B.C. and Organized Crime: A Top Cop's View

Editor's note: On October 8, as part of a wider briefing on organized crime and police efforts to deal with it, Dave Douglas, Chief Officer of the Organized Crime Agency of British Columbia, gave this overview to the Select Standing Committee on Crown Corporations. 

It's safe to say that organized crime is the world's fastest-growing industry -- low investment, huge profits, little deterrent and an unquenchable thirst out there in the general public for contraband. It's a force that affects everyone.

When you look around, you see it every day -- increased health care costs due to drug use, increased home and car insurance rates based on break and enters and a tremendous number of thefts of autos. In fact, on the auto theft side alone it's a $600 million industry -- a cost to insurers in this country. Increased credit card rates. Right now the banks are estimating that 1/12 of their revenue goes to counterfeit credit cards. That's why your interest rates are so high on credit cards. Just with grow ops alone, $1 billion is stolen from various hydro companies across this country. Of course, we have the resulting public safety issues.

Its citizenship is global. We'll see from some of our investigations that go international, on day 2, that transnational organized crime is a global problem. Its currency is cash. The International Monetary Fund estimates global money laundering to be somewhere between $1 trillion and $3 trillion a year. Its motive is profit and power. Money equals power, and that's the power to buy violence, to intimidate, to corrupt. I think we've all heard of "Mom" Boucher, who headed up the Hell's Angels in Quebec. His net worth assessment is over $250 million. Its by-product is human misery. We see that every day on our streets in the downtown east side -- health issues, violence, victims of fraud.

NAFTA 'an advantage to organized crime'

It's safe to say that in the past five to ten years, the face of organized crime has changed a great deal, and it has created unprecedented challenges for law enforcement not only in this country but around the world. Globalization -- we'll touch on this in a minute -- the fusion of criminal groups, multicommodity criminal activity, the use of technology, the geography of organized crime and the convergence of organized crime and terrorism….

When we look at changes in world politics and business technology, who would think that things like the European Union and NAFTA would be an advantage to organized crime? It's huge advantages to organized crime. The European Union has basically created a borderless Europe, customs-free. People and goods travel quite readily right across Europe. That creates all kinds of issues, and it makes that environment vulnerable for organized crime to extort.

When we look at even our own situation, with the North America Free Trade Agreement, it is now possible to ship goods in bond from Mexico to Toronto without ever going through U.S. customs or Canada customs. Think of the opportunities that creates for organized time if they set up -- and they have -- their own bonded customs importing businesses.

When we look at the map of the world, we see borders and boundaries and international jurisdictions. When organized crime looks at that same map, they don't see any of those things; they just see a seamless opportunity for criminal activity.When we look at how fast advanced communications encryption has gone over the last five to ten years….

Think of something as simple as the cell phone you carried ten years ago compared to the cell phone you carry today and all of the different things that are built into that particular cell phone. Look at encryption. Look at the Internet. Certainly, organized crime has extorted those kinds of areas to their own advantage.

The rapid movement of goods and people and money. It wasn't long ago that you didn't have on-line banking or ATMs. Again, organized crime has been very quick to jump on those opportunities.

Diffusion of criminal groups is a very interesting thing, and this is the thing that has happened in the last five to ten years. These groups are now very cellular in structure. They're organized like terrorist cells. They're hard to infiltrate. When one portion of that cell is infiltrated, it doesn't necessarily mean that you're going to be able to apprehend or interdict the other part of the cell, because there's separation in there, and they have very, very strong top-down leadership.

They're run like corporations, because they see the benefits of cooperation. They share their expertise. They share their contacts. They've created these non-traditional alliances. We've heard about the turf wars of the past. We are now faced with attacking organized crime groups that are made up of Vietnamese, Russian, Indo-Canadian, Chinese, Eastern European, all kinds of different languages and all kinds of different dialects inside those languages. Our main business is wiretap investigation, so we have to find the people who can do the translation services for us. So just that one little area there creates huge problems for us.

Entrepreneurial multicommodity criminal activity. These organized crime groups will become involved in a myriad of criminal activity. I'll give you an example of one of our projects called Coconut, and you'll hear about it a little later on. Within two weeks of starting the investigation, which went international on day 2 with various U.S.-based law enforcement agencies, we went from the exportation of B.C. bud to the importation of cocaine, huge money laundering, weapons trafficking, human trafficking and conspiracy to commit murder in New York State in two weeks. It crosses over all kinds of law enforcement stovepipes such as customs, immigration, state police, the FBI, the Secret Service. The coordination of that kind of investigation is difficult. They have created this kind of situation because they know we have difficulty dealing interjurisdictionally, both on relationships and the law.

They're pooling their resources and their expertise, especially in the area of counterfeit credit card fraud, identity theft and the flexibility to meet emerging trends. They're extremely flexible. You've heard about the drug Ecstasy, a rave drug. It's produced primarily in the Netherlands. The Netherlands has a liberal attitude toward drugs. From a Europol intelligence report, there are 120 different organized crime groups in the Netherlands -- and that's not a very big country -- all vying to export 15 metric tonnes of pure Ecstasy into North America within the next year. They are very flexible to the emerging trends.

The use of technology. News item: "Hackers Crack A&B Site -- Credit Card Details Revealed." The technology that fuels the legitimate economy also fuels criminal enterprise. We have crimes such as Internet crimes, on-line gambling, pornography encryption, software piracy, money laundering and denial-of-service attacks. We're coming into the world of on-line extortion and cyberterrorism. You just saw what happened when the power failed down in Ontario. Imagine if that was a cyberattack on a public infrastructure like a power grid, and they controlled that environment. They could bring it up, drop it down, bring it up, drop it down. Imagine what the implications of that are.

With respect to one particular case here, on-line gambling, where we had an investigation that went on for two years targeted at an organization in Vancouver called StarNet Communications, who had Hell's Angels on their board of directors…. When we took that company down, it had revenue in the amount of $48 million. Its stock was trading over-the-counter on the NASDAQ; its stock was worth $1 billion. On the day of the arrest its stock lost $250 million -- the largest one-day loss in the history of the NASDAQ -- and that was a Canadian organized crime company. That was on-line gambling.

As I said before, organized crime has been very quick to jump on these opportunities. Software piracy. We just completed an investigation . . .  working with Microsoft on what was the largest seizure of pirated software in Canadian history, worth $4.5 million. There is a lot of that going on out there.

'Geography of organized crime'

Then we have the geography of organized crime -- seaports, airports, extended border and coastline. Just looking at the map, you can see what kinds of opportunities that creates for organized crime.

We have the convergence of organized crime and terrorism. That is a very interesting thing that's happened over the last ten years since the fall of the Soviet Union. The Soviet Union used to provide state sponsorship for countries such as Cuba, a very perfect example. That state sponsorship is gone, and organizations such as the terrorist organization in Colombia called FARC, which now controls 40 percent of Colombia, now has converged with Russian organized crime in the international drug trade and trades cocaine for weapons to support their own infrastructure. So we do have the convergence of the international drug trade, organized crime and terrorism.

Of course, we all know about Afghanistan, where 75 percent of the world's supply of opium is produced. It's interesting because recently there was a report out by the UN that reported the opium output had rocketed from 185 tonnes in 2001 -- that is, before the war. Before the war, it was 185 tonnes. In 2002 after the war, it's going to be 3,400 tonnes -- an 1,800 percent increase in the production of opium -- because the Taliban is no longer there to control it.

Organized crime has been very quick to jump on that opportunity. Given that emerging trend, you can see that there will be an 1,800 percent worldwide increase in the availability of heroin, just based on that one statistic alone.

'Marijuana equals B.C.'s fruit industry'

Here in British Columbia [a newspaper reports] "Value of cross-border smuggling equals B.C.'s entire fruit industry." Imagine that: the marijuana industry now equals the B.C. fruit industry -- the cross-border export of it. Here again we have a situation where 75 percent of organized crime is drug related. Now we have poly-drug traffickers. As I said before, we had these groups fused together. They're sharing their expertise, their contacts. No longer is a person a cocaine trafficker. He's a cocaine trafficker, a heroin trafficker, a marijuana trafficker, an Ecstasy trafficker, an LSD trafficker, a methamphetamine trafficker. They've all fused together. They're sharing their contacts.

Of course, money laundering equals an increased power base for organized crime, and with that comes the resulting huge public safety issues. Here's part of it: violence, Hell's Angels, home invasions, violent assaults, murder and public safety issues. We see this every day in the paper, but what you don't see behind the paper is the extreme violence by these organized crime groups. We've just had a situation on an extortion where they stabbed this person multiple, multiple times. They could have killed him if they wanted to; they didn't want to. They stabbed him multiple times in the body and the head during an extortion. It was a Hell's Angels situation.

'Intimidation of the courts, police, media, judicial system'

We have extreme violence, violent assaults, murders and huge public safety issues around all of that. Shootings on the streets. Shootings in clubs. We have the intimidation of the courts, the police, the media and the judicial system.

I'll give you a Vancouver example. In the last conviction of the Hell's Angels, Ernie Froess, who's a member of the Department of Justice, was intimidated by an associate of the Hell's Angels in a food court while a trial was going on. Police witnesses. We've had examples in Winnipeg of fire bombings of policepersons' houses. The media. We've had shootings of a reporter in Montreal. We certainly have a lot of intimidation going on there and a lot of violence by these organized crime groups.

Theft and fraud. Well, there are 175,000 cars stolen in Canada each year. Thirty percent of them are never recovered. So where do they go? Well, they end up in eastern Europe, in Russia -- the former Soviet Union -- or in southeast Asia. Fifteen thousand of them are exported every year. We've had cases that have involved major exportation of stolen cars out of this country into Vietnam and China.

Corruption. [News item:] "'Retired deputy chief laundered money,' LAPD says." Well, this is a case where a deputy chief's son was trafficking in large amounts of cocaine, and he decided to…. He had all the expertise in investigating money laundering, and he decided to get on board with his son. He ended up being caught.Corruption of police and government staff. When I put "government staff," I'm talking of people that are in positions of supplying information -- something as simple as targeting somebody who works in the motor vehicle branch who can supply up-to-date information on addresses and vehicles, that sort of thing. That's the sort of people they go after -- information base-type people.

Use of celebrity status by businesses and boards of directors. There are lots of examples of this. David Peterson, who is the past Premier of Ontario, was on the board of directors of YBM Magnex, a Russian organized-crime stock market play that ended up being investigated in the United States. It started in Calgary -- $750 million in fraud.

'Money laundering is the fuel'

Then, of course, money laundering again. Money laundering is the fuel that actually funds all kinds of other criminal activities. I've talked about the multicommodity criminal activity by these people. It funds all those kinds of activities.

Mortgage fraud and on-line banking are some of the other areas of money laundering. Really, what this does is create unfair business practices. When you drill down on certain websites of, say, the Hell's Angels, you'll find many, many businesses attached to those websites. How did those businesses get created? Who supplied the money for them? It comes out of money laundering.

Human trafficking. Smuggling versus trafficking: Smuggling is the actual bringing in of the migrant, and trafficking is the exploitation of the person through use of force, coercion, sexual exploitation. Who would think that in Canada, that trade is worth somewhere between $120 million and $400 million?

This is a very big problem for us in an emerging trend -- what we call "pump and dump" stings, stock market manipulation. For us as an organization and for policing agencies around the world, it is very difficult to detect. There are huge jurisdictional issues, because ... it's not done in Canada. It's done in the United States. The over-the-counter NASDAQ is a very popular place for it.

We have jurisdictional issues of having to get multi-legal assistance treaties to do the work in the United States. We need the expertise to investigate them, and with the demographics of policing and retirements, that expertise is quickly leaving. And they're long, lengthy, complex and expensive investigations.

'Identity theft'

This is another big emerging trend when we look at identity theft. As late as a few days ago: "Thieves nab private data of 120,000 Canadians." Four computers taken from a tax department had names, addresses and SIN numbers on them.

Identity theft is becoming a huge problem, and it accounts for 40 percent of all consumer fraud right now -- in the United States alone, 750,00 victims, $2 billion in losses. It certainly links to organized crime and terrorism. And the proceeds of this crime also go to fund other activity. The problem here is the victim. Imagine if you were a victim of identity theft. It takes you 175 hours of your own time to clear your name and approximately $800, on average, to do it.

Recently the hard drive of the Co-operators Insurance was stolen for 24 hours from Regina. They had the information of many, many Canadians who deal with Co-operators Insurance. I'm included in that. Inside that computer is your application form, your voided cheques, your SIN numbers, your everything. They have everything. With the use of technology and computer graphics, they can create a new identity overnight. It's a huge problem.

'We have to mirror organized crime'

How do we adapt? …We really have to mirror organized crime. We have to do what they're doing. We've got to become global. We have to fuse together into partnerships. We have to create that kind of multidisciplinary team to attack organized crime, and we have to use technology to our advantage.

We have to be proactive versus reactive. This really leads into being an intelligence-led organization, where we're really using strategic and tactical intelligence to target our real threats versus our perceived ones, because it's a lot better for us to do that. We need to look at a campaign strategy versus a string-'em-up strategy. We've all seen in the paper: "Drug Sweep Nets 50." What does that really prove? Out of those 50, who are the real players in there? Nobody really says.

We need to get away from the string-'em-up strategy and move toward the campaign strategy, use intelligence-led policing, articulate our goals and objectives within our operational plans, have a coordinated prosecution and a coordinated investigation plan that clearly focuses on what our targets are. We need to do it in an integrated fashion. We need to use all the tools in the toolbox -- whether that's taxation, immigration or other law enforcement agencies -- and we need to be innovative.

The innovation, I think, is creating what really is the Organized Crime Agency, a stand-alone organization that's totally integrated and that enables policing in this province to focus its enforcement efforts on key people responsible for major organized crime in this province, which affects all of us around the table.