OVERSEAS CHINESE INVOLVEMENT IN THE NARCOTICS TRAFFIC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700030004-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 22, 2016
• Document Release Date: May 19, 2010
• Sequence Number: 4
• Publication Date: January 1, 1972
• Content Type: IM

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C i4/a /i i 7a~y ~d
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
International Narcotics Series No. 7
Overseas Chinese Involvement in the Narcotics Traffic
Secret
ER IM 72-4
January 1972
Copy No. 1.9 ..y
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP I
Eeelvd Item 9.1006111
dowepredii eed
deelndPmrtee
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
January 1972
INTELLIGENCE MEMORANDUM
OVERSEAS CHINESE INVOLVEMENT IN THE NARCOTICS TRAFFIC
Conclusions
1. Narcotics investigations over the past two years reveal that ethnic
Chinese businessmen control virtually the entire opium and heroin traffic
in Southeast Asia. The quantity that moved out of producing areas in
Southeast Asia into local and international channels exceeds by several times
the opium equivalent of heroin believed to be smuggled into North America
from all sources. At present, most opium traded in Southeast Asia stays
within the region, where it is consumed mainly by Chinese opium-smoking
communities. A lesser amount is accounted for by US servicemen stationed
in the Far East, who consume it in the form of pure heroin, which they
sniff or smoke.
2. The Chinese narcotics consortiums in Southeast Asia, their interest
whetted by the unexpected profitability of the GI market or heroin in
Vietnam, would like to penetrate the North American market on a large
scale. However, they are having difficulty getting together with large-scale
American syndicate buyers in the United States, and as a result the prospect
of Southeast Asia flooding the United States with cheap heroin appears
to be more a long-term than an immediate threat.
3. The Chinese businessmen who control opium supplies in Bangkok,
Vientiane, and Hong Kong are wealthy and, for the most part, respected
meml-ers of their communities. They avoid taking risks, do not themselves
handle the contraband, and avoid dealing directly with persons not of
Chinese descent. Go-betweens Trusted by both buyer and seller will be hard
Note: This meinora'adum was prepared by the DDI Special Research Staff
chiefly from information contained in the investigative files of the Bureau
of Narcotics and Dangerous Drugs. The memorandum has been coordinated
within the Central Intelligence Agency and with the Bureau of Narcotics
and Dangerous Drugs.
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to find, although there are a few Overseas Chinese Traffickers identified
outside Southeast Asia who probably would be willing to serve in that role.
There is, however, no identified "Chinese" organization in North America
that has the capability of organizing and receiving a steady, large flow of
heroin from Southeast Asia.
4. At present heroin moves from Southeast Asia to the United States
in small quantities through a variety of loosely organized systems, including
use of the Army Post Office and international mail by ex-GIs operating
in Bangkok. Asian heroin in small quantities also is moving via Europe and
Latin America. The total heroin smuggled from Asia to the United States
in 1970 may have been as much as 500 kilograms, less than 10% of estimated
US consumption.
5. The potential for development of a large US market for Asian
heroin is definitely present. The Chinese who control the opium trade in
the Far East are interested in tapping the profitable US market, and have
demonstrated, in the case of Vietnam, that they can produce and supply
large quantities of pure grade heroin on short notice. Thus, if European
sources of supply diminish or appear to be seriously threatened, American
buyers may look to Southeast Asia for heroin.
Discussion
The Historical Setting
6. Opium has been a widely used and traded commodity in Southeast
Asia for more than 300 years. It was first introduced to China on a large
scale in the 17th century when Dutch and English trading companies
brought opium produced in India to China. Portuguese traders introduced
the opium poppy into what is now the Shan State area of northeastern
Burma. From there it spread into sjuthern China's Yunnan Province and
adjacent areas of Thailand and Laos (see the map).
7. When Chinese from Southeast China began migrating in large
numbers to Southeast Asia in the 18th and 19th centuries, they took their
opium habit with them. Trade in opium was legal in Thailand, Malaya,
Singapore, and Indochina. The opium was retailed through licensed opium
monopolies, which were often major sources of revenue for nost
governments. Trade in opium and its local distribution traditionally has been
handled exclusively by Chinese. merchants.
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SOUTHEAST ASIA
Opium Producing Areas
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8. Until recent years virtually all opium produced and traded in
Southeast Asia was distributed within the area to Chinese opium-smoking
populations. In the 1950s and 1960s, refineries in Macao and Hong Kong
produced small quantities of pure heroin for international markets. In 1969,
production of pure heroin in Southeast Asia was greatly expanded to supply
US troops in Vietnam and to meet the needs of a growing number of
international traffickers who wanted to smuggle cheap Southeast Asian
heroin to the United States.
The Role of Overseas Chinese
9. Trade in opium and opium products in Southeast Asia is a big
business, one which ethnic Chinese could be expected to dominate for a
number of reasons. Traditionally, opium has been the only narcotic drug
traded on a large scale in Southeast Asia, and Chinese communities in urban
centers have been the only important consumers of opium. As the merchants
of Southeast Asia, the Chinese have considerable skill and experience in
moving contraband, such as gold bullion, across international borders.
Chinese merchants in the port cities of Southeast Asia have several
advantages over their native counterparts in business. As a class, the Chinese
are more industrious and more singleminded in their pursuit of wealth. Most
important of all, the common ethnic background of Chinese merchants
facilitates international business activities among themselves.
10. Chinese have been key figures in nearly every trafficking system
recently identified in Southeast Asia. Chinese specialize in controlling the
wholesale end of the business. Operating behind the scenes as much as
possible, they manage and finance the bulk of the narcotics trade in that
part of the world. They consider themselves businessmen first and criminals
second, if at all, and generally limit their activities to those that offer large
profits for little risk.
11. Ethnic Chinese are involved in other aspects of the Southeast
Asian opium business besides wholesaling. Chinese do not grow opium, but
they help collect it from the hill tribes who do grow it; Chinese own the
refineries that convert opium to heroin; , nd, to a limited degree, Chinese
are engaged in smuggling and distributing opium products from wholesale
points to consuming centers.
12. Non-Chinese people also play an important role in the Asian drug
traffic. They provide crucial services for which they are highly paid. Thus,
for example, government officials who provide police, military, and political
protection are usually non-Chinese. Non-Chinese also serve as couriers and
provide transportation services.
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Structure of the Opium Industry
13. Approximately 700 metric tons of raw opium are grown annually
in the Golden Triangle, as the opium growing region of Southeast Asia
is commonly known. The bulk of this is consumed in the growing areas
and in the lowlands of Burma and does not enter international trade. The
300 tons or so collected and processed for distribution outside the Golden
Triangle more to wholesale centers in Vientiane, Bangkok, and Hong Kong.
By comparison, illicit opium production in the rest of the world is about
700 tons a year. The amount entering the United States from all sources,
mostly in the form of heroin, is not known but has been variously estimated
at 50 to I CO tons of opium equivalent annually.
14. After the opium poppy is harvested it the Golden Triangle, in
January to March each year, it is purchased from growers by agents of
the many armed groups operating independently of government control in
those remote mountainous areas.! 1) Where conditions are relatively secure,
raw opium is purchased and collected by itinerant Chinese merchants. In
normal years, about half the 300 tons of opium brought out of the Golden
Triangle annually originates in Burma. It is usually moved to collection
points on the Burmese-Thai border by a motley assortment of armed
smuggling groups. These groups include Communist and non-Communist
insurgents, a variety of local "self-defense forces" established originally by
the Burmese government as a sort of militia and known as Kha Kwe
Yei (KKY) forces, and large well-organized Chinese irregular forces (CIF)
who for some years have been entrenched in northern Thailand. The CIFs,
originally driven out of southwest China by the Communists in 1949,
remained in Burma for a number of years until the Burmese put pressure
on them to leave in the early 1960s. Although the CIFs are now based
in Thailand, once or twice a year they dispatch large armed caravans of
pack horses deep into Burma on opium collecting trips.
15. Nearly all the opium brought to collection centers is brought by
a few of the larger KKY organizations plus the CIF caravans. Most KKY
leaders are ethnic Chinese; some are former Kuomintang (KMT) -- Chinese
Nationalist Party - officers. Three of the most important are Lo Hsing-han
(Kokang KKY), Hsu Chia-chu (Kengtung KKY) and Yang Shih-li (northern
Kengtung KKY). They have close relations with the organizations in Laos
and Thailand who buy their products. All three have operated heroin
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refineries in the Tachilek area near the tri-border point.
Yang
Shih-li works with Hu Tien-hsing, head of a large Laotian consortium that
owns the Houei Tap heroin refinery, probably the largest in the Golden
Triangle until it shut down in August 1971. It probably closed because
Hu Tien-hsing's consortium had accumulated large stocks of heroin at a
time when the future of the US serviceman market in Vietnam had become
uncertain.
16. To some extent, the opium market in northern Thailand and Laos
is an open market. Small independent dealers make their way to the
tri-border area in considerable numbers to buy opium products and smuggle
them down to Bangkok or Vientiane. The large, established organizations,
however, have major marketing advantages over small operators, and it is
believed that in fact the bulk of movement is controlled and handled in
Thailand by the two CIF forces (the 3rd and the 5th armies) and in Laos
by Hu Tien-hsing's consortium.
18. During the summer of 1971 the United States stepped up pressure
on Laos and Thailand to cooperate in narcotics control efforts, and the
opium industry has subsequently been in a state of flux. Aggressive
enforcement efforts in Thailand, Vietnam, and Laos, combined with the
prospect of a decrease in the market for pure heroin in Vietnam, have
caused a number of big operators to curtail their activities. Most heroin.
refineries have shut down in the Golden Triangle, although large stockpiles
of heroin are believed to exist, particularly in Vientiane, headquarters of
the Laotian consortium.
19. In late 1971, large stocks of opium, totaling many tens of tons,
reportedly existed at various collection points in northern Thailand and
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Burma. Various KKY and CIF groups 'folding these "end-of-season" stocks
would like to sell them to get funds to purchase next season's crop.
20. To summarize, most of the opium and opium products that reach
collection centers in northern Thailand and Laos come under the control
of a few Chinese generals and merchants. These man, whose names and
involvement in narcotics traffic are well known in the area, are important
men in their bailiwicks, are at ease in high financial circles in Bangkok,
and are used to dealing with top government officials to get cooperation
and protection. The role of these men is to ensure a steady, reliable flow
of opium and opium products to buyers from consuming markets.
Opium Products Moving in Southeast Asian Traffic
21. A number of specific types of opium products move in the
Southeast Asian trade:
Raw Opium. Morphine content: 5% to 10%. It is packed in bags or
bales. Raw opium does not keep as well as processed opium, has a strong
odor, and weighs more than processed opium. Despite these drawbacks it
continues to move to markets in substantial quantities, presumably because
many traditional customers want the product in this form. About half the
opium shipped to Hong Kong goes as raw opium (about 60 tons annually),
and most seizures of opium products reported in Singapore are of raw
opium.
Processed, Cooked, or Prepared Opium. These terms refer to the same
thing. It is merely raw opium with the moisture cooked out. Morphine
content: about 17%. Prepared opium is pressed into brick form for easy
handling. Opium smuggled to Vietnam for smoking by the Chinese
community is prepared opium (an estimated 30 tons of raw opium
equivalent annually).
Morphine Base. Morphine content: usually 50% in the Asian variety.
It is made into a molded brick with an impressed label '999.' Morphine
base is not itself consumed, but is used as a raw material for making heroin.
Countries such as Vietnam without heroin refineries have no market for
morphine base, except as a transit item.
#3 Heroin. Also called Red Rock, purple heroin, or smoking heroin.
Morphine content: 15% (large amounts of caffeine and barbitone have been
added to facilitate its consumption by smoking). Red Rock is consumed
only by those who smoke opium -- that is, chiefly Overseas Chinese
communities. It is cheaper per dose and more addictive and destructive
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than opium, and is widely used in Bangkok and in Hong Kong. Attempts
to push it in Vietnam have been unsuccessful.
#4 Heroin or Pure Heroin. Morphine content: 90% to 96%. In the
Southeast Asian trade #4 heroin is packed in plastic bags weighing 350
or 700 grams. This is a comparatively new product in Southeast Asia. Small
heroin refineries have existed in Hong Kong for some time, but the product
was totally Unknown in Laos and Thailand until the opportunity arose to
develop a market among US servicemen in Vietnam. In Vietnam, where
it has been cheap and plentiful, American servicemen sniff heroin or put
a few grains in the end of a cigarette and smoke it. In the United States
itself pure heroin is not sold retail. It is diluted by wholesalers to about
5% morphine content for injection. Most of the world production of pure
#4 heroin is consumed by Americans, either at home or abroad. Most pure
#4 heroin produced and traded in Southeast Asia is intended for American
consumers.( 2
Sources of Supply of Narcotics
22. The international buyer who wants to purchase bulk quantities
of heroin or other opium products in the Far East must go to the wholesale
markets in Vientiane, Bangkok, or Hong Kong. The inen so far identified
as controlling, financing, and managing these markets are without exception
ethnic Chinese. The top opium traders identified in the three cities are
very well known men in their communities.
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Bangkok
25. During 1970 and 1971 dozens of people who could be considered
middle-level managers were identified in the Bangkok narcotics business in
the course of police investigations. Except for one or two, these people
are Thai citizens of Chinese origin. Most are believed to be of Ch'ao-chou
origin. Ch'ao-chou is a coastal area of Southeast China on the border of
Kwangtung and Fukien provinces.(4) Throughout Southeast Asia people of
Ch'ao-chou origin have traditionally been involved in contraband trade,
chiefly gold and narcotics. They are also prominent in the banking field.
Ch'ao-chou communities in different countries thus have financial and
dialect group associations that facilitate smuggling activities. A smuggling
system employing exclusively Ch'ao-chou people is a closed, highly
disciplined system. The system that delivers raw opium and morphine base
to Hong Kong is run almost exclusively by Ch'ao-chou people. Its chief
vulnerability is that it must employ non-Chinese as couriers and as trawler
captains. Police information on the system is obtained almost entirely from
non-Chinese employees.
4. Ch'ao-chou is the romanization of the mandarin pronunciation. Other names for
Ch'ao-chou are Swatow (the principal port city in the region), Chiu Chau (the Cantonese
rendition) and Teochiu (romanization of Ch'ao-chou in the local dialect).
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26. The narcotics traffickers identified in Bangkok perform a variety
of functions. The most visible ones are heroin brokers and agents who try
to line up non-Chinese couriers to deliver narcotics to Vietnam, Hong Kong,
and other markets. Several major organizations running trawler operations
to Vietnam, Hong Kong, and Singapore are known to e;.ist in Bangkok.
27. Although there are independent operators in Bangkok who arrange
for their own sources of heroin supplies and make their own connections
with internatioral buyers, the smooth efficiency with which narcotics flow
from Bangkok to various markets implies a good deal of organization. The
meeting of the big heroin suppliers from Laos and Thailand in Bangkok
in July 1971 to discuss development of markets is illustrative of the way
the consortiums in the two countries coordinate their activities.
Hong Kong
28. Hong Kong is the third city in the Far East where international
wholesale buyers go to buy heroin in bulk quantities,
Hong Kong's total annual imports are
estimated to be on the order of 120 tons of raw opium equivalent in a
mixture of raw opium and morphine base. The morphine base alone,
probably about 10-15 tons, would be enough to meet the bulk of the entire
US annual heroin consumption.
29. Small quantities of morphine base have been smuggled
by civil air passengers flying from Bangkok to Hong Kong. A minimum
of 200 kilograms was shipped this way in 1970.
or #3, variety, which is locally consumed. Sales of Hong Kong-refined #4
heroin to international traffickers are probably increasing but were probably
less than half a ten in 1971. It takes one ton of Asian morphine base
(50% morphine content) to produce half a ton of pure heroin.
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Di,tribution O!' Opium Products to Markets
32. In the Southeast Asian opium trade the purchasers, not the sellers,
traditionally have taken the initiative in transactions. Chinese
opium-smoking communities in Hong Kona, Macao, Vietnam, Singapore and
Malaysia, and the Philippines consume most of the opium products exported
from Southeast Asian producing areas. About 200 tons a year of the
equivalent of raw opium are consumed in these traditional markets.
Practically all is consumed illegally in smoking dens run by local Chinese
vice syndicates. These syndicates determine the mix and quantity of opium
products they want and then arrange with suppliers in Bangkok - source
for all traditional markets - for delivery. It has been the suppliers' job
to fill orders quickly, but otherwise they have played a passive marketing
role.
33. The exploitation of the GI market in Vietnam illustrates the
traditional roles of suppliers and distributors. As demand for #4 heroin
by US servicemen grew in Vietnam, suppliers responded swiftly by making
available ample quantities of #4 heroin for pick-up in Vientiane or Bangkok.
Most of the heroin coming into Vietnam in 1970-71 moved through
smuggling systems controlled by Sino-Vietnamese or Vietnamese groups or
by independent operators. The supplying organizations, exercising their
customary caution, did not attempt to manage the import and distribution
of heroin inside the Vietnam market. This reluctance to get involved in
marketing may be changing.
34. Narcotics investigations in 1970 and 1971 indicate that all the
pure heroin known to have moved from Bangkok and Hong Kong out of
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Southeast Asia was taken out by independent smugglers or by agents from
the consuming markets. Okinawan citizens have been detected going to Hong
Kong and Bangkok to Lily heroin to distribute to American GIs in Okinawa.
35. Chinese seamen occasionally have been caught trying to smuggle
small quantities of heroin into the United States. Heroin has also been
concealed in art objects shipped from Hong Kong to the United States.
Ex-GIs from Vietnam who have settled in Bangkok have mailed substantial
quantities of pure heroin to contacts in the United States. Some success
has been achieved in efforts to eliminate their trafficking activities.
36. The evidence available from these investigations indicates that
heroin suppliers in Hong Kong and Bangkok have not so far taken the
initiative in developing US contacts. On the other hand, there is good
evidence that they are acquisitive men who would like to make profitable
connections in the US market. Their instinctive preference, however, is to
wait and let the customer come to them.
37. Southeast Asian heroin producers could become a serious factor
in the US narcotics scene. Illicit opium is grown in Southeast Asia in
quantities exceeding by several times the amounts consumed in the United
States in the form of heroin. Refineries to convert opium to heroin exist
both in producing areas (the Golden Triangle of Burma/Laos/Thailand) and
in Hong Kong. The producers of heroin are Chinese syndicates, which proved
to be remarkably sensitive to and responsive to growing market requirements
in Vietnam in 1970 and 1971.
38. Even a major reduction in the production of raw opium might
not significantly diminish Southeast Asian capabilities for supplying heroin
to the United States. The US market for Southeast Asian opium in the
form of heroin is potentially more profitable than the traditional Asian
markets for opium in the form of smoking opium. If these syndicates had
direct access to the US market in a situation where supplies of raw opium
were tight, much of the smoking opium normally destined for Hong Kong
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and other Overseas Chinese communities could be diverted to meet the
needs of the US market.
39. Increased pressures on smuggling routes within Southeast Asia
would not necessarily have great effect on the potential for supplying the
United States. The smugglers have ample scope for improving the efficiency
of their present operations. For example, much of the opium in the trade
now moves in a raw rather than prepared form. If the moisture were cooked
out at collection centers in the Golden Triangle, the weight of the product
to be smuggled to Bangkok, and then on to Hong Kong, Singapore, and
other consuming centers, could be cut in half. Also, raw opium has a strong
odor not present in the prepared product. Thus, reducing bulk and
eliminating odor could facilitate smuggling. For another example, much of
the opium and opium products smuggled out of Bangkok is now delivered
by fishing trawler. This method is rather vulnerable, but it has been used
for years and until recently has been safe and reliable. There is little doubt
that opium merchants in Bangkok and their connections in Hong Kong
and other consuming markets could devise ways of expanding amounts of
contraband concealed in legal trade items. These methods are likely to be
difficult to detect, given the open ports and free markets prevailing in most
of Southeast Asia. Chinese opium merchants are talented movers of
contraband, and they almost certainly will demonstrate their skill in evading
repressive measures aimed at their activities.
40. The potentially large suppliers of heroin in Southeast Asia have
their vulnerabilities, however. They consider themselves businessmen and
try to avoid taking risks. For them, avoiding risks means that they avoid
dealing directly with non-Chinese, whom they have found to be unreliable
business partners in clandestine undertakings.
41. Even occasional arrests and convictions of Chinese heroin brokers
and dealers in Southeast Asia arc likely to keep them off balance and
heighten their native sense of cautio-'. In this connection, the deportation
early in 1971 from Hong Kong to New York of trafficker Lee Ben Joe,
a wealthy Chinese businessman in the Philippines, probably served a useful
deterrent purpose. This was the first case in history in which a narcotics
criminal was deported from Southeast Asia to the United States for
prosecution. The arrest in Bangkok of heroin broker Preecha Lecyarug, a
Sino-Thai, in October 1971 was also salutary in this regard. Before his arrest
it was widely believed in Bangkok that Thai authorities, who have always
been lenient with narcotics dealers, would not move against him, even
though he had been caught openly selling pure heroin in bulk quantities
to US citizens.
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42. If demand for heroin in the United States remains strong and
if European sources are reduced by control measures, the marketing
syndicates in the United States will have to turn elsewhere. Southeast Asia
has more potential for supplying heroin than any other region in the world.
The ethnic differences of the Chinese suppliers and American buyers make
it hard for them to get together. The Chinese, in particular, are suspicious
of outsiders and, in the past, have operated most effectively when dealing
with their own people. While there are possibilities for establishing less di-ect
connections - e.g., through Latin America or Europe - even more
intermediaries would be involved, thus increasing the vulnerability and
diluting the profits of the system. If good international coordination of
surveillance of heroin traffickers who operate between Asia and the United
States leads to the arrest and conviction of some of the important Chinese
brokers, there may be reasonably good prospects for limiting the heroin
flow to the United States from Southeast Asia.
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Problem with Names of Chinese Narcotics Traffickers
Names of dozens of important Chinese narcotics dealers and traffickers
have been identified in the course of investigations conducted by US
narcotics and customs agents in the Far East in 1970 and 1971. These
investigations have been carried out in cooperation with local police in the
principal trafficking centers mainly Bangkok, Saigon, and Hong Kong.
The names of traffickers are given in the
romanization provided in investigative reports; in most cases the names used
here originated with the police of the country involved. Most Thai Chinese
have two names: a C!':nese name usually rendered in a Ch'ao-chou dialect
version, and a 'T'hai name, which only faintly resembles the Chinese name.
Thai police may report names in either version. In Vietnam, the police
consistently report Chinese names in a Vietnamese version. Names of
traffickers in Ilong Kong generally will be reported in a Cantonese
romanization.
The only way to reduce this confusion is to identify names by
characters, which could then be rendered in Chinese Standard Telegraphic
Code (STC) numbers. Use of' STC codes to identify Chinese names in
narcotics investigative reports is increasing but is not yet universal.
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