We are here today because drug cartels have become hulking multi-national conglomerates, which stand on a massive international dark economy. According to the RAND Corporation, the illicit drug trade in the United States is worth $150 billion. Worldwide, it’s reached as much as $652 billion, according to Global Financial Integrity. So if this were a national GDP, it would be 22nd in the world, ahead of Sweden, Poland and Belgium.
These conglomerates’ operations must be concealed, and virtually all of their money must be laundered and hidden. For every dollar of drugs sold, a dollar of revenue must be hidden. Yet only a fraction of the $23 billion spent by the federal government attacking the supply of illicit drugs addresses money laundering and the dark economy of the drug trade.
Today, we’ll discuss how to clean this up.
First, we need better information on the magnitude and scope of cartels’ financial flows. The federal government has no central repository for data on how much drug money it seizes. What data agencies do gather isn’t collected uniformly, nor is it de-conflicted – meaning two agencies could count the same seizure twice. Senator Hassan and I introduced the NARCO Act as an amendment to the National Defense Authorization Act¬ (NDAA) to address these problems.
Second, we need to dismantle the financial networks of the cartels. The ONDCP must make this an explicit priority in the National Drug Control Strategy, with clear goals and metrics for success, and harness the expertise of the dozens of agencies involved in that strategy.
Third, we need to stay ahead of cartels’ evolving tactics. Bulk cash smuggling remains a common method, but trade-based money laundering – trading goods with drug money – is another cartel favorite. They are beginning to use third-party money brokers as well as experimenting with new technologies and currencies, like bitcoin.
Fourth, we need to be more strategic. Co-Chairman Grassley and I included the Corporate Transparency Act in the 2021 NDAA, to prevent cartels from hiding the true owners of shell corporations used to launder funds. I’ve asked FinCEN to implement this reform swiftly, and to expand and make permanent the geographic targeting orders used to block cartels’ access to the real estate market. We must close loopholes that allow drug traffickers to use illegal money service businesses to move their illicit proceeds, as our Combatting Money Laundering, Terrorist Finance and Counterfeiting Act of 2022 would do.
Finally, we need to leverage international partnerships.
The Department of Homeland Security’s Trade Transparency Units, called TTUs, have proven highly effective, helping federal authorities partner with other rule-of-law nations to detect trade-based money laundering schemes. But this program lacks a dedicated funding source and we ought to change that.
The U.S.-Mexico Bicentennial Framework for Security, Public Health, and Safe Communities seeks to disrupt transnational criminal organization’s financial networks, and I look forward to seeing tangible results.
China is both a hub for money laundering and the originator of most precursor chemicals used by Mexican cartels. We need to encourage China to better control precursor chemicals used to manufacture synthetic drugs like methamphetamine and fentanyl, and to participate in working groups to combat money laundering globally, such as the Egmont Group. China’s participation in this group could advance improved U.S. – China cooperation on narcotics-related money laundering cases.
Finally, we must remember that drug cartels are only one part of a dark economy that supports all manner of evil in the world. In Ukraine right now, a dark-money kleptocrat has attacked a peaceful neighbor, in part to distract from his own corruption and finality. The national security imperative of rooting out this dark international economy should spur us to better and more energetic efforts. For starters, we could expand the Justice Department’s “kleptocracy initiative” within the Money Laundering and Asset Forfeiture section into a multi-agency operations center. I have asked the Attorney General to brief us on how that is going in light of the recent announcement by the Biden Administration of the Trans-Atlantic Task Force that they are putting together to attack Russian oligarch assets and how that will roll these different federal agencies and offices together.
I’ll close with a reminder of drug cartels’ deadly toll. Our most recent year’s data shows over 104,000 drug overdose deaths in the United States; 400 in Rhode Island alone.
I look forward to hearing suggestions from our witnesses on how best to strengthen our drug policy framework to better address the drug production, trafficking and finance schemes that the cartels employ.
Rich Davidson (202) 228-6291 (press office)
