Along with trafficking in drugs, guns and people, criminals are also turning to cybercrime to target wealthy, innovative businesses and financial institutions in the state, the report by the state attorney general says.
"We know that they use technology directly in a way that perpetuates and commits crimes, in particular the crimes of hacking and data breaches and malware," California Attorney General Kamala Harris said as she released the report in Los Angeles.
The Los Angeles region is particularly vulnerable to digital piracy, she said, because it produces much of the nation's movies and other mass-market media.
Harris said the 181-page report is the first to outline the effects of international criminal organizations on California residents and businesses.
It says California leads all states in the number of computer systems hacked or infected by malware; victims of Internet crimes and identity theft; and the amount of financial losses suffered as a result of online crimes.
The report says many of the breaches have been tied to criminal organizations operating out of locations including Russia, Ukraine, China and Nigeria.
"Their impact is tremendous, in the hundreds of millions of dollars from small business, mom and pop operations, who lose their very existence to a financial crime, to a scheme that's being origined out of Romania, out of Egypt, out of Israel, out of parts well off of our shores," Los Angeles police Assistant Chief Michel R. Moore said at the news conference.
California's gross domestic product of $2 trillion along with its significant foreign trade activity and its border with Mexico also make the state a target for international money-laundering schemes. The report estimates that more than $30 billion is laundered through the state economy each year.
Some money is filtered through legitimate businesses or by using virtual currencies such as bitcoin. But the report says backpacks and duffel bags stuffed with cash have been seized more frequently since Mexico began toughening its money-laundering laws in 2010.
Seizures of bulk cash increased 40 percent by 2011 in California, which now leads the nation in the number of currency seizures.
California should alter state law to make it easier for prosecutors to crack down on money laundering, the report says. Unlike federal law, state law currently requires prosecutors to prove that a suspect deliberately carried out a financial transaction in a way designed to hide the fact that the money came from or was used for a criminal activity.
The report also recommends that the Legislature change state law to let prosecutors temporarily freeze the assets of transnational criminal organizations and associated gangs before seeking an indictment. It says the state should also mimic federal law by increasing punishment for people convicted of supervising, managing or financing transnational criminal organizations.
It also calls for the state to devote more money to the state Department of Justice, which Harris leads. That would include $7.5 million to fund five new teams to target international criminals.
Assembly Speaker John Perez, D-Los Angeles, has proposed creating a California Cybersecurity Commission. His office said AB2200 would make California one of the first states with such an expert advisory panel.
Associated Press Writer Christopher Weber contributed from Los Angeles.