Chapter One

Transnational Criminal Organizations – Structure and Operations

As defined by the National Security Council, transnational criminal organizations are self-perpetuating associations operating across national borders that use violence and corruption, and exploit transnational commerce and communications, to protect and disguise their illicit, profit-driven activities.3 These organizations utilize a number of different organizational structures, including hierarchies, clans, networks, and cells, with many transnational criminal organizations evolving and adapting over time due to changing circumstances.4 They may be tied together by ethnicity, territory, or even personal relationships, or they may share a focus on particular segments of the illicit marketplace.5

Figure 2 TCO Hot Spots in California Figure 2: TCO Hot Spots in California Source: CA State Threat Assessment Center (2014)

Transnational criminal organizations have a presence in virtually every major urban area in California, as well as in many smaller cities around the state. From South to North, transnational criminal organizations of varying types have permeated and penetrated California, finding a foothold throughout the state (Figure 2).

Transnational Criminal Organizations in California: Four Key Organizational Structures

1. The Rise of Mexico-Based Drug Cartels

The dominant organizational structure of transnational criminal organizations operating in California is the corporation-like drug trafficking organization. These organizations are commonly referred to as "cartels," so we will use the terms interchangeably. Traditionally, these large cartels had rigid hierarchical structures, but analysts have identified a general trend in recent years toward decentralized cells controlled by a governing body as the "nerve center."6

The primary cartel-like transnational criminal organizations active in California are Mexico-based transnational criminal organizations (commonly referred to as "Mexican drug trafficking organizations"). Though Mexican drug trafficking organizations have been in operation for more than a century, the last 20 years have witnessed a profound change in the operation and control of the key trafficking routes to the United States. The associated emergence of these organizations has been described as "the greatest organizational drug threat to the nation."7

Following the dismantlement of the Medellín and Cali drug cartels by the Colombian government in the late 1980s and early 1990s, the highly-profitable cocaine trafficking routes to the United States were taken over by Mexican drug trafficking organizations, particularly the Tijuana cartel (controlled by the Arellano Félix family and also known as the Arellano Félix Organization) and the Juárez cartel (operated by the Carrillo Fuentes family).8 However, in 2000, the administration of Mexican President Vincente Fox, in consultation with the U.S. government, began to target high-level operatives – first in the Tijuana cartel, and then in the Juárez cartel – that resulted in the capture or death of several Félix and Fuentes family members.9 While successful in many respects, this crackdown also resulted in fragmentation of the Mexican drug trafficking market, leading to increased violence, not only between the larger drug trafficking organizations and the government, but also among smaller "cartelitos" vying for a share of the drug trafficking industry.

Out of this power vacuum, the Mexico-based drug trafficking organization known as the Sinaloa Federation has emerged as the dominant transnational criminal organization operating in California. Sinaloa – whose roots can be traced back to the breakup of the Guadalajara cartel in the 1980s – is now responsible for the vast majority of drug, weapons, and human trafficking across the California-Mexico border.10

Sinaloa and other Mexican drug cartels are adapting their corporate structures to better leverage existing resources and alliances and expand the financial and geographic scope of their enterprise. For example, Sinaloa – which has allied with the Gulf cartel, Los Caballeros Templarios, and the Arellano Félix Organization – has adopted a decentralized, less-hierarchical structure, whereby leadership directs peripheral lieutenants to carry out operations in a "hub and spoke" manner.11

This "federation" of Sinaloa-affiliated cells, developed by the cartel’s recently-arrested leader, Joaquín "El Chapo" Guzmán Loera, allows Sinaloa to maintain a presence in at least 17 Mexican states and 50 other countries throughout North, Central, and South America, Australia, Europe, Southeast Asia, and West Africa, with each subgroup enjoying significant autonomy in its business operations and ability to retain profits.12

Sinaloa is particularly active in Southern California, where it coordinates with Hispanic Sureño street gangs to distribute narcotics. The expansion of Sureño gang territories has also allowed the cartel to expand its influence to Northern California (notably, the San Jose area) and into neighboring states like Oregon, Nevada, and Arizona (Figure 3).13 This ever-increasing zone of influence has caused friction with existing regional gangs that had previously controlled trafficking routes, resulting in threats of violence, homicides, kidnappings, and extortion.14

Figure 3 Sinaloa Presence in California Figure 3: Sinaloa Presence in California

The Sinaloa Cartel: An Uncertain Future

Analysts trying to explain Sinaloa’s rise over the past decade have argued that Sinaloa leaders received preferential treatment from the Mexican government while rivals were targeted. The Mexican government has strongly denied this claim. Others have suggested that Sinaloa took advantage of a Mexican government hotline intended to boost intelligence gathering on drug trafficking organizations in order to report the actions and locations of Sinaloa’s rivals. While the July 15, 2013 arrest of Miguel Angel Trevino Morales, the leader of Sinaloa’s main rival, Los Zetas, lent some credence to this theory, the recent crackdown on Sinaloa’s senior leaders suggests that any preferential treatment has come to an end.

Reward Poster for Sinaloa’s leader, Joaqúin

The most significant event in this regard was the arrest of Sinaloa’s leader, Joaqúin "El Chapo" Guzmán Loera. In the early morning hours of February 22, 2014, Mexican authorities arrested Guzmán in the Mexican resort city of Mazatlan. Since his 2001 escape from a Mexican prison, Guzmán had been the chief executive of Mexico’s most powerful drug cartel and held the dubious distinction of being on both the annual Forbes list of billionaires and the D.E.A.’s "Most Wanted" list. He is named in federal drug trafficking indictments in California, New York, Illinois, and Texas, and faces charges in Mexico related to his 2001 escape and subsequent criminal activity.

Guzmán’s arrest followed the takedown of several top Sinaloa operatives in late 2013 and early 2014, including the arrests of 10 mid-level cartel members in February 2014 alone. Information gleaned from those arrests led to the capture of Guzmán, who had been suspected of moving covertly between seven homes in Mazatlan through a series of underground tunnels connected to the city’s sewer system.

While it is not immediately clear what impact the arrest will have on Sinaloa’s operations, some experts predict that, in the short term, the cartel will continue business as usual, with Guzmán’s partners, Ismael "El Mayo" Zambada and Juan Jose "El Azul" Esparragoza-Moreno, likely stepping into his role. Professor Pamela Starr of the University of Southern California, who studies U.S.-Mexico relations, doubts that Guzmán’s arrest will cause significant operational upheaval in the short term. "Guzmán has been on the run for years, so it is unlikely he was still running Sinaloa’s day-to-day operations." The future, however, is less certain. Starr predicts that Sinaloa’s difficulty will be establishing a long-term leadership structure after El Mayo and El Azul cycle through as transitional heads. Smaller drug trafficking organizations currently under the Sinaloa umbrella might try to establish their independence and grow their territory. For these reasons, Starr hypothesizes that "this is the beginning of the end for Sinaloa – how long it takes and how it happens remains to be seen."

The speculation about Sinaloa’s possible decline raises the additional possibility of increased violence. Vanda Felbab-Brown, a senior fellow at the Brookings Institution, is concerned about a fragmented Mexican drug market – as occurred after the Mexican government’s crackdown on the Tijuana and Juarez cartels in the early 2000s – in which organizations vie for control of Sinaloa’s previously untouchable drug routes. While large cartels like Los Zetas – which suffered a decline following years of fighting the Sinaloa cartel, other rivals, and the Mexican government – are believed to lack the operational capacity or appetite for a powerplay, Felbab-Brown warns that drug-related violence will increase if smaller cartelitos see Guzman’s arrest as an opportunity to grow their enterprises.

Regardless of what might follow, both Starr and Felbab-Brown praise Guzmán’s capture and what it symbolizes in the global effort to tackle transnational organized crime.

Sources: June S. Beittel, Mexico’s Drug Trafficking Organizations: Source and Scope of the Violence, Congressional Research Service (April 15, 2013), pp. 9, 11-12; Vanda Felbab-Brown, Calderon’s Caldron (Sept. 2011), Latin America Initiative at Brookings, p. 3; Alicia A. Caldwell & Katherine Corcoran, Mexico’s Sinaloa Drug Chief Arrested, Associated Press (Feb. 22, 2014); Interview with Vanda Felbab-Brown (Feb. 24, 2014); Interview with Prof. Pamela Starr (Feb. 24, 2014); U.S. Department of Justice.

2. Asian and Eastern European Transnational Criminal Groups

Another type of transnational criminal organization is formed when criminals based abroad attempt to partner with their counterparts in U.S. immigrant communities in order to exploit access to U.S. markets and wealth. The result is a loose transnational confederation between a criminal ring abroad and an autonomous ring here in the U.S., tied together along ethnic lines. While much still remains unknown about these groups, many of them operate in California, which is home to large immigrant communities from around the world and a quarter of all immigrants who have come to the U.S.15

Eurasian transnational criminal groups arising from the 15 republics of the former Soviet Union and from central European countries maintain an active California presence in areas including Burbank, Fresno, Glendale, Los Angeles, Sacramento, San Diego, and San Francisco. Known for their sophistication and violence, groups like Armenian Power are linked to cybercrime, financial fraud (such as identity theft and credit card crimes), auto theft, illegal gambling, and narcotics and human trafficking.16

Additionally, once confined to just a handful of urban areas with large Asian-American populations, Asian transnational criminal confederations, such as those involving the Tiny Rascal Gang and Asian Boyz, are expanding to communities in Fresno, Los Angeles, Orange, Sacramento, Santa Clara, and San Diego Counties where the growth in the number of new immigrants from Asia has been greatest. These criminal organizations engage in human and sex trafficking, drug and weapons smuggling, domestic marijuana cultivation, various forms of cybercrime, and even wildlife trafficking.17

Although tied together along ethnic lines, these confederations show little affection for those who share their ethnic identity when deciding whom to target. Indeed, immigrants who share ethnic ties with these criminal organizations are arguably the most vulnerable to victimization. For example, Armenian Power frequently targets members of the Armenian-American community for fraud and extortion, as it did in one Southern California fraud scheme described in Chapter Five. The special vulnerability of many immigrant communities underscores the urgent need for law enforcement to better understand Asian and Eastern European transnational criminal groups so that they can better protect some of California’s most vulnerable citizens and residents.

3. Proliferation of Transnational Gangs

Transnational gangs are criminal street gangs operating in the U.S. with ties to gangs of the same ethnicity or nationality, or within the same umbrella gang, operating in other countries. They are linked to the prolific use of violence or the threat of violence to further their illicit activities in California. Like Mexico-based transnational criminal organizations, transnational gangs have exploited the benefits of an interconnected world to expand their increasingly sophisticated criminal activities to a global scale. While still principally engaged in narcotics trafficking (although on a smaller scale than Mexico-based drug trafficking organizations), these gangs deeply involve themselves in crimes ranging from money laundering and robbery to extortion and contract killings, as well as emerging crimes like intellectual property fraud and human trafficking. In addition to these profit-driven activities, transnational gangs perpetrate acts of violence to establish their reputation and status in California communities.

Transnational gangs vary in organizational sophistication, though they predominately follow a "hub and spoke" model, with a hierarchical, central point directing regional "clique" or "clica" leadership. They are increasingly working with other transnational criminal organizations, as well as California street and prison gangs (a dangerous union examined in Chapter 3), and are coordinating their criminal activities across both state and international lines. The primary transnational gangs operating in California are:

  • Mara Salvatrucha (or the shorthand "MS-13"): MS-13 is the largest and most violent transnational gang currently operating in California and has been recognized by the U.S. Department of Treasury as a transnational criminal organization. Originally founded in Los Angeles during the 1980s by Salvadoran immigrants, MS-13 began as an ethnic, protection-oriented street gang. A growing Salvadoran immigrant membership, coupled with mass deportations to Central America in the 1990s of MS-13 members convicted of certain crimes, helped transform this group into a transnational gang. According to recent U.N. estimates, MS-13 is now one of the world’s fastest growing criminal organizations, with an international membership of at least 30,000, including 8,000 members in El Salvador, 7,000 in Honduras, and 5,000 in Guatemala.18
  • 18th Street Gang: Another large criminal street gang, the 18th Street Gang was formed by Mexican immigrants in Los Angeles around 1959, with many members later deported in the 1990s to Mexico and Central American countries. Despite their similarities, the 18th Street Gang, sometimes referred to as M-18 or Barrio 18, is an historic rival of MS-13.


    The 18th Street Gang is a large organization with an international membership well over 30,000. According to U.N. estimates, 14,000 to 17,000 members are based in Guatemala, 8,000 to 10,000 live in El Salvador, and another 5,000 reside in Honduras.19 Membership numbers in the U.S. are well into the thousands and cliques in different countries frequently collaborate or form alliances opportunistically. Similar to MS-13, the 18th Street Gang’s domestic operations are based in California, with the majority of their operations in the greater Los Angeles or Southern California region (although operations have also been observed in northern California). Gang members also maintain close relationships with Mexico-based transnational criminal organizations.

4. The Online Criminals: Transnational Hacking, Fraud, and Pirating Rings

With the rise of a global society connected by the Internet, criminal rings organized to commit hacking, fraud, pirating and other high-tech crimes across borders have rapidly proliferated. These rings operate frequently from Eastern Europe, but also from places as diverse as West Africa and China, and specifically target the citizens, computer networks, and companies of prosperous countries like the U.S. They vary widely in size, sometimes partnering with "locals" in the target country. Just as often, however, they feel little need to form local partnerships, since the Internet allows them to operate remotely, and a lack of a physical presence in the country they are targeting helps them more easily evade detection and criminal prosecution.

Like other transnational criminal organizations, transnational hacking, fraud, and pirating rings are profit-driven. But unlike cartels and gangs, these rings do not commonly employ fear, violence, and terror as tools in their arsenal. Instead, their success hinges on operating anonymously and surreptitiously, relying on sophisticated tactics to steal information, harvest money, and move money across jurisdictions into their own bank accounts.

Conclusion

Transnational criminal organizations have used their adaptability and fluid organizational structures to expand their networks of criminal activity to every corner of California. Mexican drug cartels, particularly Sinaloa, have been most successful in embedding themselves into the fabric of our urban communities by forming alliances with prison and street gangs for protection and distribution of illicit goods. However, transnational gangs and other organized criminal rings also pose serious threats to the physical and financial well-being of Californians.