REPORT on drugs trafficking, drugs-related crime and money laundering

17 February 1995

Doc. 7253

REPORT on drugs trafficking, drugs-related crime and money laundering

(Rapporteur: Mr RATHBONE, United Kingdom, European Democratic Group)

Summary

There is a continuing and disturbing increase in the level of international drugs trafficking throughout Council of Europe member countries. The proceeds from illicit drug trafficking continue to rise and are being laundered with increasing sophistication. The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime was opened for signature on 1 January 1993. Yet despite these measures, domestic legislation upon the part of member states and other international legislation, the problem continues to grow.

More extensive and intensive measures to reduce both the supply and demand for illicit narcotics are required urgently if the menace from illicit drugs is to be met and overcome.

Demand reduction must be achieved, particularly with greater emphasis on health education. But the supply of drugs may be reduced by closer co-operation between member states' police and customs forces, tougher penalties against drugs traffickers, harmonisation of European penal law on drugs trafficking, measures to confiscate the ill-gotten proceeds from trafficking, action to prevent money laundering and better intelligence-gathering and sharing to support all these efforts.

I. Draft recommendation

1. The Assembly cannot emphasise too strongly its continuing deep concern that drugs misuse continues to permeate every level of society in Europe, regardless of age, social group or race. Its detrimental health effects render the drug abuser physically and mentally devastated. Production, trafficking and dealing in illicit drugs increase crime. The fabric of society can be placed at risk.

2. In its Recommendation 1085 (1988) endorsed by the Committee of Ministers, the Assembly advocated a "four-pronged" approach:

i. to develop better ways to reduce drug production;

ii. to improve international co-operation to tackle trafficking and allow the seizure of traffickers' assets;

iii. to undertake urgently more and better action to reduce demand;

iv. to increase the number and quality of treatment facilities and to research new treatments and techniques.

3. Subsequently the Assembly welcomed the resolution on health education in schools of the Council of Ministers of Education of the European Communities (23 November 1988), the conclusions of the first World Ministerial Summit to Reduce Demand for Drugs (9-11 April 1990) and made its own Recommendation 1169 (25 September 1991), also endorsed by the Committee of Ministers, for better health and drug education from an early age as the best form of prevention and demand reduction.

4. But drugs-related crime continued to rise and in November 1990, the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime was opened for signature. It aimed to harmonise national legislation and to facilitate international co-operation in search, seizure and confiscation of the proceeds of drugs related and other serious crime.

5. The Assembly welcomes ratification of the convention by seven member countries and signatures by twenty-two member countries — and urges all others to sign and ratify as quickly as possible.

6. Without more extensive and effective prevention and demand reduction activities everywhere, the problems of drug misuse will never be successfully overcome.

7. The Council of Europe's 1st Pan-European Ministerial Conference on Co-operation on Illicit Drug Abuse Problems met in Oslo in May 1991. The Assembly endorses its expression of deep concern at the "magnitude of the drug problem world wide and by the continuing seriousness of drug abuse and illicit drug trafficking in Europe." It noted the marked increase in drug trafficking into and within Europe and the increase of other related criminal activities. It sought to:

i. increase co-operation between national police, customs and law enforcement agencies;

ii. improve intelligence sharing between member states;

iii. extend the network, set up by the Pompidou Group, of national contact points for persons responsible for controls on drug trafficking in European airports;

iv. maintain existing efforts to reduce demand for drugs and to develop further effective treatment, rehabilitation and reintegration programmes for drug abusers, including those in prisons;

v. support efforts to improve epidemiological monitoring and other information on the drug situation.

These trends and recommendations were confirmed by the 2nd pan-European ministerial conference in February 1994.

8. In recent years much international and domestic legislation has been initiated and passed to counter the trade in illicit narcotics and to tackle drugs-related crime. Special mention should also be made of the 19th Conference of European Ministers of Justice in Valletta in June 1994, and of the resolution adopted at that time.

9. Accordingly the Assembly recommends that the Committee of Ministers:

i. co-operate in establishing in every member state an overall drugs control strategy and a ministerial co-ordination function for all government departments concerned with demand reduction efforts and measures against drugs trafficking and money laundering;

ii. encourage the setting up of national drugs intelligence agencies in all member states;

iii. make every effort to persuade all member states to support the proposed European Union Europol intelligence-gathering centre;

iv. seek for and adopt the most sophisticated police and customs intelligence-gathering processes, without which successful interdiction cannot succeed;

v. harmonise European extradition procedures, so that there is no European haven for drug criminals;

vi. ensure that each member state has sufficiently heavy sentences for convicted traffickers and money launderers, and that such sentences are applied in an even-handed way throughout Europe;

vii. consider a long-term plan for a common European penal code and court of justice;

viii. establish the right of national police forces to cross borders for surveillance purposes;

ix. improve still further international co-ordination between national police and customs forces;

x. establish a pan-European shared assets fund, similar to the one that operates in the United States, to encourage international co-operation and national efforts to tackle drugs-related crime and reduce demand;

xi. encourage and increase international exchange programmes between national police and customs authorities;

xii. seek out opportunities to harmonise police equipment, to improve further co-operation and trust between national forces;

xiii. encourage member states to develop and adopt ever more sophisticated profiling techniques to identify and catch drug traffickers;

xiv. encourage all member states to sign and ratify the Council of Europe Convention on the Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and to do so with the utmost haste;

xv. establish, in conjunction with Europol, a central money laundering unit to monitor new trends in money laundering techniques;

xvi. encourage bilateral and multilateral agreements between member states to provide the widest possible amount of mutual assistance;

xvii. encourage all member states to enact legislation to establish forfeiture of all assets gained from drugs trafficking and other illicit activities;

xviii. urge member states to improve supervision of non-bank financial institutions through which, it appears, increasing money laundering is undertaken;

xix. encourage member states to expand the use of controlled deliveries as frequently the easiest method of identifying distribution channels and the criminals involved;

xx. encourage users of SWIFT (Society for Worldwide Interbanking Financial Telecommunications) to identify all customers and beneficiaries of international electronic fund transfers, so as to discourage abuse of the system;

xxi. increase the training opportunities for law enforcement authorities and demand reduction activities in member and non-member countries in central and eastern Europe;

xxii. encourage all states to sign and ratify the Council of Europe Agreement on Illicit Traffic by Sea.

II. Explanatory memorandum

by Mr RATHBONE

1. This report on drugs trafficking, drugs-related crime and money laundering aims to:

i. highlight the current and growing dimension of the drugs problem in Europe;

ii. emphasise the importance of tackling drugs trafficking and associated money laundering;

iii. outline the perceived future threats to Europe from drugs trafficking;

iv. note the current international legislation that has already been taken by member states;

v. recommend further possible action for improving present methods;

vi. suggest further national and international action that can be taken to reduce both drugs trafficking and money laundering.

1. The existing situation

a. Drugs trafficking

2. Despite international efforts to stem drug trafficking, including a host of international agreements, all available evidence points to further increases in imports of illicit narcotics into Europe and increasing traffic within Europe. The amounts seized by law enforcement agencies are rising; but this reflects the greater quantities being imported rather than greatly improved means of interception upon the part of the law enforcement authorities. It has been estimated that as little as 10% of illicit narcotics are intercepted as they arrive in Europe. A report by the Italian Minister for Social Affairs in 1991 put the figure for Italy as low as 3,5%.

3. The amount of land taken up for the growing of coca leaf and opiates continues to grow. This is despite United Nations, European Community and American efforts to encourage crop substitution away from coca and poppies to other crops. According to the United Nations Division of Narcotics Drugs, Columbia doubled its hectarage growing coca in 1989 alone. Heroin, coca and cannabis are worth $2 thousand million per annum to the Columbian economy — nearly one-third of the country's GNP. The amount of land in Peru taken up by coca production has risen from 6 000 to 200 000 hectares in recent years.

4. A further worrying trend is reports of opium cultivation in Columbia. In 1991, for the first time, Columbian authorities were able to confirm reports of opium growing in the southern Andean region. The much higher profits that are available to the Columbian cartels from America heroin sales will ensure that this will be a rising and disturbing trend. It is estimated that 2 300 hectares are given over to growing the drug, though this may well prove to be a conservative figure.

5. In the Far East, land given over to opiate production continues to rise. Although the Pakistani authorities have recently toughened up on illicit drugs trafficking, the United States Government estimates that good weather, improved farming techniques and lack of central political control resulted in a 9% rise in opiate production in 1991. Burma (Myamar) shows no sign of heeding international calls to take action against the increase of land devoted to opiate growing.

6. The Single European Market that came into place on 1 January 1993 has given drug traffickers new opportunities. Drugs traffickers operate across all international boundaries. The abolition of border checks between European Union member states has made it easier for traffickers to move drugs around the Community.

7. European nations appear to be particularly under threat as a result of low prices and falling demand in the United States. Columbian cocaine cartels seem to be targeting Europe — attracted by the large and as yet undeveloped market for cocaine. A noteworthy increase in the number of Columbians settling in Poland appears to be evidence of this. The handover of Hong Kong to China in 1997 could result in an exodus of "Triad" criminal groups from the colony, where they are currently very active. They appear to be already well established in the Netherlands and amongst the Chinese community in the United Kingdom.

8. The break up of the former Soviet Union and the collapse of communism in eastern Europe have offered new opportunities for heroin traffickers from the Golden Crescent countries of south-west Asia. The lack of established and effective smuggling controls, new and as yet relatively untrained drug enforcement authorities and often the lack of drug control legislation means that drug trafficking through central and eastern Europe is already a major problem.

9. The potential for actual drug production in the former USSR is considerable. There are over 140 000 hectares of cannabis growing wild in Kazakstan (according to the UNDCP). The cultivation of the oil poppy variety has been a long tradition. Mafia style criminal syndicates appear to be already well developed in Russia, capable of exploiting the breakdown in law and order to produce and traffic drugs. In 1991, the Czech Interior Minister reported that he had evidence that the Mafia was trying to establish drug production in the former USSR. In eastern Europe, activities of international criminal organisations appear to be on the increase. Poland, the Czech Republic and other countries already have sufficient advanced chemicals industries, capable of supplying the precursor chemicals necessary for drug production.

10. Cannabis remains the main drug of abuse in Europe. Despite some large seizures, its availability remains widespread. Source areas include Jamaica, Asia, South America and Africa. An increasing amount is being home bred and home grown. And man-made drugs are on the increase everywhere.

11. Heroin trafficking originates in south-west Asia, the Near and Middle East and continues through Iran and Turkey to Bulgaria, Romania, Hungary, Slovakia and the Czech Republic. Interpol figures show that Greece appears to be now an important country in the traffickers route into Europe. Quantities of heroin seized in Greece in 1991 were 272 kg as opposed to 84 kg in 1990 and 35 kg in 1989. The United Nations has estimated that 75% of imported European heroin came through the Balkan corridor. However, with the collapse of the former Soviet Union, it is likely that drugs traffickers will use a route through the Central Asian republics into eastern Europe from Russia.

12. Cocaine trafficking similarly appears to be on the increase. In the United Kingdom current seizures are now twenty-five times those of the early 1980s. This partially reflects increased targeting of cocaine traffickers by law enforcers, but also underlies the ever-larger quantities of cocaine being imported into Europe. It is now one of the main drugs of abuse. Of even greater concern is the emergence of crack cocaine. Its extremely harmful health effects for the user make its spread particularly worrying. Figures from Interpol show that recent seizures of cocaine in Europe were fourteen metric tonnes compared to only four metric tonnes fifteen years ago. Most cocaine is imported from Colombia and Venezuela. The main gateway for cocaine imports is Southern Europe. Spain, in particular, has been targeted by the Colombian cartels. Forty-four per cent all European cocaine seizures are made in Spain.

13. Amphetamines, including MDMA (ecstasy), remain the main drug of abuse in northern European countries, but there is growing misuse elsewhere. Amphetamines have developed a market among the young. Their popularity is likely to remain as a result of their incorporation into youth culture. The Netherlands and Poland seem to be the main suppliers to the region.

14. Polyabuse of drugs, and of drugs and alcohol, is increasing.

15. The number of drug related deaths continue to rise in Europe. As illustration, in Germany, drug related deaths rose by 35% to 2 125 in 1991. This trend will increase more rapidly if crack cocaine is allowed to proliferate.

b. Drugs-relatedlog crime

16. Although it is hard to find concrete evidence to prove it, most experts would agree that there is a link between drugs and crime. This includes crime by drug traffickers to maintain market share at street level and violent offences and crimes, such as burglary, committed by drug addicts to finance the habit.

17. Few criminal gangs involved in drug trafficking confine their illicit activities solely to drugs. Only too often drug dealing goes hand in hand with prostitution, pornography, counterfeiting and other serious crimes.

18. The United States has witnessed rapid and alarming increases in violent crime as a result of drugs. In San Diego, population 1,2 million, stolen property per annum is valued at $16 million, most of which is drug related. One-hundred-and-seventy-two deaths per annum are drug related and sixteen-year-old children have been killed in drive-by drugs-related shootings. Although most European cities do not have such a large racially disadvantaged underclass that is susceptible to drug trafficking, the potential for drugs-related crime to inflict social cleavage is already apparent. In evidence, in November 1990, to the Council of Europe Standing Conference of Local and Regional Authorities of Europe, the deputy police commissioner of Belgium noted that: " In police circles drugs and crime are closely correlated, which is illustrated by the fact that in Belgium ... some 70% of offences are related to the use of drugs." Judicial sources in Paris show that some 60% of moderately serious and petty offences are linked to drug addiction.

c. Money laundering

19. Money Laundering is the process by which criminals attempt to conceal the true origin of the proceeds of their illicit activities from crime. The money usually starts off as cash to be deposited in a financial institution. After several movements to different accounts, often offshore and in other parts of the world, the illicit funds emerge as reputable funds to be invested at will in legitimate as well as illegitimate financial investments or commercial activities.

20. The growth of money laundering has only recently been recognised by governments around the world. The United Kingdom Home Office estimates that national drug trafficking turnover per annum is $1,8 thousand million, the majority of which will be laundered. The Italian Government estimates that its national annual drug trafficking turnover is 45 000 thousand million lire or US $37 thousand million. The Financial Action Task Force of the G7 industrialised nations estimated in 1989-90 that sales of drugs in the western world amounted to US $122 thousand million, with most of that amount being laundered in one way or another.

21. Money is being laundered in more and more financial centres. The United States Government has noted the growing use of Singapore and Hong Kong in the Far East. Colombia, Brazil, Argentina, Ecuador, Paraguay, Uruguay and Venezuela in South America. Eastern Europe remains vulnerable to exploitation of its financial system by money launderers and despite national laws, regulations and international agreements, European cities continue to be used for laundering purposes.

22. The situation for law enforcement authorities has been made more difficult as technology has improved and barriers to the free movement of capital reduced. United States authorities also note the emergence of professional money laundering specialists who sell their services and knowledge of money movements to criminals.

23. Non-bank financial institutions are being increasingly targeted by money launderers. These include industrial companies, insurers, mortgage lenders, gold and precious metal dealers, currency exchanges and express delivery services. As measures to prevent money laundering through banks are implemented, it appears likely that these other laundering channels will be used more and more.

2. Existing international legislation

a. Council of Europe Convention on the Laundering, Search, Seizure and Confiscation of the Proceeds from Crime

24. The convention became open for signature in November 1990. It was designed to facilitate international co-operation concerning search, seizure and confiscation of the proceeds from all types of criminal activity. This, in particular, covers drug offences. It aimed to complement the existing Vienna Convention on money laundering. Seizure and confiscation orders issued by one member state requested of another are covered by the convention. A requested state is required to enforce such orders or issue a new order to the same effect. A number of well-defined reservations are allowed. The system can be weakened by defects in national legislation that hinder international co-operation on money laundering cases (see Appendix I).

b. Basle Declaration

25. This was the first concerted international action against money laundering. It was based on the Basle Declaration of Principles, signed in December 1988, by the G7 countries as well as Belgium, Switzerland, Luxembourg, Sweden and the Netherlands. It committed central banks to take measures to identify customers and the source of their funds, to co-operate with criminal investigations and refuse all transactions of dubious legality (see Appendix II).

c. Vienna Convention

26. The United Nations Vienna Convention was opened for signature in December 1988 and came into force in November 1990. It was drawn up under the auspices of the United Nations Drug Control Programme — the United Nations body responsible for the global fight against illicit drugs. It established new standards in the fight against illicit money laundering. It compelled all ratifying nations to introduce money laundering as a criminal activity. Article five compels all ratifying nations to remove bank secrecy laws so they no longer act as a barrier to criminal investigations and to provide mechanisms for the identification, seizure and confiscation of the proceeds from illicit drug trafficking (see Appendix III).

d. EC Money Laundering Directive

27. In June 1991, the Council of Economic and Financial Ministers of the European Community adopted a directive to prevent the use of the financial system for money laundering. The directive came into force on 1 January 1993. The provisions within the directive include: compulsory identification upon the part of the credit and financial institutions of their customers when they enter into business relations, making member states ensure that national credit and financial institutions co-operate fully with law enforcement authorities to combat money laundering, a prohibition against disclosure to a customer or third party when a money laundering investigation is being carried out.

3. Existing international organisations

a. Financial Action Task Force (FATF)

28. The FATF was set up after the 1989 G7 Houston Summit. It was given a mandate to study measures that could be taken to combat money laundering. FATF members include all the members of the European Community, Japan, the United States, Canada, Sweden, Norway, Finland, Iceland, Austria, Switzerland, Turkey, Australia, New Zealand, Hong Kong, Singapore, the Commission of the European Communities and the Gulf Co-operation Council. FATF brings together legal and financial experts to assess problems, determine policy and find solutions. It stemmed from a realisation that the fight against money laundering had to be fought on a global basis and not simply by national governments acting alone.

29. This is arguably the most important international anti-money-laundering initiative currently in action.

30. In practical terms, the FATF is committed to undertaking an analysis of member countries' financial legislation to determine their strength in combating money laundering and implementation of FATF proposals against money laundering. Members subsequently approved forty action recommendations concentrating on strengthening national legal systems and improving co-operation between member states. The commitment by member governments to be subjected to detailed analysis, emphasises to the world financial community the commitment of the global financial centres to halt the laundering of the proceeds from criminal activity. The FATF also undertook to monitor new trends in money laundering and in conjunction with the United Nations Drug Control Programme, draw up new measures to counter new threats from the drug traffickers.

b. Interpol

31. Interpol is the world wide police organisation. It was founded in 1923. It aims to facilitate international police co-operation in the fight against international crime. However, many national police forces have been reluctant to share information with Interpol, as a result of a perception, whether true or not, that security concerning classified information is lax. But this barrier to full co-operation is being overcome.

32. A special FOPAC (Fonds Provenant d'Activités Criminelles) working group was set up in 1988 to study and develop new mechanisms for gathering financial information related to drug trafficking and money laundering. It was also committed to the implementation of a plan to create a clearing house for the sharing of such information between member states. FOPAC has started a database on money launderers, which includes their aliases, bank accounts and fictitious companies. It also publishes a "Financial Assets Encyclopedia", which includes details on national confiscation laws, central bank currency regulations and other financial regulations.

c. Europol/TREVI Group

33. The TREVI Group of the European Union was founded in 1975 to act as a Community-wide focus on terrorism. In 1985, it set up sub-groups on international crime. Group IV dealt with the problems of drug trafficking. TREVI provided a framework for agreements on Community-wide co-operation on such matters as: police training, technology, information exchange and liaison officers. This is now all handled by the European Union under the Third Pillar of the Treaty on European Union. TREVI as such no longer exists.

34. It was under the auspices of TREVI, that the framework for the proposed European Union Europol is being developed. It is envisaged that Europol act as a non-operational intelligence gathering centre for the Union member states. It is initially to be solely the home of the European Drugs Centre.

d. Dublin Group

35. The Dublin Group is an informal consultative group of co-operating countries. It meets at various levels to discuss co-ordination of drugs related assistance to countries with drugs production or trafficking problems and more general policy concerning the international drugs threat. Members consist of all European Community countries, the United States, Canada, Japan, Australia, Sweden and Norway. The European Commission takes an active interest in all discussions.

e. Pompidou Group

36. The Pompidou Group is the Council of Europe's subsidiary body dealing with the international drugs problem. It is regarded as pioneering international co-ordination and measures to tackle the problems of drugs trafficking and money laundering, as well as measures to reduce demand. It now involves all countries of central and eastern Europe in its technical activities.

f. Chemical Action Task Force

37. This too was set up by the G7 nations at the 1990 Houston Summit. Its mandate notes that " Effective procedures should be adopted to ensure that precursor and essential chemicals are not diverted to manufacture illicit drugs". A series of recommendations were drawn up, including five basic measures to prevent the diversion of chemicals to illicit drugs manufacture.

38. The Commission of the European Union has incorporated the recommendations in the amendment of the 1990 European Community Chemical Control Regulations. In addition, it is urging the adoption of these regulations by other non-member countries, especially in central and eastern Europe. In December 1991, the Commission signed association agreements with Czechoslovakia, Hungary and Poland with specific provisions for co-operation in preventing the diversion of chemicals used in the illicit manufacture of narcotic drugs.

g. Other international organisations

39. i. The Organisation of American States (OAS) legal experts group is a thirteen-nation group of experts that has been developing legislation on money laundering and drugs trafficking for the Inter American Drug Abuse Control Commission (CICAD) of the OAS. The group has now drawn up a set of articles compatible with Latin American law, incorporating many of the clauses of the 1988 United Nations convention.

ii. The Caribbean Financial Action Task Force is a forum for Caribbean and selected South and Central American countries to develop co-operation and plans regarding money laundering. It includes a process, partially sponsored by the OAS, of mutual evaluation of member states' anti-money-laundering laws. These evaluation techniques are similar to the ones drawn up by FATF.

iii. The World Customs Organisation (formerly called the Customs Co-operation Council) is a forum for developing customs co-operation amongst all its member states. It is involved in discussing new measures that customs forces may take collectively to increase their efficiency in catching drugs traffickers.

4. Action required

40. The abuse of narcotics, drug trafficking, drug related crime and money laundering are among the most serious problems confronting Europe. Despite international agreements and domestic legislation, the importation of drugs still proceeds relatively unhindered. Criminals are still able to enjoy the proceeds from illicit activity with relative impunity.

41. Solutions to this international problem of drugs and crime will never be found without dramatic reduction in demand. That must remain the highest priority.

42. Though the total elimination of supply can never be entirely achieved, crime must be tackled wherever it occurs. If it is international, the response must be global. It must also be tackled at a European level.

43. The political will must be found to respond to the drugs threat in Europe. National measures must be improved, because the strength of the overall European anti-drugs effort equates only to the strength of the weakest border post. Further national and international action must be taken to improve intelligence-gathering and to increase interception rates, and to obtain successful prosecution of the criminals involved in that horrific trade.

a. Further action to increase police and customs co-operation

44. Co-operation between law enforcement authorities should be an area in which the Council of Europe takes a lead.

45. The Council of Europe's two Pan-European Ministerial Conferences on Co-operation on Illicit Drug Problems have made increased police and customs co-operation one of their main recommendations. More effective intelligence gathering, by police and customs forces, more sophisticated profiling of drugs traffickers and better training are all ways to heighten police efficiency. The Pompidou Group has been largely successful in pioneering such initiatives, whilst ensuring that such action is carried out in accordance with the fundamental principles of human rights and individual liberties, as noted in paragraph 15.xv of the declaration of the 2nd ministerial conference.

46. It is only through greater commitment by national governments to anti-drug trafficking programmes that the problems of drugs misuse and associated crime will be overcome. One measure that would both highlight this commitment and lead to practical advantages for the law enforcement effort would be the development, by national governments, of national agencies purely devoted to fighting drug trafficking and money laundering. Although the different law enforcement authorities enjoy good relations in some member states, in others, rivalry and poor communications exists between police and customs authorities. Such a decision would obviously rest with the member state. However, by bringing together all law enforcement and demand reduction efforts under one national umbrella agency, efforts to curb the illicit drugs trade should meet with greater success. Such an agency should be represented at a ministerial level and could be co-ordinated by the Pompidou Group at European level.

47. The ministerial TREVI Group of the European Community agreed, in 1989, to co-operate on police training, technology, information exchange and liaison officers. It is also the co-ordinating body for the development of the proposed Europol. Council of Europe member states should consider joining Europol when it is created.

48. The concept of such a pan-European central intelligence and co-ordinating body is very important. High standards of profiling, common training procedures and intelligence sharing must be established. The operational effectiveness and efficiency of national law enforcement agencies can thereby be greatly increased.

49. In the Council of Europe Parliamentary Assembly's Recommendation 1044 (1986) the Assembly envisaged the formation of such a European information and intelligence centre. National customs and police forces would share active intelligence with each other through the centre. The centre would co-ordinate national police forces on a European level.

50. In 1989, Interpol started a database on the Balkan route traffic. It notes suspects, vehicles and routes. The World Customs Organisation, UNDCP and the Italian Government all ensure a secure communications network to link the drug enforcement agencies of the ten countries on the Balkan heroin route. This system could become the basis for a similar pan-European database.

b. Making justice work

51. The Pompidou Group's Symposium on Drug Misusers in Criminal Proceedings, meeting in Strasbourg in October 1986, noted that "The criminal justice system has a symbolic function towards society where it establishes and reaffirms the moral standard given by the law, thus helping to avoid the situation in which too many people too easily engage in consuming drugs, and thereby contributing to the protection of society as a whole".

52. A clear conviction has existed that one of the most effective ways of eliminating the supply of drugs is to make drug trafficking not worthwhile for the drug trafficker. This means the total confiscation of the ill-gotten pecuniary gains of the drug trafficker, as well as the evolution of a criminal justice system that catches and heavily punishes the offenders. The knowledge that offenders stand a high chance of being brought to justice is a most important disincentive — especially if it is known that long prison sentences will await the guilty. Drugs trafficking is an increasingly international crime. Justice too, to be effective, must be administered uniformly and internationally.

53. A European penal code might be a long term goal. That could be the ideal way of tackling the international aspects of drug crime. It would ensure that criminals are aware that all members states deal equally harshly with convicted and suspected drugs traffickers and money launderers. Thus it would deter. A proposal for a European model penal code is under consideration by the Committee on Legal Affairs and Human Rights (Doc. 6851, Rapporteur: Mr Severin).

54. Evidence suggests that drugs traffickers exploit the variance in member states's illicit drugs laws. Bases of operation are built up in selected countries and the drugs are then moved around within Europe with relative impunity. Leniency in one country undermines the effect of tough sanctions in other member states in dealing with convicted drugs traffickers. The long term goal of a common European penal system and criminal code would ensure that this does not occur.

55. A common European penal code is not an entirely new suggestion to Council of Europe members. Recommendation 1066 (1986) invited governments, if and when they were reviewing their penal law, to take penal provisions in other member states into account. In the short term such convergence of judicial procedures is desirable. This clearly is a logical step forward in international efforts to tackle drugs trafficking and the crime associated with drugs misuse.

c. Giving the police more powers

56. Police from one member state should be able to carry out surveillance operations within another member state — in co-operation with local police as necessary. This would enable national police forces to carry out more effective intelligence gathering of drugs traffickers operating within its borders — even if they were temporarily abroad. It seems absurd that if suspected traffickers are under surveillance before they reach a national border, that surveillance cannot continue as they cross that border.

57. The Schengen Agreement between some of the states of the European Union regulates the exchange of information. It permits undercover officers to continue their surveillance across borders. Some experts in the field of European police co-operation have advocated "hot pursuit" across borders as well. But that would just give rise to serious questions of ultimate jurisdiction and answerability — and undesirable political problems would be bound to ensue.

58. In major and lengthy operations much police time and money (if several national police forces are involved) may be consumed before arrests are made and drugs confiscated. For that reason alone assets seized should be shared between the law enforcement authorities that helped in the operation. That is provided they are ploughed back into drugs law enforcement or measures to achieve demand reduction. This would be particularly helpful to eastern European police forces struggling from lack of funds. But it should also give incentives for all police forces to co-operate fully in multinational operations, given the knowledge that seized assets would be shared. However, it must be said, such seized assets funding must be in addition to, not replacing, the actual budget of the law enforcement authority involved.

59. More frequent exchange visits between officers of national police forces should be arranged to foster closer links between national forces. Drugs liaison officers are already seconded to other member state's police forces. Their number could be expanded to increase trust and communications between European police forces, as well as to improve further their intelligence-gathering function, which is already so important.

60. National decisions on anti-drug trafficking equipment procurement should be taken with regard to other European police forces. Training methods for drug officers should be harmonised to facilitate joint operations. Such measures, if implemented, would be a further step in heightening pan-European police co-operation and efficiency.

61. Profiling of likely drugs traffickers is one of the most effective ways of catching traffickers. But profiling is a continual process — only as good as the latest information on current smuggling techniques and the people involved. Many European law enforcement authorities are leading the world in profiling techniques. Profiling should be encouraged throughout member states and profiling information readily exchanged. Its importance cannot be over emphasised.

d. Countering the threat from dirty money

62. It is only through the confiscation of the criminals' profits that supplying drugs will become unprofitable. This, along with tougher sentences, is the most effective way of getting at and hurting the largest drug traffickers. Their activities and wealth can be politically and economically destabilising to financial institutions, to financial centres and to the countries in which they are located. It is imperative that member states sign and ratify the Council of Europe Convention on Money Laundering. Other non-member states should be encouraged to sign the convention. This is all the more important because, in some European states, asset seizure is not possible as a result of the lack of national legislation. What is lacking is the political will to implement such legislation. The political will of member states must be encouraged.

63. The United States requires the reporting by financial institutions of all transactions above $10 000. This, in the opinion of many European experts, is of dubious help. It creates vast amounts of paperwork that requires huge resources to monitor and analyse; this happens only too seldom. A more effective means of catching the money launderer is through the mandatory reporting, by financial institutions, of all suspicious transactions. This places the onus upon the institutions themselves, in making it a criminal offence to fail to report such transactions. This has already been enshrined in the European Union Money Laundering Directive that came into force on 1 January 1993. This legislation should be adopted by all European countries.

64. To this end, proper training of national and corporate personnel must be encouraged. The legislation will not work if those working in financial institutions are insufficiently trained to be able to spot criminals and their habits.

65. Under the European Union Money Laundering Directive, all member governments must make it a criminal offence for the non-reporting by bank staff of customers who are suspected money launderers. In many instances, governments had already established a voluntary code of practise to this effect. Council of Europe member states should be encouraged to set up such voluntary codes, if they do not already exist. The eventual aim should be to enact legislation to make it a legally enforceable offence for financial institutions not to report their customers who they suspect as being engaged in money laundering.

66. As with the suggestion that cash proceeds from drug busts be shared between the national law enforcement authorities involved, so too should seized assets be shared with those countries that participated in the financial investigation. The United States maintains such a policy. The logic and fairness of such a system for Europe seem beyond question.

67. A European money laundering unit would bring tangible benefits to national law enforcement authorities. It would be closely connected with the proposed European Union Europol, and would be able to gather intelligence on suspected money launderers, receive such intelligence from national law enforcement authorities, monitor new trends in money laundering, study patterns of cash flow and establish common training procedures for national law enforcement personnel dealing with suspected money laundering. It would thus participate in a two way flow of information with national law enforcement authorities working closely with the FATF. It would be up to national agencies to undertake arrests and operational seizures.

68. The FATF has noted the increasing use of non-bank financial institutions by money launderers. Casinos, bureaux de change, financial brokers, life insurance companies and postal money orders must all be more effectively monitored to prevent laundering.

69. The use of controlled deliveries for drugs traffickers have been used for many years. Cross-border transactions of dubious origin should be allowed, under the surveillance of the authorities, so as to identify and gather information on channels of trafficking and the most senior criminals involved. National legislation should be amended accordingly to make it possible where it is not at present.

70. Banks in many countries are already required to identify their clients and take reasonable measures to obtain information about beneficial customers. The increased use of shell corporations, often in offshore tax havens, by money launderers has been reported. Better measures, that would require the identification of the owners of shell corporations, should be introduced.

71. In 1992-93 FATF members took notice of the increased use of international electronic fund transfers to transfer funds anonymously by money launderers. The FATF in conjunction with SWIFT drew up guidelines to ensure that the true identity of customers and beneficiaries of the system were identified. SWIFT along with national governments have taken steps to ensure that these guidelines are implemented within their jurisdictions. Such freely available information will greatly help to reduce the blatant abuse of the system by money launderers. It will also facilitate the task of law enforcement authorities attempting to follow the audit trail of illicit funds left by electronic payment and message instructions.

e. Measures to help the emerging nations of eastern and central Europe

72. The European Union PHARE programme already provides training and assistance to eastern European police and customs forces. This PHARE programme should be enlarged and contributions from non-European Union Council of Europe member states invited. Member states should be encouraged to set up know-how funds to give specialist aid to nascent anti-drugs trafficking efforts. Assistance should be given in drafting drugs trafficking and money laundering legislation. The penetration by the drugs cartels into eastern Europe has not yet nearly reached the proportions seen in western Europe. If such penetration is to be avoided, more action is needed before it becomes too late.

73. The co-ordinating role on law enforcement training and equipment provision to the CCEE has been given to the UNDCP at the request of the Dublin Group. UNDCP itself, Interpol, the World Customs Organisation and a wide range of national bilateral initiatives are important. The contribution of non-European Union countries to this effort is already in place.

74. It must be mentioned, in this context, that far more attention needs to be given to demand reduction activities in CCEE, as is now being given in other countries and in other international organisations. More demand reduction training is required. In the CCEE countries, and elsewhere, better health and drug education from an early age is the best form of prevention and demand education. Without such activities everywhere the problem of drug misuse will never by successfully overcome.

APPENDIX I

APPENDIX II

The Basle Declaration was signed by the institutions represented on the Basle Committee which are:

Belgium: National Bank of Belgium

Banking Commission

Canada: Bank of Canada

Office of the Superintendent of Financial Institutions

France: Bank of France

Banking Commission

Germany: Deutsche Bundesbank

Federal Banking Supervisory Office

Italy: Bank of Italy

Japan: Bank of Japan

Ministry of Finance

Luxembourg: Luxembourg Monetary Institute

Netherlands: The Netherlands Bank

Sweden: Sveriges Riksbank

Swedish Bank Inspection Board

Switzerland: Swiss National Bank

Swiss Federal Banking Commission

United Kingdom: Bank of England

United States: Federal Reserve Board

Federal Reserve Bank of New York

Office of the Controller of the Currency

Federal Deposit Insurance Corporation

Secretariat: Bank for International Settlements

The Basle Committee's primary aim is to encourage a gradual convergence of bank supervisory practices of the member regulatory institutions, by enhancing the scope and effectiveness of supervisory techniques for international banking activities, by studying and making recommendations on specific areas of prudential concern in international banking, and by facilitating the exchange of information among bank supervisors so as to upgrade the quality of international bank supervision.

APPENDIX III

APPENDIX IV

19th Conference of European Ministers of Justice

Valletta, 14 to 15 June 1994

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R.T. Naylor Hot money and the politics of debt

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" " A Single Market in European policing

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J.J. Thomas Informal economic activity

With much help from: Derek Todd, Regional Crime Squad, Mike Ross (NCIS), Douglas Tweddle (H.M. Customs & Excise), Derek Bardon (Heathrow Customs), Dilwyn Grifthys (OECD Paris & the ISDD), and Miranda.

In addition, numerous documents from the Council of Europe.

Reporting committee: Committee on Legal Affairs and Human Rights.

Budgetary implications for the Assembly: none.

Reference to committee: Doc. 6720 and Reference No. 1833 of 1 February 1993.

Draft recommendation unanimously adopted by the committee on 12 December 1994.

Members of the committee: Lord Kirkhill (Chairman), MM. Schwimmer, Jansson, (Vice-Chairmen), Amaral, Andriukaitis, Arnalds, Bentkowski, Berti, Bindig, Borg, Bučar, Candal, Columberg, Croze, Deasy, Mrs Err, MM. Fogaš, Frunda, Fry, Fuhrmann, Galanos, Mrs Gelderblom-Lankhout, MM. Ghigo, Guenov, Hagård, Mrs Haller, Mrs Holand, MM. Hunault (Alternate: Masson), Inönü, Mrs Jaani, MM. Jaskiernia, Karas, Kempinaire, Loutfi, van der Maelen, Maginas, Mangakis, Mészáros, Moeller, Németh, Rathbone, Robles Fraga, Rodeghiero, Salvi, von Schmude, Severin, Solé Tura, Mrs Soutendijk-van Appeldoorn, MM. Trojan, Vinçon, Vogel, Mrs Wohlwend.

N.B. The names of those members who took part in the vote are printed in italics.

Secretaries to the committee: Mr Plate, Ms Bakardjieva and Ms Kleinsorge.