INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT

UNCLAS SECTION 01 OF 06 TEGUCIGALPA 002939 SIPDIS DEPT. FOR INL/LP, EB/ESC/TFS, S/CT, DRL/PHD, AND WHA/CEN STATE PASS AID FOR LAC AND G JUSTICE FOR OIA, AFMLS AND NDDS TREASURY FOR FINCEN DEA FOR OILS AND OFFICE OF DIVERSION CONTROL PANAMA FOR CUSTOMS ATTACHE E.O. 12958: N/A TAGS: SNAR EAID PREL ETTC KCRM KJUS PHUM PTER HO SUBJECT: INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT (INCSR) - HONDURAS 2003 REF: A. STATE 328024 ¶B. STATE 324347 ¶1. Summary The trans-shipment of cocaine through Honduras by air, land, and maritime routes continued, but with significant disruption in 2003. Overall, seizures in Honduras were higher than the past five years combined, with 5,738 kilos of cocaine seized. Corruption within the police, Public Ministry (Attorney General and prosecutors),and the judiciary remain a primary impediment to successful law enforcement cooperation. However, the Government of Honduras has moved forward with the implementation of new units in support of the new Money Laundering Law, which was passed in 2002. The National Council for the Fight Against Drug Trafficking (CNCN) renewed its commitment to lead the country's counternarcotics efforts. The Supreme Court is operating with greater political independence, however, political pressures within the court have had less than positive results on many occasions. Available funds to implement a government approved counternarcotics master plan remain severely limited. While the Ministry of Public Security (which includes all police) and the Honduran Armed Forces have taken a more active and successful role in counternarcotics operations, the Public Ministry remains unable or unwilling to prosecute suspects and/or seize assets. In addition, those assets that have been seized have yet to be disposed of properly. Honduras is a party to the 1988 UN Drug Convention. ¶2. Status of Country Honduras does not produce drugs in any meaningful quantities. Its primary drug problem stems from the trafficking of drugs, in particular, cocaine, via air, land, and Western Caribbean maritime routes. There are direct air and maritime links to U.S. cities and the Pan-American Highway crosses southern Honduras. The Honduran police and Honduran Navy do not have sufficient maritime assets to attack drug trafficking along its north coast. There was a significant increase in drug interdiction this year, with the total amount of cocaine seized increasing from 76 kg in 2002 to 5,738 kg as of December 15, 2003. Despite the recent passage of a broader money laundering law, money laundering in Honduras remains a serious concern. ¶3. Country Actions against Drugs in 2003 Policy Initiatives: The Government of Honduras launched a combined police and military effort in the anti-narcotics efforts in April to create a negative impact on the transiting of along the North Coast and Southern Borders areas. A new Pan American Highway checkpoint, constructed with INL assistance, provides a constant deterrent to the flow of narcotics into Honduras from its southern border with Nicaragua. The new money laundering law now allows cases to be investigated that are not directly linked to narcotics, including corruption, terrorism, and other crimes. The Government of Honduras formed a Financial Investigation Unit and assigned prosecutors and investigators to special money laundering units to insure that suspected narcotics traffickers are fully investigated. The Honduran Congress is in the process of reviewing a new anti-narcotics law that will provide law enforcement with expanded authority to initiate undercover operations. The current law, as written, prohibits these types of narcotics operations and mandates that police participating in sting operations be arrested for the purchase or sale of narcotics. The new Criminal Procedures Code took effect on February 20, ¶2002. This code changes Honduras' criminal legal system from an inquisitorial system to an accusatorial one. While the code's primary goal was to decrease opportunities for accused criminals to manipulate the justice system, it has been used to block efforts to prosecute drug-trafficking cases. Accomplishments: As of December 15, 2003, 5,738 kilograms of cocaine and 13 kilograms of heroin have been seized. In addition, over 364,592 marijuana plants have been detected and destroyed. Close to a thousand narcotic related arrests have been made. The Honduran Frontier Police have been largely responsible for these seizures, drawing on INL provided counternarcotics training, technical assistance, and equipment. Law enforcement agencies have also seized cash totaling USD 1,119,130, and boats and vehicles with a total worth of approximately USD 1,000,000. Law Enforcement Efforts: Counternarcotics efforts are a priority for the Government of Honduras, however the Directorate for the Fight Against Narcotrafficking (DLCN) suffers from poor leadership, inadequate funding, and unqualified personnel. The DLCN appointed a new director in June 2003, selecting a person with only military experience, who has been unable to work effectively with U.S. and Honduran law enforcement agencies. Despite the ineffectiveness, the DLCN, Frontier Police, military, and other Government of Honduras agencies have had successes. Corruption: While the Government of Honduras has taken some steps to address internal corruption, the judicial system continues to be a significant impediment to effective law enforcement. The Ministry of Public Security has taken significant steps to investigate corrupt individuals in the ministry. A new police Internal Affairs Unit has been formed and several cases have been brought to trial. However, corruption in the Public Ministry as well as the judiciary provided significant road blocks in the prosecution and conviction of alleged narcotraffickers, money launderers as well as corrupt officials. In the past eight months, two members of congress have been arrested for participating in illegal narcotics related activity. Although they initially claimed diplomatic immunity, one voluntarily relinquished his immunity so that his case could be fully investigated and brought to trial. The other, a member of the Central American Parliament, was not able to use his immunity due to his arrest in a third country, Nicaragua. Agreements and treaties: Honduras has counternarcotics agreements with the United States, Belize, Colombia, Jamaica, Mexico, Venezuela and Spain. The Ministry of Public Security and the taxing authority for Honduras (DEI) have signed an agreement that provides the Ministry of Public Security the authority to open sealed containers with probable cause, an authority that was formally solely held by the DEI. The Honduran government is an active member of the Inter-American Drug Abuse Control Commission (CICAD). Honduras also hosts the Regional Center for Counternarcotics Development and Judicial Cooperation in Central America, headed by a Nicaraguan. In November 2003, Honduras completed all necessary domestic requirements to become a party to the UN Convention on Organized Crime. Cultivation/Production: Cannabis remains the only illegal drug known to be cultivated in Honduras. Although thousands of plants were destroyed in 2003, the Government of Honduras does not use aerial herbicides in eradication efforts. As a rule, when marijuana farms are detected, the plants are cut down and destroyed. Drug Flow/Transit: Despite increased interdiction efforts, the volume of drugs transiting Honduras continues to increase. There has been a noticeable growth in the number of suspect air-tracks and maritime vessels en route to southern Mexico and the United States. Overland routes using commercial and private vehicles continue to be used to smuggle cocaine and heroine. Approximately 90 percent of drugs entering/transiting Honduras is destined for the United States, although it has now become a common practice for traffickers to pay local transporters in drugs rather than cash. Gang members are increasingly used to distribute these in-kind payments to Hondurans in urban areas and along the North Coast. There is evidence of the existence of an illicit trade of "arms for drugs," with the arms from these deals presumably destined for use by terrorist groups in Colombia. Drug smuggling, using ships departing Honduran ports on the Caribbean, is common. The Government of Honduras has made a concerted effort to implement a port security program with the goal of having it in place and functional by July 2004. Domestic Programs/Demand Reduction: The Maduro Administration has launched two pilot programs directed at Honduran youth to fight drug abuse. The CNCN is making demand reduction a major part of Honduran counternarcotics efforts. It reflects the government's appreciation that drug trafficking through Honduras is not only a national security threat, but a major public policy problem as well. Drug use continues to increase among youth in Honduras; 49 percent of Hondurans are under 18 years of age. Drug abuse by gang members is a growing issue of public concern. It is viewed by some as only one of many public health and social problems linked to unemployment, poverty and economic under- development. Cannabis is the most widely abused illegal drug in Honduras, followed by inhalants, and to a much lesser extent cocaine and designer drugs. The CNCN's program and the Ministry of Public Security's program link the efforts of the government's demand reduction entity, the Institute for the Prevention of Alcoholism and Drug Addiction (IHADFA),with an umbrella group (CIHSA) of NGOs working in demand reduction and drug rehabilitation efforts. The new programs combine those formerly operated by the Ministries of Public Health and Education, IHADFA and CIHSA, to launch a community-wide effort to inform youth about the dangers of drugs and provide alternatives in the form of sports, the arts, and after school projects. The U.S. Embassy is working with the National Council and the Ministry of Public Security to support this approach. ¶4. U.S. Policy Initiatives and Programs U.S. Policy Initiatives: U.S. counternarcotics initiatives aim to strengthen Honduran law enforcement entities, with a special focus on enhancing Government of Honduras maritime interdiction along the north coast. The Maduro Administration has worked hard to support implementation of bilateral counternarcotics projects and has expressed interest in expanding program cooperation, though resources continue to be extremely limited. Bilateral Cooperation: The United States added almost USD 750,000 to its bilateral counternarcotics program during ¶2003. The U.S. Government funded additional training and equipment to the Frontier Police, continued to support existing canine and maritime projects, as well as the checkpoint project along the Pan-American Highway, which was implemented in March 2003. The Road Ahead: The Honduran government has demonstrated a strong renewed commitment, backed by concrete action, to attack drug trafficking through its national territory. It is organizing police, military, social services, and national security policy to more effectively respond to this challenge on a limited budget. We expect to see an increased level of maritime and land interdiction operations during the next year. The CNCN has taken a revitalized leadership role within the government. We expect to work closely with the Council to better address implementation of the national counternarcotics master plan. Corruption, threats, and violence continue to pose a major challenge to effective law enforcement. ¶5. Statistical tables Summary Tables for Three Years For Calendar Years: 2003 -- 2002 -- 2001 ¶1. Coca: -- A. Cultivation N/A N/A N/A -- B. Eradication N/A N/A N/A -- C. Harvestable after Eradication N/A N/A N/A ¶2. Potential Coca Leaf: N/A N/A N/A ¶3. Opium: -- A. Cultivation N/A N/A N/A -- B. Eradication N/A N/A N/A -- C. Harvestable after Eradication: N/A N/A N/A ¶4. Cannabis (in plants) -- A. Cultivation: Unknown Unknown Unknown -- B. Eradication: 364,592 41,402 269,000 -- C. Harvestable after Eradication: N/A N/A N/A ¶5. Potential Cannabis Yield: Unknown Unknown Unknown ¶6. Drug Seizures (in kilos) ¶A. Coca leaf N/A N/A N/A ¶B. Cocaine paste N/A N/A N/A ¶C. Cocaine base N/A N/A N/A ¶D. Cocaine HCL 5,738 76 182 ¶E. Opium poppy straw N/A N/A N/A ¶F. Opium gum N/A N/A N/A ¶G. Heroin 13 0 0 ¶H. Cannabis 3,205 2.85 2.74 ¶I. Crack Cocaine (rocks) 2,157 708 714 ¶8. Illicit Labs Destroyed: 0 0 0 ¶9. Domestic Consumption of illicit drugs: Unknown Unknown Unknown ¶10. Arrests: 1,058 722 896 ¶11. Users: Unknown Unknown Unknown ¶6. Chemical Control: The Government of Honduras continues attempts to limit the illicit introduction of precursor chemicals into the country. Comprehensive regulations to control the sale of chemicals necessary for the processing of illegal narcotics, however, have yet to be developed. During the year, the government, in conjunction with the UNDP, installed a national data system to more effectively track precursor chemical transactions. ¶7. Money Laundering: Honduras is not regarded as an important regional financial center nor is it considered to have a significant black market for smuggled goods. However, Honduras does have a growing money laundering problem, due to its connection to the narcotics trade. Honduras passed a tough new money laundering law in February 2002 (Decree 45-2002). In 2003, the government took steps to implement the law, by establishing and equipping the entities responsible for combating money laundering. Further progress, however, will depend on the training and retention of personnel familiar with money laundering and financial crimes, clearer delineation of responsibility among different government entities, and improved ability and willingness of the Public Ministry to investigate and prosecute financial crimes aggressively. In 2003, there were ten cases brought to court under the new money laundering law, which were pending at year's end. The money laundering that takes place in Honduras is primarily related to narcotics trafficking, although there are connections to other forms of criminal activity as well. The 2001 arrest of the Jimenez drug trafficking cartel on the north coast of Honduras revealed an extensive money laundering operation of both domestic and foreign illicit proceeds. Their operation revealed a variety of criminal activities including narcotics trafficking, auto theft, kidnappings, bank fraud, smuggling, prostitution and corruption. Money laundering activities are not limited to the banking sector, but likely include currency exchange firms, casinos and front companies. The 2002 money laundering law expands the definition of the crime of money laundering to encompass (1) any non- economically justified sale or movement of assets and (2) asset transfers connected with trafficking of drugs, arms and people, auto theft, kidnapping, bank and other forms of financial fraud, or terrorism. The penalty for money laundering is a prison term of 15 to 20 years. The law includes banker negligence provisions that make individual bankers subject to two to five-year prison terms for allowing money-laundering activities. The law created a Financial Information Unit in the National Banking and Insurance Commission to which banks and other non-bank financial institutions must send information on all transfers exceeding USD 10,000 or 500,000 lempiras (about USD 28,000),or other atypical transactions. The law requires the Financial Information Unit and the reporting banks to keep a registry of reported transactions for five years. The Financial Information Unit receives over two thousand reports per month of transactions over the designated threshold. The money laundering law requires that a public prosecutor be assigned to the Financial Information Unit. In 2002, a prosecutor from the Public Ministry was assigned to the Unit full time. However in 2003, the Public Ministry changed this arrangement so that now there are four prosecutors assigned to the Unit, each on a part time basis, with responsibility for specific cases divided among them depending on their expertise. Public prosecutors, under urgent conditions and with special authorization, may subpoena data and information directly from financial institutions. In 2003, the Financial Information Unit initiated investigations into 74 atypical transactions, as compared to 24 in 2002. The Unit also responded to 156 requests for investigation made by the Public Ministry, as compared to 48 in 2002. Early in 2003, there was ambiguity as to which of two units within the police forces would have responsibility for the investigation of financial crimes. This issue was resolved by mid-year, with responsibility assigned to the Office of Special Investigative Services (DGSEI). By the end of 2003, it appeared the various government entities involved in the fight against money laundering (the police investigators, the Financial Information Unit and the prosecutors) were beginning to work well together and communicate more effectively among themselves. International Cooperation: In October 2002, Honduras became a member of the Caribbean Financial Action Task Force. Honduras cooperates with U.S. investigations and requests for information pursuant to the 1988 UN Drug Convention. Honduras has signed Memoranda of Understanding to exchange information on money laundering investigations with Panama, El Salvador, Guatemala and Colombia, and has signed and ratified the UN Convention against Organized Crime. The Honduran government adheres to the core principles for effective banking supervision that the Basel Committee adopted in 1997. At the regional level, Honduras is a member of the Central American Council of Bank Superintendents, which meets periodically to exchange information. Asset Seizure and Forfeiture: The National Congress enacted an asset seizure law in 1993 that subsequent Supreme Court rulings substantially weakened. The 2002 money laundering legislation greatly strengthened the asset seizure provisions of the law, establishing an Office of Seized Assets under the Public Ministry. The law authorizes the Office of Seized Assets to guard and administer "all goods, products or instruments" of a crime. However, the actual process of establishing and equipping this office to carry out its function has been slow. The implementing regulations governing the Office of Seized Assets were finalized and published in March 2003, and a director of the office was named at the same time. However, plans to build separate offices and a warehouse for this entity are still incomplete, with the result that seized assets are currently kept in various locations under dispersed authority. Moreover, in September another government entity made an attempt to take over the function of controlling seized assets from the nascent Office, though unsuccessful. Consequently, the Office of Seized Assets cannot yet be said to have established firm control over the asset seizure and forfeiture process. The physical transportation of large sums of cash is also a growing phenomenon in Honduras. As reported in last year's cable at year-end the "Captain Ryan Case" resulted in a seizure of USD 460,000. This marked the beginning of a trend and since last year's report there has been seizures of cash and assets totaling over USD 2,000,000. Terrorist Financing: The National Banking and Insurance Commission has issued freeze orders promptly for the names on the UN 1267 Sanctions Committee's consolidated list and each of the subsequent lists of individuals and entities the U.S. has designated under relevant authorities. The Commission has reported that, to date, no accounts linked to the individuals or entities on the lists have been found in the Honduran financial system. The Ministry of Foreign Affairs is responsible for instructing the Commission to issue freeze orders. The Commission directs Honduran financial institutions to search for, hold and report on terrorist-linked accounts and transactions, which, if found, are frozen. While Honduras is a major recipient of flows of remittances (estimated at USD 800 million in 2003),there has been no evidence to date linking these remittances to the financing of terrorism. Remittances primarily flow from Hondurans living in the United States to their relatives in Honduras, and the great majority of these remittances are sent through wire transfer or bank services. Honduras has signed and ratified the 1999 International Convention for the Suppression on the Financing of Terrorism. Offshore financial centers: Honduras is not considered an offshore financial center. Per a January 2002 National Banking and Insurance Commission Resolution (No. 012/08-01- 2002),the operation of offshore financial institutions is prohibited. Palmer