UNCLAS SECTION 01 OF 06 TEGUCIGALPA 000004

SIPDIS

STATE FOR INL/LP, WHA/CEN, WHA/PPC, AND DRL/PHD
STATE PASS AID FOR LAC AND G
JUSTICE FOR OIA, AFMLS AND NDDS
TREASURY FOR FINCEN
PANAMA FOR CUSTOMS ATTACHE

E.O. 12958: N/A
TAGS: SNAR EAID PREL ETTC KCRM KJUS PHUM HO
SUBJECT: INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT
(INCSR) - HONDURAS

REF: A. STATE 240035

B. STATE 240015


1. Embassy Tegucigalpa hereby submits 2002 International
Narcotics Control Status Report (INCSR) for Honduras. Begin
text:


I. Summary

The trans-shipment of cocaine through Honduras using air,
land and maritime routes continued without significant
disruption in 2002. Overall seizures in Honduras dropped to
their lowest level in more than three years and were the
fewest in Central America. There is solid evidence of drug
trafficking-related corruption within Honduran law
enforcement, judicial, and military organizations. On a
positive note, the Honduran Congress finally approved a new
money laundering law in March that will facilitate U.S. and
Honduran law enforcement and counterterrorism efforts. The
National Council for the Fight Against Drug Trafficking
renewed its commitment to lead the country's counternarcotics
efforts. A new, more politically-independent Supreme Court
was installed in January with the change of government. It
has already demonstrated its willingness to tackle the
problems of judicial corruption. It is working assiduously
to improve the administration of justice in the country.
Available funds to implement a government-approved
counternarcotics master plan remain limited. The Ministry of
Public Security and Honduran military took a more active role
in counterdrug operations; however, their actions did not
effectively reduce the amount of drugs transiting Honduras.
The U.S. continues to provide funding, training and technical
support to improve Honduran law enforcement capabilities.
Ensuring the detention, prosecution and incarceration of
major offenders, however, remains a challenge. Honduras is a
party to the 1988 UN Drug Convention.

II. Status of Country

Honduras does not produce drugs in any meaningful quantities.
Its primary drug problem stems from the trafficking of hard
drugs, in particular, cocaine, via air, l

and and maritime
routes. There are direct air and maritime links to U.S.
cities and the Panamerican Highway crosses southern Honduras.
The Honduran police and Honduran Navy do not have sufficient
maritime assets to attack drugtrafficking along its north
coast. There was a significant drop in drug interdiction
this year, with the total amount of cocaine seized dropping
from 182 kg to 76 kg. Despite the recent passage of a new
broader money laundering law, money laundering in Honduras
remains a serious threat, although the country is not yet a
major money laundering center.

III. Country Actions against Drugs in 2002

Policy Initiatives: In February, the new President, Ricardo
Maduro, launched a "zero tolerance" campaign to combat crime
in Honduras. His policy launched a combined police-military
effort to patrol throughout the country, but primarily in
urban areas, where widespread violent gang activity had
reached alarming levels. The President directed more than
3,000 soldiers to work directly in support of law enforcement
activities.

In response to violations of its airspace, the new Government
approved the creation of a joint inter-agency incident
response group; however, implementation of this new
capability stalled. In late 2002, Presidential-designate
Armida Villeda de Lopez Contreras, the chair of the National
Council for the Fight Against Drug Trafficking, launched an
effort to improve coordination between the police, armed
forces, prosecutors, and judiciary.

The Criminal Procedures Code took effect on February 20,

2002. The new code changes Honduras, criminal legal system
from an inquisitorial system to an accusatorial one. The
code's chief goal is to decrease opportunities for criminals
to manipulate the justice system; and it should assist
efforts to prosecute drug-trafficking cases. However, it
requires substantial political will and monetary resources to
implement effectively. All elements of the judicial system
(law enforcement, prosecutors, judges, public defenders)
required, but did not fully receive, additional budgetary
resources for the successful implementation. Nonetheless,
Honduras carried out far more trials (84) under the new code
than other Central American countries during similar
transition periods.

Accomplishments: As of December 1, 2002, 76 kilograms and
708 rocks of crack and 914.75 pounds of marijuana had been
seized and there had been 722 narcotics-related arrests.
Some progress was made in establishing a small maritime law
enforcement facility in Gracias a Dios Department. The
Honduran Frontier police had success detecting cocaine
transshipments through frontier posts, drawing on increased
U.S. government-provided counternarcotics training. Law
enforcement agencies seized USD 460,000 in a mid-December
seizure and search of the M/V Capt. Ryan.

Law Enforcement Efforts: Counternarcotics efforts are a
priority for government agencies, but evidence continues to
mount of penetration of law enforcement agencies by
narcotraffickers and other criminals, as well as bribery.
The DEA equivalent investigative force (the DLCN) continued
to operate ineffectively despite new leadership. The new
DLCN Director subsequently resigned his post in late October.
A successor had not yet been named as of December 30. The
Minister of Public Security supported creation of new
anti-narcotics police units, authorized an expanded role for
the Frontier Police in the counter-drug effort, and joined an
inter-agency effort to create a new joint police-military
counternarcotics command.

Corruption: Corruption remains a major problem in all
aspects of national life. It is the single most serious
impediment to more effective counternarcotics efforts. While
the government does not encourage or facilitate drug
trafficking nor does any senior official participate in the
illicit production or distribution of drugs, corruption
within the government and judiciary is a significant
impediment to effective law enforcement actions. The
Minister of Public Security named a new Police Chief and
Internal Affairs Director in February and continued efforts
to purge the police of corrupt elements. However, the
Government has still not conducted any effective
investigations into criminal penetration of law enforcement
and judicial units. The Internal Affairs Director and
Minister of Public Security became embroiled in a highly
publicized dispute over the involvement of police officers in
extrajudicial killings, which inhibited efforts to
investigate corruption within the police. Nationally elected
officials enjoy legal immunity for all acts while in office,
creating a perverse incentive for people involved in illicit
activity to run for office and complicating enforcement
efforts against suspected illegal narcotics activity. The
widespread issuance of Honduran diplomatic and official
passports also aids drug-trafficking. A member of the
1997-2001 Honduran Congress was arrested with 6 kilos of
heroin while attempting to cross the Panama-Costa Rica border
using a valid Honduran diplomatic passport.

Agreements and treaties: During the course of year, the U.S.
and Honduras both ratified a stolen car treaty, which had
been signed in November 2001. The treaty has not yet entered
into effect. A U.S.-Honduras maritime counternarcotics
agreement entered into force in 2001, under its auspices a
trilateral counterdrug maritime operation, which included
Nicaragua, was conducted during April 2002. The agreement
allows U.S. vessels to operate in Honduran waters in support
of Honduran law enforcement efforts; in addition, the
agreement provides for information exchange and the
coordination of joint counternarcotics activities. 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. Honduras has counternarcotics agreements with
the U.S., Belize, Colombia, Jamaica, Mexico, Venezuela and
Spain.

Cultivation/Production: Marijuana remains the only illegal
drug known to be cultivated in Honduras. There were no
additional seizures of synthetic drugs during 2002, despite
the seizure of ecstasy for the first time in Honduras in
December 2001. Aerial herbicides are not used.

Drug Flow/Transit: The volume of drugs transiting Honduras
continues to increase. There has been a noticeable increase
in the number of suspect air flights transiting Honduran
airspace en route to Guatemala and southern Mexico. Overland
routes using commercial and private vehicles continue to be
used to smuggle cocaine. Illegal go-fast boat landings in
Department of Gracias a Dios also are used to deliver cocaine
for trans-shipment via small boat to La Ceiba, where it is
transported onward for embarkation on commercial vessels, or
trucked toward Guatemala. The vast majority of drugs
entering/transiting Honduras - probably over 90 percent - are
destined for the U.S., although it is now an apparent common
practice for traffickers to pay local "contractors" in drugs.
Gang members are increasingly used to "push" these in-kind
payments to Hondurans in urban areas and along the north
coast. Drug smuggling using ships departing Honduran ports
on the Caribbean is common. Despite efforts to establish a
port security program, the government's autonomous Port
Authority has not made any significant progress to address
this problem.

Domestic Programs/Demand Reduction: The Maduro
Administration, under the direction of Presidential-designate
Armida Villeda de Lopez Contreras, the chair of the National
Council for the Fight Against Drug Trafficking, has launched
a pilot program directed at Honduran youth to fight drug
abuse. The National Council is making demand reduction a
major part of Honduran counternarcotics efforts. It reflects
the government's appreciation that drug trafficking through
Honduras is a national security threat and major public
policy problem inside the country.

Drug use is a growing phenomenon among youth culture in
Honduras; 49 percent of Hondurans are under 18. 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. Alcohol is by far the most abused drug in
Honduras, followed by marijuana, inhalants, and - to a much
lesser degree - cocaine. Crack cocaine and designer drug use
is increasing.

The National Council's pilot program links the efforts of the
government's demand reduction entity "IHADFA" - the Institute
for the Prevention of Alcoholism and Drug Addiction - with an
umbrella group ("CIHSA") of NGOs working in demand reduction
and drug rehabilitation. The new program combines programs
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 to address root causes
of drug experimentation. The U.S. Embassy is working with
the National Council to support this new approach.

IV. U.S. Policy Initiatives and Programs

U.S. Policy Initiatives: U.S. counternarcotics initiatives
are aimed at improving the institutional abilities of
Honduran law enforcement entities, with a special focus on
enhancing GOH maritime interdiction capabilities along the
north coast. The new government has worked hard to support
implementation of bilateral counternarcotics projects and
expressed interest in expanding program cooperation, even
though its resources are extremely limited. In addition, the
June amendment to the 2000 Letter of Agreement directed
monies for the establishment of a machine readable passport,
completion of the construction of a container freight
tracking system, and a repatriation shelter for illegal
aliens from third countries. We are continuing our support to
help launch the Honduran government's pilot programs.

Bilateral Cooperation: The U.S. added almost USD 1.5 million
to its bilateral counternarcotics program during 2002. We
funded construction of additional office space for a new
transnational crime analytical unit and provided necessary
computer equipment to CEINCO, the joint intelligence
coordination center. U.S. Customs provided refresher
training and an assessment of the DLCN canine program.
Construction of a counternarcotics and customs checkpoint on
the Panamerican Highway was completed in November 2002. The
new facility will be manned by the Frontier Police, which
received intensive training for the U.S. INS Border Tactical
Police. The refurbishment of two 36-foot and two 24-foot
USG-donated boats for counternarcotics purposes was completed
and the boats were deployed along the Caribbean (north)
coast. The U.S. doubled its support for Honduran demand
reduction programs. The Embassy found no irregularities when
it conducted a thorough review, including site visits, of the
status of previous USG donations to Honduran law enforcement
units.

The Road Ahead: The Honduran government of President Maduro
has demonstrated a strong interest in attacking drug
trafficking through its national territory and is organizing
itself to more effectively respond to this challenge. We
expect to see an increased level of maritime interdiction
operations by the government during the next year. The
National Council for the Fight Against Drug Trafficking,
under the direction of Presidential-designate Armida Villeda
de Lopez Contreras, has taken a revitalized leadership role
within the government. We expect to work closely with the
council to address better implementation of the national
counternarcotics master plan. The council is more
effectively coordinating the various efforts of the police,
Attorney General's Office, judiciary, and armed forces.
Corruption, threats and violence continue to pose a major
challenge to effective law enforcement, but our relationships
with the National Council and key ministries should result in
significant progress during the next year.


V. Statistical tables

Summary Tables for Three Years

For Calendar Years: 2002 -- 2001 -- 2000


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. Cannibis (in plants)

-- A. Cultivation: Unknown Unknown Unknown
-- B. Eradication: 41,402 269,000 590,000
-- 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 76 182 1,139

E. Opium poppy straw N/A N/A N/A

F. Opium gum N/A N/A N/A

G. Heroin (grams) N/A N/A N/A

H. Cannabis (tons) .46 2.85 2.74

I. Crack Cocaine (rocks) 708 714 1,289


8. Illicit Labs Destroyed: 0 0 0


9. Domestic Consumption of illicit drugs:
Unknown Unknown Unknown


10. Arrests: 722 896 1,009


11. Users: Unknown Unknown Unknown

VI. Chemical Control: The GOH continues to try to limit the
illicit introduction of precursor chemicals into the country.
However, comprehensive regulations to control the sale of
chemicals necessary for the processing of illegal narcotics
have never been developed. During the year, the government
in conjunction with UNDP installed a national data system to
more effectively track precursor chemical transactions.


VII. Money Laundering:

Honduras has a growing money laundering problem, but with
passage of a tough new anti-money laundering law in February
2002 (Decree 45-2002), is taking steps to control money
laundering activities. Honduras is not an important regional
financial center and is not considered to have a significant
black market for smuggled goods. Per a January 2002 National
Banking and Insurance Commission Resolution (No.
012/08-01-2002), the operation of offshore financial
institutions is prohibited. The arrest of the Jimenez drug
trafficking cartel in May 2001, 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 new anti-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 law includes banker
negligence provisions that make individual bankers subject to
two to five-year prison terms for allowing money laundering
activities.

The law creates 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
30,000) 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 between 2,600 to 2,700
reports per month of transactions over the designated
threshold. A public prosecutor is assigned full-time to the
Financial Information Unit and public prosecutors, under
urgent conditions and with special authorization, may
subpoena data and information directly from financial
institutions. Since passage of the law, the Financial
Information Unit has begun investigating approximately 70
cases of possible money laundering activity.

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. 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 Honduran Supreme
Court rulings substantially weakened. The new money
laundering legislation strengthens the asset seizure
provisions of Honduran law. According to the law, officials
in the Public Ministry will operate a warehouse for seized
assets. The implementing regulation governing the operations
of the warehouse is still under discussion. Since passage of
the law and during the course of investigating cases of
suspected money laundering, Honduran officials have frozen
two bank accounts worth approximately USD 250,000.

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 the
subsequent lists of individuals and entities the U.S. has
designated under relevant authorities. The Commission
reported that, to date, no accounts linked to the 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. Honduras signed
the 1999 International Convention for the Suppression on the
Financing of Terrorism on November 11, 2001.
Palmer