BURMA'S COUNTERNARCOTICS PERFORMANCE

UNCLAS SECTION 01 OF 04 RANGOON 000757 SIPDIS STATE FOR EAP AND INL TREASURY FOR OASIA DEA FOR OF,OFF CDR USPACOM FOR FPA E.O. 12958: N/A TAGS: SNAR KCRM BM SUBJECT: BURMA'S COUNTERNARCOTICS PERFORMANCE REF: A. STATE 100273 ¶B. STATE 153955 ¶1. Summary: The Burmese government (GOB) has reduced opium cultivation, cooperated with the United States, Australia, China, Thailand, and other states on a series of major narcotics cases, and continued to prosecute traffickers. It has failed in regard to its new money laundering law, whose implementation has been delayed by the collapse of Burma's private banking system. The GOB has deliberately chosen to give the Wa and other former insurgent groups time to exit the narcotics trade - the last of these grace periods expires in 2005. The GOB has cracked down whenever former insurgent groups have broken their pledges and, after 2005, the United Wa State Army, like all other groups in Burma, will be fair game for government enforcement actions. Burma's current narcotics legislation (basically the 1993 Law on Narcotic Drugs and Psychotropic Substances) is more than adequate for the investigation and prosecution of major drug offenses. It has been used already to put more than 10,000 felons behind bars with sentences in excess of ten years each. End Summary. ¶2. The paragraphs below are keyed to the criteria outlined in our counternarcotics demarche (reftel A). ¶3. Facilitate the participation of independent monitors to verify poppy eradication and other counternarcotics efforts. Burma cooperates with the United States on its annual opium yield survey and UNODC on census surveys of opium production. In fact, all recent estimates of opium and heroin production in Burma have been compiled by the United States and the United Nations on the basis of these surveys. According to the United States, Burma reduced opium production by more than three-quarters between 1996 and 2002. According the United Nations, Burma reduced its opium production by more than half over the same period. The results of the U.S. survey in 2003 is not yet available. According to the United Nations, Burma reduced its opium fields by a further 24 percent in 2003, despite good weather. By their estimate, the acreage under opium cultivation in Burma in 2003 declined to only 62,200 hectares, down more than 100,000 hectares from the area under cultivation in 1996. Burma cooperates closely with the United States' Drug Enforcement Administration and the Australian Federal Police on narcotics enforcement activities. Both DEA and AFP maintain active offices in Burma. Both offices have maintained detailed records of the Burmese government's seizures, arrests, and other law enforcement operations in recent years. DEA's file, compiled and verified by agents who have been involved in investigations in Burma, is available in Washington. ¶4. Arrest and prosecute the senior leadership of heroin and methamphetamine trafficking organizations. Burma has arrested over 90,000 persons on drug-related charges over the past 15 years. Through the end of 2002, 42 persons were sentenced to death for drug-related offenses in Burma, and another 37 were imprisoned for life. During the same period, more than 12,500 persons were sentenced to prison for ten years or more for narcotics-related offenses. These arrests and prosecutions continued in 2003. While statistics on prosecutions are not yet available, preliminary data indicate that Burma arrested more than 700 suspects in drug-related cases during the first three months of 2003. Many of these arrests and convictions involved major drug syndicates. Many also involved close cooperation with the United States, Australia, and other western law enforcement agencies. Among the most notable were the following: -- Cooperation with the United States and China in the investigation of the "1-2-5" syndicate, which led to the arrest of 28 persons in the United States, Hong Kong, China, and India in May 2003. Reportedly, this group had been responsible for the export of more than $100 million in heroin to the United States since 2000. -- Cooperation with China in a series of arrests and seizures that have continued throughout 2001 and 2002 all along the Chinese border following the signature of a Chinese/Burmese MOU on counternarcotics operations in January 2001. Since then, Burma has turned over 60 fugitives to China, including members of one group (Tan Xiao Lin and company) which China described as the "largest armed drug-trafficking gang in the Golden Triangle." -- Cooperation with Thailand in the seizure of 116 kilograms of heroin and 7.8 million methamphetamine tablets in February ¶2002. Two of the principals behind this shipment were also eventually convicted in Rangoon and sentenced to "indefinite" (i.e., unending) terms in prison. -- Cooperation with the United States Drug Enforcement Administration and the Australian Federal Police in the seizure of 357 kilograms of heroin in Fiji in October 2000. Death sentences were eventually handed down in Rangoon for two drug kingpins connected with this case. ¶5. Establish a mechanism for reliable measurement of methamphetamine production and demonstrate progress in reducing production and increasing seizures. There is no mechanism for reliably measuring illicit methamphetamine production in any country, including the US. The most commonly used procedure is to take seizures and multiply by 10. If applied to Burma, that measure would suggest production of 320 million tablets in 2001, 94 million tablets in 2002, and 19 million tablets during the first three months of 2003. However, the GOB believe that this reduction in seizures is due more to changing patterns of methamphetamine production and trafficking than it is to the overall reduction in production. Since 2002, under pressure from the GOB, more traffickers have taken to mixing chemicals at sites along the Chinese/Burmese border and then shipping the product in powder or crystal form along the Mekong River to plants in Laos, Thailand, and Burma where the drug is flavored for local markets and stamped into tablets. The net result is that the product spends far less time in Burma than before; hence, the lower seizures. ¶6. Establish an effective program for the control of precursor chemicals. Burma does not have a precursor chemical industry; nor does it produce any of the precursor chemicals used in the manufacture of heroin, amphetamine-type stimulants, or other synthetic drugs. All chemicals used for the production of narcotics in Burma (with the exception of opium itself) are imported from China, India, Thailand, and other states. None are produced locally. Burma has outlawed 25 precursor chemicals, including ephedrine, acetic anhydride, and even caffeine (in bulk). However, it has not yet been able to stem trafficking from neighboring countries, despite seizures in 2002 which amounted to 2,900 liters of acetic anhydride, 26,000 liters of chemical liquids, 4,800 kilograms of chemical powders, and 1,700 kilograms of ephedrine. On the other hand, it has begun to build the international cooperation that is required to control this trade. In January 2003, Burma held its first trilateral conference with India and China on precursor chemicals, and in March met bilaterally with India on the same topic. As a result of those meetings, India is now considering creating a 100-mile wide exclusion zone along its border with Burma within which any possession of ephedrine would be illegal. A similar zone on the Indian frontier already exists for acetic anhydride. ¶7. Create a special task force of police and prosecutors to target and investigate high-level drug traffickers and drug trafficking groups. Drug enforcement efforts in Burma are led by the Central Committee for Drug Abuse Control (CCDAC),which is comprised of personnel from the police, customs, military intelligence, and the army. CCDAC now has 21 drug-enforcement task forces around the country, with most located in major cities and along key transit routes near Burma's borders with China, India, and Thailand. CCDAC's units are underfunded and badly equipped. Nevertheless, they are bringing narcotics traffickers to heel and securing convictions. As noted above, more than 90,000 persons have been arrested for narcotics-related offenses in Burma over the past 15 years and more than 10,000 have sentenced to 10 years or more in prison. CCDAC has also developed arrangements for cooperation with the United States, China, Thailand, and India, among others, that have allowed law enforcement agents around the world to move effectively against major drug cartels. Burma, in short, has an organization that has already proved that it can move effectively against high-level drug traffickers and drug trafficking groups. What it does not have is a political situation that will allow it to move aggressively against former insurgent groups, like the United Wa State Army and others implicated in the drug trade, for fear of reigniting the insurgencies that devastated eastern Burma for so many decades before 1989. Burma has deliberately chosen to slowly wean these former insurgent groups from their dependence on the narcotics trade, while building power at the center to use when the grace periods it has allowed these groups run out. In 1997, the Eastern Shan State Army of Sai Lin promised to end opium production in its cease-fire area and did so. In 2000, the Kokang Chinese of Pen Kya Shin broke their pledge to end opium production and, since 2001, have been raked by counter-narcotics operations that have been mounted by both the Burmese and Chinese governments. In 2003, as a result, opium production in the Kokang Chinese capital district of Lawkai was a mere fraction (20 percent) of its level two years earlier. In 2005, the United Wa State Army is scheduled to end opium production. If it fails, it will get the same treatment from the Chinese and Burmese that the Kokang Chinese have already tasted. ¶8. Fully implement and enforce Burma's money-laundering legislation. The GOB enacted new and relatively powerful money laundering legislation in June 2002. That legislation criminalizes money laundering in connection with virtually every kind of serious criminal activity and levies heavy responsibilities on banks in regard to reporting. Penalties are also substantial. Implementation of the new legislation has lagged, however. While the government held training seminars on money laundering, started several investigations, and seized assets in connection with several major narcotics cases, it has not yet prosecuted these cases as violations of the money-laundering law. Neither has it published regulations to guide bank reporting in regard to suspicious transactions. The net result is that the government is effectively working only with the asset seizure provisions of its 1993 narcotics law. Perhaps deterred by a banking system crisis which ripped through the country in February 2003, it has not really yet put its money laundering legislation to work. ¶9. Take effective measures to stem the flow of illicit drug money into the banking system and economic enterprises and to end joint economic ventures with the leaders of drug trafficking organizations. Money, illicit or otherwise, is not flowing into Burma's banking system, which collapsed in February 2003. Since then deposits at Burma's banks have declined by estimated 40 percent, with the hardest hit banks being those, like the Asia Wealth Bank, Myanmar Mayflower Bank, and Myanmar Oriental Bank, that were rumored to have connections with criminal elements. The GOB has not attempted to bail the banks out of their current predicament; rather, it has let them slowly collapse as monuments to bad banking. A variety of factors contributed to this banking system crash, including a long-standing climate of financial repression, the collapse of Burma's informal financial institutions, and the introduction of Burma's new money laundering law, which required bank depositors to prove, if challenged, the legal origin of their funds. Since accurate record-keeping is a rarely practiced art in Burma, many businessmen reacted to the new legislation, and the possibility that the government might seize their funds, by withdrawing their deposits. This was probably not the primary cause of the crash, but was one of the straws that broke the back of Burma's banks. The GOB does not have joint ventures with the leaders of drug trafficking organizations. Rather, it has given corporations like the United Wa State Party's Hong Pang Company outright concessions for the operation of a variety of businesses which range from farms to ranches to ruby mines and other trading and industrial establishments. This has been controversial, both in Burma and abroad, but the GOB has argued that it is necessary, for two reason: (1) to give known narcotics trafficking groups an alternative source of income; (2) to tie these groups more closely to the Burmese economy. The Burmese view is that these former insurgents are less likely to go back into rebellion if they have interests in the Burmese economy. ¶10. Amend Burma's substantive and procedural criminal laws to facilitate effective investigation and prosecution of major drug traffickers. With UNODC's assistance, Burma has recently completed the draft of a new mutual legal assistance law which will facilitate legal and judicial cooperation with other countries. Reportedly, this draft legislation will be made law later this year. The legal regime will also be helped by the final publication of the rules and regulations for the 2002 money laundering law. However, with the banking system now imploding, that is not a critical issue. Otherwise, Burma's current narcotics legislation (basically the 1993 Law on Narcotic Drugs and Psychotropic Substances) is more than adequate for the investigation and prosecution of major drug offenses. It is completely in compliance with the recommendations of the 1988 UN Drug Convention and has been used already to put more than 10,000 felons behind bars with sentences in excess of ten years each. Martinez