Self-funded health care, also known as Administrative Services Only (ASO), is a self insurance arrangement in the United States whereby an employer provides health or disabilitybenefits to employees using the company's own funds.
This is different from fully insured plans where the employer
contracts an insurance company to cover the employees and dependents.
In self-funded health care, the employer assumes the direct risk for payment of the claims
for benefits. The terms of eligibility and covered benefits are set
forth in a plan document which includes provisions similar to those
found in a typical group health insurance policy. Unless exempted, such plans create rights and obligations under the Employee Retirement Income Security Act of 1974 ("ERISA").
Health plans
In
the United States, a self-funded health plan is generally established
by an employer as its own legal entity, similar to a trust. The health
plan has its own assets, which, under the Employee Retirement Income
Security Act of 1974 (“ERISA”), must be segregated from the employer's
general assets. The health plan's assets are derived from pre-tax (in most cases) contributions made by employees, and sometimes additional contributions made by the employer.
The contributions to the health plan's assets are required to be
immediately segregated from the employer's general assets. Any claims
incurred by plan members in excess of the amount contained within the
health plan's pool of assets are the sole responsibility of the
employer. The employer, in that case, must deposit its own funds into
the health plan's trust account sufficiently to fund any outstanding claims liabilities.
Health plans that cover dependents as well as employees collect
contributions for dependents from the employee's payroll deductions.
Similar to in traditional insurance, the plan sponsor determines the
cost of health coverage and generally requires different payroll
deductions depending on whether an employee elects self-only coverage,
self plus spouse, self plus spouse plus child(ren), or certain other
permutations as determined by the plan sponsor.
Self-funded health care allows some flexibility in structuring a
benefit plan; some plans allow fewer options, for example only a choice
between self-only coverage and full family coverage, with two
contribution tiers.
Designs
As
health care costs continue to rise, more employers will look to
alternative ways to finance their healthcare plans. Consumer driven
plans have become popular recently as employers look to shift some of
the accountability to employees. HSAs (health savings accounts) and HRA (health reimbursement accounts)
encourage employees to shop around for the best value when considering
elective medical procedures or filling pharmacy prescriptions.
Self-funded plans take one step further in that they provide all claims
data to employers allowing them to set up an EPO (exclusive provider organization) basically a PPO hand selected by the organization to eliminate high cost providers.
Prevalence
Historically
self-funding has been most effective for large corporations and Fortune
500 companies with over 1,000 employees but with the rising cost of
healthcare over the past ten years at a rate of close to 10%,
self-funding has become an option for smaller employers. It is now
estimated that the average self-funded plan covers 300-400 employees and
that, of private sector employees that have a workplace health plan,
59% were covered by a plan that is at least in part self-insured.
While some large employers self-administer their self funded
group health plan, most find it necessary to contract with a third party
for assistance in claims adjudication and payment. Third party administrators
(TPA's) provide these and other services, such as access to preferred
provider networks, prescription drug card programs, utilization review
and the stop loss insurance market. Insurance companies
offer similar services under what is frequently described as
"administrative services only" or "ASO" contracts. In these arrangements
the insurance company provides the typical third party administration
services but assume no risk for claims payment.
Perhaps the biggest advantage of self-funded plans is
transparency of claims data. Self-funded employers who contract a TPA
receive a monthly report detailing medical claims and pharmacy costs.
Knowing this information becomes instrumental in controlling costs by
shifting buying patterns. Other advantages include plan flexibility,
access to national PPO networks, and financial savings.
Affordable Care Act
The Affordable Care Act
has had huge ramifications on self-funded health plans; market reforms
have invalidated many plan designs that were previously used, and now
that employees are required to have health insurance and many employers are required to offer health benefits as well, the self-funded industry has enlarged.
In the United States, self-funded plans must comply with a number of the provisions in the PPACA including dependent coverage until 26, prohibition on rescission, and prohibition annual or lifetime limits. However, while the ACA required coverage of essential health benefits for fully insured plans, self-funded plans are notably exempt from this requirement.
ERISA
ERISA is a
federal law that sets minimum standards for employee benefit plans,
including pension plans and health benefit plans, in private industry
within the United States. ERISA neither requires an employer to
establish a pension plan, with few exceptions,
nor dictates what benefits must be offered; instead, it requires that
employers who establish plans meet certain minimum standards. The law is
designed for the protection of plan participants, and to ensure a
uniform statutory body of law regulating applicable benefit plans,
throughout every jurisdiction in the country.
Plan sponsor and plan administrator
There
are two primary entities involved in the formation and administration
of a health plan – the plan sponsor and the plan administrator. These
terms are defined separately and the difference is important.
Plan sponsor
The
plan sponsor (also known as the “employer” or “group”) is the entity
that sponsors, crafts, offers, maintains, and funds the plan. While the
duties of a plan administrator may be delegated to an entity other than
the employer, the law invariably requires that the employer be
considered the plan sponsor.
Plan administrator
The plan administrator is the entity charged with general plan administration duties, similar to a trustee
in the case of a trust. The plan administrator is always a plan
fiduciary; the plan administrator can share the fiduciary duty with
other entities, but the plan administrator is required to assume some fiduciary duty
and cannot disclaim that duty. In general, the plan administrator is
the employer – but new trends in the industry are seeing more and more
groups outsourcing plan administrator duties to TPAs or other entities for a fee.
Employers that sponsor self-funded insurance plans often contract
with a third-party administrator (TPA), which is an entity that
provides ministerial services on behalf of the health plan and the plan
sponsor. Traditionally, TPAs do not make discretionary claims
determinations; if a determination requires interpretation of the
governing plan document, most TPAs do not make it but instead require
the plan administrator to provide its own determination. This is because
a fiduciary duty is incurred by any entity that exercises discretion
over plan assets or in connection with making a binding determination
under a health plan. According to ERISA, no matter which entity is
identified as a fiduciary within the health plan, any entity will be
considered a fiduciary if that entity acts as a fiduciary in a given
case. Plan sponsors contract with their chosen TPA by means of an
agreement known as an Administrative Services Agreement, which outlines
the TPA's duties, generally including administering payment for claims,
issuing benefit determinations, and distributing documentation. This
agreement generally contains provisions that provide for the TPA's
access to the employer's claims funding bank account, and TPAs generally
charge on a per-employee-per-month fee.
Contrast to traditional insurance
Traditional
insurance is, in general, a way for individuals to manage the risk of
their health care expenses. Individuals pay a set premium to an insurer,
and in turn the insurer agrees to pay that person's eligible healthcare
claims. All risk transfers to the insurer; no matter how much is racked
up in eligible claims, the insurer bears the risk of paying those
claims and the insured can rest easy knowing that he or she will not be
responsible.
In self-funded health care, plan sponsors have broad discretion
to determine what terms will be used in the plan, as well as to decide
which entities will have the authority to make benefits determinations,
factual determinations, appeals determinations, and language
interpretations. In traditional insurance, those responsibilities (and
risks) are all borne by the insurer.
Part of every insurance premium is allocated to the payment of
health claims, and part is allocated to profit for the insurance
company. Profit generated by a traditional insurer comes directly from
the policyholders, while a self-funded health plan is, or is funded by, a
trust.
Funding
Self-funding
involves a transfer of risk from the employee and his/her dependents to
the employer directly. Self-funded health plans pay health claims out
of plan assets; there is no element of traditional insurance on these
programs, and the employer assumes all additional liability for claims
that have not been paid by plan (trust) assets. Some health plans have
no plan assets; known as an unfunded plan, a plan with no assets is
funded solely from the general corporate assets of the plan sponsor.
Plan assets can never inure to the benefit of the plan sponsor.
Once funds become plan assets – whether through payroll deductions from
employees or employer contributions to the plan – those assets
invariably belong to the plan.
Stop-loss insurance
Stop-loss insurance is a form of reinsurance that insures self-funded plans and their assets.
Due to the limited assets at the disposal of an average employer
as compared to an insurance company, an employer could easily bankrupt
itself if its employees incur a large number of high-dollar claims and
the employer is unable to fund them all. This risk is where the concept
of stop-loss insurance comes into play, as it provides the employer with
an additional source for funding to pay for catastrophic losses.
Smaller managed care organizations also may purchase stop-loss insurance
to protect themselves from the risk of catastrophic claims loss, but
larger insurance companies, such as those that more commonly provide
fully insured policies to employers, typically have a large enough pool
of assets to be able to assume all of the risk of paying claims. Most
employers, however, have a tangibly limited pool of assets.
As employers turn to ERISA pre-emption as a way to bypass
variable state regulations and state regulations unfriendly to
self-funded health plans, it has become apparent that for many, the only
way to achieve this is through the health plan's purchase of stop-loss
insurance; however, many states have passed laws that attempt to
regulate or limit the issuance of stop-loss insurance to certain groups,
either by prohibiting the sale of stop-loss insurance to “small groups”
or by setting a statutory minimum attachment point. A 2013 Kaiser
Family Foundation study
revealed that 59% of self-insured groups’ employees are members of
plans that have purchased stop-loss insurance. That number may be a
significant underestimate, however, due to groups' being hesitant to
admit that they have stop-loss coverage.
In a traditional fully insured health plan, the employer
regularly pays a premium, which is a fixed rate for a given time period,
and the covered employees pay a monthly contribution to the employer
designed to partially offset the employer's premium. In general, the
premium does not change except in certain specific instances, such as,
most commonly, a change in the number of covered employees. The insurer
collects the premiums and pays the health care claims based on the
benefits in the health insurance policy that was underwritten and
purchased. The employees are responsible to pay any deductibles or
co-payments required under the policy.
A self-funded plan has fixed components similar to an insurance
premium; but to contrast, the self-funded plan pays the claims incurred
by the plan participants, and the employer's risk is not capped. Even
with stop-loss insurance, the employer still retains one hundred percent
of the risk of claims payments, in a purely self-funded scenario.
Stop-loss insurance reimbursements are made if the claims costs exceed
the catastrophic claims levels in the policy, but if a stop-loss carrier
became defunct or simply breached the contract, there would be nothing
alleviating the self-funded plan from responsibility for the full amount
of claims.
State regulation
While
ERISA preempts some state laws that relate to self-funded employee
benefit plans, ERISA does not regulate stop-loss insurance, since
stop-loss insurance does not protect employees but instead protects a
health plan itself or the employer.
Benefits and risks
One
of the main benefits of self-funding is that the group is able to
customize the benefits it offers and tailor the plan to its employee
base. With this in mind, the sponsor can craft plan provisions to cover
certain benefits and exclude others as it sees fit. Less is sometimes
more, a Plan which covers the services its employees will likely need
and excludes the others will have much lower cost.
As described above, employers that choose to sponsor a
self-funded health benefits plan truly do so at their own risk. To be
self-funded, the employer necessarily retains one hundred percent of the
risk of the payment of the health benefits claims of plan participants.
The practical effect of that is that many small groups simply cannot
afford to self-fund; a common theory is that groups with too few
employees are unable to collect a contribution sufficient to allow the
employer to pay health benefits claims without bankrupting itself. While
the practical solution to this is simply to charge a higher and higher
contribution as necessary, both the Affordable Care Act and the general
business considerations prevent raising the employee's required
contribution amount above a certain level.
Another major risk of self-funding is that the obligation to make
claims determinations falls upon the Plan Administrator, which is most
commonly the employer. While the employer's chosen TPA pays or denies
claims when the SPD is clear on how a given claim should be treated,
dubious claims are referred to the Plan Administrator for final
decision, because most ASAs specify that the TPA is not permitted to make claims determinations (which protects the TPA and Plan Administrator alike).
Sponsoring a self-funded plan has its risks, but it also has its
rewards. While the group may incur unexpectedly catastrophic claims
amounts, stop-loss is designed to mitigate those claims.
Size of self-funded market
A
recent study has reported that as of 2014, about 81% of workers covered
by healthcare through an employer were in a partially or completely
self-funded plan, which is up 21% since 1999. According to the Department of Health and Human Services,
over 82% of employers with over 500 employees offer a self-funded
health plan, and over 25% of firms with between 100 and 499 employees,
and over 13% of employers with fewer than 100 employees also offer a
self-funded health plan.
As is demonstrated by these statistics, self-funded health plans
are rooted in the same underlying mathematical principle as insurance in
general: Spread of risk. Larger employers have more plan
participants over which to spread the risk (loss) and are therefore able
to more accurately predict and budget for the cost of the plan. In
contrast, an employer with only 50 employees has a small number of
participants over which to spread the risk and therefore may experience
wide fluctuations in plan costs as the result of covered losses from
only a small number of participants.
Non-traditional plan models
MEWAs
A
Multiple Employer Welfare Arrangement, or MEWA, is a vehicle through
which more than one employer can come together and offer a self-funded
plan to employees – a type of co-op. MEWAs are useful for small groups
that on their own would not be able to self-fund; for instance, a number
of local small businesses, each with a dozen employees, can pool their
assets, form a MEWA, and offer a self-funded plan as successfully as one
company with the same number of total employees.
ERISA defines a MEWA as:
The term “multiple employer welfare arrangement” means an
employee welfare benefit plan, or any other arrangement (other than an
employee welfare benefit plan), which is established or maintained for
the purpose of offering or providing any [welfare benefit] to the
employees of two or more employers (including one or more self-employed
individuals), or to their beneficiaries...
The definition goes on to except rural telephone and electric
cooperatives, and any plan established or maintained pursuant to a
collective bargaining agreement.
The benefits included as welfare plan benefits are broadly
described and wide-ranging. Virtually any type of health, medical,
sickness, or disability benefits will fall into this category,
regardless of whether the benefits are offered pursuant to a written
instrument or informally, funded or unfunded, offered on a routine or ad
hoc basis, or limited to a single employee-participant.
If it is determined that qualifying benefit is being provided, a
determination then must be made as to whether the benefit is being
provided by a plan “established or maintained by an employer or by an
employee organization, or by both.” For example, MEWAs provide medical
and hospital benefits, but MEWAs generally are not established or
maintained by either an employer or employee organization, and, for that
reason, do not constitute ERISA-covered plans.
There are certain requirements of a MEWA, and many benefits;
MEWAs are governed by state insurance law, rather than ERISA, regardless
of whether the MEWA's constituent groups would separately be governed
by ERISA if they were to sponsor separate plans.
Section 514(b)(6)(A)(ii)
of ERISA provides that in the case of an employee welfare benefit plan
which is a MEWA, any law of any state which regulates insurance may
apply to the extent not inconsistent with Title I of ERISA. Accordingly,
if a MEWA is self-funded rather than fully insured, the only limitation
on the applicability of state insurance laws to the MEWA is that the
law not be inconsistent with Title I of ERISA.
In general, a state law would be inconsistent with the provisions
of Title I to the extent that compliance with such law would abridge an
affirmative protection otherwise available to plan participants under
Title I or would conflict with any provision of Title I, making
compliance with ERISA impossible. For example, any state insurance law
which would adversely affect a participant's or beneficiary's right to
request or receive documents described in Title I of ERISA, or to pursue
claims procedures established in accordance with Section 503 of ERISA,
or to obtain and maintain continuation health coverage in accordance
with Part 6 of ERISA would be viewed as inconsistent with the provisions
of Title I. Similarly, a state insurance law that would require an
ERISA-covered plan to make imprudent investments would be inconsistent
with the provisions of Title I.
Conversely, a state insurance law generally will not be
considered inconsistent with the provisions of Title I if it requires
ERISA-covered plans constituting MEWAs to meet more stringent standards
of conduct, or to provide more or greater protection to plan
participants and beneficiaries than required by ERISA. The Department of
Labor has expressed the view that any state insurance law which sets
standards requiring the maintenance of specified levels of reserves and
specified levels of contributions in order for a MEWA to be considered,
under such law, able to pay benefits will generally not be considered
inconsistent with the provisions of Title I. The Department of Labor
also has expressed the view that a state law regulating insurance which
requires a license or certificate of authority as a condition precedent
or otherwise to transacting insurance business or which subjects persons
who fail to comply with such requirements to taxation, fines and other
civil penalties, would not in and of itself be considered inconsistent
with the provisions of title I.
School trusts
School
trusts are MEWAs, but some states impose slightly different
requirements upon MEWAs established solely by a group of public schools.
It is unclear whether some states treat these particular MEWAs
differently due to the government funding of the schools or the public
interest served, but some states have lowered the enforcement or
standards or other requirements for these MEWAs.
Captives
Rather
than a co-op, as each of the previous sections has described, a captive
is a subsidiary created to provide benefits to its parent company or
companies – although when a captive is offered by more than one
employer, the captive is a form of co-op. Captives present
risk-management resources for employers who provide self-funded health
plans to their respective employees. As is the case with all
self-funding arrangements, when a self-funded health plan is offered by a
captive, the captive, as opposed to any one particular employer, bears
the risk.
In October 2006, the International Association of Insurance
Supervisors published an “Issues Paper on the Regulation and Supervision
of Captive Insurance Companies.” The Issues Paper defines a captive as:
an insurance or reinsurance entity created and owned,
directly or indirectly, by one or more industrial, commercial or
financial entities, the purpose of which is to provide insurance or
reinsurance cover for risks of the entity or entities to which it
belongs, or for entities connected to those entities and only a small
part if any of its risk exposure is related to providing insurance or
reinsurance to other parties.
Shock loss is the direct loss that is borne by a self-funding entity;
if a self-funding entity has purchased stop-loss, amounts of shock loss
that rise above an amount known as the specific deductible are covered
by the applicable stop-loss policy. Under the captive model, the parent
companies do not themselves offer health plans. Instead, the captive is
the only entity offering, sponsoring, and maintaining the self-funded
health plan. Accordingly, the captive bears the risk of shock-loss.
A captive increases the ability of a group to properly manage
risk. Self-funding is simply not an option to some employers; in order
to be able to efficiently fund shock losses from the general assets of
the Plan Sponsor, members of a group must contribute enough to the
Sponsor's general assets, in the aggregate, that the Plan Sponsor is
able to pay claims incurred by participants of the plan.
Stop loss insurance
Many employers seek to mitigate the financial risk of self funding claims under the plan by purchasing stop loss insurance from an insurance carrier.
These policies typically provide for risk retention limitations both on
a specific claim and aggregate claims basis. An important aspect of
self funded group health plans lies in the requirement that the employer
remain liable for funding of plan claims regardless of the purchase of
stop loss insurance. What this means, in turn, is a fund or company's
own bank account creates a pool of their employees and is managed &
distributed to claim payouts. In other words, only the employer has a
contractual relationship with plan participants and beneficiaries. The
stop loss policy runs solely between the employer and the stop loss
carrier and creates no direct liability to those individuals covered
under the plan. This feature provides the critical distinction between
fully insured plans (subject to State law insurance regulations) and
self funded health plans which, under the provisions of Section 514 of
ERISA, are exempt from state insurance regulations.
Stop-loss policies are instrumental in establishing a "worst-case
scenario", or aggregate for any given year. The aggregate stop-loss
helps establish a finite number that can be compared to a plan's
guaranteed fully insured cost. If the aggregate cost does not exceed the
plans' fully insured guaranteed cost, self-funding may be a viable
option. Another way to look at aggregate insurance is an umbrella policy
that caps a company's liability within a specified time period.
Lawsuits and liability
In
the United States, self-funded plans regulated under the Employee
Retirement Income Security Act of 1974 are notably exempted from insurance bad faith laws. The law has also affected medical malpractice liability.
International drug routes (~year 2000)Main heroin-producing countries in the world (colored in red)Drug trafficking air routes monitored by the US Southern Command
The illegal drug trade or drug trafficking is a global black market dedicated to the cultivation, manufacture, distribution and sale of prohibited drugs. Most jurisdictions prohibit trade, except under license, of many types of drugs through the use of drug prohibition laws. The think tank Global Financial Integrity's Transnational Crime and the Developing World report estimates the size of the global illicit drug market between US$426 and US$652billion in 2014 alone. With a world GDP
of US$78 trillion in the same year, the illegal drug trade may be
estimated as nearly 1% of total global trade. Consumption of illegal
drugs is widespread globally, and it remains very difficult for local
authorities to reduce the rates of drug consumption.
The government of the Qing Dynasty issued edicts against opium smoking in 1730, 1796 and 1800. The Westprohibited addictive drugs throughout the late 19th and early 20th centuries. Beginning in the 18th century, British merchants from the East India Company began to illegally sell opium to Chinese merchants, and by the early 19th century, an illegal drug trade in China
emerged. As a result, by 1838 the number of Chinese opium-addicts had
grown to between four and twelve million. The Chinese government
responded by enforcing a ban on the import of opium; this led to the First Opium War (1839–1842) between the United Kingdom and Qing-dynasty China. The British defeated the Chinese, and in the resulting treaty that ended the war, the Treaty of Nanking,
the Qing government was forced to allow British merchants to sell
Indian-grown opium. Trading in opium was lucrative, and smoking it had
become common for the Chinese in the 19th century, so British merchants
increased trade with the Chinese. The Second Opium War broke out in 1856, with the British joined this time by the French. The Treaty of Tianjin,
which concluded that conflict, stipulated that the Chinese authorities
would open further ports to foreign trade, including opium.
In 1868, as a result of the increased use of opium in Britain,
the British government restricted the sale of opium by implementing the 1868 Pharmacy Act. In the United States, control of opium remained under the control of individual U.S. states until the introduction of the Harrison Act in 1914, after 12 international powers signed the International Opium Convention in 1912.
The beginning of the 21st century saw drug use increase in North America and Europe, with a particularly increased demand for marijuana and cocaine. As a result, international organized crime syndicates such as the Sinaloa Cartel and 'Ndrangheta have increased cooperation among each other in order to facilitate trans-Atlantic drug-trafficking. Use of another illicit drug, hashish, has also increased in Europe.
Drug trafficking is widely regarded by lawmakers as a serious offense
around the world. Penalties often depend on the type of drug (and its
classification in the country into which it is being trafficked), the
quantity trafficked, where the drugs are sold and how they are
distributed. If the drugs are sold to underage people, then the
penalties for trafficking may be harsher than in other circumstances.
Drug smuggling carries severe penalties in many countries. Sentencing may include lengthy periods of incarceration, flogging and even the death penalty (in Singapore, Malaysia, Indonesia and elsewhere). In December 2005, Van Tuong Nguyen, a 25-year-old Australian drug smuggler, was hanged in Singapore after being convicted in March 2004. In 2010, two people were sentenced to death in Malaysia for trafficking 1 kilogram (2.2 lb) of cannabis into the country.
Execution is mostly used as a deterrent, and many have called upon much
more effective measures to be taken by countries to tackle drug
trafficking;
for example, targeting specific criminal organisations that are often
also active in the smuggling of other goods (i.e. wildlife) and even
people. In many cases, links between politicians and the criminal organisations have been proven to exist.
In June 2021, Interpol
revealed an operation in 92 countries that shut down 113,000 websites
and online marketplaces selling counterfeit or illicit medicines and
medical products a month earlier, led to the arrests of 227 people
worldwide, recovered pharmaceutical products worth $23 million, and led
to the seizure of approximately nine million devices and drugs,
including large quantities of fake COVID-19 tests and face masks.
Societal effects
The
countries of drug production and transit are some of the most affected
by the trade, though countries receiving the illegallyimported
substances are also adversely affected. For example, Ecuador has
absorbed up to 300,000 refugees from Colombia who are running from
guerrillas, paramilitaries and drug lords. While some applied for
asylum, others are still illegal immigrants. The drugs that pass from
Colombia through Ecuador to other parts of South America create economic
and social problems.
Honduras, through which an estimated 79% of cocaine passes on its way to the United States, had, as of 2011, the highest murder rate in the world. According to the International Crisis Group,
the most violent regions in Central America, particularly along the
Guatemala–Honduras border, are highly correlated with an abundance of
drug trafficking activity.
Violent crime
In several countries, the illegal drug trade is thought to be directly linked to violent crimes such as murder and gun violence. This is especially true in all developing
countries, such as Honduras, but is also an issue for many developed countries worldwide.In the late 1990s in the United States the Federal Bureau of Investigation estimated that 5% of murders were drug-related.
In Colombia, drug violence can be caused by factors such as the
economy, poor governments, and no authority within law enforcement.
After a crackdown by US and Mexican authorities in the first
decade of the 21st century as part of tightened border security in the
wake of the September 11 attacks, border violence inside Mexico surged. The Mexican government estimates that 90% of the killings are drug-related.
A report by the UK government's Drug Strategy Unit that was
leaked to the press, stated that due to the expensive price of highly
addictive drugs heroin
and cocaine, drug use was responsible for the great majority of crime,
including 85% of shoplifting, 70–80% of burglaries and 54% of robberies.
It concluded "[t]he cost of crime committed to support illegal cocaine
and heroin habits amounts to £16 billion a year in the UK"
Drug trafficking routes
The nephews of President Nicolás Maduro,
Efraín Antonio Campo Flores and Francisco Flores de Freitas, after
their arrest by the U.S. Drug Enforcement Administration on 10 November
2015.
Africa
East and South
Heroin
is increasingly trafficked from Afghanistan to Europe and America
through eastern and southern African countries. This path is known as
the "southern route" or "smack track". Repercussions of this trade
include burgeoning heroin use and political corruption among
intermediary African nations.
According to the Africa Economic Institute, the value of illicit
drug smuggling in Guinea-Bissau is almost twice the value of the
country's GDP.
Police officers are often bribed. A police officer's normal monthly
wage of $93 is less than 2% of the value of 1 kilogram (2.2 lb) of
cocaine (€7000 or $8750).
The money can also be laundered using real estate. A house is built
using illegal funds, and when the house is sold, legal money is earned.
When drugs are sent over land, through the Sahara, the drug traders
have been forced to cooperate with terrorist organizations, such as Al-Qaeda in Islamic Maghreb.
Asia
Drugs in Asia
traditionally traveled the southern routes – the main caravan axes of
Southeast Asia and Southern China – and include the former
opium-producing countries of Thailand, Iran, and Pakistan. After the 1990s, particularly after the end of the Cold War
(1991), borders were opened and trading and customs agreements were
signed so that the routes expanded to include China, Central Asia, and
Russia.
There are, therefore, diversified drug trafficking routes available
today, particularly in the heroin trade and these thrive due to the
continuous development of new markets. A large amount of drugs are
smuggled into Europe from Asia. The main sources of these drugs are Afghanistan, along with countries that constituted the so-called Golden Crescent. From these producers, drugs are smuggled into the West and Central Asia to its destinations in Europe and the United States.
Iran is now a common route for smugglers, having been previously a
primary trading route, due to its large-scale and costly war against
drug trafficking.
The Border Police Chief of Iran said that his country "is a strong
barrier against the trafficking of illegal drugs to Caucasus, especially
the Republic of Azerbaijan." The drugs produced by the Golden Triangle
of Myanmar, Laos, and Thailand, on the other hand, pass through the
southern routes to feed the Australian, U.S., and Asian markets.
According to the United Nations, there was an increase of cocaine trafficking through Venezuela since 2002. In 2005, the government of Hugo Chávez severed ties with the United States Drug Enforcement Administration (DEA), accusing its representatives of spying.
Following the departure of the DEA from Venezuela and the expansion of
DEA's partnership with Colombia in 2005, Venezuela became more
attractive to drug traffickers.
Between 2008 and 2012, Venezuela's cocaine seizure ranking among other
countries declined, going from being ranked fourth in the world for
cocaine seizures in 2008 to sixth in the world in 2012.
On 18 November 2016, following what was known as the Narcosobrinos incident, Venezuelan President Nicolás Maduro's
two nephews were found guilty of trying to ship drugs into the United
States so they could "obtain a large amount of cash to help their family
stay in power".
According to a research conducted by the Israel-based Abba Eban InstituteArchived 2019-10-23 at the Wayback Machine as part of an initiative called Janus Initiative,
the main routes that Hezbollah uses for smuggling drugs are from
Colombia, Venezuela and Brazil into West Africa and then transported
through northern Africa into Europe. This route serves Hezbollah in
making a profit in the cocaine smuggling market in order to leverage it
for their activities.
Online trafficking
Drugs are increasingly traded online on the dark web on darknet markets.
Internet-based drug trafficking is the global distribution of
narcotics, making extensive use of technology. Similarly, the use of the
Internet for the illegal trafficking of two controlled categories of
drugs can also be identified as Internet-related drug trafficking. The platform Silk Road provided goods and services to 100,000 buyers before being shut down in October 2013. This prompted the creation of new platforms such as Silk Road 2.0, which were also shut down.
Profits
US$207 million and additional amounts in other currencies were confiscated from Mexican Zhenli Ye Gon in 2007.Hashish seized in Operation Albatross, a joint operation of Afghan officials, NATO, and the DEA
Statistics about profits from the drug trade are largely unknown due
to its illicit nature. An online report published by the UK Home Office
in 2007 estimated the illicit drug market in the UK at £4–6.6 billion a
year.
In December 2009 United Nations Office on Drugs and Crime Executive Director Antonio Maria Costa
claimed illegal drug money saved the banking industry from collapse. He
claimed he had seen evidence that the proceeds of organized crime were
"the only liquid investment capital" available to some banks on the
brink of collapse during 2008. He said that a majority of the
$352 billion (£216bn) of drug profits was absorbed into the economic
system as a result:
"In many instances, the money
from drugs was the only liquid investment capital. In the second half of
2008, liquidity was the banking system's main problem and hence liquid
capital became an important factor ... Inter-bank loans were funded by
money that originated from the drugs trade and other illegal
activities...there were signs that some banks were rescued that way".
5 cm hashish packages taken from a smuggler by police.
Costa declined to identify countries or banks that may have received
any drug money, saying that would be inappropriate because his office is
supposed to address the problem, not apportion blame.
Though street-level drug sales are widely viewed as lucrative, a study by Sudhir Venkatesh
suggested that many low-level employees receive low wages. In a study
he made in the 1990s working closely with members of the Black Gangster Disciple Nation in Chicago, he found that one gang (essentially a franchise)
consisted of a leader (a college graduate named J.T.), three senior
officers, and 25 to 75 street level salesmen ('foot soldiers') depending
on season. Selling crack cocaine,
they took in approximately $32,000 per month over a six-year period.
This was spent as follows: $5,000 to the board of twenty directors of
the Black Gangster Disciple Nation,
who oversaw 100 such gangs for approximately $500,000 in monthly
income. Another $5,000 monthly was paid for cocaine, and $4,000 for
other non-wage expenses. J.T. took $8,500 monthly for his own salary.
The remaining $9,500 monthly went to pay the employees a $7 per hour
wage for officers and a $3.30 per hour wage for foot soldiers. Contrary
to a popular image of drug sales as a lucrative profession, many of the
employees were living with their mothers by necessity. Despite this,
the gang had four times as many unpaid members who dreamed of becoming
foot soldiers.
Impact of free trade
There
are several arguments on whether or not free trade has a correlation to
an increased activity in the illicit drug trade. Currently, the
structure and operation of the illicit drug industry is described mainly
in terms of an international division of labor.
Free trade can open new markets to domestic producers who would
otherwise resort to exporting illicit drugs. Additionally, extensive
free trade among states increases cross-border drug enforcement and
coordination between law enforcement agencies in different countries.
However, free trade also increases the sheer volume of legal
cross-border trade and provides cover for drug smuggling—by providing
ample opportunity to conceal illicit cargo in legal trade. While
international free trade continues to expand the volume of legal trade,
the ability to detect and interdict drug trafficking is severely
diminished. Towards the late 1990s, the top ten seaports in the world
processed 33.6 million containers.
Free trade has fostered integration of financial markets and has
provided drug traffickers with more opportunities to launder money and
invest in other activities. This strengthens the drug industry while
weakening the efforts of law enforcement to monitor the flow of drug
money into the legitimate economy. Cooperation among cartels expands
their scope to distant markets and strengthens their abilities to evade
detection by local law enforcement.
Additionally, criminal organizations work together to coordinate
money-laundering activities by having separate organizations handle
specific stages of laundering process.
One organization structures the process of how financial transactions
will be laundered, while another criminal group provides the "dirty"
money to be cleaned.
By fostering expansion of trade and global transportation networks,
free trade encourages cooperation and formation of alliances among
criminal organizations across different countries.
The drug trade in Latin America emerged in the early 1930s. It saw significant growth in the Andean countries, including Peru, Bolivia, Chile, Ecuador, Colombia and Venezuela.
The underground market in the early half of the 20th century mainly had
ties to Europe. After World War II, the Andean countries saw an
expansion of trade, specifically with cocaine.
The Ba'athist government of Syria ruled by the Al-Assad
family is known for its extensive involvement in drug trade since
1970s. As of 2022, the Syrian government finances the biggest
multi-billion dollar drug trade in the world, mostly focused on an
illegal drug known as Captagon, making it the world's largest narco-state.
Its revenues from Captagon smuggling alone is estimated to worth 57
billion dollars annually in 2022, which is approximately thrice the
total trade of all Mexican cartels. General Maher al-Assad, younger brother of Syrian dictator Bashar al-Assad and commander of the Fourth Armoured Division,
directly supervises the production, smuggling and profiteering of the
drug business. Already suffering from severe financial problems as a
result of corruption and civil war, profits from Captagon are said to be
the "lifeline" of the Assad regime, through which it earns more than
90% of its total revenue. The smugglers receive direct training from Syrian military to successfully conduct trafficking operations.
A joint investigation conducted by Organized Crime and Corruption Reporting Project and BBC News Arabic published a documentary in June 2023, revealing further details about the activities of regime officials, Ba'athist military
commanders and Assad family members in their involvement in Syria's
drug cartel. The investigation found that Lebanese criminal and drug
kingpin Hassan Daqou collaborated with Syria's Fourth Armoured Division on trafficiking billions of dollars of drugs, under the command of General Ghassan Bilal, the right-hand man of Maher al-Assad. The report also unearthed Hezbollah's
close participation in the drug production and smuggling networks. The
Fourth Armoured Division, being an elite military unit permitted to move
freely across Assad regime's checkpoints, oversees the smuggling
operations from Syria, including the trafficking of cash, weapons,
illegal drugs, etc. Days after the publication of the joint BBC-OCCRP documentary; Assad government banned all activities of BBC media outlets and entry of affiliated media personnel in Syria.
The extensive involvement of Syrian Armed Forces in sponsorship of drug production and trade has led to pervasive drug addiction problems amongst pro-Assad soldiers. In many instances, military officials encourage the soldiers to consume captagon and other illegal drugs, leading to overdose or drug abuse. Pro-Assad fighters in the National Defence Forces and Hezbollah also consume illegal drugs in large quantities. In July 2023, German police busted a major captagon network run by two Syrian-born men in southern German state of Bavaria. Assad regime sponsors the largest Captagon production network in Syria; which is the source of about 80% of total captagon supply in the world.
United States
The U.S. Coast Guard offloads seized cocaine in Miami Beach, Florida, May 2014
Background
The effects of the illegal drug trade in the United States
can be seen in a range of political, economic and social aspects.
Increasing drug related violence can be tied to the racial tension that
arose during the late 20th century along with the political upheaval
prevalent throughout the 1960s and 70s.
The second half of the 20th century was a period when increased wealth,
and increased discretionary spending, increased the demand for illicit
drugs in certain areas of the United States. Large-scale drug
trafficking is one of the capital crimes, and may result in a death sentence prescribed at the federal level when it involves murder.
Political impact
A large generation, the baby boomers,
came of age in the 1960s. Their social tendency to confront the law on
specific issues, including illegal drugs, overwhelmed the understaffed
judicial system. The federal government attempted to enforce the law,
but with meager effect.
Marijuana was a popular drug seen through the Latin American
trade route in the 1960s. Cocaine became a major drug product in the
later decades. Much of the cocaine is smuggled from Colombia and Mexico via Jamaica.
This led to several administrations combating the popularity of these
drugs. Due to the influence of this development on the U.S. economy, the
Reagan administration began "certifying" countries for their attempts
at controlling drug trafficking.
This allowed the United States to intervene in activities related to
illegal drug transport in Latin America. Continuing into the 1980s, the
United States instated stricter policy pertaining to drug transit
through sea. As a result, there was an influx in drug-trafficking across
the Mexico–U.S. border,
which increased the drug cartel activity in Mexico. By the early 1990s,
so much as 50% of the cocaine available in the United States market
originated from Mexico, and by the 2000s, over 90% of the cocaine in the
United States was imported from Mexico.
In Colombia, however, there was a fall of the major drug cartels in the
mid-1990s. Visible shifts occurred in the drug market in the United
States. Between 1996 and 2000, U.S. cocaine consumption dropped by 11%.
In 2008, the U.S. government initiated another program, known as the Merida Initiative,
to help combat drug trafficking in Mexico. This program increased U.S.
security assistance to $1.4 billion over several years, which helped
supply Mexican forces with "high-end equipment from helicopters to
surveillance technology". Despite U.S. aid, Mexican "narcogangs" continue to outnumber and outgun the Mexican Army, allowing for continued activities of drug cartels across the U.S.–Mexico border.
Social impacts
ICE arresting an individual in Arizona, October 2011
Although narcotics are illegal in the US, they have become integrated
into the nation's culture and are seen as a recreational activity by
sections of the population.
Illicit drugs are considered to be a commodity with strong demand, as
they are typically sold at a high value. This high price is caused by a
combination of factors that include the potential legal ramifications
that exist for suppliers of illicit drugs and their high demand. Despite the constant effort by politicians to win the war on drugs, the US is still the world's largest importer of illegal drugs.
Throughout the 20th century, narcotics other than cocaine also
crossed the Mexican border, meeting the US demand for alcohol during the
1920s Prohibition, opiates in the 1940s, marijuana in the 1960s, and heroin in the 1970s.
Most of the U.S. imports of drugs come from Mexican drug cartels. In
the United States, around 195 cities have been infiltrated by drug
trafficking that originated in Mexico.
An estimated $10bn of the Mexican drug cartel's profits come from the
United States, not only supplying the Mexican drug cartels with the
profit necessary for survival, but also furthering America's economic
dependence on drugs.
Demographics
With a large wave of immigrants in the 1960s and onwards, the United States saw an increased heterogeneity in its public.
In the 1980s and 90s, drug-related homicide was at a record high. This
increase in drug violence became increasingly tied to these ethnic
minorities. Though the rate of violence varied tremendously among cities
in America, it was a common anxiety in communities across urban
America. An example of this could be seen in Miami, a city with a host
of ethnic enclaves.
Between 1985 and 1995, the homicide rate in Miami was one of the
highest in the nation—four times the national homicide average. This
crime rate was correlated with regions with low employment and was not
entirely dependent on ethnicity.
The baby boomer generation also felt the effects of the drug trade in their increased drug use from the 1960s to 80s.
Along with substance use, criminal involvement, suicide and murder were
also on the rise. Due to the large amount of baby boomers, commercial
marijuana use was on the rise. This increased the supply and demand for
marijuana during this time period.
Mexico
Political influences
Corruption in Mexico
has contributed to the domination of Mexican cartels in the illicit
drug trade. Since the beginning of the 20th century, Mexico's political
environment allowed the growth of drug-related activity. The loose
regulation over the transportation of illegal drugs and the failure to
prosecute known drug traffickers and gangs increased the growth of the
drug industry. Toleration of drug trafficking has undermined the
authority of the Mexican government and has decreased the power of law
enforcement officers in regulation over such activities. These policies
of tolerance fostered the growing power of drug cartels in the Mexican
economy and have made drug traders wealthier.
Many states in Mexico lack policies that establish stability in
governance. There also is a lack of local stability, as mayors cannot be
re-elected. This requires electing a new mayor each term. Drug gangs
have manipulated this, using vacuums in local leadership to their own
advantage.
In 1929, the Institutional Revolutionary Party (PRI) was formed to resolve the chaos resulting from the Mexican Revolution. Over time, this party gained political influence and had a major impact on Mexico's social and economic policies.
The party created ties with various groups as a power play in order to
gain influence, and as a result created more corruption in the
government. One such power play was an alliance with drug traffickers.
This political corruption obscured justice, making it difficult to identify violence when it related to drugs.
By the 1940s, the tie between the drug cartels and the PRI had
solidified. This arrangement created immunity for the leaders of the
drug cartels and allowed drug trafficking to grow under the protection
of the government officials. During the 1990s, the PRI lost some
elections to the new National Action Party (PAN). Chaos again emerged as elected government in Mexico changed drastically.
As the PAN party took control, drug cartel leaders took advantage of
the ensuing confusion and used their existing influence to further gain
power.
Instead of negotiating with the central government as was done with the
PRI party, drug cartels utilized new ways to distribute their supply
and continued operating through force and intimidation. As Mexico became more democratized, the corruption fell from a centralized power to the local authorities.
Cartels began to bribe local authorities, thus eliminating the
structure and rules placed by the government—giving cartels more
freedom. As a response, Mexico saw an increase in violence caused by drug trafficking.
The corruption cartels created resulted in distrust of government by the Mexican public. This distrust became more prominent after the collapse of the PRI party. In response, the presidents of Mexico,
in the late twentieth century and early twenty-first century,
implemented several different programs relating to law enforcement and
regulation. In 1993, President Salinas created the National Institute
for the Combat of Drugs in Mexico. From 1995 to 1998, President Zedillo
established policies regarding increased punishment of organized crime,
allowing "[wire taps], protected witnesses, covert agents and seizures
of goods", and increasing the quality of law enforcement at the federal
level. From 2001 to 2005, President Vicente Fox created the Federal Agency of Investigation.
These policies resulted in the arrests of major drug-trafficking bosses:
Over
the past few decades drug cartels have become integrated into Mexico's
economy. Approximately 500 cities are directly engaged in drug
trafficking and nearly 450,000 people are employed by drug cartels. Additionally, the livelihood of 3.2 million people is dependent on the drug cartels.
Between local and international sales, such as to Europe and the United
States, drug cartels in Mexico see a $25–30 bn yearly profit, a great
deal of which circulates through international banks such as HSBC.
Drug cartels are fundamental in local economics. A percentage of the
profits seen from the trade are invested in the local community. Such profits contribute to the education and healthcare of the community. While these cartels bring violence and hazards into communities, they create jobs and provide income for its many members.
Culture of drug cartels
Major
cartels saw growth due to a prominent set culture of Mexican society
that created the means for drug capital. One of the sites of origin for
drug trafficking within Mexico, was the state of Michoacán.
In the past, Michoacán was mainly an agricultural society. This
provided an initial growth of trade. Industrialization of rural areas of
Mexico facilitated a greater distribution of drugs, expanding the drug
market into different provinces. Once towns became industrialized, cartels such as the Sinaloa Cartel
started to form and expand. The proliferation of drug cartel culture
largely stemmed from the ranchero culture seen in Michoacán. Ranchero
culture values the individual as opposed to the society as a whole.
This culture fostered the drug culture of valuing the family that is
formed within the cartel. This ideal allowed for greater organization
within the cartels.
Gangs play a major role in the activity of drug cartels. MS-13 and the 18th Street gang
are notorious for their contributions and influence over drug
trafficking throughout Latin America. MS-13 has controlled much of the
activity in the drug trade spanning from Mexico to Panama.
Female involvement is present in the Mexican drug culture. Although
females are not treated as equals to males, they typically hold more
power than their culture allows and acquire some independence. The
increase in power has attracted females from higher social classes.
Financial gain has also prompted women to become involved in the
illegal drug market. Many women in the lower levels of major drug
cartels belong to a low economic class. Drug trafficking offers women an
accessible way to earn income.
Females from all social classes have become involved in the trade due
to outside pressure from their social and economic environments.
It was common for smugglers in Colombia to import liquor, alcohol, cigarettes and textiles, while exporting cocaine. Personnel with knowledge of the terrain were able to supply the local market while also exporting a large amount of product.
The established trade that began in the 1960s involved Peru, Bolivia,
Colombia, Venezuela and Cuba. Peasant farmers produced coca paste in
Peru and Bolivia, while Colombian smugglers would process the coca paste
into cocaine in Colombia, and trafficked product through Cuba.
This trade route established ties between Cuban and Colombian organized
crime. From Cuba, cocaine would be transported to Miami, Florida; and
Union City, New Jersey. Quantities of the drug were then smuggled
throughout the US.
The international drug trade created political ties between the
involved countries, encouraging the governments of the countries
involved to collaborate and instate common policies to eradicate drug
cartels. Cuba stopped being a center for transport of cocaine following
the establishment of a communist government in 1959. As a result, Miami
and Union City became the sole locations for trafficking.
The relations between Cuban and Colombian organized crime remained
strong until the 1970s, when Colombian cartels began to vie for power.
In the 1980s and 90s, Colombia emerged as a key contributor of the drug
trade industry in the Western Hemisphere. While the smuggling of drugs
such as marijuana, poppy, opium and heroin became more ubiquitous during
this time period, the activity of cocaine cartels drove the development
of the Latin American drug trade. The trade emerged as a multinational
effort as supplies (i.e. coca plant substances) were imported from
countries such as Bolivia and Peru, were refined in Colombian cocaine
labs and smuggled through Colombia, and exported to countries such as
the US.
Colombia's economy
Colombia
has had a significant role in the illegal drug trade in Latin America.
While active in the drug trade since the 1930s, Colombia's role in the
drug trade did not truly become dominant until the 1970s.
When Mexico eradicated marijuana plantations, demand stayed the same.
Colombia met much of the demand by growing more marijuana. Grown in the
strategic northeast region of Colombia, marijuana soon became the
leading cash crop in Colombia. This success was short-lived due to anti-marijuana campaigns that were enforced by the US military throughout the Caribbean. Instead, drug traffickers in Colombia continued their focus on exporting cocaine.
Having been an export of Colombia since the early 1950s, cocaine
remained popular for a host of reasons. Colombia's location facilitated
its transportation from South America into Central America, and then to
its destination of North America. This continued into the 1990s, when
Colombia remained the chief exporter of cocaine.
The business of drug trafficking can be seen in several stages in
Colombia towards the latter half of the 20th century. Colombia served as
the dominant force in the distribution and sale of cocaine by the
1980s. As drug producers gained more power, they became more centralized
and organized into what became drug cartels.
Cartels controlled the major aspects of each stage in the traffic of
their product. Their organization allowed cocaine to be distributed in
great amounts throughout the United States. By the late 1980s,
intra-industry strife arose within the cartels.
This stage was marked by increased violence as different cartels fought
for control of export markets. Despite this strife, this power struggle
led to then having multiple producers of coca leaf farms. This in turn
caused an improvement in quality control and reduction of police
interdiction in the distribution of cocaine. This also led to cartels attempting to repatriate their earnings which would eventually make up 5.5% of Colombia's GDP.
This drive to repatriate earnings led to the pressure of legitimizing
their wealth, causing an increase in violence throughout Colombia.
Colombian drug lord Diego Murillo Bejarano was extradited from Colombia to the U.S. in May 2008
Throughout the 1980s, estimates of illegal drug value in Colombia ranged from $2bn to $4bn.
This made up about 7–10% of the $36bn estimated GNP of Colombia during
this decade. In the 1990s, the estimates of the illegal drug value
remained roughly within the same range (~$2.5bn). As the Colombian GNP rose throughout the 1990s ($68.5bn in 1994 and $96.3bn in 1997), illegal drug values began to comprise a decreasing fraction of the national economy.
By the early 1990s, although Colombia led in the exportation of cocaine,
it found increasing confrontations within its state. These
confrontations were primarily between cartels and government
institutions. This led to a decrease in the drug trade's contribution to
the GDP of Colombia; dropping from 5.5% to 2.6%.
Though a contributor of wealth, the distribution of cocaine has had
negative effects on the socio-political situation of Colombia and has
weakened its economy as well.
Social impacts
By the 1980s, Colombian cartels became the dominant cocaine distributors in the US. This led to the spread of increased violence throughout both Latin America and Miami.
In the 1980s, two major drug cartels emerged in Colombia: the Medellin
and Cali groups. Throughout the 1990s however, several factors led to
the decline of these major cartels and to the rise of smaller Colombian
cartels.
The U.S. demand for cocaine dropped while Colombian production rose,
pressuring traffickers to find new drugs and markets. In this time
period, there was an increase in activity of Caribbean cartels that led
to the rise of an alternate route of smuggling through Mexico. This led
to the increased collaboration between major Colombian and Mexican drug
traffickers. Such drastic changes in the execution of drug trade in
Colombia paired with the political instabilities and rise of drug wars
in Medellin and Cali, gave way for the rise of the smaller Colombian
drug trafficking organizations (and the rise of heroin trade).
As the drug trade's influence over the economy increased, drug lords
and their networks grew in their power and influence in society. The
occurrences in drug-related violence increased during this time period
as drug lords fought to maintain their control in the economy.
Typically a drug cartel had support networks that consisted of a number
of individuals. These people individuals ranged from those directly
involved in the trade (such as suppliers, chemists, transporters,
smugglers, etc.) as well as those involved indirectly in the trade (such
as politicians, bankers, police, etc.). As these smaller Colombian drug
cartels grew in prevalence, several notable aspects of the Colombian
society gave way for further development of the Colombian drug industry.
For example, until the late 1980s, the long-term effects of the drug
industry were not realized by much of society. Additionally, there was a
lack of regulation in prisons where captured traffickers were sent.
These prisons were under-regulated, under-funded, and under-staffed,
which allowed for the formation of prison gangs, for the smuggling of
arms/weapons/etc., for feasible escapes, and even for captured drug
lords to continue running their businesses from prison.
Western Balkans
Since
the beginning of the 21st century, the global drug trade network
witnessed the emergence of criminal groups from the Western Balkans
as crucial players. These groups have moved up from being small-time
crooks to major drug distributors. Most of these organized crime groups
belonged to Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. The illicit trade activities of the Balkans primarily involved Latin America, Western Europe, South Africa, Australia and Turkey.
These groups keep their operations outside the Western Balkans, while
staying connected to their homeland. Within the network of these groups,
the dealmakers operate in a proximity of supply sources and the
distribution networks are managed by foot soldiers. However, the bosses
of the organized criminal groups stay and keep their wealth in the United Arab Emirates.
The UAE is amongst the enablers of global corruption and illicit
financial flows. Analysts have claimed that criminal actors across the
world either operate from or through the Emirates. It was a haven for
criminals, where the risk for illicit activities remains low.
For the Balkan criminals, a growing trend was to relocate to the
UAE, which became an attraction to dirty money and kingpins from several
European nations and the United Kingdom. Besides, Dubai was also dubbed as the "new Costa del Crime", replacing the crime hideaway of Spain, the Costa del Sol. The UAE had poor regulations for money laundering and for screening of suspicious transactions. The lack of regulations against illicit financial activities prompted the Financial Action Task Force (FATF) to place the Gulf country on its grey list in March 2022.
Consequently, the Emirates' remained a safe option for the criminals.
Nearly two-thirds of the Albanian criminal groups, who were active in
trade of drugs like cocaine,
were believed to be hiding in the UAE. One of such individuals, Eldi
Dizdari was accused of international drug trafficking and was living in
Dubai. Research revealed that these criminals invested huge amounts in
the Emirates' real estate and other economical sectors to live there. Another trafficker of cocaine from Bosnia,
Edin Gačanin was living in the UAE using his extensive profits to buy
property and protection in the country. Dubbed as the "European
Escobar", he connected the supply network between production markets of
Latin America and consumer markets of Western European. He was able to
evade the arrest and investigations, including by the US Drug Enforcement Administration, by seeking shelter in the Emirates.
While the recreational use of (and consequently the distribution of) cannabis
is illegal in most countries throughout the world, recreational
distribution is legal in some countries, such as Canada, and medical
distribution is permitted in some places, such as 10 of the 50 US states
(although importation and distribution is still federally prohibited). Beginning in 2014, Uruguay became the first country to legalize cultivation, sale, and consumption of cannabis for recreational use for adult residents.
In 2018, Canada became the second country to legalize use, sale and
cultivation of cannabis. The first few weeks were met with extremely
high demand, most shops being out of stock after operating for only four
days.
Cannabis use is tolerated in some areas, most notably the
Netherlands, which has legalized the possession and licensed sale (but
not cultivation) of the drug. Many nations have decriminalized the
possession of small amounts of marijuana. Due to the hardy nature of the
cannabis plant, marijuana is grown all across the world and is today
the world's most popular illegal drug with the highest level of
availability. Cannabis is grown legally in many countries for industrial, non-drug use (known as hemp) as well. Cannabis-hemp may also be planted for other non-drug domestic purposes, such as seasoning that occurs in Aceh.
The demand for cannabis around the world, coupled with the drug's
relative ease of cultivation, makes the illicit cannabis trade one of
the primary ways in which organized criminal groups finance many of
their activities. In Mexico, for example, the illicit trafficking of
cannabis is thought to constitute the majority of many of the cartels'
earnings,
and the main way in which the cartels finance many other illegal
activities; including the purchase of other illegal drugs for
trafficking, and for acquiring weapons that are ultimately used to
commit murders (causing a burgeoning in the homicide rates of many areas
of the world, but particularly Latin America).
Some studies show that the increased legalization of cannabis in the United States (beginning in 2012 with Washington Initiative 502 and Colorado Amendment 64) has led Mexican cartels to smuggle less cannabis in exchange for more heroin.
In the 1950s and 1960s, most heroin was produced in Turkey and transshipped in France via the French Connection crime ring, with much of it arriving in the United States. This resulted in the record setting April 26, 1968 seizure of 246 lb (111.6 kg) of heroin smuggled in a vehicle on the SS France (1960) ocean liner. By the time of The French Connection (1971 film), this route was being supplanted.
Then, until c. 2004, the majority of the world's heroin was produced in an area known as the Golden Triangle. However, by 2007, 93% of the opiates on the world market originated in Afghanistan.
This amounted to an export value of about US$4 billion, with a quarter
being earned by opium farmers and the rest going to district officials,
insurgents, warlords and drug traffickers.
Another significant area where poppy fields are grown for the
manufacture of heroin is Mexico. In November 2023, a U.N report showed
that in the entirety of Afghanistan, poppy cultivation dropped by over
95%, removing it from its place as being the world's largest opium
producer.
According to the United States Drug Enforcement Administration,
the price of heroin is typically valued 8 to 10 times that of cocaine
on American streets, making it a high-profit substance for smugglers and
dealers.
In Europe (except the transit countries Portugal and the Netherlands),
for example, a purported gram of street heroin, usually consisting of
700–800 mg of a light to dark brown powder containing 5–10% heroin base,
costs €30–70, making the effective value per gram of pure heroin
€300–700. Heroin is generally a preferred product for smuggling and
distribution—over unrefined opium due to the cost-effectiveness and
increased efficacy of heroin.
Because of the high cost per volume, heroin is easily smuggled. A
US quarter-sized (2.5 cm) cylindrical vial can contain hundreds of
doses. From the 1930s to the early 1970s, the so-called French Connection supplied the majority of US demand. Allegedly, during the Vietnam War, drug lords such as Ike Atkinson used to smuggle hundreds of kilograms of heroin to the US in coffins of dead American soldiers (see Cadaver Connection).
Since that time it has become more difficult for drugs to be imported
into the US than it had been in previous decades, but that does not stop
the heroin smugglers from getting their product across US borders.
Purity levels vary greatly by region with Northeastern cities having the
most pure heroin in the United States. On 17 October 2018 police in Genoa, Italy discovered 270 kg of heroin hidden in a ship coming from the Iranian southern port of Bandar Abbas. The ship had already passed and stopped at Hamburg in Germany and Valencia in Spain.
Penalties for smuggling heroin or morphine are often harsh in
most countries. Some countries will readily hand down a death sentence
(e.g. Singapore) or life in prison for the illegal smuggling of heroin
or morphine, which are both internationally Schedule I drugs under the Single Convention on Narcotic Drugs.
In May 2021, Romania seized 1.4 tonnes of heroin at Constanța port of a shipment from Iran that was headed for Western Europe.
Methamphetamine smuggled inside a car tireHeroin or methamphetamine drug use kit ("works") with needles and a spoon
Methamphetamine is another popular drug among distributors. Three common street names are "meth", "crank", and "ice".
According to the Community Epidemiology Work Group, the number of clandestine methamphetamine laboratory
incidents reported to the National Clandestine Laboratory Database
decreased from 1999 to 2009. During this period, methamphetamine lab
incidents increased in mid-western States (Illinois, Michigan, Missouri,
and Ohio), and in Pennsylvania. In 2004, more lab incidents were
reported in Missouri (2,788) and Illinois (1,058) than in California
(764). In 2003, methamphetamine lab incidents reached new highs in
Georgia (250), Minnesota (309), and Texas (677). There were only seven
methamphetamine lab incidents reported in Hawaii in 2004, though nearly
59 percent of substance use treatment admissions (excluding alcohol)
were for primary methamphetamine use during the first six months of
2004. As of 2007, Missouri leads the United States in drug-lab seizures,
with 1,268 incidents reported. Often canine units are used for detecting rolling meth labs
which can be concealed on large vehicles, or transported on something
as small as a motorcycle. These labs are more difficult to detect than
stationary ones, and can often be obscured among legal cargo in big
trucks.
Methamphetamine is sometimes used intravenously, placing users and their partners at risk for transmission of HIV and hepatitis C.
"Meth" can also be inhaled, most commonly vaporized on aluminum foil or
in a glass pipe. This method is reported to give "an unnatural high"
and a "brief intense rush".
In South Africa methamphetamine is called "tik" or
"tik-tik"."Known locally as "tik," the substance was virtually unknown
as late as 2003. Now, it is the country's main addictive substance, even
when alcohol is included. " Children as young as eight are abusing the substance, smoking it in crude glass vials made from light bulbs. Since methamphetamine is easy to produce, the substance is manufactured locally in staggering quantities.
The government of North Korea
currently operates methamphetamine production facilities. There, the
drug is used as medicine because no alternatives are available; it also
is smuggled across the Chinese border.
The Australian Crime Commission's illicit drug data report for
2011–2012 stated that the average strength of crystal methamphetamine
doubled in most Australian jurisdictions within a 12-month period, and
the majority of domestic laboratory closures involved small
"addict-based" operations.
Temazepam, a strong hypnotic benzodiazepine, is illicitly manufactured in clandestine laboratories (called jellie labs) to supply the increasingly high demand for the drug internationally. Many clandestine temazepam labs are in Eastern Europe. The labs manufacture temazepam by chemically altering diazepam, oxazepam or lorazepam. "Jellie labs" have been identified and shut down in Russia, Ukraine, Latvia and Belarus.
Surveys in many countries show that temazepam, MDMA, nimetazepam, and methamphetamine rank among the top illegal addictive substances used.
Prostitutes buy cocaine capsules from a drug dealer in Berlin, 1930. The capsules sold for 5 marks each.
Cocaine is a highly trafficked drug. In 2017 the value of the global
market for illicit cocaine was estimated at between $94 and $143 billion
dollars. In 2022, illicit sales in Europe were estimated at $11.1 billion, and illicit sales in the US at . In 2020, almost 2,000 tons of cocaine were produced for distribution through illicit markets.
.jpg)
.jpg)
