Source: 2003
Released by the Bureau for International Narcotics and Law Enforcement Affairs
Kazakhstan continues to be an important transit corridor for drugs being transported to Russia and Europe. UNODC estimates that approximately one-third of Afghanistan's predicted 4,500 metric ton opium crop will transit Central Asia in 2004, with 70 percent of that amount expected to transit Kazakhstan. Reports also continue to suggest that Kazakhstan has become a transit country for illegal drugs going to Europe from China and other parts of Eurasia. Local drug use and its consequences continue to increase, but local crime connected to drug use seems to have dropped. Kazakhstan continues to take steps to control drug abuse within its own borders, but official corruption complicates efforts to improve controls over drug trafficking. Kazakhstan became a party to the 1988 UN Drug Convention in 1997.
Although vast fields of wild marijuana and ephedra, along with some local production of opium, show that Kazakhstan could become a major producer of narcotics, evidence continues to suggest that local production is mostly limited to in-country use with some smuggling into Russia. Drugs transiting Kazakhstan impact mainly Russia and Europe, but proceeds from drug smuggling are a potential revenue for terrorist groups. No discovery of laboratories for the production of narcotics was announced this year, but a large increase in the seizure of precursors suggests that Kazakhstan could become a source for these chemicals.
Policy Initiatives. Kazakhstan is in the third year of its five-year plan against drug trafficking, although the President recently announced that it will be twenty years before Kazakhstan gains control over its narcotics problem. For the last three months of 2003, the GOK has been holding extensive meetings on the reinforcement of all law enforcement bodies, with a view to simplifying bureaucratic structures and eliminating duplication of functions. Other meetings have focused on counternarcotics forces, proposing, inter alia, eliminating the moribund Drug Control Committee, the creation of a DEA-like office with sole responsibility for fighting narcotics, or the transfer of all counternarcotics forces to the Ministry of the Interior. The GOK also announced a reform of all law enforcement academies in the country.
GOK's announcement last year that it would be establishing a regional counternarcotics information center under the EU's Central Asia Drug Action Program (CADAP) has been superseded by a UNODC project, in which GOK will participate, to create a Central Asia Regional Information and Coordination Center (CARICC) based in Tashkent. The project announced last year to convert 20,000 hectares of wild marijuana in the Chu Valley to the commercial production of hemp apparently will not be carried out.
Internally, GOK continues to strengthen its law enforcement capacity, having increased the total budget for law enforcement agencies from 45.7 billion tenge ($326.4 million) in 2001 to 70 billion tenge ($500 million)in 2003. Police salaries were increased in 2003 with promise of a further fifty per cent increase in 2004, weakening the argument for "survival-based corruption." In January, the Ministry of Justice began drafting a strengthened counternarcotics law and in September, the GOK placed controls over a wide range of equipment that might be used for the production of illegal narcotics and precursors. The GOK also announced the construction of twenty-five major new border posts, fifteen for the search of trucks and ten for the search of trains. The first five of these posts will be built in 2004.
Law Enforcement Efforts. The GOK continues to fight drug smuggling actively with results, however, showing only slight improvement over last year. The first nine-month figures for 2003 show only a moderate increase in seizures of opium and a slight increase in seizures of heroin. The majority of narcotics seizures were made by the Border Guards, with Ministry of the Interior running a close second. Seizures by Customs were negligible. One notable seizure not reflected in these figures, however, is Customs' seizure in November of 340 kilograms of heroin, discovered in a train car filled with vegetables stopped at the Temirzhol Railway Station on the Russian border.
Kazakhstan also participated with other CIS states (Armenia, Belarus, Kyrgyzstan, Russia, and Tajikistan) in a joint operation that netted 116 kilos of heroin and 168 kilos of opium. The fact remains, however, that the vast majority of drug seizures in Kazakhstan consist of locally grown marijuana.
The lack of improvement in narcotics seizures has not gone unnoticed by the GOK. In September, the Deputy-Prosecutor General denounced the ineffectiveness of GOK customs and border services, pointing out that the Russian Federal Security Forces often seize more in a single operation than GOK forces seize all year.
Data furnished by the Ministry of the Interior show a drop in drug-related arrests from 18,000 in 2001 to 13,000 in 2002, with a continued drop during the first nine months of 2003. Other sources suggest, however, that these figures only show a drop in the general crime rate and that drug-related crime is actually on the increase. After a steep drop in 2001 and 2002, arrests for narcotics smuggling showed a fifteen per cent increase in the first nine months of 2003.
Corruption. In a recent poll, ninety per cent of respondents claimed daily experience of corruption while seeking government services. A poll of local businessmen again rated Customs as the most corrupt agency in Kazakhstan, with every other government agency rated a close second or third. GOK regularly denounces corruption among government officials and, in fact, there were 3,370 corruption-related arrests between April 1, 2002, and March 31, 2003, the majority of these arrests being made in the Ministry of Defense, Ministry of Internal Affairs, Customs and the Tax Inspectorate. Arrests for corruption are up thirteen per cent during the first nine months of 2003.
Agreements and Treaties. These were discussed in detail above. GOK readily cooperates regionally and internationally in the fight against narcotics.
Cultivation and Production. Marijuana and ephedra grow wild on about 1.2 million hectares of southern Kazakhstan, with the largest single location being the 130,000 hectares of marijuana in Chu Valley. Approximately 97 percent of the marijuana sold in Central Asia originates in Kazakhstan. Production of opium and heroin remain minimal.
Drug Flow/Transit. One estimate of last year's predicted opium harvest in Afghanistan was 3,000 metric tons (three million kilos), of which one-third was expected to pass through Central Asia. Seventy per cent of that amount (700 metric tons, or 700,000 kilos) was expected to transit Kazakhstan. If we assume that half of that was converted to heroin (the ratio is ten to one), then a total of 385 metric tons (385,000 kilos) of opiates passed through Kazakhstan in 2002. Total seizures last year were less then 400 kilos of opiates, about 0.1 percent (zero point one per cent) of the total. In other words, the flow of narcotics through Kazakhstan is essentially unimpeded.
The main routes for narcotics coming into Kazakhstan continue to run through Tajikistan and Kyrgyzstan, or Turkmenistan and Uzbekistan. Kazakhstan's increasing prosperity has created a new market for artificial drugs like Ecstasy and amphetamines shipped in from Russia.
Domestic Demand. During the first nine months of 2003, there were 49,207 registered addicts in Kazakhstan, almost a six per cent increase over last year. Experts estimate that the true number of addicts is about five times the number of those registered. Recent reports suggest that the huge influx of narcotics from Afghanistan into Russia and Europe has begun to saturate the market, and that opiates are beginning to face stiff competition from artificial narcotics. If this is true, narcotics dealers are likely to turn to the less profitable Central Asia market for increased sales and we may expect Kazakhstan's drug-use problem to grow.
In March, President Nazarbayev approved the State Department's Narcotic Assistance Program Letter of Agreement, signed in December 2002, allowing assistance to begin. The U.S. overall goal is to develop a long-term cooperative relationship between police and investigative services of the United States and those of Kazakhstan. Within that framework, the U.S. has the more specific goal of working with the GOK to strengthen areas of recognized weaknesses. The U.S. will be working with the National Forensics Laboratory, the Ministry of the Interior and the Border Guards to provide equipment and training related to counternarcotics.
Given that Kazakhstan will soon become a regional financial center, but has little experience investigating money laundering related to narcotics and terrorism, the U.S. will begin a long-term training effort with the Financial Police Academy, using the Federal Law Enforcement Training Center as the lead agency, but also involving FBI, Treasury and others as appropriate. In the near future the U.S. will also start a trafficking in persons (TIP) program in coordination with USAID. The U.S. program will emphasize training local investigators and prosecutors to build successful legal cases against traffickers.
The Road Ahead. Despite its current problems, Kazakhstan is making serious efforts to end its status as a narcotics transit country, refining laws, developing its police services and cooperating with the international community. Corruption, failure to devote sufficient resources to training and equipment, and a weak infrastructure remain serious problems, but trends are encouraging.
Kazakhstan has a relatively advanced financial infrastructure in comparison to other countries in the region. When combined with the presence of organized crime, entrenched smuggling networks, and corruption in the sizeable oil industry, the country is vulnerable to money laundering. Smuggling of cash is also an ongoing problem in Kazakhstan. Although travelers are required to report the amount of cash they are carrying as they enter or exit the country, porous borders and corrupt officials allow a large amount of cash to pass undetected. Most of the smuggled cash is probably related to illegal capital flight, but there are reports that Kazakhstan has become a transport route for narcotics into Russia and cash and trade items moving into Afghanistan to finance terrorist organizations. It is estimated that 80-90 percent of drugs seized in Kazakhstan originate in Afghanistan.
Relatively large cash seizures of U.S. dollars have been seized at Kazakhstan's borders. And in one money laundering case, an undeclared $831,200, originally from Kazakhstan, was seized by French customs. There was a recent scandal involving the Kazakh Eurasian Bank group, three of whose officials were charged in Belgium with money laundering in connection with the purchase of a villa near Brussels. Kazakhstan suffers high levels of illegal capital flight despite the existence of currency controls and capital transfer restrictions. The Ministry of Finance has estimated that between $500 million and $1 billion are lost annually in illegal fund transfers abroad. Much of the capital flight is achieved via the practice of transfer pricing, particularly in the oil sector. Oil swaps are also common. The arrangement provides a way to get oil to refineries and then to market from remote oil fields and isolated nations like Kazakhstan. Title to oil in one location is transferred to an available oil supply that might be thousands of miles away. Oil swaps can be appropriate and even necessary but they also create perceptions that the energy sector is vulnerable to bribery and money laundering. Kazakhstan is ranked low on the Transparency International Corruption Perceptions Index.
Money laundering was criminalized in Kazakhstan by Article 30 of the 1998 antidrug law, which makes it illegal to launder money in connection with the sale of illegal drugs. However, the definition of money laundering used in the act is narrow. A further limit to the effectiveness of the law is that bank records may not be examined until after a criminal case has been initiated. In January 2002, the Tax Committee was replaced by the Financial Police Agency, which has authority to investigate money laundering and other financial crimes. The Government of Kazakhstan (GOK) is reportedly aware of the problems with the policing of financial crimes, including money laundering, and is taking corrective measures. The GOK has made limited efforts to pass anti-money laundering legislation, but it is not anticipated that this will happen before 2005. The National Bank has established a "know your customer" program and has asked local banks to report suspicious financial activities. Perhaps as a result, there are reports that large amounts of money seem to be moving into less regulated parts of the economy.
Kazakhstan ratified the 1988 UN Drug Convention and in December 2000 the country signed the UN Convention against Transnational Crime. On February 24, 2003 Kazakhstan ratified the UN International Convention for the Suppression of the Financing of Terrorism. Kazakhstan is also a signatory of the Central Asian Agreement on Joint Fight Against Terrorism, Political and Religious Extremism, Transnational Organized Crime and Illicit Drug Trafficking, signed in April 2000 by Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
Kazakhstan is still in the process of developing some of the key legal and institutional frameworks to guarantee successful economic security and development. As part of this program, Kazakhstan should pass comprehensive anti-money laundering and terrorist and terrorism financing laws that adhere to world standards. Kazakhstan law enforcement and customs authorities should examine smuggling and trade-based money laundering.