DEA
Congressional Testimony
March 4, 2004
Statement
of
Karen
P. Tandy
Administrator
Drug
Enforcement Administration
Before
the
United States Senate
Caucus on International Narcotics Control
March
4, 2004
"United
States Efforts to Combat Money Laundering and Terrorist Financing"
Chairman Grassley,
Senator Biden, and distinguished members of the Caucus, I particularly
appreciate your invitation to testify today on the importance of combating
money laundering and terrorist financing as it is one of the cornerstones
of my vision for the Drug Enforcement Administration.
Overview
The motivation for virtually everyone involved in illegal drug trafficking,
from kingpin to street dealer, is the money. To make a significant impact
on the drug trade in America and around the world, there is no strategy
more effective than following the money back to the sources of drug supply
and taking away the dirty proceeds of that trade. But our efforts to
date clearly have not successfully done the job. While the Office of
National Drug Control Policy (ONDCP) has estimated that Americans spend
approximately $65 billion per year on illegal drugs, current seizures
are well short of $1 billion per year. Drug traffickers pay more than
that each year in fees to launder their ill-gotten gains.
Without question, law enforcement can and must better address drug proceeds
and profits. One of my top priorities since becoming Administrator has
been to systematically transform not only the organization and operation
of the DEA regarding financial investigations, but also our fundamental
mindset. Since every drug transaction has a profit motive, every investigation
has a financial component. Therefore, I have established a new Office
of Financial Operations at DEA headquarters as well as financial teams
in each field division. We are also making financial background a priority
in hiring new Special Agents and undertaking other initiatives to increase
interagency cooperation and enhance training in drug financial investigations.
The DEA is already bringing this focus to bear on such problems as bulk
currency movement and the black market peso exchange.
Restoring
DEA’s Emphasis on Financial Investigations
Let me begin by
explaining my vision to restore the DEA’s emphasis
on financial investigations. I firmly believe that it is not possible
to truly dismantle a drug organization when any meaningful part of its
assets and infrastructure are left in place. Accordingly I have made
the financial attack on drug money laundering and money laundering organizations
one of my top priorities for the DEA.
Although the DEA
has had the drug intelligence, technology and agents to address drug
revenue, we
needed a vision of how to best expand the
agency’s mission toward the financial side of the drug business.
We began to rebuild expertise on money laundering means and methods shortly
after my Senate confirmation, focusing on how to identify, document and
prosecute drug-money laundering organizations in the U. S. and abroad.
We quickly determined that we would need specialized training, identification
and gathering of financial intelligence, and redirection of enforcement
priorities. We needed special projects targeting money-laundering systems
and techniques, enhanced working relationships with the financial services
industry, and collaboration with our federal, state, local and international
law enforcement counterparts.
To spearhead this
effort, I reorganized and enhanced the structure of the headquarters
section
responsible for financial investigations by
elevating and re-establishing it as the Office of Financial Operations
(FO), a separate office under the Chief of Operations. FO will augment
all of the DEA’s domestic and foreign financial investigations
in the field by providing the necessary assistance to enhance and build
the expertise to identify, document, disrupt, dismantle, and prosecute
drug and drug-money laundering organizations, and identify, seize and
forfeit their illicit revenues. The formation of FO was necessary to
revitalize DEA’s attack on the illicit proceeds of drug trafficking
organizations.
To implement my
vision, I asked the Special Agents in Charge of each of the DEA’s 21 field divisions to establish at least one Financial
Investigative Team (FIT) in each division, and they have done so. Many
of our FIT Teams are staffed not only with DEA special agents and analysts
but also with special agents from the Internal Revenue Service-Criminal
Investigations (IRS-CI), U. S. Immigration and Customs Enforcement (ICE),
the Federal Bureau of Investigation (FBI), the Postal Inspection Service,
and state and local law enforcement officers. These FIT Teams are vital
to our success, and will be responsible for handling the more complex
drug-money laundering investigations and projects, serving as field division
resident experts and supporting DEA’s national money laundering
initiatives. However, DEA will not rely entirely on its FIT Teams to
carry the financial investigative workload. I have mandated that every
DEA investigation have a financial investigative component, and we are
currently implementing new inspections accountability standards to insure
that this directive is carried out. We are placing an increased emphasis
on our collection of intelligence relative to the way drug networks make,
transport, and store money and assets. I have told our agents that they
are not truly gathering drug intelligence unless they are asking about
the money. Our Special Agents in Charge and Country Attaches agency-wide
are reemphasizing the importance of debriefing human sources of information
about the drug trade and the money that fuels it. We our also implementing “post
mortem” reviews in our investigations to ensure that the money
side is attacked completely and thoroughly. This renewed emphasis has
been integrated into our inspection and internal compliance policies
to ensure consistent and uniform application of this strategy.
DEA Country Offices in Colombia and Mexico are increasing their special
agent commitments to money laundering investigations. Other DEA Country
Offices also are refocusing their investigative efforts to increase concentration
on the financial aspects of their investigations.
Training
We also have expanded
and reemphasized financial investigations in our hiring and training.
With respect to hiring, we are aggressively recruiting new personnel
with financial degrees and work experience.
With respect to
training, FO currently conducts and coordinates all training for DEA
relating
to money laundering and financial investigations.
Training is also provided to federal, state, local, and international
law enforcement counterparts in addition to individuals in the banking
and financial sectors. DEA Training at Quantico is in the process of
increasing its financial investigative instructor cadre and will be assuming
most of the responsibility for DEA’s financial investigative training.
DEA conducts a three-day
conference annually on Attorney General Exempted Operations (AGEO).
A DEA supervisor,
case agent, and an Assistant United
States Attorney (AUSA) from each of DEA’s 21 field divisions attend.
Representatives from other various Department of Justice (DOJ) components
are also in attendance. A representative from each AGEO provides an overview
on their operation. Presentations are also made from such agencies as
the World Bank, Office of the Controller of the Currency and the Commerce
and Treasury Departments on matters relating to currency flow and trade.
Representatives are also sought from the private banking arena to discuss
normal banking practices.
Specific
Priorities and Financial Initiatives
Bulk Currency
The smuggling of large sums of cash across our borders continues to
be the primary method used to expatriate drug proceeds from the United
States. This has been increasingly prevalent after the USA PATRIOT Act
tightened the controls and reporting requirements on financial and non-financial
institutions.
To address this
increasing threat, the DEA, IRS-CI and ICE are working together to
initiate a
bulk currency program to coordinate all U.S. highway
interdiction money seizures in order to develop the evidence necessary
for identifying, disrupting and dismantling large-scale narcotic trafficking
organizations. Upon notification of a cash seizure by a state or local
municipality, agents will respond to the scene, assist with debriefing
of the defendants, and coordinate potential controlled deliveries of
currency. Agents will also assist in follow-up investigations, seizure
and forfeiture of currency, and provide guidance on federal prosecution.
The resources of the DEA’s El Paso Intelligence Center (EPIC) will
be used to conduct research and analyze evidence and intelligence relating
to priority organization targets and other types of investigations.
Black Market
Peso Exchange (BMPE)
The Black Market Peso Exchange
(BMPE) is currently the largest known money laundering system in the
Western Hemisphere, responsible for moving
an estimated $5 billion worth of drug proceeds per year from the United
States back to Colombia. The BMPE is a "parallel exchange" system
where drug traffickers sell U.S. drug proceeds to brokers for pesos.
Brokers then sell the drug proceeds to Colombian importers who purchase
goods in the United States and elsewhere. These goods often appear in
Colombia as smuggled contraband. By purchasing the U.S. dollars on the
BMPE and not through Colombia's regulated exchange system, the importers
avoid Colombian taxes and tariffs, gaining significant profit, and a
competitive advantage over those who import legally. Prosecution of individual
peso brokers, their agents in the U.S. who are often referred to as “smurfs”,
and businesses that buy or receive BMPE dollars have been successful
individually, but have had little effect on the system and no effect
on the Colombian drug trafficking organizations who sell their dollars
to the peso brokers. Consequently, DEA is changing its investigative
tactics to assure that our BMPE money laundering investigations are focused
to inflict the most damage against the Colombian sources of drug supply.
DEA is also a participant in a multi-agency initiative to attack the
BMPE as a system rather than on an individual case-by-case basis.
Bilateral
Southwest Border Collective Targeting Initiative
The Bilateral Southwest
Border Collective Targeting Initiative focuses on identifying and targeting
Southwest Border money laundering schemes. The DEA Southwest Border
Offices are investigating a wide range of narcotics related money laundering
and bulk smuggling practices. We presently have active investigations
targeting laundered U.S. dollars from Mexico and Colombia into the
United States and the smuggling and transportation of bulk cash shipments
from the United States into Mexico.
Information
Sharing
We are also working to share information on drug financial
investigations with other agencies, both to assist in the fight against
terrorism and to improve overall coordination and cooperation for financial
investigations.
Terrorism
Drug enforcement can play a critical role in protecting our national
security by starving the financial base of criminal organizations. Traditional
criminal organizations continue to dominate the international drug trade
at all levels, but some terrorist organizations are involved in drug-related
activities. Drug income is among the sources of revenue for some international
terrorist groups. Department of Justice investigations have highlighted
the links between groups and individuals under investigation for drug
violations and terrorist organizations. In fact, 47 percent of the 36
Foreign Terrorist Organizations identified and updated by the Department
of State in October 2003 are on record with DEA as having possible ties
to the drug trade.
Although the DEA does not specifically target terrorists or terrorist
organizations we do target those associated with major drug trafficking
organizations like the Revolutionary Armed Forces of Colombia (FARC)
and the United Self-Defense Forces of Colombia (AUC). For example, in
2002, several high ranking members of the FARC and the AUC were indicted
in the United States for drug trafficking. This represents one of the
first times that drug-trafficking charges were brought in the United
States against members of foreign terrorist organizations. In fiscal
year 2003, DEA disrupted one Consolidated Priority Organization Target
and dismantled four Priority Target Organizations with terrorism links.
Interagency Cooperation
The DEA terrorism
Information Sharing Program institutionalizes within DEA the Attorney
General’s directive to coordinate information
and activities to prevent and disrupt terrorist activities. Under this
program, all DEA entities must identify investigations that have a nexus
or potential nexus to extremist and terrorist organizations, and agencies.
For financial investigations, FO also coordinates with the National Money
Laundering Committee, the Treasury Department's Financial Crimes Enforcement
Network and Interagency Coordinating Group and the FBI’s Terrorist
Financial Review Group.
In addition, DEA’s Special Operations Division (SOD) presently
coordinates and mutually shares investigative and intelligence resources
with the FBI, the ICE, and the IRS-CI in a concentrated and centralized
environment.
To further expand the exchange of information the Departments of Justice,
Homeland Security, and Treasury are planning to join together and establish
a multi-agency Drug Intelligence Fusion Center. The mission of the Drug
Intelligence Fusion Center will be to gather, store, and analyze all-source
drug and related financial investigative information to support coordinated,
multi-jurisdictional investigations focused on the disruption and dismantlement
of the most significant drug trafficking and money laundering enterprises.
To achieve this mission the Drug Intelligence Fusion Center will create
a powerful information and analytical capability not available today
by completing a cross-agency integration and analysis of law enforcement
and intelligence data that has historically been segregated by organizational
and technical boundaries.
Conclusion
Drug trafficking
organizations attack the soul and fabric of America in pursuit of one
thing, money. As America’s defenders against these vile organizations,
it is incumbent upon us in the Drug Enforcement Administration to attack
these groups on all fronts. There is no more important battle in this
effort than the attack against the proceeds that fuel this illicit
industry and provides the motive to those who prey upon our society.
DEA is embracing this responsibility through its investigative efforts,
to lead the fight against drug money laundering.
Mr. Chairman, thank you for the opportunity to testify here today and
I will be happy to answer any questions you may have.
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