[Joint House and Senate Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



115th Congress }                            Printed for the use of the                       
                        
2nd Session    }     Commission on Security and Cooperation in Europe
                                             
======================================================================

	             The Opioid Crisis and the Dark Web:
	               How Transnational Criminals
	                Devastate U.S. Communities

                      
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]



                             March 28, 2018

                           Briefing of the
          Commission on Security and Cooperation in Europe
------------------------------------------------------------------------
                         Washington: 2018



      Commission on Security and Cooperation in Europe
                  234 Ford House Office Building                                               
                   Washington, DC 20515
                          202-225-1901
                      [email protected]
                      http://www.csce.gov
                         @HelsinkiComm

                                      
                                      
                                      
            Legislative Branch Commissioners



              HOUSE				SENATE
CHRISTOPHER H. SMITH, New Jersey 	ROGER WICKER, Mississippi,
          Co-Chairman			  Chairman
ALCEE L. HASTINGS, Florida		BENJAMIN L. CARDIN. Maryland
ROBERT B. ADERHOLT, Alabama		JOHN BOOZMAN, Arkansas
MICHAEL C. BURGESS, Texas		CORY GARDNER, Colorado
STEVE COHEN, Tennessee			MARCO RUBIO, Florida
RICHARD HUDSON, North Carolina		JEANNE SHAHEEN, New Hampshire
RANDY HULTGREN, Illinois		THOM TILLIS, North Carolina
SHEILA JACKSON LEE, Texas		TOM UDALL, New Mexico
GWEN MOORE, Wisconsin			 SHELDON WHITEHOUSE, Rhode Island
                        
          
                 

               Executive Branch Commissioners
               
               
                    DEPARTMENT OF STATE
                   DEPARTMENT OF DEFENSE
                  DEPARTMENT OF COMMERCE
                            [II]





ABOUT THE ORGANIZATION FOR SECURITY AND COOPERATION IN EUROPE               
               
The Helsinki process, formally titled the Conference on Security 
and Cooperation in Europe, traces its origin to the signing of the 
Helsinki Final Act in Finland on August 1, 1975, by the leaders of 33 
European countries, the United States and Canada. As of January 1, 
1995, the Helsinki process was renamed the Organization for Security 
and Cooperation in Europe [OSCE]. The membership of the OSCE has 
expanded to 56 participating States, reflecting the breakup of the 
Soviet Union, Czechoslovakia, and Yugoslavia.
    The OSCE Secretariat is in Vienna, Austria, where weekly meetings 
of the participating States' permanent representatives are held. In 
addition, specialized seminars and meetings are convened in various 
locations. Periodic consultations are held among Senior Officials, 
Ministers and Heads of State or Government.
    Although the OSCE continues to engage in standard setting in the 
fields of military security, economic and environmental cooperation, 
and human rights and humanitarian concerns, the Organization is 
primarily focused on initiatives designed to prevent, manage and 
resolve conflict within and among the participating States. The 
Organization deploys numerous missions and field activities located in 
Southeastern and Eastern Europe, the Caucasus, and Central Asia. The 
website of the OSCE is: .


ABOUT THE COMMISSION ON SECURITY AND COOPERATION IN EUROPE

    The Commission on Security and Cooperation in Europe, also known as 
the Helsinki Commission, is a U.S. Government agency created in 1976 to 
monitor and encourage compliance by the participating States with their 
OSCE commitments, with a particular emphasis on human rights.
    The Commission consists of nine members from the United States 
Senate, nine members from the House of Representatives, and one member 
each from the Departments of State, Defense and Commerce. The positions 
of Chair and Co-Chair rotate between the Senate and House every two 
years, when a new Congress convenes. A professional staff assists the 
Commissioners in their work.
    In fulfilling its mandate, the Commission gathers and disseminates 
relevant information to the U.S. Congress and the public by convening 
hearings, issuing reports that reflect the views of Members of the 
Commission and/or its staff, and providing details about the activities 
of the Helsinki process and developments in OSCE participating States.
    The Commission also contributes to the formulation and execution of 
U.S. policy regarding the OSCE, including through Member and staff 
participation on U.S. Delegations to OSCE meetings. Members of the 
Commission have regular contact with parliamentarians, government 
officials, representatives of non-governmental organizations, and 
private individuals from participating States. The website of the 
Commission is: .


                                 [III]


                  The Opioid Crisis and the Dark Web: 
       How Transnational Criminals Devastate U.S. Communities


                             March 28, 2018


                                  Page
                              PARTICIPANTS

    Paul Massaro, Policy Advisor, Commission on Security and 
Cooperation in Europe

1

    Kemp Chester, Associate Director of the National Heroin 
Coordination Group, Office of National Drug Control Policy

3

    John Clark, Vice President and Chief Security Officer, Global 
Security, Pfizer Inc.

5

    Dr. Louise Shelley, Director, Terrorism, Transnational Crime, and 
Corruption Center (TraCCC); Professor, George Mason University

6

                                APPENDIX

    PowerPoint presentation of John Clark

25

    PowerPoint presentation of Dr. Louise Shelley

29



 
               The Opioid Crisis and the Dark Web: 
                 How Transnational Criminals Devastate 
                         U.S. Communities
                              ----------                              

                             March 28, 2018




    The briefing was held at 3:27 p.m. in Room 485, Russell Senate 
Office Building, Washington, DC, Paul Massaro, Policy Advisor, 
Commission on Security and Cooperation in Europe, presiding.
    Panelists present: Paul Massaro, Policy Advisor, Commission on 
Security and Cooperation in Europe; Kemp Chester, Associate Director of 
the National Heroin Coordination Group, Office of National Drug Control 
Policy; John Clark, Vice President and Chief Security Officer, Global 
Security, Pfizer Inc.; and Dr. Louise Shelley, Director, Terrorism, 
Transnational Crime, and Corruption Center (TraCCC); Professor, George 
Mason University.

    Mr. Massaro.  Well, I've been told we are to get started on time 
today. And while that isn't exactly--[laughs]--congressional tradition, 
we'll make it happen for this briefing.
    So hello and welcome, everyone, to this briefing of the U.S. 
Helsinki Commission. The Commission is mandated to monitor compliance 
with international rules and standards across Europe, which encompass 
military affairs, economic and environmental issues, and human rights 
and democracy.
    My name is Paul Massaro, and I am responsible for economic and 
environmental issues, including transnational organized crime, drug 
trafficking, and illicit trade. We'll cover all of those topics today 
as we discuss the criminal dimension of one of the most pressing issues 
of our time, the U.S. opioid crisis.
    In the 21st century, criminals are hijacking globalization. Taking 
advantage of the swift and often anonymous movement of money and goods 
provided by modern technologies, members of criminal networks engage in 
all manner of nefarious activity to enrich themselves. There is no 
specialization in the criminal world. This convergence of criminal 
networks is made all the more complicated by state capture, a situation 
in which organized crime controls the bureaucracies and functions of a 
state, and oftentimes also the most important businesses with which the 
state interacts.
    These kleptocracies create an opportunity not only for greater 
personal enrichment, through state-level corrupt practices such as 
fraud and bribery, but also for the facilitation of transnational 
criminal activity. By controlling customs services and manufacturing 
plants, kleptocracies become hubs of corruption, leveraging the dark 
side of globalization. This melding of states and transnational 
criminal networks has created a unique threat--one well-expressed in 
the way that it exacerbates the U.S. opioid crisis.
    The opioid crisis faced in the United States has become a tragic 
fact of American life, and the administration and many Members of 
Congress view its resolution as a top priority. Just last week, the 
president announced his national opioid plan in New Hampshire. Forty 
thousand people die annually as a result of this crisis, and experts 
estimate that millions more abuse opioids each year. Many of those 
addicts later turn to stronger illicit substances, such as heroin and 
fentanyl. These drugs enter the country through many different methods, 
but one of the most malicious is dark web marketplaces, where products 
can be purchased and shipped to your door as though you were using 
Amazon. Tracking these products, and the criminals that produce, sell, 
and smuggle them, is an enormous challenge and the focus of our 
discussion today.
    To conclude, I would like to point out that the word corruption is 
mentioned 14 times in the National Security Strategy. The United States 
is wisening up to the challenge posed by transnational organized 
criminals and all the ways that they may threaten the daily lives of 
Americans, be it through rent hikes caused by money laundering in real 
estate, dangerous counterfeit goods, or the topic of today's 
discussion: the provision of deadly opioids. Globalized corruption is 
the great adversary of this era. And I look forward to working with my 
colleagues in Congress, the executive branch, academia, civil society, 
and the private sector to build the coalitions needed to recognize and 
respond to it.
    We have a truly distinguished panel with us here today to discuss 
how to go about doing just that. Our first speaker is Kemp Chester, who 
is the associate director of the National Heroin Coordination Group at 
the Office of National Drug Control Policy, or ONDCP, in the executive 
office of the president. We are very grateful that he can be here with 
us today. Kemp's role at ONDCP is a continuation of a long and 
distinguished career in Federal service, having spent 27 years as a 
U.S. Army officer. He has also worked in private sector consulting.
    Kemp will be followed by John Clark, who is Pfizer's chief security 
officer and vice president of global security. He leads an 
international team of security professionals, with the goal of 
protecting Pfizer's personnel, real and intellectual property, and the 
reputation and integrity of its medicines. John, too, has had a long 
and distinguished career in Federal service, having spent 25 years at 
the Department of Homeland Security (DHS) and its precursor agencies. 
We are greatly looking forward to hearing his perspective today.
    Finally, we will hear from Dr. Louise Shelley, who is the founder 
and director of the Terrorism, Transnational Crime and Corruption 
Center, or TraCCC, at George Mason University, where she is also a 
professor. Dr. Shelley is one of the leading lights on the national 
security threat of globalized corruption, and has a new book coming out 
in fall 2018 entitled, ``Dark Commerce: How a New Illicit Economy is 
Threatening Our Future.'' The Commission has had the good fortune of 
hearing her testimony once before, last July, at our hearing on 
cigarette smuggling.
    Thank you all for being with us today, and I look forward to a 
robust discussion. Kemp, the floor is yours.
    Mr. Chester. Thank you very much. And thank you very much for 
inviting me here to discuss the opioid crisis and what the Federal 
Government is doing to address it. And I appreciate the Helsinki 
Commission's interest in this very important topic. And my thanks to 
you for the work you do, and have done for the last 42 years.
    As you know, the Office of National Drug Control Policy crafts the 
president's drug control strategy, it oversees all Federal Government 
counter-drug activities, and related funding. I serve as its associate 
director, in charge of the National Heroin Coordination Group within 
ONDCP, an organization responsible for guiding and synchronizing 
Federal Government activities related to the illicit opioid problem 
set.
    So, first, please allow me to take just a couple of minutes to 
address the magnitude and the complexity of this crisis, and then 
mention some of the things that the Federal Government has been doing 
to address it. According to the Centers for Disease Control and 
Prevention, in 2016--the year for which we have the most recent data 
available--63,632 Americans died due to a drug overdose--a 21 percent 
increase from 2015, amounting to about 174 Americans every single day. 
Opioids make up the largest category of drugs contributing to overdose 
deaths in America, with 15,472 overdose fatalities involving heroin, 
and 19,431 involving synthetic opioids, other than methadone, a 
category dominated by fentanyl and its analogs.
    The illicit opioid crisis is a complex national security, law 
enforcement, and public health crisis, and it is the Nation's number 
one drug priority. First, I should mention that while fentanyl has been 
the primary driver of the horrific number of deaths we have been 
seeing, we still have an enormous problem with heroin. It is too 
abundant in the market and far too available in our communities. But 
along with our heroin crisis, we're currently facing the additional and 
related problem of illicit fentanyl and fentanyl analogs.
    Fentanyl and its analogs are extremely potent and potentially 
deadly, being anywhere from 50 to 10,000 times as potent as morphine. 
And fentanyl comes in many forms. And we truly have watched the crisis 
of illicit fentanyl evolve before our very eyes over the last 2 years--
from fentanyl powder mixed into heroin often without the user's 
knowledge, to fentanyl pressed into pill form and sold as counterfeit 
medications, to fentanyl being bought and sold over the internet, to 
the proliferation of fentanyl analogs now available for sale--which 
brings us to where we are today.
    We have among us a family of drugs that are extremely addictive and 
deadly, sometimes ordered over the internet and purchased using 
cryptocurrencies, coming into the country at a high volume through the 
mail system or commercial carriers, or sometimes smuggled across our 
land borders, with a low signature in a variety of forms that are 
incredibly hard to detect. And this should tell us a great deal. More 
than anything, we must accept that fentanyl, while a crisis in its own 
right, is also very likely a window into the future of the drug problem 
in America.
    We know that we must reduce the size of the user population through 
prevention, treatment, and recovery support services at the same time 
we are reducing the availability of these drugs, as two complementary 
efforts to reduce the market forces pulling these drugs across our 
border. But we could very well be seeing a move away from the plant-
based drugs toward synthetic drugs, with lower overhead on the front 
end and lower risk and greater profits for traffickers on the back end. 
And we have to accept a more expanded image of the using population.
    The prototypical experienced intravenous drug user is now being 
joined by those who think they are buying off-market prescription 
opioid pain relievers, but in fact are buying--and too often dying--
from fentanyl pressed into pill form. And there should be no doubt that 
the internet has made purchasing drugs much easier. And the online 
marketplace and the use of cryptocurrencies have empowered a 
democratization of the drug trade.
    The hierarchical drug trafficking organizations we have 
traditionally seen, and are well postured to address, may no longer 
have a monopoly on supplying drugs to the U.S. market. Rather, 
individuals can simply go online to one of the many internet drug 
marketplaces, and purchase drugs like fentanyl for their own personal 
use or for further sale, creating a constellation of micro-networks 
across the country.
    So what we do now is not only important to get ahead of the deadly 
fentanyl crisis in front of us, but also establishes the framework of 
relationships and laws and regulations and technologies and procedures 
that set the conditions to deal with the future of drug use and its 
consequences for years to come. I can tell you that we know now about 
where fentanyl and its analogs are being manufactured and how they're 
getting into the country than ever before, thanks to the intelligence 
community, the Federal law enforcement community, and our partners at 
the state level and below.
    Greater testing of seizures and better post-mortem testing by 
medical examiners and coroners is telling us more about the specific 
fentanyl analogs that are in our communities and that are killing our 
people. Our international partners--specifically Mexico, Canada, and 
China--have internalized this problem and are taking active measures to 
help us address it. And right here at home, the targeting efforts of 
our law enforcement professionals help us narrow the universe of all 
inbound items to those more likely to contain fentanyl.
    As this crisis has taken hold here in America, we have been 
building and sustaining the architecture where the entire Federal 
Government is applying its time and energy focusing on this complex 
problem and a network of partners, each taking their own share of the 
task and achieving complementary effects. And so what you have seen 
recently from the role that Congress has played in keeping this issue 
at the forefront of our national consciousness--from the president 
signing the INTERDICT Act recently, to the recent announcement of his 
opioid initiative, the tangible efforts from every department and 
agency across the Federal Government, to the enormous commitment and 
resolve at the state level, and to the energy and innovation in our 
communities across the Nation, which speaks to the seriousness of this 
issue and our common commitment to addressing it in a meaningful and 
sustainable way.
    The drug market is vast, dynamic, and adaptive. But it is not 
without its own vulnerabilities. And I will tell you that it is no 
match for our own intelligence and determination and the very best 
talents that we can bring together to guard against it.
    Thank you very much, and I look forward to your questions.
    Mr. Massaro. Well, thank you so much for that overview, Kemp. And I 
already have a few questions of my own, but I'll hold them till the 
end. We'll have a Q&A session at the very end of the briefing.
    But for now, we'll move onto John Clark. John, please.
    Mr. Clark. Thanks, Paul. Also thanks to the Helsinki Commission for 
putting this on. I have a couple of slides.
    Mr. Massaro. So Sarah's going to help you out there. You're all 
set. If you just want to say next slide, she'll take care of you.
    Mr. Clark. You might be wondering what a drug manufacturing R&D 
company is doing on this panel. Twenty-eight years, actually, with the 
Federal Government, law enforcement, a lot of it involved with 
international smuggling, transnational criminals, counterfeits. I'm 
proud to say that in my work for Pfizer for the last 10 years, we have 
probably the most proactive security group in the pharma sector dealing 
with counterfeit medicines, and the danger they present to patients. A 
lot of the opiate worry and problem today in the United States and 
elsewhere is somewhat related to counterfeits and some of the work we 
do.
    The fentanyl issue in particular, over the last 2 years we've seen 
an increasing number of counterfeit Xanax, which we make, infused with 
fentanyl and killing people. It's becoming an epidemic here in the 
United States. And we're seeing it as much if not more in the U.K., 
with a threat to spread to other countries, Australia now showing some 
signs of that spreading. So I'll just touch on a couple of things we're 
doing in terms of counterfeits, in terms of the Xanax problem, and then 
open it up for questions later on in terms of what other aspects of the 
work we do that you might be interested in.
    As was previously mentioned, when it comes to the United States and 
counterfeit medicines, the big gap here is the internet. People go 
online to the internet all the time looking for all odds and ends, 
particularly medicines. There's this reputation for Canadian medicines 
being fantastic and cheaper, so there's an automatic attraction for 
people gravitating to websites that say they are representing Canadian 
pharmaceuticals and they can get U.S. patients their medicines at a 
cheaper rate, right to their door.
    Back in about 2009 or so we were investigating Mr. Strempler, as 
were a number of other pharma companies--Andrew Strempler, who once 
upon a time was a pharmacist, was involved in getting legitimate 
Canadian medicines to U.S. patients at cheaper prices. Unfortunately, 
as his supply shrank in terms of available genuine medicines, Mr. 
Strempler decided to branch out and just get medicines from wherever he 
could around the globe and send them to U.S. patients.
    So if you can go to the next slide--and in about 2009 or 2010, I 
think it was, U.S. customs actually stopped a shipment of Mr. 
Strempler's counterfeit medicines coming into the U.S. It's an older 
case, but it gives us a really good snapshot of how he and others 
operate when getting these medicines into the U.S. And you'll see, his 
medicines never did originate in Canada. They originated in China, as 
is pretty standard. China and Pakistan are two of the biggest 
manufacturers of counterfeit medicines.
    And then, like a narcotics organization, Mr. Strempler would try 
and ship all around the globe to hide the source of his medicine. He 
would go from China to Hong Kong, Hong Kong to Dubai, Dubai up to the 
U.K., where he would get the container with the raw shipment of pills 
in barrels. He would then send it down to a fulfillment center of his 
in the Bahamas, where he would have barrels of counterfeit medicines 
and sheets of patients in the United States who had ordered.
    And he would have the fulfillment center break down those barrels 
into individual orders, put into envelopes. Then he would have those 
massive envelopes sent back to the U.K., so that when they were stamped 
they would show an origin of the U.K., giving everybody the sense who 
was ordering in the United States that, okay, it didn't come from 
Canada, but at least it came from the U.K. Good reputation for 
medicines. And never realizing that, in fact, their medicines came from 
China. In fact, if you'll see that slide, there's no transition whereby 
they even go through Canada. They were shipped to U.S. patients from 
the U.K.
    I was a special agent in charge in Miami for several years. And 
having worked a lot of the narcotics smuggling down there, that diagram 
represents to me something similar I would have seen in Miami, except 
it would have been north-south. And all the cartels shipping their 
cocaine and other narcotics through the Caribbean, Central America, 
whatever it was, Mexico, to get up to the organizations and their 
outlets in the United States. So pretty much in my opinion the major 
violators of counterfeit medicines act like narcotics traffickers. And 
this is just an example of the kind of shipping they'll do to get it 
around the world.
    Next slide, if you would. We had previously been exposed to the 
dark web too intimately here in Pfizer. Most of our work, up until 
about 2 years ago, we were actually trying to do what we could to 
address the online pharmacy exposure on the open web, the web that most 
people can go to. As we started to read in the paper more and more 
problems with counterfeit Xanax, we started trying to get the 
Department of Justice (DOJ) to come on board. We wanted to partner up 
with Drug Enforcement Agency (DEA) in particular to see if we could 
lend a hand to partner with them to address that problem.
    Because it's a scheduled medicine, although we make it, we're not 
authorized to actually test purchase it ourselves. So there was a bit 
of a stumbling block in that regard. But we did go through the dark web 
and found out that unlike on the open web, Xanax was heavily being 
advertised. And it sort of coincides with the rash of Xanax overdoses 
and hospitalizations within the last 3 to 5 years. And so those 
diagrams are just some of many we have in our intelligence division 
showing how Xanax is highly advertised in the dark web, and 
outstripping, even in terms of the upper left's--compared to other 
benzodiazepines. Whatever reason, criminal elements have decided Xanax 
has the most cache. And that's the one they're going to counterfeit and 
send to patients and stuff. So it just gives you a flavor for what 
we're looking at within Pfizer.
    I'll turn it over to Dr. Shelley then, to sort of wrap up the 
panel.
    Mr. Massaro. Well, thanks so much, John, for that perspective.
    At this point, Dr. Shelley, would you like to be the anchor for the 
panel?
    Dr. Shelley. As a specialist on transnational crime, and especially 
being a specialist in the region that the Helsinki Commission is 
comprised of--which is Europe and the states of the former Soviet 
Union--I want to give you a perspective on how different our phenomenon 
is from what we're seeing in the rest of the OSCE region.
    Next slide. First of all, as was mentioned, we have a very large 
number of fatalities in this country. But this number is not only 
large, it's unique in the developed world. In the OSCE region--or, I 
should say within the European Union, there were only a little over 
8,000 deaths in all of the EU in 2015, which is a region of about a 
half a billion people--so much larger than the U.S., where we were 
having deaths of over 63,000 from drugs in general and 42,000 from 
opioids.
    As we're talking about how much is available on the dark web, that 
Mr. Clark just explained, one of the reasons that we have so much sales 
on it is that Americans--or, I should say, North Americans are 
particularly good at illicit entrepreneurship. Just as we have helped 
develop some of the largest licit platforms, we're also extremely good 
at developing some of the largest illicit platforms. And we also don't 
have such a unified police force, I can say, of analysis, like Europol. 
So I'll go into that point.
    Go to the next slide, please. As we've talked about today, the 
special element that is making our population die at such a significant 
rate is the presence of fentanyl, which we have more of than does the 
rest of the OSCE region--that is, more than Western Europe, more than 
the former Soviet Union. And as was said, and I won't want to repeat, 
it comes directly from China. Some of it comes into Latin America and 
then is moved north.
    But our phenomenon is not an urban phenomenon. In many places in 
the European Union, the deaths or the users are in major urban centers. 
But we are having these fentanyl deaths all over the United States, and 
in rural areas, because the mobility of our population is mirrored by 
the mobility of the sellers of the drugs. And it's managing to 
penetrate throughout our country in ways that we have not seen before.
    Next slide. So what is different? If you read Europol's statistics, 
they will tell you that 35 percent of their organized crime groups are 
involved in drugs. We can't tell you a comparable figure. We know that 
we have gangs involved in drugs. We have Latin American cartels in 
drugs. But who else is involved? We don't have what I think is enough 
research on the supply chains and the way that the drug markets are 
operating in the U.S.
    Yes, as Kemp Chester said, we're understanding more and more about 
this, but we need to understand the operations of transnational crime 
and how the diverse actors work, and when they diversify to other 
products, and when they stick with what drug products they stick with. 
In parts of the OSCE region, especially in the former Soviet Union 
where the northern route of the drugs coming out of Afghanistan 
follows, we have enormous problems of corruption.
    But the reason that we're having such a serious drug problem in the 
U.S. cannot be blamed on corruption. Yes, there are some problems of 
corruption on the border, but this is not our reason. Our reason is a 
demand, the availability, the technology, and the distribution system. 
But it is not a terrible corruption problem that we have to clean up in 
regards to the drug trade. That's one of our advantages.
    Next slide. So let's give you some ideas of why we're so good at 
this illicit entrepreneurship. You may think about Silk Road. Silk Road 
was the first large-scale online marketplace for illicit drugs. Now, 
who ran it? It was not a member of any cartel. It was Ross Ulbricht, 
who is now sitting in prison for a very long time, who was a dropout in 
physics from Penn State.
    So there he is, an extremely highly skilled individual with tech 
skills. He was never a juvenile delinquent. He was an Eagle Scout, the 
highest level Boy Scout you can be. And he had an ideology of 
distributing drugs and making a market available--sort of like the 
counter-Amazon. And he was extremely good at this. And it took about 
2\1/2\ years for law enforcement to catch up with him.
    But this is the kind of new type of facilitator of these massive 
illicit marketplaces. When we have Eastern Europe dark web 
marketplaces, or former Soviet marketplaces, they are not dealing in 
drugs as much. We've had pharma leaks that dealt in prescription drugs, 
like Viagra. And they're dealing in selling us malware and botnets and 
terrible things for our computer systems, but they are not the leaders 
in the online drug markets.
    Next slide. So what we're looking at in the corruption problem is 
that we've had an enormous change in the way that drugs are coming out 
of Afghanistan. The heroin problem, which was mentioned, that we still 
have, is not just an Afghan heroin problem, but it is a heroin problem 
that is getting worse in Europe. And a third of it is now estimated to 
go through Central Asia, which has many of these kleptocracies that 
Paul Massaro talked about in the introduction, where the leaders are 
part of this illicit drug trade. And then it goes through Russia into 
Europe, where organized crime that was once deeply involved in the 
privatization process is now increasingly involved in the drug trade. 
And that's a terrible problem not only for Russia, as we're going to 
see in a minute, but for Europe as well.
    Next slide. And so Russia never had a serious problem of drugs. If 
you go back into the history of this country, we've had problems of 
drug abuse for decades. But Russia is a country with a long history of 
vodka abuse. And there's this wonderful Russian proverb, ``Vodka is not 
water, don't drink too much.'' So that's what people were concerned 
about.
    But as this northern route has emerged, we're now talking about 7 
million users of illicit drugs, with a 1\1/2\ million addition, which 
tells you that you have such clever marketers of drugs, that you can 
rapidly convert a country from a bunch of alcoholics to vodka to 
addicts to heroin. And that's a very serious problem. And it's a 
serious problem for their security. But we have a different problem. 
And our problem is primarily fentanyl, in causing our deaths.
    Next slide. So just to give you an idea of how far this dark web 
has grown in the last few years, we started off with Ross Ulbricht, who 
was shut down in 2013. In 2017, law enforcement shut down AlphaBay, 
that was started by a Canadian. That had 200,000 users, 40,000 vendors, 
and was 10 times the size of Silk Road. So in a short period, we've had 
an enormous scaling of sellers and buyers on the dark web. But if you 
look at the comparable takedown in the Netherlands, which was Hansa, 
which was taken down in mid-2017, that only had 18,000 vendors. So our 
illicit entrepreneurs have a competitive advantage against other OSCE 
countries.
    Let's go on. We're almost there. So what do we need to do? We need 
to understand how these markets operate, how they are linked to 
organized crime, how much they're linked to our tech community gone 
bad. We need to understand much more about the transport routes. And we 
need to bring together different elements of the community--health, 
education, awareness, research and law, as we are trying to do at 
George Mason today. We also need to be much more careful in how we are 
regulating our technology community and how we are dealing with online 
platforms, where some legitimate online platforms are also being used 
for the drug trade.
    Thank you.
    Mr. Massaro. Thank you so much, Dr. Shelley, for that fabulous 
presentation, and those insights into who's really suffering and who's 
doing stuff.
    One immediate followup question from me. And that is, you point out 
that the tech entrepreneurship, the illicit entrepreneurship is coming 
from the U.S. and Canada. Is the reason why this affects the United 
States and Canada more just one of language? Is it because it's in 
English? I mean, even though we are starting the dark web websites, 
you'd think that people in the EU, Russia, elsewhere, could just order 
drugs from those websites. It's global in nature, right? So just 
because they're being run out of the United States or Canada or 
elsewhere, why does that necessarily affect the United States, Canada 
and elsewhere more so than the EU? Do you see what I'm saying?
    Dr. Shelley. It seems that most of the customers who are going into 
the dark websites are from the former British colonies. So just as was 
mentioned of the spread of some of what John Clark was talking about of 
Xanax going into the U.K. and Australia, that's what we're seeing on 
the dark web in those markets. When Russians are successfully 
marketing--like with the Viagra--they were combining it with spam and 
control of botnets that was getting the message out there, which is 
something that they're very technologically proficient at. And that 
gives them a competitive advantage in sort of a large marketplace, but 
not in this dark web market.
    Mr. Massaro. So is it just that these former British colonies tend 
to be more tech-savvy that they're able to, use Tor and the necessary--
you know, to access these dark web markets?
    Dr. Shelley. I think that there are many people in the world who 
are successful in using TOR because it's being used for communications 
in many parts of the world. But there seems to be this sort of parallel 
to what we see of the largest platforms, except for AlphaBay, being 
American-based. So is the illicit side of this going on.
    Mr. Massaro. Interesting.
    Dr. Shelley. And it's not in technology products.
    Mr. Massaro. Okay.
    Dr. Shelley. The technology--the malware, the botnets--are not our 
prime contribution to----
    Mr. Massaro. It's drugs?
    Dr. Shelley. Yes.
    Mr. Massaro. Got it. Okay, switching gears a little bit--we're 
entering the Q&A session now, so I'd hope we can get audience 
participation in here. I hope that you've come with some questions. I'm 
going to ask one, two, maybe three and then we'll open it up to the 
audience for additional questions.
    Maybe Kemp's the right person for this question. And that is, we've 
had a great discussion already and thank you for your statements. One 
thing that I'm surprised didn't come up is the Postal Service. And I 
thought of the Postal Service as a humungous piece of how these drugs 
are entering the country. Are you the right person to speak to that, 
Kemp?
    Mr. Chester. Yes.
    Mr. Massaro. Thank you.
    Mr. Chester. And I'm glad, because this is one of my favorite 
topics, because the Postal Service is doing a tremendous job. The 
Postal Service, and particularly the Postal Inspection Service, which 
is the law enforcement arm of the U.S. Postal Service, was very early 
to understand the magnitude of the problem and the fact that the U.S. 
Postal Service was a critical vulnerability that we had, and that it 
was being used as a vector for these drugs to get into the United 
States.
    We in ONDCP began working with them very closely. And they work 
across the interagency with other Federal law enforcement to do a 
couple of things. The first thing is to get advanced electronic data 
from the shipping company--or, from the originating country, so that 
they know the shipments that are coming into the United States before 
they get here. And that's usually about 72 hours out. And that's for 
tracked and untracked packages.
    The volumes that we are talking about are enormous--up to about 
144,000 packages every single day into one international service 
center. So when you get advanced electronic data, they can share that 
with customs and border protection, so that they can pull aside and 
give separate attention to those companies that are most related to the 
illicit shipment of goods. So that's the first thing.
    The second thing is the non-intrusive detection capability that is 
there at the international shipping center for them to be able to 
detect illicit substances that are in there. And then the third thing 
is to be able to work with other law enforcement partners, whether it's 
from the Department of Homeland Security or from the Department of 
Justice, in order to get a prosecutorial outcome for the things that 
they intercept.
    I'll tell you that the Postal Inspection Service and the Postal 
Service writ large has done a tremendous job in helping us to better 
understand this vector for these drugs getting into the United States, 
and actually doing tangible things against it, and really over the last 
year and a half or two years.
    Mr. Massaro. Fabulous. And a followup question to that: When these 
drugs are ordered off dark web marketplaces, are they shipped almost 
exclusively via the Postal Service, or are private delivery services 
used--like FedEx and et cetera, et cetera?
    Mr. Chester. No, private delivery services are used as well. So 
that's all of your major kind of express consignment carriers, all who 
have done a tremendous job working with Federal law enforcement to 
share information and allow Federal law enforcement to be able to 
assist in intercepting these packages before they can be delivered to 
the end user. And so when we say the Postal Service, you know, that's 
kind of one element of it. But the express consignments, the FedEx, 
DHL, UPS, those others, they also provide a means for the drugs to get 
into the country. But those companies are working very hard with the 
Federal Government to interdict those shipments.
    Mr. Massaro. Fabulous. Dr. Shelley, you wanted to add something?
    Dr. Shelley. Yes. In October, the research center that I direct, 
TraCCC, had a day-long conference on the opioid epidemic. And one of 
the speakers was the former IG of the Postal Service, who we work with. 
And one of the points that was made is that law enforcement is limited 
in being able to look at the packages that are coming through the U.S. 
mail, as opposed to the delivery services. And this gives the Postal 
Service a greater problem with tracking this, and a greater volume of 
the products that are coming through. And that report is available 
online. If you put in ``opioids'' and ``TraCCC'' you'll find it. And 
you can read more about it.
    Mr. Massaro. Thank you, Dr. Shelley. And I'll ask one more question 
before we open up to the floor. And that's for John Clark. John, when 
you're working on these issues, how closely and with which agencies are 
you working on in the U.S. Government? And what do those public-private 
partnerships look like, and how can we build those?
    Mr. Clark. We'll work with anybody and everybody. We've worked with 
Microsoft. As Dr. Shelley was saying, when Viagra was sold by a lot of 
the spam ads, Microsoft was interested in taking down the spam and the 
botnets. We were interested in taking down the counterfeit Viagra. We 
work with law enforcement agencies all around the globe. We've actually 
trained law enforcement agencies in 151 different countries. Our 
investigators, investigating the counterfeit medicines, are all former 
law enforcement from all different countries.
    So we have the experience of knowing what law enforcement needs to 
be a prosecution. We have a sense of what's a more serious violation 
than others. So when we develop a case, we pretty much have it cooked 
that we can bring it to law enforcement in a country and have a good 
sense of confidence that they're going to accept it, and then do the 
last part of the investigation and the ensuing enforcement actions, 
which we can take. So a lot of it is just good collaboration, good 
coordination, good communication. We had actually a pilot program last 
year with DEA here in the United States.
    Again, since we're restricted from test purchasing an advertised 
counterfeit, and unless you can get a test purchase and a delivery and 
test and verify it's a counterfeit, you can't do an investigation. And 
just as an example, while we had the pilot going with DEA, we actually 
ordered about 225 different advertisements for Xanax. Only 115 were 
delivered, which tells you why it's such a difficult problem to follow. 
A lot of the ads out there are bogus. They're intended just to steal 
your financial information or just to steal your money if you pay in 
advance. So out of 225, 115 would get delivered.
    We found, in that program, that of the 125 we tested, only five 
turned out to be authentic diverted Xanax, the balance being either 
counterfeit Xanax or some other product that we couldn't even identify. 
So it really was a great program to give us insights that we hadn't had 
previously because we were restricted from doing those types of test 
purchases in the ensuing investigation. So, you know, there are other 
private companies we'll work with, and government agencies. We'll work 
with ministries of health, ministries of interior, ministries of 
justice.
    We don't care, because at the end of the day, much as we are 
interested, the government agencies obviously are interested in patient 
health and safety. And these counterfeits are just so horrendous and 
have not really garnered the specter of danger that I think they merit. 
People don't realize when you're taking a counterfeit cancer medicine 
and you die of cancer, that the counterfeit is probably the reason you 
died. They attribute it to the fact that, you know, maybe your medicine 
wasn't working. Maybe you were an outlier for that medicine, never 
going back to look at what type of medicine you were taking.
    So if the medicines--the counterfeits in and of themselves don't 
poison you, at best they're not going to kill you but you're not 
getting the efficacy. So, you know, these are just horrendous things. I 
think the Xanax now, and particularly where Xanax is infused with 
fentanyl, where there are quick results from people taking them, is 
finally bringing to light how dangerous counterfeit medicines are to 
patient health and safety. And it's not just the cancer medicines or 
the heart medicines.
    We've had where people say, well, Viagra, it's a discretionary 
medicine, so it's not as serious as cancer medicine. Well, there was a 
case in Canada 2 years ago where, in fact, Viagra was being infused 
with fentanyl. It wasn't being done deliberately, but the 
counterfeiting organization was pressing the same counterfeit Viagra 
tabs off of a machine that they were pressing counterfeit oxycontin 
that had fentanyl in it. And, you know, as we've all heard, two 
micrograms of fentanyl can kill. So it doesn't take much to make that 
Viagra a deadly Viagra.
    So if you don't know what's in it, if it's not certified, 
registered, under FDA authorization--whether it's Viagra or whether 
it's a cancer medicine--you know, you're really spinning the wheel in 
terms of what the impact is going to be on your health.
    Mr. Massaro. Thanks, John. Can I take some questions from the 
audience? Anybody want to ask a question? Please. There's actually a 
microphone right next to you. [Laughs.] You can stand and get up there.
    Questioner. I'm Sean Bartlett with Senator Cardin.
    I was on a Congressional Delegation to Mexico last year with my 
boss and a few other members. And one of the things they wanted to know 
was not just the flow of fentanyl from Mexico into the United States, 
but the origination in China and how in some ways Mexico was serving as 
a passthrough. I don't know who to direct this to exactly, but what 
would be some of your recommendations for us people trying to help our 
bosses do policy responses to this? Is it going after the source in 
China? Is it disrupting it in Mexico?
    Thank you.
    Mr. Chester. I can start. And the answer to the question is both. 
The principal issue that we have with Mexico, obviously, is heroin. 
They are the primary supplier of heroin to the United States. And the 
United States is Mexico's primary customer. Anywhere between 90 to 93 
percent of the seized and tested heroin in the United States comes from 
Mexico as the source country. So we work very closely with the 
government of Mexico to reduce the production of heroin in Mexico 
through poppy eradication and through lab identification and 
neutralization that processes the poppy into the heroin. So that's kind 
of one aspect of it.
    But we also know that Mexico is a transit zone for fentanyl coming 
up across the southwest border. We believe that the origin of that, in 
many cases, is China, and that it's shipped from China in a much purer 
form into Mexico, and is either mixed with diluents or inert matter 
like lactose, or dipyrone, or acetaminophen, and then sold as fake 
heroin, brought about the southwest border and sold as fake heroin. Or, 
in some cases, it's milled into heroin there and sent across the 
southwest border.
    The differences that we see between the southwest border kind of 
entry into the United States and what we see through the mail system, 
coming directly from China, generally involves purity. So the fentanyl 
that comes across the southwest borders seems to be much, much less 
pure--10 percent or less. Whereas the purity levels that we see coming 
directly from China are about 90 percent or above. They tend to be 
about the exact opposite.
    The very best that we can do with the government of Mexico is 
continue to work the heroin problem set, No. 1. Do a better job of 
sharing information on both sides of the border in terms of seizures 
and the transnational criminal organizations that are actually moving 
these drugs, No. 2. No. 3, to be able to increase their capacity to 
better track the finished products and the precursor chemicals for 
fentanyl synthesis, if that's taking place in Mexico, that come from 
Asia into Mexico as well. All of those are kind of part of a 
comprehensive approach that we have with the government of Mexico.
    We work very closely with them under a number of mechanisms that we 
have. And I will tell you that the government of Mexico does see this 
as a shared responsibility. There was a long, long time that there was 
a lot of finger pointing about, ``We produce a lot of drugs because you 
use a lot of drugs,'' and, ``We use them because you produce them.'' 
The government of Mexico has internalized this problem. They see it as 
a shared responsibility. And we work very closely with them on the 
spectrum of illicit opioid issues that we have, understanding that the 
opioid problem in the United States from illicit opioids, heroin and 
fentanyl and the violence in Mexico are both manifestations of the same 
problem. And the government of Mexico understands that. We have a very 
good relationship with them in this regard.
    And I don't know, Louise, if you want to add something.
    Mr. Clark. I'll just jump in real quick, too. Fentanyl isn't that 
tough to make. You could shut it off in China, and it's going to pop 
up, if the demand is there, elsewhere. Now, maybe it's more pure from 
where they've been making it, China versus Mexico, but one of the 
worries we have found and have, particularly when it comes to the 
counterfeit Xanax, is historically all counterfeit medicines--and I'll 
speak just on behalf of the Pfizer but I think it's true for the 
industry--have come in as finished products manufactured elsewhere, 
come in generally, like I said, before via the internet, personal 
packages.
    But with Xanax, we've seen a turning of the tide. And we're seeing 
manufacturing done inside the United States of the counterfeit Xanax. 
Terribly troubling. Showing that the problem is getting worse instead 
of better. But I will say that, you know, based on my Federal law 
enforcement background and now my pharma security background, you're 
not going to ``law enforcement'' your way out of this. You know, you 
really have to concentrate a lot of effort on education. We try and do 
as best we can within Pfizer just educating patients--you know, where 
to look and where not to look in terms of medicines.
    You can go to the internet and find valid, authentic medicines 
maybe at a cheaper price. We're not saying don't go to the internet. 
But if they're telling you that we have a prescription medicine that 
you don't need a prescription for, you know, you should get off that 
site right away. Not only are they going to sell you a counterfeit, 
they're going to steal your information as well. Raising awareness 
relative to the problem and treatment, particularly for the fentanyl 
opioid problem, I think are just as important, if not more important, 
than trying to get law enforcement in front of the problem.
    One of the reasons we partner with law enforcement so much is 
recognizing, particularly since we're all former law enforcement, that 
they've got a lot on their plate. So we try and do a lot of the work 
for them, a lot of the groundwork, to help them out and give them that 
head start. When you take into consideration all the things they're 
responsible for, you know, they're rolling a big boulder up a hill and 
stuff. And so law enforcement in and of itself isn't going to be the 
silver bullet that stops it.
    Mr. Massaro. Do you have anything you want to say to that?
    Dr. Shelley. I had two things I wanted to say. One, our concern of 
how much cooperation we're going to get from the Chinese if we're 
having a trade war with them is something that we need to be thinking 
about, because the Chinese remember--and they remind their citizens in 
their museums on the history of crime that the U.S. participated in the 
opium wars. This is a long, historical legacy. And so for 150 years, 
this has been part of Chinese memory. And therefore, we need to be--if 
we want them to cooperate, we have to be not engaging in tariff wars if 
we need them in other areas. And it's a very difficult situation.
    Second, as was said, the problem may be displaced elsewhere. You 
know, China has enormous production capacity for everything, so it's 
got it for fentanyl. But if you think about a country like Myanmar, it 
used to be in the agricultural type of drug production. And now it's 
going into different types of methamphetamine production on a large 
scale. So you may see things of drugs being--production being moved to 
regions in Asia with lower production costs, just as you're seeing with 
other commodities.
    Mr. Massaro. Thank you. Do we have any questions from the 
audience--additional questions from the audience? You want to ask one, 
Sarah? Okay, please.
    Questioner. [Laughs.] Hi. My name is Sarah. I am a graduate student 
at George Mason University. I'm actually right next to you at the 
School of Conflict Analysis and Resolution.
    My question is for you, Dr. Shelley. It's just a point of 
clarification. You had said that there really isn't a history of drug 
consumption in Russia, but I was wondering where Krokodil fit in that 
story.
    Thank you.
    Dr. Shelley. There have been tens of thousands of people who have 
abused drugs. But in the Soviet period, the Soviet Union was really cut 
off from the rest of the world and there was limited drug consumption. 
And most people abused alcohol on just a massive scale. And so, what 
we've seen of the rise of millions of customers in a very short period 
is just a total transformation of the problems of addiction. And I've 
never seen it grow quite so rapidly in any locale.
    Mr. Massaro. Could I just follow up on that real quick, because I 
had a question I had written down here. You really elaborated on why 
the United States is vulnerable to this, and why the EU is not. But are 
there commonalities between Russia and the United States here that make 
us both vulnerable to the same sort of opioid epidemic? I mean, it 
really is an epidemic there too.
    Dr. Shelley. I think there are various problems that make a country 
vulnerable. And we have particular problems of opioid epidemic in the 
United States, where you can see geographically areas of enormous 
economic transition, where people are having great economic 
difficulties. And that's where we have this new type of addiction 
that's moved outside of our urban areas. In Russia, you can see it 
along the Trans-Siberian Railroad and in some of the old industrial 
areas of Russia that are not converting. So these--they've had a 
transition in--away from a communist system that provided security. And 
with that has come a terrible drug problem. And we've had some 
transitions in our society that have made people very vulnerable to 
drug abuse.
    Mr. Massaro. But it's similar, in that it's mostly occurring in de-
industrialized, rural areas--more rural areas?
    Dr. Shelley. In the U.S., it's happening--the new types of opioid 
problems are occurring. Yes, they're going on in urban areas, but 
they're going on much more in rural areas, where if you look in the--in 
my class, we looked at maps of where they are--are areas in which we've 
never had very serious drug addiction.
    Mr. Massaro. And I guess what I was pointing out is, that's the 
same trend as in Russia, is in de-industrialized, more rural areas.
    Dr. Shelley. More de-industrialized areas. They're not necessarily 
rural, but de-industrialized, yes.
    Mr. Massaro. Okay, great. More questions? Please.
    Questioner. Hi. I'm Samantha Mastin. I'm an undergrad at American 
University.
    And my question is, from a private sector perspective, what more 
can Congress and the U.S. Government do to combat the flow of illicit 
products from the dark web into the United States?
    Mr. Clark. A lot. Actually, our laws are not weak. Our enforcement 
is pretty good. From--and I can only speak from a counterfeit medicine 
perspective--I think the judicial system needs to wake up. I think the 
sentencing for violators is not nearly as serious as it needs to be. 
Counterfeiting medicines is probably one of the most profitable crimes 
you can imagine. Germans did a study several years ago weighing 
different commodities of counterfeiting. With a 1,000-pound investment 
what would be the ROI on it, the return on investment? Counterfeit 
medicines came up light years ahead of any other commodity. It was, 
like, 500,000 pounds return on investment for a 1,000-pound investment 
in a counterfeiting medicine operation.
    When you counter that with--some countries it's not a violation. In 
some countries they have laws, but it's not enforced. In the United 
States, we actually have laws that are in force. But then we sentence 
so lightly. Mr. Strempler I think served maybe 2 years of a 3- or 5-
year sentence, I forget. He wasn't even charged with counterfeiting 
medicines. He was charged with wire fraud. Allowed to serve the latter 
part of his sentence in Canada on an exchange program, and then was let 
out early. I forget the hundreds of thousands--what the exact number is 
of counterfeits that he was selling to patients in the United States. 
You know, so when I see that type of a crime with what type of 
sentencing was given, it just spins my head.
    And this is where I see we don't really see how seriously of a 
crime it is. We are starting to recognize it when in fact it's infused 
with fentanyl, whether it's Xanax or anything else, and people are 
dying. But until this time, I think we've all had this benign concept 
that a counterfeit medicine is really another name for a generic, and 
it's not really that dangerous, so no real need to sentence anybody. No 
harm, no foul, to some extent. And that's just not the case. So I'd say 
in sentencing we need to really take a sharper look at those that are 
selling counterfeits and what the consequences should be.
    I think Postal needs to have that advanced targeting capability. I 
don't know that it's been passed yet, but it's something that FedEx, 
UPS have had, to sort of work with Customs and Border Protection (CPB) 
and highlight those types of packages that are coming into the United 
States earlier than they are. CBP needs some more authority to be able 
to give us the information from the packages that are coming in so we 
can work with them to do investigations, and then work with CBP and DHS 
and Homeland Security Investigations to help them find the targets and 
stuff. So there's a lot. Not huge steps, but a lot of incremental steps 
that I think would make the situation in the United States much better.
    Dr. Shelley. I couldn't agree with John more. My new book that Paul 
mentioned, called ``Dark Commerce,'' has a whole chapter called 
``Destroyers of Human Life.'' And in that, I talk about many of the 
individuals who were involved in illicit trade in pharmaceuticals. And 
it's just shocking how low the sentences are for crimes that actually 
kill human beings. I mean, people are trading in oncology drugs that 
are useless or haven't been conserved properly, that then lose their 
effectiveness. So this is a very important issue of sort of our 
consciousness about what illicit trade is and what it can do to us and 
to our health security, our human security. So that's a very important 
issue.
    I also think that we need to be much more proactive in dealing with 
cryptocurrencies, because we've gone--that's another thing I write 
about--that in 4,000 years we had a rather consistent type of trade, in 
which we were trading in known commodities where people knew their 
trading relationships, that they traded in currencies. And now we've 
gone into a cyber world in which you're dealing with sort of the 
invented product. We're dealing with cryptocurrencies that are not 
backed by states. And totally anonymous relationships. And that makes a 
trade that's not built on trust.
    And so sometimes in this dark web, they have rating systems to try 
and rate the sellers. But those rating systems are also criminalized 
because this is such a criminalized world. They've developed 
criminalized rating systems. And somehow we have to go and become much 
more engaged with the entry points into the dark web, like the 
cryptocurrencies. And we also need to be more vigorous in how we are 
letting the internet and the dark web develop. We've had this concept 
that online marketplaces just should be allowed to grow freely, but the 
consequences for us are just too deadly for this.
    Mr. Massaro. Sorry to keep you standing there. Can I just follow up 
real quick? [Laughs.]
    Questioner. It's okay.
    Mr. Massaro. Because I had a question for Kemp on this topic, and 
I'm going to scratch another one off my list here. You know, we're 
talking a lot today about network convergence, and that's this idea 
that the same people that are involved in smuggling counterfeit goods, 
and in counterfeiting themselves, are the people that are trafficking 
drugs, trafficking humans. They're the people that are running states 
now, right? [Laughs.] Running sort of kleptocracies, to a certain 
extent, indulging in bribery and looting of the state treasury.
    And I guess we conceptualize of that in an intellectual level. I 
wonder in your work, when you look at a shipment that's coming to the 
United States, or when you get something through the Postal Service, or 
whatever else, are you seeing these products coming together? Are you 
seeing drugs being accompanied by counterfeit pharmaceuticals, being 
accompanied by cigarettes, being--you know, is this whole criminal 
enterprise now one big thing? [Laughs.]
    Mr. Chester. Sure. I think that there's probably a desire to kind 
of make order out of this, when in reality it's a much more vast and 
diverse world, right? So sometimes the illicit drug is the counterfeit 
pharmaceutical. So it's the fake oxycontin that came in. Well, that's 
two crimes right there, right? And I understand your point, right--bad 
people do bad things. I think that we are starting to see more and more 
what are called poly drug loads, which the exclusivity of traffickers--
you're a heroin trafficker, you're a marijuana trafficker, you're a 
cocaine trafficker--actually for efficiency's sake, there are probably 
drug loads, go across the border, and then are broken down for greater 
distribution.
    I do think that the biggest change--the biggest fundamental change 
is this model that we've had of drug trafficking for so many years, 
which in reality it was hierarchical drug trafficking organizations 
that would bring a large load of cocaine or heroin or something across 
the southwest border, and they'd break it down through a distribution 
network. And then what would happen would be a face-to-face cash 
transaction somewhere between two individuals that had to meet 
somewhere and then buy the drugs. And so from a law enforcement 
perspective, you could pretty easily intersect that at some point. And 
you hang a felony over the head of the seller and then you work your 
way back up through the hierarchy and you begin to dismantle that 
organization.
    That's turned upside down by what we see with the internet, the 
dark web, and cryptocurrencies, where individuals themselves can order 
these things either for their own personal use or for distribution to a 
small number of people. That is a vastly more distributed and complex 
drug trafficking--if you could even call it that--when in reality it's 
a direct to consumer model versus kind of a distribution model that we 
had for drug trafficking in the past. I do believe that that is the 
biggest change. That's compounded by the fact that these drugs are 
highly potent and therefore can be shipped in very, very small 
quantities. Because they're synthetic, they're very, very hard to 
detect. And because they're small they're ordered at very low dollar 
figures that don't really raise any of the suspicions or the alarms 
that we've set off through our banking system.
    So that entire kind of complex of federal law enforcement 
architecture that we've developed over the last 30 years has got to be 
amended to deal with this new direct-to-consumer model of highly potent 
synthetic drugs coming at a huge volume and at dollar figures that are 
very, very hard to detect. That's the big change for the future, I 
think.
    Mr. Massaro. Well, then--really quick--[laughs]--again I'm sorry--
does this mean that the same sort of narco-sanctioning under the 
Kingpin Act has become less meaningful?
    Mr. Chester. Right. No, because I will tell you that we still have 
the 20th century problem as well, because the market is so diverse, and 
it really is a consumer-driven market. And so while we do have this 
enormous problem with very lethal fentanyl in the United States, we 
still have the traditional heroin problem. And you still have the large 
drug trafficking organizations that are bringing them in. When we began 
dealing with this problem about 2\1/2\ years ago in a very earnest 
fashion, we learned the lesson of Estonia.
    And in Estonia, they cracked down several years ago on heroin. And 
they essentially pushed their user population over to fentanyl. And so 
we decided to handle heroin and fentanyl as part of the same problem 
set, because we thought that the worst thing that could happen would be 
that we could be successful in eradication and lab identification and i 
n trafficking from Mexico, and that we would push everyone over to 
fentanyl and that we would have a new problem. That's not the worst 
thing that could happen. The worst thing that could happen is that we 
have a significant heroin problem and a significant fentanyl problem as 
well. And it speaks to the diversity of the customer base and the 
ability of traffickers all along the spectrum to be able to satisfy 
what the customer wants.
    Mr. Massaro. Thanks, Kemp.
    Okay, please.
    Questioner. No problem. Sharon Castillo from Pfizer. I actually 
have a question from someone who's watching on CSPAN.
    The question is for Mr. Chester, and it's regarding the Senate 
Permanent Subcommittee on Investigations report that was released, I 
believe, in January. As you know, the report said that only 30 
percent--or 36 percent of the packages that come here from China 
contain any advanced electronic data. What was your reaction to the 
report, the administration's reaction to the report, and what measures, 
if any, are being considered to address this situation?
    Thank you.
    Mr. Chester. No, thank you very much. I don't handle the advanced 
electronic data. Actually, it's U.S. Postal Service. But we do work 
very closely with them, so I hope they don't mind that I'm going to 
speak on their behalf, because they really are doing a tremendous job.
    So you're absolutely right. The vast majority of foreign packages 
that come into the United States come from China alone. And then the 
remaining percentage come from about 10 other countries. That's the 
preponderance of the foreign packages that come into the United States. 
I believe the figure is well above 50 percent right now in advanced 
electronic data. I know that in the president's commission on drug 
abuse and the opioid crisis, there was a recommendation in there to 
vastly increase the amount of advanced electronic data. And I know that 
it was also part of the president's opioid initiative as well.
    The Postal Service is well on its way to meeting its target I 
believe of 90 percent advanced electronic data within the next 3 years, 
and then 100 percent within the next 5 years, I believe was the target. 
And that has come from the Postal Service dealing directly with the 
government of China, with China Post, to see if the ability was there 
and then the right procedures were in place. And in the case with 
China, both are in place. And China has cooperated greatly in getting 
advanced electronic data for both tracked and untracked packages.
    But I think it was--John brought up a very good point--getting that 
type of advanced electronic data has always been a feature of the 
express consignment world. When you're dealing with the Postal Service, 
it's actually governed under an international agreement called the 
Universal Postal Union that is reached between different countries. So 
there was kind of that extra step that they had to go through. But the 
Postal Service has very aggressively worked with the government of 
China to increase that number a great deal. And I'm fully confident 
that they're going to meet their target within the next 3 to 5 years.
    Mr. Massaro. Thanks. More questions from the audience? Anybody? 
Stand up, ask a question? Oh, yes, please, John.
    Mr. Clark. Since there are no questions, I'll throw another 
extension of an answer out. One thing we hadn't touched on in this 
discussion so far, but related to it, particularly what Kemp was saying 
relative to customer demand and delivery to the customer, we're seeing, 
particularly with the dark web, our experience with I'll just say 
Xanax--counterfeit Xanax is, generally speaking, your individual 
customers are not going to the dark web to order their counterfeit 
Xanax. We see Xanax--or counterfeit--or, the dark web, sorry, as more 
of a business-to-business type of enterprise, where more commercial 
criminals are utilizing it to sell larger quantities.
    What's problematic is the social networks are now being used as the 
means by which the distributors are selling to Tommy and Jane in San 
Diego through Facebook--and I don't want to pile on Facebook--but I'll 
say Facebook, Instagram, Snap, you know, all of these means by which 
they can more directly go to individuals and even have communities 
where they can talk together and sort of comment on the counterfeit 
that they're buying and stuff like that. That's a huge threat that's 
continuing to expand now. I think part of it is driven by we have done 
a relatively good job of starting to mitigate the online pharmacies. 
But now that direct-to-consumer capability through the social media is 
just really scary.
    Mr. Massaro. This actually gives me wonderful opportunity to cross 
another question off my list that I wanted to ask Kemp, but John, if 
you could chime in here as well. Your average American is not using 
these dark web marketplaces, correct? Does the model remain there are 
individual dealers in a community that are buying from an online 
pharmacy or a dark web marketplace, or wherever else, and then 
distributing in their community in the United States? Is that----
    Mr. Clark. Yes, I'd say the online pharmacies still are direct 
appeal to an individual, but the darknet in and of itself--and I'll 
just speak from our experience, I can't compare it to other companies 
or agencies--government agencies. But, yes, it's more of a business-to-
business--you know, I'm getting 500,000 a month, I'll sell in 
quantities of 10,000. So a distributor or sub-distributor buys the 
10,000, and then starts marketing, again, through any means, but a lot 
of it being social media.
    Mr. Chester. No, I agree with John. I mean, I think you have a lot 
of different varieties out there, from kind of the traditional 
distribution networks to the individuals who just order for their own 
personal use, to the individuals that order small amounts for small 
distribution either with known customers, so they have a known customer 
base, or to sell to unknown customers as they come within a fairly 
confined geographic area. You have all of those things in the 
environment now.
    Mr. Massaro. Great. So the major change has been one of above sort 
of the local level. Okay, Mahmut, please.
    Questioner. I have two short questions. I am Mahmut Cengiz. I am at 
TraCCC at George Mason University.
    I have learned that Mexico is a source country for heroin in the 
U.S. So how is the drug money transported to Mexico--from U.S. to 
Mexico, Mexican drug cartels? And the second question is, have you come 
across any linkages of terrorist organizations with the drug trade in 
the U.S.?
    Mr. Chester. I'll start off, and then I could turn it over to 
Louise.
    The larger issue of the nexus between terrorism and drug 
trafficking, I would tell you that it makes intuitive sense, but that's 
kind of a large issue. I think the difference is whether you have one-
off interactions of convenience versus deep and enduring relationships 
and where that kind of falls along the spectrum.
    As far as the money going back down into Mexico, it goes in a 
variety of ways. Everything from bulk cash smuggling to the transfer of 
kind of nonmonetary instruments back across the border to be converted 
into cash over there, all the way down to wire transfers, whether it's 
Western Union or whatever, kind of below the $10,000 threshold that go 
back into Mexico, to physically being carried. Anything that you can 
possibly imagine.
    I would tell you that when it comes to cryptocurrencies and 
electronic money transfers versus bulk cash, I think one of the most 
interesting things about that is that bulk cash creates its own kind of 
vulnerability. So that's the most secure way--you know, you don't leave 
any electronic footprints, right? So you're exchanging cash for drugs 
somewhere and there's really no record of it. But cash is hard to hide. 
It's hard to transfer. It's hard to move around. Ideally, you want to 
get that down to an account number that can be transferred from one 
place to another. But when you do that, it creates enormous 
vulnerabilities, because you do leave electronic footprints.
    So the very thing that makes that much more efficient also makes it 
much easier for law enforcement to be able to track illicit activities. 
And so that's why cryptocurrencies, the anonymous nature of them--
particularly when they're using Tor or other anonymizing capabilities, 
kind of removes that vulnerability. And that's what makes it a 
particularly pernicious part of this particular trade.
    Mr. Massaro. Anyone want to comment on the piece of interplay with 
terrorism? Do we see any of that?
    Dr. Shelley. Well, we've certainly seen in the southern hemisphere 
with the FARC, that has been deeply involved in the drug trade. And now 
there's a peace process. And one of the criteria of the peace process, 
to bring the FARC into the political process, is that they're supposed 
to help dissemble the drug transport networks, because they've always 
insisted that they weren't part of the drug production system, but that 
they were part of the--living off the drug transit routes. But there 
are problems with this FARC agreement and some of its implementation. 
And so they're not totally out of these markets, and they've not 
totally helped dismantle the markets and the supply chains, as was 
hoped.
    Mr. Massaro. Questions from the audience? Okay, while you guys are 
thinking about it, I've got a couple more of my own.
    One in particular, Dr. Shelley, that during your presentation you 
mentioned that Europol is doing an exceptionally good job. Do you think 
that generally speaking, the idea that a supranational organization 
like the EU is doing better than a national police agency at 
intelligence and information collection, like in the United States, is 
surprising? Generally, the EU is thought of as having issues with that 
sort of thing. So, I mean, what is it that makes Europol special? And 
what lessons can the United States learn from that?
    Dr. Shelley. All right. I think maybe I wasn't clear enough. I 
think on the enforcement side the fact that Europol doesn't have its 
own law enforcement system and relies on law enforcement from other 
countries and trying to make them work together is hard. But it does 
bring together a lot of data on transnational crime within the EU 
region. And they're spending a lot of resources on doing analysis of 
it. And that's where we're not, I think, capitalizing enough on it. We 
have under our U.S. data our Uniform Crime Reporting Program, which is, 
the FBI collects data on the most serious crimes. But we're not having 
enough data collection that allows us to understand these networks. And 
therefore, that's what we're missing, as a researcher, is some of the 
analytical capacity that we need to help law enforcement target this 
activity more.
    Mr. Massaro. And is that something the executive branch could 
implement on its own, or does it require legislation?
    Dr. Shelley. I think there's a lot that could be done through some 
of the mandates in the legislation that's going on. For example, there 
were things that were just passed in our omnibus financial bill last 
week on how to combat illicit cigarette trade, to work on it. This 
could be applied in other areas of providing more direction and 
developing analytical capacity.
    Mr. Massaro. Thank you.
    And a question for Kemp. Is there a feeling in the executive branch 
and in the executive office of the president that the administration 
has all the powers it needs to combat this, and that it's a matter of, 
you know, coordination and getting it done at this point? Or is there 
legislation that you would like to see provide additional authorities 
to the executive branch?
    Mr. Chester. Yes. No. 1, as you know, the president has repeatedly 
stated that this is his number one drug priority. And he sees this as 
the fight of a generation. And he's committed to doing everything that 
he can, and has rallied the entire administration, the Federal 
Government, in order to be able to address this head on. And I think 
that level of presidential leadership has been enormously important to 
give us the energy and the ability to do what we need to do.
    I think that the Congress has done a remarkable job of keeping this 
in the forefront of American consciousness and keeping this on the 
legislative agenda. I have lost count of how many hearings and how many 
pieces of legislation directly related to the opioid crisis have moved 
through this Congress. And that's important as well, because the 
president and the Congress are both on the same page about that.
    I think you saw recently the president signed--here's a good 
example--the INTERDICT Act, right? So the INTERDICT Act provides $9 
million for customs and border protection to increase its technological 
and scientific capability in order to be able to interdict synthetic 
opioids, specifically fentanyl, as they come in the country. That was a 
result of gaps that were identified and vulnerabilities that the United 
States had in the flow of these drugs into the United States. The 
Congress acted. The president signed it. And now CBP has $9 million in 
resources to be able to address that.
    That sort of process I think is well in place to deal with this 
particular opioid crisis. And that is the sort of thing, I think, that 
we'll see in the coming years, that once we understand we have a 
vulnerability, we have a gap, we have something that needs to be 
filled, we don't see a lot of problem getting the energy and the 
initiative and the innovation to be able to close that and give our 
government--and not only our Federal Government, but our state and 
local partners as well, the resources that they need.
    Something else I would like to mention--certainly we've talked a 
lot about the criminal aspect and the law enforcement and the national 
security aspect of this as well. You know, I'd be remiss if I didn't 
remind everyone of the enormous amount of energy and resources that 
have been put and are being put into the prevention and education 
aspect of this, and into treatment leading to long-term recovery. I 
think everyone understands, and certainly the Congress and the White 
House, have a sophisticated understanding of the drug problem, and that 
there's a complex interplay between the availability of these drugs and 
their use in the United States.
    And John's absolutely right, right? You're not going to ``law 
enforcement'' your way out of this. Whatever we do on the front end of 
the supply chain, as smart and dynamic and as innovative as it is, has 
got to be complemented by preventing initiates to drug use in the first 
place and providing treatment resources leading to long-term recovery 
for individuals with substance use disorders. Those two things working 
together are what's going to allow us to be able to bend the curve on 
this.
    The Congress understands that. The president and the administration 
understand that. And I do believe that's the combination of activities 
that we need across the Federal Government in order to address this 
crisis.
    Mr. Massaro. So we're on the right track, you'd say so far? 
[Laughs.]
    Okay, another question then. I'm just about done with my list and 
then I'm going to let you all go. [Laughs.] And I hope this isn't too 
basic or ignorant, but, these illicit marketplaces, why can't they just 
be seized? You know, why can't they just be shut down? You'd think if 
this sort of thing was going on at a Walmart or any other store, a 
physical location, it could just be shut down.
    Mr. Chester. Well, in July 2017, I think that happened to AlphaBay. 
That was a very good operation done by the Department of Justice. 
Following up on that, the Department of Justice and the attorney 
general announced the Joint Criminal Opioid Darknet Enforcement Team, 
to bring together a taskforce of individuals to be able to work 
specifically on the darknet to do just that, to shut down these darknet 
marketplaces. However, it's a little more complex than that, just 
because they stand up and close down on their own very, very quickly.
    It can be regenerated very, very quickly. In many cases they're up 
for 75 days and they shut themselves down in order to not be tracked. 
And then they flip over and then they open up in another darknet spot. 
So they certainly can be shut down. I think it's necessary, but not 
sufficient, just because of the ability to be able to generate and 
regenerate these websites. But that certainly is a focus of effort for 
the administration, for the Department of Justice as well.
    Mr. Clark. Just to follow up, there's no bigger challenge for law 
enforcement than transnational crime. I mean, you know, once upon a 
time, when borders were what they were, and global commerce wasn't what 
it is, you could work within your jurisdiction and address crime 
relatively simply, I'll say. But transnational crime is just 
phenomenally complex. If you consider counterfeit medicines, you have a 
manufacturer in Pakistan, you've got distributors in Dubai and Hong 
Kong, you've got maybe sub-distributors in New York, and you've got 
end-users in San Diego. Law enforcement in each of those areas has a 
specific thing to address, but to put the whole package together is 
just phenomenally difficult.
    And then you consider the money goes to Eastern Europe or in 
cryptocurrency, there's no transnational law and there's no 
transnational organization that can sort of go across all of those 
territories and put the case together to take the kingpins down, per 
se. I mean, it happens, but it's hugely difficult. It takes a lot of 
coordination between countries. It takes a lot of paperwork and 
bureaucratic mind-melding to be able to sort of ask your compatriots in 
a second country about, ``can you get us the information on such and 
such a thing,'' and 2 months later get the records back.
    One of the things we can bring to the table as a private industry 
is the fact that we work in all these countries. We have liaison with 
all these law enforcement agencies. We often are able to sort of bridge 
that gap between intelligence collection and help law enforcement see 
the bigger picture. Your distributor in Panama is connected to a 
manufacturer in Beijing is connected to a distributor out of San Juan. 
And sort of help law enforcement work together with some of the 
intelligence we would bring to the table, and actually share through us 
intelligence like that.
    But it's a phenomenally difficult thing. And, you know, between the 
computer and global commerce now, it's just gets more and more 
difficult--regardless of counterfeit medicines, or whatever it might 
be.
    Mr. Massaro. Dr. Shelley.
    Dr. Shelley. In our discussions in the last half-hour or so we've 
focused on the centrality of social media and the distribution of drugs 
through social media--not just the dark web, not just what's going on 
the internet, but the centrality of social media, which is present in 
every part of illicit trade. And this is a very, very difficult 
question, because at the moment in our country we're looking at social 
media, what its role is in elections, what its role is in the political 
process. And so what we're groping with, apart from the difficulties 
that Mr. Kemp and John Clark have outlined here of transnational crime 
and the realities of law enforcement, are very central issues of our 
society at the moment, where technology is one of the drivers of our 
economy. But it is also one of the drivers of our most pernicious 
elements of illicit trade.
    And how do we deal with this? How do we regulate these new engines 
of commerce and of trade that are less than 30 years old, but are 
having enormous--in their negative aspects, enormous social harm in our 
society? And part of this is that we have chosen not to regulate, as we 
do pharmacies, as we do newspapers. We're not regulating this new 
cyberworld as we're regulating other parts of our society.
    And therefore, as we proceed through this discussion, we need to be 
integrating our issues of illicit trade into this. And just last week, 
both the House and the Senate passed legislation on making online 
platforms more responsible for human trafficking. And I know that some 
of the tech industry has been concerned about this, because they see 
this as an attack on them, even though the human trafficking issue is 
the issue in which our Congress and our population is most in agreement 
on what we need to do. And I don't think drugs is much behind it.
    And so we're dealing with very profound and deep issues in our 
society that are not just law enforcement issues, that are not just 
demand issues--and what is causing this demand, but where the engines 
of our economy are today and how much we regulate them.
    Mr. Massaro. Thank you, Dr. Shelley. And I have one final question, 
and then we'll end at 5. And that is, this obviously requires an 
enormous amount of international coordination and cooperation, as John 
mentioned just a second ago. How do you work with countries where 
organized crime elements that are trafficking in drugs--[laughs]--and 
trafficking in counterfeit pharmaceuticals, are also the government? 
And we're seeing more and more of that in the world today. If anyone 
would like to take that question? It's a tough question. It's a 
provocative question. [Laughs.]
    Mr. Chester. It's very difficult. I'm lucky, because I deal with 
Mexico, China, Canada, United Kingdom. I really haven't had to confront 
that situation. The officials that we deal with are very committed to 
this. They understand their share of the task. They understand the role 
that their government plays. But they also understand their limitations 
and where they need help from the United States, and where they need 
help from other countries.
    But I do think that you raise a larger issue, that years down the 
road, you know, what is considered an inherently non-state problem, 
which is illicit trafficking of any goods--actually gets state 
sanction. And when that happens, how do you use the instruments 
available to you to deal with what is an inherently a non-state 
problem? I don't have a great answer for that, but I can tell you that 
that's probably something that we're going to have to think about in 
the years ahead.
    Mr. Massaro. Sanctions are one potential answer to that, 
potentially. [Laughs.] Anybody else?
    Dr. Shelley. Yes. I'll say that this is a hearing of the Helsinki 
Commission. And as we were saying, our heroin problem is mostly a 
Mexican heroin problem, but the European heroin problem is mostly a 
problem that comes out of Afghanistan. And many of those countries in 
Central Asia fit into that criteria that you're just talking about. And 
since they--Western Europe--are our closest allies, those problems are 
also our problems. And how do we help them deal with these issues in, 
you know, central Asia, which has had so many economic difficulties, so 
many conflicts in the region, is not in much capacity to deal with 
these heroin flows that are affecting Europe. Maybe in not in as deadly 
a way as fentanyl is affecting our country, but they are having very 
serious consequences for human security there too.
    Mr. Clark. Yes, it's 5:00. I don't want to take up too much more--
--
    Mr. Massaro. Yes, we have 1 minute, 30 seconds maybe.
    Mr. Clark. I'll echo Kemp's. It's not easy from a counterfeiting 
medicine perspective. We have an obligation, regardless of the 
government involvement or not. We knock our heads against the wall 
sometimes if the law isn't going to be behind us. We try and so as best 
we can to take out of circulation what we can. But it can be extremely 
frustrating. You just have to keep trying, though.
    Mr. Massaro. Well, thank you so very much to our audience and our 
panel. That'll be all for today. The briefing is concluded. [Applause.]
    [Whereupon, at 5 p.m., the briefing ended.]


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