[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





  TRANSNATIONAL DRUG ENTERPRISES (PART II): U.S. PERSPECTIVES ON THE 
         THREATS TO GLOBAL STABILITY AND U.S. NATIONAL SECURITY

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY
                          AND FOREIGN AFFAIRS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 3, 2010

                               __________

                           Serial No. 111-117

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

         Subcommittee on National Security and Foreign Affairs

                JOHN F. TIERNEY, Massachusetts, Chairman
CAROLYN B. MALONEY, New York         JEFF FLAKE, Arizona
PATRICK J. KENNEDY, Rhode Island     DAN BURTON, Indiana
CHRIS VAN HOLLEN, Maryland           JOHN L. MICA, Florida
PAUL W. HODES, New Hampshire         JOHN J. DUNCAN, Jr., Tennessee
CHRISTOPHER S. MURPHY, Connecticut   MICHAEL R. TURNER, Ohio
PETER WELCH, Vermont                 LYNN A. WESTMORELAND, Georgia
BILL FOSTER, Illinois                PATRICK T. McHENRY, North Carolina
STEVE DRIEHAUS, Ohio                 JIM JORDAN, Ohio
STEPHEN F. LYNCH, Massachusetts      JEFF FORTENBERRY, Nebraska
HENRY CUELLAR, Texas                 BLAINE LUETKEMEYER, Missouri
MIKE QUIGLEY, Illinois
                     Andrew Wright, Staff Director







                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 3, 2010....................................     1
Statement of:
    Kerlikowske, R. Gil, director, White House Office of National 
      Drug Control Policy; David T. Johnson, Assistant Secretary 
      of State, Bureau of International Narcotics and Law 
      Enforcement, U.S. State Department; Anthony P. Placido, 
      Assistant Administrator and Chief of Intelligence, Drug 
      Enforcement Administration, U.S. Department of Justice; 
      Adam J. Szubin, Director, Office of Foreign Assets Control, 
      U.S. Treasury; and William F. Wechsler, Deputy Assistant 
      Secretary of Defense for Counternarcotics and Global 
      Threats, U.S. Department of Defense........................    11
        Johnson, David T.........................................    26
        Kerlikowske, R. Gil......................................    11
        Placido, Anthony P.......................................    40
        Szubin, Adam J...........................................    57
        Wechsler, William F......................................    73
Letters, statements, etc., submitted for the record by:
    Johnson, David T., Assistant Secretary of State, Bureau of 
      International Narcotics and Law Enforcement, U.S. State 
      Department, prepared statement of..........................    28
    Kerlikowske, R. Gil, director, White House Office of National 
      Drug Control Policy, prepared statement of.................    14
    Placido, Anthony P., Assistant Administrator and Chief of 
      Intelligence, Drug Enforcement Administration, U.S. 
      Department of Justice, prepared statement of...............    42
    Szubin, Adam J., Director, Office of Foreign Assets Control, 
      U.S. Treasury, prepared statement of.......................    59
    Tierney, Hon. John F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of Mr. Bever....     3
    Wechsler, William F., Deputy Assistant Secretary of Defense 
      for Counternarcotics and Global Threats, U.S. Department of 
      Defense, prepared statement of.............................    75

 
  TRANSNATIONAL DRUG ENTERPRISES (PART II): U.S. PERSPECTIVES ON THE 
         THREATS TO GLOBAL STABILITY AND U.S. NATIONAL SECURITY

                              ----------                              


                        WEDNESDAY, MARCH 3, 2010

                  House of Representatives,
     Subcommittee on National Security and Foreign 
                                           Affairs,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. John F. Tierney 
(chairman of the subcommittee) presiding.
    Present: Representatives Tierney, Flake, Quigley, Foster, 
Mica, Leutkemeyer, Jordan, Welch, and Duncan.
    Also present: Representative Chu.
    Staff present: Orly Isaacson, LA; Catherine Ribeiro, CD; 
Robyn Russell, LA; Andy Wright, staff director; Elliot 
Gillerman, clerk; Talia Dubovi and Scott Lindsay, counsels; 
Steven Gale and LaToya King, fellows; Aaron Blackberg and 
Bronwen De Sena, interns; Adam Fromm, minority chief clerk and 
Member liaison; Tom Alexander, minority senior counsel; and 
Christopher Bright, minority senior professional staff member.
    Mr. Tierney. Good morning, everybody. A quorum being 
present of the Subcommittee on National Security and Foreign 
Affairs, the hearing entitled, ``Transnational Drug Enterprises 
(Part II): U.S. Government Perspectives on the Threats to 
Global Stability and U.S. National Security,'' will come to 
order.
    I ask unanimous consent that only the chairman and ranking 
member of the subcommittee be allowed to make opening 
statements. Without objection, so ordered.
    And I understand that Representative Judy Chu is joining us 
today on the subcommittee and would like to welcome her 
participation. As such I ask unanimous consent that Ms. Chu be 
allowed to participate in the hearing in accordance with 
committee rules. She will be allowed to question the witnesses 
after all official members of the subcommittee have had their 
turn. Without objection, so ordered.
    I ask unanimous consent that the hearing record be kept 
open for 5 business days so that all members of the 
subcommittee be allowed to submit a written statement for the 
record. Without objection, so ordered.
    And I ask unanimous consent the written testimony from Mr. 
James Bever from the U.S. Agency for International Development 
be submitted for the record. And without objection, that as 
well is so ordered.
    [The prepared statement of Mr. Bever follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Tierney. With that all aside, again good morning and 
thank all the witnesses for joining us here today. We are 
continuing our oversight on national security and the threats 
from illicit global drug enterprises. In October we held our 
first hearing with a panel of nongovernment experts who focused 
on disrupting and dismantling drug operations in Southwest 
Asia, Latin America, and West Africa. We heard then about the 
mounting evidence that the drug trade is closely tied to 
international criminal and terrorist organizations and poses a 
national security threat to the United States.
    Today we welcome witnesses from the Drug Enforcement 
Administration, the Department of Defense, the State 
Department, and the Treasury Department to respond to the 
recommendations that emerged from our October hearing. We are 
pleased to have with us today the White House Director of 
National Drug Control Policy.
    The U.N. Office on Drugs and Crimes estimates that the 
global proceeds from illicit drugs range from $100 billion to 
more than $1 trillion per year. That is quite a range. The 
amount of money garnered by the drug trade puts enormous power 
in the hands of criminal actors who have every incentive to 
disrupt law enforcement, displace legitimate enterprise, and 
destabilize governments.
    The President's drug control budget request for fiscal year 
2011 is now before Congress. It asks for $15.5 billion, of 
which $6 billion is slated for international support in 
interdiction. This includes funding for efforts to halt drug 
flows from abroad into the United States.
    One question we should address today is whether this 
overall amount is adequate. The second question is whether the 
amount targeted to international drug cartels in interdiction 
is sufficient to mitigate the national security threats 
emanating from the expanding global drug trade and associated 
criminal syndicates.
    Our last hearing highlighted a number of policy and 
strategy issues. In Afghanistan the ever-changing and 
increasingly complex relations between the drug trade, the 
insurgency, and terrorism continue to challenge us. Our main 
counternarcotics initiatives over the past 9 years, 
eradication, interdiction, justice reform, and the promotion of 
alternative livelihoods, continue to evolve. These programs are 
supposed to be interwoven with our counterinsurgency efforts, 
but a recent Inspector General report questions whether those 
efforts are actually integrated.
    The witnesses at our October hearing cautioned that no 
single counternarcotics approach will work successfully since 
traffickers are quick to adapt. They also emphasized that 
regional, cultural, and economic differences across the country 
must be taken into account for any effort to succeed.
    The extreme violence we have seen in recent years along the 
Mexican border has exposed the tragic consequence of the drug 
trade as well as the acute threat these enterprises pose to our 
own Nation and to our neighbors. The United States has 
longstanding counternarcotics efforts in Latin America, 
including the multi-year, multi-billion dollar Plan Colombia 
and the ongoing Merida Initiative in Mexico and Central 
America. While eradication has been an entrenched aspect of 
U.S. drug control policy in Latin America for many years, in 
part because it has been seen as cutting a lot of drugs at 
their source, some witnesses told us that the forced crop 
eradication in the absence of real alternative livelihood 
programs was a doomed drug control policy.
    West Africa is fast becoming a preeminent international 
drug hub, and the threats of the region are still not fully 
understood. New transit routes where drugs travel from Latin 
America to West Africa and then to Europe represent lucrative 
opportunities for criminal enterprises. These organizations 
threaten stability in an area of the world that is already 
prone to violence and corruption and where we are seeing the 
rise of terrorist organizations such as al Qaeda in the Islamic 
Maghreb.
    The United Nations Office of Drug Control estimated that 
close to $2 billion worth of cocaine passed through West Africa 
in 2007, which would make cocaine one of the largest exports of 
that region.
    Transnational drug enterprises did not evolve overnight and 
have shown remarkable flexibility, alliance building capacity, 
operational fluidity, and top to bottom organizational 
sophistication that many licit businesses would envy. The 
United States, working closely with our partners, must break 
the back of transnational drug enterprises and sever the drug 
terror nexus where the monetary proceeds from drug trafficking 
help fund terrorist organizations such as the FARC in Colombia, 
the Taliban in Afghanistan, and al Qaeda in the Islamic 
Maghreb.
    While it is not the focus of our hearing today, I want to 
note the importance of addressing the demand for drugs that 
comes from within our own borders. Until we are more successful 
at reducing demand and taking the profits out of drug 
trafficking, we will continue to face significant challenges in 
our international counternarcotics efforts.
    With these sobering thoughts in mind, I look forward to 
hearing from today's witnesses, who have been charged by the 
American people with the challenging task of dismantling 
international drug enterprises, stopping the flow of money to 
terrorists and criminal organizations, and protecting our 
national security.
    Mr. Flake, I welcome you to give your opening remarks.
    Mr. Flake. Thank you, Mr. Chairman. Thank you for calling 
this hearing. I appreciate the witnesses coming forward. We 
have heard from the private sector nonprofit witnesses before, 
as mentioned, and it is good to hear now from every level of 
government, both those who are targeting the financial networks 
like we do at Treasury and those who are looking at other 
efforts.
    I will be interested to see how targeting the heroin trade 
now will impact what we are doing with the surge in Afghanistan 
and then how those two items intersect, but also to see how 
your assessment of what our international partners are doing, 
if this has been a good year and a good trend or if we need 
some more help there.
    But anyway, thank you all for coming. I look forward to the 
hearing.
    Mr. Tierney. Thank you. The subcommittee will now receive 
testimony from the panel that is before us today. I will give a 
brief introduction of each of you, and then we will start going 
from left to right on the testimony.
    Mr. Gil Kerlikowske is the White House Director of National 
Drug Control Policy, a position he has held since May 2009. In 
that capacity he coordinates Federal drug control programs and 
oversees implementation of the President's National Drug 
Control Strategy. Prior to this position he served for 9 years 
as chief of police in Seattle. Mr. Kerlikowske holds a BA and 
an MA from the University of South Florida.
    Ambassador David Johnson is the Assistant Secretary of 
State for International Narcotics and Law Enforcement Affairs. 
In that role he coordinates with the President and the 
Secretary of State to develop policies to combat crime and 
international narcotics. A career Foreign Service Officer, 
Ambassador Johnson has also previously served as a Deputy Chief 
of Mission for the U.S. Embassy in London and as the Afghan 
Coordinator for the United States. He holds a BA from Emory 
University.
    Mr. Anthony Placido is an Assistant Administrator and Chief 
of Intelligence for the Drug Enforcement Administration. In 
that capacity he serves as DEA's senior officer for the U.S. 
intelligence community and manages the agency's Intelligence 
Division in the Organized Crime Drug Enforcement Fusion Center. 
Mr. Placido has served with the DEA since 1982 in a number of 
foreign and domestic posts. He holds a BS from Northeastern 
University and an MPA from Golden Gate University.
    Mr. Adam Szubin serves as the Director of the Treasury 
Department's Office of Foreign Assets Control. In that capacity 
he is responsible for overseeing the U.S. Government's economic 
sanctions programs which target international narcotics 
traffickers. He has held this position since 2006 and has also 
previously served as a senior adviser to the Under Secretary of 
the Treasury for Terrorism and Financial Intelligence. A former 
Fulbright scholar, Mr. Szubin holds a BA from Harvard College 
and a JD from Harvard Law School.
    Good to see so many Massachusetts educated people.
    Mr. William Wechsler is the Deputy Assistant Secretary of 
Defense for Counternarcotics and Global Threats. In that 
capacity he oversees the Department of Defense's 
Counternarcotics and Threat Finance Policies and Operations. He 
has previously served on the staff of the National Security 
Council as Director for Transnational Threats and is Director 
for Global Issues in Multilateral Affairs. Mr. Wechsler holds a 
BA from Cornell University and an MPA from Columbia University.
    I want to thank all of you for making time on your 
schedules to join us here today and share your substantial 
expertise. It is the policy of this subcommittee to swear you 
in before you testify today or have you affirm your obligation 
to tell the truth. So I ask you to please raise your right 
hands and stand.
    [Witnesses sworn.]
    Mr. Tierney. The record will please reflect that all the 
witnesses answered in the affirmative. I think you all know 
that your complete written remarks by agreement are already 
going to be put in the hearing record, and I know that they 
were substantial. We appreciate them and they will be read. But 
I ask that you try to summarize those remarks in about 5 
minutes if you would.
    The lights reflect green while you are on the go time, with 
a minute to go it will turn to amber, and when your 5 minutes 
is up it will turn to red, the floor opens up, you drop down 
and that is it. The Ambassador says, fine with me, I get to get 
out of here. Not so lucky. We will try to be as flexible as we 
can, but we do have five witnesses. We appreciate you trying to 
adhere as best you can to those time guidelines.
    Mr. Kerlikowske, we are pleased to hear from you.

STATEMENTS OF R. GIL KERLIKOWSKE, DIRECTOR, WHITE HOUSE OFFICE 
 OF NATIONAL DRUG CONTROL POLICY; DAVID T. JOHNSON, ASSISTANT 
 SECRETARY OF STATE, BUREAU OF INTERNATIONAL NARCOTICS AND LAW 
    ENFORCEMENT, U.S. STATE DEPARTMENT; ANTHONY P. PLACIDO, 
    ASSISTANT ADMINISTRATOR AND CHIEF OF INTELLIGENCE, DRUG 
ENFORCEMENT ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE; ADAM J. 
   SZUBIN, DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL, U.S. 
 TREASURY; AND WILLIAM F. WECHSLER, DEPUTY ASSISTANT SECRETARY 
   OF DEFENSE FOR COUNTERNARCOTICS AND GLOBAL THREATS, U.S. 
                     DEPARTMENT OF DEFENSE

                STATEMENT OF R. GIL KERLIKOWSKE

    Mr. Kerlikowske. Thank you for the opportunity to testify 
on this important subject of transnational drug enterprises. 
The Obama administration believes that a balanced drug control 
strategy includes comprehensive efforts to reduce our 
consumption of illicit drugs as well as drug production, 
trafficking and related violence at home and abroad. Consistent 
with this view, the President's fiscal year 2011 national drug 
control budget proposal seeks over $2.3 billion to provide 
support to our international partners and counternarcotics 
programs, and that is an increase of $20 million over the 
levels of the last fiscal year.
    Now, although today's hearing focuses on transnational 
threats, it is important to note the administration's strong 
commitment to reducing drug consumption at home. As a long time 
police chief I have seen up close the terrible impact that 
drugs have had on individuals, families and communities. The 
earlier we can intervene to get people help, the better, and 
that is why community-based prevention will be a focus of our 
efforts.
    Drug use and its consequences affect different places in 
very different ways, and in fact there is no single drug 
problem in this country, but a wide variety of drug problems. 
The drug issues in each community are closely tied to the 
makeup, the economy, the geography, and the culture of 
particular communities.
    We will be expanding and enhancing existing prevention 
efforts and working to ensure drug abuse treatment services are 
made more widely available. These efforts will include expanded 
work to address the abuse of pharmaceutical drugs. That is a 
problem of increasing concern within the United States.
    Let me turn to the serious transnational threat posed by 
drugs. In order to put the thrust of our efforts to combat 
transnational drug enterprises in context, it is essential to 
examine the manner in which these organizations function. They 
thrive in an environment of weak governmental institutions, 
insecurity, corruption, and limited legitimate economic 
opportunity, and their purposes are served by a culture of 
violence, intimidation, and impunity to create the perception 
that they are the governing body in the areas that they operate 
freely.
    A clear nexus has been established linking the revenue 
produced by illicit trafficking and their violent destabilizing 
activities. In light of this, government efforts against the 
international drug production and trafficking organizations 
typically include interdiction, direct organizational attack, 
and disruption of inputs to the trafficker's chain of 
production and distribution.
    In Colombia we have witnessed an evolution from what many 
describe as a nearly failed state during the nineties to 
today's situation in which the drug funded terrorist 
organizations have been reduced in size and power. 
Additionally, security has returned to many parts of the Nation 
and the government is taking an increasing responsibility for 
implementation of programs formerly dependent on U.S. 
assistance.
    I visited Colombia last September and I observed that it is 
a safer place than at any time in the last 20 years. They have 
also significantly improved their human rights record over the 
past 10 years. There are still certainly problems, but this 
remains a priority for the U.S. Government in working with 
Colombia. And the government is stepping up to take on more 
ownership of the counterdrug programs, I met with the national 
police chief there, from eradication to alternative development 
to demand reduction.
    And in Mexico President Calderon's government is engaged 
in, as we well know, a violent struggle to dismantle major 
criminal organizations, and at the same time they are working 
to permanently reform and strengthen the democratic 
institutions of government.
    The U.S. intelligence sharing, training and the provision 
of equipment through the Merida Initiative and other regional 
programs have been invaluable to our strategic partnership with 
Mexico, the Caribbean, and the Central American nations. 
Additionally, U.S. cooperation with Mexico also includes 
expanding collaboration and exchanges on prevention, treatment, 
and innovative criminal justice practices.
    The most recent example is the U.S.-Mexico Demand Reduction 
Bi-National Policy Conference which ONDCP hosted last week here 
in Washington, DC, with many Federal partners, including the 
State Department. The conference brought together public policy 
leaders, researchers, program providers and local coalition 
organizers from both nations to address the science of 
addiction, and the effective prevention, treatment and recovery 
programs that we have here in the United States that can be 
outsourced. The conference concluded with a joint declaration 
of drug demand reduction cooperation, to include among other 
things the further implementation of best practices in the 
fields of prevention and treatment. Similarly, there is much 
that we can do to address the drug threats attacking both the 
United States and Mexico.
    In June 2009, Secretary Napolitano, Attorney General 
Holder, and I released the National Southwest Border 
Counternarcotics Strategy in New Mexico. That strategy is a key 
component of our comprehensive national response to the threat 
along the border. The response includes cooperation with Mexico 
through the Merida Initiative. The Southwest Border Strategy 
also seeks to leverage information sharing with State and local 
partners.
    And given the stop sign, I think I will stop here so the 
floor doesn't open up.
    [The prepared statement of Mr. Kerlikowske follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Tierney. Thank you very much. We will try to give you 
an opportunity to get where else you want to go in terms of 
questioning on that.
    Ambassador Johnson.

                 STATEMENT OF DAVID T. JOHNSON

    Mr. Johnson. Thank you, Mr. Chairman, Ranking Member Flake, 
members of the subcommittee, thank you for the opportunity 
today to discuss an issue of great concern to me and to my 
colleagues at the Department of State: transnational drug 
enterprises and their associated illicit networks.
    Mr. Chairman, I am grateful for your leadership and the 
awareness that today's hearing brings to this important 
national security issue. We believe that transnational drug 
enterprises directly threaten the security interest of the 
United States as well as the health and safety of our fellow 
citizens. These criminal enterprises actively work to subvert 
the rule of law wherever they operate. They undercut democratic 
institution building and economic growth in developing 
countries.
    As you noted at the first part of this hearing, the large 
profits generated by the drug trade and the efforts to hide and 
launder them can distort economies and governing institutions 
even in developed states. Drug trafficking organizations are at 
their core business enterprises often closely linked to other 
transnational crime groups and regularly engaged in a broad 
range of illegal activities that affect American values, 
business, and our security and health.
    The Department shares this subcommittee's deep concerns 
over links between international drug trafficking and 
terrorism. As the international community has clamped down on 
terrorism and pressured governments from financially supporting 
terrorist organizations, some groups have resorted to drug 
trafficking as a source of revenue. Much of the work my 
colleagues and I do at the State Department involves foreign 
assistance and cooperation programs to isolate, minimize, and 
neutralize transnational drug enterprises. Using bilateral, 
regional and global initiatives and assistance programs, we 
seek to build the law enforcement capacity of foreign 
governments so they can confront these threats before they 
reach or impact on U.S. soil.
    We help them strike directly at these organizations by 
disrupting their operations, arresting and imprisoning their 
leaders, and seizing their assets. This can include destroying 
drug crops on the ground before they can enter the processing 
chain, particularly in areas where farmers have viable 
alternatives, as Mr. Mansfield pointed out in Part I of this 
hearing. And in other cases with our partners at the U.S. 
Agency for International Development we provide substantial 
programs to help wean growers away from drug farming through 
alternative livelihood and economic development.
    Mr. Chairman, countering the power of transnational drug 
and crime enterprises requires a global effort. It requires 
enormous strategic political, operational and financial 
coordination and commitment and, most importantly, it requires 
building and further developing good and capable governance 
capacity in the regions where transnational drug enterprises 
operate.
    Thank you for your invitation this morning. I look forward 
to addressing any questions you have, in particular any 
questions you might have about the programs and initiatives 
that my Bureau operates around the world. Thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Johnson follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Tierney. Thank you, Ambassador.
    Mr. Placido.

                STATEMENT OF ANTHONY P. PLACIDO

    Mr. Placido. Thank you, Mr. Chairman, Ranking Member Flake, 
distinguished members of the subcommittee. On behalf of the men 
and women of the Drug Enforcement Administration, I would like 
to thank you for your continued support, and I will cut 
directly to the chase.
    Drug trafficking and abuse exacts a significant toll on the 
American public. More than 31,000 Americans or approximately 10 
times the number of people killed on 9/11 die each year as a 
direct result of drug abuse. Approximately 7 million people who 
are addicted to controlled substances squander their productive 
potential. Many of these addicts neglect or abuse their 
children and commit a variety of crimes under the influence of 
or in an attempt to obtain illicit drugs. Tens of millions more 
suffer from this erstwhile ``victimless'' crime as law abiding 
citizens are forced to share the roads with drugged drivers, to 
clean up toxic waste in clandestine laboratories, rehabilitate 
addicts, incarcerate criminals, and put together the pieces of 
shattered lives.
    However, if we want to assess the true cost of this threat 
we have to go further and we have to look at the impact that 
transnational drug trafficking has on corrupting government 
institutions, undermining confidence in the rule of law, 
fueling violence, undermining regional stability and funding 
terrorism.
    Those who organize, finance, and direct this criminal 
enterprise thrive in areas where government control is week. It 
is no coincidence that the so-called kingpins who run this 
global trade do not reside in the United States where they 
would be most exposed to our criminal justice system. They 
operate from locations which they perceive to be safe havens 
and they direct the activity of subordinates and surrogates who 
supply drugs to the United States.
    Drug trafficking is a global enterprise that generates a 
staggering $394 billion a year. This figure dwarfs the proceeds 
from all other forms of organized crime. Let me put this number 
in context. In aggregate, that $394 billion exceeds the gross 
domestic product of many national governments around the globe. 
Some would argue that legalization and regulation even at the 
cost of untold human suffering and misery would at least strip 
the proceeds of this economic fund from the market. But both 
common sense and history have taught us that those who are 
displaced from the drug trade don't move into corporate life, 
they morph into other areas of criminality. And what we are 
really faced with is fighting people who put personal greed 
above all else.
    Parts of Central America, West Africa and Asia have become 
havens for criminals who pursue illicit activities largely 
undeterred by law enforcement or local government. Drug 
traffickers use these regions for the production, 
transshipment, and storage of illicit drugs. Violent 
traffickers are relocating to take advantage of these 
permissive environments and importing their own brand of 
justice, contributing to further instability.
    Unfortunately, areas with limited or poor governance are 
also the breeding grounds for other types of criminal activity, 
to include terrorism. Eighteen of 44 international terrorist 
groups have been linked to some aspect of the international 
drug trade.
    Today the FARC is primarily funded through the drug trade. 
It sells multi-ton quantities of cocaine and uses the proceeds 
to purchase weapons for use in the FARC's decades long fight to 
topple the legitimate government of Colombia.
    Similarly, insurgents in Afghanistan and terrorists in the 
Middle East, Europe and Africa fund their activities through 
the drug trade. The DEA has documented hundreds of millions of 
dollars in proceeds from drug trafficking flowing to the 
Taliban.
    In Africa international terrorist organizations such as al 
Qaeda and the Islamic Maghreb rely on criminal specialists 
closely linked to the drug trade for money laundering, document 
forgery, transportation, security, weapons, corruption, and 
other criminal activities.
    In Europe the Madrid train bombing was funded through the 
sale of hashish and Ecstasy. And DEA investigations have 
disclosed significant linkages between Hezbollah and the drug 
trade in Africa, the Middle East, and Latin America.
    However, these transnational threats do not have to involve 
insurgency or terrorism to warrant our concern. In spite of 
President Calderon's extraordinary steps to deploy more than 
45,000 military troops to assist the police in combating cartel 
influence, there have still been more than 18,000 murders, 
drug-related murders, in the last 3 years. More troubling is 
the fact that many of these murders were intentionally 
committed to try and intimidate the public and influence the 
government to stop its activities.
    From the war on terrorism to our southwest border 
transnational drug trafficking threatens the security of 
Americans at home and abroad. In Afghanistan, U.S. soldiers are 
fighting an insurgency that is substantially funded by the drug 
trade. In our own hemisphere ever increasing rates of violence 
threaten the security of our borders and those of our 
neighbors.
    Let me conclude by saying that the consequences of drug 
trafficking have never been higher. We must continue our 
efforts to mitigate this damage or we will certainly pay a 
higher price later on. Thank you.
    [The prepared statement of Mr. Placido follows:]

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    Mr. Tierney. Thank you, Mr. Placido.
    Mr. Szubin.

                  STATEMENT OF ADAM J. SZUBIN

    Mr. Szubin. Thank you, Chairman Tierney, Ranking Member 
Flake, members of the committee. Thank you for the opportunity 
to appear before you today to discuss the role played by the 
Treasury Department in combating the threat posed by 
transnational drug enterprises. We work alongside the agencies 
represented here and many others in our government to add 
financial expertise and our unique authorities to our 
collective counternarcotics efforts, and financial sanctions 
can be a powerful tool.
    Top level Colombian traffickers have told us that they fear 
three things above all else: The first, arrest and extradition 
to the United States; second, seizure of their assets; and 
three, being placed on the OFAC sanctions list.
    There is a heightened awareness of sanctions among the drug 
trafficking community and a fear of their consequences. 
Individuals and entities designated by OFAC lost access to the 
U.S. financial system. And U.S. persons, whether they be here 
or abroad, are forbidden from doing business with them. Any of 
their assets are immediately frozen if they are or come within 
possession of a U.S. person or financial institution.
    And while these direct legal consequences can be highly 
disruptive, the informal ripple effects of our designations go 
much farther. In practicing their own due diligence and risk 
avoidance, many foreign, non-U.S. banks will immediately close 
the accounts and deny service to anyone who is placed on the 
OFAC list. Foreign companies that have no legal obligation to 
comply with U.S. sanctions will likewise often refuse to do 
business with designated parties, thereby further isolating 
them from legitimate commercial markets.
    This type of reaction is now common in Colombia, and we are 
beginning to see the same type of isolating impact played out 
in Mexico.
    Treasury has been targeting international drug enterprises 
for 15 years. In 1995, President Clinton signed Executive Order 
12978 which targets Colombian drug traffickers and 
organizations. In 1999, Congress globalized the concept 
enacting the Foreign Narcotics Kingpin Designation Nation Act, 
or the Kingpin Act, which has allowed us to act against the 
network of cartels worldwide. Since 1999, the President has 
identified 82 Tier I kingpins and OFAC has identified over 500 
individuals and companies that make up their support and 
financial networks.
    Just yesterday we designated two of Colombia's most wanted 
drug lords; Daniel Barrera Barrera, known as ``El Loco'' 
Barrera, and Pedro Oliviero Guerrero Castillo, a/k/a 
``Cuchillo.'' These druglords operate primarily in eastern 
Colombia and are closely aligned with the FARC, whose criminal 
and destabilizing activities were highlighted by Mr. Placido.
    In a good example of OFAC's network approach, at the same 
time yesterday we also named and targeted the assets of 29 
individuals and 47 companies in these druglords' distribution, 
money laundering, and money concealment networks.
    Cooperation with host governments is vital to our work. 
These are transnational threats, and they warrant a 
transnational approach. A good example are our collective 
actions against the Amezcua Contreras organization. In October 
2008 we designated a company named Collins Pharmaceuticals and 
its associated officials. The company had manufactured 
pseudoephedrine and diverted it to drug trafficking 
organizations for the production of methamphetamine. As a 
result of this action nearly $3 million was immediately blocked 
in U.S. bank accounts.
    But following our action, Mexico's Attorney General's 
office blocked bank accounts in Mexico belonging to the same 
individuals and entities that we had listed.
    In September 2009, we followed up again on the action and 
designated additional individuals and front companies who had 
been working to circumvent the earlier sanctions. Of course we 
have also intensified our efforts greatly against narcotics 
traffickers in Afghanistan and Pakistan to support the efforts 
alluded to earlier by others on this panel. Treasury is 
actively supporting those efforts to disrupt and dismantle the 
narcotics networks in those countries using the same approaches 
that have yielded results elsewhere.
    In sum, economic sanctions can be a highly effective tool 
which when used in concert with United States and foreign law 
enforcement authorities can advance U.S. efforts to combat 
these dangerous transnational drug efforts.
    Thank you for your invitation and for your interest in this 
important matter.
    [The prepared statement of Mr. Szubin follows:]

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    Mr. Tierney. Thank you Mr. Szubin.
    Mr. Wechsler.

                STATEMENT OF WILLIAM F. WECHSLER

    Mr. Wechsler. Thank you very much. Mr. Chairman, Ranking 
Member Flake, distinguished members of the committee, thank you 
for the opportunity to testify here. And it is particularly 
appropriate that you invite me to testify with all my 
interagency colleagues because this panel represents the whole 
of government approach to this issue that we find vitally 
important.
    We have all seen the disruptive effect of illegal 
trafficking. Unfortunately, looking back over time, most 
governments around the world, including ours, have historically 
compartmentalized these threats into categories that fit our 
bureaucratic organizations. There are national security 
threats, there are intelligence threats, there are law 
enforcement threats, there are health concerns, there are 
commerce concerns, there are education concerns. As a result, 
again, historically, each bureaucratic arm addressed the threat 
according to its respective organization's perspective without 
as much crosscutting organization and integration as to 
maximize our effectiveness. The predictable result in those 
instances has been lack of uniformity and marginal results. 
Where we have had on interagency, coordinated approach we have 
had quite powerful results.
    Under the Obama administration the United States is 
attempting to address these shortcomings by providing a whole 
of government approach designed to dismantle bureaucratic 
barriers that have long prevented a centralized method of 
attacking these threats to global stability and U.S. national 
security.
    As my colleagues have described, in some parts of the world 
broken communities become breeding grounds for criminal 
activities of all kind, including all types of illicit 
trafficking: drugs, weapons, people, cash. Lawless environments 
make inviting sanctuaries for religious zealots, political 
ideologues, insurgents, and terrorists, all sharing a common 
proclivity for violence and destruction. Such groups seek to 
evade or neutralize the forces of order. Their common needs 
allow them to cohabit in an environment where the government is 
weak and the populace can be controlled by bribes, 
intimidation, violence, and corruption. All types of 
organizations expand power bases and corrupt and control more 
communities. They become more formidable. Eventually criminal 
and extremist organizations may be able to carve out safe 
havens in parts of the world and at times they become direct 
threats to U.S. national security in which the Department of 
Defense has to become involved directly. A coordinated 
interagency response is critical to defeating the threats posed 
by these transnational drug enterprises.
    My office's principal role is to provide counternarcotics 
support to domestic law enforcement agencies and foreign 
security forces conducting counternarcotics missions. The 
Department has also concluded from experience, quite often 
painful experience, that the kinds of enemies that we are 
fighting on the battlefield today and the kinds of enemies that 
we expect to fight on the battlefield in the years to come are 
going to be financed, supported, and organized in part by 
transnational illicit networks and especially drug networks.
    Therefore, we in the Department of Defense have to reach 
out to our interagency colleagues who have much more 
experience, expertise and particular authorities in dealing 
with these threats in order to integrate them into our military 
efforts to make our efforts as successful as possible.
    In addition to these kinds of support that we provided in 
the past, the Department of Defense is trying to increase its 
supporting role in addressing threat finance more generally. 
Terrorists and insurgents typically rely on irregular ways to 
fund their activities, including crime, donation from 
nongovernmental organizations, using front companies, and 
various black market activities that Adam talked about. Only 
recently we have developed all the weaponry that we need to 
really attack these financial networks, and we cannot 
overemphasize enough that a successful effort in this nature 
will be accomplished only with an interagency whole of 
government approach. It is critical for us, for our way of 
thinking, of addressing the asymmetric warfare that we are 
confronting today and we expect to confront in the future.
    Chairman, ranking member, thank you again for the 
opportunity to discuss this issue. I look forward to answering 
all the committee's questions.
    [The prepared statement of Mr. Wechsler follows:]

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    Mr. Tierney. Thank you, Mr. Wechsler. Thank all of you for 
your testimony.
    This is a perplexing area, to say the least. I know your 
jobs are challenging. We appreciate what you do.
    Mr. Kerlikowske, let me start with sort of a procedural 
question here. I understand you don't yet have in place all the 
key staff you need. What expectations do you have on staffing 
up and where is the status of that?
    Mr. Kerlikowske. We are working very hard at getting the 
people on board. One of the concerns has been the Deputy 
Director. One of the Deputy Directors was voted out in November 
and is still awaiting confirmation.
    Mr. Tierney. He is out of committee and waiting full Senate 
confirmation?
    Mr. Kerlikowske. That is exactly right, Mr. Chairman. So I 
think it is difficult sometimes to get the job done if you 
don't have all the folks in place.
    Mr. Tierney. Perhaps we can engage our colleagues here and 
maybe we will be able to communicate with the Senate our desire 
at least that this office get staffed up and that you have the 
tools that you need to move forward on that. I am sort of 
always struck by this idea that this all is driven by money, at 
least it seems to all have been driven by money and therefore 
the power and everything else on that basis, and I wonder of 
all the different methods that we have to address that, which 
ones are really, really effective or are we just chasing our 
tails on some of this stuff. I can imagine the frustration of 
the DEA fighting the same fight over and over again every day 
and it seems to pop up somewhere else.
    So I want to ask each of you a question and answer it if 
you can. We have the drugs obviously, so you can go after the 
drugs, interdiction on that, you can go after the money on 
that, you can go after the precursors if you can so that they 
can't make the drugs in the end, or you can sort of attack the 
one thing that we have some control over, I guess, in this 
country, which is the end user, and try to diminish that. Of 
those, if I have missed something please tell me that, but of 
all those ideas which do you think is the more effective, just 
so I can get something from each of you.
    Mr. Kerlikowske. The money. I think choking off the money 
has not been as much of a whole of government approach as you 
are seeing here today. I also don't think that when it comes to 
seizing those assets that State and local law enforcement, and 
I spent the vast majority of my career at the local level, I 
don't think that they have been as engaged in working with 
Federal partners on choking off money.
    We have all seen the press conferences with the arrests and 
the people in handcuffs, we have seen the seizures of guns and 
drugs laid out on the table. It is not that exciting to seize a 
bank account. And I think that if we really concentrate the way 
it has been expressed here I think that we will have a better 
opportunity to choke off money and in turn that is the life 
blood of these cartels.
    Mr. Tierney. Ambassador Johnson.
    Mr. Johnson. I think that the monetary driver of this is 
something you always have to keep your eye on. It is the reason 
these people get up in the morning. They are not interested in 
trading cocaine for its own sake. But I think it is important 
to peel back a little bit and figure out how you go about that. 
And from my point of view, and this is, I guess this is because 
of what I do for a living, but helping foreign governments 
build the institutions of governance is the long run, durable 
answer to this problem, and that gets at the money as part of 
that. Getting at the money is a first level, is a rifle shot 
and it has to be followed up and followed up and followed up. 
But helping build those institutions with our foreign partners 
gives people in the DEA and the Treasury and other places in 
our government partners to work with.
    And it goes back to the main problem here, and that is that 
ungoverned space will bite you. And whether it is ungoverned 
space in a remote part of the world or it is ungoverned space 
in a neighborhood, in a close-by country, that is I think where 
the key is to dealing with this problem, and it goes directly 
to that question of how do you make money on the street.
    Mr. Tierney. Mr. Placido.
    Mr. Placido. Thank you, Mr. Chairman, for the question. I 
would just say that I have spent the better part of my 31 years 
in this profession wrestling with the question that you have 
asked and I have come to the conclusion that there is no silver 
bullet, there is no one tool that will eliminate this problem, 
but rather many. What I will say is a matter of personal 
preference, and my organization of the Drug Enforcement 
Administration has come to the conclusion that the notion that 
we have a war on drugs suggests that we are fighting against 
the contraband itself and we don't believe that is true. We are 
really fighting against organizations and it is an 
organizational attack strategy designed to go after the people 
and the greed of those who put personal profit above all else. 
And I believe you heard Mr. Szubin and others talk about the 
things that these traffickers fear most is really their own 
well-being. Certainly they are concerned about their money, and 
the profit is the reason that they get involved in the 
business. But it is actually taking these people out of 
circulation where their money can't buy corruption, can't help 
them where they can't benefit from that and actually 
incarcerating these people for long periods of time, I think 
that is the reason why the so-called kingpins, or as we now 
call them, the consolidated priority organization parties, 
don't reside here within the confines of the United States. We 
do a pretty fine job of motivating people to stay out of our 
jurisdiction.
    That is not true around the world, and that is why we have 
to build these partnerships around the globe as they are 
looking for safe havens and refuge.
    Mr. Tierney. Mr. Szubin, if you can quickly.
    Mr. Szubin. It won't come as a surprise for us that the 
focus is money.
    Mr. Tierney. I knew what everybody's focus was. I think 
people have been pretty good about stepping outside of that to 
find something else that was effective.
    Mr. Szubin. I think the effectiveness can be really 
significant for all the reasons mentioned. And when we are 
talking about the money of these traffickers it is not just the 
bulk cash smuggling that people often picture that is secreted 
in a compartment in a truck heading down to Mexico. It is what 
are these narcotics organizations doing with the money, doing 
with their profits. They are not putting it under their 
mattresses. They are investing it in often appearing seemingly 
legitimate businesses. And they will develop networks of 
companies, whether or not they are companies that they use 
directly in their trafficking enterprises. We have just this 
week designated a trucking company that was affiliated with a 
narcotics organization. Well, a trucking company is very 
useful; small aircraft companies are very useful. But more 
broadly, retail operations are very useful. If you have a 
pharmaceutical company you have an excuse for coming into banks 
with large sacks of cash because you have customers coming in 
and you have receipts. So we see them putting the money in 
these accounts in these companies to launder it, to conceal it. 
And when we talk about going after the money we are talking 
about going after their treasure houses, going after their bank 
accounts, their financial holdings abroad. And I think the 
impact there can be palpable. And not just the impact on the 
worst of the traffickers but the deterrent impact on those who 
otherwise might have said, I will go into business with you, I 
will agree to serve as a corporate officer. We try to name all 
of those people who are found on the Dun & Bradstreet sheets 
for these companies, and we see them then coming to us and 
saying, I want off the list, I won't have anything to do with, 
you fill in the blank, drug organization, just take me off your 
list. And so it is a behavior changing tool as well.
    Mr. Tierney. Thank you.
    Mr. Wechsler.
    Mr. Wechsler. I would echo in many ways what Tony has said, 
that rather than looking for one the critical element that is 
too often missing is the integration of all of these efforts. 
And I would suggest as one place to look for a successful 
effort to date, although not final, is in Colombia. There in 
the late 1990's the Colombian people when polled, two-thirds of 
them believed that it was very likely that the FARC was going 
to take Bogota and take over the whole country. Now the FARC 
controls only a sliver of territory and is a shadow of what it 
was. There are so many problems there, we don't want to 
discount them. But taking a long range multi-year approach, 
bringing in all the lines of operation, the financial 
operation, the law enforcement operation, the capacity building 
operation to foreign countries, the military and Special Forces 
operation, the intelligence operations and integrating it as a 
whole under the leadership of strong local leadership as we had 
in Colombia is what can succeed and can really change the game.
    Mr. Tierney. Thank you.
    Mr. Flake, take 8.
    Mr. Flake. Thank you. I have enjoyed this testimony. It is 
been very enlightening. Mr. Szubin, you have mentioned the 
importance of having agreement with host countries while we are 
trying to target some of this illicit action.
    Can you talk a little about third countries, particularly 
in Europe, with the banking system? A lot of this money as you 
said isn't put under mattresses, it moves throughout the 
system. How has the cooperation been with our European allies, 
for example, with regard to movement of money to South America 
or Middle East or elsewhere through Europe?
    Mr. Szubin. I would say it has been very good in our area, 
and I would certainly leave it to Ambassador Johnson and others 
to talk more broadly. But when it comes to isolating named 
kingpins and their networks, the Europeans are extremely 
supportive of our efforts. And the European banks are, even 
without the cooperation of their governments, large reputable 
banks in Europe do not want to be doing any business with 
somebody who ends up on the wrong side of a kingpin listing. 
And it is a very powerful, reinforcing impact because it means 
what is technically, perhaps legally a unilateral sanction 
under the congressionally enacted Kingpin Act ends up spilling 
out in terms of its effect across the globe.
    Mr. Flake. Thank you.
    Now, Mr. Szubin is too much of a diplomat to say this but I 
will. I think part of the issue, you mentioned that, Mr. 
Kerlikowske mentioned that in the past maybe a weaker link has 
been the money side, and part of the issue we have had is the 
wide portfolio that OFAC, the Office of Foreign Assets Control, 
has had. Few people outside of government realize that OFAC 
administers the travel ban we have on Cuba. And in the past I 
think far too much time and resources has had to be devoted, 
not their choice, it is Congress's edict, to issuing travel 
licenses for individuals to travel to Cuba and looking at that 
angle. And I think that has the effect of diverting too much 
attention from the real matters that matter right now, and that 
is to intercept these money transfers.
    I have worked with Mr. Szubin before and I know that they 
have the right priorities and they are doing well and focusing 
more partly because some of those restrictions on travel have 
been lifted and it perhaps has made it easier and less of a 
drain on that office. But I want to commend you for how you are 
handling that. And also I want to appeal to my colleagues to 
change it and free up OFAC to do what it needs to do with more 
of their time and resources.
    Did you have a comment on that?
    Mr. Johnson. I just wanted to say that European governments 
have been very careful in trying to work with us on this issue. 
They probably exercise more care than sometimes we would like 
to make sure that they don't get a bad precedent set which 
would tie their hands. But the issue that Adam raised about the 
banking institutions themselves I think has been probably the 
most important and the most effective, and that is the banking 
institutions, particularly those that hang up signs that you 
see, are extremely concerned about their own reputational risk. 
And bringing things to their attention about what those risks 
are and helping them with their compliance programs has been an 
extraordinarily effective tool that Treasury has worked very 
hard with the Europeans.
    Mr. Flake. It sounds as if the contacts are made with the 
banks themselves as opposed to the governments in which these 
banks are located.
    Mr. Johnson. It is both. But I think that it has been more 
creative, if you will, on the reputational side, and this is a 
new tool. And I compliment Treasury because they have really 
worked this issue hard.
    Mr. Flake. That is good to hear, that is good to hear. Mr. 
Kerlikowske, the Southwest Border Initiative you mentioned 
earlier, the announcement, how is that going to change what is 
going on from the Southwest border. Those of us from Arizona 
are particularly interested in this.
    Mr. Kerlikowske. I have been to the Southwest border now 
three times. Over my career my colleagues in the major cities 
all along those States have oftentimes in our meetings 
reflected upon the real problems that they have been facing. I 
think there are a couple of important changes with the 
Southwest Border Initiative. One is that there has been a very 
active involvement of State and locals that I don't think had 
been brought into the fold as much before. There was concern in 
the past that, look, we are already pretty busy in these 
sheriff's departments with literally thousands of square miles, 
as you know, and not an awful lot of deputies. But they have 
really stepped up to the plate. They really understand that 
partnering with the Federal Government is important.
    The second thing that I think is important is this new 
initiative and focus on guns going south and cash or the assets 
or proceeds going south. And so the government of Mexico making 
those choices to inspect cars coming into the country, which 
had really not been done in the past, those things are 
important. So I see the continuing cooperation and work of 
everybody coming together having perhaps some significant 
effects in the course of this year.
    Mr. Flake. Thank you.
    Mr. Foster [presiding]. Thank you. And now I will recognize 
myself for 5 minutes.
    Director Szubin first. Which countries currently provide 
safe haven for the drug traffickers' finances? Is there a short 
list of countries that are most prominent?
    Mr. Szubin. No, I don't think we find that there are 
countries that are affirmatively stepping up to operate as safe 
havens. Certainly there are areas that are less well regulated. 
And where the banking sector, the financial industry writ 
large, is less aware of the types of risk factors that I was 
talking about earlier that have become so central to banks in 
Latin America. And our efforts alongside State, alongside all 
of our colleagues, are of course to raise the tide for all 
boats and to try to see the kind of careful compliance efforts 
by banks around the world and to see governments also doing 
more across the board.
    When they improve their anti-money laundering practices, 
that helps in terms of the narcotics effort. When they improve 
sanctions implementation efforts, that helps. You know, 
narcotics is touching on so many different areas that our 
technical assistance activities, our capacity building 
activities that have been flagged so well by Director 
Kerlikowske and Ambassador Johnson are helping us throughout 
the world.
    Mr. Foster. And how connected is this to the efforts to get 
at bank secrecy laws used for tax evasion? Are these very 
similar efforts or are these really disjoined?
    Mr. Szubin. I would say they are separate, and people tend 
to make a distinction in foreign discussions between tax issues 
and counternarcotics or other sort of mainstream criminal 
organization issues, and so I see them as separate. But I would 
certainly defer to my colleagues to comment.
    Mr. Johnson. I think they are separate. Obviously some of 
the capacity building about bank regulation can have an impact 
on both issues. But on tax regulation we are looking more at 
what our own citizens are doing. And in the money laundering we 
are tending to focus on what others are doing. And those tend 
to involve as much domestic transactions as they do 
international transactions.
    Mr. Foster. And are there additional legislative tools or 
international agreements that you really need to make these 
financial pressures on the drug cartels more effective?
    Mr. Szubin. The main tool we use, as I noted, is the 
Kingpin Act, and it is a very powerful authority that Congress 
gave the administration back in 1999. It allows the President 
to name what we refer to as Tier I kingpins, whether an 
organization or a major trafficker. And then it falls on us in 
the Treasury to followup. And when I say us in the Treasury, I 
am not really speaking about a single agency effort by any 
means, because it is the intelligence, the law enforcement 
information from our colleagues at this table that are the fuel 
for these actions.
    But what we ideally do is go after the companies, the front 
companies, shell companies, money laundering vehicles, the 
accountants, the lawyers that are propping up these networks 
and that are allowing them to launder and to conceal their 
funds and ideally put them out of commission.
    Now, I don't want to give you the mistaken impression that 
every time we take a sanction action it means the company 
closes down. There are times when we have to keep at it for 
years and employ diplomatic efforts and persuasion to try to 
bring foreign law enforcement to bear, whether that is in a 
seizure, a forfeiture, or pulling the company's registration 
altogether. But sometimes the coordination works so well that 
the effects really are immediate.
    Mr. Foster. So you think it is a fair statement that you 
are limited by your manpower and foreign cooperation at this 
point rather than your legislative authority.
    Mr. Szubin. I don't view the legislative authority as 
holding us back in any way.
    Mr. Foster. I guess a question just for anyone who wants to 
field it. Has there ever been any attempt at a sort of unified 
economic analysis to see where we should put our money to get 
the most bang for the buck, you know, just to try to figure out 
some sort of metrics for how to minimize the economic damage 
caused by drugs in the United States and the indirect cost to 
our military and just some sort of bottom line and say, OK, 
given that where do we put our resources? You know, you could 
put them anywhere from bribing Afghan farmers to grow something 
else to try to, you know, better enforcement on the streets and 
cities in the United States and anywhere in between.
    Has there ever been any group that just tried to look at 
the whole, the economics of the whole thing and identify the 
best return on investment?
    Mr. Kerlikowske. It depends on which group I am talking to. 
It is been interesting, but an area that actually you left out, 
the prevention programs, are critically important. If we reduce 
our demand here in the United States, if these other countries, 
and I just came back from Russia, I have heard from every 
country now that I have visited of their growing addict 
populations, it is a significant drain on dollars. A small 
amount of investment and prevention, we know that treatment is 
about half the cost of incarceration and that treatment can in 
fact be effective. None of this means that we are reducing the 
power of law enforcement or the importance of law enforcement. 
And in fact oftentimes people go into treatment with handcuffs 
on. So I think that might be important.
    When it comes to the other areas that you have talked 
about, it has often been said that if our goal in eradication 
is to reduce the amount of drugs coming into the United States, 
it would be analogous to reducing the number of diamonds by 
removing the lumps of coal. There are a lot of good reasons for 
various eradication programs, a number of good reasons for it. 
But if you really look at how it is going to reduce the amount 
of drugs that are in the United States, that is probably at the 
lowest end of that tier.
    Mr. Foster. Thank you. I guess my time has expired, and so 
now I will recognize Representative Mica.
    Mr. Mica. Thank you. And I am glad that we are conducting 
this hearing. I had the privilege of chairing this subcommittee 
or its predecessor back in 1998 to 2000, and I think 
responsibility for oversight is extremely important. I am 
dismayed, however, at the systematic dismantling, and we heard 
we are not even supposed to talk about a war on drugs. When 
this administration comes in and takes your position, Mr. 
Kerlikowske, takes it out of the Cabinet to me lessens its 
importance, of, visibility. Some of the efforts to promote 
legalization may be well intended, but they do have 
consequences. And some of the reduced enforcement, all of this 
will end up with more young people, in particular, who look to 
role models and also look to leadership, believe it or not, and 
the direction from the highest office of the United States 
toward their attitudes of drug use and drug abuse. So I think 
we are headed downhill.
    I saw some statistics the other day I thought were 
disturbing. With crime down generally across the country, we 
still have young people addicted. And was it Mr. Placido, who 
gave the statistic, 31,000 deaths? It is by far the worst 
social and criminal problem that we have in the United States.
    The other thing, too, is you are talking about putting 
resources and what is most effective on the international 
scene, and that is important. I want to talk about that. But 
aren't most of the drugs still coming into the United States 
from the Caribbean and South America through the Southwest 
border and Florida? Is that right, Mr. Kerlikowske, Mr. 
Placido? Is that right, Mr. Placido?
    Mr. Placido. Particularly with cocaine we estimate now, the 
interagency estimates about 91 percent of the cocaine crosses 
the Southwest border, significant amounts of meth and 
marijuana.
    Mr. Mica. I was down in San Juan and got a briefing by the 
Coast Guard and they showed me the charts of the drugs coming 
out of South America. They traced the planes coming out. There 
were solid red lines coming still out of there. So it is coming 
into Florida, some of it was going up to Mexico and then 
transiting in.
    Were you consulted, Mr. Kerlikowske, or anyone else here 
when the administration proposed to cut the Coast Guard 
positions by 1,100, to mothball five recently upgraded 
helicopters, reducing the Coast Guard's antidrug operations in 
Florida, where I just happen to live? And the Caribbean, which 
we just cited, was the main source of these people bringing 
this crap in. That would dramatically reduce our Nation's 
capability. Were you consulted on these cuts?
    Mr. Kerlikowske. No.
    Mr. Mica. Were you consulted, anyone on the panel?
    OK. I was appalled. I am going to the budget hearing in a 
few hearings and speak about that. I have gone to the Coast 
Guard hearing. And actually both sides of the aisle were just 
stunned at the administration's proposal.
    Furthermore, in the same budget to cut border protection 
fencing technology and infrastructure by more than--well, it is 
almost a quarter of a billion dollars, $225 million. Were you 
consulted Mr. Kerlikowske, the Drug Czar, on this?
    Mr. Kerlikowske. I wasn't consulted on the fencing, but I 
do know there are significant concerns about how effective that 
program has been.
    Mr. Mica. Well, again, our job is to take the resources and 
make them effective, and I am looking for that. I am not here 
just to criticize you. We want this to be successful. Those 
kids are dying in our streets. I can tell you the names of 
parents I have talked to in the last year that have lost their 
kid with drug overdoses and drug abuse.
    Ambassador Johnson, most of the heroin that is produced in 
Afghanistan, I haven't been up to the border in a long time, 
but it used to go to Europe. Is still about 90 some percent 
going to Europe of that heroin?
    Mr. Johnson. I don't think 90 percent goes.
    Mr. Mica. OK. How much?
    Mr. Johnson. Almost none of it comes to the United States.
    Mr. Mica. All right. That was my point. You said in your 
statement, I took it down, requires a global effort. Now, I 
don't think the United States, and I used to be involved in 
these panels, in legislative panels, and you guys listen here, 
the new Members here who haven't been around. We need to get 
some of our folks into these discussions again, legislative 
people who set the policy, and get with the commissioners, get 
with the European Union and others because they do have clout. 
And if we talk to them Member to Member, interparliamentary 
discussions to get the EU to do more, that crap is coming into 
Europe and they are suffering. How much are they doing as far 
as programs in Afghanistan, what share are they doing now?
    Mr. Johnson. The Europeans are contributing significantly 
to the ISAF forces, notwithstanding the----
    Mr. Mica. For the drugs, crop substitutions, others.
    Mr. Johnson. Yes, particularly the European Union 
Commission and the British Government.
    Mr. Mica. I can tell you whatever they are doing is peanuts 
compared to what the United States is doing. They have lost 
personnel, too, and we have lost personnel. But they have a 
distinct interest in stopping this heroin. And I used to go to 
those meetings, and we would sit there and the Europeans would 
pooh-pooh us about cocaine. We did such a good job, up until 
most recently, of stopping that cocaine from getting into the 
United States and the price down here that it is being diverted 
to Europe because it gets more dollars, right, and now they are 
transiting they have a cocaine problem from South America in 
Europe.
    But we need to get more engaged as a subcommittee and 
committee, and you guys need to get over there. And I know this 
is an election year. Talk to these parliamentarians who make 
that policy and get them engaged, not only for their benefit 
and stop this stuff, but also for our benefit.
    I thank you for letting me go over my time. I have 
additional questions to submit to the record.
    Mr. Foster. Representative Quigley is the next in 
subcommittee seniority.
    Mr. Quigley. Thank you, Mr. Chairman.
    Mr. Kerlikowske, just taking this a slightly different way, 
we have been told by many, including the Secretary of State, 
that 90 percent of the weapons, including assault weapons that 
are used in these drug wars that take place, are coming from 
the United States.
    Your thoughts on reextending the assault weapon ban as it 
relates to these weapons?
    Mr. Kerlikowske. No. I have been on the record as a police 
chief for a number of years along with many, many, many of my 
colleagues on the assault weapons ban. There were a number of 
issues surrounding that, how effective it was. I would tell you 
that right now that the assault weapons ban issue has not even 
been something that I have considered only because of the 
amount of time that I have been devoting on the drug issue.
    But I will tell you this: that I think with the ATF's 
implementation of electronic tracing data that has now been put 
into Mexico in a Spanish version, we will know with much more 
certainty the number of guns being seized in Mexico and where 
they actually came from, whether it was Guatemala, Honduras, or 
whether it was the United States. And I think that information 
will in fact then impact future discussion.
    Mr. Quigley. It will do that?
    Mr.Kerlikowske. I think that information about where the 
guns are coming from that are being seized in Mexico and are 
being used to kill prosecutors, judges, and others, I think the 
information about where those guns come from will be helpful to 
any administration.
    Mr. Quigley. Let's just say that it allows us to determine 
that 70 or 80 or 90 percent of the assault weapons are coming 
from the United States, that they are purchased through straw 
purchasers or whatever. I know that is valuable information, 
but I have a pretty good hunch that is the ballpark number now, 
and doesn't it make sense to go forward more strongly and 
reinstate the assault weapon ban?
    I don't know that it gives anybody comfort whose lost 
family members through assault weapons that we know where they 
came from.
    Mr. Kerlikowske. I think it makes sense to take that 
information as an administration and to very carefully review 
it and consider also the problems that have existed in the past 
around the assault weapons ban. Other than that, there are a 
number of other agencies and Secretaries that have a vested 
interest in this issue, also, and I would probably defer some 
of those comments to them.
    Mr. Quigley. I have asked just about everybody who has come 
before this committee the same question. But for the time 
allowed, if anyone else on the panel would like to provide 
their insight on that thought.
    Mr. Placido. Thank you, Mr. Quigley. I just have one 
comment. That is that this committee may be pleased to hear 
that through the use of the asset forfeiture fund; that is, 
moneys that have been seized from the drug traffickers 
themselves, we have rolled out a picket line of license plate 
readers in general proximity to the Southwest border to inspect 
vehicles southbound into Mexico looking for bulk cash and 
firearms, and I believe that we are having some success, at the 
early stages now, but in actually stopping those firearms from 
reaching Mexico in the first place.
    Mr. Quigley. I appreciate that but you realize you are not 
going to catch them all, right?
    Mr. Placido. That is right.
    Mr. Quigley. And having a greater source or greater volume 
of weapons purchased initially legally makes it tougher to stop 
all of them. There is a bigger pool coming into the country of 
Mexico, therefore putting more innocent people, including 
Americans involved in this war, at risk?
    Mr. Placido. Yes, sir.
    Mr. Quigley. Thank you.
    Mr. Foster. And we will now recognize Representative 
Luetkemeyer for 5 minutes.
    Mr. Luetkemeyer. Mr. Wechsler, I am very familiar with the 
program that we have, the National Guard troops over in 
Afghanistan trying to teach the Afghan farmers how to produce 
other crops so that they will no longer produce poppies, which 
we get heroin from. How successful do you believe that program 
to be?
    Mr. Wechsler. That program, which is quite important, is 
integrated into a number of other programs for alternative crop 
development. The Secretary of Agriculture has personally gone 
out there to give his advice and guidance.
    It is, from the Department of Defense's recent experience 
at least, the first time that we are integrating the Department 
of Agriculture into our war efforts. It is critical that we do 
so.
    One that I would call your attention to is that not too 
long ago, in the 1970's, the area of Afghanistan that we are 
talking about was not a massive source of drugs. It was a 
massive source of regular agricultural produce that was part of 
the global market and made its way to market, and people had 
healthy, vibrant communities based on that.
    The efforts that we are doing there are to do crop 
substitution and alternative development. Efforts are not going 
to succeed overnight. In fact, they are going to take quite a 
long time, given how much damage has been done, and they are 
integrated into our wider COIN efforts to do so.
    But it at least gives some degree of comfort to note that 
there was a time not in the too distant past where that 
provides a vision of where we might be going again.
    Mr. Luetkemeyer. I come from Missouri. Our National Guard 
group was the first one to go over there, and we have our group 
over there for the third tour. And meeting with Colonel Lepper 
last week with regards to his oversight with regards to the 
program, it has been, in my view, pretty successful. And I 
think it is probably, as you indicated, it is probably an 
integral part of any sort of ability of us to transform that 
country and cutoff the flow of drug money. If they don't 
produce the agricultural crop from which they derive the drug, 
it is going to be more difficult for the Taliban to fund 
themselves.
    So as a result of the success of the program, are you 
thinking about promoting it somewhere else in the world, or is 
this the pilot project and the verdict still yet to be 
determined?
    Mr. Wechsler. We still have a lot of work to do in 
Afghanistan, and again, this work is going to take place over a 
number of years. And it is not, of course, going to be just a 
military activity but a wider whole-of-government activity to 
do so because once we take the territory we have to hold the 
territory and build the territory. And building the territory 
means a lot of things, and one of the things it means is 
bringing this territory back into an economic zone where they 
can feed themselves and meet their own needs without having to 
rely on the drug trade.
    And it is also important to note for the individual farmer, 
there are a number of crops that provide a lot more in the way 
of money and value to that farmer that are completely legal 
than opium. We just need to build the infrastructure around and 
build the security structure around that so they can make the 
logical financial decision to move in that direction. Right now 
they are not in that position, too many of them.
    Mr. Luetkemeyer. I realize it is a long-term process, but 
it is a huge step in the right direction. If you transform the 
economy, you can earn the trust of the people. If you can earn 
the trust of the people, you can root out the Taliban, and I 
think that is where we are headed. And I think from my 
discussions and my knowledge of the programs, it seems to be 
working very, very well.
    Mr. Placido, with regards to threats around the world, what 
do you feel right now is the most significant threat or what 
you feel is the rising threat from whatever area, whatever 
country that is sort of top of mind, ones we really need to 
focus in on?
    Mr. Placido. I think it is very difficult to put them in a 
rank order because we are not comparing apples to apples. My 
personal opinion--and I think where this administration has 
been--is to really focus on Mexico, which is the arrival zone 
for three of the major four drugs that are abused in the United 
States and because of its geographic proximity to the United 
States. While we are concerned about lawlessness across the 
globe, be it West Africa or Afghanistan, there is a certain 
urgency that is felt when there is instability to our immediate 
south. And so I think that this administration and my agency 
have spent a lot of time focusing on Mexico, and I think that 
is appropriate.
    Mr. Luetkemeyer. Mr. Kerlikowske, what do you think about 
that?
    Mr. Kerlikowske. When I look at the 2,000-mile border and 
the level of violence, I would say that Mexico is very clearly 
one where we should concentrate time, effort and resources. 
General McCaffrey was just recently down there along with a 
number of other people. I don't think it quite gets the 
attention right now that other places in the world do get. But 
after that, I think working on the global cartel issues--
because we not only see the flow coming through Mexico at times 
and into the United States, we see a flow coming out of South 
America into West Africa, Europe, the UK, etc.
    And somebody had mentioned we are all in this lifeboat 
together, with increasing addict populations and increasing 
drug problems. So when Tony talks about this shared 
cooperation, particularly among law enforcement agencies 
regardless of nation, I think that has the most potential. But 
Mexico would be at the top of my list.
    Mr. Foster. Mr. Duncan, you are recognized for 5 minutes.
    Mr. Duncan. Thank you, Mr. Chairman.
    It was mentioned a while ago that 90 percent of the heroin 
comes up from South America, but Mr. Placido just said three of 
the four major drugs are primarily coming through Mexico. Do we 
know what percentage of the drug activity overall is coming 
from Mexico?
    Mr. Placido. Sir, if I misspoke let me correct myself. The 
interagency assesses that 91 percent of the cocaine which 
enters the United States actually, whether it comes through the 
Caribbean or up the isthmus of Central America, finds its way 
into Mexico to cross the border in the Southwest. So that is 
cocaine.
    The four principal illicit drugs of abuse would be 
marijuana, methamphetamine, heroin, and cocaine, and what we 
know is that in addition to 91 percent of the cocaine 
transiting Mexico before it arrives, a very large percentage of 
the methamphetamine abused in the United States is either 
manufactured in or comes from Mexico. I don't know that we can 
put a number on it with precision. I have heard numbers that 
range from the 70 to 80 percent range. Whether those are 
accurate or not, it is a significant amount.
    And we also get a very large percentage of the heroin, 
which is either manufactured in Mexico or South American 
heroin, principally from Colombia, that transits Mexico on it 
is way to the United States.
    So Mexico has become a very critical transshipment point 
for many of the drugs that arrive in the United States.
    Mr. Duncan. How are those drugs coming in? I know there are 
thousands of trucks that come from Mexico every day. Is most of 
it coming in on these trucks, or how is it coming in?
    Mr. Placido. Well, I suspect that if we knew with precision 
the answer we could really do something about it. What we know 
is the seizures that we do effect reflect ingenuity by the 
traffickers. Million-dollar-a-copy, self-propelled, semi-
submersible vessels, essentially a poor man's submarine, that 
are used on a one-way trip where the drugs are ballast, bring 
it up into the isthmus of Central America and into Mexico where 
it is staged and moves across the border. We see backpacking of 
marijuana and other drugs across the border between ports of 
entry, ingenious concealments in vehicles and on railcars going 
across the border.
    Given the enormous profits that are at stake, the 
traffickers have used planes, trains, and automobiles, and I am 
sure some modes of conveyance that we have not even learned of 
yet. But what we do know is that based on the seizures that we 
make, the arrests, and the information that we develop, that 
despite our best efforts they are successful in smuggling large 
quantities of drugs into this country.
    Mr. Duncan. What percentage of the vehicles coming from 
Mexico are inspected for drugs each day?
    Mr. Placido. I am afraid I am not the best person to 
address that question. That would probably be best addressed by 
somebody in the Bureau of Customs and Border Protection.
    What I can say for the record is that it is a relatively 
small number, and there is a constant tension between 
facilitating lawful commerce across the border and inspecting 
for contraband.
    Mr. Duncan. Yes, sir.
    Mr. Johnson. In some manner of speaking, there is 100 
percent inspection, but the CBP, Customs and Border Protection, 
has to make a decision as to whether a vehicle or a trailer 
deserves further. They have a range of equipment to do so. But 
as Tony was mentioning, the ability and ingenuity of these 
individuals to secret their product in places, in cavities in 
cars that people don't really know exist really requires kind 
of a special touch by the customs people to discern who might 
be a little dodgy and go after them in a very concentrated way.
    Mr. Duncan. Well, it seems to me a few minutes ago it was 
said that almost none of these drugs in Afghanistan are coming 
to the United States, they are going to Europe. Seems to me 
that we should direct almost all of this effort in Mexico, 
where the problem really exists, instead of to places where the 
problem doesn't exist.
    Thank you very much, Mr. Chairman.
    Mr. Tierney [presiding]. Thank you very much, Mr. Duncan.
    Ms. Chu, you are recognized for 5 minutes.
    Ms. Chu. Thank you. Unfortunately, I know all too well how 
the violence of the Mexican drug cartels can affect us here in 
the United States. Last December, one of my constituents was 
the innocent victim of the drug cartels in Mexico. His name was 
Bobby Salcedo, and he was abducted and murdered along with five 
other men while visiting family members in Durango, Mexico. He 
was an elected official and a rising star in our community. 
Neither he nor the other five men had any connection to the 
cartels or the drug trade. They were just in the wrong place at 
the wrong time.
    Since Mr. Salcedo was murdered, I have been in touch with 
the Secretary of State, representatives for the FBI and 
representatives from the Mexican Government to try to 
understand how we can bring the killers to justice and also how 
we can curb the violence of the drug cartels.
    So I have questions on the Merida Initiative and money 
laundering, specifically with regard to Mexico.
    First on the Merida Initiative, we know that this was 
started in 2007 but that out of the $830 million that has been 
appropriated for Merida, only $26 million has been spent as of 
September 2009.
    What I would like to ask is the Merida Initiative, I 
believe, was a very important first step toward a strong 
cooperative relationship between the United States and Mexico, 
but the official agreement ended last year and the 
administration has not yet come up with a comprehensive plan to 
succeed this initiative.
    What are the plans for the future and what would be your 
recommendations?
    Mr. Johnson. Thank you, Madam Congresswoman. A couple of 
preliminary comments.
    I think that the Merida Initiative represents a new and 
comprehensive method of cooperation between us and the Mexican 
authorities and the type of engagement we have had with them 
during the course of this is in a different plane than it has 
been before. This is an ongoing program. What we are trying to 
do, working with the Mexicans, is trying to figure out what the 
next steps are beyond what we are already committed to do 
together, what sort of Merida II, if you will, will be. But our 
work with them under the current program continues unabated and 
is very, very aggressive.
    The second point I would like to make is while that $26 
million number that you cited from the GAO report is correct in 
terms of ``expended,'' it doesn't really reflect what has been 
done. For example, the appropriation for the Blackhawk 
helicopters that have been purchased, that will not appear as 
an expended fund for some time because we don't actually pay 
the bills until the product is delivered, accepted, and 
everything is done in order to protect the taxpayer. Those 
aircraft have already been manufactured, they have been 
delivered by Sikorski, they are in Huntsville, AL, being 
modified for the Mexicans' needs and they will be delivered to 
them we believe sometime in the early to mid-summer.
    So many of these programs continue even though they are not 
reflected in that number. That doesn't mean that we don't want 
to accelerate that just as rapidly as we possibly can. We are 
very grateful to Sikorski and the Army for having found a place 
in the queue, if you will, to accelerate this delivery in a way 
that didn't affect our own Army's delivery of these 
helicopters, for example. We are taking as many steps like that 
as we can. We have delivered about 50 of these nonintrusive 
inspection vehicles that they require for their police and 
their border officials, a like number of armored vehicles. 
Programs we have developed to train investigators that bring in 
our own law enforcement authorities from DEA, from FBI, from 
State and local government in Houston and Chicago and Los 
Angeles.
    So there are a number of aggressive programs going on that 
I think reflect more clearly the effort that we have underway 
with Mexico.
    Ms. Chu. Can you tell me what Merida II might look like?
    Mr. Placido. I think that what the distinction will be that 
much of the, if you will, big ticket items have been covered 
under the current appropriation: aircraft, nonintrusive 
inspection equipment, things of that nature that are truly 
quite expensive. As we look forward, we are going to want to 
concentrate much more on training and institution building and 
helping the Mexicans transform their police service and their 
courts and their prosecution so that they are much more 
effective.
    Ms. Chu. In fact, I am glad you talked about the equipment 
because when I talked to Ambassador Sarukhan he did express 
concern that the Mexican Government has not yet received some 
of the equipment that was promised under the Merida Initiative.
    Are the items that you talked about the main items that are 
really on the books but have not yet been delivered?
    Mr. Placido. The items that I mentioned to you have in fact 
transited to the border and are in the hands of the Mexican 
authorities. I appreciate that the Mexicans want to push this 
as hard as they can go and get materials as quickly as they 
can. There has been a number of deliveries already. The Bell 
helicopters are there as of last fall. These things are 
ongoing, but we are working with the Mexican authorities to 
move them just as quickly as we can.
    Ms. Chu. My next questions have to do with the money 
laundering aspect.
    I understand that they have made progress on electronic 
transfers that have to do with money laundering but that there 
is a big problem with the bulk cash smuggling and that there 
need to be more remedies along those lines.
    Could you talk about that?
    Mr. Placido. The effort that we have underway with the bulk 
cash smuggling issue that I am primarily responsible for has to 
do with giving the Mexicans greater capacity to detect cash 
that is being smuggled into Mexico. As Director Kerlikowske was 
mentioning a few minutes ago, the Mexicans are now inspecting 
southbound cargo in a way that they have never done before, and 
they are utilizing some of this equipment that we have provided 
both at the land border and at air transit points and at marine 
points as well. These are the points of capabilities that will 
allow them to see into things as odd as tractor axles where 
moneys are secreted.
    I think that will get to part of the problem, but I have to 
say that is an integral part of the larger effort to stop money 
laundering through financial institutions, and that continues 
to be a work in progress. We have made some progress on that, 
but there is much more work to be done because we know there 
are billions flowing in through the accounting systems that we 
have in our banking system and theirs, and we are only catching 
a sliver of that.
    Ms. Chu. Thank you.
    Mr. Tierney. Mr. Flake.
    Mr. Flake. I just have one more question.
    It has been said in your testimony and also we have heard 
from others that West Africa is becoming a transit point, 
Guinea Bissau in particular, some of the other countries.
    What are we doing proactively? What structures can we put 
in place now, both financially and otherwise, with DOD to try 
to head this off before it becomes more of a problem? Is there 
something that, looking back now at Latin America and South 
America and everything else, that we could have done more 
easily before it became such a big problem that we can do in 
West Africa?
    And I will go with Mr. Szubin first on that.
    Mr. Szubin. It is a real challenge that you are raising, 
and I think that the financial system there, the capacity of 
the regulatory system, the government, is really not where it 
needs to be in order to replicate what we have been able to do 
in some other places, and it is not a quick fix.
    I get a lot of e-mails from Nigerians every day. I would 
encourage you not to send money.
    Mr. Flake. Good advice. Thanks.
    On DOD's side, anybody want to add anything, or anybody 
else, on proactively what can we do to make it easier before it 
becomes more of a problem than it is?
    Mr. Johnson. As Adam mentioned, this is going to be 
probably harder than Latin American rather than easier, and 
that is because of the weak nature of these governments and the 
institutions that they have. We have jointly done some 
assessments of their capabilities. We have worked with DEA to 
help build their partners, and this is a nascent effort.
    But we believe that the most effective way is going to be 
investing in building institutional capacity in those 
governments so that they can detect, prosecute, incarcerate 
people as well as build the type of linkages that we need so 
that they can extradite people to the United States, if indeed 
their activities implicate activities that are prosecutable 
under our laws.
    Mr. Placido. The only thing I would add, Mr. Flake, is that 
through the generosity of Congress, the Drug Enforcement 
Administration has been able to open a second office in West 
Africa in 2009 in Accra, Ghana, and it was through the opening 
of that office and the creation of vetted teams that we are 
working with that we are able to, for example, this latest 
investigation linking AQIM, al-Qaida in the Islamic Maghreb, 
with drug trafficking. And our colleagues in Ghana expelled 
these folks and they are sitting in a prison in New York 
awaiting trial.
    So there are things that can be done. I believe this is an 
order of magnitude problem. We are not resourced at a level 
that is commensurate with the problem that we face over there, 
and there is engagement with organizations like ECOWAS, the 
Economic Council of Western African States, and perhaps ILEA 
training for some of our counterparts over there. There is much 
in the works but a long, long way to go.
    Mr. Flake. Thank you, Mr. Chairman. I believe you are going 
to take care of this, but several Members on this side want to 
submit questions. So if we can unanimous consent to allow them 
to submit them for 5 days.
    Mr. Tierney. There is unanimous consent to allow all 
Members to submit remarks and questions to the witnesses within 
the next 5 days.
    Do any of the witnesses have any objection to that? The 
record will reflect that they are all willing to do that, and 
by unanimous consent that will be the case.
    Just one last set of brief questions.
    Mr. Szubin, you properly staff the Treasury. Does it have 
enough personnel in collaboration with your colleagues here and 
your own staff to address this at the level that you want to 
address it?
    Mr. Szubin. We are a much smaller outfit obviously than 
some of my colleagues located here, and that is as it should 
be. We don't need to do the very difficult work of drug 
eradication.
    Mr. Tierney. I am assuming that you leverage them for some 
of the things that you need. Would that be a correct statement?
    Mr. Szubin. That is very accurate. And it is DEA's field 
investigators, the information they are obtaining, the 
information that our intelligence colleagues are obtaining that 
then feeds and fuels our targeting efforts to apply sanctions.
    Mr. Tierney. Do you find like other aspects of this drug 
situation that when you shut off one avenue there are still too 
many avenues that are left available, and those would be 
countries that don't cooperate with the United States, and what 
other impediments do we have?
    Mr. Szubin. I didn't hear the last few words.
    Mr. Tierney. The impediments that we have for getting this 
right? Some countries still just don't cooperate and are there 
other impediments as well?
    Mr. Szubin. I heartily agree that wherever you hit them, 
they then move to another area. Whether that is another means 
of transmitting money, whether we are talking about moving from 
financial system to the gray market, casa de cambios, and bulk 
cash. There is also, as soon as we designate a company, we know 
that there is going to be efforts to circumvent sanctions, to 
create a new company, a new shell, a new front, and disguise 
the assets. This is our bread and butter, is not just 
designating a network and walking away from it but then 
monitoring very closely to see what are springing up as the 
attempts at evasion and hammering them again. There is a cat-
and-mouse aspect to it which I think is common to all law 
enforcement efforts, and we have to keep at it.
    Mr. Tierney. I want to give each of you an opportunity. If 
anybody feels they want to contribute something but feels they 
weren't given that chance, just give me some acknowledgement 
here, and I will be happy to give you an opportunity to make a 
closing statement on that.
    Mr. Kerlikowske.
    Mr. Kerlikowske. Mr. Chairman, there was some discussion 
about efforts to promote legalization. The administration is on 
the record 100 times over that legalization of drugs is not in 
the President's vocabulary, it is not in mine, and it is not 
anything being discussed.
    Role models. There is only one anti-drug messaging system 
out there. The President requested $70 million for that, and I 
think that is important.
    And then Mr. Placido brought up the number of deaths in 
this country, the tragic number of deaths in this country that 
exceed gunshot wounds that are due to drugs. That has been 
spiked by prescription drugs, drugs coming right out of 
medicine cabinets and pharmaceutical places, not necessarily 
drugs flowing into the country from other countries.
    Mr. Tierney. Anybody else? Ambassador.
    Mr. Johnson. Just to followup on a couple of points, on the 
issue that Mr. Flake raised with respect to West Africa, we are 
doing our best to get ahead of this problem. The Presidential 
request for assistance to West Africa for institution building 
goes up sharply in this budget from a relatively small base but 
to $13\1/2\ million, and while it is dwarfed, if you will, by 
some of our other programs there is a capacity takedown from 
the governments involved that we have to pay attention to. 
Showering them with more and more resources may be not be the 
best way. We are going to have to build and work with our 
partners, as Tony was mentioning, both within our government 
and without.
    The second point I would make is, as Will was mentioning 
earlier, this is very much an every agency at the table 
operation. There is a role for Africa on here, there is a very 
big role for DEA, there is a role for institution building as 
well, and a role for institution finance.
    The second point to followup I would make, there was a 
question raised earlier about whether we should drop everything 
else we are doing and work just on Mexico. That is a very 
important challenge that we have, and the law of concentric 
circles certainly works. But we have an incredible national 
interest in addressing the problems of Afghanistan in order for 
our colleagues in the military to succeed.
    So while the heroin problem from Afghanistan affects 
largely its immediate neighbors, particularly Iran and the 
Central Asian countries, as well as Europe and the Russian 
Federation, we have an enormous interest in helping deal with 
that problem because if we don't we are not going to succeed 
there in any other way at all.
    Thank you.
    Mr. Placido. Mr. Chairman, if I could just add to briefly 
clarify the record. It has been mentioned several times that 
hardly any of the heroin from Afghanistan comes to the United 
States. In point of fact, we run a forensic chemistry program 
that identifies the source geographically of the heroin that is 
seized in the United States, and there is a small percentage, 
about 4 percent, of the heroin seized and analyzed by our DEA 
laboratories has its origins in Southwest Asia, Afghanistan. 
But more importantly is that a large percentage of the heroin 
abused in Canada today comes from Southwest Asia and 
Afghanistan, and so it would be a mistake to simply say that 
this is a European problem or a problem in Iran or Russia or 
other places which feel the bite of Afghan heroin more strongly 
today because these networks that are smuggling into Canada 
could very easily move that heroin into the United States and 
undercut the market quickly. So it is not something that we can 
take our eye off the ball on.
    Mr. Tierney. Let me leave this closing question with you. 
When we look at a range of drugs that cause problems for 
people, either result in deaths or addiction or health 
problems, alcohol is way up there. In fact, it is way over some 
of these drugs that we are talking about here today.
    So how do we reconcile that, that alcohol is way up there, 
we spend very little attention on that. Marijuana, for 
instance, is way down there, and we spend an incredible amount 
of attention on that. Are we prioritizing any of our efforts on 
that, or are we taking that into account at all?
    Mr. Kerlikowske, I am going to let you do that one.
    Mr. Kerlikowske. Mr. Chairman, the issue of underage 
drinking has been in all of the past National Drug Control 
Strategies, a discussion about it. I think it is well 
recognized. It isn't exactly in my portfolio, but we are 
certainly able to address it and talk about it because we also 
see that combination of alcohol and other types of drugs. And 
your points, sir, are well taken.
    Mr. Placido. Sir, I would just add that our guidance from 
the Department of Justice and from ONDCP, for that matter, on 
the prioritization from these drug threats is crystal clear, 
and while there has been much news about law enforcement 
operations targeting medical marijuana, pain clinics and the 
like, I can tell you it is a miniscule part of DEA's overall 
effort that is spent on those kinds of operations and that when 
we do get engaged in those it is because the people engaged in 
that activity are violating both State and Federal law and we 
are doing it with the help and at the request of State 
governments.
    Mr. Tierney. So you are going to tell me, Mr. Placido, that 
every time the Federal DEA goes into a State that has legalized 
medical marijuana and makes a bust or an arrest in there or 
gets involved in that, you have been requested to go in by the 
State?
    Mr. Placido. We are working in conjunction with the States. 
That is right, sir.
    Mr. Tierney. You are working in conjunction with them, but 
have you been requested to go in by them or is it an initiative 
of the Federal Government?
    Mr. Placido. It depends on at what level you are talking 
about, the request. There is not a formal request coming from 
the Governor's office but oftentimes working with local, 
municipal, and community authorities who have requested 
assistance.
    Mr. Tierney. I have read quite a bit lately that there 
seems to be some discontent with the fact that the policy was 
that people were legalized for medical use in different States 
and the Federal Government would basically allow that policy to 
be implemented, but the DEA seems to be, according to these 
accounts, a bit of a rogue agency and just going off and doing 
it anyway.
    Mr. Placido. I would assert that is not the case, sir, and 
I would be glad to provide you with a briefing on that.
    Mr. Tierney. Mr. Kerlikowske.
    Mr. Kerlikowske. Mr. Chairman, also the guidelines from the 
Attorney General's Office to the U.S. Attorneys in those States 
with medical marijuana, there is a sentence that says that they 
should listen to the concerns voiced by local law enforcement 
and prosecutors to be receptive to that issue.
    Mr. Tierney. I understand that to be the case, but what we 
are reading about is that there aren't any complaints and they 
decide that they are going in anyway despite local 
considerations otherwise. So I do want to clarify that and I 
would like at least a staff briefing on that so we can clarify 
that issue.
    I want to thank all of the witnesses for being here today 
for your testimony and expertise. We will do the followup 
questions. And I know that Members were not leaving because of 
disinterest, but there is a ceremony for Mr. Murtha, who passed 
away, right now that has drawn a lot of Members away.
    This hearing is adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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