Border security - Transnational crime in Micronesia

Introduction. As described in the first two parts of this small series, Micronesia is an enormous, remote, thinly populated region containing two independent microstates (Kiribati and Nauru), three states in ‘Free Association’ with the USA (Republic of the Marshall Islands or RMI, Federated States of Micronesia or FSM, and Palau), and two US territories (Guam and the Commonwealth of the Northern Mariana Islands or CNMI). Micronesia straddles the equator and is composed of atolls, islands and reefs scattered across the open ocean from the Philippines to Hawaii.

6th Mar 2012

 Border security

Transnational Crime in Micronesia (Part 3 - Final)

Byline: Michael Yui / Singapore

Introduction. As described in the first two parts of this small series, Micronesia is an enormous, remote, thinly populated region containing two independent microstates (Kiribati and Nauru), three states in ‘Free Association’ with the USA (Republic of the Marshall Islands or RMI, Federated States of Micronesia or FSM, and Palau), and two US territories (Guam and the Commonwealth of the Northern Mariana Islands or CNMI). Micronesia straddles the equator and is composed of atolls, islands and reefs scattered across the open ocean from the Philippines to Hawaii. The total population is about 500,000 people on about 2,000 square kilometers of land dispersed across millions of square kilometres of sea. Of this population, about 400,000 are US citizens or residents, or have unfettered access to the USA due to Compacts of Free Association with that country.

None of the Micronesian states are economically viable. All of its states are aid-dependant, and aid is at least a primary income source. Government corruption is endemic, if mostly minor and relatively low key. Other revenues flow from tourism, commercial fishing and a declining garment industry. The region is wide open to transnational criminal activity and transnational criminal groups from the Philippines, South America, Taiwan, China and Japan have been identified operating in Micronesia, and local law enforcement is poorly equipped to deal with them. A major cocaine trade route from South America to Asia passes through Micronesia, with (it is assessed) multi-ton shipments being transferred at sea in RMI and Kiribati waters.

Federated States of Micronesia (FSM)

The FSM is composed of four quite different states. Kosrae state to the east has the smallest population density. There is very little criminal activity in Kosrae, which is traditional in outlook. Society is deeply influenced by religious leaders and is routinely described as ‘God-fearing’, with all the societal advantages that brings. Pohnpei state is the location of the FSM capital (Palikir) and it reaps the benefits typical of a capital in terms of foreign exposure and investment. Chuuk (Truk) contains half the population of the FSM, has significant corruption and quite poor economic development. Tap state is the most traditional of the FSM states. It has a Council of Chiefs as the fourth branch of government. The Council provides oversight of the executive, judicial and legislative branches.

FSM is an independent nation in a Compact of Free Association with the USA. It is spread across 2,700km with four states (Kosrae-7.000 people, Pohnpei-29,000 people, Chuuk-60,000 people and Yap-12,000 people) containing 607 islands. Each state has an international airport. The population is 89% Micronesian, the rest being an eclectic mix where there are no major groups. FSM revenue comes form US aid ($130 million annually until 2023), most people are subsistence farmers or fishers and most other food (and all industrial goods and fuel) are imported. Australia also assists, having provided three Pacific patrol boats and a RAN advisor. The Pacific Transnational Crime network is present at Pohnpei, where a transnational crime unit (TCU) has been established by Australian Federal Police (AFP) and the US Hawaii-based Joint Interagency Task Force West (JIATFW). TCU staff receive training from AFP in law enforcement intelligence, investigations, surveillance and operations security. JIATFW supports training for TCUs, and agencies such as the Paciļ¬c Islands Forum secretariat conduct training programs. AFP have provided the TCUs with vehicles, office equipment and furniture, and all have similar surveillance equipment. JIATF West refurbished the Micronesia TCU, and the AFP provided the training, a vehicle and an advisor/mentor. New Zealand has supported the development of a Combined Law Agency Group (CLAG) to provide a forum within the FSWM for coordinated inter-agency investigations. The four FSM states have an internal Department of Public safety. These are small, not trained as Police (they are partly trained as firemen and ambulance personnel) and are very poorly paid.

As usual in Micronesia, drugs provide local law enforcement with some of their major concerns. The local drug of choice is locally grown marijuana, which is illegal but the laws are rarely enforced. Crystal methamphetamine has been identified in the FSM but so far as anyone seems able to tell penetration is in the early stages except in Pohnpei, where it is smuggled in via Palau. Alcohol and Sakau (a potent local form of kava) are the local substances of choice. Marijuana is cheap (US1.00 to $2.00 per joint) and is exported from FSM to Guam, CNMI and RMI in bulk. It is also occasionally exported in bulk aboard Chinese fishing vessels and yachts. There is no cocaine market locally, but there have been infrequent seizures of cocaine during transit through to Asia, and the usual wash-ups of cocaine have occurred. These ‘leakages’ from the trans-Pacific cocaine route are of serious concern to local authorities, as many FSM citizens are aware of the existence of the wash-ups and of the value of the cocaine.

The market in ecstasy and methamphetamines has traditionally been described as a ‘sporadic market’ but it is the view of the AFP TCU that there is a locally significant and growing local market for these drugs. One reason the TCU was established was the concern that this remote, poor region could easily play host to a ‘containerised’ or ‘prefabricated’ methamphetamine laboratory on the scale of the Suva lab seized in 2004.

Other criminal opportunities exist. Aside from .22 calibre rifles and .410 calibre shotguns no firearms are permitted in FSM (they are completely illegal in Yap). There is a criminal market for smuggled firearms and semi-automatic pistols have been seized by FSM Customs. There is also an occasional instance of people trafficking. In one case, a small group of young women from Chuuk state were lured to Guam by well-paid job opportunities in the service and hospitality sector. They were then forced through actual physical harm to engage in prostitution.

The FSM are extremely vulnerable to transnational criminal activity. Public safety personnel are mostly busy with assaults and theft where they are involved with law enforcement actions at all. They have no capability against sophisticated criminals or against drugs, which they have no capacity to identify – samples are sent to Guam for the DEA to analyse. There is a small but locally powerful Chinese business community in Pohnpei, which also hosts the Embassy of the People’s Republic of China. Chinese and Taiwanese fishing interests also play a major role in the fishing industry. There are numerous cases of smuggling into and out of the FSM tied to Chinese and Taiwanese fishing vessels. US DEA personnel and the TCU are confident that this fishing fleet ties to the trans-Pacific cocaine route. However, they lack the resources to prove this and note that this would be extremely hard to do should the fishing vessels involved use the right operating profile. It is suspected that they smuggle small amounts of materials out from China to the FSM, conduct their fishing, and then a small number of boats collect cocaine from ‘motherships’ on their homeward voyage.

In Chuuk it is the growing Philippines community that is the centre of law enforcement concern. Shabu (low grad methamphetamine) is produced in large quantity in the Philippines. It has been noted in small quantity in Chuuk but the scale of the problem is not known. Shabu is produced so cheaply in the Philippines that a ‘hit’ can be less than a US dollar yet still have a large profit margin. However, large profits depend on quantity sale, which is why FSM, US and Australian police officials are concerned about the early signs of the trade developing.

The FSM is among the most vulnerable of Micronesian states. Officials are poorly trained and paid, money is very short, and the country covers a vast expanse of sea. The population is unsophisticated and the trans-Pacific cocaine route passes through the FSM. The pre-emptive spread of the PTCN into the FSM recognises the strategic nature of the FSM’s location, its vulnerability and its weakness.

Republic of Palau

Palau is the closest Micronesian nation to Asia and has had a methamphetamine problem for at least a decade. The Republic is in a Compact of Free Association with the USA, is about 640km at its maximum NW-SE extent and is composed of 340 atoll, volcanic and limestone islands of 490 sq km. Of these nine are inhabited. There are about 22,000 people of whom 15% are Filipino and 5% Chinese. The basis of the economy is tourism with about 84,000 visitors in 2009 (down from 93,000 in 2007) and this number declined by 10% in 2010 due to the recession. Most are from Japan, Taiwan, Korea and the USA. Most agriculture and fishing is subsistence although the EEZ is rich and under-exploited.

The country receives substantial US assistance (US$23 million of a US$132 million economy) and her citizens have visa-free entry to the USA. Exports are mostly tuna, copra and garments.

The drug of local choice is marijuana, which is grown locally and exported to Guam and other Micronesian states due to its high quality. Methamphetamine is a growing issue and is the narcotic of choice in Palau. There have been murders associated with it (the first being in 2003 when a missionary and his wife were killed by two users) and there has been a steady number of cases progressing though the legal system. The drug comes from two streams, high-grade and expensive ‘crystal meth’ brought in by courier and parcel post from the Philippines, and lower-grade drug (shabu) also brought in from the Philippines by sea and in cargo. There is, to date, no evidence suggesting local manufacture. It is easier to import it, indicting a breakdown in law enforcement function. Palau forms a node from which methamphetamines are exported to Guam and other Micronesian states – and this helps explain the establishment of a TCU there.

Significantly, law enforcement efforts against methamphetamines declined between 2001 and 2006 due to a combination of sophisticated smugglers and corruption of law enforcement personnel. The number of arrests has risen since, as has the scale and nature of the problem.

Aside from the usual postal and body-pack smuggling methods, methamphetamines are also smuggled into Palau and from there to other Micronesian destinations in ‘ice chests’. These are normal plastic domestic cold boxes. They are frequently part of checked baggage, transporting frozen seafood for family gifts or celebrations. Small volumes of methamphetamine inside a mass of frozen fish are very difficult for local law enforcement to detect.

This indicates that there is a profitable Palauan ‘trade’ in this drug. It is by its nature a transnational criminal activity as it originates in the Philippines and Japan (‘ice’ dissolved in Saki has been found transiting from Japan to Palau to Hawaii) and is then retailed in Palau or re-exported. This is a complex and sophisticated activity and must include money laundering as profits are repatriated.

Other illegal activities occurring in Palau include people trafficking. About 25% of the population are Filipinos. Prostitutes from that country are used in Palau, as are people employed in near-forced-labour conditions. They live in barracks, routinely working 12-14 hours per day, seven days per week for pay of US$250 or less.

Chinese and Filipinos also dominate small retail. This has led to the usual problem of cheap counterfeit goods being smuggled in. The Chinese fishing fleet plays a role in this smuggling, but the majority of smuggling is done in bulk, using fraudulent documentation. The primary seizures relate to cigarettes, alcohol and counterfeit medicines although normal consumer items have also been seized. Under-valuing of export and import goods is rife. This is especially true of high-quality tuna exports. Undervaluing denies the government revenue and indicates a degree of corruption in the Customs service.

The Palauan law enforcement community is under-staffed and not especially well paid, although they do have a degree of social respect in Palauan society and are held to high standards. Their inter-agency cooperation has been poor in the past but is improving

Republic of Nauru

Nauru is a very small state (21 square kilometers and 13,000 people) which has experienced a catastrophic collapse in income and living standards. Phosphate mining and payments for past inequities once gave the population a per capita income in excess of US$40,000. This is now below US$3,000, the opportunity to retain wealth for the future was not taken and the revenue was squandered.

As a result Nauru is essentially an Australian dependency. The AFP provides diligent support, 36% of food is imported from Australia and the country is aid-dependent. New Zealand also provides significant law enforcement support. Drug problems are confined to locally grown marijuana and home-brewed alcohol. The island is too remote, small and poor to be attractive to trans-national criminal organisations. Nauru’s foray into ‘creative banking’ was a boon to money launderers the world over, but has long been abandoned under international pressure. The same is true of their foray into sale of Nauru passports. While Nauru had significant financial resources its retail market was completely dominated by Chinese businessmen. Many of these have since moved on, many on Nauruan passports to Papua New Guinea. There is no available evidence of transnational criminal activity in Nauru.

Republic of Kiribati

The most eastern nation of Micronesia is Kiribati. Like the other Micronesian archipelagic states, it is a small land mass (32 atolls and one island of which 21 are inhabited) with a small population (93,000 people mostly at Tarawa) scattered across an immensity of open ocean (811 square kilometers of land lost in 3,500,000 square kilometers of ocean). It shares the standard problems of aid dependence, as well as poverty, under trained and under paid law enforcement personnel. It has one Australian-supplied Pacific patrol boat. About half its economy is foreign aid, the exports are copra and fish and most agriculture is subsistence. Also, alcohol is the major social drug of choice, marijuana is grown locally and is also imported from Fiji.

The country loses millions annually from under-reported fishing catches and is essentially dependent on Australia and New Zealand. Ni-Kiribati make superb seamen and when appropriately trained are sought after, especially by German and Japanese shipping companies. Their remittances are about the same size as income from tourism. The main port is at Betio (Tarawa), which is also the hub of the domestic fishing industry and a supply point for some foreign fishing vessels.

The Kiribati police are poorly trained. As late as 2006 they had no training on how to identify a marijuana plant. Cocaine wash-ups do occur and Kiribati officials have heard many tales from locals in the northern area of the country about suspicious cargo transfers between merchant ships, fishing vessels and yachts. Unfortunately, the communications are so poor that these are mostly heard long after the event, and with various embellishments.

There are persistent reports of people trafficking, however the only evidence is for prostitution (including underage females and males) at Betio itself. This has been investigated by JIAFTW and local police. There is considerable prostitution especially to Korean fishing boats, but it is voluntary and not organised – more a reflection of poverty and the crowded nature of Betio itself.

Kiribati is not attractive to transnational criminal gangs due to its poverty and extreme remoteness. Its one value is as a place where transfers from the trans-Pacific cocaine route can occur without significant risk

Strategic Summary

Micronesia is a light dusting of islands across a fifth of the planet’s circumference. Its people are poor and none of the states of Micronesia are economically viable. All are aid dependent to a greater or lesser degree. Once possessed by a global maritime power they have little inherent strategic value until a rival power develops on the opposite side of the pacific to the possessor. This is what occurred in WWII - their importance lies in the strategic pathway they create across the Pacific. Since the USA seized Micronesia during WWII, they have relapsed into being a remote backwater, and this should be their usual condition when they are effective possessions of the globally dominant maritime power.

This value as a pathway is also their value to transnational criminal enterprises, but only when the owning power has little interest in them and few garrisons in the region. This is the current state of play. The South American and Chinese transnational criminal groups using the ‘strategic pathway’ have access to remote anchorages, ‘local cover’ and infrastructure provided by the fishing fleets and yacht routes east west connecting South America to Asia and north-south from Micronesia to Australia. There is sufficient transport infrastructure to move any personnel necessary to support this drug route, and the regional microstates are vulnerable to the corrupting influences of transnational crime should the criminal groups seek to attack their law enforcement agencies.

As societies, the Micronesian states are vulnerable to penetration by transnational criminal entities, and there is ample evidence of this occurring in Micronesia and in Melanesia. Mostly, this penetration is by Chinese transnational criminal groups who use a dual business model: the legal wing launders the money of the illegal wing, which in turn provides the legal wing with an unfair competitive advantage by providing counterfeit goods and suborning local law enforcement agencies. They have the appearance of consistently taking over large sections of the economy of these vulnerable countries.

This is not to say that this is centrally controlled by Beijing. However, what is a functional strategic opportunity being seized by transnational criminal groups can provide secondary strategic vulnerabilities. This lies in any potential Beijing has to convert such economic and political penetration of Micronesian states in to a more formal strategic advantage.

APDR at a glance