US embassy cable - 03TEGUCIGALPA2939

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