    Mr. ROYCE. On our next panel we will hear from two witnesses who add different elements to the overall picture of African criminal enterprises. We will shut the door before we reconvene the hearing here with our next panel. Thank you.
    We will reconvene the hearing at this time. In this panel we will hear from Jack Blum, an attorney who is an expert on controlling government corruption, international financial crime, money laundering, tax havens, and drug trafficking. He is a partner at the Washington law firm of Lobel, Novins & Lamont.
    Professor Phil Williams is director of the Matthew B. Ridgway Center for International Security Studies at the University of Pittsburgh. He has traveled down from Pennsylvania today. We thank him for that. Dr. Williams is an acknowledged expert on security and transnational crime issues, whose writings have appeared in journals such as the Washington Quarterly. He also has served as a consultant to such agencies as the U.N. Drug Control Program, and the Institute for Defense Analysis.
    Mr. Blum.
    Mr. BLUM. Mr. Chairman, I very much appreciate the ability to appear here today. I have a prepared statement. I would like to have it made part of the record. Rather than read it, there are just a couple of points I would like to make.
    I think you can't look at African organized crime without looking at the weaknesses of various African governments. I was appalled on various trips to Africa at the state of the criminal justice system in the various countries. A previous witness said, well things are going better in South Africa. The reason is that South Africa has a tradition of judges and prosecutors, and has a court system that works. Most of the rest of Africa does not.
    In my statement, I describe what I discovered in Kenya, which absolutely appalled me. There are no published court opinions, no transcripts of trials, no assistance for prosecutors, cases that would go on for 8 or 10 years, and anyone with money is able to buy his way out of the criminal justice process.
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    It is the same way in Nigeria. In Nigeria it is particularly bad because many of the enterprises we have discussed—the Nigerian crime enterprises have their headquarters in Nigeria and are directed by reasonably senior people who enjoy the protection of the Nigerian Government. This means they get documentation, they get the travel papers they need, and the kingpins and the people who are orchestrating and master minding what is going on can not be touched.
    I had this conversation with a senior official of the Nigerian Government some years ago who acknowledged that trying to take on some of the major drug trafficking organizations could be fatal. He was not particularly interested in doing it.
    Now I think it is important also to understand some of the reasons why the African organized crime groups are so effective. Nigeria has 75 mutually un-understandable tribal languages. You can't find people in the United States who can speak any of them. We don't have that capacity in law enforcement. We used to have programs at various state universities to teach people exotic languages. We have unfunded those programs. To me, knowing about the cultures and the languages is as important to getting inside these criminal groups as almost anything else we do.
    So, first, we must face the issue of criminal justice systems in the country. Then we must address the question of the tools we need, which include understanding culture and language and understanding how the society works.
    Now I also listened to the previous witnesses discussing the joint task force. Let me give you my experience trying to work with victims of Nigerian fraud schemes. Prosecutors don't want these cases. When I worked on one case, what we got was the arrest of two runners here in the United States, and the seizure of little or no money. The runners were in the country illegally. The Secret Service, which has worked 3 or 4 weeks on the case, said to the prosecutor, go after these guys. The prosecutor said, look, they are in the country illegally; we are going to deport them. It is a waste of everybody's time and money to send them to jail because many of them would rather be in jail.
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    So, as a result, you catch a couple of low level people. They get caught up in the system. They get deported, and they come right back in over the Mexican border or under another name with a new passport with new documentation. Despite the notion of task force and coordination, I want to assure you it isn't working and these people are here by the score.
    It is a combination of problems. It is porous immigration. It is ensuring that the paper people use to travel on is genuine. All of these things have to be addressed if we are going to address this Nigerian West African crime problem.
    I see my time has expired.
    [The prepared statement of Mr. Blum appears in the appendix.]
    Mr. ROYCE. Thank you, Mr. Blum.
    Mr. Williams.
    Mr. WILLIAMS. Thank you, Mr. Chairman. It is a great pleasure to be here. I request permission for a more formal and fuller version of my remarks to be entered into the record at a later date.
    Two broad issues stand out in looking at African organized crime, Nigeria and South Africa. I will focus only on the first today, accentuating some points that previous speakers have already made. The first is the ubiquity of Nigerian criminal organizations. Nigerian criminal groups are more pervasive around the globe than those of any other nation. In November 1996, I visited Lubyanka in Moscow and interviewed the head of the drug control operations of the FSB for 2 hours. An hour of that time he spent telling me about his Nigerian problem, and the apparent support for criminal activities by officials of the Nigerian Embassy there, who often provided false documentation.
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    Other highlights of the global snapshot on Nigerian activities include Brazil, where apparently Nigerian groups employ about 1,500 people, export 10 tons of cocaine a year, and engage in barter of cocaine and heroin. Other countries where they are active include the Philippines, Cambodia, Hungary, Germany, Czech Republic, Singapore, and of course the United States and Britain. So that gives you a sense of the extensiveness.
    The second characteristic is adaptability. Nigerian criminal organizations are very flexible and very innovative. They adapt easily to the host society. In Britain, they have become adept at obtaining welfare benefits using a myriad of false identities and links with fellow countrymen who work inside national and local agencies where there is access to financial data and personnel records. They really exploit the people in the system.
    The third characteristic is careful conception of crimes and preparation. Nigerian criminals do considerable research in identifying potential targets for 419 fraud. A colleague of mine at the University of Pittsburgh was the recipient of a Nigerian fraud letter, which actually included his middle name—a name he never uses and none of his colleagues actually knew. The Nigerians had discovered his middle name and included it in the letter. It shows they had done a lot of work.
    The fourth characteristic of Nigerian groups is that they are well organized. I would suggest that there are three kinds of Nigerian organizational structure. The first is the old-fashioned pyramid or hierarchy. There are major organizers, many of whom are in Lagos, and are linked with significant numbers of criminal operations elsewhere in the world. These are crime barons, often members of the elite and members of government, who benefit from activities that they coordinate or support. They are also among the beneficiaries of the proceeds of crime that come back to Nigeria. They protect those proceeds from seizure under Nigeria's very poorly implemented money laundering laws.
    The second type of structure is the flexible network. Many Nigerian criminal organizations are relatively small, and they are based around bonds created by family membership, tribal affinity, or personal friendship. These groups operate within a larger network that resembles trade associations rather than traditional mafia hierarchies. The fluid network provides support, structure and potential connections.
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    The third type of group is the self-contained cell in which there are a few people with specific responsibilities and a clear cut division of labor. These cells are independent entities and take the initiative in generating and exploiting criminal opportunities.
    Let me now turn to current trends and future directions in Nigerian organized crime. One we have seen that's very important is the transition from employees to employers and from couriers to managers. Nigerian criminal groups and Nigerian criminals have graduated from working for others to becoming organized smugglers in their own right. I think this has partly been in response to the profiles law enforcement has developed. They become very adept at recruiting non-profile couriers, including females in the target country, and even in one case 20 servicemen who were recruited in 1996 to courier drugs from Istanbul to Rome. We should increasingly expect this managerial role to continue in the future.
    Second, I think there is increasing imitation of Nigerian criminals by other West Africans and increasingly citizens elsewhere in Africa. In Britain, for example, law enforcement doesn't talk about Nigerian crime, it's West African crime—predominantly, but not exclusively, Nigerians and Ghanians.
    The third trend is the upward trajectory of the Nigerian crime problem. There are long-term structural factors that will lead to an intensification of this problem on a global scale. The most important is population growth. According to some estimates, by 2010, the Nigerian population will be so large that domestic oil production will not be sufficient to meet the country's needs and Nigeria will become a net importer of oil, in spite of its large-scale production. Amidst growing impoverishment in the country, crime will be an increasingly attractive career path for young Nigerians.
    Fourth, another projection. Nigeria will continue to be a safe haven from which criminals can operate. Much of course will depend on what happens, as Mr. Hastings has pointed out, to the political system. But I have my doubts that we are going to see fundamental change because I think a lot of the crime and corruption is so deep rooted.
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    The fifth trend is toward growing sophistication. Many Nigerian criminals are well educated with excellent language skills. I think we will see growing use of computers and other technologies.
    Sixth, we will see more efforts to infiltrate government agencies by Nigerian criminals. This is happening in Britain. In the Benefits Agency, Nigerians and Ghanians made up 5 percent of the staff, but accounted for almost 90 percent of the internal fraud. I think that is a significant figure.
    Another trend is toward diversity in trafficking. Nigerians are not wedded to any particular drug. Cocaine or heroin, they don't care. They don't produce. So they can increasingly follow the fashion. Consequently, we should expect that they will increasingly become involved in trafficking synthetic drugs such as methamphetamine.
    Finally, although there might be some move toward greater concentration of power and authority in the Nigerian criminal world, I am not sure the term cartels is appropriate. Cartels control price and production levels. Nigerian drug traffickers control neither. They don't have dominance over the market so they can not determine price and availability. Nevertheless, I do expect rationalization and consolidation, if only to counter the international law enforcement efforts which are increasingly targeting Nigerian criminal groups.
    Thank you, Mr. Chairman. I appreciate the opportunity, and conclude my remarks.
    [The prepared statement of Mr. Williams appears in the appendix.]
    Mr. ROYCE. Thank you, Mr. Williams.
    Let me ask you both about one of the observations that was made. In South Africa there is an effective functioning of the rule of law, and that is critical to combatting organized crime. Now in Nigeria we have an opportunity for transition. How, in your opinion, could a similar court system be set up?
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    Mr. BLUM. I think that as much emphasis has to be placed on training people in the judicial system as is placed on the law enforcement side. You need judges, you need prosecutors, you need a system that produces written opinions, that gives transcripts, that gives people a sense of justice.
    You also need a penal system that works, that isn't a rarified form of torture and has some rational basis. I think all of these things are missing. Our emphasis has been very heavily on providing help to police, not in helping the basics of the justice system.
    Now I would argue that we can't expect the system in Nigeria, our people in Nigeria to solve the problem in Nigeria. If you have 110 to 150 million people in that country, and the estimates on population vary widely, 20 FBI agents still won't dent a criminal population of 2 to 3 million. Really it is in everyone's interest to have the system in Nigeria deal with Nigerian criminals. That is what we have to look to. I think that is true in places like Kenya, Tanzania, all through the region there are deficient, defective, and broken criminal justice systems. Police are only one part of it.
    Mr. WILLIAMS. I am not as optimistic as Mr. Blum is about South Africa. In some ways, South Africa is a classic state in transition. States in transition have four problems. One is that the state generally has collapsed and they have to rebuild the state and reestablish its legitimacy. Second, there has been a breakdown of social norms. Third, transitions are accompanied by fairly massive economic dislocation which leads to migration from the licit economy to the illicit economy. Fourth, transitions are generally characterized by an opening of the country, an opening of the borders. That can often lead to an influx of criminals. South Africa has suffered from this with Chechen groups operating there, Chinese groups, and of course many Nigerian groups. Nigerian criminals in South Africa really helped to create the serious cocaine and heroin problem that just wasn't there a few years ago.
    Mr. BLUM. It is not that I would argue with what you said, but it is compared to what. My experience, for example, with the Kenyan system where they haven't published an opinion in 15 years, even though it's a common law-based system, it depends on judicial opinion. That is non-functional period full stop.
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    South Africa isn't at that level. I am just saying that yes, it is a problem. It is not perfect, but compared to what. Nigeria doesn't work at all.
    Mr. WILLIAMS. I agree. Not only is the South African police service reasonably good, and corruption does not seem to reach high levels, but South African intelligence agencies have also turned their attention to the crime problem. I think they are fairly vigorous in pursuing organized crime.
    Mr. ROYCE. One of the issues that's in the written testimony that Mr. Blum gave us was combating money laundering. What specific steps do you propose? Considering the computer technology proliferation, what should be done about money laundering?
    Mr. BLUM. I think for Africa, a very serious aspect of the money laundering is the hiding of money that's stolen by corrupt government officials. There we can do a lot of things. I think that there should be international agreement on assisting countries that want to recover money stolen by, for example, Mobutu. There is no excuse for that money being safely stashed in a bank account in the Channel Islands or in the Caribbean. The $8 billion that Mobutu is said to have taken from Congo is more than all the foreign assistance Congo will see in the next 10 years, 20 years.
    So I think there should be international agreement that that money is hot and that every country in the world will cooperate with another government in recovering it.
    Mr. ROYCE. A few years ago we had Seychelles attempting to alter its banking laws to become a haven for money laundering before the scheme was made public. Is this common for such small countries to attract criminal activity?
    Mr. BLUM. It is very common. Some of the things that indeed I testified before the Banking Committee, and it was on some recommendations in the U.N. report that Professor Williams and I worked on, there are numbers of things that can be done. For example, most of these jurisdictions will charter shell banks that are unsupervised and unregulated. Under current rules, we permit those shell banks to open correspondent accounts with very substantial U.S. banks to give them a window on the banking system. In my view, we should not do that. We should say sorry, no correspondent accounts.
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    They need a window into the dollar major market to function. The way they get that is through links, which can be controlled by our government and our regulatory agencies. I think that Mr. Barr has come up with some legislation and so have some other Members of the Committee. I know the chairman of the Banking Committee is working on it. I think that that kind of legislation will go a long way to controlling the access that these criminals have to financial markets.
    Mr. ROYCE. Thank you, Mr. Blum.
    I am going to go to Mr. Hastings.
    Mr. HASTINGS. Mr. Chairman, I'll be very brief.
    Mr. Blum and Professor Williams, I appreciate both of you. I find absolutely nothing that either of you said in your initial testimony that I disagree with at all. So it is very difficult to formulate questions when you are in agreement with your interlocutors. But at the very same time, just out of curiosity, I am interested in the answer that you would give to the constant notion that governments themselves are involved in drug trafficking. When governments are not, that officials sometimes in government are either willing accomplices or forced accomplices. To the extent that you have a view on that, would you share it with us? Either of you or both.
    Mr. BLUM. I think that in the case of Nigeria, government officials are clearly involved in a variety of criminal enterprises. That comes based on the experience I have had seeing how a criminal organization could generate a fax, let's say from inside the Central Bank of Nigeria, how criminal organizations could get passports and indeed diplomatic passports for key members of the organization. That comes about in part because of the colonial history and the notion of what the purpose of government is.
    I think in the colonial period, government was viewed as a way of administering a place to extract wealth. When many of these countries became independent, the people who took over took the same principle, only now the extraction was for themselves as opposed to the colonial power. Very rarely do we get a situation where the idea is it's government of the people and the people who are in government work for the people. That concept has not gotten very far.
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    When you have a succession of military coups, as you had in Nigeria, where you have individuals who have clearly taken anywhere from $2 to $10 billion and stashed it in London, as the country goes from a relatively high GNP to next to nothing, you get a pretty clear idea of why government is involved and what is happening.
    Mr. WILLIAMS. I think the question is very, very important. In my work with transnational organized crime, I have tried to draw or develop a typology. The range is from some states which are generally strong and are willing to confront organized crime. They are often the exception. What we tend to see more often are weak states which acquiesce in organized crime. They lack the capacity to do anything about it. These are states in which there is some corruption in government so there are some beneficiaries. A third level going up the chain is where a crime corruption relationship goes beyond individual corruption to collusion between members of government operators and the criminals.
    Finally, at the top are criminal states, where members of the government themselves are leaders of criminal enterprises. The regime in Nigeria has the characteristics of this criminal state, and is very predatory. Members of the government are themselves being among the major beneficiaries and among the major organizers of many criminal activities.
    Mr. HASTINGS. That is all I have, Mr. Chairman.
    Mr. ROYCE. I want to thank both of you gentlemen. In closing, I would ask you to mention the example of states that are utilizing effective control. Can you discuss how we might convince other African states to emulate that model?
    Mr. BLUM. Well, I think that the closest we can come in Africa is South Africa. It, too, is troubled, but it is still a working democracy. The important thing is to give citizens a sense of control of their government and some sense that they have a say in the process and that there is an idea of law and justice.
    I think it is going to take years to rebuild that, given what has gone on in Nigeria. The answer is not simply let's open up trade tomorrow and that will solve the problem. This is a process of teaching people what the function of government is and teaching people to trust to some degree a process and its fairness. That takes a lot of time.
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    Mr. WILLIAMS. I would say that the key is to try to create a culture of lawfulness. That will be a long-term process. I would also emphasize that even countries where we do have effective government (like Britain and the United States) can still have a significant Nigerian crime problem. So even where there is a lot of intelligence capability, a lot of law enforcement effort devoted to the problem, it doesn't always seem to be a winning battle.
    Mr. ROYCE. Well, Mr. Williams, I thank you. Mr. Blum, thank you again. Mr. Hastings, thank you. That concludes our hearing.
    [Whereupon, at 2:40 p.m., the Subcommittee was adjourned, subject to the call of the Chair.]


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