Intelligence: January 7, 2000


RUSSIAN INTELLIGENCE AND ORGANIZED CRIME: Over the last six months, various reports have appeared regarding the laundering of Russian Mafia drug money through the Bank of New York and other banks. The estimated amount of laundered money has been steadily climbing; the latest police estimates are $10 billion. This may only be the tip of the iceberg. What is emerging from new investigations and revelations from former Warsaw Pact agents and files is that Soviet intelligence had long-running and far reaching campaigns to infiltrate both banks and organized crime. The money-laundering case is simply the convergence of these two campaigns. The KGB went after Western banks as early as 1950. Corrupted bank officials could provide not only key industrial information, but useful blackmail information on politicians, industrialists, and military officers. Many bank officials subverted by the Soviets thought they were working for local criminal groups, and with good reason. The KGB had also infiltrated organized crime. By 1960 (after only five years of trying), the Soviet bloc had over 100 agents inside the Italian Mafia, including 23 by the Bulgarians alone. The Czechs, Hungarians, and Russians each had about that many. Efforts to penetrate other criminal organizations quickly followed. Access to the internal workings of such organizations had numerous effects helpful to Soviet espionage. With Mafia-run smuggling, murder, and blackmail organizations already in place, the KGB and its allied organizations could piggy-back their needs onto existing Mafia operations, gaining considerable efficiency. There was no need to figure out how to smuggle something into, say, France, if the Mafia already knew how to do it. Murders could be contracted to criminal organizations, which left no tell-tale political traces back to Moscow. After finding the Mafia so easily penetrated and its rich repertoire of skills so easily learned, the KGB and its allies began setting up their own criminal organizations, partly to facilitate intelligence operations and partly for pure profit. After the collapse of the Soviet Empire at the end of the Cold War, many of these KGB-run criminal organizations simply cut their ties to Moscow and became fully-fledged non-political crime syndicates. Many "downsized" KGB agents were able to find employment with old friends "on the other side of the house". This was particularly true for non-Soviet agents (e.g., the Bulgarians, Czechs, and Hungarians) who had been steadily growing more independent from Moscow even before 1990. This makes sense, as it is simply unbelievable that so many Russian-based criminal organizations could have suddenly sprung into life in the West during the first two years after the fall of the Berlin Wall. These were, in fact, not new organizations but former intelligence operations with a new focus for their activities. Soviet Military Intelligence (the GRU) and its allied Warsaw Pact organizations developed ties to terrorist organizations that were well known even in the 1980s. They supplied these organizations with intelligence, training, weapons, and money. What has only lately become known, however, is that the GRU and its allies were also heavily involved in the international drug industry. This began with the fact that many terrorist organizations had close ties to drug production. The KGB allowed the GRU to handle the drug business because it was seen as a type of sabotage. As time went by, Soviet Military Intelligence found that smuggling drugs into target countries (and providing them at reasonable prices near military bases) was a good way to weaken those targets. Targeted individuals with a drug problem (or with relatives who had drug problems) could be paid for their services with drugs rather than cash. After this campaign got rolling in the 1960s, the Soviets discovered what should not have been a surprise -- drug smuggling can be immensely profitable. Tons of money began flowing into the coffers of the GRU and its allied agencies through drug sales. The two campaigns converged when banks penetrated by the KGB began laundering drug profits for the GRU. By 1980, the KGB estimated that it owned outright or exercised "strategic control" over operations that provided 31% of the drugs smuggled into the US. Similar operations provided drugs to Europe, and KGB/GRU organizations provided markets and/or shipping services for drugs from Latin American and Asian groups which produced drugs. The KGB also estimated that Soviet or allied operations controlled 38% of drug distribution in the US, and had agents in 75% of Latin American banks as well as 45% of US and Canadian banks. The post-1991 Russians have been keen to see intelligence cooperation in the wars on organized crime and drugs. It is unclear if the motivation for this is an effort to destroy or control the now-rogue criminal operations, or to tip them off to attempted infiltrations and attacks. Given that current Russian intelligence (both the FIS and the military) cannot in its own mind decide if it is a friend or enemy of the US, it is probable that both motivations exist. --Stephen V Cole 


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