[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
_____________________________________________________________________________





 
 
                        Roundtable on Illicit Trade
               
               













[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








                                  JUNE 21, 2018
                                
                                
                                
                                Briefing of the 
               Commission on Security and Cooperation in Europe
_____________________________________________________________________________
                                 
                                Washington: 2019
                                
                                


















                       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 Stae
                            Department of Defense
                            Deartment 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 ORGANIZATION FOR 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]













                      Roundtable on Illicit Trade


                               _________


                             June 21, 2018





                                                                                        Page
                              PARTICIPANTS

Paul Massaro, Policy Advisor, Commission on Security and Cooperation in Europe  ......     1

Russ Travers, Acting Director, National Counterterrorism Center, Office of the Director 
  of National Intelligence ...........................................................     3 

Christa Brzozowski, Deputy Assistant Secretary, Trade and Transport, Department of 
 Homeland Security ........................................................... .......     6

Lisa Dyer, Director, Office of Intellectual Property Enforcement, Department of State ..  10

Aaron Seres, Acting Section Chief, Financial Crimes Section, FBI .......................  13


                           OTHER PARTICIPANTS


Frank Cullen; Cynthia Braddon, Trace It; Kasey Kinnard, Financial and 
Outreach Coordinator, Terrorism, Transnational Crime and Corruption 
Center, George Mason University; John Kennedy; Gretchen Peters; Steven 
Sin, Director, Unconventional Weapons and Technology, Subject Matter 
Expert Instructor, National Center for Security & Preparedness; David 
Lynch, Director of Solutions, Sayari Analytics; John Pacheco; John 
Clark; Kristin Reif, Director Illicit Trade Prevention, Philip Morris 
International; John Clark; Susan Fridy, Acting Head of Center, 
Washington Center, Organization for Economic Co-operation and 
Development; Jim King; Rob Quartel, Chairman and CEO, NTELX; Tyler 
Crowe; Kevin Rosenbaum, Attorney, Mitchell Silberberg & Knupp LLP; 
David Luna, President and CEO, Luna Global Networks; Travis Johnson; 
Jon Kent; Blake Marshall; Chris Martin, Assistant Director, Fiscal 
Crime Liaison, Her Majesty's Revenue and Customs, United Kingdom; Jerry 
Cook, Vice President of Government and Trade Relations, Hanesbrands, 
Inc.; Liz Confalone; Kevin Delli-Colli, Managing Director, Forensic and 
Investigations Practice, Deloitte; James J. Duggan, Vice President, 
Coty Inc.; Flora Okereke; Clay Fuller, Jeane Kirkpatrick Fellow, 
American Enterprise Institute; Matthew Rubin; Crawford Allan, Senior 
Director, TRAFFIC, World Wildlife Fund; Dawson Hobbs; and Megan Glibin, 
Director, Customs and Trade Facilitation, U.S. Council for 
International Business.



                                   [IV]
                                   
                                   
                                   

                       Roundtable on Illicit Trade


                              ----------                              


                             June 21, 2018




                Commission on Security and Cooperation in Europe

                                Washington, DC
                                
                                
                                

    The briefing was held at 1:05 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; Russ Travers, Acting Director, 
National Counterterrorism Center, Office of the Director of National 
Intelligence; Christa Brzozowski, Deputy Assistant Secretary, Trade and 
Transport, Department of Homeland Security; Lisa Dyer, Director, Office 
of Intellectual Property Enforcement, Department of State; and Aaron 
Seres, Acting Section Chief, Financial Crimes Section.
    Mr. Massaro. All right. So we've got a real full table today. I 
know everybody's shoulder to shoulder and everyone's going to get to 
know one another real well. You'll see, they pulled a fast one on us at 
the very last minute and gave us 12 mics, instead of the expected 36, 
so we're going to have to share. And I hope that's okay with everybody. 
But in any case, my name's Paul Massaro. I work for the Helsinki 
Commission and put together this event today. I'm going to go ahead and 
start with my opening statement, and we'll take it from there.
    Good afternoon and welcome to this roundtable of the U.S. Helsinki 
Commission. The commission is mandated to monitor compliance with 
international rules and standards across Europe, which include military 
affairs, economic and environmental issues, and human rights and 
democracy. My name is Paul Massaro and I am the policy advisor for 
economic and environmental issues, including illicit trade. I would 
like to welcome you today on behalf of our bipartisan and bicameral 
leadership to discuss a topic fundamental to the national security of 
the United States and government based on the rule of law as a whole.
    In the 21st century, criminals are hijacking globalization. By 
leveraging new technologies and exploiting archaic legal frameworks, 
transnational criminal networks have become a looming presence across 
the world. These networks engage in whatever nefarious activity makes 
them the most money. There is no specialization in the criminal world. 
Meanwhile, the rule of law, which has largely remained a national 
competency, struggles to keep up.
    This is complicated further by the emergence of kleptocracies, 
authoritarian states that have merged with criminal interests and have 
at their core the personal enrichment of the autocrat and his cronies. 
It can often be difficult to tell where the public sector ends and the 
private sector begins in these kleptocracies. By taking advantage of 
this opaque structure and the one-sided openness of governments based 
on the rule of law where reliable information is readily available, 
kleptocracies profit at the expense of those who play by the rules.
    The unique national security threat born of the merger of 
transnational criminal networks and authoritarian states is nowhere 
better expressed than in the booming enterprise of illicit trade, the 
topic of today's discussion. The damage done by illicit trade is 
immense. There is an economic cost, in the form of stolen intellectual 
property, lost sales, and tarnished brands. There is a social cost in 
the form of stalled development, environmental destruction and 
political corruption. Finally, there is a human cost in the form of 
those who are hurt or killed by counterfeit products, defective 
machinery, and deadly narcotics--not to mention those who have their 
lives destroyed through modern slavery.
    The diverse group at today's roundtable represents a broad 
coalition seeking to combat illicit trade. We are joined by large 
companies, small- and medium-sized enterprises, universities, think 
tanks, trade associations, advocacy groups, and many other 
organizations that demonstrate the leadership and diversity of the U.S. 
private sector and civil society, and those of our allies. You all 
represent the prosperity and innovation that the rule of law makes 
possible. On behalf of our leadership, I would like to thank each of 
you for attending today. Each of your organizations is a valuable 
member in curbing illicit trade. And I encourage you to stay in touch 
with me and one another as we develop strategies to do so.
    This roundtable is meant to signal clearly that the legislative 
branch, the executive branch, the private sector, and civil society are 
united when it comes to countering transnational criminal networks and 
their facilitators.
    I have a short administrative note here about mic capacity, but I 
think I've kind of explained that already and we'll make do. So let me 
go ahead and introduce our panelists. Russ Travers will be our first 
speaker. Russ is the acting director of the National Counterterrorism 
Center. NCTC is responsible for leading and integration of the national 
counterterrorism effort by fusing foreign and domestic CT information, 
providing terrorism analysis, sharing information with partners across 
the CT enterprise, and driving whole-of-government action to secure 
national CT objectives. Thanks so much for taking the time, Russ.
    Christa Brzozowski will follow Russ. Christa serves as deputy 
assistant secretary for trade and transportation policy within the 
Department of Homeland Security's Office of Policy, where she is 
responsible for multiple economic and security policy issues that 
affect the United States. She is also the co-chair of the Organisation 
for Economic Cooperation and Development [OECD] taskforce on countering 
illicit trade. Christa, so glad you're here.
    Ms. Brzozowski. My pleasure. Thank you.
    Mr. Massaro. We will then hear from Lisa Dyer. Lisa is the director 
of the Office of Intellectual Property Enforcement in the Bureau of 
Economic and Business Affairs at the Department of State, where she 
works with her colleagues to identify intellectual property rights 
[IPR] issues and formulate strategies to engage foreign governments on 
issues of concern. Lisa, thank you. Trying to see you. Thanks for so 
much for joining us.
    Finally, we will hear from Aaron Seres. Aaron is the acting section 
chief of the FBI's Financial Crimes section. Here, he oversees all of 
the FBI's financial crime programs nationally, which include a wide 
variety of fraud schemes as well as intellectual property crimes. He 
also has oversight responsibility for the FBI's Forensic Accountant 
Program. Aaron, it's a real pleasure to have FBI at the table.
    Mr. Seres. Thank you. It's good to be here.
    Mr. Massaro. Russ, without further ado, the floor is yours.
    Mr. Travers. Thanks very much. It is a great pleasure to be here. 
Paul indicated I am a counterterrorism guy. And so that is going to be 
my optic as I talk about convergence. I'm going to do three things. 
First, I'm going to give you a little bit of nuance in terms of what 
convergence means from my perspective. Second, I will then burrow down 
into the relationship between terrorists and criminal actors. And then 
third, I want to give you a couple of very brief observations about how 
I think some of the lessons learned from counterterrorism over the last 
17 years could be applied to transnational crime.
    So, first, on nuance. A few years ago, we started talking about 
TCOs [transnational criminal organizations] and terrorism converging. 
That left the terrorism community a little bit uncomfortable. And 
definitionally, it would seem to suggest that they are coming together. 
And, kind of reduction ad absurdum, that al-Qaida was coming together 
with Russian organized crime, or something along those lines. And that 
clearly is not what's happening. Now, in our view there is a spectrum. 
On the one hand, you've got terrorists that definitely use crime, and 
have forever, for funding, logistics--Bali, Beslan, Madrid, 77--all, 
the entire spectrum. That motivation was ideological.
    At the other end of the spectrum, you've got criminals who will use 
terrorist tactics for the purposes of intimidation. So that, for 
instance, you see Mexican drug cartels using beheadings. Their 
motivation is profit. And in the middle, you've got a whole host of 
kind of blurry interactions. You will have seen arrangements of 
convenience. For instance, Al-Shabaab and pirates a decade ago. You'll 
have fellow travelers. You'll have the Abu Sayyaf group in the 
Philippines, who are truly a bunch of thugs that wrap themselves in the 
Islamist flag. You might have AQIM, which is an amalgam of terrorists 
but also just long-standing smugglers. And then you've perhaps got the 
most complicated, which is Hezbollah.
    Occasionally, you will get rather bizarre cases like that of 
Arbabsiar, who was convicted several years ago. He had a cousin who was 
Quds Force, Iranian. And he was trying to do the bidding of his cousin 
to reach out to Mexican drug trafficking organizations to eventually 
assassinate the Saudi Ambassador to the U.S. That's a little bit on the 
rarer side. The point is I think that you do have a very broad spectrum 
of interaction. And at least in our view, convergence as a bumper 
sticker kind of suggests a single narrative that we think actually is 
far more complex than that which may be concluded.
    So what is going on? Again, from the terrorism perspective, there 
is no question that there is a nexus between criminal actors and 
terrorist actors in a number of different ways. I'll only give you two. 
First, we believe that terrorist groups knowingly exploit criminal 
activities for operational purposes, and they have done so forever. 
Interestingly, in the last several years you've also seen terrorists 
begin to provide a religious justification for engaging in criminal 
activity. Second, we find that non-ideological driven criminal 
enterprises--such as human smugglers, weapons dealers, and document 
forgers--will work with terrorist groups solely for financial gain. 
Sometimes they're witting. Sometimes they're not. I want to address 
both of those in some detail.
    So let's start with how terrorist groups knowingly exploit criminal 
activities for operational purposes. They tap into criminal networks or 
use criminal means to facilitate funding for the acquisition of 
materials or weapons. A few examples: To fund the majority of the 
group's operations, ISIS members have illicitly gathered and sold oil, 
pillaged antiquities, and they've extorted individuals in both Iraq and 
Syria. In a number of ISIS plots in Europe, the operatives tapped in 
criminal networks, including using personal relationships within those 
networks to identify co-conspirators and obtain fraudulent documents. 
It was pretty easy for them because if you look at someone like 
Abaaoud, who was responsible for the attacks in Paris, he had been a 
criminal. He had been in and out of prison. He had a very wide array of 
criminal contacts.
    And it's not just ISIS. AQAP-associated attackers leveraged 
organized crime networks to acquire firearms to conduct the Charlie 
Hebdo attack back in 2015. And certainly, in Africa there have been 
concerns for years that extremists have supported financing group 
operations through illicit smuggling of everything from gemstones, to 
ivory, to charcoal. As Paul mentioned, the advent of technologically 
enabled services--dark web, digital currencies--have helped terrorist 
groups conduct their operations. They are quite good at exploiting the 
attributes of globalization and can move far quick than governments 
can.
    An example: We had an al-Qaida supporter in Britain using stolen 
credit card numbers obtained on the dark web to generate more than $3 
\1/2\ million of revenue for the terrorist group. And a relatively 
recent EU commission study found that firearms acquired from criminal 
networks were a primary source of weapons for European terrorist 
attacks, all purchased on the dark web.
    As I mentioned, interestingly, we started to see terrorist groups, 
through their propaganda, provide religious justification for engaging 
in criminal activities. ISIS has urged supporters to engage in criminal 
activities such as theft in Rumiyah and in multiple propaganda organs. 
In one article, ISIS argued that they should take wealth by any means. 
A prominent ISIS recruiter in Belgium said that stealing from the 
infidels is permitted by Allah and necessary to finance travel to 
jihadist hotspots. Amedy Coulibaly took out a consumer loan using 
fraudulent pay slips from a fake company to acquire over $30,000. He 
then used that money to purchase weapons.
    The propaganda espoused tactics more commonly associated with 
crimes with a broad range of attack nodes. So within AQAP's Inspire 
magazine groups encouraged individuals to conduct arson, stabbings, and 
deliberate vehicle rammings, in addition to tactics more commonly 
associated with terrorism. And that kind of blurs the line for us in 
terms of determining motivation. Is it criminal, or is it terror? 
You'll also note that in publications like Rumiyah and Inspire, they 
use recruiting posters from organizations like al-Qaida and ISIS that 
advocate going after criminals to bolster their ranks--almost like an 
opportunity for redemption.
    It's very common for individuals to start out in prisons as 
criminals, get radicalized, and go on to conduct terrorist attacks when 
they get out. And that is a trend that we've seen increasing around the 
globe. In the post-mortem for terrorist attacks, the individuals are 
often known to local security services as criminals, but not as 
terrorists. And that is a significant challenge for the intelligence 
community. An interesting guide point from the EU--last year a growing 
trend that ISIS had probably had the most success in exploiting 
criminals to conduct attacks. Recruits are at least twice as likely to 
have a criminal record in the case of ISIS as they were in the case of 
al-Qaida.
    So that's the terror side of the equation. We briefly discussed 
thoughts on how, when, why we believe criminal enterprises engage with 
terrorist groups. We believe the intersection between criminal 
enterprises and terrorist groups is largely transactional in nature and 
absent any common ideological views. Criminal enterprises will continue 
to place a higher value on the financial or material incentives they 
gain through various transactions over the actors that they are working 
with. In October 2017, a Pakistani national was sentenced to almost 3 
years in prison for smuggling individuals to the U.S. At least one of 
them had family ties to the Taliban and who was implicated in a plot to 
attack the U.S. or Canada.
    Several years earlier, three Pakistani citizens were sentenced to 
multiple years in prison for conspiring to provide material support to 
a foreign terrorist organization when they agreed to smuggle an 
individual who they believed to be a Taliban member. However, we've 
also seen many cases where criminals have been concerned that dealing 
with terrorists may bring unwanted law enforcement attention. So it's a 
bit of a risk calculus for them.
    Criminal networks routinely conduct kidnapping operations targeting 
U.S. and other Western citizens. They also carry out kidnappings with 
the intent of selling the hostages to terrorist groups for financial 
gain, rather than any ideological motivation. A cooperative 
relationship between criminals and terrorists is, in fact, prominent in 
Afghanistan and Yemen, where foreign hostages often change hands 
between criminals and terrorist groups. The Taliban and Haqqani network 
in Afghanistan routinely cooperate with criminal groups and receive 
hostages from those criminal groups.
    And that brings me to my last topic. I want to say just a quick 
word about the opportunities to apply lessons learned from 
counterterrorism to countertransnational organized crime. The nexus 
does have significant policy implications. Since 9/11, counterterrorism 
focus across the government has been very much focused on the whole of 
government efforts, better integration across the U.S. Government, to 
improvements in information sharing that may be horizontally within the 
Federal structures, vertically, Federal, non-Federal, with our 
international partners, and with the private sector. And it has 
involved the establishment of authoritative data bases and a completely 
integrated screening and vetting architecture.
    It is not perfect, but we are dramatically better than we were 17 
years ago. It has allowed us to push borders out. It has allowed us to 
keep potential terrorists out of the country, better track individuals, 
and build out networks. Many of these capabilities would be relevant to 
any transnational threat, but crime in particular, with better 
integration across law enforcement and intelligence across the United 
States, but also a better sharing of criminal history data with 
international partners. Judging from the improvements we've seen in CT, 
I think there will be substantial improvements in our understandings of 
transnational crime. And equally important, it would further enhance 
our own counterterrorism efforts, help plug a bit of a hole that exists 
as a result of this crime-terror nexus.
    With that, I'll stop. And I look forward to questions after my 
colleagues.
    Mr. Massaro. Christa, please.
    Thank you, Russ.
    Ms. Brzozowski. Great. Thank you. So I will note start off with a 
little bit of a humorous note. The task for today is how to stop the 
flow of illicit goods. Not giving a sense of the problem, but just what 
is the answer to stop the flow of all illicit goods. And because it's 
not qualified in any way, I take that to mean globally as well.
    Mr. Massaro. I figure it's a pretty easy problem.
    Ms. Brzozowski. [Laughs.] So I hope I have some good solutions here 
today. And I clearly don't have them, otherwise I would be on my yacht 
somewhere in the Bahamas. [Laughter.] I'm from the Department of 
Homeland Security [DHS], where I do trade and transport policy. And my 
usual disclaimer is have everyone emphasize the policy aspect of that. 
So please don't ask me any very specific questions about quarter rates 
or tariff numbers or the harmonized tariff schedule or anything like 
that. I'll know enough to get myself in trouble and not enough to 
actually answer the question. So we'll keep it at a pretty strategic 
level.
    Within DHS, I'll give perhaps just a quick overview--although I'm 
assuming many of you, if not all, are very familiar with the mission of 
that department. It's always helpful to kind of give you at least my 
perspective so we're maybe starting off on the same page. The 
Department, as folks know, is a relatively new organization, a 
relatively still immature organization still figuring out how to 
integrate and how to work in concert with other Federal partners and 
other global partners. It brings together 22 different agencies that 
had previously been scattered across other departments.
    And so it has a tremendously broad mission area that includes 
things as diverse as the counterterrorism mission that Russ was talking 
about, and it is focused on protecting critical infrastructure, 
including the broad transportation sectors, financial sectors, 
telecommunications sectors. So that mission set specifically for 
working with owners and operators and private sector folks is to 
protect those critical infrastructures here domestically. Also, a huge 
focus is protecting Federal networks and systems from cyberattacks--so 
putting out cyber guidance, hiring some of those professionals, and 
making sure that, first, Federal systems are secure, and then working 
and engaging with private sector folks to make sure that broader 
networks throughout the country are also secured and free from attack.
    And finally, I'm giving you a high-level overview of the many, many 
missions in DHS--a big part of the mission is to facilitate the secure 
flows of goods and people. I'm here today to talk about the goods side 
of that house. That's my little niche of the world. But still, some 
pretty significant problem sets and challenges there.
    So when we're talking about cross-border commerce, you'll usually 
hear about, customs--so Customs and Border Protection [CBP] or the 
Immigration and Customs Enforcement [ICE] folks. We get a lot of 
assistance from our science and technology people who provide and 
deliver some of the capabilities that are used. But ultimately, all 
groups come together within the Department of Homeland Security around 
the singular mission of supporting the vital economic benefit that we 
all derive from cross-border trade. We support it by both enforcing the 
number of laws that ensure both security and compliance and the revenue 
streams that continue to come, but strive to do so it in a way that 
doesn't impede free movement. That balancing act is one that we're 
constantly striving to maintain as we deal with goods coming across the 
border.
    Here are a couple of stats just to put this in perspective. These 
are from 2017. So $2.4 trillion in imports and $1.5 trillion in exports 
are processed by DHS at the border annually. That's across 328 
different ports of entry, so a huge land expanse there as well. We deal 
with around 365,000 formal importers of records, folks that are 
actually accomplishing imports, and collect about $45 billion in 
duties, taxes, and other types of fees at the border.
    If that wasn't enough, we--the DHS--are also doing that, hopefully, 
in close coordination with 47 different agencies that have some border 
responsibility or need for the data that is collected on the things and 
people that come across the border. This becomes immensely complex 
when, in addition to dealing with the flows of goods, you are 
coordinating with 47 different agencies, not only operationally but in 
terms of law and with their legal departments as well, as we are 
dealing with a huge amount of systems and capabilities. So there's a 
technology angle as well. We also deal with people actually working at 
the border. So a huge operational component there as well.
    It's not an easy task on any day, particularly as we're in the 
midst of an evolving and dynamic environment the task is ever more 
complicated. DHS has a unique mission set and a unique set of 
authorities and capabilities working on behalf of all these different 
agencies. It is an area where the rules of the road and the lanes are 
being worked out on a minute-by-minute basis. But DHS is the biggest 
physical presence actually at the border. So we serve on behalf of 
these 47 different agencies to enforce compliance with laws that might 
not necessarily be DHS laws, but laws from the Department of 
Agriculture or the Department of Interior Fish and Wildlife Service.
    We deal with everything from invasive species like a nematode to 
consumer health and safety on pharmaceutical or engine parts, to 
counterfeit and pirated goods, which we'll hear a bit more about today, 
to dealing with folks who are looking to misclassify or misvalue goods 
to avoid tariffs or duties or quotas or to claim preferential 
treatment, all the way to big, big concerns about the bomb in the box 
or WMD-type of weapons of mass destruction. Included in this is money, 
narcotics, weapons, and then a whole array of controlled technologies 
that are either conceived of or developed here in the United States, 
and that we just don't want to get in the hands of bad folks, and so we 
control those technologies for the purpose of export.
    That was a quick overview of the diversity of the DHS mission set 
to again emphasize why I might not have all the answers on how to stop 
illicit flows. I thought I'd give you a quick overview of what that 
actually looks like and the challenge before us all. But I can give a 
sense of what the emerging and dynamic environment in the trade world 
looks like from our perspective. And as we've worked with many of you, 
and as we make sense of some of the evolving trends and look to 
characterize some of the flows and develop policies to address it, 
understanding the as-is and understanding the changes that are on the 
horizon is incredibly important. So I'll do that, and then outline some 
of the ongoing strategies and activities, not purporting to have all 
the answers, but some of the work that is being done and, in my 
opinion, should be done to counter illicit trade.
    So on some of the evolving trends--I'm among an increasingly rare 
breed of folks that have been with the department since before it was 
the department--who came in with a new administration right before 9/
11, and so had the opportunity to see this department develop, see the 
legislation that created it be worked on, see how the department has 
seen the issue of cross-border flows develop and mature, and see some 
of the priorities that we've had, some of the priorities I know 
Congress has had, and some of the priorities that I know industry has 
had change over the years.
    I'll put two environments before you. First is the immediate post-
9/11 trade which I'll juxtapose with some of the changes that we're 
seeing now. From there I'll address how those changes are impacting the 
types of illicit goods, and how that's impacting our strategies to 
counter those flows.
    In the days right after 9/11, and probably even the years, the 
focus and the emphasis was very much on physical goods, stuff coming 
across the border, largely coming across in containers. You had a big 
maritime volume there, so lots of goods coming on big ships, either in 
bulk or in these big containers, from known retailers--the big 
importers, the big exporters, working through some of the big carriers. 
You had a focus then--I'm not saying other issues weren't important--
but I recall many of the hearings, many of the meetings, many of the 
work with international partners tended to focus on this big bomb-in-
the-box security concern. WMD, money, drugs, weapons, with a big import 
focus on security. The tools that DHS and other governments brought to 
bear at that time were based on the mantra of we have a risk-based, 
layered approach. We worked with foreign governments to push the 
borders out as far as possible and get as much information about 
entities and things as early in the process as we could to advance 
data. We used technology. And at that time, we were thinking about 
technology as scanners at the border to run goods through. And we 
always worked wanting to develop global standards.
    In today's environment, I see many of those same types of concepts, 
but they need to be tweaked, evolved, or even, perhaps, developed 
wholesale, out of whole cloth, to accommodate the new world that we're 
in. Instead of just physical goods crossing the border, we see lots of 
services, lots of intangibles, transactions that are occasioned by not 
only globalization, but this move toward digitalization. We no longer 
see those giant containers, but rather e-packets, these small little 
things that I know end up on my front doorstep, more often than they 
should, coming from Amazon or other intermediaries. They're small, 
little packages.
    We've got tens of thousands of new entrants to the marketplace, in 
addition to the big retailers, the big importers, the big exporters, 
you start to see more micro and medium and small business. And vendors 
or sellers that before had too many boundaries to participate in the 
global marketplace now find through digital capabilities an ability to 
do so. You therefore see a shift in some of the threats, at least from 
our perspective. And I'll put a big question mark over this whole area, 
because we're still making sense out of the threats in this space. But 
of course, intellectual property rights protection is a huge concern as 
we start to begin to believe that we're seeing, and are now working 
very hard to quantify, the growth of counterfeit goods and pirated 
goods.
    That triggers consumer safety concerns, not knowing what is 
immaterial or where it's coming from if it is counterfeited, as well as 
economic concerns--not only to the brand owners, but to the taxes lost 
by U.S. Government, as well as concerns over where that money is going 
and what illicit activities is it perhaps feeding. There are a huge 
amount of data privacy concerns in this new world. This new marketplace 
runs on information. And as we've seen recently with Facebook, 
consumers and vendors have traditionally been willing to provide 
information on how to derive value from that information, how to tax 
that information, whether to tax that information, how to protect that 
information, and how to understand the future benefit of that 
information as we see the advent of big data analytics, as we see 
robotics, big data, and perhaps see the capabilities of our adversaries 
to suck in that data and potentially use it in ways that we can't even 
conceive of right now.
    And then we also see the threats to the information and 
communication technology [ICT] that underpins this whole process 
itself, the component pieces that are being hooked into an increasingly 
globalized and interconnected information communication technology 
system that's the engine for this entire thing. What are its 
components? Who's producing them? What are their capabilities now and 
potentially in the future? These are things that are very much our 
concern here.
    Many of the areas that we're working on are really to address this 
paucity of data, understanding the problem in this space. What are the 
new trends? What are the new risks? Who are the new actors? There is 
lots of work. You mentioned I was one of the chairs of the OECD Illicit 
Trade Task Force. Let me introduce my co-chair, Chris Martin, and 
former chair, David Luna. So we've got a font of expertise, mostly on 
that end of the room.
    Mr. Massaro. And the OECD is right there.
    Ms. Brzozowski. And the OECD is here as well. Great. So sorry, 
didn't recognize you. [Laughter.] But organizations like this, like the 
World Customs Organization, are working to try to understand what these 
flows look like. We see assessments that are dated now, but that tell 
us that up to 2.5 percent of total world trade is in fake goods. We 
probably have newer numbers but I don't have them. And from that we see 
a lot of the innovative sectors being at high risk. And this is the 
bread and butter of the U.S. economy, is their innovation. When 6.5 
percent of the trade in high-tech goods is fake, that's a problem not 
only for the producers of those goods and for innovation in general. 
Further, knowing and trying to figure out where are those fake pieces 
going is another major problem. Into satellites? Into nuclear plants? 
Into the defense industrial base?
    We are also, through the OECD, starting to understand who are the 
players? Whose countries' rights are being infringed? What countries 
are doing it? Where are the hubs? And from there start to develop some 
very country-specific assessments. I point folks to the one that the 
OECD did of the U.K. that really tried to quantify some of the jobs 
lost, the impacts moneywise to the economy, as well as to specific 
companies of some of these flows. And it allows policymakers like 
myself to tease out areas where governance frameworks are most 
necessary. And we've been focusing on three areas: Understanding free 
trade zones and the impact that those zones and the policies and 
security features around those zones have on illicit trade. It's a 
little bit outside my wheelhouse, but our Department of Justice 
colleagues, and other legal folks around the world, look at the 
penalties and sanctions regimes that could be perceived as enabling 
this flow.And then finally I would like to focus on the term everyone's 
using these days, the tsunami of small packages or e-packages that are 
now hitting borders. We've got a significant amount of not only these 
small packages coming across the border, but just an alarming lack of 
global consensus around the basic things, like definitions, like 
advanced information requirements so folks can assess and target risk, 
around how companies should engage with governments. Where does 
liability lie for the movement of both goods and digital transactions? 
And then how do we collect revenue and who's responsible for it? So 
these are some of the big policy questions in the world on this issue.
    So unfortunately, I'll leave you probably with a few more questions 
than with actual answers to them. But to the question of how to stop 
illicit goods, I think the old frameworks or the traditional frameworks 
still apply, they just need to be perhaps revised and some gaps need to 
be filled. It's all about whole-of-government approaches. It's about 
partnership with foreign governments. It's about understanding and 
using data, both to understand the problem and then data to understand 
the movement and the actors involved. And it's about having the very 
best technology and resources from government and from the private 
sector to address the problem.
    Mr. Massaro. Thanks so much, Christa.
    And we'll go to Lisa.
    Ms. Dyer. Thank you very much. And thank you to the Helsinki 
Commission and its staff for the invitation to appear today to 
represent the State Department's views on this very important topic. As 
you mentioned, I am absolutely honored to represent the State 
Department's Office of Intellectual Property Enforcement here today. 
Our motto: We represent America's genius to the world.
    Why does the United States promote intellectual property 
protections in overseas markets? Quite simply: Intellectual property 
rights are an economic powerhouse. According to the Department of 
Commerce, 45 million U.S. jobs and $6.6 trillion of U.S. gross domestic 
products can be attributed to IP-intensive industries, as many of you 
in the room know. But small- and medium-sized enterprises, which 
represent almost 90 percent of all of the new businesses in the United 
States, also rely on IP protections to grow their business, to become 
stronger in our economy. These small- and medium-sized enterprises are 
also the highest percentage of new businesses in some of the emerging 
and developing countries around the world.
    On a more serious side, supply chains that knowingly or unknowingly 
are including substandard counterfeit goods represent a real danger to 
all of us, as many of my colleagues have already mentioned. And that 
includes our soldiers, sailors, airmen and Marines. The dangers to the 
defense side is also equally as important. Pirated products transmit 
spyware, ransomware, and all manner of computer viruses, undermining 
the privacy and freedom of our electronic communications. At the 
Department of State, we have a special role to play on behalf of 
America's taxpayers. And I thank you for the opportunity to outline 
what we are doing to better combat violations of intellectual property 
protections and outline our suggestions to strengthen the U.S. 
Government's efforts in this area.
    Our embassies are essential platforms for promoting innovation and 
intellectual property protections in overseas markets, as well as 
defending U.S. rights holders and combating counterfeit and pirated 
goods. The State Department's 1,500 economic officers posted worldwide 
ensure that the United States remains the world's strongest and most 
dynamic economy and help to ensure that global supply chains work 
efficiently, effectively, and responsibly. Each of these economic 
officers is evaluated on their efforts to promote intellectual property 
protections for Americans. What a tremendous resource for the American 
taxpayers--1,500 people working around the world to promote 
intellectual property protections.
    Representing America's genius also means spreading the word. We 
show our foreign counterparts and public audiences that the United 
States economy is a strong example of the powerful gross domestic 
product building, economy expanding, job creating effects of strong 
intellectual property protections. We point out that if it works for 
us, it can work for them. But many audiences don't always see the 
connection between something as commonplace as a counterfeit purse or a 
pirated movie and the economic security of a nation.
    The December 2017 National Security Strategy draws a direct line 
between economic security and this administration's national security 
priorities. For all intents and purposes, the document states that 
economic security is national security. It further states that we need 
to reduce the illicit appropriation of U.S. public and private sector 
technology and technical knowledge by foreign competitors. For those 
who are interested, it's on page 22 of the strategy. In my office, and 
more widely in the Department, we took this charge seriously. We've 
embarked on a new strategy that takes advantage of the strengths of all 
agencies and stakeholders to fight this battle. After all, there are no 
so safe counterfeit or pirated goods.
    For those who don't know, our embassies are also staffed by 
representatives from a number of U.S. Government agencies who work with 
states' political, economic, and public affairs officers to promote 
intellectual property protections. Legal, law enforcement, and 
technical experts from the Department of Justice, the Department of 
Homeland Security, Health and Human Services, and the Patent and 
Trademark Office, among others, are key members of embassy working 
groups that are advancing intellectual property protections and 
fighting counterfeits and piracy.
    I will agree adamantly with my colleagues that in the United States 
we all know that no one Federal agency can effect positive changes in 
tough policy challenges. By leveraging the strengths of a number of 
Federal agencies, but also you all in the room and those on Facebook 
Live, the U.S. companies and trade associations and small businesses, 
as well as our academic partners, we can make changes that benefit U.S. 
businesses and taxpayers. The U.S. Government doesn't have all the 
answers, and we'd be kidding ourselves if we thought we did.
    Let me give you an example of how putting together the strengths of 
many agencies and stakeholders can effect positive change. Customs 
officials, as noted previously, are absolutely critical to stopping the 
flow of counterfeit goods into the United States and other countries. 
However, in many countries there are far too few customs officials that 
can adequately deal with this growing problem. We know this because our 
officers report these facts: What the word is about IP among citizens 
within their countries, where the government is putting their 
resources. And it's clear that many countries just do not have the 
right amount of customs officials to work closely with us.
    To raise attention toward the role of customs officials, custom's 
top political leaders need to understand the importance of intellectual 
property protections. They need to understand enforcement as a way to 
counter the negative effects of counterfeit and pirated goods on the 
economy and, more importantly, on the health and safety of their 
citizens. Countries need to prioritize and allocate funds to increase 
the numbers of customs officials and to adequately train them. In some 
cases, legislative changes are needed.
    Our ambassadors--political, economic, and public affairs officers--
serving in embassies know enough of these top political leaders who 
have the power to make these changes. Our officers also know to include 
intellectual property in the broader economic goals of their host 
countries. And they are doing just that. Technical experts, legal and 
law enforcement experts, are also absolutely vital to this process. 
They can help write legislation, provide training to current and new 
customs officials, and work with the country's technical experts on a 
day-to-day basis to stop the flow of counterfeit and pirated goods.
    You all in the room and other industry groups have developed on a 
voluntary basis a variety of best practices to combat counterfeits and 
privacy. And I wanted to highlight just a couple of these valuable 
resources. The International Chamber of Commerce Business Action to 
Stop Counterfeiting and Piracy has released several publications for a 
variety of audiences, ranging from landlords to property owners to 
governments and enforcements agencies. Its goal is to protect each 
member's grants and investments from the illegal practices of 
counterfeiting and piracy. If you haven't had a chance to look at their 
publications, I recommend you do so.
    I'm also excited about the work of the Trustworthy Accountability 
Group and their Certified Against Piracy program. According to Mike 
Zaneis, the president and CEO of the Trustworthy Accountability Group, 
this voluntary initiative is designed to help advertisers and ad 
agencies avoid damage to their brands from ads placed on websites and 
other media properties that facilitate the distribution of pirated 
content and counterfeit goods.
    We work closely with a number of other organizations. I'm a huge 
fan of the National Intellectual Property Rights Coordination Center, 
which just turned 10 years old this year. They bring together U.S. and 
foreign law enforcement officials whose common goal is to combat IP 
theft, actively reduce the flow of counterfeit and pirated goods, and 
to train domestic and international law enforcement officials. If you 
haven't had a chance to get to know these folks, I highly recommend you 
do. If we can do anything to help make those introductions, please let 
one of us know.
    I will also acknowledge the OECD, the Organization for Economic 
Cooperation and Development. The works they've published on the flows 
of counterfeit and pirated goods are extremely valuable for, as Christa 
said, understanding just the staggering sums of money that are flowing 
across borders in the counterfeit space.
    I've spoken about the talented people we work with to combat IP 
violations and reduce the prevalence of counterfeit and pirated goods. 
Now I will tell you how we protect intellectual property and thereby 
further the goals of the National Security Strategy. This year my team 
looked to our colleagues at embassies from around the world to ask them 
how we could help, but also understand the best practices that they 
embarked upon to just actually do what we've been talking about here.
    Some of our indices have been active on these fronts in years, 
especially at some of the larger cities. They work closely with the top 
political leaders and their technical experts in those countries. But 
others have not. And we wanted to make sure that everybody had in their 
hand the right information and tools they could do to fight 
counterfeits and pirated goods. Based on the feedback we got from them, 
I'll touch on just three themes.
    The first suggestion is disarmingly simple: Make it interesting and 
relevant to the audience. Illegal copies of music, videos, shoes, and 
even software can get into the hands of students all too easily. And 
that can begin a potentially lifelong habit of purchasing substandard 
counterfeit products. We tailor our public outreach activities to these 
very impressionable audiences. Most recently, our embassy in Cambodia 
hosted a panel trumpeting how IP enables musicians to make a living. 
They showcased the talents of a Cambodian pop star. The message was 
simple: If people don't pay for music, the musicians you love can't 
make a living. The event was streamed on Facebook Live and as of today 
has garnered over 41,000 views.
    Another recommendation: That the Federal Government become fluent 
in emerging technologies, such as artificial intelligence, blockchain, 
quantum computing--any technologies that have the possibility to combat 
violations of IP protections and reduce the prevalence of counterfeit 
and pirated goods. Frankly, some of these technologies will not pan out 
or they won't live up to their hype. I have to say, though, if we do 
not have sufficient understanding of these technologies to have an 
informed discussion among ourselves with those of you in industry or 
with academia about them, how can we convince a foreign government that 
nurturing and adopting promising technologies that can help them in 
this space is beneficial for their economy and to help protect its 
citizens from harmful effects and counterfeit goods?
    One foreign government official has already approached us asking: 
What do you think about artificial intelligence? What if this 
artificial intelligence creates some really important intellectual 
property? Who owns those properties? It's a great question. And an 
effort to answer these types of questions, or at least engage in 
conversations with them, continues providing our embassies with 
information to strike at the nexus of these leading-edge technologies 
and intellectual property rights. And we're doing so in plain language, 
because remember our audience. We are prepared to engage with foreign 
interlocutors on this front.
    Most of the things that I talked about here are repeating what Russ 
and Christa talked about. It's about sharing information. We can 
outsmart the interconnected unofficial networks that facilitate and 
circulate illicit products by sharing information. We aren't perfect, 
as Russ noted. And can you imagine other countries, where the idea of 
talking to other ministries or other law enforcement or legal officials 
is an entirely strange concept to them. It's not easy, as we've seen in 
our own government, but we are continuing to work with our embassies to 
make sure that they understand the best practices that have worked 
elsewhere and trying to help them engage with those host governments, 
industry, and trade groups.
    We share information for action to protect the health and safety of 
all citizens from the prevalence of counterfeit and pirated goods, and 
to improve the economies of countries around the world. On that note, 
this roundtable is an absolutely fantastic opportunity to establish 
this teamwork between government and business, and to build new 
understandings and partnerships. It's through these partnerships that I 
think we'll find the new tools that we can use to fight this difficult 
problem, to shut down illicit markets, put criminal entrepreneurs out 
of business, and help create a safer, more prosperous future for our 
citizens.
    Thank you, again, for the opportunity to describe the outstanding 
work of our embassies, the Department of State, the private sector, and 
the technical experts from around the world in strengthening IP 
protections, thereby reducing the prevalence of counterfeit and pirated 
goods. I look forward to a productive discussion. And I, again, thank 
you.
    Mr. Massaro. Thank you so much, Lisa.
    And we have our anchor here, Aaron, here from the FBI. Thanks so 
much.
    Mr. Seres. Thank you, Paul. I appreciate it. And I realize it's 
between me and your questions, so I'll try to be brief. And I'll be 
probably echoing many of the sentiments of my colleagues that are here 
today.
    Ladies and gentlemen, I thank you for the opportunity to speak with 
you here today about this important topic. My name is Aaron Seres, 
assistant section chief for financial crimes at the FBI. An expertise 
of mine is in financial crimes. So, for this past year I've been 
enlightened about the intellectual property crimes rights issues that 
are facing us in this country. It'll be my pleasure here to discuss 
illicit trade, specifically intellectual property rights crimes. They 
have a profound effect on businesses and consumers alike.
    The investigation of intellectual property crimes traces back to 
the beginning of the FBI in 1908, where our initial agents focused 
primarily on white-collar crime, one of those crimes being copyright 
violations. Copyright and patent clause of the Constitution has 
provided protection of intellectual property since the foundation of 
our country, recognizing the importance of such rights to encourage 
innovation and protect economic value for the United States. Our 
country showed great foresight in protecting these assets. However, I'm 
sure few could have imagined the growth of the intellectual property 
and the related crime problem facing us today in this interconnected 
global marketplace we all operate in.
    It is currently estimated that intellectual property rights crimes 
generate approximately 461 billion dollars per year, a tremendous 
amount of illicit revenue for criminals, transnational and the like, to 
launder around the world in support of their criminal activities. Here 
in the FBI, we are a very broad agency. Just in the financial crimes 
section alone I have experts and specialists that assist us in money 
laundering and health care fraud to help us to support our intellectual 
property rights efforts. In addition to our specialists in intellectual 
property--many of them patent lawyers themselves in a prior life--we 
have experts in organized crime and our cyber division folks with 
technical expertise to help us with these upcoming technologies, such 
as virtual currency and the new platforms we see through the dark web.
    You saw recently in the past year, the FBI and other partner 
agencies and international agencies have taken out some of these dark 
web marketplaces, which have been open forums for some illicit products 
and trade. But as our experts in the FBI and IPR have explained to me, 
that is not always the case with the products that we're talking about 
here today for you all. For you all, the products are so good and so 
well counterfeited they don't need the dark web often. They can trade 
over an open platform in the clear web, giving more credibility to the 
products that they're selling to consumers.
    With the growth of the internet and ecommerce platforms, the 
opportunities for criminals to bring illicit goods to the market has 
grown exponentially. Criminals who once had to find ways to bring large 
quantities of fake goods into the United States now can direct ship to 
an unsuspecting consumer's home. This has lowered the barriers and 
costs for criminals who engage in intellectual property rights crimes, 
making these profitable schemes lucrative opportunities for 
transnational criminals.
    Intellectual property rights crimes today are not only large in 
regards to the volume of illicit goods, but as our partners here have 
also mentioned, the potential harmful effects for our consumers, here 
in the United States and abroad. Counterfeits no longer just imitate 
popular clothing lines or the like. They now include items such as 
counterfeit pharmaceuticals, children's toys, and makeup with harmful 
toxins, fake airbags--all of which can lead to serious harm or even 
death to those consumers of such products.
    The intellectual property rights program in the FBI prioritizes the 
investigation of theft of trade secrets, counterfeit products, and 
copyright and trademark infringement investigations, placing an 
emphasis on those matters that pose a threat to public safety and the 
health of our consumers and cases involving significant economic 
impact. However, we are not alone in this fight. These crimes are best 
addressed collaboratively with government agencies working together in 
a partnership with industry and foreign partners who bring all of our 
expertise and ideas to fight this crime problem.
    I'm proud the FBI has such great partners as all of you here today, 
and many others who would partner with you. The FBI, along with our 
other founding partner, the Department of Homeland Security, and other 
partners in the National Intellectual Property Coordination Center, the 
IPR Center, which was mentioned by Lisa Dyer here just recently. The 23 
agency IPR-focused fusion center that promotes national security 
through safeguarding of the public's health and safety, U.S. economy, 
and our military from predatory and unfair trading practices.
    Through this center, which celebrated its 10th year back in April, 
government agencies are working together with our foreign partners, 
through Europol and others, to address IPR crimes. Although law 
enforcement efforts can have a significant educational and deterrent 
impact on the crime problem, we are greatly aided through the 
expertise, criminal referrals, and support of our industry partners. 
The FBI, with our IPR Center partners, participate in several national 
multiagency initiatives aimed at providing a comprehensive response to 
several high-priority counterfeiting problems.
    One such initiative was Operation Ingenuity, formed to address 
counterfeit aerospace and automotive parts that pose a threat to human 
health and safety, such as airbags, brake pads, and the like. Through 
this initiative, law enforcement, working closely with a consortium of 
private companies from the automotive industry and e-commerce brought 
forth effective change, decreasing the supply of counterfeit airbags 
available to be purchased by consumers in online marketplaces. So the 
threat to the public has been significantly decreased as these 
potentially explosive devices are removed from our marketplaces.
    Transnational criminals have expanded their counterfeit activities 
into all categories of merchandise with the primary purpose of 
generating criminal proceeds, with no regard for public health and 
safety. These criminal actors capitalized on the current ecommerce 
platforms available to sell counterfeit goods direct to U.S. consumers, 
capitalizing on copyright matters through illicit streaming services, 
and are targeting proprietary information to seek ransom payments for 
its return or to prevent release.
    So how do we address these criminal organizations and individuals 
that manufacture and traffic counterfeit and pirated goods or other 
intellectual property? Similar to my colleagues here today, we will not 
have all the answers, but I think this is a great start. And I have 
some ideas from the FBI's perspective as to what we can do for good 
enforcement in IP. As law enforcement, we make good cases that will 
convict subjects, we have the handcuffs and we put the folks in jail. 
This is a significant deterrent for intellectual property rights 
criminals. Providing law enforcement deterrent to the crime problem is 
one solution, but we cannot arrest our way to a solution to the IPR 
crime problem. As mentioned and illustrated here today, it's going to 
take a village for us to address this issue.
    One way we attack this problem is by addressing the supply and the 
demand for counterfeit goods. On the supply side, through interagency 
and public-private collaboration we have seen effective results in 
addressing counterfeits. The success in the automotive industry already 
mentioned, we have other similar initiatives to address counterfeit 
pharmaceuticals and to protect our U.S. Government supply chain. The 
goal on the supply side is to do what we can to create enough barriers 
to entry into the marketplace where criminals are deterred from 
trafficking in counterfeit goods. We will not stop all the flow of 
counterfeit goods into our marketplaces, but we can make it much harder 
for the criminals to make an entryway.
    The FBI in this regard spends a good amount of time collaborating 
with the private sector through the IPR sector and various conferences, 
seminars, and events throughout the United States and the world. Here, 
the latest trends and best practices work to educate one another and 
find solutions to identify, disrupt, and dismantle counterfeit 
operations. Sharing best practices with companies can be one of our 
best tools to prevent proprietary information theft. As with all 
financial crimes, I always say the best victim is no victim at all. 
Right? I'd love to be there in all situations. And the more we can get 
toward that goal the better.
    Our companies are on the front lines facing criminals--you all are 
seeing this from a front row perspective--seeking to steal their 
information. And there are efforts that have been taken in regards to 
compartmentalizing your production, your manufacturing, your sales, 
ensuring your human resources are putting in strong noncompete 
nondisclosures, exit interviews are being completed of individuals, and 
there's a robust structure to monitor and track activity of folks 
within your private entity. Much as the case with the FBI, the biggest 
threat often to the loss of information in our IP is an inside threat 
from folks who work in our companies or have worked in our 
organizations. We must be diligent in protecting from this threat.
    It's also critical for law enforcement and the private sector to 
build relationships, so that in the even if there is an incident or 
response there can be a response as quickly as possible. Similar to a 
kidnapping event, we see the theft of intellectual property from a 
company in a similar situation in terms of the need for speed to try to 
get back the intellectual property that was taken from you. The faster 
that law enforcement is made aware of an issue, the more effective we 
can be in assisting a private sector company.
    On the demand side, public awareness campaigns are very important 
to educate consumers on the risk of fake products. I will be the first 
to admit that I did not have breadth of the mass amounts of counterfeit 
products that are out there prior to my current role here in 
Washington, DC. And it is immense. We live in a digital society where 
consumers--including myself, including people in our families and 
families around the world--our consumers are used to searching the web 
for the best price for the item they want to buy. They just want to 
find the best opportunity at the lowest cost, and then it's shipped 
direct to their door.
    However, there may be a reason that price is so good, and it's not 
for the benefit of the customer. The more we can educate consumers, the 
better. For some products the message is safety, as we discussed in 
regards to the airbags on our auto parts, toxic toys, and the like. But 
in other areas, like fraudulent, illicit streaming, we must educate the 
public on the risks of the illegal streaming boxes and their services. 
These devices can be a gateway for criminals not only to make money off 
of individuals, but potentially allow them access to your network and 
your personal information that can lead to further victimization.
    I believe it's messaging through ways like this where we can reach 
these consumers with a message that is important for them. We would not 
just leave our front doors open for all to enter, and that may be 
exactly what's happening with some of these products. In addition to 
addressing supply and demand, criminals cannot get their fake goods to 
market without private sector intermediaries, such as online 
marketplaces, payment processors, different companies. The FBI has 
worked with these industries on education and these entities have their 
own form of monitoring, looking for indicators of IPR crime, and are 
making referrals to law enforcement.
    Criminals are often, though, the early adopters of new and a 
disruptive technology and will seek to exploit vulnerabilities when 
they can. The sharing of information amongst y'all in industry, amongst 
law enforcement, and amongst foreign and U.S. partners is vital for us 
to connect the dots--not just identify a bad vendor, but the network 
behind it is critical as we work together to disrupt and disband these 
operations, protect IP, and keep consumers safe. We go around the world 
not only training and providing outreach with private sector folks and 
individuals, but also with our foreign partners.
    Just recently, we've had a request to go to Europe--over to Eastern 
Europe, to the Middle East, and other locations around the world to 
provide training on organized crime, corruption, and intellectual 
property rights enforcement. Sometimes those are basic, building the 
foundation for these other agencies, other law enforcement to assist us 
in these efforts. Sometimes it's more advanced. But I think these 
efforts are going to work over time, and we're trying to see some 
fruits of our action. In addition, the FBI has deployed around the 
world 63 legal attache offices and works very closely with our partners 
in Homeland Security, Department of State and others, on continuous 
education and law enforcement efforts around the world.
    One issue that I would like to finally note here is the 
pervasiveness of the intersection between transnational organized crime 
and the counterfeiting. What we're seeing is not just the trafficking 
of the counterfeit goods into the United States for the purposes of 
profiting these organizations. It's also a tool and a vehicle for 
agencies and entities, such as the Mexican mafia and Los Zetas and 
others, drug trafficking organizations south of the border, that are 
not only trafficking counterfeit goods or profits--such as DVDs and 
other Motion Picture Association issues--but also to use those as a 
vehicle for trade-based money laundering to move funds across the 
border through the United States and other countries.
    The FBI is committed to addressing this issue, not only going after 
the counterfeiting but also trying to address specifically these 
professional money laundering facilitators that are out there to 
provide the facilitation of illicit proceeds, regardless of source, 
around the world for a fee. And we are seeking to hold the individual 
companies that are out to steal your IP rights accountable for their 
action. As given in a recent example up in Milwaukee of a wind turbine 
investigation related to the company by the name of Sinovel, who 
acquired wind turbine technology from a U.S. company, resulting in 
hundreds of jobs lost, hundreds of millions of dollars in lost funds to 
that U.S. entity. There was a very successful investigation. It 
resulted in a conviction of a foreign company, who sought to shortcut 
their efforts by stealing the properties of a U.S. company, and sought 
to advance their efforts and cut out the U.S. partner.
    These are just a couple examples of what we're seeing across the 
globe. I believe that what we're all echoing here today is that 
partnership amongst the folks in this room, amongst the folks in the 
world are the most important efforts we can make in addressing this 
problem. I appreciate the time to discuss this important topic and I 
look forward to our discussions here today.
    Thank you.
    Mr. Massaro. Thanks so much, Aaron. Do you mind if I take a 
microphone now?
    Mr. Seres. Yes, sir. Here you go.
    Mr. Massaro. [Laughter.] Thank you. All right, so for the 
discussion section, here's how we're going to proceed. If you could 
place your nameplate like this if you'd like to speak. We're going to 
go left to right around, Okay? If you have a question or if you have a 
comment, if you can just please keep it to about 5 minutes. We'll just 
keep going around left to right, in that order, until we've exhausted 
everybody's time and patience and/or we've hit 4:00 p.m., all right? 
Okay, great. And please also if you're asking a question, if you could 
let us know who you're asking it to--one, two, three of the panelists, 
whatever--that'd be very helpful.
    Okay, so we're going to start right there. Clay, if you could just 
state your name and organization.
    Mr. Fuller. Thank you. Clay Fuller with the American Enterprise 
Institute. I'm a Jeane Kirkpatrick Fellow in foreign and defense policy 
studies. I specialize in authoritarian political institutions.
    I'd just like to start off quickly by saying to all our panelists, 
and to Paul, and to everybody at the table, thank you for everything 
that you do that makes America the greatest, most prosperous, and most 
powerful country on the planet in the history of Earth. I mean, I think 
that's awesome. And I think we need to make sure we don't lose sight of 
how great everybody is at what we are actually doing. That's not to say 
that there's not problems. There are lots of them. But America is also 
the best at always solving them, so we'll get to work.
    Forgive me if I put on my professor's cap for a second. It'll only 
be a second before I have some questions and policy stuff. But in 
thinking of this in the connection with kleptocracies in particular, I 
don't know that there's such thing as an authoritarian regime out there 
that's not a kleptocracy. They are all kleptocracies in my view. But, 
again, you could debate forever over what's what. Is democracy in 
decline? All this stuff.
    So I'll go with illicit trade, illicit finance are both forms of 
corruption, right? But if you ask, what is corruption, right, every 
single person that you ask is going to give you a very different 
answer. Corruption is typically perceived through the eye of the 
beholder, through the eye of the victim typically. This is why we have 
such a diverse crowd from very diverse sectors all around the table, 
which we could have representatives of every agency of government that 
deal with aspects of this, because it's a very, very--in social 
sciences, we call it fuzzy. A fuzzy concept.
    So if we all agree, though, we want to fight illicit trade, we want 
to fight illicit finance, we want to combat corruption, it's useful, I 
think, to think about what the opposite of corruption would be? Which 
is something I don't think we do very much, and it's important to do. I 
hope whatever the opposite of it is, is what we are fighting for. We 
have to have something that we're fighting for, right, if we're going 
to successfully get rid or something or weed it out.
    Most people fall back on the rule of law definition, right? But 
this is an equally fuzzy concept, right? Whose laws? What rules? Where? 
The questions could go on forever. So to make it simple, start with 
Transparency International. Their most basic definition of corruption 
is the abuse of entrusted power for private gain, right? Reverse that, 
and you get a definition: the use of earned power for public gain, 
right? So the use of earned power for public gain. If you think about 
it, earned power--it could be considered to be somewhat synonymous with 
private enterprise, right, especially as it relates to trade and 
finance, right? But it could also be reputational power, such as in the 
media or in nongovernmental organizations, right?
    And then if you think of a term for the use of earned power for 
public gain, public gain can be considered synonymous with the benefits 
of living in a democracy, which we all enjoy--the prosperity, the 
freedom, the stability and the strength of living in democratic 
countries. With this, we can start, I think, thinking clearly about 
policy objectives and ways to structure our conversations around this. 
I'd call it a guiding principle. So if you want--if you take that 
reverse definition of corruption and you want to fight illicit trade, 
then that means it can be fought by increasing more opportunities for 
rules-based trade. We fight illicit trade with more rules-based trade.
    Specifically, this means expanding our own foreign trade zone 
program, modernizing, growing it even more, publicizing it more, 
bringing more of the private sector into them to increase our exports, 
to increase our imports, and to grow our trade program will minimize 
the size of the illicit sector. It will actually provide opportunities 
for illicit actors to join the actual licit market. Internationally, 
through the State Department we could move to improve compliance 
standardization around the world through the OECD recommendations that 
are out there right now. There are special economic zones all around 
the world that grew Dubai from a bunch of mud huts into the beautiful 
spectacle that it is today, right? Grew Tianjin into the beautiful 
skyline that it is today, right? But they need some rule of law. There 
needs to be some help there to get in compliance standardization around 
the world so that we can all respect our own--the privacy rights.
    Specifically thinking of illicit finance, there are things we could 
do at home such as beneficial ownership registries I think are a very 
pragmatic start that Congress could do that would give the executive 
agencies a tool not only to enforce the law but will also lighten the 
load on compliance departments of our banks, and would actually lighten 
the load on the compliance departments of small banks, which would 
actually allow small financial institutions to actually compete better 
in the game. So you combat illicit finance by creating opportunities 
for more licit finance.
    In my expertise, it might be helpful to reevaluate the way 
sanctions work as well too, because there's actually a conundrum when 
you enforce sanctions--which I'm not against sanctions, I like 
sanctions--but when you enforce them, it actually creates illicit 
trade. It creates--North Korea has to go around them. And this creates 
networks. This creates illicit trade highways that criminals and 
terrorist organizations can jump on and use as well. And so we can 
recognize that in sanctions legislation and actually design ways to get 
into countries that are being sanctioned and help them facilitate 
better rules-based trade.
    So I'm curious if you have thoughts on where that fits into your 
specific agencies.
    Mr. Massaro. Any particular person, or the whole panel?
    Mr. Fuller. The whole panel.
    Mr. Massaro. Thanks, Clay. Let's just go left to right here, Lisa 
to Aaron.
    Ms. Dyer. There's a lot there. [Laughter.]
    Mr. Massaro. Clay always gives us a lot to unpack. [Laughter.]
    Mr. Fuller. Sorry.
    Ms. Dyer. I think I'm going to defer my response to Christa, 
because I think some of her--[laughter]--I think some of her remarks 
actually touched on a few of the items that we talked about with free 
trade zones, and her remarks about sanctions. So I will defer my time 
to her.
    Mr. Travers. And I'm afraid it's not really a terrorism or 
intelligence question. So I'll pass it along.
    Mr. Massaro. [Laughter.] Christa's very on the spot.
    Ms. Brzozowski. Man, thank you. No, very interesting comments. I 
was particularly taken with your thought that you have to figure out 
the opposite of what it is that you're coming to oppose, therefore 
bringing something to the table. Actually wrote that down. It's going 
to inform some problems that we're having with international 
organizations as well, and that you can't just say no as we're trying 
to tell you something. We actually have to have something to hold up as 
the best practice or as the standard.
    On illicit finance, that area is not really my area of expertise. 
But I think some of your comments about the kleptocracy and the 
figuring out what these finances are actually funding and how they are 
funding it is--it's an interesting framework. I don't think we've 
written a lot on this. Some of those recommendations might be helpful 
to digest a bit more in a written form.
    FULLER: There's a report coming out soon I'll be happy to share 
with everyone. [Laughter.]
    Ms. Brzozowski. Yes, perfect. I'd invite you to also take a look at 
a report either coming out or just recently came out from the OECD, 
where they are looking at what happens in those foreign trade zones/
free trade zones. And a lot of the illicit finance, a lot of the 
figuring out who's who and what corruption is and how it's defined are 
issues that were discussed. This report doesn't necessarily purport to 
have all the answers, but it does provide guidelines. And so, but if 
it's not final yet, it's in the state of being released for public 
comment and input. I'd invite you to take a look at that as well and 
maybe some of the intersections and the ideas--[inaudible].
    Mr. Massaro. Aaron, you do finance, right?
    Mr. Seres. I do. Yes. [Laughter.] That's right up my alley.
    Ms. Brzozowski. Should have started at this end. [Laughter.]
    Mr. Massaro. That's true enough.
    Mr. Seres. Right to left. On the issues of legislative affairs, I 
would defer to our partners at the Department of Justice. But I would 
make a comment from a law enforcement perspective, we are seeing a lot 
of increasing professional facilitation of money laundering and 
individuals who are, in the business of moving money around the world 
for a fee. It used to just be a guy who was connected maybe an 
organized crime family or some other group with criminality. And now 
it's very professionalized. In that regard, any tools that we would 
have at our discretion to allow us to do our job better in that space 
are always welcome. One challenge for us nominally is trying to trace 
through the funds, through a multitude of shell entities and other 
structures where the money moves from place to place. So just in 
regards to your beneficial ownership comment, any tool in that regard 
for law enforcement to utilize is a helpful tool.
    Mr. Massaro. Thank you very much, Aaron. Let's move to the next 
speaker, right over there. Jerry.
    Mr. Cook. Thank you. Jerry Cook with Hanesbrands.
    Let me start with thank you for what you all do and your teams do, 
because we need a very strong U.S. Government. And we need you all to 
employ the best people with the greatest acumen in what you do. And we 
need you to share that, use that, and help defend us along the way. And 
we share a lot of risk. And we share risks sometimes not with y'all, 
but with others. And one of the things in our company, we were one of 
the original CTBAC, Counterterrorism and Business Against Smuggling. 
But we do not share any risk data or any risk situations with a single 
foreign country. We will only share that directly with the U.S. 
Government and no other.
    And we have a policy not to allow the U.S. Government to share 
anything we share with them to a foreign government. And our experience 
has been no good deed goes unpunished by a foreign government. And that 
includes the kidnapping of our management team--not just senior but low 
level--and other things that happened to them in this process. So the 
first thing we run into is, our people are most important to us. It 
just seems too often we find ourselves in a situation where once we 
leave the U.S. shore the criminal element, terrorist element, whatever 
you want to call it, we have no government.
    I've dealt with nine kidnappings, and there is nobody that comes to 
your rescue. You're on your own. It doesn't matter if you're in Haiti, 
Colombia, if you're in Jordan, if you're in Brazil, or if you're in 
Mexico. There is no government that's there with you on that. And 
that's a big issue, because you talk about real threat and 
intimidation. It is a real threat and intimidation when one of your 
peers has been taken.
    The second item I'd like to point out is there is no universal 
definition of illicit trade. So if you picture going hunting, and 
someone says, look, we're going hunting and we're going to go out. What 
are you hunting with and what are you hunting? Are you hunting deer or 
rabbit? Are you hunting criminals? Are you hunting terrorists? So 
that's a very big issue for trying to narrow down what you're chasing.
    But the one thing that we've learned overall is that in the world 
that we live today it seems that the one caution that we would flag is 
that the U.S. Government has--like businesses--sometime we're 
overdriving our headlights. And we're doing that right now in the world 
of ecommerce. The ecommerce sphere, you compare--I'm moving a 
container, let's say 10,000 pair of underwear coming into the United 
States. Hopefully you're all wearing it, and if you are you're 
comfortable. [Laughter.] If you're not, we can fix that. [Laughter.]
    But one of the challenges you have is that you know everything 
about who my manufacturer is, where my manufacturer is located, you can 
see us. You can look on Google Earth and watch. You can see a lot of 
those things. You can see my containers move, see where I'm shipping 
to. But in the ecommerce world, you don't know any of that. You know 
there's 50,000 people in a container. It was said earlier, and it's 
true, a container catches the U.S. Government through enforcement when 
it's one person bringing it in. But if there's 50,000 different 
entities in it, the government doesn't care about the 50,000. It's too 
small to go after one person, but who do you go after?
    So those tend to become an accelerator. Why that's important? If 
they're in a free zone next door to us, doing bad behavior, you're 
bringing bad behavior into a free zone that I'm trying to defend, keep 
clean, and keep the other people out of. And so we operate in certain 
free zones around the world. We're large enough to keep other people 
out, not for competitive reasons, but for security reasons. We will 
only use a certain class of carriers off the seaboard and only certain 
airlines. And we won't use others.
    The third item is time. The way the government's working today with 
data, you're making us hurry up and wait. The TSA is a good example of 
that. So if I'm shipping something by air, or if I'm shipping by ocean, 
I've got to hurry a container to a point to have it sit there for 2 
days. It is open for anybody and their brother to grab that container. 
In the days that we used to, we could take a container, be the last one 
on board, drive it to my plant. We used two different security groups 
plus the government. It would go straight on. No one could touch that. 
So we have increased the danger for the shipper, we've increased risk 
for the U.S. Government, and we've increased risk for our own nation by 
having this pause process. If I give you data, you can see it moving by 
GPS, just pick--[inaudible]. We'd like to slide that data model over to 
y'all. Y'all picked it up and it's coming straight through because you 
can move and move faster.
    The other one is that when it gets down to it, when there's a 
failure there's only one person that loses in a failure--the company. 
We get fined. Somebody stows in a container, someone smuggles drugs in, 
the government fines us. No U.S. employee loses their job. No 
government employee gets fined. Only a company gets fined. Then we can 
advertise in the newspaper: Somebody found marijuana. So when you pull 
all that down, there's a hybrid inside the government today that's 
called Customs and Border Patrol. They've been through so many wars 
with companies like us. They have an incredible intuitive knowledge 
base. They've taught their people how to work tightly with industry. We 
share data. They share.
    But we have backed away from government sharing risk to us now. So 
we don't get a risk profile. You're sharing it with other governments, 
but you're not sharing it with us. And the compounded problem now is 
you're also sharing all of my shipment data. You publish it. 
[Inaudible]--gets it. It's enough that Jon Kent's here. It's enough we 
share all that with our broker. You make our brokers go through a lot 
of background checks for employees because they have intense data. And 
they have a lot of exposure if they have bad employees. And so we have 
good brokers.
    And when you share our cargo information, which you do, you release 
it and organizations like yours publish it, you will allow every drug 
cartel, every smuggler to mimic our cases, our quantities, from what 
location. And then the last piece that goes with it, we used to never 
tell anybody where we were shipping through. We'd ship from a foreign 
location. We'd tell the carrier to go to a certain port. But we would 
never tell you where it's being distributed to. Customs would know 
through a third-party paper to them.
    The trucker would never know which trucker is picking you up, 
because we use the roulette wheel, so that they could never--the cartel 
could never go to the trucking firm and go after them, because we knew 
if we kept that silent--the only reason they're going to try to use our 
supply chain is if they know they can get the drugs out. So the more we 
could control, not knowing where it's going to and who's going to get 
it, that now is a requirement. We have to tell you where it's going, 
who's getting it, who the driver is. And you've put all these people at 
risk in the process, maybe for good reason.
    But our request to you is, let's go back to the world of intimacy. 
We will give you everything you want, but don't make us tell everybody 
else and don't share it with everybody else. We trust you. We want you 
to trust us. But we don't trust the process today that's so public. And 
the other is, we really need the random factor to be in there. But we 
also need to respect the people that make the product around the world 
that are put in harm's way, whether it's criminal or terrorist, because 
they no longer pay people off to do something wrong. They hurt them. 
And they disappear. And that's our concern. We got 74,000 people around 
the world. We don't like it when they disappear. We don't like it when 
somebody doesn't come to work. We are very aware when you don't show up 
for work today, it's probably not because you're sick. It's probably 
because somebody has threatened you and you have chosen not to be 
disloyal to the company, so you just don't come to work. So we need 
your help. And we need to do this together. The process today I think 
is a little misdirected.
    Mr. Massaro. Would anyone on the panel like to respond? Maybe 
Christa, or--yes, Russ?
    Mr. Travers. I'll start. So after 9/11 I was one of the deputies at 
the NCTC. And I was given the charter of trying to figure out how we 
had improved information sharing. I didn't know anything about the 
subject at the time. I've now been in the government for the better 
part of 40 years. So I'm pretty convinced that information sharing is 
more complicated than any intelligence discipline I've ever been 
involved in. Your points are fascinating, and I would frankly love to 
follow up. The NCTC doesn't deal a ton with the private sector. I think 
we have gone miles in terms of fixing department-to-department 
information sharing. But we're not as good at the Federal to non-
Federal. And while we try to push out more information to the private 
sector, that tends to be a little bit more DHS and FBI than statutorily 
my remit.
    But I could certainly bring together the relevant executive branch 
organizations to sit down and talk about pairing with the private 
sector, what you give us, what we give you. The international thing is 
a huge challenge. There's no question that when it comes to terrorism 
our country can't do it alone. And so we are absolutely having to deal 
with lots and lots of other counterterrorism-focused countries around 
the globe. We try to do it smartly. So we share a lot more with our 
very close allies and we share a lot less with those that we may have 
interests that overlap. But I take your point. I don't know the private 
sector in particular, but it really plays into that. So I will get your 
card and exchange notes.
    Ms. Brzozowski. Yes. I mean, yes, very compelling points, Jerry. 
Being responsible for 74,000 people across a global footprint sounds 
like an extraordinary challenge. And when you're dealing with people's 
lives, it's going into a whole new terrain.
    I guess from the DHS or customs perspective in how we see the 
world, I'll take on your point regarding this very sensitive shipping 
data and some of the vulnerabilities that it produces for your folks 
and also for your product. Perhaps it's helpful to look at some of the 
issues in the regulatory data. So what's required per regulation, which 
has gone through a formalized public comment review process where we 
take into consideration a lot of the points that you're making, and the 
voluntary data, which is also positive and can be the germ of later, 
smarter, more informed regulations. I think the CTBAC might have even 
started out as a voluntary partnership before being regulated. And you 
see other types of programs that DHS has for getting advanced 
information, programs which start off as a voluntary exchange of data 
to figure out what makes sense, who has what when, who can share it 
through what means.
    And so grouping those two things--regulatory and voluntary--when 
you're talking the regulatory data, in terms of the shipping data, 
there--it is an interesting conversation that I'd love to continue as 
well. You've got--on one hand, you do hear industry wanting some 
sharing of that customs data between administrations through formalized 
processes and mutual information-sharing agreements so that there's 
some consistency as you're trying to get stuff across borders, and that 
some of the countries that could benefit from the information that 
we're seeing--there's benefits to business of that sharing as well.
    So unpacking that--where there's benefits and then when does it 
really start to become dangerous, I think, is a very interesting 
question. We see really tangible benefits in sharing among allies, be 
it the Border Five or Five Eyes or all these different acronyms, to 
compare notes--where new threats are coming, where new actors are, and 
expanding each of our regulatory reaches. Kind of dividing that--
finding that line of when it slips over to too much, I think, is a big, 
big concern.
    And then I'll just touch quickly on the provision of this voluntary 
data, because I do think that's something that we're wrestling with 
right now as a matter of fact. Customs and Customs and Border 
Protection, as you said, and DHS, have a really solid, decades-long 
relationship with industry and there is a trust that I hope we've 
developed over those years. That's not to say that we should always be 
requiring or asking for voluntary data. Voluntary could very easily 
slip into de facto required. I think we appreciate that. So we 
ourselves need to be disciplined. And then we also need to be 
disciplined when we're establishing global standards and talking about 
provision of voluntary data, And the default of exchanging everything 
and opening the kimono to everyone may be something that's attractive 
to some when you're talking about the United States having that 
relationship with businesses, when we're talking about adversaries 
having that relationship with U.S. businesses, requests data from U.S. 
companies to get access to other markets, it's not a voluntary request 
anymore. So maybe just some thoughts there.
    But I think from the shipping-data angle, I'd push back just a hair 
and say there is a real and demonstrated value to governments sharing 
that information, but we've got to make sure we've got that calibrated 
correctly so it's not leaking out to places where it shouldn't.
    Mr. Massaro. Great. Thanks so much.
    Let's have the next speaker here. Chris, please.
    Mr. Martin. Thank you, Chair. I'm going to make an observation and 
then ask what I think is a rhetorical question.
    Mr. Massaro. Please, real quick, get your full name and 
organization. [Laughs.]
    Mr. Martin. All right. Yes, I do beg your pardon. Sorry. I'm Chris 
Martin. I represent the U.K. customs and tax administration here in 
Washington, but I'm also speaking on behalf of the OECD Countering 
Illicit Trade Task Force.
    So I'll make an observation, I'll ask what I hope is a rhetorical 
question. I think to the point made by Mr. Cook about how there is no 
definition of illicit trade, I think I'd just like to say that it's 
been an asset to the OECD Countering Illicit Trade Task Force that we 
didn't tie ourselves down too firmly to a definition. By keeping it 
broad--by keeping the task force focused on all aspects of illicit 
trade from counter-narcotics, people smuggling, alcohol, tobacco, 
pharmaceuticals, wildlife products--keeping it broad meant that we 
attract the broadest range of stakeholders to the task force--law 
enforcement, NGOs, industry, academia. I think that's to our advantage.
    The question of free-trade zones, I'll say there's no smoke without 
fire. Back in 2008, the Financial Action Task Force on Money Laundering 
recognized the vulnerabilities in free-trade zones, and prior to that 
the World Customs Organization. And there have been some excellent 
reports since that time: World Customs Organization; Europol; Interpol; 
the Business Action to Stop Counterfeiting and Piracy [BASCAP]; and 
very recently, of course, the TRACIT report, the Global Illicit Trade 
Environment Index, which includes five free-trade zone case studies, 
which are excellent. Of course, free-trade zones, offer a preferential 
environment for businesses to thrive, to attract investment and 
innovation. But those same benign circumstances and environments--lack 
of taxes, duties, bureaucracy, and oversight--have allowed illicit 
actors to thrive in those zones.
    And as a consequence of that, and building on all of the work that 
others have done in the past, the task force has had a sharp focus on 
the lack of transparency in free-trade zones and what we might do about 
that. Working with the European IPO, we've developed a code of conduct, 
voluntary guidance for governments and free-trade zone operators. That 
guidance will be released to public consultation in the very near 
future.
    So my question to the panel, and to everybody else here actually, 
is: When that public consultation is launched, I would ask you to 
please take part of that. The more evidence and the more responses we 
can get to that, the greater weight we have in implementing something 
which is absolutely necessary to improve transparency and governance in 
free-trade zones across the world.
    Mr. Massaro. Thank you.
    Yes, you want to have everybody respond to that, Chris?
    Mr. Martin. Maybe [just a little ?].
    Mr. Massaro. Okay, just to nod your head yes, everyone. Okay, got 
it. [Laughter.] Perfect.
    Okay. David?
    Mr. Luna. Thank you very much, Paul. My name is David Luna. I'm the 
president and CEO of Luna Global Networks, a former U.S. Government 
employee for the last 20 years working for the executive branch, 
started my career here in the U.S. Senate.
    Let me first start by applauding Senator Wicker and his co-chair, 
Congressman Smith, for their leadership in encouraging his staff in 
organizing this very important illicit trade roundtable. The U.S. 
Helsinki Commission is a very unique mechanism that, as you said, Paul, 
is bicameral as well. And it's great to see the executive branch here, 
and I applaud the administration and my former colleagues for being 
here on this important roundtable.
    I do also recognize and applaud the support of the private sector 
and civil society organizations for being here. It's not only the whole 
of government, but really it's the whole of society that I think is 
important to tackle the illicit trade.
    As we have learned from the important research of the OECD, we're 
finding more and more about the breadth and scale of today's illicit 
market. It's really in the trillions of dollars, as we heard at the 
opening, and it's getting worse. Whether it's in counterfeits--I know 
from the IDSA [ph] and the ICC BASCAP project that the value of the 
counterfeiting and pirated goods will double in 5 years. And I think if 
we look at the issue of cybercrime, it will go from $1.5 trillion to $3 
trillion in 5 years as well.
    So I think it is a very important time to be discussing these 
issues with the administration. And, I think the question that I had is 
in February 2017, President Trump issued a very important executive 
order to combat transnational organized crime. And we've heard a little 
bit from NCTC on the overarching National Security Strategy. We also 
heard from DHS.
    The specific question that I had: Is there any effort within the 
administration to do a deeper dive in developing an anti-illicit-trade 
strategy to help not only work with the private sector, but with other 
partners overseas to combat these threats? We heard on how free-trade 
zones are becoming more and more important as a conduit to various 
illicit criminal activities.
    And related to that, I think the resource issue is becoming 
important. I know that the OECD has also undertaken an exercise of case 
studies for intellectual property. And I think it would be great if the 
United States were to follow on those case studies and join other 
partners, helping partners like Panama in their capacities in the Colon 
Free Trade Zone so that they can fight corruption and the various 
illicit activities that are going on in Panama.
    And finally, I think public-private partnerships are very 
important, and I would hope if there were to be any strategy that we 
could leverage and harness the expertise and resources of the public--
or the private sector as well. Thank you.
    Mr. Massaro. Fantastic.
    David, anyone in particular you want to hear from first there?
    Mr. Luna. Well, I mean, there's four and they represent the 
administration. So, as a followup to the executive order, whether 
there's any effort to do a specific strategy to combat the illicit 
trade----
    Mr. Massaro. We'll start from the left. Lisa, you got anything to 
say on that?
    Ms. Dyer. I will defer to Russ. I mean, his----
    Mr. Massaro. Great.
    Ms. Dyer. His organization has a very strong lead in that area--
[inaudible]--activity.
    Mr. Travers. I would just say, David, as I think, when the last 
strategy was done on transnational organized crime, it explicitly noted 
that our efforts against that problem suffered after 9/11, that we--
from my optic for the intelligence community, we cut back on both 
analysis and production related to transnational crime to move 
resources to terrorism.
    I do think it's fair to say that, as you've seen in the National 
Defense Strategy, that terrorism is no longer viewed as the Number 1 
priority for the country. I completely agree with that assessment.
    When it comes to transnational crime, within the intelligence 
community it's absolutely fair to say that there is now greater focus 
on the problem, and that within the interagency there--the executive 
order has spawned a number of very senior-level meetings to figure out 
how exactly do we handle prioritization and mission management and 
those sorts of things. I can't say--and, frankly, I just don't know--
whether or not there's a new strategy on the horizon. But I take your 
point entirely that the executive order, I think, has reflected a new 
focus--a renewed focus on the problem at hand, and that's just a really 
big deal.
    Mr. Massaro. Next speaker, please.
    Mr. Luna. Just one followup, related to that. On the resource 
issue, is there an effort to work with Congress to try to earmark or 
get more resources to combat illicit trade and organized crime?
    Mr. Travers. In that regard, you're now way out of my lane. That 
would be Department of Justice and Department of Homeland Security.
    Ms. Brzozowski. Yes, I will say that--just, again, back to the 
definitional issue. On illicit trade, I don't think anything is 
specifically earmarked. But you do see requests--and I don't want to 
get ahead of any new budget items--but reflective of the most recent 
president's budget that came out, new moneys are requested from DHS 
specifically to help implement the Trade Enforcement and Trade 
Facilitation Act that came out in 1915, but was started to be 
implemented in 1916. That covers a lot of issues that I think would be 
germane to this umbrella title of illicit trade, forced labor, human 
trafficking, import safety, IP violations, and other types of trade 
issues that are perhaps less specific. So in that regard, yes, there 
was a wholesome DHS-wide request of resources to make sure that we've 
got that customs presence that we noted was so important.
    And then I'll also note, too, that we're very interested--we 
haven't cracked this nut yet--in finding ways to better understand the 
IP-specific impact, as I noted in my opening comments, to the U.S. 
economy, and find ways to potentially have the OECD assist us with the 
work and have a resulting document similar to the one that I think the 
U.K. has and that's been valued by them and which has benefited them 
enormously in being able to tailor very specific policy and operational 
responses because they've had that quantitative data and are able to 
use that as the basis for action. So in that very specific regard, yes, 
but watch that space.
    Mr. Luna. Great. Thanks.
    Mr. Massaro. Thanks so much.
    Please.
    Mr. Rosenbaum. Thank you very much. My name is Kevin Rosenbaum. I'm 
an attorney with Mitchell Silberberg & Knupp LLP, and I represent a 
coalition of the copyright industries. I am here in my individual 
capacity, though, so these comments may not reflect my clients. Just to 
get that set. [Laughter.]
    Mr. Massaro. Okay.
    Mr. Rosenbaum. So, again, thank you for having me. I've enjoyed the 
discussion so far. In particular it was great to hear a lot of talk 
about the dangers of digital piracy, which is what I spend a lot of my 
time worried about, and in particular how digital piracy websites are 
sources of malware and funding for criminal networks, and of course 
damaging very much to the economy.
    And I think, for one, I just wanted to make a fairly brief comment. 
I think in the early days of the internet there was this notion that 
the rules don't apply to some things online--that piracy, we should 
just kind of look the other way. I think that has slowly changed. I 
think there is a growing recognition that principles in the physical 
world should be brought to bear in the virtual world.
    And we've heard a lot of talk about it taking a village and this 
being a group effort, and one group I wanted to make sure we note here 
is the role of internet platforms and intermediaries. Just like how in 
the physical world landlords can't look the other way while 
counterfeiting is happening on their sites, the same principles of 
liability needs to be looked at for internet platforms that may look 
the other way or not take appropriate action to prevent illicit 
activity on their sites.
    And in foreign countries where piracy rates are sky high, a lot of 
times these countries do not have adequate principles of protection or 
liability, and that is a huge problem that I see around the world. And 
then I think it's a problem that our trade policy really does not 
adequately address. So I just wanted to kind of note the role that 
these internet intermediaries have in this discussion, and to mention 
that principles of intermediary liability that are at least as strong 
as what we have here in the U.S. should be very important to promote 
overseas as well.
    Mr. Massaro. Thank you, Kevin.
    Christa, would you like to comment on that?
    Ms. Brzozowski. Yes, thank you so much. This issue of intermediary 
liability is one that's very timely right now. We're looking at this as 
an interagency and finding ourselves at tension with some of these 
principles, meaning these very questions that you had noted on, which 
physical-world principles and rules apply to this new world? Where is a 
tweaking necessary or where is a wholesale new way of looking at it in 
a transformational way necessary? And that's exactly what's happening 
literally today in organizations like the World Customs Organization, 
that we have a working group on e-commerce that is looking at these 
very issues.
    I'll just give you a little sense of the conflict as we see it--not 
necessarily an answer, but maybe some input from you during or after on 
whether we're conceiving of this in the right way. I hear your point 
that liability should be with the platforms, the marketplaces, and that 
is a thought or a way to do this. But really they're pushing back a 
bit. And their defense is you've got to understand that business model, 
and there's very specific ways that currently laws are enforced, 
compliance is enforced, revenue is collected, and then often it's 
associated with who is formally designated in certain capacities as the 
importer of record, for instance.
    As these value chains and supply chains become even more attenuated 
and you've got a whole bunch of new actors, you've got some new models 
that countries are looking at--Australia, the EU, China with the 
Alibaba model--that are very, very different. And some of the questions 
we have to ask ourselves is that pro/con analysis. Making the 
intermediaries liable and asking them to do more about the safety of 
the products and the intent of the players using their platform is one 
thing, and there is value there. It assumes, though, or is predicated, 
I think, on those intermediaries having access to more information. And 
if, again, you flip that prism, we're now potentially asking U.S. 
companies and U.S. citizens to provide a whole bunch of data to 
platforms that probably have closer relationships with governments than 
our U.S. platforms do.
    And so what are the security implications there? What are the 
business implications? What are the consumer privacy, what are the 
market access implications? Is this veiled tech transfer? So those are 
the two sides that are at tension right now, even among us in the U.S. 
Government as we try to work to establish global standards.
    So I take one--I take the point I think David--or Jerry had made 
earlier of you can't just say no, you've got to come with an 
alternative. And so that's very, very much front and center--I mean, 
that's what we're working on among the interagency, key players being 
Treasury, from the revenue angle, DHS, State Department of course, 
Commerce, and then FTC, of course, because of the consumer safety and 
anti-competition law angle of what is the U.S. policy and position on 
this, and should we be piloting concepts of how best to leverage this 
immense power of these new players of the intermediary platforms.
    Mr. Massaro. Yes, please, please.
    Ms. Dyer. Thanks for your remarks. For those of you who aren't 
aware, I will tell you that the United States Trade Representative's 
Notorious Markets List that comes out annually contains information 
from our embassies overseas. One of my colleagues reaches out to them 
to say what online and physical marketplaces are you all seeing as you 
are living in those countries that we should be worried about, that we 
should identify as places trading in counterfeit goods or listing 
pirated content, for instance. And we make that information available 
to the entire network of government agencies, taking a look at that 
information, and together with work from your organization helps to 
create that Notorious Markets List, and for those who haven't seen it, 
it's available on the United States Trade Representative's website.
    Our embassies are really focusing on trying to shut down some of 
these digital piracy websites. I'm delighted to say that our embassy in 
Vietnam just had a major success in shutting down one of the largest 
pirated websites. The government of Vietnam made that happen thanks to 
the intervention and the conversations that our embassy had with the 
government.
    We are actively working with other governments around the world to 
do the same thing, and you will forgive me if I don't tell any more 
details because these sites are slippery little suckers. [Laughter.] We 
close them down in one place and they pop up on a server in a different 
country. It's extraordinarily difficult, but that doesn't mean that we 
don't pay attention to it. So I wanted to just make sure that we let 
that we are actively working on it.
    Mr. Massaro. Thanks, Lisa. Rob, please.
    Mr. Quartel. I'm Rob Quartel. I chair NTELX, which is a technology 
company that does autonomous decision management systems for the 
government, including FDA, and [predict O&I ?]--you and Customs are an 
indirect client, British Customs--the former Federal maritime 
commissioner, and sit on a number of technology boards including the 
Center for Innovative Technology out in Northern Virginia which has two 
funds, one of which is a cyber fund.
    And I have a couple observations and a question, and one is that 
I've been hearing the issue of data since about 2001 when I first 
brought the idea of container security as an issue to Customs and some 
of the working task forces, and of course the issue then was that the 
industry, with which I was very familiar, didn't trust Customs to 
secure their data, and yet they were being told they had to give their 
data to Customs, including some that was voluntary, and Customs has 
now, for 17 years, been unable to bridge that gap between industry and 
the data collectors. And it's a huge problem partly because there's a 
dilemma involved in it, which is that we use a lot of that data for 
high-level commercial decisionmaking and the analytics, and companies 
like Haines use it for tactical security. So that one has not been 
solved in all of this time.
    The bigger issue, I think, is the technology one. Lisa, you 
mentioned that you all are looking at things like blockchain and all 
the rest of that. I see these technologies every day--blockchain and 
many others, quantum computing, et cetera. I deal with that. And it 
seems to me--and this is my suggestion--if you are not doing it, you 
and the DHS should--and I know the NCTC is doing some of this, but 
government agencies never can keep up with what's happening in the 
private sector on technology. There is always a lag--always a lag.
    So I don't know if you have, but you should have an industry-based 
technology committee that people who actually are on the front lines of 
technology development--not to have a Cisco or whatever company--
because they are not doing it. You ought to have a working group that 
deals with technology advancement in both of your situations, and you 
may already have it.
    So that's a suggestion, and I don't know if you have.
    Mr. Massaro. Does anyone want to comment on that?
    Mr. Quartel. Let me make one more point about blockchain.
    Mr. Massaro. Sure.
    Mr. Quartel. We all tend to think of blockchain--all we who are in 
business--as a solution to security, but it's also a solution for the 
guys--the bad guys, particularly if it's combined with pneumatic [ph] 
data--not nemetic [ph], but pneumatic [ph], which is miming real data 
at the outset of a blockchain pathway.
    So it's both a good and a bad.
    Ms. Dyer. I will be honest. I'm not aware of an industry-based tech 
committee that's advising the U.S. Government on it, but it's a great 
suggestion. I've said it's fascinating to see the claims of what 
blockchain is going to solve out there, the environmental challenges 
associated with blockchain and the amount of energy required to make 
that work on a global scale I think is something that I'm really 
looking forward to learning more about--whether it actually is a viable 
solution for some of these, so thank you very much for your suggestion, 
and that should be a great one.
    You may know something else, Christa, that I don't know.
    Ms. Brzozowski. I don't know anything specific to blockchain or 
some of the technologies you mentioned. I know enough to be dangerous, 
again--[laughter]--but without having the answer or relationships with 
the Office of Science and Technology Policy at the White House, or 
OSTP--I mean, they do a lot of the engagement across the administration 
on making sure that we're connecting with industry.
    I've benefited from some of their engagements so I know their work, 
so we probably do need to query them and see specific to this set of 
problems that we're looking at, what are some of the solutions.
    I have to admit I've received--it's got to be dozens of briefings 
I'm watching right now, and I still don't get--[laughter]--how it 
works, and I do have a natural skepticism that I would need to overcome 
on how is this just not the next silver bullet that 2, 3, 4, 5 years 
from now we're going to understand how it could be used--not only by 
the bad guys but attacked and delegitimized by folks having access to 
it in ways that we just haven't thought of today.
    So, yes, helpful solution, and I think we've got a couple of calls 
in to OSTP to point us in the right direction.
    Mr. Quartel. If I can add, it's not just blockchain. That's just 
the symbolic technology. I think there are numerous technologies----
    Ms. Brzozowski. Yes, the autonomous decisionmaking--yes, 
absolutely.
    Mr. Massaro. Okay, thank you so much. We'll go on to the next 
speaker. Susan?
    Ms. Fridy. First of all, I'd like to say I'm really grateful to 
have heard a couple of the speakers already mention the OECD. I should 
say I'm Susan Fridy, the head of the OECD's Washington Center, so 
hopefully that's already putting in people's minds that the OECD is a 
key partner for working on these issues.
    Our secretary general likes to say that global issues require 
global solutions, and I think this issue is one that certainly 
exemplifies that. And I also like the phrasing that David Luna used a 
few minutes ago, saying that we need not just a whole-of-government 
approach, but a whole-of-society approach.
    So I just want to make a plug for the OECD's role in this because I 
have a colleague here from the U.S. Council for International Business, 
which is the formal U.S. business arm of the OECD. So, if you are a 
business representative, you should talk to the U.S. Council for 
International Business--USCIB--about how is it that business can work 
with the OECD and work with other international organizations as well 
on this and other key issues. And there are also ways that civil 
society and labor can participate with USCIB, but I think on this issue 
especially, the private sector really ought to be having a good, strong 
voice, and showing governments--not just the U.S., but other 
governments that are members of USCIB, what are the key issues that you 
are facing every day, the kind of conversation that we're having here 
today is crucial for letting policymakers know what is happening on the 
ground, what are you seeing that they might not be aware of.
    So I think my question for the panel is along those same lines, do 
you see how the private sector could be more engaging, I think maybe 
especially for Lisa and for Christa, since you are familiar at least 
with the OECD through the task force and through other work? I know 
business is involved, but how do you think that they could be more 
involved with international fora?
    Mr. Massaro. Thank you, Susan.
    Ms. Dyer. I know that we very firmly support having U.S. business 
at international organizations. It is a fundamental tenet. We are 
delighted when people do join us at those organizations.
    I am incredibly grateful for the number of people who come to us 
and say, hi, can we talk, can we share what we know and what we've seen 
so that it better informs your work. I know that it takes a lot of time 
to get to the Department of State, to get through the security, but 
thank you for doing that.
    I also want to say, please, when you are traveling overseas--if you 
don't already--please stop in to see the embassies. Again, it's not 
easy, but the more they know about your challenges, the more people in 
Washington hear about them because they let us know that you've stopped 
by and you've made your issues known. It makes them smarter and more 
capable to--hey, I have an upcoming meeting; I might be able to raise 
this with my counterparts over there.
    And then I will just say that I am grateful for the questions and 
the comments here today. I have learned a tremendous amount from each 
one of you, and I look forward to the rest of the questions.
    Mr. Massaro. Thank you, Lisa. Christa?
    Ms. Brzozowski. Yes, very quickly, and thank you again for all the 
excellent help from the OECD. We rely on a lot of that data that comes 
out of the organization very extensively in my work.
    So how best to plug in industry? I mean, again, you can make 
millions off that if you came up with a perfect answer. [Laughter.] 
I've got a couple of thoughts because from the very beginning my work 
in trade and supply chains is vitally dependent on input from industry 
and across the spectrum. And I find two things extraordinarily 
valuable. One is when you are having a formalized conversation with 
industry--and by formal I mean on a specific issue, or with a specific 
agency--some internal consensus or a prioritization done by industry of 
self-organizing before or as they engage with government is really 
helpful.
    What can be difficult for government stakeholders who are not 
experts in each of the areas that everyone else is is to have--
roundtable discussions like this are great when we have a diversity of 
thought and opinion, but prescriptive do this, do that, government can 
fix the problem, coming from various voices without being prioritized 
can increase the noise-to-signal ratio. So formal advisory committees 
are also extraordinarily valuable. There's a process then by which 
there is some self-vetting among the industry, some consensus emerges, 
and what issues are the most important and how they should be 
prioritized, and how they should be teed up for government stakeholders 
to consider.
    So in that regard I would say, those formal pathways are very, very 
important, but we also very much appreciate these types of less formal 
and also just we pick up the phone and call us so that we know--we have 
a network of folks to call up--hey, I've got a question, who might know 
that answer.
    I'll give an example. USCIB and Harry [sp] have put together, and 
the Chamber, a session for interagency stakeholders, government folks 
before we sent a team to the current meetings in the World Customs 
Organization that I just mentioned so that we could talk about the 
agenda and get that perspective from our various industry stakeholders. 
So that kind of very agile/flexible hey, tell us what you think on a 
particular issue, that was a bit outside of the formal advisory 
constructs that government has but are a bit more of a listening 
session for government to just be informed and updated by the industry 
perspective. So just a couple of ideas.
    Mr. Massaro. And let me also say just from the Helsinki Commission 
perspective, we want to hear from you, too. [Laughter.] The legislative 
branch has to play our role, so you all have my information; now please 
reach out to me, my interlocutors on the committees, and things like 
that. We've got a role to play in this somewhere.
    So, all right--oh, Aaron, yes, please.
    Mr. Seres. I just want to echo what Christa was saying--we do a lot 
of outreach with private sector entities. A lot of them have interests 
when they have overseas assets or deployments of operations forward in 
another country--what do you do, how do I go about that, how do I 
assess the risk--so any international outreach to that extent is 
helpful to these companies. And when I do outreach like that I implore 
them, as Lisa and I go to the embassy, make a contact, find individuals 
who are on the ground, where you are putting your assets 
internationally. And then here locally those forums are great for 
companies who share information about best practices or what they're 
seeing.
    And what Christa mentioned about the coalition of industry--in the 
automotive industry we talked about the success against airbag products 
that are defective and others. And there is an entity, A2C2--it's a 
coalition of automotive industry that brings together one voice for 
that industry to help message to us and message to other entities, what 
their issue is as an industry. So I would second that that is a great 
way to go about it if they've been dealing with a government entity and 
trying to get a message to law enforcement, trying to get some 
effective change from a working perspective.
    Ms. Dyer. May I----
    Mr. Massaro. Yes, please. Please, definitely.
    Ms. Dyer. Jerry, your comments about the safety and security of 
your people, I'm sure that is shared by everyone here. If you haven't 
had a chance to join the Overseas Security Advisory Committee that 
Diplomatic Security in the Department of State runs, I urge you to do 
so.
    When you are traveling overseas you can easily register that you 
are traveling, or your employees can register when they're traveling. 
It helps them when an emergency takes place--whether that's a political 
coup, or some humanitarian or natural disaster that hits. Immediately 
our first priority is supporting American citizens overseas when 
something like happens. But our job is more challenging if we don't 
know that you are there. So please, if you have a chance to do that, I 
urge you to do so.
    Mr. Massaro. Thank you very much. Kristin, please.
    Ms. Reif. Okay, thank you. I'm Kristin Reif from Philip Morris 
International. I'm the director of Illicit Trade Prevention for us, 
based here in Washington, DC. I want to thank everybody for their 
comments so far, and folks on the panel as well as the guests.
    Illicit trade in tobacco has actually been labeled by the U.S. 
State Department as a threat to national security. There was a report 
issued under the leadership of David Luna, who's here today, that said 
as much. And right now the State Department is leading an interagency 
effort to come up with an international strategy in combating this, so 
we are looking forward to seeing the results of that.
    For those who don't know, illicit trade in tobacco, the value of it 
on the low end is $40 billion to $50 billion a year. That's more than 
blood diamonds, oil, wildlife, and antiquities trafficking combined. So 
this is an incredibly serious issue. So thank you to the Helsinki 
Commission, especially Chairman Wicker and all of his staff there for 
bringing this together. They also led the charge last summer, holding a 
hearing specifically on this issue to show that level of seriousness.
    I have a couple of questions, and I'll just read them through and 
then hand them over. The first one to Russ, when he talked about threat 
financing, specifically mentioning ISIS--I wanted to point out also 
that ISIS has made millions of dollars over the years trafficking in 
illicit cigarettes via confiscations and then resale of that product. 
The fines were for consumers and then taxing of safe passage through 
there. And I'm just sharing that as an example because, as a brand 
owner, and as someone who works in the illicit trade space, we often 
talk to law enforcement and intelligence services, and they tell us we 
don't care about the product; we're product agnostic. We care about the 
network. And I couldn't agree more. The point that I would be curious 
about, though, is if we all have an individual piece in filling the 
picture of how the network is gaining their money, what is the 
systematic approach for the U.S. Government to engage with us? Not just 
so we can protect our own markets and our own brands, but so that you 
all can have the benefit of that knowledge, whether it's the modus 
operandi, whether it's the hot spots of activity, under- and over-
valuation of the product--I think we bring a lot to the table.
    So my question to you--and I also have one for Christa as well--the 
question to you is--what can systematically be put in place--because a 
couple of people have talked about some of this informal sharing, and 
picking up the phone, and certainly a lot of people in this room get 
things done that way, but what can systematically be put in place?
    A question to Christa--and I'm glad there is wonderful OECD 
representation here. I think that they've made wonderful, not only 
awareness raising, but also recommendations on free-trade zones.
    To be clear, those free-trade zones in Panama end up flooding the 
Central American countries with illicit markets, illicit products that 
then go in the hands of MS-13 and others, and that is directly what is 
leading to people being on our borders. In the United Arab Emirates 
[UAE], the free-trade zones are exploited and product goes through 
Iran, and it goes to the Afghanistan-Pakistan border. That was in that 
State Department report, and the Department of Defense has listed it as 
a threat to national security as well.
    So I am very appreciative of OECD leadership, U.K. leadership on 
this. What is the U.S. Government willing to do and recommend to our 
friends and allies--Panama is an ally; UAE is an ally--that they can be 
doing, because I think we have some common-sense, due-diligence 
measures that we are willing to offer, and is the U.S. Government 
willing to get behind those?
    And then last, to Aaron, just really quickly--as I have stated my 
case about illicit trade in tobacco funding nefarious activity, it was 
recently reported on that alcohol and tobacco enforcement will be 
actually spun out ATF and go strictly to the tobacco tax bureau, taking 
a threat financing mechanism away from those with criminal 
investigations institutional knowledge and authorities and putting it 
in the tobacco tax bureau.
    I don't know if you can speak to the rationale behind that and 
maybe what could or should be done about it.
    Thank you.
    Mr. Massaro. Thanks so much, Kristin. We're going to start with 
your question for Russ.
    Mr. Travers. Yes, first to your point about illicit tobacco in 
particular, my listing of the ways in which ISIS was making money was 
not in any way meant to be--there are a ton. I mean, these guys are 
very entrepreneurial in terms of how they move commodities.
    Second, unfortunately I don't have an answer for you other than to 
say that it was directed this last year. Treasury has stood up an 
interagency effort that is looking at threat finance. What I don't know 
is the extent to which they outreach to the private sector, but if you 
want to give me your card, I can certainly get you the [information ?].
    Mr. Massaro. Christa?
    Ms. Brzozowski. Thank you. So if I understood the question, it's 
more on the foreign-trade zones than the free-trade zones and our 
relationships. So I'll narrow it to a couple of things. Again, as Chris 
and as I mentioned before, we are very much looking forward to the OECD 
report on the guidelines, your contribution, your steers on whether we 
are hitting that message right in the guidelines document would be 
great.
    And then, absolutely, the U.S. did endorse that document in its 
draft stage, and unless it changes wholesale, we look forward to 
continuing to endorse it, and we take that forward to all our 
engagement with partners.
    The link between--and I'll be brief on this--the economic 
prosperity and reduced migration flows is not lost on DHS and not lost 
on the interagency. To the extent that we, DHS, and the broader U.S. 
Government can make the situation in Central America, the Northern 
Triangle more secure, more safe, and more economically viable for 
people to enjoy their local area, I think we could all see the benefits 
of that.
    I hadn't really thought about the more attenuated Panama to Central 
America demarcation, that circle, so that's an interesting takeaway for 
me.
    Mr. Seres. And on your question regarding the removal of 
authorities, to speak on behalf of another agency that maybe has a 
different authority than we do, and it's not an area of expertise that 
I have. So it's something I can get back to you if we do have an FBI--
[inaudible]--that's relevant. I'll get back to you later.
    Mr. Massaro. Lisa, please.
    Ms. Dyer. I just wanted to add that the United States Trade 
Representative puts together a report to Congress called the Special 
301 Report, and for those who don't know, it's the countries that are 
not respecting intellectual property and are putting up market access 
barriers to those who own intellectual property.
    The UAE was placed back on that list this year for some of the very 
reasons that you articulated, so just as an additional----
    Mr. Massaro. Thanks, Lisa. Thanks, Kristin. David, please.
    Mr. Lynch. Hi, my name is David Lynch from Sayari Analytics. We are 
a financial intelligence firm based here in D.C. that works with 
government, law firms and private sector to better map and track 
transnational illicit networks across a range of different threat 
verticals from terror financing to illicit trade.
    As an organization, we leverage official public records across the 
globe with a focus on data sets that are traditionally siloed within a 
certain jurisdiction, within a language, or within a certain medium of 
dissemination. We try to bridge those gaps between jurisdictions and 
between languages to paint a hopefully clearer picture of the full 
extent of these illicit networks.
    And so my question to you guys would be, for your respective 
mandates on illicit trade, what do you guys feel is your biggest data 
gap in trying to tackle these issues?
    Mr. Massaro. One for everyone.
    Mr. Lynch. Yes.
    Mr. Massaro. All right, so Lisa.
    Ms. Dyer. Interesting question. From a policy standpoint, from a 
persuading-foreign-governments standpoint, I think we have a lot of 
data that, at that very strategic level that we are communicating with, 
I think works. The statistics are compelling, they are powerful, it's a 
message that we're able to deliver that these actual illicit trade 
activities are harming your economy. That would be my answer to your 
question because we are talking at such a very strategic level. But 
others with a more tactical mission might have a different answer.
    Mr. Massaro. I was going to say, specifically how harm is 
occurring. How----
    Ms. Dyer. Yes.
    Mr. Travers. We could talk for hours. Ten years ago, Mike Hayden 
was talking volume and the velocity of data, and to Lisa's point, we 
are all drowning in it. I used to keep statistics on how much was 
incoming to NCTC every day. I've long since quit because there is so 
much.
    The specific point you made with respect to financial data I agree 
with entirely. It's not just between and amongst countries, frankly. 
There are a host of legal policies, security, privacy reasons--we have 
these same challenges within the USG--and then when you are looking at 
financial, in particular, I've had many conversations with the big 
banks who would argue, I think, that the government has the context, 
but the private sector has the data, so how do you bring that marriage 
together in a way that doesn't give competitive advantage to one over 
another, and how do you respect the privacy rights.
    I am an intel officer. How much U.S. persons' data do you or don't 
you want me to have? These are questions that we have not yet resolved 
as a country, and it just so happens that the financial datasets bring 
an additional level of complexity over and beyond--[inaudible].
    Ms. Brzozowski. Great, yes, I should have gone first because I had 
an answer right out of the gate for you. So a little bit more specific, 
but on Lisa's flow of her--of the threats in the space--I would 
specifically say that we've got a pretty big gap that work in the OECD 
is looking to address, but any additional help or hands on deck would 
be appreciated on what are the new threats in the ecommerce space, and 
I think there is a particular interest in answering the question of 
whether we are seeing more counterfeit products or just the same number 
or volume, I guess, in different forms. So instead of coming in a giant 
container, there is now just as many counterfeits which are coming 
through all these kind of little e-packets. Answering that question is 
really necessary for us to, as I said, apply the right policy answers. 
And we just don't have a sense of that.
    There's a particular interest as well in what we're terming low-
value shipments, and low value because they tend to be not required to 
pay certain duties and taxes if they're under a certain threshold of 
value.
    Is that value--is that waiver of taxes and fees being exploited by 
folks by either undervaluing the product inappropriately and/or by 
assuming or perceiving there to be a lighter law enforcement touch for 
those types of products? So very quickly the counterfeit threat in low-
value ecommerce space.
    Mr. Seres. And I would just like to add a comment from more of a 
tactical law enforcement perspective as it relates to intellectual 
property rights crimes and illicit trade.
    From a law enforcement standpoint, we're just looking for 
information so we can try to identify where the bad actor is coming 
from--are they aggregating, is it a network, is it an organized group 
or is it just one guy, right? So how do we best place our assets from 
that perspective against whatever criminal group is out there?
    That being said, I think a good comparison was made in regards to 
the banking industry. We've been receiving information from finance 
institutions for a long time. We've set up mechanisms, teams, and data 
information systems to cull that data, look for commonalities--
commonalities of address, the bad guys--so we can target our 
effectiveness with our resource utilization.
    Similarly here, we have bad actors who I think are agnostic to what 
platform they are going to utilize, whether it be one company or the 
next, one shipping lane or the next. I don't think they really care 
about that, so to the extent that we're seeing a bad actor in a certain 
platform, an ability to start to find a way to share some of that 
information, whether it's a bad IP address, a bad overseas address, et 
cetera, in an aggregated way so we can start targeting our resources a 
little bit more effectively, I think would be a helpful tool from a law 
enforcement perspective.
    Thank you.
    Mr. Massaro. Thank you so much. START, please.
    Mr. Sin. Good afternoon. Thank you very much for your participation 
and words of wisdom this afternoon.
    My name is Steve Sin. I'm from START National Consortium based at 
the University of Maryland. I'm currently the director of 
unconventional weapons and technology for that organization.
    Some of the work that we do--we have looked at emerging technology. 
I'm a radiological and nuclear terrorism specialist, so we looked at 
things like what kind of technology 5 or 10 years out from now will 
affect nuclear or radiologic terrorism in the--[inaudible]--space.
    So my question from that perspective was, are there works or 
organizations or committees that you have that look at what illicit 
trade or what illicit trafficking would look like 5, 10, 15 years from 
now? Kind of do a net assessment--[inaudible]--we do, and that would be 
one of the questions.
    And the second question actually is a personal question, just 
because I'm from academia. We talk about illicit trade and illicit 
trafficking, ordinarily, a lot of times we talk about it in terms of 
industry. So the question that I would have is, are there any efforts 
being done to limit--since our product is largely intellectual 
property--limit the trafficking of academic intellectual property so 
that we actually don't lose--because universities are a number-one 
target of foreign [governments ?] as well, especially universities like 
the University of Maryland. So I was wondering if there was a measure 
or something that is being done to address that, or do you need our 
help to be more involved. So those are my questions.
    Mr. Massaro. Is there anyone in particular you would like to 
address your questions to?
    Mr. Sin. No.
    Mr. Massaro. Okay. All right. Anyone like to take it first? Illicit 
trade in 10, 15 years.
    Ms. Brzozowski. I'll jump on that part----
    Mr. Massaro. Sure.
    Ms. Brzozowski. ----very quickly. Just taking the fact that what 
came to my head immediately, and maybe the gut reaction is the best 
thing, or maybe you primed the pump by talking about emerging 
technology initially, but I do think that much interagency, and the 
White House, and administration, and congressional branch discussion on 
the new threats that we are going to potentially see with the emerging 
technology and--links to our ability to protect intellectual property. 
You see this in a Defense Intelligence Agency legislation currently 
under consideration, and which partners--or part of the new CFIUS, or 
Committee on Foreign Investment in the United States' modernization 
rules that have now added an export control component, and that link is 
that we've got valuable IP on emerging technologies that's absolutely 
critical to DoD, to DHS for Homeland Security enterprises, for 
Commerce, for some of the economic applications.
    And the current export control regime might not be appropriately 
situated to account for these new emerging technologies. And we are 
kind of seeing vulnerabilities kind coming at different angles. The 
ability to export these might not be appropriately controlled, and 
we're looking just to take that up, but we're also seeing foreign 
acquirers just come in and wholesale buy the business or hire the 
engineer, and that's where this new legislation is looking to come at 
it from a couple of different angles.
    When we're talking illicit trade, it's getting around some of these 
new tools and new requirements that the administration is putting in 
place.
    Mr. Massaro. Aaron, do you have----
    Mr. Seres. Yes, I would just say, in regards to the academic 
property, I don't know of a specific initiative or effort in relation 
to that specific area, but it's something I'd be happy to put you in 
contact with the FBI's center and maybe discuss it a little further. I 
appreciate the suggestion.
    Mr. Massaro. Okay, yes, we'll move on to TraCCC, please.
    Ms. Kinnard. My name is Kasey Kinnard, and I'm from the Terrorism, 
Transnational Crime and Corruption Center at George Mason University, 
and conveniently put academia together because that's where most of my 
comments lie.
    We've been very privileged to work with a lot of the folks and 
organizations in the room, so I have several comments. I'll try to keep 
them concise.
    Mr. Travers spoke about the difficulty of sharing information, but 
I wanted to specifically encourage everyone to continue to try and do 
that. And, specifically, we've heard a lot about including private 
industry in that. I would throw academia in the ring wholeheartedly, 
for several reasons. First of all, I would say that it helps to think 
about some of these problems more creatively, particularly when coming 
to a lot of--you've all spoken about intellectual property crime or 
terrorism. Some of those are crimes that are higher risk, and we looked 
at sometimes problems that are lower risk and therefore are a good, 
creative way to get at a criminal element, but you might have influence 
or get information from folks like academia.
    Within academia, new threats is a place that we focus and would be 
a great place to help, hopefully, inform the executive which might also 
serve other purposes. When we talk about other governments and where 
you share information, we find sometimes that we might be more 
affordable than government researchers. We might also be able to get 
into a niche where the U.S. Government is not so welcome, and that has 
helped to make, create some bridges.
    So I would also say that when getting into grants and programs, 
like most of the agencies do because we've gotten these funds before, 
will allow for some flexibility because academia tends to be able to be 
flexible, like transnational organized criminal groups are, but the 
U.S. Government is not set up to be. We can be flexible, but we've also 
been hindered when asked, by global partners, can you help us with this 
issue. Nope, I'm only a stovepipe. But we look at all illicit trade, 
and we know we are connected and we could help, but we can't touch it. 
So I would encourage that type of flexibility.
    I also was encouraged to hear that money is moving a bit out of the 
absolute concentration of terrorism and into a bit of a broader 
spectrum because we've been saying for a long time we need to be 
looking at a crime-terror nexus. Crime is often the funding for 
terrorism, and we have found that sometimes getting funding--it's hung 
up unless you can point at a terrorism connection, which has been 
problematic because, to get that funding, some people have needed those 
connections and are not quite there.
    We want the government to have the best and most academically sound 
information, but if you are hamstrung in trying to get that funding--
[inaudible]--for getting the best information.
    Thank you very much.
    Mr. Massaro. Thank you. We'll just go on to the next speaker, 
please. Cyndi [sp].
    Ms. Braddon. Thank you. I am here today for a new organization 
called Trace It, and only been around since last September, and 
essentially, and it's an organization that consists of business, 
companies that are cross-sector--we represent 11 sectors and everything 
from alcohol, to pharmaceutical, to oil and gas, to tobacco, to 
counterfeit goods, wildlife, forestry, et cetera, and also concerned 
with human trafficking.
    As an entity, we were formed basically to try to unite, across 
sectors, businesses to come together to advocate on behalf--or to 
create a voice of advocacy, working with governments around the world 
to deal with the issues of trade.
    One of our first products, which Chris mentioned, was that we 
commissioned the Economist Intelligence Unit to prepare a global, 
illicit trade environment in-depth, and it analyzes 84 countries which 
represent 95 percent of GDP, 95 percent of trade, and it measures how 
each of the countries stand up and how they are--through policy 
primarily--set up to either encourage or discourage illicit trade.
    We did this because we wanted to expand the learning around what 
are the better practices, so we can go to governments and help advise 
them on where efforts need to be made. And what we learned through the 
process is, to quote Chris again--is that everybody needs to pull up 
their socks a bit, including us here in the United States.
    We also did a case--a report on free-trade zones, and picking up 
points that have been raised before, and what we did was put together 
five cases studies, including in Panama, and really identified some 
areas that need work--most commonly is devoting more resources to 
hiring and training, customs and law enforcement to work together and 
to do their jobs and to do it with due diligence. And what we'd like to 
see is more coordination--more formal coordination between the private 
sector and all stakeholders, and government, to help stop illicit 
trade.
    So let me start with a question, and that is with regards to free-
trade zones. And maybe it's from State and Homeland Security across the 
board. What do you envision will change in the near future that can 
continue to facilitate trade--the good trade--but can help with 
stemming the really serious issues we have with illicit goods going 
through either small packages or large containers?
    And second, knowing that China and Panama are negotiating a treaty 
now, with regards to what we got to see in Panama, what's the U.S. 
Government doing to 3:13--[inaudible]--that especially?
    Mr. Massaro. Great, thanks so much. Shall we start with Christine--
Christa? [Laughter.] You're up.
    Ms. Brzozowski. All right. I will probably speak to more of the--
well, first let me thank you for the excellent work on the index. I 
mean, that's exactly the kind of data that's really necessary to help 
us as DHS, as the U.S. Government, and then in international forums, 
like the OECD terror and illicit trade task force, to understand what's 
working, what's not, and to be able to identify best practices that can 
then be promulgated in various ways.
    I'd very much love to--and I'm assuming it's just online, but I'd 
love the case study on Panama that you just did. This is a fairly new 
issue to me, but as I said, we are exploring ways, in concert with the 
development bank, and USAID, and of course, State Department, on how a 
security and prosperity message supporting Central American and 
Northern Triangle countries in a variety of ways to reap those 
benefits. So we'd love to see that report.
    On the China-Panama free-trade agreement, I don't have anything on 
that. This is not my area, about what the United States is probably 
doing. If I knew, I probably couldn't say, so--[laughter]--I'll just 
hit quiet and mute on this one. [Laughter.]
    Ms. Dyer. I will say that it's not just Panama that people are 
concerned about where China is expanding, and not just within the free-
trade zone. Africa is a huge area, and I think there's a lot to watch 
there and keep an eye on how we do keep the good stuff coming and the 
bad stuff not.
    I will actually take your question back to some of our free-trade-
zone experts, and I'd love to take a card to--[inaudible]--with me.
    Thank you.
    Mr. Massaro. Megan, please.
    Ms. Giblin. Megan Giblin of the U.S. Council for International 
Business. I am the director of customs and trade facilitation, and 
unlike Christa, I am steeped in the details, mostly. [Laughter.] And 
unfortunately, I could probably talk to you about classification codes, 
and valuation. And Susan, thank you for your mention about USCIB being 
the--[inaudible]--unfortunate that my boss is the chair of the trade 
committee, so, feel free to reach out if you have any questions.
    And I just wanted to make a couple of points, to add some 
discussion to discussion points from earlier, so after Jerry's point 
about data elements, and sharing customs data with other governments 
and other government agencies, I know from our membership perspective, 
for a number of reasons over the past year or so, we've talked about 
concerns about data being shared with other parties, under what 
mechanisms, and unintended consequences of that information being 
shared as a result of questions about trading, do others know what they 
are looking at, or potentially controls around that data, and so that's 
the discussion that we are having with some of Christa's colleagues.
    And then I just wanted to touch on Rob's point, and at a much more 
granular level, so in the context of the Customs operational advisory 
committee, there is a group looking at--at least in the customs space--
emerging technologies--[just wanted to leave that there ?]--so it's a 
subject matter--[inaudible].
    And then back to Christa's point about the work going on in 
Brussels and the international discussions--again, being steeped in the 
content details like--[inaudible]--there has been discussion and 
context about looking at emerging technologies,--I just thought that 
would be helpful for you to understand.
    Thank you.
    Mr. Massaro. Definitely, definitely. Thank you so much.
    Now, Crawford, I know you've been waiting very patiently. 
[Laughter.] I saw you were the first to flip it and then had to wait 2 
hours to speak, so I really----
    Mr. Allen. This is called the last----
    Mr. Massaro. I really, really appreciate it. [Laughter.] Thank you 
so much.
    Mr. Allen. The last man caught standing. [Laughter.]
    So thank you very much. My name is Crawford Allan. I'm a senior 
director of the TRAFFIC group at the World Wildlife Fund, and we've 
been working on setting up the first global coalition to end online 
wildlife trafficking. And we've got 22 of the world's biggest companies 
involved--[inaudible]--Google, Facebook, Microsoft, Instagram. We've 
got 10 Chinese companies--Alibaba, Tencent and Baidu--all working 
together to prevent this pernicious threat of trafficking in wildlife.
    One thing we have learned in this is that there are some really 
critical nexus here between the companies, the online marketplaces, 
between the parcel companies, the express courier companies, and 
between the paying and processing companies in the finance sector. What 
we are finding is we don't know how to bring those three sectors of 
finance, transport, and commerce together, and we wondered whether 
people around this table or our lovely panelists here had suggestions 
or recommendations about that, because we feel this is a trick and what 
we are missing is bringing those together, and we think that they've 
all got a piece of the puzzle, but they're sitting there and doing it 
separately. And I'm sure that many of you have been through hoops of 
working in the private sector yourselves, for your own interests, that 
we have still yet to learn, and we would love to learn more.
    I also think the other thing that we've found very much is that 
it's absolutely critical, and what you all say is true--information 
sharing is the one blockage that we find is most pertinent and most 
problematic. We know that we've got a fortunate situation where 
hundreds are sitting together and sharing best practice. How do you--
[inaudible]--tech companies, they are really [competitive ?] with each 
other, but around this issue of wildlife they put that competition 
aside and they are really trying to share information about how we 
refine algorithms to protect wildlife, how we prevent the odds of being 
poached in the first place. I'm sure you've got expertise and insight 
that we could learn.
    But what platform, what forum could we take this expertise and join 
these people together? We're all from different sectors. We're from 
probably the best--[inaudible]--in the world, which I'm going to--
[inaudible]--[laughter]--take them to pharmacies to give them the 
cigarettes. How--what platform is it--[inaudible]--that could bring us 
together to look at the interface between online, transport, and 
payment--and finance. I think you've probably got some great ideas 
about that, so I really appreciate it. We just need to build trust with 
these companies. They're very scared of working with law enforcement, 
unfortunately, in sharing information.
    Thank you.
    Mr. Massaro. Would someone like to start with that? I assume--
[inaudible]--that the right person will start.
    Ms. Brzozowski. Yes, welcome to my world here. [Laughter.] That 
very question, that, very powerful, very economically successful 
companies, different agendas, different perspectives. People are 
realizing that things are changing, but maybe not--without being able 
to control where they're going, aren't jumping up and down to say, come 
regulate us, U.S. Government and other government. [Laughter.] So 
surprising. But those are exactly the types of groups that we're trying 
to, as an interagency--have engagement with and understand from the 
U.S. perspective where we see ourselves--what concepts need to be 
tested, and where we see ourselves potentially in 2 to 5 years.
    This is exactly--I'll put in a pitch--this is exactly the 
conversation that is happening in Brussels, as I said, today. It's the 
World Customs Organization ecommerce working group. It's from a very 
specific Customs perspective, and we would like to keep it like that. 
So that's one forum, I think, for some of these engagements. I believe 
they will be getting a mandate to extend their working group for 
another year, and we're looking right now to figure out how to organize 
that so that that year is beneficial, so that we get some standards 
coming out of that year, we get some definitions coming out of that 
year. We'll maybe get some additional case studies out of that year. So 
now is the time for engagement with that group.
    And then Chris and I, following David's lead, hosted the Countering 
Illicit Trade Task Force within the OECD, so a different group of 
stakeholders, but in some ways a good set of stakeholders will be 
taking on this issue. We're working now to figure out what our next-
year and 2-year trajectory looks like, what workshops are necessary on 
what issues. I think we've got general consensus among the member 
States that we do want to tackle e-commerce next. That's a pretty big 
mandate; almost as big as how do you solve illicit trade. [Laughter.] 
So defining that work plan and coming up with that schedule of the who 
needs to meet around what issues in the coming year, 18-month 
timeframe. But very, very timely, again. I don't have the answer yet, 
necessarily, but we'd love to engage to make sure you're part of the 
development of the answer.
    Mr. Massaro. Lisa, you wanted to say something?
    Ms. Dyer. I'll just add, in addition to what Christa has said, that 
our team has worked with the International AntiCounterfeiting Coalition 
to put together a toxics/counterfeits workshop. And the idea is pulling 
together people from different sectors around to look at what hidden 
dangers are in some of our most common consumer items, such as luxury 
goods, cosmetics, toys, apparel, and test them for those toxins, and to 
see what exactly are we finding that could then be used for a public-
awareness campaign to get some more information out to the public to 
support consumer safety.
    I will take your suggestion back to the team in the State 
Department that works on wildlife activities, and--[inaudible]--similar 
things.
    Mr. Massaro. And IACC is here, right? Over there? Great. Cool.
    Jim?
    Mr. Duggan. Hi. Jim Duggan from Coty, fragrance and cosmetics. Lisa 
just stole what I was going to say.
    Ms. Dyer. I'm sorry. [Laughter.]
    Mr. Duggan. So I'll start in reverse, then. Aaron made a very 
excellent point. Arrests are a significant way to curtail, but you 
can't arrest your way out of this. And I've heard that ever since I've 
been--[inaudible]--counterfeit for the last 18 years. It's been stated 
by many other federal agents that I've worked with over time. Homeland 
Security, Customs and Border Patrol, and the IPR Center are all 
excellent tools for us to use to combat the problem.
    At the end of the day, the most important thing from my perspective 
is educating the American consumer. When I talk to the American 
consumer in a counterfeit 80 to 90 percent of the time I get a shrug of 
the shoulder; what's the big deal? And they just don't get it, and they 
don't understand it because at the end of the day, the consumer wants--
and it's not just the American consumer--it's my knowledge of the world 
that every consumer wants to get the product at the best price.
    So we are working with Joe Giblin [ph], under his group, and we're 
very happy to be--further, that the company is very interested in 
seeing that through.
    Ms. Dyer. Thank you for investing the time.
    DUGGAN: Education is effective, just so important. If the consumer 
is not there--the consumer doesn't buy it, that world is going to dry 
up.
    Mr. Massaro. There has to be demand for these products.
    Ms. Brzozowski. Can I----
    Mr. Massaro. Yes, please.
    Ms. Brzozowski. Yes, I thought of--thank you for that comment. A 
very quick note on that, and I think it's a great example of why the 
data is going to be so critical to us. I'll go back again to this in-
country, in-depth study the U.K. did utilizing the OECD, which found 
that, I think--I'm trying to look through my stack here--about 50 
percent of consumers said they weren't aware that they were buying a 
counterfeit product, so that gives policymakers an immediate, okay, now 
half the problem is people that do know they're doing it, and we've got 
to dissuade them through campaigns at the State Department, but we've 
got half of these people that don't even know that they're doing it, so 
that's a whole set of policy options to counter it.
    So that was an eye-opener for me when I read that report, and we're 
very interested in trying to get that type of granularity for the U.S. 
market as well.
    Mr. Massaro. Okay, do we have any other questions? We've got maybe 
time for one more if anybody's got something to say.
    All right, so we're all exhausted. That's fantastic. [Laughter.]
    So thank you all so much for coming. I want to thank our panel of 
executive branch officials, if you will join me in a round of applause. 
[Applause.]
    And to all of you, as well, I just want to extend my sincerest 
thanks, and on behalf of our, again, bipartisan and bicameral 
leadership, I can't think of a single member, a single commissioner who 
doesn't care deeply about these issues. I really hope that we'll keep 
this dialog going. And thank you all again for attending.
    Mr. Luna. Paul, would it be possible to circulate the contact 
information for people who attended the hearing?
    Mr. Massaro. Sure. Anybody object to that? [Pause.] No? All right, 
great. We'll do it.
    [Whereupon, at 3:52 p.m., the roundtable was adjourned.]

                              [all]








  

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