James S. Milford
Acting Deputy Administrator
Drug Enforcement Administration
Subcommittee on East Asian and Pacific Affairs, Washington, DC
April 10, 1997
Note: This document may not reflect changes made in actual delivery.
HONG KONG DRUG CONTROL EFFORTS
SOUTHEAST ASIAN HEROIN: A HISTORICAL PERSPECTIVE
FUTURE COOPERATIVE EFFORTS IN THE REGION
Chairman Thomas and Members of the Subcommittee: It is a pleasure to appear before the Subcommittee today. I am the Acting Deputy Administrator for the Drug Enforcement Administration (DEA) and this morning I would like to discuss DEA operations in Hong Kong, and the expected impact that Hong Kong’s reversion to Chinese rule could have on our operations.
DEA and its predecessor agencies have been represented in Hong Kong since our Country office opened in the late 1960's. We currently have a Country Attache, five Special Agents, and an Intelligence Analyst, assigned to the Country Office. We also have a DEA presence in Thailand, Burma, Singapore, Malaysia, Korea, Japan, the Philippines, and Australia. Since its inception, DEA’s relationship with the Hong Kong law enforcement authorities has been excellent. Hong Kong devotes considerable resources to support DEA investigations targeting high-level Southeast Asian heroin traffickers. Since 1991, Hong Kong has returned 64 fugitives to the United States with the vast majority of those being charged with drug-related offenses. In addition to our office in Hong Kong, DEA and the FBI have requested authorization to open offices at the United States Embassy, Beijing, China. We have support from the U.S. Department of State and our Ambassador to the PRC, but authorization has yet to be granted.
Hong Kong has been identified as being the site of a major part in the international heroin trade, not only as a transshipment point but also as a base, along with Thailand and Taiwan, for the command and control functions of international smuggling operations. It is also one of the world’s leading financial centers which offers ample opportunity for the laundering of drug-related proceeds by international traffickers.
The Hong Kong Government’s passage of the Drug Trafficking Ordinance in 1991 has enabled authorities to trace and freeze the assets of persons suspected of drug trafficking activity, and confiscate these assets if the person charged isconvicted of a drug-related crime. Since the laws enactment, millions of dollars in drug-related proceeds have been frozen or confiscated in Hong Kong. After the passage of this law, Hong Kong entered into an asset sharing agreement with the United States which essentially divides the proceeds of forfeited assets on a 50/50 basis. This Ordinance also allows us to obtain, through local authorities, bank account information on targets under investigation by domestic DEA offices.
HONG KONG DRUG CONTROL EFFORTS
Hong Kong’s counter-narcotics program is organized around a five-pronged strategy that blends law enforcement activities, preventive education with publicity programs, treatment and rehabilitative programs, research efforts and international cooperation. During 1996, Hong Kong moved forward with a number of new legislative initiatives designed to strengthen its counter-narcotics regime. These included, in January, 1996, an amendment to the 1994 Acetylating Substances (Control) Ordinance which extended licensing restrictions to an additional 21 precursor chemicals.
Additionally, in May, the maximum fine stipulated in the Dangerous Drugs Regulations for contravention of record-keeping requirements for authorized handlers of these narcotics was increased from about $6,500 to over $58,000. The regulations governing the acquisition and supply of these dangerous drugs were further tightened in August. In November, Part IV-A of the Drug Trafficking Recovery of Proceeds Ordinance came into operation, empowering the Royal Hong Kong Police and Customs and Excise Service to detain property which is being imported and exported and has been shown to be the proceeds of drug trafficking. In March of this year, Hong Kong authorities enacted the Surrender of Fugitive Offenders Bill, which will serve as the implementing regulations for a number of bilateral extradition agreements that Hong Kong is negotiating to serve beyond the July 1, 1997, reversion to Chinese sovereignty.
At the present time, there is little to no cultivation, refining or manufacturing of illicit drugs taking place in Hong Kong. Traffickers do, however, operate heroin "cutting" centers, where they dilute high grade heroin for consumption. A record number of heroin "cutting" centers (36) were seized in Hong Kong in 1994 which is indicative of a growing heroin abuse problem.
In order to provide an accurate description of the role that Hong Kong plays in our Southeast Asian operations, it is imperative to give you an overall view of the heroin trafficking situation in the region.
SOUTHEAST ASIAN HEROIN: A HISTORICAL PERSPECTIVE
Southeast Asian Heroin is produced mainly in the tri-border region of Burma, Laos, and Thailand known as the "Golden Triangle". During the early 1980's, most drug traffic through China and Hong Kong consisted of Thai couriers flying from Bangkok or from the Yunnan Province to Guangzhou, and then traveling by rail to Hong Kong. Eventually, land routes were established across China by which traffickers moved multi-kilogram quantities of heroin. While traffic through China was once confined to the three provinces lying between the "Golden Triangle" and Hong Kong, Chinese authorities now
advise that at least four additional provinces are involved in trafficking activity.
Burma is still the world’s largest source of illicit opium and heroin as poppy cultivation and production has increased to near record levels. The 1996 crop estimates indicate there were 163,000 hectares under opium cultivation which could yield up to 250 metric tons of opium. A significant percentage of the opium produced in Southeast Asia is consumed in source, production, and transshipment countries as opium or smokeable heroin, so it is difficult to estimate the total amount that reaches the United States.
In 1994, DEA Bangkok and the Royal Thai Police initiated Operation Tiger Trap, which was an operation designed to disrupt the heroin trafficking capability of the Shan United Army (SUA). The objectives of the operation were to disrupt and immobilize the SUA infrastructure in Thailand and to arrest and extradite members of the organization under indictment in the U.S. Tiger Trap primarily targeted the heroin traffickers on the production and wholesale levels. To date, fifteen targets of Operation Tiger Trap have been arrested.
As a result of Tiger Trap and other influences, in 1995, the SUA, formerly the principal producer of Southeast Asian heroin, experienced a number of setbacks. Its northern bases were attacked by the Burma Army and United Wa StateArmy (UWSA). Thailand restricted the flow of supplies to the SUA by maintaining a closed border policy with Burma's Shan State that began in 1994. Months of secret negotiations between the Government of Burma and the SUA, resulted in Burma Army troops peacefully occupying the Ho Mong headquarters of the SUA on January 1, 1996.
The infamous heroin warlord, Chang Chi-fu, a.k.a. Khun Sa, surrendered to Burmese authorities. The subsequent arrests of key members of his trafficking organization denied Chang the ability to market his heroin and collect monies owed from prior transactions. Many of the other SUA troops also surrendered. Nevertheless, heroin production has continued, albeit at reduced levels, in the Shan-controlled areas. Law enforcement action further weakened the Shan marketing infrastructure in Thailand.
Concurrently, the heroin production in Burma shifted to areas controlled by the Wa and the Kokang ethnic groups along the China border, into Laos and Thailand, to avoid Burma Army suppression. These setbacks have allowed the ethnic Chinese to assume a dominant role in the control of the heroin leaving the "Golden Triangle".
Most of the heroin which transits China is produced in refineries in northern Burma and brought across the Sino-Burmese border into the Yunnan Province by brokers for the UWSA and the Burma National Democratic Alliance Army. Currently, heroin production in this border area of Burma-China is controlled by UWSA, the Kokang Chinese, or smaller insurgent forces.
From Burma, the ethnic Chinese direct the transportation of heroin into the Yunnan Province. Shipments are transported by trawlers, truck, railway or airline to ports in China’s Southeastern Provinces of Guangdong and Fujian, where it is warehoused, concealed in container cargo and transshipped to Hong Kong or Taiwan for movement to the major international markets.
This increase in the use of China as a transshipment center can be attributed to an increase in ethnic Chinese influence in the heroin trafficking trade; China's trade and commerce with neighbors in Southeast Asia; a loosening of travel restrictions in China; and the development, in the last 15 years, of a more consumer-oriented society.
Our investigations indicate that the major Southeast Asian trafficking groups have relocated segments of their operations in the Yunnan Province to other provinces in order to facilitate the shipment of heroin across the PRC and then onward to international markets via numerous shipping ports along the China coast, including Hong Kong and Taiwan. A variety of smuggling methods are employed to move heroin from Burma into the PRC and Hong Kong. The largest shipments, ranging from 50 to multi-hundred kilograms, are concealed in containerized cargo aboard commercial maritime vessels and air freight cargo. Smaller shipments will be concealed in a passenger's checked luggage or strapped to the body.
Another common method of smuggling heroin into the Hong Kong area is by Thai fishing trawlers. In recent years, Thai fishing trawlers have transported heroin to rendezvous locations in international waters adjacent to Hong Kong where the drugs are transferred to local fishing junks or smuggling boats and taken to destinations in Southern China. Due to the large volume of sea traffic that enters Hong Kong harbor on a daily basis, an excellent opportunity exists for low-risk smuggling activity since only a small percentage of the total cargo is searched. Once in Hong Kong, heroin can easily be concealed within legitimate maritime cargo and shipped to North America.
High level Chinese heroin traffickers, located in Burma, Thailand, the PRC and Hong Kong, facilitate transportation of heroin shipments to ethnic Chinese criminal organizations in the United States for distribution in major cities along the East Coast.
On April 25, 1996, the Chinese authorities in Guangzhou Province seized 600 kilograms of heroin and arrested approximately 40 individuals. Several of those arrested were Hong Kong residents. This stockpile of heroin was controlled by a major heroin smuggling group based in Hong Kong and was to be transported to Guangzhou and on to Hong Kong in approximately 50 unit increments. (The unit measurement is equivalent to 700 grams and is commonly used in this part of the world). Our information indicates that 1100 kilograms of heroin was smuggled into the United States by the same organization prior to the April 25th seizure, and this organization was responsible for approximately an additional 100 shipments, involving unknown quantities of heroin, during the previous two years. A majority of these shipments of heroin were also destined for distribution in cities along the Eastern Seaboard of the United States, predominantly New York City.
The PRC is also a major source for essential precursor chemicals utilized in the production of methamphetamine, heroin, and cocaine by trafficking organizations based in Asia, as well as South and Central America. Acetic Anhydride, a necessary chemical in the production of heroin, is produced in the PRC and reportedly shipped in bulk quantities to heroin refineries throughout Burma's Kokang and Wa regions. Other precursor chemicals are transshipped through Taiwan and Hong Kong and via the PRC for use in the "Golden Triangle".
The PRC recognizes the significant increase in the involvement of criminal groups in their country in the heroin trade, the use of their country as a transhipment point and the collateral rise in drug abuse and public corruption. Chinese officials reportedly are pressuring insurgent-trafficking groups in northern Burma to curtail heroin production. Materials and technical assistance for crop substitution programs in the area, along with access to markets in the Yunnan Province are being provided by government channels.
During 1996, the PRC initiated through their national law enforcement arm, the Public Security Bureau a number of well publicized anti-drug and anti-crime campaigns that have resulted in thousands of arrests and impressive drug and chemical seizures.
FUTURE COOPERATIVE EFFORTS IN THE REGION
In China, Hong Kong, and Taiwan, authorities are all dedicating an increasing amount of resources to drug interdiction, as well as to drug abuse treatment. Our continued efforts towards more effective coordination among these three regions is essential in disrupting the amount of heroin that trafficking groups transport through and out of the region. Intelligence indicates that trafficking and abuse trends are on the rise and the amount of opium being cultivated and heroin being transported out of the region is unlikely to diminish without continued pressure.
Economic development in the region has resulted in an expanded flow of trade and capital, which has made the inspection of cargo and the detection of illicit drug proceeds increasingly more difficult. While drug seizure statistics indicate that China and Taiwan authorities have been successful in improving drug interdiction capabilities, they also confirm that China and Taiwan are major transhipment points, particularly for heroin. A close working relationship has not yet developed among China’s Ministry of Public Security, U.S., and other foreign drug law enforcement officials in the region. Nevertheless, DEA will continue our efforts toward coordination and productivity the region.
We feel a DEA presence in Beijing would help promote cooperation throughout the region. Our efforts to establish a demonstrable cooperative effort with the law enforcement entities in the PRC, Hong Kong and Taiwan that exhibits timely and effective sharing of information, assistance in investigative leads, and better coordination of investigations, will ensure further drug law enforcement success. As I have stated, our relationship with the Royal Hong Kong Police (RHKP) has been and continues to be excellent and productive, and further expansion in the region is expected to further our cooperative efforts.
As July 1997 approaches, we plan to continue with our current excellent relationship that we have established with our counterparts in Hong Kong. We are working joint investigations with other law enforcement agencies in the region and we do not anticipate any interruption in our cooperative efforts. A closer relationship between Hong Kong and the Chinese law enforcement authorities will further enhance our ability to conduct effective investigations in the region.
Currently, there is joint law enforcement training being conducted with the Chinese in sophisticated law enforcement techniques which will assist them in becoming better equipped to build cases on the groups controlling the heroin trade in Southeast Asia. From DEA’s standpoint, we will continue to concentrate our investigative efforts in the region as the PRC continues to be a major transshipment point for heroin, particularly as the overland trafficking routes and Triad activity increases with the opening of the economy. Lastly, we need to continue to work with the Chinese to ensure that our relationship and investigative sharing continues to improve.
I will be happy to answer any questions that you have on DEA’s operations in Hong Kong.