[Senate Hearing 116-190]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 116-190
 
           ILLICIT MINING: THREATS TO U.S. NATIONAL SECURITY 
                      AND INTERNATIONAL HUMAN RIGHTS

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

                                HEARING


                               BEFORE THE

                        SUBCOMMITTEE ON WESTERN
                       HEMISPHERE, TRANSNATIONAL
                       CRIME, CIVILIAN SECURITY,
                        DEMOCRACY, HUMAN RIGHTS,
                       AND GLOBAL WOMEN'S ISSUES


                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS


                             FIRST SESSION



                               __________

                            DECEMBER 5, 2019

                               __________


       Printed for the use of the Committee on Foreign Relations
       
       
       
       
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             U.S. GOVERNMENT PUBLISHING OFFICE 
40-426 PDF            WASHINGTON : 2020 
                         
                         


                 COMMITTEE ON FOREIGN RELATIONS        

                JAMES E. RISCH, Idaho, Chairman        
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               BENJAMIN L. CARDIN, Maryland
CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
MITT ROMNEY, Utah                    CHRISTOPHER A. COONS, Delaware
LINDSEY GRAHAM, South Carolina       TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia              CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
ROB PORTMAN, Ohio                    EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky                  JEFF MERKLEY, Oregon
TODD, YOUNG, Indiana                 CORY A. BOOKER, New Jersey
TED CRUZ, Texas
              Christopher M. Socha, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        



              SUBCOMMITTEE ON WESTERN HEMISPHERE,        
       TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,        
            HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES        

                 MARCO RUBIO, Florida, Chairman        
ROB PORTMAN, Ohio                    BENJAMIN L. CARDIN, Maryland
TED CRUZ, Texas                      TOM UDALL, New Mexico
CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia





                              (ii)        

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Rubio, Hon. Marco, U.S. Senator From Florida.....................     1

Cardin, Hon. Benjamin L., U.S. Senator From Maryland.............     3

Filipetti, Carrie, Deputy Assistant Secretary, Bureau of Western 
  Hemisphere Affairs, U.S. Department of State, Washington, DC...     6
    Prepared statement...........................................     8

Glenn, Richard H., Deputy Assistant Secretary, Bureau of 
  International Narcotics and Law Enforcement Affairs, U.S. 
  Department of State, Washington, DC............................    10
    Prepared statement...........................................    12

Haeni, Jeffrey, Acting Deputy Assistant Administrator, Bureau for 
  Economic Growth, Education and Environment, U.S. Agency for 
  International Development, Washington, DC......................    18
    Prepared statement...........................................    20

Lechleitner, Patrick J., Assistant Director for International 
  Operations and Homeland Security Investigations, U.S. 
  Immigration and Customs Enforcement, Washington, DC............    22
    Prepared statement...........................................    24

Thompson, Regina E., Deputy Assistant Director, Criminal 
  Investigative Division, Federal Bureau of Investigation, 
  Washington, DC.................................................    27
    Prepared statement...........................................    29

              Additional Material Submitted for the Record

Responses of Carrie Filipetti to Questions Submitted by Senator 
  Benjamin L. Cardin.............................................    43

Responses of Carrie Filipetti and Richard H. Glenn to Questions 
  Submitted by Senator Benjamin L. Cardin........................    45

Responses of Richard H. Glenn to Questions Submitted by Senator 
  Benjamin L. Cardin.............................................    48

Responses of Jeffrey Haeni to Questions Submitted by Senator 
  Benjamin L. Cardin.............................................    49

Responses of Patrick J. Lechleitner to Questions Submtted by 
  Senator Benjamin L. Cardin.....................................    60

The Committee Received No Responses From Ms. Regina E. Thompson 
  for the Following Questions Submitted by Senator Benjamin L. 
  Cardin.........................................................    64

Miami Herald Article Submitted by Senator Benjamin L. Cardin.....    66

Venezuela, The Smugglers' Paradise Article Submitted by Benjamin 
  L. Cardin......................................................    71

Global Witness Statement Submitted by Benjamin L. Cardin.........    75


                             (iii)        


  ILLICIT MINING: THREATS TO U.S. NATIONAL SECURITY AND INTERNATIONAL 
                              HUMAN RIGHTS

                              ----------                              


                       THURSDAY, DECEMBER 5, 2019

                               U.S. Senate,
 Subcommittee on Western Hemisphere, Transnational 
Crime, Civilian Security, Democracy, Human Rights, 
                         and Global Women's Issues,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:08 a.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio 
presiding.
    Present: Senators Rubio [presiding], Cruz, and Cardin.

            OPENING STATEMENT OF HON. MARCO RUBIO, 
                   U.S. SENATOR FROM FLORIDA

    Senator Rubio. The Senate Foreign Relations Subcommittee on 
the Western Hemisphere, Transnational Crime, Civilian Security, 
Democracy, Human Rights, and Global Women's Issues will come to 
order. We have the longest name. We've got to come up with an 
acronym.
    Anyway, the title of the hearing is, ``Illicit Mining and 
Threats to Our National Security, and the Threat to Human 
Rights.''
    I want to thank the ranking member. Our offices collaborate 
on a number of issues; in fact, on a lot of issues. But in 
particular with regard to this hearing, they've been great in 
terms of securing the panel of witnesses and so forth.
    I also want to acknowledge the investigative reporting of 
the Miami Herald, which shined a light on this issue last year 
and in particular how it related to how illegally mined gold 
was being transacted out of South Florida.
    Last year I had the chance to visit the Summit of the 
Americas in Peru, and I visited our embassy staff, which 
briefed me and my staff on the environmental and ecological 
impacts of illegal mining in Peru, and on the ongoing efforts 
to fight these activities, which are associated with crime, and 
I was really impressed with their work. I was also shocked to 
see the scale of this activity that's ongoing in so many 
places, not just Peru.
    Illicit mining is a very lucrative business. In fact, at 
times it's far more lucrative than drug trafficking. So during 
this hearing we're going to hear directly from experts in our 
government about the negative impacts of illegal mining and 
about all the criminal activities that surround it, such as the 
trafficking of firearms and explosives, human smuggling and 
trafficking; and, of course, it's also very valuable for money 
laundering.
    Mining is an important income-generating industry for many 
countries in the Western Hemisphere. In 2016, Latin America 
produced 20.5 percent of global gold output, and supplied 58 
percent of U.S. gold imports. According to these sources, like 
the 2016 Minerals Yearbook, the production leads to water 
contamination, it leads to mercury and cyanide releases, 
deforestation and ecosystem damage. That actually is according 
to a report called the Wires Act of 2017.
    This mining has also been linked, in addition to those 
environmental damages, to human rights abuses, and that 
includes the displacement of the local populations from the 
areas being mined. It's led to human trafficking and forced 
labor, and even prostitution.
    Illegal gold mining's effects are not limited to the 
communities outside of the United States. They are, in fact, a 
direct threat to our interests. Criminal organizations that 
traffic in illicit gold, for example, operate right here in the 
United States. Unfortunately, my home community in my home 
state of Florida, South Florida, has become a major entry point 
for this activity.
    It's refined, it's made into jewelry or placed into our 
electronics, and then it's sold to U.S. consumers, much of it, 
if not all of it, untraceable. Criminal organizations are using 
these anonymous shell companies to help launder funds that are 
associated with illicit mined gold into the U.S. The Miami 
Herald reported last year that in Latin America, ``criminals 
see mining and trading precious metals as a lucrative growth 
business carefully hidden from U.S. consumers who flaunt gold 
around their necks and fingers but have no idea where it comes 
from or who gets hurt.''
    Illegal mining operates outside the law, and because it 
does, international conventions and mining industry guidelines, 
things that control toxic mining processes, inputs like cyanide 
and mercury, are ineffective. Law enforcement presence in these 
areas is often weak, too. That's due to corruption, but also 
due to state resource constraints and the remoteness of these 
mining sites, and deforestation is directly linked to illicit 
gold mining, particularly extensive in the Amazon region, and 
has contributed to widespread damage within tropical rain 
forests.
    I'm focusing here today on Latin America in particular 
given its proximity to our borders and its direct threat to our 
security and our interests. Specifically, countries like 
Venezuela, Peru, and Colombia continue to have major problems 
with illicit mining activity. This remains a major key factor 
of instability as you have criminal networks violating 
international standards of human rights within their borders. 
In 2016, the government of Peru declared a temporary state of 
emergency on widespread mercury poisoning in Madre de Dios, an 
area in which four or five adults tested positive for high 
levels of mercury.
    In 2017, Colombia's Comptroller General reported that 80 
percent of all mining activity in Colombia was illicit. Experts 
estimate that these groups may annually earn as much as $2.4 
billion from illegal mining, 3 times the value of Colombia's 
cocaine production.
    Our State Department describes illegal gold mining in Latin 
America as ``a direct threat to U.S. national security and to 
the integrity of the U.S. and international financial system.''
    I want to commend the government of Peru, who at the 
beginning of this year began a comprehensive plan against 
illegal mining in that region I just mentioned earlier, in 
Madre de Dios, and in September of 2019 Colombian President 
Duque convened a regional group of leaders to coordinate action 
to prevent further Amazon rainforest destruction. Various other 
countries have responded by creating policies or laws 
controlling mining, including a permanent ban which is now in 
place in El Salvador.
    In March of 2019 the Treasury Department imposed sanctions 
on Venezuelan state-run gold mining company Minerven for 
engaging in illicit transactions that have supported the 
illegitimate regime of Nicolas Maduro. But the willing 
countries that are trying to help us need to be equipped with 
the necessary tools to combat this illicit activity. Mining 
firms in countries can apply guidelines to reduce human rights 
abuses, environmental degradation, and other negative impacts. 
There is a major human toll if we do not get control of this 
problem, and I look forward to hearing your responses to 
questions.
    What I really want to focus on today is how do we mitigate 
the impact that illegal gold mining has on the health and human 
rights of indigenous groups residing in these regions; how has 
the presence of sex trafficking in and around mines driven the 
recent sharp rise in HIV/AIDS cases and deaths in the region; 
what can the U.S. do to play a leading role in countering 
illegal mining in our hemisphere and beyond. It's my hope that 
we can shed some light on this important issue and these 
important questions.
    I want to now recognize my colleague, the ranking member, 
Senator Cardin.

             STATEMENT OF HON. BENJAMIN L. CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Well, let me thank Chairman Rubio for his 
leadership on this and for calling this hearing. I want to 
thank all of our witnesses for being here today as we try to 
deal with this issue.
    The chairman mentioned the article that appeared in the 
Miami Herald entitled ``Dirty Gold, Clean Cash.'' I would ask 
unanimous consent that that article could be made part of our 
record.
    Senator Rubio. Without objection.

    [The information referred to is located at the end of the 
hearing]

    Senator Cardin. I would also ask consent that the article 
in regards to ``Organized Crime Controls Gold: Exploitation in 
Venezuela,'' be made part of this record; and also ask consent 
that the statement from Global Witness be made part of our 
record.

    [The information referred to is located at the end of the 
hearing]

    Senator Cardin. They all underscore the point the chairman 
made, that illicit mining fuels corruption, conflict, human 
rights abuses, and threatens the United States' national 
security.
    We can give many examples. I'll just give one global 
example of this. In Burma, the Burma jade trade is well known 
as being the financial source for the Burmese military and 
their activities, and recently we've seen it used in regards to 
the Rohingya crisis. So the Burmese gems are now known as 
``genocide gems.'' I want to complement Cartier and Tiffany for 
not purchasing jade that's sourced from Burma.
    In Latin America, over 20 percent of the world's gold 
supply comes from Latin America. Fifty-eight percent of U.S. 
gold imports come from those countries. The challenge is it's 
virtually impossible for us to be able to identify with 
certainty the source as to where that gold is coming from, so 
we could very well be supporting this illicit mining activity.
    The State Department, as the chairman stated, and I'm going 
to repeat exactly what he said, the quote, because it's kind of 
chilling, that ``illicit mining is a direct threat on U.S. 
national security and the integrity of the United States' and 
international financial systems.'' So we're at risk.
    There's also a great deal of evidence that in our 
hemisphere, that we're going from narco-trafficking to illegal 
mining. And what is really frightening is that those criminal 
elements are finding it more profitable in the mining than they 
did in narcotics. There are estimates that in the Andes $2.4 
billion a year is earned in illicit mining, which is 3 times 
more than they were able to earn in cocaine trafficking.
    So what do we do about this? I mean, I think that's the 
challenge. We know we have a problem; what do we do about it?
    It should start with U.S. leadership. And quite frankly, 
Mr. Chairman, I think there's a very easy way for us to start. 
There is an international coalition known as the Extractive 
Industries Transparency Initiative, EITI, which is, I would 
suggest, a minimal effort to make sure that we have 
transparency, because we know in many cases these resources are 
in countries that are relatively poor even though they're 
resource rich. And the resource becomes a resource curse 
because it's used to fund corruption rather than the wealth of 
the country.
    The EITI is an effort to try to get at that by adding 
transparency, and the United States should be a leader. 
Instead, President Trump has removed the United States as an 
implementing country. We need to reverse that. That was a 
mistake. It's an easy one, I think, for us to show our 
leadership in regards to dealing with transparency on 
extractive industries.
    Fighting corruption at the highest levels of government and 
industry should be a cornerstone of U.S. foreign policy because 
it impacts our national security and it's who we are as a 
nation. Two pieces of legislation I authored, Section 1504 of 
the Dodd-Frank Act and the Global Magnitsky Act, work hand in 
hand to fight exactly that type of corruption that leads to the 
proliferation of illicit economic sectors all over the world.
    I want to talk a moment about Section 1504, also known as 
the Cardin-Lugar anti-corruption provisions, requiring foreign 
and domestic oil and mining companies listed on the U.S. Stock 
Exchange to disclose their payments to governments, including 
tax payments. The late Senator Lugar was a great champion of 
1504, which essentially gives us the information, and civil 
societies the evidence they need to hold leaders accountable 
for what's happening to their mineral wealth. That part of 
Dodd-Frank instructed the Securities and Exchange Commission to 
write implementing rules for the law.
    Well, it took them many years to get it done. They finally 
got it done, they issued the rules, and then the Trump 
administration came into power and one of the first things that 
they supported was a Congressional Review Act that removed that 
regulation from taking effect. Unfortunately, my Republican 
colleagues supported that.
    Now, remember the debate during that discussion. They felt 
the rule was overly broad and that we would have a new rule. 
Well, it's 2 years later, or 3 years later now, and we're still 
waiting for that rule.
    So we have a law, it's the law of the land, but we still 
don't have the implementing regulations issued by the SEC. But 
thankfully, the EU, Norway, and Canada all modeled their 
disclosure laws on Section 1504, and because of these efforts 
we've seen companies like Exxon exposed for their bad-faith 
dealings with corrupt government actors in the extractive 
industries.
    So because we now have stock exchanges that require it, we 
are moving in that direction. It was U.S. leadership that 
provoked that activity, but the United States is now behind. 
Major oil companies such as Shell, BP, Total, Eni, and BHP also 
raise capital on the U.S. Stock Exchange to support the global 
standard now enforced in 30 countries and have written to the 
SEC to adopt similar rules. I hope we can get this done. We 
need a strong rule in the spirit of 1504 that will help, and I 
would hope we would have support on both sides of the aisle to 
get this done.
    The Global Magnitsky Act also establishes the U.S. 
government to go after and enforce sanctions against corrupt 
actors. I encourage the administration to use this as a tool to 
create greater accountability in the illicit mining sector.
    So I think we have some steps that we've already taken. The 
chairman mentioned some countries that have stepped forward and 
are doing some positive things. We know we have a problem. 
Let's work together to solve this problem and get the United 
States in the leadership in dealing with the extractive 
industries so that the resources of a nation can truly be a 
blessing rather than a curse.
    I look forward to hearing from our witnesses.
    Senator Rubio. Thank you.
    Let me introduce the panel here, quickly.
    Ms. Carrie Filipetti is the Deputy Assistant Secretary in 
the Bureau of Western Hemisphere Affairs.
    Mr. Richard Glenn is the Deputy Assistant Secretary in the 
Bureau of International Narcotics and Law Enforcement Affairs 
at the State Department.
    Mr. Jeffrey Haeni is the Acting Deputy Assistant 
Administrator in the Bureau for Economic Growth, Education, and 
Environment at the U.S. Agency for International Development.
    Mr. Patrick Lechleitner is the Assistant Director for 
International Operations and Homeland Security Investigations 
at U.S. Immigration and Customs Enforcement.
    And Ms. Regina Thompson is the Deputy Assistant Director at 
the Criminal Investigation Division of the FBI.
    We want to thank all of you for being here.
    We'll start from right to left with you, Ms. Filipetti. 
Thank you.

  STATEMENT OF CARRIE FILIPETTI, DEPUTY ASSISTANT SECRETARY, 
BUREAU OF WESTERN HEMISPHERE AFFAIRS, U.S. DEPARTMENT OF STATE, 
                         WASHINGTON, DC

    Ms. Filipetti. Thank you, Chairman Rubio, Ranking Member 
Cardin. We greatly appreciate the opportunity to appear before 
you today to show the concerns of the State Department 
regarding illicit mining.
    While my colleagues are going to describe the impact of 
this practice on the region, today I'm going to focus on 
Venezuela, where illicit mining perpetuates a horrific cycle 
of, as you said, corruption, violence, human rights abuses, 
disease, and ecological devastation.
    As we know, Venezuela is a land blessed with immeasurable 
resources. We often speak about Venezuelan oil, but their 
resources extend far beyond that. Venezuela holds vast deposits 
of gold, precious minerals, and resources like coltan, which is 
used in manufacturing electronics. In fact, Venezuela's mining 
arc, or Arco Minero as it is called, comprises 12 percent of 
Venezuela's entire land mass, making it larger than Cuba, 
Portugal, or Panama.
    Security is perhaps one of the most significant concerns 
when it comes to illicit mining, which we estimate makes up 
approximately 91 percent of all mining coming out of Venezuela. 
Prison gangs known as pranes colectivos, and ELN members and 
FARC dissidents, are all active in the mining arc. In many 
places these individuals maintain power over the mines 
themselves, over transit routes, or over the resources required 
to successfully mine, including mercury. This, along with their 
use of force, gives these gangs broad power over the 
communities living near the mines, in many cases making them 
dependent on the violent whims of these illegal groups for 
food, medicine, and a livelihood.
    This leads to another threat, how illicit mining benefits 
the Maduro regime. The regime is determined to retain power, 
and it needs money to do so. This is a large reason why we have 
implemented sanctions, to cut off these sources of financial 
income and prevent the oil industry, for example, from being 
exploited for patronage. But since the regime lacks both the 
will and the capacity to stop people from exploiting mines, it 
facilitates its allies' access to mining revenue, and in so 
doing reinforces the loyalty of those allies.
    And there are many innocents who are victims of this 
violent, corrupt network. There are, of course, the indigenous 
communities, as you both mentioned, who are disproportionately 
affected by illicit mining thanks to their high populations in 
the heavily mined states of Zulia, Amazonas, and Bolivar.
    There are also those victims who are lured to the mines out 
of desperation. Many are subsequently exploited in forced labor 
or sex trafficking, including children, compelled through 
violence and fear by the groups running the mines.
    In addition, trafficking in persons and sexual exploitation 
at mining camps has created significant spikes in HIV and AIDS.
    A horrifying example is that of Leocer Jose Lugo, a former 
member of the Venezuelan military who was drawn to a mine in 
Bolivar for work. When the gang he was working for discovered 
that he had previously worked for the armed forces, the 19-
year-old was tortured and left for dead. They cut out his 
tongue and they made him swallow it, and when that wasn't 
enough they amputated his hands and they gouged out his eyes.
    Leocer Jose Lugo is not the only example. Bolivar State is 
tragically the site of countless mass graves for an unknown 
number of victims, leaving National Assembly Deputy Angel 
Medina noting just last week that there have been over 40 
massacres in the State of Bolivar alone since 2016.
    But it is not just the violence that is a threat to the 
population. Among the other health risks are mercury poisoning 
and mosquito-borne diseases, particularly malaria. As a 
reminder, in 1961 Venezuela was the first country in Latin 
America to have eradicated malaria in the majority of its 
territory. Now, largely due to the collapsed public health 
system, the Maduro regime's incompetence, and the illicit 
mining industry, the WHO reported that Venezuela had the fourth 
highest malaria rate in the entire world between January and 
October of this year.
    And with respect to mercury, a powerful neurotoxin used in 
the extraction of gold, a test performed in mining communities 
recently showed that over 90 percent of people working in the 
mines in Bolivar had unsafe concentrations of mercury in their 
urine, with effects also reaching 87 percent of women and 68 
percent of children.
    Now, this poisoned water harms both humans and the earth, 
as does the immeasurable amount of drilling and deforestation 
these practices require. They have wrought vast ecological 
damage to the vital Amazonian landscape, including portions of 
it that were supposedly protected, turning this beautiful 
ecologically significant landscape into the latest victim of 
the Maduro regime.
    The crisis in Venezuela has led to the flight of over 4.6 
million refugees, the collapse of a once prosperous country's 
educational, economic, industrial, and health care systems, and 
the depravation of fundamental freedoms for tens of millions. 
Illicit mining is a key part of this story and one that needs 
to be better told.
    This is why we deeply appreciate the opportunity to brief 
on the subject this morning. It's also why we have focused on 
imposing costs for engaging in the mining sector, both for the 
Maduro regime and for those foreign countries like Russia, 
China, and Turkey whose partnerships on illicit mining have 
enabled this horrific human and ecological devastation. It is 
why in March of this year the Treasury Department announced 
sanctions designations against the Venezuela state-owned gold 
industry, and it is why we stand in support of the National 
Assembly, the only remaining democratic institution in 
Venezuela, which has issued resolutions calling out the abuses 
of the mining industry and declaring contracts with the 
industry null and void.
    Of course, our key focus is in uprooting the cause, the 
Maduro regime. A swift political transition is the single best 
and most effective way to reduce these and other abuses, and 
this remains the focus of the Department of State and our 
efforts on Venezuela.
    Thank you very much for the opportunity to bring awareness 
of this important issue. I look forward to the questions.
    [The prepared statement of Ms. Filipetti follows:]

                 Prepared Statement of Carrie Filipetti

    Chairman Rubio, Ranking Member Cardin, distinguished Members of the 
Subcommittee; thank you for the opportunity to appear before you today 
to share the concerns of the U.S. Department of State regarding illicit 
mining. While my colleagues have described the impact of this practice 
on the region as a whole, today I will focus my remarks on Venezuela, 
where illicit mining perpetuates a horrific cycle of criminality and 
both human and ecological abuse. In this cycle, lawless, ungoverned 
territories are taken over by armed and violent criminal and terrorist 
groups who strip Venezuelans, including many members of indigenous 
communities, of their land, their dignity, and often their lives, 
subjecting them to unsanitary conditions that have reversed decades of 
progress in combatting disease, poisoning their water supply with 
unsafe quantities of chemicals involved in the mining process, and 
destroying thousands of square kilometers of the Amazon.
    Recognizing its incompetence in removing this threat, the Maduro 
dictatorship has begun to capitalize off of it, trading guns, cash, and 
control for loyalty to the regime.
    Illicit mining is a therefore a perfect storm of criminality and 
corruption, and is a critical threat to the security, governance, 
cultural heritage, human rights, health, and ecology of Venezuela.
                        what is the mining arc?
    Venezuela is a land blessed by immeasurable resources. Sitting on 
the world's largest known oil reserves, petroleum fueled Venezuela's 
rise. But Venezuela's riches extend far beyond oil.
    Venezuela holds vast deposits of gold, diamonds and precious 
minerals, and resources like coltan, which is used in manufacturing 
batteries, cars, planes, and electronics. It is estimated that there 
are over 45 types of minerals, as well as one of the world's largest 
gold reserves in Venezuela's Mining Arc. This ``Arco Minero,'' as it is 
called, is almost 112,000 square kilometers, making it 12 percent of 
Venezuela's entire landmass and larger than Cuba, Portugal, or Panama. 
But it is not just the size that matters--it is location. The 
territories with the largest reserves of these minerals are Zulia, 
Bolivar, and Amazonas, three states that are known not just for their 
mineral reserves but because of their high population of indigenous 
communities and because they are some of the most biologically diverse 
and ecologically significant lands in all of Venezuela. The resources 
in these states could greatly benefit the Venezuelan people, and 
highlight the beautiful cultural and biological diversity of the 
country. Instead, illicit extraction of these resources is generating 
profits that help prop up the illegitimate Maduro regime and leaves in 
its wake lawless, ungoverned territory managed by non-state armed 
groups, horrific human rights abuses, and vast ecological devastation.
       security: armed and violent criminal and terrorist groups
    I began noting threats posed by Venezuelan illicit mining. The 
first is the core of the problem: Security. Illicit mining makes up an 
estimated 91 percent of all mining coming out of Venezuela, and it 
provides a unique opportunity for illegal armed and violent criminal 
groups, including terrorist entities like the ELN and FARC, to cement 
their grip on power thanks to the profitability, permissive 
environment, and increasing government focus on mining as a substitute 
to oil profits. Prison gangs known as pranes, decentralized, pro-
government gangs known as colectivos, and ELN members and FARC 
dissidents are all active in the mining arc. In many places, these 
individuals maintain power over the mines themselves, over the transit 
routes, or over the resources required to successfully mine, including 
mercury. This, along with their use of force, often gives these gangs 
broad power over the communities living near the mines, in many cases 
making entire communities dependent on the violent whims of these 
illegal groups for food, medicine, and a livelihood.
              governance: maduro regime patronage network
    This leads to another major threat: Governance. Illicit mining 
directly undermines our policy in Venezuela by enabling a patronage 
network that secures loyalty for the Maduro regime. The regime is 
determined to retain power, and it needs money to do so. This is a 
large reason why we have implemented sanctions--to cut off those 
sources of financial income and prevent the oil industry from being 
exploited for patronage. Since the regime lacks both the will and the 
capacity to stop people from exploiting mines, it facilitates its 
allies' access to mining revenue--and, in doing, reinforces the loyalty 
of those allies. In this way, the gangs, the military, and the 
government officials continue to receive largesse from the Maduro 
regime--a largesse that would otherwise have been successfully cut off 
via our petroleum and other sanctions.
      human rights abuses: trafficking, torture, and intimidation
    It is not these threat networks alone that are of concern. So, too, 
is the violence that stems from this system of corruption and 
patronage. As noted, these gangs have a monopoly on force in these 
regions, which are disproportionately populated by indigenous 
communities. According to the last census in Venezuela in 2011, only 
about 2.8 percent of the total population in Venezuela were from 
indigenous communities. In Zulia state, however--which is the capital 
of coal mining in Venezuela--indigenous communities like the Wayuu make 
up over 61 percent of the total population. Likewise, in Amazonas, 
there are over 20 ethnic groups, including the Yanonmami, and in 
Bolivar, communities like the Pemon, the Piaroa, and the Penare make up 
7.5 percent of the total population.
    Bolivar state is a devastating example of the human rights abuses 
committed in the wake of illicit mining. Like in many mining regions, 
human rights organizations cite a complete absence of government 
presence in Bolivar, leaving its residents subject to the order imposed 
under the non- state armed groups I've just described.
    In the context of Venezuela's complex humanitarian emergency, 
people are lured to the mines out of desperation. Some arrive in search 
of anti-malarial medication, the distribution of which is controlled in 
large part by armed groups surrounding the mines. Others arrive seeking 
to pay for medical care or basic subsistence. Many are subsequently 
exploited in forced labor or sex trafficking, compelled through 
violence and fear by the group running the mine. There has been 
reporting that in some regions, the average age of those being sex 
trafficked is 13-14 years old.
    Some victims have described facing a 2-day period of interrogation 
upon arrival and, if accepted to work the mines, are warned of 
consequences of not following the rules including gang rape, 
mutilation, and a slow, painful death. The Department of Labor's 
Findings on the Worst Forms of Child Labor reports that children are 
engaged in gold mining production.
    Venezuelan NGO Centros Comunitarios de Aprendizaje (Cecodap) has 
reported that children travel with their parents to mining areas to 
perform activities related to gold mining.
    Leocer Jose Lugo was a former member of the Venezuelan military, 
drawn to the Yin Yan mine in Bolivar for work. When the gang he was 
working for discovered he had once been a member of the armed forces, 
the 19-year-old was tortured and left for dead. They cut out his tongue 
and made him swallow it, amputated his hands, and gouged his eyes.
    Bolivar is also, tragically, the home of countless mass graves for 
an unknown number of victims. Testimony from one victim states that 
when the non-state armed groups first arrived, individuals who had run 
afoul of the armed group were murdered in the jungle, never to be seen 
again. But in recent years, the tortures and mutilations are made 
public, like those of Leocer Jose Lugo, to serve as a warning to 
others. Those who stand witness to this criminal economy are silenced 
by the fear that they or their loved ones may end up harassed, 
tortured, or murdered. National Assembly Deputy Angel Medina noted just 
last week that there have been over 40 massacres in the state of 
Bolivar alone since 2016, and U.N. High Commissioner for Human Rights 
Michelle Bachelet noted the alarming scope of ecological devastation of 
illicit mining and the adverse effect on the lives of indigenous 
communities in her July report.
                 health: reversing decades of progress
    This leads to another victim of illicit mining: human health. Two 
of the most serious concerns are mercury poisoning and mosquito-borne 
diseases--particularly malaria. Because of the rapid expansion of 
mining in the region, we have reports of waterways like the Orinoco 
river, a main water source for many indigenous communities, 
contaminated with mercury, a powerful neurotoxin that is used to 
extract gold. Tests performed in mining communities across Bolivar 
state found that over 90 percent of people working in the mines showed 
unsafe concentration of mercury in their urine, with effects also 
reaching 87 percent of women and 68 percent of children.
    Mercury is not the only health concern caused by illicit mining. 
Men, women, and children involved in gold mining are exposed to 
accidents and injuries as a result of this activity.
    Trafficking in persons and sexual exploitation at mining camps has 
created spikes in HIV/AIDS as well as exponential increase of malaria, 
diphtheria, chikunguna, yellow fever, and dengue fever cases due to the 
large amounts of standing water at illicit mining sites. This is 
especially poignant when you recall the incredible achievements 
Venezuela once had in confronting these diseases. Back in 1961, 
Venezuela was praised as the first country in Latin America to have 
eradicated malaria in the majority of its territory. Now, largely due 
to the collapsed public health system and the illicit mining industry, 
the WHO reported over 323,392 malaria cases in Venezuela between 
January and October of this year, 70 percent of which occurred in the 
heavily mined Bolivar and Amazonas states. This is the fourth highest 
rate in the entire world.
                  ecology: deforestation of the amazon
    This poisoned water harms both humans and the earth, as does the 
immeasurable amount of drilling and deforestation these practices 
require. These practices have wrought vast ecological damage to the 
vital Amazonian landscape. The territory in the mining arc is home to 
over 9,400 flora, 2,100 of which are endemic. And yet, from 2011-2015, 
immediately following the nationalization of the mining sector, over 
2,821 square kilometers were destroyed due to illicit mining. 50 
percent of these territories were in supposedly ``protected'' areas. 
And it has only gotten worse, as the Amazon biome becomes yet another 
victim of the Maduro regime.
                             u.s. approach
    The crisis in Venezuela has led to the flight of over 4 million 
refugees, the collapse of a once prosperous country's educational, 
economic, industrial, and healthcare systems, and the deprivation of 
fundamental freedoms from tens of millions. Illicit mining is a key 
part of this story, and one that needs to be better told. To do so is, 
however, challenging: We only know of these heinous acts because of 
members of Venezuela's civil society who put themselves in harm's way 
to research and document these horrors. They do so at great personal 
risk, and we are forever grateful for their service and sacrifices.
    For our part, we will not stand idly by. We have responded to these 
concerns, primarily through executive authorities that allow us to 
sanction individuals, entities, and sectors in Venezuela. In March of 
this year, the Treasury Department announced specific sanctions 
designations against the Venezuelan state-owned gold sector company, 
MINERVEN and its president Adrian Antonio Mata. To date, we have 
sanctioned over 200 individuals and entities in Venezuela.
    We are also focused on imposing costs on those foreign partners, 
including Russia, China, and Turkey, whose partnerships on illicit 
mining have enabled this horrific human and ecological devastation. And 
we stand in support of the National Assembly, Venezuela's only 
remaining democratic institution, which has passed several resolutions 
related to the mining region, including one on November 12 prohibiting 
gold contracts, one on September 3 tying non-state actors to illegal 
mining, and one last month creating a committee to investigate the 
abuses and corruption of the mining region. We stand ready to receive 
the findings of this National Assembly committee once complete, and 
will take appropriate action to help bring this nefarious activity to 
an end.
    Of course, our key focus is on uprooting the cause: the Maduro 
regime. A swift political transition is the single best and most 
effective way to reduce these and other abuses. And this remains the 
focus of the Department of State in our efforts on Venezuela.
    Thank you for the opportunity to bring awareness of this important 
issue. I look forward to the Committee's questions.

    Senator Rubio. Thank you.
    Mr. Glenn.

  STATEMENT OF RICHARD H. GLENN, DEPUTY ASSISTANT SECRETARY, 
BUREAU OF INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS, 
            U.S. DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Glenn. Chairman Rubio, Ranking Member Cardin, good 
morning and thank you for your interest in this vital issue. 
I'm here this morning to speak to you about our efforts at the 
State Department's Bureau of International Narcotics and Law 
Enforcement Affairs to combat illicit mining in the Western 
Hemisphere.
    It is a global concern that in our hemisphere it is most 
prevalent in Bolivia, Brazil, Colombia, Ecuador, Guyana, 
Mexico, Nicaragua, Peru, Suriname, and Venezuela. That's a good 
number of countries. Illegal mining fuels organized crime and 
narco-trafficking, corruption, trafficking in persons, 
violence, and environmental destruction.
    Transnational criminal organizations, which I will refer to 
as TCOs, threaten the national security and prosperity of the 
United States by using gold, mostly mined illegally in remote 
areas in South America, to launder illicit profits through the 
U.S. financial system. For the purposes of this hearing I will 
focus most of my words on Peru since it is the largest producer 
of gold in Latin America and the sixth largest in the world.
    Mr. Chairman, you and I were in Peru at the same time last 
year and got a brief from our embassy staff on the depth of 
destruction in the Amazon jungle due to illegal mining. 
Deforestation associated with illegal mining destroys rain 
forests or has destroyed rain forests equivalent to the size of 
7 times the City of Miami in just the region of Madre de Dios. 
I brought in some pictures here that we will submit for the 
record. I think seeing such images helps us better understand 
the enormity of the challenge we face.
    As our neighbors in the hemisphere cracked down on the 
narcotics industry, TCOs began to move into the under-regulated 
gold mining sector as it offers lucrative incentives. Experts 
believe that a third of the gold leaving Peru is illegally 
mined. In 2019, Peru's Financial Intelligence Unit found that 
illegal gold mining emerged as the largest source of money 
laundering, at more than double the amount of narcotics.
    Once gold is mined, it is difficult to trace its origin. 
Criminals use cash or wire transfers to pay for gold, which 
makes transactions essentially anonymous. Lax registration 
procedures or falsified records allow criminal groups to set up 
companies to buy gold used to launder funds and enter the 
legitimate supply chain.
    Like most criminals, illegal mining thrives where there is 
little state presence. Major drug production locales in the 
hemisphere overlap with illegal gold mining areas. The routes 
used to smuggle drugs and precursor chemicals are also used to 
smuggle gold, humans, supplies, and equipment used for illegal 
mining.
    In addition to financing activities and controlling the 
labor, TCOs also buy illegal gold and launder their money 
through gold consolidators, defunct mines, semi-refiners, and 
shell companies. To combat this threat, the State Department 
helps partner nations disrupt criminal networks responsible for 
illegal mining and its associated crimes. We reinforce 
transparent and traceable supply chains for gold and eliminate 
the use of mercury. We recently signed an MOU with Peru just 2 
years ago, in 2017, to combat illegal gold mining and its 
deleterious effects on the rule of law, of human rights, and 
the environment.
    Since the MOU was signed, we have funded trainings for 
prosecutors to build complex environmental cases and to set up 
a forensic laboratory with advanced technology to detect 
mercury and map crime scenes. Our assistance is helping the 
government of Peru take action. In February of this year they 
launched Operation Mercury to evict illegal miners from Madre 
de Dios. This operation has led to subsequent interdictions 
around the country, as well as a 92 percent reduction in rates 
of deforestation caused by illegal mining in the Madre de Dios 
area.
    We recognize illegal mining is a threat and effective 
response requires strengthening law enforcement and regulatory 
capacity of partner nations and improving regional 
coordination. We recently established a project with the 
Organization of American States to strengthen the national and 
regional systems that combat illegal mining financial 
structures and enhance regional collaboration. Working with 
financial intelligence units and customs and immigration 
authorities, the project will increase investigations and 
convictions of crimes related to illegal mining.
    While we have made progress, stronger action is needed to 
stop the trafficking of illegal gold through U.S. ports of 
entry and to target bad actors at home and abroad. We must 
continue to advance our shared interests through a coordinated 
interagency approach, with an eye toward developing greater 
cross-border collaboration.
    Our hemispheric collaboration is essential to disrupting 
these criminal networks, reducing the demand for human 
trafficking, and preventing illegally mined gold from entering 
the U.S. and international markets.
    Chairman Rubio, Ranking Member Cardin, thank you again for 
the opportunity to appear before you today. I look forward to 
your questions.
    [The prepared statement of Mr. Glenn follows:]

                 Prepared Statement of Richard H. Glenn

    Chairman Rubio, Ranking Member Cardin, distinguished Members of the 
Subcommittee; thank you for the opportunity to appear before you today 
to discuss the work of the Bureau of International Narcotics & Law 
Enforcement Affairs (INL) at the U.S. Department of State to combat 
illicit mining. Mining in violation of the laws of the nation in which 
the activity occurs often takes place in remote areas, and is difficult 
to police, which leaves opportunities for organized criminal groups to 
carry out this activity. Transnational criminal organizations (TCOs), 
including drug trafficking organizations (DTOs), and insurgent groups 
use gold, mostly mined illegally in South America, to reap billions in 
illicit profits that further bolster their strength and long-term 
viability. They also use gold trafficking as a mechanism to launder 
profits from other illicit activities. Illicit mining threatens the 
national security and prosperity of the United States and our partners 
throughout Latin America by compromising the lawful gold supply chain 
and exploiting the U.S. financial system for illegal gain.
    TCOs take advantage of a lack of state presence, corruption, and 
weak rule of law. They implement an efficient, low-risk business model 
that complements their traditional focus on narcotics production and 
trafficking. TCOs use illicitly mined gold to launder criminal proceeds 
by selling illegally mined gold to legal supply chains, which then 
exports it to refineries in the United States, China, India, the United 
Arab Emirates, Switzerland, and Italy. This scheme provides TCOs clean 
cash with high profits at low risk. In addition, illegal gold mining 
operations enable human trafficking; endangers public health; and 
destroys natural resources.
            illegal gold largest source of money laundering
    In the last 10 to 15 years, some TCOs in the Western Hemisphere 
realized gold trafficking can provide them higher and easier returns 
than cocaine trafficking. Gold prices increased significantly between 
2000 and 2012, reaching their peak at $1,895 an ounce between 2011 and 
2012. The heightened focus on counternarcotics operations increased the 
risks for these groups to produce and traffic narcotics and the move 
into the under-regulated gold mining sector offered lucrative 
incentives. One of the main incentives is that it is easy to import 
illegal gold into the United States. For example, although passengers 
must declare currency or monetary instruments such as gold coins, 
valued at $10,000 or greater, non-monetized gold such as gold bars do 
not require the same reporting because it is not considered a monetary 
instrument. As a result, it is legal for a passenger to fly into the 
United States with, for example, 50 pounds of gold bullion, worth $1 
million at today's prices, without providing the same customs 
declaration information required when traveling with $1 million in 
cash. Therefore, the individual passes through customs and does not 
automatically trigger secondary screening.
    Peru is the top gold producer in Latin America and the sixth 
largest in the world. The Global Initiative Against Transnational 
Organized Crime, a network of over 430 independent and regional 
experts, estimates up to 28 percent of the gold leaving Peru is 
illegally mined.
    According to a report released by Verite, a non-profit research 
organization, illegal gold mining generates an estimated $3 billion 
annually in Peru. In 2019, Peru's Financial Intelligence Unit found 
that illegal gold mining emerged as the largest source of money 
laundering, at more than double the amount related to illicit narcotics 
profits.
    Although cocaine production in Colombia has risen to record levels, 
Colombian DTOs, dissidents of the Fuerzas Armadas Revolucionarias de 
Colombia (FARC), and other criminal groups have nevertheless turned 
also to the illegal gold trade. They have made substantial revenue 
through illegally mined gold in recent years and often use it to also 
launder their revenue from drug trafficking. Colombia is the fourth 
largest gold producer in Latin American and 21st largest globally; the 
government estimates over 80 percent of gold mined in Colombia is mined 
illegally. This activity is widespread and coexists with cocaine 
trafficking in some areas controlled by FARC dissidents and other armed 
groups that operate in locations where there is little effective state 
presence, such as remote parts of Antioquia, Choco, Caqueta, Narino, 
and the Amazonas departments.
              tcos control many aspects of illegal mining
    Like most crimes, illegal mining thrives where the state is not 
present. Major drug production locales in the hemisphere overlap with 
major gold mining areas. The routes used to smuggle drugs and precursor 
chemicals are also used to smuggle gold, migrants, and controlled 
mining inputs such as mercury, petroleum, and dynamite. In Peru, family 
clans control these areas and direct illicit activities, such as drug 
production, illegal mining, illegal logging, and human and wildlife 
trafficking, which then feed into transnational criminal networks. With 
the opening of the Trans-Oceanic highway in 2011, illegal mining 
skyrocketed in Peru, particularly in the Amazonian region of Madre de 
Dios. The road has enabled illegal miners to bring heavy machinery, 
laborers, and inputs to set up gold mines there. Since illegal miners 
do not have access to capital through the formal banking sector, they 
often turn to TCOs and other criminal groups for financing. This gives 
TCOs another opportunity to launder drug money through the sale of 
heavy equipment, such as excavators and dredges.
    Residents of mining regions in Peru refer to criminal groups 
operating locally as ``assassins,'' as they are often equipped with 
satellite phones and automatic weapons. In 2017, police in Peru's Madre 
de Dios region uncovered a mass grave with 20 burned bodies thought to 
be the bodies of laborers from illegal mining camps. In addition to 
financing the activities and controlling the labor, TCOs are principal 
purchasers of illegal gold and launder their money through gold 
consolidators, semi-refiners, and shell companies. TCOs have also 
bought long? defunct gold mines to launder additional money by claiming 
the mines are back in production, while passing off purchases of dirty 
gold as their own.
    In Colombia, criminal organizations frequently engage in both 
narcotrafficking and illegal mining operations, as illegally mined gold 
is an efficient mechanism to launder profits from the drug trade. There 
is also a strong connection between illegal mining, forced labor, and 
trafficking-in-persons, which provide miners and sex workers for 
illegal mining camps. In addition, children are engaged in illegal 
mining operations as well as activities related to the supply chains of 
these operations.
            mined gold is easier to transact than drug cash
    Gold's origin is difficult to trace; once gold is melted down, it 
is almost impossible to trace. People often use cash to pay for gold, 
which makes transactions anonymous. Lax registration procedures allow 
criminal groups to set up companies to buy gold used to launder funds. 
Some licensed brokers also purchase illegally mined gold to pad their 
profits. Although gold exporters are required to provide documentation 
citing the gold's origin to ensure its legitimacy, these documents are 
easy to falsify or obtain from corrupt officials and allow illegally 
mined gold to enter the legitimate supply chain.
  illegal mining fuels human trafficking and environmental destruction
    Illegal mining also promotes and is associated with other crimes, 
including sex and labor trafficking. The lucrative nature of illegal 
mining in Peru and Colombia has driven the demand for forced sex and 
labor trafficking, particularly in Peru's Madre de Dios, Puno, and 
Cusco regions. In the annual Trafficking of Person's Report for Peru, 
Embassy Lima reported that traffickers subjected victims to forced 
labor in artisanal gold mines and nearby makeshift camps that provide 
services to miners; traffickers compel victims through deceptive 
recruitment, debt-based coercion, restricted freedom of movement, 
withholding wages, and threats and use of physical violence. The 
International Labor Organization estimates that since 2010, 50,000 
children have been forced to work in the illegal gold mines or 
subjected to sex trafficking in mining camps in the Madre de Dios and 
Puno regions. According to informal reports, mining workers have 
disappeared when attempting to denounce the inhumane working and living 
conditions. Workers have also reported that when trying to separate 
from their employer, they were forced to traffic drugs in order to 
receive their payment.
    Illegal gold mining also has severe environmental consequences. In 
Colombia, gold mining operations frequently use mercury, a potent 
neurotoxin used to extract gold from the sediment, which results in 
severe and long-lasting soil, air, and water pollution. In Peru, 
illegal mining has destroyed a part of the Amazon rainforest equivalent 
to 7 times the size of Miami. The majority of this deforestation has 
taken place within the last 10 years and the pace of destruction is 
quickening. Miners have moved into some of the most biodiverse areas of 
the world, including the Tambopata National Reserve in Madre de Dios. 
The attached images, provided by the U.S. Embassy Lima, represent a 
glimpse of the devastation illicit mining poses on Peru's biodiversity. 
In Peru, Colombia, and other countries with illegal mining, mercury is 
poisoning the rivers and will impact public health for generations. In 
this process, mercury is also being released to the atmosphere where it 
can travel thousands of miles. An estimated 70 percent of mercury 
deposited in the United States comes from global sources. Each year, 
illegal miners in Peru release an estimated 40 metric tons of mercury 
into rivers, soils, and air, which allows it to enter the food chain. 
In 2012, researchers from Stanford University found that 60 percent of 
the fish species and 78 percent of adults in Madre de Dios had mercury 
contamination above EPA limits--in some cases, over 27 times the 
reference limit.
              u.s. collaboration addresses illegal mining
    The United States signed a Memorandum of Understanding (MOU) with 
the governments of Peru and Colombia, in 2017 and 2018 respectively, to 
expand bilateral cooperation to combat illegal mining and minimize its 
negative impacts. The Peru MOU supports over 40 activities that build 
the Peruvian government's capacity to fight TCOs, eradicate illegal 
mining from protected areas, support the development of transparent and 
traceable supply chains for small-scale gold, and eliminate the use of 
mercury from artisanal and small-scale gold mining. Support from INL 
aims to disrupt criminal networks that smuggle migrants, narcotics, 
illegal gold, and controlled chemicals, as well as to prevent illegally 
mined gold from entering the United States and the international 
market.
    Within the framework of the MOU, INL works with other U.S. 
government agencies and the Government of Peru to train the police, 
prosecutors, judges, auditors, and others responsible for investigating 
these crimes and convicting perpetrators. INL provides capacity 
building and mentoring to Peru's Financial Intelligence Unit to 
identify money laundering risks in the mining sector and to take steps 
to raise scrutiny on suspicious transactions linked to illegal mining. 
INL also trains customs authorities at ports and airports on how to 
recognize fraudulent documents to increase seizures of illegal gold 
before it leaves Peru.
    The U.S. Embassy in Lima issued a Commercial Advisory encouraging 
buyers, sellers, traders, and refiners of gold to conduct additional 
due diligence as part of their risk management regimes to account for 
the influx of illegally mined Peruvian gold into existing supply 
chains. It also alerted buyers that illegally mined gold from Peru is 
exported via neighboring countries to obscure its origin and illegality 
before it enters the international market.
    In February 2019, the Government of Peru launched Operation 
Mercury, a whole-of-government operation to evict illegal miners from 
Madre de Dios, the illegal gold epicenter in Peru. The 2-year plan 
began with a 2-week operation, led by 1,200 Peruvian police, 300 
soldiers, and 70 prosecutors, aimed at removing an estimated 6,000 
illegal miners from the La Pampa area of Madre de Dios and establishing 
a semi-permanent government presence in the region to prevent their 
return. INL provided operational support to the Peruvian National 
Police efforts and supported the Attorney General's efforts to set up a 
forensics laboratory in Madre de Dios with advanced technology to 
detect mercury and map crime scenes. The successful operation has led 
to subsequent interdictions around the country, as well as a 92 percent 
reduction in rates of deforestation caused by illegal mining in the 
area. Through the illegal gold mining MOU, INL will increase support 
for Operation Mercury as it enters into a new phase where authorities 
will remain in the region for 2 years to consolidate gains.
    The U.S.-Colombia MOU signed at the 2018 High-Level Dialogue has 
increased joint efforts to combat illegal mining, including detecting 
and eliminating mercury usage. INL provides training as well as field 
and laboratory equipment to Colombian law enforcement entities for 
detecting and supporting prosecution of illegal mining activities for 
environmental damage, including a $1.5 million environmental chemical 
laboratory. INL helps Colombia build institutional capabilities in the 
police, armed forces, office of the attorney general, and judicial 
institutions to detect, investigate, and prosecute environmental 
crimes, as well as money laundering, narcotics trafficking, and other 
organized criminal activity. This year alone, INL's direct operational 
support and the crucial use of INL-supported helicopters have allowed 
the Colombian National Police to seize or destroy more than $4 million 
worth of heavy machinery and other mining equipment belonging to TCOs. 
Through the U.S.-Colombia MOU, INL coordinates with USAID and the Oro 
Legal program, a USAID-funded initiative, which aims to formalize 
small-scale and medium-scale mining operations, reduce mercury use, and 
rehabilitate degraded lands. This coordinated inter-agency approach 
provides a comprehensive set of interventions to address the complex 
challenges associated with illegal gold mining in Colombia.
    INL recognizes that illegal mining is an issue that extends beyond 
individual country borders and that tackling this issue head-on 
requires strong regional networks. In August 2019, INL established a 3-
year project with the Organization of American States (OAS) to 
strengthen the national and regional systems that combat illegal mining 
financial structures and to enhance regional collaboration. Through 
training courses focused on financial intelligence units, customs and 
immigration authorities, and agencies responsible for the 
administration of seized and confiscated assets, we seek to enhance 
regional collaboration and to increase investigations and convictions 
of crimes related to illegal mining. We also seek to increase the 
quantity and value of seized and confiscated assets linked to TCOs.
    While we have made progress, stronger regulation is needed to stop 
the trafficking of illegal gold through U.S. ports of entry and to 
target bad actors at home and abroad. I am glad to be joined by my 
colleagues who work on the domestic law enforcement aspect of this 
issue.
                               conclusion
    Illegal gold mining presents a direct threat to U.S. national 
security interests. TCOs use illegally mined gold to launder billions 
of dollars in revenue from other criminal activities through the United 
States, harming our legitimate businesses and exploiting our financial 
system for illicit gain. Illegal gold mining feeds corruption and 
insecurity, presenting serious governance challenges for our partners. 
Our collaboration with Peru and Colombia is essential to disrupting 
these criminal networks, reducing human trafficking, decreasing 
environmental and health impacts of illegal mining, and preventing 
illegally mined gold from entering the United States. We must continue 
to advance our shared interests through a coordinated interagency 
approach with an eye toward developing greater cross-border 
collaboration, given the regional nature of illegal gold mining and 
associated crimes. We must do more to identify financial and money-
laundering networks, and the flow of controlled mining inputs and heavy 
equipment used in gold mining. Illuminating the methods and processes 
used to facilitate illegal mining and trafficking of illegally mined 
gold will help us intensify our efforts to combat this scourge.
             attachment: environmental devastation in peru
    Illegal miners have moved into some of the most biodiverse areas of 
the world, including the Tambopata National Reserve in Madre de Dios 
along southeast Peru. Illegal mining is rapidly destroying parts of the 
Amazon rainforest and poisoning rivers with mercury causing severe 
environmental consequences. The below images, provided by the U.S. 
Embassy Lima, represent a glimpse of the devastation illicit mining 
poses on Peru's biodiversity.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Senator Rubio. Thank you.
    Mr. Haeni.

      STATEMENT OF JEFFREY HAENI, ACTING DEPUTY ASSISTANT 
   ADMINISTRATOR, BUREAU FOR ECONOMIC GROWTH, EDUCATION AND 
    ENVIRONMENT, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, 
                         WASHINGTON, DC

    Mr. Haeni. Chairman Rubio, Ranking Member Cardin, thank you 
for the opportunity to testify about the important role the 
U.S. Agency for International Development, USAID, plays in 
addressing illegal and unregulated mining. Illegal and 
unregulated mining undermines U.S. interests around the globe, 
contributes to armed conflict and instability, provides funding 
to criminal networks, threatens our shared environmental goals, 
and menaces indigenous people(s).
    The linkages between mineral wealth and development are 
complex and dynamic. Whether a country harnesses its mineral 
wealth for inclusive economic growth, or its mineral wealth 
leads to a downward spiral of corruption and violent conflict 
depends largely on a supportive policy framework and its 
enforcement, combined with citizen responsive governance, 
including transparency and accountability.
    Within the minerals sector, artisanal and small-scale 
mining, ASM, is uniquely vulnerable to exploitation by corrupt 
officials, elites, and criminal groups. At least 40 million 
people in developing countries, most of them poor, work in the 
ASM sector, which is mostly informal in nature. Women and 
children are especially vulnerable to labor and sexual 
exploitation on illegal mining sites, especially in conflict or 
post-conflict environments.
    Illegal ASM has helped finance prolonged and deadly 
conflicts throughout sub-Saharan Africa. In the Sahel, armed 
groups are increasingly seizing control of artisanal and small-
scale gold mining sites in Mali, Burkina Faso, and Niger, which 
could further destabilize the region.
    Artisanal and small-scale mining often occurs in and around 
protected areas of high biodiversity, which hampers efforts to 
protect critical ecosystems. In Colombia and Peru, artisanal 
and small-scale gold mining has deforested over 140,000 
hectares of tropical forest.
    Artisanal and small-scale gold mining is the largest source 
of mercury pollution on earth, as at least 10 million people 
use mercury to mine for gold in more than 70 countries, with 
severe effects on human health.
    Unfortunately, we have no easy or quick solutions. Evidence 
suggests, however, that formalization of the sector is one 
effective step to break the link between minerals and armed 
conflict, mitigate environmental impacts, and minimize human 
rights abuses.
    USAID has learned through experience that addressing 
illegal and unregulated mining requires a coordinated whole-of-
government approach and long-term investments. We cannot solve 
this problem alone with development assistance. USAID invests 
in efforts to formalize and improve the ASM sector in 
partnership with national and local governments, civil society, 
and the private sector.
    Over the last 5 years, USAID has awarded programs with an 
anticipated total value of $125 million to address illegal and 
unregulated artisanal and small-scale mining in countries such 
as Afghanistan, the Central African Republic, Colombia, Cote 
d'Ivoire, Democratic Republic of the Congo, Peru, and Rwanda. 
On a recent trip to Colombia, USAID Administrator Mark Green 
commented that he was ``shocked to see remnants of the illegal 
mining and the devastating consequences for the environment.'' 
But he was also heartened to witness firsthand the impact that 
USAID's programs have had to help support environmentally and 
socially responsible legal supply chains that ``bring revenues 
into legal channels in a way that helps to support families and 
provides new revenues for the government.''
    In Latin America, USAID's programs in Peru and Colombia 
directly support bilateral MOUs between the United States and 
the aforementioned governments to counter illegal mining and 
related crimes. USAID recently launched a new 5-year $23.9 
million program in Peru to strengthen environmental justice 
institutions, reduce environmental crimes, and support civil 
society and the media to serve as effective watchdogs.
    In Colombia, USAID funded programs to promote legal and 
responsible mineral supply chains in Antioquia and Choco. These 
programs have helped formalize 42 mining operations, eliminate 
nearly 40 tons of mercury from mining operations, assisted in 
generating $110 million of legal gold sales, and rehabilitated 
17,000 hectares of land affected by mining.
    In Africa, USAID works closely with the government of the 
Central African Republic to improve compliance with the 
Kimberley Process and reduce the flow of conflict diamonds, and 
helps to establish legal, responsible mineral supply chains for 
tin, tantalum, tungsten, and gold in the Democratic Republic of 
the Congo.
    In 2010, the United Nations reported that almost every mine 
site in eastern DRC was under the control of armed groups. 
Since that time, USAID has supported the validation of more 
than 600 mine sites as conflict free. In 2018, validated 
conflict-free supply chains in the DRC legally exported 
approximately 15,800 tons of minerals worth over $285 million.
    A comprehensive solution for illegal mining cannot succeed 
without also strengthening the governance of industrial mining. 
That is why USAID has invested more than $19 million in 17 
countries to advance the Extractive Industries Transparency 
Initiative, a voluntary global partnership between governments, 
extractive industry companies, and civil society to promote the 
transparency and accountable management of oil, gas, and 
mineral resources.
    USAID's interest is and always will be to work with 
governments, civil society, and the private sector in countries 
on their journey to self-reliance. Part of this journey is the 
effective management of natural resources, including high-value 
minerals.
    Thank you for your time, and I look forward to your 
questions.
    [The prepared statement of Mr. Haeni follows:]

                  Prepared Statement of Jeffrey Haeni

    Chairman Rubio, Ranking Member Cardin, Distinguished Members of 
this Sub-Committee: Thank you for the opportunity to testify about the 
important role the U.S. Agency for International Development (USAID) 
plays in addressing illegal and unregulated mining. It is an honor to 
be here with you today.
    USAID is committed to working with governments, civil society, 
communities, and the private sector to reduce the impact of conflict; 
counteract the drivers of violence, instability, and transnational 
crime; address corruption; advance prosperity; protect human rights; 
improve human health; and prevent the loss of biodiversity. For all of 
these reasons, USAID is deeply concerned about illegal and unregulated 
mining. There is little doubt that illegal and unregulated mining, 
particularly artisanal and small-scale mining (ASM), undermines U.S. 
interests around the globe, contributes to armed conflict and 
instability, provides funding to criminal networks, threatens our 
shared environment, and menaces indigenous people.
    The linkages between mineral wealth and development are complex and 
dynamic. Despite the potential for a country's mineral wealth to 
translate into prosperity and social development, we see far more 
examples in which discovery and exploitation of mineral wealth 
undermines development gains. Whether a country harnesses its mineral 
wealth for inclusive economic growth, or its mineral wealth leads to a 
downward spiral of corruption and violent conflict depends largely on a 
supportive policy framework and its enforcement, combined with citizen 
responsive governance, including transparency and accountability.
    In many countries in which USAID works, governments, illegitimate 
regimes, and powerful non-state actors, including companies, elites, 
and criminal groups, use intimidation, violence, and corruption to 
acquire wealth and control over the minerals sector. In these cases, 
economic benefits concentrate within a small percentage of the 
population, while many more people bear the negative environmental, 
social, and economic impacts.
    Within the minerals sector, ASM is uniquely vulnerable to 
exploitation by corrupt officials, elites and criminal groups. At least 
40 million people in developing countries--most of them poor--work in 
the ASM sector, most of which is informal in nature. Women and children 
are especially vulnerable to labor and sexual exploitation on illegal 
mining sites, particularly in conflict or post conflict environments. 
Powerful actors who face little or no accountability for predatory 
behavior easily undermine local regulatory structures.
    Mining in violation of the laws of the nation in which the activity 
occurs often takes place in remote areas that are difficult to police. 
In Latin America, illegal and unregulated ASGM generates billions of 
dollars in illicit revenue for transnational criminal organizations, 
some of which have close ties to high-ranking officials in government 
and state security forces. In 2016, the total value of illicit gold 
production in South America was estimated as at least $7 billion, and 
by all accounts is increasing. In Venezuela, the former Maduro regime 
has increasingly turned towards illegal and unregulated gold mining to 
line its pockets and maintain its power, in cooperation with 
transnational groups.
    In Africa, artisanal diamond, gold, coltan, and tungsten mining has 
helped finance prolonged and deadly conflicts in countries such as 
Angola, Central African Republic (CAR), the Democratic Republic of the 
Congo (DRC), Liberia, and Sierra Leone. In CAR and DRC, minerals have 
become synonymous with ``conflict,'' which has resulted in temporary 
restrictions on their export. In the Sahel, armed groups are 
increasingly seizing control of ASGM sites in Mali, Burkina Faso, and 
Niger which could further destabilize the region. As in Latin America, 
high-ranking officials in government and state security forces often 
profit personally from these operations.
    Throughout much of Africa, illegal and unregulated ASM supply 
chains have links to criminal networks and contribute to domestic and 
regional insecurity.
    ASM often occurs in and around protected areas of high 
biodiversity, which hampers efforts to protect critical ecosystems. 
Indigenous people and other vulnerable groups inhabit some of these 
areas. Artisanal and small-scale gold mining (ASGM) is the largest 
source of mercury pollution on Earth as at least 10 million people use 
mercury to mine for gold in more than 70 countries--with severe effects 
on human health. Much of the mercury released goes into the atmosphere 
and travels thousands of miles. It is estimated that 70% of the mercury 
deposited in the United States comes from global sources. Alluvial gold 
mining--the extraction of gold from creeks, rivers and streams--has 
deforested over 62,500 hectares in the Amazon's uniquely biodiverse 
Madre de Dios region since 1999.
    Unfortunately, we have no easy or quick solutions. Illegal and 
unregulated ASM mining is a complex problem that requires long-term 
investments and structural reforms. USAID aims to support our partners 
that show the resolve to address the pervasive problems that surround 
this sector. Over the last 5 years, USAID has awarded programs with an 
anticipated total value of $125 million to address illegal and 
unregulated ASM in countries such as Afghanistan, CAR, Colombia, Cote 
d'Ivoire, DRC, Peru, and Rwanda. Our programs include rigorous, field-
level monitoring, evaluation, and oversight which has generated the 
data needed to demonstrate impact and to ensure our programs constantly 
learn and adapt. On a recent trip to Colombia, USAID Administrator Mark 
Green commented that he was ``shocked to see the remnants of the 
illegal mining and the devastating consequences for the environment,'' 
but he was also heartened to witness first-hand the impact of USAID's 
programs that have helped support environmentally and socially 
responsible licit supply-chains that ``bring money revenues into legal 
channels in a way that helps to support families and provides new 
revenues for the government.''
    Evidence suggests that formalization and legalization of the sector 
is one effective step to break the link between the trade of artisanal 
minerals and armed conflicts. USAID has learned through experience that 
addressing illegal and unregulated mining requires a coordinated, 
whole-of-government approach and long-term investments. We cannot solve 
this problem through development assistance alone. At USAID 
headquarters and in our Missions in the countries in which we work, our 
decision to engage in the artisanal mining sector occurs on the ground 
as part of a comprehensive and cross-sectoral Country Development and 
Cooperation Strategy. We make our investments in efforts to formalize 
and improve the ASM sector in partnership with national and local 
governments, civil society, and the private sector, almost always 
coupled with closely coordinated interventions from other U.S. 
Government Departments and Agencies.
    In Latin America, USAID's programs in Peru and Colombia directly 
support bilateral Memoranda of Understanding (MOU) between the United 
States and the aforementioned governments to counter illegal mining and 
related crimes. In Peru, USAID has built up the country's scientific 
and research capacity by establishing the first laboratory in Madre de 
Dios with the capacity to analyze environmental mercury contamination 
and supporting the publication of over 25 papers on remediation and 
management techniques. USAID recently launched a new 5-year,
    Twenty-three and nine tenths million dollar program in Peru to 
strengthen environmental criminal justice institutions; reduce 
environmental crimes in key landscapes in and around protected areas 
and indigenous land; and support civil society and the media to serve 
as effective watchdogs. In Colombia, USAID- funded programs promote 
legal and responsible mineral supply-chains in Antioquia and Choco. Our 
programs have helped formalize 42 mining operations, eliminated nearly 
40 tons of mercury from mining production, and assisted in generating 
$110 million dollars of legal gold sales, which mobilized $8 million of 
domestic resources in the form of royalties and taxes. In addition, 
USAID rehabilitated 17,000 hectares of land affected by mining.
    In Africa, USAID works closely with other U.S. Government 
Departments and Agencies in CAR and the DRC. In CAR, USAID helps reduce 
the flow of conflict diamonds by improving compliance with the 
international due-diligence process known as the Kimberley Process 
Certification Scheme. In 2013, CAR was temporarily suspended from the 
Kimberley Process because of its lack of compliance and concerns about 
conflict diamonds, which led to an embargo on diamonds from CAR. USAID 
worked closely with the government of CAR to improve compliance, which 
led to a partial lift on the embargo in 2015. USAID continues to 
support the Government of CAR to improve compliance and strengthen 
social cohesion in mining communities. In the DRC, USAID supports the 
establishment of legal, responsible mineral supply-chains for tin, 
tantalum, tungsten and gold. In 2010, the United Nations reported that 
almost every mine site in Eastern DRC was under the control of armed 
groups. Since that time, USAID has supported the validation of more 
than 600 ASM sites as conflict-free. By 2017, an estimated three out of 
four tin, tantalum, and tungsten sites were free of the control of 
armed groups. In addition to the security improvements, the conflict-
free supply-chains have also generated a legal source of revenue. In 
2018, validated conflict-free mine sites in the DRC legally exported 
approximately 15,800 tons of tin and tantalum worth over $285 million. 
This year, USAID supported the very first export of conflict-free gold 
to the United States from Eastern DRC through private-sector-led gold 
supply-chain involving only U.S. companies. Furthermore, USAID, along 
with the State Department and Department of Labor, established the 
Public-Private Alliance for Responsible Minerals Trade (PPA), a multi-
stakeholder initiative that promotes responsible sourcing of gold, tin, 
tantalum, and tungsten in the DRC and the Great Lakes Region.
    In Afghanistan, where extractives are the second-largest source of 
revenue for the Taliban after narcotics, USAID has developed 
interagency agreements with the U.S. Department of Commerce and the 
U.S. Geological Survey (USGS) within the Department of Interior with an 
anticipated total value of $38.2 million. This USAID funding supports 
the provision of targeted legal, regulatory, and policy advice as well 
as the analysis of geological data and management assistance to the 
Afghanistan Ministry of Mines and Petroleum and the Afghanistan 
Geological Survey.
    But let me be clear, just because artisanal mining is legal and 
regulated, does not necessarily mean that it will propel a country 
towards self-reliance, nor can a comprehensive solution succeed without 
strengthening the governance of industrial mining. This is why USAID 
also funds the Extractive Industry Transparency Initiative (EITI), a 
voluntary, global partnership between governments, extractive-industry 
companies, and civil society to promote the transparent and accountable 
management of oil, gas, and mineral resources. Advancing the EITI 
Standard serves key U.S. national-security, economic, and foreign 
policy objectives, including fighting corruption, empowering 
communities affected by mining operations, leveling the playing field 
for U.S. companies overseas, and promoting good governance in the 
extractive sector worldwide. Since 2013, USAID has obligated more than 
$19 million in funding through over 17 USAID Missions--including in 
both Colombia and Peru--for programs to support the EITI-related 
disclosure of data on government revenue, explorations and concessions 
in the extractives sector; to strengthen multi-stakeholder governance; 
and to promote beneficial-ownership processes to enhance transparency 
and minimize supply-chain risks to businesses, including money-
laundering and terrorist-financing.
    USAID's successes in the sector have been hard-won. Mining in 
violation of the laws of the nation in which the activity occurs is a 
complex development problem that must be addressed through carefully 
planned and sustained investments, a permissive operational 
environment, and close collaboration with other U.S. government 
departments and agencies. USAID will continue to participate in U.S. 
Government interagency efforts to combat illegal and unregulated mining 
of a country's natural resources; advance the formalization and 
regulation of the ASM sector; strengthen mineral ASM supply-chains to 
render them legal, transparent, and environmentally and socially 
responsible; combat related crimes such as sex and labor trafficking in 
mining regions; clarify land and resource rights; prevent encroachment 
into protected areas; promote the environmental rehabilitation of 
degraded lands and the elimination of mercury; protect the rights of 
indigenous peoples and other vulnerable populations; and support 
increased transparency and accountability in the minerals sector.
    Our interest is, and always will be, to work with governments, 
civil society and the private sector in countries on their Journey to 
Self-Reliance. Part of this Journey is the effective management of 
natural resources, including high-value minerals. USAID will continue 
to join forces with partners that are committed to improving their 
regulation and management of the mining sector for the economic, 
social, and environmental benefit of their people.
    Thank you for your time. I look forward to answering your 
questions.

    Senator Rubio. Thank you.
    Mr. Lechleitner.

  STATEMENT OF PATRICK J. LECHLEITNER, ASSISTANT DIRECTOR FOR 
INTERNATIONAL OPERATIONS AND HOMELAND SECURITY INVESTIGATIONS, 
    U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, WASHINGTON, DC

    Mr. Lechleitner. Good morning, Chairman Rubio and Ranking 
Member Cardin. Thank you for the opportunity to appear before 
you today to discuss the illicit mining of gold and the threats 
this activity poses to U.S. national security, international 
law, and human rights.
    As the largest investigative agency within the U.S. 
Department of Homeland Security, U.S. Immigration and Customs 
Enforcement Homeland Security Investigations investigates and 
enforces more than 400 federal criminal statutes. HSI utilizes 
its broad legal authorities to investigate immigration and 
customs violations, including those related to import/export 
control, human rights abuses, narcotics, weapons and contraband 
smuggling, financial crime, cybercrime, human trafficking, 
smuggling, child exploitation, IP theft, transnational gangs, 
immigration document and benefit fraud, and worksite 
enforcement. We are grateful for the continued congressional 
support that allows ICE HSI to maintain critical operations at 
home and abroad and increase our efforts to target and combat 
dangerous transnational gangs and other criminal organizations.
    ICE HSI has a global presence, with over 500 personnel, 
including special agents deployed to 78 offices in 52 countries 
who conduct criminal investigations against TCOs, terrorists, 
and other criminal organizations that threaten our national 
security. HSI leverages its international footprint and 
partnerships to disrupt and dismantle TCOs that seek to exploit 
America's legitimate trade, travel, and financial systems, and 
enforces U.S. Customs and Immigration laws at and beyond our 
nation's borders to prevent threats from entering the United 
States.
    Today, I would like to highlight how HSI has investigated 
illicit actors whose activities touch our borders. 
Investigations spearheaded by HSI have ranged from blood 
diamonds mined in Africa to unregulated harvesting of timber in 
the Amazon to wildlife trafficking in Southeast Asia. HSI, in 
collaboration with Federal partners such as U.S. Customs and 
Border Protection, the U.S. Department of the Treasury, the 
Department of State, as well as partnering with INTERPOL to 
combat natural resources exploitation through the sharing of 
criminal intelligence and application of U.S. Customs and money 
laundering laws.
    As you know, the U.S. has a long history of protecting our 
environment, wildlife, and natural resources through the 
promulgation and enforcement of statutes exemplified by the 
Lacey Act, the Clean Diamond Trade Act, the Trade Facilitation 
and Trade Enforcement Act, and many others. The activities of 
TCOs and other illicit actors are often diversified, regardless 
of whether calculated or opportunistic. At its core, HSI 
recognizes that the impetus of most criminal schemes is 
financial enhancement and, as such, financial investigations 
are the cornerstone of HSI investigations.
    Financial irregularities are often the tip-off leading to 
an HSI criminal investigation. As an example, an HSI-led 
investigation resulted in the conviction of the director of 
operations, the executive sales director for Latin America, and 
others from the largest American-owned precious metals 
purchasing and refining company for conspiracy to produce over 
$3 billion of criminally derived gold from Latin America, 
originating primarily from Peru and the Caribbean. These 
proceeds were gained from unlawful criminal activities, 
including mining, foreign bribery, smuggling, narcotics 
trafficking, and the entry of goods into the United States by 
false means and statements. They subsequently transmitted over 
$3 billion of wire payments from the United States to Latin 
America and the Caribbean to promote the delivery of additional 
criminally derived gold.
    The investigation further resulted in the indictment of 
four Peruvian nationals in November of 2017 who were charged in 
the Southern District of Florida for their alleged 
participation in this money laundering scheme. One of the 
suspects was arrested in Peru by the Peruvian police on charges 
of illegal gold mining and laundering more than $630 million 
worth of gold. The American-owned company was sentenced to 
forfeit $15 million to the United States, develop and maintain 
an effective compliance and ethics program, and also received a 
5-year term of probation that prohibits it from purchasing 
precious metals from outside the United States.
    HSI continues to work with the Department of State and our 
international and U.S. law enforcement partners to address the 
challenges and threats posed by these illicit activities to the 
United States.
    Thank you for the opportunity to appear before you today. I 
would be pleased to answer any questions you may have.
    [The prepared statement of Mr. Lechleitner follows:]

              Prepared Statement of Patrick J. Lechleitner

                              introduction
    Chairman Rubio, Ranking Member Cardin, and distinguished members of 
the Subcommittee:
    On behalf of the Department of Homeland Security (DHS), thank you 
for the opportunity to testify before you today to discuss how U.S. 
Immigration and Customs Enforcement (ICE), Homeland Security 
Investigations (HSI), the largest investigative DHS Component, works 
with its international law enforcement partners to investigate 
transnational criminal organizations (TCOs) and the criminal activities 
of these TCOs, including human trafficking and money laundering, among 
other things. HSI protects U.S. borders by conducting multi-faceted law 
enforcement operations, and by partnering with foreign and domestic 
counterparts to combat criminal organizations and prevent terrorist 
activities. As a Senior Executive of HSI, I serve as Assistant Director 
of HSI International Operations.
    HSI International Operations has a network of over 400 personnel, 
including over 180 special agents deployed to 78 offices and eight 
Department of Defense Liaisons across 52 countries, who conduct 
investigations against TCOs, terrorists, and other criminal 
organizations threatening our national security. HSI leverages its 
international footprint and partnerships to disrupt and dismantle TCOs 
seeking to exploit America's legitimate trade, travel, and financial 
systems; and enforces U.S. customs and immigration laws at and as 
appropriate, beyond our Nation's borders to prevent threats from 
entering the United States.
             combating transnational criminal organizations
    HSI utilizes its broad legal authorities to investigate immigration 
and customs violations, including those related to export control, 
human rights abuses, narcotics, weapons and contraband smuggling, 
financial crime, cybercrime, human trafficking, migrant smuggling, 
child exploitation, wildlife trafficking, intellectual property theft, 
transnational gangs, immigration document and benefit fraud, and 
worksite enforcement. We are grateful for the continued congressional 
support that allows HSI to maintain critical operations at home and 
abroad and increase our efforts to target and combat dangerous 
transnational gangs and other criminal organizations.
    During Fiscal Year (FY) 2019, HSI investigations led to over 36,000 
criminal arrests, including criminal arrests of over 3,800 
transnational gang members. HSI also seized over 1.4 million pounds of 
narcotics, made over 2,500 seizures for violations of U.S. intellectual 
property and commercial fraud laws, and seized over $620 million in 
currency and monetary instruments. Additionally, HSI identified and 
assisted over 1,400 victims of human trafficking and child 
exploitation.
    During the last two decades, transnational crime has expanded 
dramatically in size, scope, and impact, posing a significant threat to 
national security. HSI takes this threat very seriously, and targets 
TCOs at every critical location in the cycle: internationally, in 
cooperation with foreign counterparts, where transnational criminal and 
terrorist organizations operate; at our Nation's physical border and 
ports of entry, in coordination with U.S. Customs and Border Protection 
(CBP), where illicit smuggling cells attempt to exploit America's 
legitimate trade, travel, and transportation systems; and in cities 
throughout the United States, where criminal organizations earn 
substantial profits off of their illicit activities.
    As directed by the President's Executive Order 13773, Enforcing 
Federal Law with Respect to Transnational Criminal Organizations and 
Preventing International Trafficking, HSI will continue to place a high 
priority and devote sufficient resources to dismantling TCOs and 
subsidiary organizations. HSI will continue to focus on cooperative 
work with other federal agencies, as well as with foreign counterparts, 
by sharing criminal intelligence and law enforcement information when 
appropriate and permitted by law.
                          illegal gold mining
    Higher gold prices invigorate artisanal and small-scale gold mining 
(ASGM) throughout the world. Usually unregulated and outside the formal 
economic sector, ASGM and the gold it produces are a significant 
problem throughout Latin America, particularly in Venezuela, Suriname, 
Colombia, Ecuador, Bolivia and Peru. Consequences of ASGM include 
deforestation, environmental contamination, and loss of biodiversity. 
Mercury, a highly potent neurotoxin, is often used to extract gold, 
making ASGM the largest source of global mercury pollution and an 
important issue addressed in the Minamata Convention on Mercury. It is 
widely reported that mine workers face exploitation and forced labor, 
that child labor is not uncommon in the mines, that mining communities 
drive the demand for sex trafficking, and that health risks, due to 
exposure to mercury and other toxic chemicals, abound.
    Gold mining in violation of the laws of the nation in which the 
activity occurs often takes place in remote areas, and is difficult to 
police, which leaves opportunities for organized criminal groups to 
carry out this activity. For example, HSI personnel stationed in 
Colombia and Peru work hand-in-hand with their law enforcement 
counterparts to investigate and dismantle TCOs involved in the illegal 
mining of gold.
    The United States has a long history of protecting our environment 
and wildlife through the promulgation and enforcement of statutes 
exemplified by the Lacey Act, the Clean Diamond Trade Act, and the 
Trade Facilitation and Trade Enforcement Act, among many others. Since 
its inception, HSI has ardently investigated illicit actors, both 
individuals and businesses, whose activities lead them to our borders. 
Investigations spearheaded by HSI have ranged from ``blood'' diamonds 
mined in Africa, to unregulated harvesting of timber in the Amazon, to 
wildlife trafficking in Southeast Asia. HSI works in collaboration with 
federal partners such as CBP, U.S. Fish and Wildlife Service, U.S. 
Department of Agriculture's Office of Inspector General and Animal and 
Plant Health Inspection Service, and the U.S. Department of the 
Treasury Financial Crimes Enforcement Network and Office of Foreign 
Assets Control, as well as internationally with the International 
Criminal Police Organization (INTERPOL), to combat natural resources 
exploitation through the sharing of criminal intelligence and 
application, as appropriate, of U.S. customs and money laundering laws.
    The activities of TCOs and other illicit actors are often 
diversified, regardless of whether calculated or opportunistic, 
touching on more than one type of crime. HSI recognizes the impetus of 
most criminal schemes is financial enhancement, and as such, financial 
investigations are the cornerstone of HSI investigations. Financial 
irregularities are often cited as the tip leading to an HSI criminal 
investigation.
                      peruvian gold investigation
    HSI leads the multi-agency Operation Arch Stanton. This Organized 
Crime Drug Enforcement Task Force (OCDETF) investigation is a joint 
effort among U.S. Federal (HSI, DEA, FBI, CBP, DOJ-Office of 
International Affairs, and IRS-Criminal Investigations), state and 
local law enforcement agencies. Since January 2018, Operation Arch 
Stanton has resulted in the conviction of executives from one of the 
largest American-owned precious metals purchasing and refining 
companies, of conspiracy to purchase over three billion dollars of 
criminally derived gold from Latin America (originating primarily from 
Peru) and the Caribbean. These proceeds were gained from unlawful 
criminal activities (including mining, foreign bribery, foreign 
smuggling, foreign narcotics trafficking, and the entry of goods into 
the United States by false means and statements). They subsequently 
transmitted over $3 billion of wire payments from the United States to 
Latin America and the Caribbean to promote the delivery of additional 
criminally derived gold.
    Operation Arch Stanton has also resulted in further charges against 
one executive and the indictment of an additional four Peruvian 
nationals in November 2017, who were charged in the Southern District 
of Florida for their alleged participation in this gold money 
laundering scheme. One of the suspects was arrested in Peru by the 
Peruvian Police for charges of illegal gold mining under Peruvian law 
and laundering more than $630 million worth of gold. Pursuant to the 
terms of the Plea & Forfeiture Agreement filed with the court, the 
American-owned precious metals purchasing and refining company was 
sentenced to forfeit $15 million to the United States, develop and 
maintain an effective compliance and ethics program, and be subject to 
a 5 year term of probation, during which time it will be prohibited 
from purchasing precious metals from outside the United States and 
required to comply with all further investigations.
    Additionally, in October 2018, 10 members of a transnational 
criminal organization were arrested by Colombian authorities for 
violation of Colombian law concerning illegal gold mining, customs 
fraud, and money laundering. This organization used shell corporations 
to introduce illegally mined minerals into legitimate mineral trade 
sectors of the United States. The illegally mined gold was then paid 
for through a trade-based money laundering scheme.
               illicit finance and proceeds of crime unit
    HSI's Illicit Trade, Travel and Finance Division, through its 
Illicit Finance and Proceeds of Crime Unit (IFPCU), develops 
investigative techniques and typologies to identify and eliminate 
vulnerabilities in U.S. financial systems and criminally pursue 
perpetrators of financial crimes. The IFPCU enhances cooperation and 
forges partnerships with domestic and foreign law enforcement, money 
service businesses (MSBs), regulatory agencies, and non-government 
institutions. The IFPCU then leverages these partnerships to enhance 
HSI's financial investigations and various anti-money laundering (AML) 
programs. The IFPCU works with other government entities to provide AML 
assessments, training, best practices, and lessons learned in the fight 
against global money laundering.
    The IFPCU continues to expand its outreach work with the private 
industry. In May 2018, the IFPCU participated in a conference with 
national and international precious metal and gem dealers to develop 
industry contacts, discuss trends, and provide education on the 
applicability of the U.S. Bank Secrecy Act and AML compliance 
guidelines. Of particular note, in March 2018, a U.S. gold refinery 
pleaded guilty to failure to maintain an adequate AML program.
    In FY 2019, HSI initiated over 3,500 new financial investigations 
operating under the scope of the IFPCU and made over 2,600 criminal 
arrests, over 1,600 indictments and over 1,100 convictions, as well as 
the seizure of over $620 million in illicit currency and criminal 
proceeds.
    As the only investigative law enforcement agency with direct access 
to trade data, HSI is uniquely positioned to provide analytical, 
strategic, and tactical support for complex long-term and high-profile 
investigations, including third-party money laundering and trade-based 
money laundering investigations, across multiple programmatic areas.
                        trade transparency unit
    HSI's Trade Transparency Unit (TTU) was created in 2004 and 
establishes TTUs in partner countries to share trade data to detect 
trade-based money laundering and sanctions violations as well as 
commercial smuggling and other crimes that generate illicit proceeds. 
TTUs detect suspicious transaction and financial discrepancies and 
coordinate investigative and enforcement activities with domestic and 
international HSI offices and partners. HSI has TTU agreements with 
seventeen countries, including the Latin American countries of 
Argentina, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, and 
Uruguay. Formal information sharing agreements are used to exchange 
valuable trade data, providing visibility to both sides of trade 
transactions. As such, TTUs offer another means to link international 
customs and law enforcement agencies together in combating 
transnational crime.
               national targeting center--investigations
    HSI's National Targeting Center--Investigations (NTC-I) was 
established in December 2013, in collaboration with CBP, to enhance our 
shared border security mission. As the investigative arm of DHS, HSI's 
increased manpower and concerted efforts at the NTC support the entire 
border security continuum, from CBP interdictions and HSI 
investigations, to the joint exploitation of intelligence. NTC-I serves 
as HSI's central targeting and coordination center and plays a critical 
role in promoting border security, public safety, and national security 
through the identification and investigation of TCOs, terrorists, and 
other criminal actors attempting to undermine DHS's border security 
efforts.
    The NTC-I methodology involves identifying and cultivating the 
financial and trade aspects of each individual investigation, 
identifying, seizing, and forfeiting criminal assets, and disrupting 
and dismantling transnational criminal networks. The HSI NTC-I 
methodology also involves the coordination of efforts between multiple 
HSI, federal, state and international agencies to maximize resources 
and results to identify, disrupt, and dismantle criminal enterprises, 
while bolstering the U.S. Government's efforts to combat money 
laundering and the financing of terrorism.
              law enforcement information sharing efforts
    In addition to leveraging domestic assets, HSI International 
Operations Attache personnel deployed to 78 offices in 52 countries are 
uniquely positioned to use established relationships with host country 
law enforcement, including the engagement of foreign partner 
Transnational Criminal Investigative Units (TCIUs). TCIUs are comprised 
of foreign law enforcement officials with DHS training who have the 
authority to investigate and enforce violations of law in their 
respective countries. Also, included in TCIUs are customs officers, 
immigration officers, and prosecutors who undergo a strict vetting 
process to ensure that shared information and operational activities 
are not compromised. Since our law enforcement officers working 
overseas do not possess general law enforcement or investigative 
authority in most host countries, partnering with these TCIUs enables 
HSI to promote direct action in its investigative leads while 
respecting the sovereignty of the host country and cultivating 
international partnerships.
    HSI International Operations partners with TCIUs in 13 countries. 
TCIUs identify targets, collect evidence, share intelligence, and 
facilitate the prosecution of TCOs both in-country and through the U.S. 
judicial system. These efforts, often thousands of miles from the U.S.-
Mexico border in countries like Colombia and Panama, essentially act as 
an extended outer layer of security for our Southwest Border.
                               conclusion
    Thank you again for the opportunity to appear before you today and 
for your continued support of DHS and our mission. HSI is committed to 
continuing its successful practice of sharing information with domestic 
and foreign partners and leveraging its resources around the world to 
stem cross-border criminal organizations and threats. I appreciate your 
interest in these important issues and the efforts I have discussed 
today.
    I look forward to any questions you may have.

    Senator Rubio. Thank you.
    Ms. Thompson.

  STATEMENT OF REGINA E. THOMPSON, DEPUTY ASSISTANT DIRECTOR, 
      CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF 
                 INVESTIGATION, WASHINGTON, DC

    Ms. Thompson. Good morning, Chairman Rubio, Ranking Member 
Cardin, and members of the subcommittee. I am pleased to appear 
before you to discuss the FBI's efforts to disrupt 
transnational organized crime, TCOs, and specifically their 
involvement in illegal mining.
    The FBI has a long history of successfully combatting 
organized crime. And as illicit activity of these actors evolve 
and diversify, so have our strategies to combat them. The last 
decade in particular has seen a boom in illegal mining 
operations primarily due to financial instability and an 
increase in global demand for precious metals. It is well known 
that drug trafficking is a money-making cornerstone of TCOs in 
the Western Hemisphere. However, criminal endeavors such as 
illegal mining are also substantial generators of revenue.
    The precious metals trade is a global industry with 
established value. Penetration of the industry by criminal 
organizations allows them to establish global networks for the 
sale of illegally mined metals and establish money laundering 
platforms. Illegal mining and the subsequent laundering of gold 
allows criminal organizations to easily commingle illicitly 
obtained commodities with the legal market by using witting or 
unwitting businesses or smuggling techniques to introduce it 
into the domestic and global economy.
    TCOs also leverage the gold industry as a money laundering 
platform which allows them to exchange large sums of illicitly 
gained cash for gold that can be easily transported, stored, 
and used in lieu of cash. These organizations purchase gold, 
much of which is illegally mined, then sell it into the 
legitimate market, where then clean money is returned.
    We have seen well-known groups, including Sinaloa and FARC, 
and also smaller clan-based groups in the current 
administration in Venezuela, engaged in these types of criminal 
activities.
    To effectively combat this threat, in October of 2015 the 
FBI established the Illegal Mining Initiative. This initiative 
is an intelligence-led effort to disrupt TCOs' involvement in 
the illicit trade and prosecute those involved. Through the 
initiative, the FBI engages with other Federal agencies and 
international law enforcement partners in complex, multi-
jurisdictional investigations that span the globe.
    A prime example of the initiative's success in the FBI's 
efforts to detect and disrupt this activity is Operation Diez 
Condores, which was initiated in January 2016 as a joint FBI 
and Chilean police investigation. This investigation disrupted 
a network responsible for importing $80 million in illicit 
gold. Intelligence obtained during the investigation identified 
a link with an ongoing OCDETF case, Operation Arch Stanton, 
which ultimately led to the prosecution of a multi-billion-
dollar money laundering scheme.
    A spinoff investigation targeting a U.S. company, NTR 
Metals, was launched in conjunction with DEA Lima and HSI 
Miami. This investigation uncovered a conspiracy responsible 
for the importation of over $3.6 billion of gold with ties to 
illicit activities.
    The work of multiple U.S. federal and foreign law 
enforcement agencies ultimately resulted in convictions, 
restitution, a landmark guilty plea by the NTR Metals parent 
company, and the disruption of a major international gold 
smuggling and money laundering operation.
    The FBI continues to identify and target networks worldwide 
that are exploiting illegal mining, and we provide information 
to law enforcement and private-sector partners related to this 
growing threat.
    The FBI has collaborated extensively with the State 
Department to develop and implement national and international 
training, most recently providing training in Panama for law 
enforcement and prosecutors in October of this year.
    TCOs will continue to pose a significant threat to national 
and international security as they continue to evolve and 
diversify their activities. Disrupting these activities will 
require enhanced domestic and international collaboration and 
education in both the government and private-sector arenas. 
This is key, as it increases reporting, which in turn enhances 
our intelligence base and leads to more investigations and 
prosecutions.
    Thank you for the opportunity to appear today, and I look 
forward to your questions.
    [The prepared statement of Ms. Thompson follows:]

                Prepared Statement of Regina E. Thompson

    Good afternoon Chairman Rubio, Ranking Member Cardin, and Members 
of the Subcommittee. I am pleased to appear before you today to discuss 
the threat of illicit mining and the FBI's efforts to address it.
                  the threat: tcos and illicit mining
    The last decade has seen a boom in illicit mining operations in the 
Western Hemisphere due to various factors affecting global markets such 
as financial instability and increased demand for precious metals. The 
fracturing of major transnational criminal organizations (``TCOs'') in 
the hemisphere into smaller organizations due to the death or 
apprehension of key leadership, compounded with infighting for control, 
has forced TCOs to diversify their criminal activities in order to 
supplement their revenue. Illicit mining operations provide Western 
Hemisphere-based TCOs with a profitable source of income beyond 
traditional revenue streams, such as narcotics trafficking, and a 
reliable mechanism to launder illicit proceeds from those traditional 
activities. TCOs use traditional criminal infrastructure--to include 
established drug trafficking routes, control of corrupt officials, and 
proven smuggling techniques--to traffic illegally mined metals and 
minerals in the same manner as narcotics. In contrast to narcotics, 
however, illicit mining provides an avenue for TCOs to exploit a legal 
commodity. Illicit activity is easily commingled with legal trade 
obfuscating TCO involvement.
    The precious metals trade is a global industry with longstanding 
value. Penetration of the industry by TCOs allows these criminal 
organizations to maintain global support networks and a global platform 
for money laundering, hindering law enforcement prosecution by co-
opting a legitimate, high volume commodities industry. Currently there 
is no test to accurately determine where the gold was mined, and thus 
whether the metals or minerals have been mined illegally.
    TCO involvement in illicit mining occurs through the taxation or 
extortion of both legal and illicit miners operating in the region 
under their control, as well as the direct control and operation of 
illicit mines. TCOs in Mexico, Colombia, Venezuela, Peru, Guyana and 
other South and Central American countries exploit valuable metals, 
minerals, and precious stones such as gold, silver, copper, coltan 
(colombite-tantalite), iron, coal, emeralds, and uranium. Neighboring 
countries and Caribbean islands serve as transshipments points, while 
North American countries are final destination markets.
    The U.S. market plays a key role in the global exchange of precious 
metals. TCOs use often-witting U.S. businesses to exploit U.S. 
regulations and export illegally extracted gold to the United States to 
launder billions of dollars of illicit proceeds from criminal 
operations in Latin America. Because gold bullion is classified as a 
commodity rather than a monetary instrument, the imported gold is not 
subject to Treasury Department reporting requirements; nor is it 
subject to customs duties, which limits law enforcement visibility into 
this money laundering method and increases profitability for TCOs.
    Large amounts of illegally mined gold and the few hurdles it 
currently faces to reach legal markets provides TCOs, especially those 
involved in drug-trafficking, with a reliable vector to exchange large 
sums of illicitly gained cash into a compact, manageable commodity that 
can be easily transported, stored, or used in lieu of cash for criminal 
transactions. Additionally, the gold itself can be laundered into the 
global markets via several methods: acquiring fake documents, through 
bribery or threats, opening front companies, selling the gold to 
dishonest brokers, smuggling the gold through countries with lax export 
laws, or simply by paying individuals with legitimate authorization to 
sell gold.
    Governments in the Western Hemisphere face internal obstacles due 
to a lack of capacity to properly regulate the mining industry, issues 
with corruption, as well as inadequate laws that make combating illicit 
mining challenging. Mining operations often exist in remote areas with 
minimal government presence allowing illicit mining, other criminal 
activity and human rights abuses--including those involving forced 
labor, sex trafficking, child labor, and violence against native 
communities--to thrive.
    TCOs' continuous involvement in illicit mining operations also 
negatively affects the environment and public health. TCOs facilitate 
the trafficking of mercury, currently used in illicit gold mining 
operations. Mercury is transported long distances through the 
atmosphere, and approximately 70 percent of the mercury deposited in 
the United States originates from global sources. Although 
international agreements, like the Minamata Convention, are designed to 
curtail the legal global commerce and availability of mercury, these 
restrictions combined with the current demand could further drive 
mercury commerce to illicit markets controlled by TCOs. Illicit mining 
operations also have driven alarming rates of deforestation and loss of 
biodiversity in South America.
                fbi initiative to combat illicit mining
    In October 2015, the FBI established the Illegal Mining Initiative 
to disrupt TCO involvement in this illicit trade and to prosecute 
complicit companies. The initiative simultaneously addresses the FBI's 
strategic and tactical necessities, enhancing our understanding of the 
threat, and steering joint intelligence production and multi-agency 
operations. This work culminated in an international investigation 
comprised of multiple Federal and foreign law enforcement agencies, and 
resulted in the first prosecution of a multi-billion-dollar money 
laundering scheme involving illegally mined South American gold. The 
investigation uncovered a conspiracy responsible for the importation of 
over $3.5 billion dollars of gold derived from numerous illicit 
activities, including narcotics trafficking, illegal gold mining, 
foreign bribery, foreign smuggling, and U.S. customs violations, on 
behalf of multiple TCOs.
    Operation Diez Condores, initiated in January 2016 as a joint FBI 
and Investigations Police of Chile (``PDI'') investigation, disrupted a 
Chilean TCO involved in smuggling illicit gold. The Chilean-based 
operation procured gold from various illicit sources and collected the 
metals at their headquarters in Santiago, Chile, where they conspired 
with disreputable businesses to generate fraudulent paperwork about the 
gold's true origin and composition. TCO couriers hand-carried the gold 
on commercial aircraft from Chile to the United States where they 
presented the fraudulent paperwork to U.S. customs officials in Miami, 
thereby circumventing regulations. The couriers would then deliver the 
gold to a U.S. refinery, NTR Metals Miami (``NTR''), which paid for the 
gold via wire transfer back to Chile.
    In August 2016, the members of the TCO were arrested in Chile after 
the investigation documented $80 million in gold shipments that moved 
through multiple shell companies established in Chile and Miami with 
the assistance of NTR. The TCO was charged with racketeering, 
smuggling, customs fraud, and money laundering in Chile. Intelligence 
obtained during debriefs of the Chilean TCO members by U.S. law 
enforcement helped to identify inconsistencies in NTR's practices and 
that the Miami executives were aware that the gold that they were 
purchasing involved TCOs in multiple Latin American countries linked to 
gold smuggling, illicit mining, and narcotics trafficking activities. 
This led to a spinoff investigation in conjunction with the Lima office 
of Drug Enforcement Administration and the Miami office of U.S. 
Immigration and Customs Enforcement Homeland Security Investigations 
(``HSI'') that identified a link to an ongoing FBI/HSI Organized Crime 
Drug Enforcement Task Force investigation. Law enforcement efforts 
culminated in the successful prosecution of three NTR executives in 
March 2017 for their dealings with the Chilean TCO as well as others in 
Latin American.
    The investigation ultimately resulted in the conviction of seven 
subjects, restitution of approximately $16 million in the United States 
and $25 million in Chile, and the disruption of a major international 
precious metals smuggling and money laundering operation. This 
investigation received national and international attention for 
highlighting the role of illicit gold as a profitable and preferred 
method for TCOs and other criminal organizations around the globe to 
launder illicit revenue and for being one of the largest money 
laundering cases prosecuted in the Southern District of Florida. In 
addition, in November 2017, four members of a Peruvian TCO linked to 
the investigation were indicted.
    While the efforts of the United States Government have concentrated 
on targeting TCOs' drug trafficking operations, it is critical to 
examine other illegal income streams to achieve operational disruption.
                               conclusion
    Transnational organized crime continues to pose a significant 
threat to national and international security. The FBI remains 
dedicated to combating this threat. In the Western Hemisphere, efforts 
against illicit mining have emerged as a significant priority for 
governments in the region, and the FBI is committed to working with 
them to combat this threat.
    Thank you again for the opportunity to appear today. I now look 
forward to any questions you might have.

    Senator Rubio. Thank you.
    We'll start with the ranking member.
    Senator Cardin. I want to thank all of you for your 
efforts. You are involved in trying to, through enforcement, 
deal with these illicit activities. And here's the challenge, 
and there are a lot of similarities between the illicit 
activities with gold, with wildlife trafficking, and we've seen 
the same or similar type of circumstances where we could get to 
child labor products that violate international human rights 
with the same type of enforcement issues; or, for that matter, 
we have corrupt officials in the extractive industries in 
dealing with those activities.
    So when you have the direct line between a company and 
illegal activities, then, yes, you can go after the 
enforcement. It's not easy, but you can draw those direct 
lines. The problem is that the reason these activities take 
place is that they're profitable, and they find ways to get 
into the supply chain, into legitimate companies who either 
don't know or don't care to know where the supply is coming 
from.
    So we need to help you--and I mean that sincerely--and 
that's why to me transparency in the supply chain is critically 
important here. And it seems to me that we could do a better 
job in the legal requirements of legitimate companies with 
their requirements to dig in more into the supply chain before 
they purchase their products, and that is a political hurdle we 
have here because, obviously, companies don't like to have to 
go through that burden.
    But with the size of this problem--if the numbers we have 
are correct--we are allowing a lot of illicit gold to come into 
America that we're not able to stop under today's enforcement 
rules.
    So I guess my question to you is, I mentioned two examples 
of transparency initiatives, one the EITI, which is a global 
initiative; it's been around for a long time. And then I 
mentioned 1504, which has taken hold by other countries 
enforcing their disclosure laws on the stock exchanges. 
Wouldn't that help you if we had greater transparency, put more 
responsibility where the money is coming from, and that is the 
consumers of this country or the people who buy, believing 
they're buying legitimate product, but in reality they're 
buying illicit gold that's been melted down into a different 
look, and therefore it's difficult to find? Can't we develop a 
better way for transparency in the supply chain?
    [No response.]
    Senator Cardin. Everybody is quiet? That's a question for 
an answer.
    Yes?
    Ms. Thompson. Yes, sir. I certainly agree. A lot of times 
when we're engaging in training, whether it be with foreign 
partners or in collaboration with domestic agencies or with the 
private sector, we speak a lot about anti-money laundering 
measures, and the measures can be taken, obviously, on a 
national level, but they can also be taken at a business level 
in terms of implementing these anti-money laundering measures 
so that we can really see the beneficial ownership information, 
meaning who is ultimately benefitting from the money of the 
sale of the illegal gold or where the payments are going.
    Senator Cardin. So, you have a company here who's buying, 
let's say, gold from a company in our hemisphere, a legitimate 
company that's operating three companies below with illegal 
activities. How do you operate here in America to require that 
supply chain information to be known so that the company here 
in the United States cannot participate because they have not 
gotten the satisfaction that the gold being purchased here was 
not part of illicit activity? How do we do that?
    Good, I found one volunteer. Yes?
    Mr. Haeni. Senator, it can be quite difficult for gold, but 
I think we could use some other examples, particularly in 
tantalum, and tungsten and the success that we have had in the 
DRC. Establishing traceability is absolutely critical as we 
look to decouple the criminal activity from these local mining 
operations and allow the local population to profit from them. 
The progress to go in 2010 from almost total control of the 
mine sites in eastern DRC under criminal and armed group 
control to today down to 20 percent is quite remarkable, and I 
think that's an example of when traceability is in place where 
we can see progress.
    As I mentioned, that is more difficult on the gold side 
because gold is more easily smuggled and more difficult to 
establish traceable supply chains, but we very recently have 
done the same thing for the first time in the DRC, establishing 
a fully traceable, conflict-free supply chain for the export of 
gold to the U.S. through an all-U.S. private sector supply 
chain.
    Senator Cardin. And, of course, 1502 of Dodd-Frank deals 
with that requirement.
    Let me tell you the alternative. The alternative is that 
Congress passes a ban on these products coming into America, 
just an outright ban, because we can't with satisfaction 
determine that it is safe from contamination from illegal 
sources. That could violate some of our trade agreements. That 
could cause diplomatic and bilateral problems. And it presents 
an economic challenge for America.
    So if we can't get this right, we will look for other ways 
to deal with this. And, quite frankly, I don't believe we have 
the cooperation of the commercial entities in this country. I 
don't think they share enough concern about where their 
revenues are going. They look more as to their own 
profitability rather than what they are contributing to, and 
that's why it requires us to give them guidance. If everyone 
has to comply with the same rules, no company is put at a 
disadvantage, and we need stronger national laws on this. 
That's why 1502 was adopted. That's why 1504 was passed. That's 
why we've worked on these issues that provide a common 
requirement so that everyone is under the same standards.
    I can tell you 1502 wasn't easy to pass. There was a lot of 
opposition to 1502. So we need your help, because I can only 
imagine how difficult it is for the FBI or Homeland Security to 
try to put together one of these cases. It's not an easy thing 
to do because you can't connect all the dots under current 
laws, and there is virtually no way you can establish criminal 
responsibility at the end user level unless you can connect 
some dots on culpability. That's the challenge today.
    So we've identified a problem. I'm not sure we've 
identified an answer that will be comprehensive enough. We 
certainly want to do everything we can at the source, working 
with the countries involved, good governance. You're right, get 
rid of Maduro, the best thing we could do for Venezuela, and so 
many other things come along with that, including illicit 
mining. We agree with that, and we have to work in that regard. 
But I do think recognize it is the money from the consumers in 
this country that is fueling these operations, and we have to 
have a better way of identifying the source in order to stop 
the practice.
    Thank you, Mr. Chairman.
    Senator Rubio. Thank you.
    Let me begin with Ms. Thompson and Mr. Lechleitner. We've 
seen numerous cases where private planes are being used to 
transport illegal gold. How can we boost scrutiny of such 
flights at our nation's airports and encourage stronger customs 
enforcement in countries through which the illegal gold passes?
    Mr. Lechleitner. Thank you, Mr. Chairman. That's a very 
difficult issue because of the way that gold is handled and 
that it's virtually impossible once it's melted and combined 
together to trace it. It's very difficult to tell if it's 
illicit or licit. The best solution, one of the best solutions, 
I believe, would be working with our foreign partners to 
determine where this gold is being sourced and potentially 
where these flights are coming from. Working with our partners 
in transnational criminal investigative units both domestically 
and abroad to determine where these flights are coming from and 
their source countries would be a way that we could potentially 
attack this issue.
    It's not an easy issue. It's very easily hid, and it's very 
easily obscured. So only with the participation of our foreign 
partners, I think, can we really attack the issue to any 
measureable degree.
    Senator Rubio. Let me ask you both, maybe you guys can help 
us. Just logistically, if you could walk us through how, for 
example, illicitly mined gold in Peru, in Venezuela, wherever, 
winds up in our marketplace here, what are the steps. Obviously 
they illegally mine it, and then what happens? If you could 
just walk us through how it gets here, typically.
    Ms. Thompson. Well, there are two main ways that it's going 
to enter our markets. One is through fraudulent documentation 
that is given at the border, and the other way is the 
smuggling. So to take a step back, as you said, the gold is 
obviously illegally mined, and then it will pass through a 
number of hands. Sometimes it's more direct. Sometimes it 
really is a number of hands to hide the original source of the 
gold. And then sometimes that involves shell companies. And 
then, as I said, it's the two primary ways that it enters the 
U.S.
    Senator Rubio. But physically, how does it get--does 
somebody have it on their person on a commercial flight? Do 
they send it via FedEx? I mean, how does it come in?
    Ms. Thompson. Oh. Sorry, sir. Yes, both. So, for example, 
if it's crossing and declared when it's coming into the 
country, it can have fraudulent documentation with it. That's 
one way the illegal gold can come in. And then second is the 
smuggling route, which we have talked about a little bit 
earlier, where it's melted down into belt buckles, jewelry, 
purses, things like that, and that's a way to smuggle it in.
    Senator Rubio. So I arrive at Miami International Airport 
with gold bars in my suitcase. What are the declaration 
requirements when you land?
    Mr. Lechleitner. If it's greater than $10,000, you need to 
declare it, but there would be no way to determine if those 
gold bars are illicit or licit.
    Senator Rubio. Right. But if it's more than $10,000, 
they're supposed to declare it. Obviously, it's the equivalent 
of cash in that case, right?
    How many of the entry points do we think come in through 
just a regular commercial flight where people are going to 
carry gold in amounts of less than $10,000 but with sufficient 
back-and-forth travel to get it into the country in numbers 
that make sense for them?
    Mr. Lechleitner. I don't have a specific number. I can 
research that and get back to you on the specific numbers, if 
we could find that. We do know that the gold is coming in 
through various sources, both legitimate and illegitimate. What 
happens is that in the source countries it's being melted down 
and combined, and then it basically legitimizes it, launders 
the gold, and very often it's coming in and it's essentially a 
legitimate commodity at that point, and it's basically a----
    Senator Rubio. So one route is the way they clean it up, 
they launder it basically, and that is they take the gold and 
either pass it through various entities until the paper trail 
makes it look like it came from--no one knows where it came 
from; the other is it's melted down and mixed with other 
sources, again untraceable anyway, and then it comes in through 
the normal commercial transaction for importation.
    The other is--and it was one of the cases that they were 
highlighting to us in the past--that somebody actually arrives 
at the airport in Miami, gets through Customs, and then drives 
down to some company who converts the gold into a cash 
transfer. So what has happened with that route in terms of 
bringing it in? Do companies now--if I show up with a bunch of 
gold at one of these exchanges and they wire cash to me in 
exchange for the gold, does that transaction, that wire, now 
have to be reported?
    Ms. Thompson. It depends upon what you mean by being 
reported, because one thing with the reporting, and it's an 
issue, is gold is not considered a monetary instrument. It's 
considered a commodity. So the paper trail is very minimal with 
the gold. So there is no financial reporting to track. When it 
comes to the payments, that's what we have. Like in the case 
that you referenced, there were money wire transfers, and 
that's what we were able to track.
    Senator Rubio. Right, you were able to track the wire. But 
does it specify that this is turning a commodity into cash for 
the seller, and then that transaction is reported? Is that how 
that works?
    Mr. Lechleitner. No, I don't believe so. I don't believe 
so. It's just a money transfer.
    Senator Rubio. Without knowing that the source of it was 
$10,000 worth of gold sold in exchange for $10,000 cash wire.
    Mr. Lechleitner. Correct.
    Senator Rubio. So you have to know who to look for.
    Mr. Lechleitner. Absolutely.
    Senator Rubio. Because if you're just scouring 
transactions, that alone is not going to tip you off.
    Mr. Lechleitner. No, that's correct.
    Senator Rubio. And if the transactions are under $10,000, 
there's no reporting; correct? On the wiring side.
    Mr. Lechleitner. Well, with gold, as was stated, because 
it's a commodity, it's handled a little differently. But with 
transactions, if you do enough of them under the $10,000 
threshold, that's called----
    Senator Rubio. Under the banking system, right. If you go 
to a bank, I think the threshold is $10,000 as well. Any 
transaction over $10,000, there has to be a record made.
    Mr. Lechleitner. Correct.
    Senator Rubio. So if you go to one of these exchange houses 
that buy gold from people, and you show up with $9,999 worth of 
gold, and they give you cash for it, that's not reported 
anywhere; correct?
    Mr. Lechleitner. I'll have to research that. I don't 
believe so.
    Senator Rubio. Right. Okay.
    Mr. Glenn, let me ask you, what can we do to bolster the 
investigatory and enforcement capacity of the governments in 
the region to go after firms that are laundering? We just 
talked about how some of this stuff is taken, illegally mined 
and mixed in with other stuff, the other gold and so forth, and 
at that point they have laundered it, basically, for lack of a 
better term.
    What's the best thing we can do? Obviously, in Venezuela, 
the government is actively participating in it. But in places 
like Peru and Colombia and El Salvador, others that want to be 
cooperative, what do they need? How can we help them to 
increase their capacity?
    And that's for anybody who has an idea, by the way, whether 
it's Mr. Haeni or Ms. Filipetti. But I want to start with you, 
Mr. Glenn.
    Mr. Glenn. Sure. Thank you for the question. It's an 
excellent question.
    We've actually had, I would say, considerable success with 
Peru since they decided to attack this problem head-on. 
Political will from the president, President Vizcarra, and his 
decision to take this problem on, has been essential.
    In terms of our assistance and what we've been able to do 
to help, and what we can do to help in other countries, I think 
is very good if we're able to model it upon what we've been 
able to do in Peru. So we focus on building the capacity of 
investigative agencies to be able to do the complex types of 
investigations. We do that through partnering with the FBI, 
with DHS, with other U.S. agencies that have the expertise. We 
can bring those experts down to Peru, to Colombia, to El 
Salvador, to whatever country, and share those best practices 
and expertise.
    Another essential part is making sure that they have the 
laws that exist that give the governments the tools or the 
hammer or the stick that they need to do enforcement. So in 
many countries asset forfeiture laws do not exist, or they're 
weak, or they're unenforceable. So we work to help them reform 
those laws or to pass those laws in the first place, and then 
train investigators, prosecutors, and judges so that they then 
have the confidence and ability to enact those laws.
    So going at it from a regulatory and a criminal regulatory 
perspective has been essential. It has proven successful in 
Peru. There has been a large uptick in the number of cases that 
they've been able to successfully prosecute. That's one of the 
many ways that we can go about it, but we know that that one is 
successful.
    Senator Rubio. Could you update us on the status of the 
2017 Memorandum of Understanding with the Peruvians?
    Mr. Glenn. Sure. The MOU with the Peruvians was essential, 
in large part to get the U.S. Government side talking to each 
other. It then helped the Peruvian side as well to get their 
side. Just like us, there are multiple agencies within the 
government of Peru that engage on this issue. That MOU that was 
signed under the time that Ambassador Nichols was there has 
been continued under Ambassador Urs. We used that MOU to model 
a similar MOU in Colombia, and those have been the documents 
that we've used to strategically focus our assistance, our law 
enforcement efforts, and to help our partners do their part.
    But those MOUs are focused not just on law enforcement. 
They're focused on looking at alternatives to formalizing the 
mining sector, getting the mercury out, and it's a 
comprehensive approach.
    Senator Rubio. I'm sorry to go back to Mr. Lechleitner and 
Ms. Thompson for a second. I forgot to ask, what evidence do we 
have? Are we seeing the use of shell companies in the United 
States to help launder money associated with this?
    Mr. Lechleitner. Yes, we are, quite a bit. We've seen quite 
a bit of shell companies. Specifically, I can address some that 
are in Florida, south Florida.
    Senator Rubio. Any in Maryland? No?
    [Laughter.]
    Senator Rubio. All right.
    Mr. Lechleitner. Very often they go back to a residence, 
and we've seen some commonalities with some B1/B2 holders as 
well. But shell companies are being utilized to launder the 
money.
    Ms. Thompson. And to add to that, sometimes it's not as 
simple as just a shell company. They often engage in what's 
called layering, where there will be multiple shell companies, 
therefore making it even harder to track the documentation.
    Senator Rubio. Which is now a shameless plug for my bill 
with Senator Wyden to unmask some of these companies that are 
being used for these illicit purposes.
    Mr. Haeni, let me ask how the USAID programs that are 
helping miners and targeting the artisanal miners, can you give 
us an update on those programs?
    Mr. Haeni. Sure. As you noted, they're a critical component 
to the MOUs that were signed both in 2017 with Peru and in 2018 
with Colombia. Peru's recent $23.9 million program is in direct 
support of that MOU, as is the ongoing CINCIA project, which, 
as Mr. Glenn mentioned, helped to establish the first-ever 
mercury testing facility in Peru. It has also worked to promote 
innovative reforestation techniques. So we're really taking a 
holistic approach all the way from the formalization of the ASM 
sector, looking at the link to environmental degradation, 
including looking at alternative livelihood. So both in Peru 
and Colombia, we've had success through USAID's programming.
    Senator Rubio. Senator Cardin.
    Senator Cardin. I want to just follow-up on the 
conversation with our State Department people. I think there's 
a lesson to be learned in a positive way on how we have been 
able to go after trafficking in wildlife, particularly elephant 
tusks and rhino horns. We've had an all-out effort to deal with 
that issue, and we've gotten great cooperation from the 
countries involved; not all, but most have worked with us in 
order to really deal with these illegal takings. And Congress 
gave additional resources and tools, and it was a priority of 
the State Department, a priority in each of our missions in the 
countries involved, and it made a difference.
    I think we could do the same in regards to this illicit 
mining, and I appreciate the fact that you've given us good 
examples of the relationship in Peru and what's been going on 
in Peru. But I think there needs to be stronger attention given 
within the State Department instructions to our different 
missions, and in the use of USAID's activities in these 
countries, to make it clear that this is something that you 
need to have a checklist on in order to be able to maintain a 
positive relationship with the United States.
    I can tell you that it really was the interest in the State 
Department, the interest in Congress that made a difference on 
wildlife. I don't think we've had the same visibility on 
illicit mining, and it is perhaps a much larger dollar problem 
for us than the rhino horns and elephant tusks, although that's 
a huge business, don't get me wrong.
    So what is the game plan here beyond just a one-country 
effort?
    Mr. Glenn. Political will is essential. We can put in 
hundreds of millions of dollars to this effort and it will go 
nowhere unless political will exists. So the question really is 
how do we generate political will?
    Senator Cardin. That is exactly right. I agree with you, 
you need political will. But it's amazing how political will 
changes when the United States pays attention to a problem.
    Mr. Glenn. Yes. What I don't want to encourage, though, is 
that money and assistance isn't necessarily going to generate 
that will. What we've been able to do in Peru--the Peruvians 
and their Operation Mercury, it's a $300 million investment in 
the government of Peru. The investment on the U.S. side is 
remarkably small. It enables a lot of what they're able to do, 
but it is their investment that is making the difference there. 
We will see similar results as we are seeing in Peru in places 
like Colombia and some of the other Latin American countries 
when that political will gets generated.
    How do we create that political will? Under Ambassador 
Nichols at the time in Peru, and continuing under Ambassador 
Urs, the constant attention from our embassy staff, these types 
of hearings where an expression is being made by the U.S. 
Government, my focus on it. I will be down in Peru and Colombia 
next week. In Colombia, we'll actually be specifically focused 
on criminal activity, much of it mining, that is being 
generated out of Venezuela and how can we as a region in the 
Western Hemisphere combat that illegal mining coming out of 
Venezuela.
    So it's those kinds of engagements that help build that 
political will and gets countries to invest. I think a lot of 
it is convincing them of the profitability of a legal system, 
and a lot of that has to do with USAID's programming. So that's 
the key. Obviously, the resources from our end that we are able 
to invest in their capability and increase their capacity is 
key. But I think, again, the most important part is to get them 
to want to address this issue.
    Senator Cardin. And we have an opportunity. The President 
has nominated a new ambassador to Peru, and I believe she's 
from Florida, if I'm correct. I may be wrong about that, but 
she's not from Maryland. That I did notice. But we will make 
sure that that's an issue that we bring up as important, and 
I'm sure it will be on the administration's mind.
    I agree with you, you've got to create the interest, and 
it's more than money. But a relationship with the United States 
is multifaceted, and if this issue isn't a top tier issue, then 
it's of less political will locally. I understand it can be 
generated locally, but normally international pressure can make 
a difference in political will locally.
    Thank you, Mr. Chairman.
    Senator Rubio. And I have a couple of comments and maybe a 
question, and I want to focus specifically on Venezuela with 
you, Ms. Filipetti, and then the broader group if you have 
comments on it as well.
    The interesting thing about illegal mining in Venezuela, 
the first thing is the ecological disaster. Irrespective of the 
political outcome there, the ecological disaster is 
extraordinary and some of it irreversible, and much of that, 
frankly, has been underreported because the political disaster 
and the economic disaster has been so extraordinary.
    There are two things happening. One, frankly, is the regime 
has dipped heavily into their gold reserves just to sustain 
itself. The central bank puts out these numbers, but if you do 
the math they're lying, and they're probably under $10 billion 
in reserves as is, and they will probably be lower here by the 
end of the year because one of the ways Maduro holds on to 
power is he does these Christmas bonuses, pork for Christmas 
and so forth. He won't even be able to meet the demand that 
exists, but he takes funds and sort of throws them into the 
street just to keep people calm over the holiday. So they'll 
have to use reserves to pay for that.
    We've seen U.S.-origin gold bullion from the 1940s winding 
up in the global market. Stuff that was used during the Second 
World War to pay for oil, that's now winding up out there in 
the global marketplace. That's been openly reported in a number 
of sites.
    But the second piece, the one that's leading to the 
degradation ecologically, is the illegal mining. Ms. Filipetti, 
it's my understanding that--and correct me if I'm wrong. What 
is the role of the ELN and the dissident FARC movements that 
are within Venezuela playing in the mining regions? Some report 
that they have almost complete control and operate with 
impunity. What's the assessment of the State Department as to 
the role they're playing in the illegal mining occurring in 
Venezuela?
    Ms. Filipetti. Sure. Thank you very much, Senator. Well, 
it's clear that the ELN and the FARC are very present in the 
mining arc. It really depends on what specific areas we're 
focusing on. It's essentially ungoverned, lawless territory. So 
it's common that terrorist entities like ELN and FARC will make 
themselves present there.
    In some cases we are seeing them control the mines 
themselves. In other cases we're seeing them control transit 
routes. We're seeing them take advantage of refugees who are 
trying to flee and sort of forcing them to work in the mines 
and to stay. In other cases we're seeing them have control over 
some armed weapons which are enabling them to have control over 
medicinal supplies and things of that nature. So it really does 
depend.
    But the truth is their presence in the region is one of the 
most dominant concerns of the State Department. We have seen 
also how--I spoke a little bit about the Maduro regime and its 
incompetence in gaining control over this problem. What it 
realized is once it was not able to effectively combat illicit 
mining, it decided to capitalize off of it in order to get more 
resources that it realized were being deprived of it, largely 
because of U.S. and international sanctions on the petroleum 
industry.
    So we have now seen how there's a relationship between 
government officials. There's a relationship between the army 
and the national guard with some of these entities, whether 
it's the ELN and the FARC or whether it's the pranes colectivos 
who are also present in order to really trade weapons, control 
over some of the territories, or cash, for support from these 
territories.
    Senator Rubio. I think that's the key point, because we're 
not talking about criminal operations in a country that doesn't 
want them there. We have criminal operations like that in other 
countries like Peru or Colombia, but the governments by and 
large want them out. There may be some localized corruption, 
but the government wants them out. In this particular case 
they've basically been deputized and/or the industry has been 
outsourced to them by the regime in exchange for those groups' 
support and cooperation and a small fee or whatever that's 
generating income not just for the regime but for the 
individuals in the regime. This is one of the ways that Maduro 
keeps these people around and loyal, not to him but to that 
source of revenue of illicit gain. So this is with their 
cooperation.
    Ms. Filipetti. That's right, Senator. In some cases they 
have tried to cut down on instances of illicit mining simply 
because they don't have the relationships with those gangs. So 
in that case they do try to stop it so that they can generate 
those relationships. But, absolutely.
    You know, we've spoken a lot about how we need to generate 
political will. There are things we can still do even with a 
country that's under a regime that has no interest in working 
with us on combatting it. Venezuela is a really unique case 
because Maduro is part of the problem, and also because we 
sanctioned the entire gold sector for precisely the reasons 
that you've described, because it has enabled this patronage 
network that has kept him in power.
    So that actually gives us a number of unique tools that we 
can use in order to combat illicit mining inside Venezuela. 
We've used some of them. Diplomatic engagement, as Senator 
Cardin mentioned, has been critical with some of our allies. 
We've seen how the Bank of England has confiscated $550 million 
worth of Venezuela-origin gold. We've also seen a decrease in 
the amount of gold flowing to Turkey thanks to our engagement 
with Turkey.
    There are other things that we've been working on as well. 
Sanctions and imposing a cost for dealing with this sector has 
been effective as well. We continue to look at other companies 
that continue to operate with the Venezuelan mining sector. 
And, of course, looking at a transition scenario, this is where 
we can be most effective. This is when we can start to deploy 
some of the resources and tools that my colleagues spoke about 
that we're using in Peru and Colombia.
    It's also an opportunity for us to consider how we might be 
able to encourage more legal forms of mining so that we can get 
rid of the illicit category within Venezuela. But, of course, 
that would require a lot of security assistance as well, and it 
would be something that we can only consider once we have a 
democratic government in place in Venezuela.
    Senator Rubio. My last question is what you've described 
and what I've talked about often is that you have a 
governmental agency, for lack of a better term, in the Maduro 
regime that basically cooperates with drug dealers for a fee. 
They have done drug seizures, but the drug seizures are on the 
people who haven't paid them. If you pay them, they might 
actually even fly the drugs for you or transport it for you. 
The same is true in the illicit mining. They may go after a 
group, but it's the group that isn't paying them. In essence, 
if you pay them, they let you operate.
    How is that any different from how organized crime operates 
when it takes over a neighborhood and cracks down on loan 
sharking or gambling among those crews who are not paying the 
capo the kickback that he's asking for? What you're basically 
describing is an organized crime effort dressed up, that 
retains some elements of a nation-state government. But in 
essence, this is an organized crime ring that today doesn't 
govern but controls Venezuela.
    Ms. Filipetti. Senator, that's how we would describe it. We 
don't refer to the Maduro regime as a government. It is a 
corrupt criminal network. It's corrupt and criminal both, as 
you described. It's involved in the drug trade. It's also 
corrupt and criminal in its involvement in the mining industry, 
and not just gold. Again, we're talking about a lot of illicit 
sources of coltan, of diamonds, of coal even. So I absolutely 
agree with your characterization of it as a criminal network.
    Senator Rubio. Senator Cruz.
    Senator Cruz. Thank you, Mr. Chairman.
    Good morning. Welcome to each of the witnesses. Thank you 
for your testimony.
    I've long worried that we're not paying nearly enough 
attention to the use of gold as a monetary instrument of 
illicit finance, so today's hearing is valuable in that regard. 
I appreciate Chairman Rubio convening this hearing.
    Earlier this year I introduced a bill that would add trade 
in illicit precious metals as a class of transaction to be 
considered when making a Section 311 primary money laundering 
concern designation. This bill would allow the Treasury 
Department leverage when determining whether a country or bank 
should be designated a jurisdiction of primary laundering 
concern, a label which has an obviously chilling effect. I 
continue to urge the administration to consider this and 
similar measures which would help address both the mining and 
the trade of illicit materials.
    On that issue I'd like to ask each of you to talk a little 
bit about how illicit metals are being used by the Maduro 
regime and other anti-American regimes in South America 
specifically. The porous border between Venezuela and Colombia 
facilitates the smuggling of illegal gold with ties to guerilla 
groups like the ELN and the FARC. How widespread is this 
challenge, and how can we support Colombia in monitoring and 
halting smuggling across its borders?
    Ms. Filipetti. Senator, thank you. I can speak very briefly 
to the Venezuela angle of it. In terms of how prevalent it is, 
unfortunately, because we don't have a relationship with the 
Maduro regime, it can be difficult for us to gain exact 
numbers. We do know that approximately 91 percent of all the 
mining in Venezuela is illicit, which is partially why our gold 
sanctions are so significant. It enables us to target the 
entire industry because either it is illicitly mined or it is 
in some way trying to be used by the Maduro regime in order to 
support itself by stealing from the natural resources of the 
Venezuelan people.
    We know that the ELN and the FARC are present. We also know 
that there are a number of centralized gangs, colectivos, as 
you are aware, that are operating there, and it's really a 
vicious cycle because the presence of these ungoverned spaces 
means that these terrorist and criminal groups come in. They 
are the ones who have control over the weapons. They're often 
in indigenous communities. It's notable that the three highest 
mining instances are in Bolivar, Amazonas, and Zulia, which 
are, of course, also the most heavily and densely populated 
indigenous communities in all of Venezuela.
    So their land is being stolen from them. They are being 
trafficked both into the sex trade as well as forced into 
labor. So it's a key problem, and it affects Colombia as well 
because, of course, as you noted, these are porous borders. The 
transit routes are often controlled by the ELN and the FARC and 
other gangs. So the health impacts and the poisoning of the 
water and so on does not stop at Venezuela's borders. Colombia 
had recently indicated that most of its--I think it was 95 
percent of all of the new malaria cases in foreign-born 
individuals who were in Colombia came from Venezuela.
    So we're seeing everything start to trickle out of 
Venezuela, and I think it's critical that we focus both on 
regional approaches, which my colleagues can discuss, in the 
surrounding countries where we have partnerships, but also some 
of the ideas that we posited on how do we address the problem 
inside Venezuela, even with a government that's not willing to 
cooperate with us.
    Senator Cruz. Let me follow up. How does the Maduro regime 
benefit from illegal mining carried out by groups like ELN and 
the FARC? And will disrupting the region's illegal mining 
networks undermine the stability of the Maduro regime? If so, 
how can we rally the region behind this goal?
    Ms. Filipetti. The answer to if disrupting it will 
destabilize Maduro, I think the answer is a categorical yes. 
It's partially why we have implemented the gold sanctions. He's 
going to keep looking at other sources of potential cash the 
more our sanctions take effect, particularly on the petroleum 
sector. So we have seen him turn even more towards gold. We've 
seen him make announcements in both 2018 and this year 
indicating that this Arco Minero is a central piece of his 
strategic developments. And, of course, there are billions and 
billions of dollars' worth of revenue that can be generated 
from the gold reserves inside Venezuela.
    In terms of what we can do, again, we have very strong 
allies on the borders of Venezuela who have been working very 
closely with my colleagues and I and elsewhere in order to 
combat illicit mining. We have seen reports, though--of course, 
it's hard to determine the origin of some of the gold. So what 
comes out is Colombian gold, and they have actually been 
Venezuelan in origin.
    A few things that we can look at in the near term. So, as 
I've pointed out, we have had some cooperation from our allies 
as we've come forward and indicated to them the sanctions risk 
of engaging with the Maduro regime. So we have seen a 
significant decrease. I think Turkey is an example of this. 
Between January and September of 2018, we saw Turkey purchase 
over $900 million worth of Venezuelan gold. That's more than 
the total trade between the two countries in the previous 5 
years combined. We engage with them very directly. Our embassy 
engaged with them very directly, and we are not seeing that 
kind of engagement with the Venezuelan gold industry to that 
extent. So that is something that we continue to engage with 
our partners on.
    Another thing for us to potentially look at is mercury. 
Mercury is one of the key causes of the ecological devastation, 
which also affects the health of the indigenous communities 
that are present. If we can potentially consider ways to 
prevent or disrupt the amount of mercury that's going into 
Venezuela and being used by these small mining individuals, 
that I think could potentially prevent the production of that 
gold from ever making it out from Venezuela in the first place. 
So that's an area for us to look into as well.
    Senator Cruz. Let's shift for a minute from gold to 
uranium. In Latin America there are two converging developments 
on uranium. First, legal mining has been on the rise of uranium 
across Latin America, and illicit mining will undoubtedly 
increase alongside it. Second, as we have known for a decade 
now, Iran and Hezbollah are both engaged in efforts to mine 
strategic minerals for missile and nuclear programs across the 
region. A report recently published by Los Alamos National 
Laboratory about Hezbollah specifically called attention to the 
``global pandemic'' of missing nuclear material and equipment.
    A couple of questions. What is your assessment of the risk 
Hezbollah or affiliated extremist organizations are trying to, 
and can, acquire illicit precious metals for their ballistic 
missiles and nuclear programs, especially illicitly mined and 
traded uranium?
    Ms. Filipetti. I can speak briefly to the Venezuela angle 
of this. We certainly know that there is an Iranian presence. 
The extent to which the Iranians are directly involved in 
mining, inside Venezuela at least, is still a little unclear to 
us. So we know that there are Iranians; we just don't know the 
extent to which they're operational in the mining industry.
    There are some deposits of thorium and uranium inside 
Venezuela, so it's something that we watch incredibly closely, 
and the minute we have further details we're happy to provide 
those to you.
    Senator Cruz. Very good. Thank you.
    Senator Rubio. Anything else? Thank you.
    Thank you all for your time. We appreciate it very much. I 
think this has been a useful hearing for us. As you can see, 
there's interest in this topic, and it's important. It's not an 
easy one to address, but it's one we're trying to find ways to 
move forward that we can do both from a legislative perspective 
and also from a public awareness perspective about this need.
    So again, I want to thank you all for being here.
    The record will remain open for 48 hours.
    And with that, this hearing is adjourned.
    [Whereupon, at 11:29 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


              Responses of Carrie Filipetti to Questions 
                Submitted by Senator Benjamin L. Cardin

                mining supporting criminals in venezuela
    Over the past 3 years, a boom in illegal mining in Venezuela has 
helped Nicolas Maduro's government retain power. In March 2019, the 
U.S. Treasury Department imposed sanctions on Venezuela's state-run 
gold mining company (Minerven) and its president for engaging in 
illicit transactions that have supported Maduro. Treasury accuses 
Minerven of buying gold from hundreds of thousands of ASM miners, 
exploiting a large military-controlled zone seized from indigenous 
groups.

    Question. What role do you see illegal armed groups from Colombia 
playing in the control of the illicit gold mining industry in 
Venezuela?

    Answer. In Bolivar State, a massive territory in the southeast of 
Venezuela, human rights organizations cite a complete absence of 
government presence, leaving its residents subject to the order imposed 
by armed, non-state groups. The increased presence of such groups has 
created heightened violence and insecurity in local communities. Some 
mines are run by Colombian armed groups--the Ejercito de Liberacion 
Nacional (ELN) and the Fuerzas Armadas Revolucionarias de Colombia 
(FARC) dissidents. Others are run by Venezuelan ``sindicatos'' and 
``pranes'' or gangs. These non-state armed groups work in concert with 
members of the illegitimate Maduro regime and distribute profits as 
patronage.

    Question. To what extent, if at all, do you see ties between 
criminal actors in the mining sector and the Maduro government?

    Answer. While the precise extent of the current ties between 
criminal actors in the mining sector and the Maduro government are only 
partially understood, they are clearly strong. According to reports 
from well-respected think tanks and other independent experts, criminal 
actors operate in mining regions as intermediaries between local 
miners, the Venezuelan armed forces and government officials. In some 
cases, the Maduro regime has traded control over mines for political 
loyalty, establishing a criminal patronage network that empowers 
Maduro. At the very least, with the explicit acquiescence and support 
of the armed forces and the Maduro government, the criminal actors have 
a monopoly on the use of force in the mining regions, essentially 
placing miners, and many members of indigenous communities, under their 
control. In exchange for this so-called protection, miners are 
generally forced to pay a portion of the mined gold to criminal actors 
and sell mined gold to the criminal actors at prices set by the 
criminal actors. Much of the gold then flows from local criminal 
actors, through local military officials, to higher ranking military 
officers, and senior government officials, before being smuggled out of 
the country. At each step, participants in the scheme siphon off gold 
or share profits of the gold sales.

    Question. How have U.S. sanctions imposed in March 2019 affected 
the Maduro government's ability to fund itself through illicit gold 
mining proceeds?

    Answer. As a result of the designation, all property and interests 
in property of CVG Compania General de Mineria de Venezuela CA 
(Minerven) and its President, Adrian Antonio Perdomo Mata, and of any 
entities that are owned, directly or indirectly, 50 percent or more by 
Minerven and Perdomo, that are in the United States or in the 
possession or control of U.S. persons are blocked. U.S. persons are 
generally prohibited from dealings with Minerven and Perdomo, and 
persons and entities transacting with Minerven and Perdomo risk 
exposing themselves to U.S. sanctions and losing access to the U.S. 
financial system. While difficult to quantify the effect, this 
designation has impinged Minerven and Perdomo's ability to continue 
normal operations.

    Question. To what extent is forced labor, including child labor, 
present in the illegal mining sector in Venezuela?

    Answer. The former Maduro regime makes no effort to prevent 
children from working in the gold mining industry, or to protect them 
once they are working. It is difficult to determine the exact extent to 
which forced labor is present in the illegal mining sector in 
Venezuela. While many miners are local indigenous people, some miners 
have also voluntarily migrated to the gold mining regions desperately 
in search of work that is otherwise so difficult to find under Maduro's 
rule. Virtually all miners must work under the direction of and under 
terms and conditions set by criminal groups. Many can only gain medical 
care through these entities, and often, women and girls as young as 14 
are sexually trafficked. According to a report by the non-governmental 
organization Cecodap.Indigenous, up to 45 percent of those engaging in 
illegal gold mining are children or adolescents.
                  impact on human rights in venezuela
    Over the past 3 years, the boom in illegal mining in Venezuela has 
also contributed to environmental degradation in indigenous areas, 
clashes between rival criminal gangs, violence against miners, and 
outbreaks of malaria and diphtheria (diseases that had been rare in 
those areas). According to numerous reports, the illegal mining 
industry also commits various human rights violations, reportedly 
including the forcible recruitment of child labor from the indigenous 
Yanomami tribe:

    Question. What impact has a recent increase in illegal gold mining 
had on the health and human rights of indigenous groups residing in 
Venezuela's gold-producing regions?

    Answer. The former Maduro regime has been developing and expanding 
illegal mining zones, particularly in the growing ``Arco Minero,'' an 
area that extends between the states of Bolivar and Amazonas. It has 
been doing so without consulting those native to the region, putting 
indigenous communities at risk. Impacts of this illegal mining include 
environmental degradation, water contamination, child labor, forced 
labor, and the unprecedented influx of disease, drugs, and 
prostitution.
    We understand there has also been an increase in the presence of 
armed groups, including Colombian guerrillas and former rebels in these 
areas, creating heightened violence and insecurity in local 
communities. Indigenous leaders have reported that various incidents, 
including the November killing of eight individuals from the indigenous 
community of Ikaburu, have led to the displacement of more than 1,300 
members of the community.

    Question. To what extent has the presence of sex trafficking in and 
around mines driven the recent sharp rise in HIV/AIDS cases and deaths 
in that region?

    Answer. In the 2019 TIP Report, the Department documented the 
increase in sex trafficking in Venezuela's informal mining sector. 
Illegal mining operations exist in some of the region's most remote 
areas, which have a complete lack of rule of law. Such is the case of 
Bolivar state, which has become a hotspot for criminal activity, 
including the sex trafficking of girls, the forced recruitment of youth 
to join armed criminal groups, and the forced labor of young people to 
work in the mines under dangerous conditions.
    These vulnerabilities and compounding factors, paired with the lack 
of access to decent Healthcare, create fertile ground for the spread of 
sexually transmitted diseases, such as HIV/AIDS. PEPFAR is working to 
provide HIV testing and treatment services to Venezuelan migrants 
sheltering in Colombia and to conduct an HIV disease surveillance 
activity in Colombia to produce better estimates of HIV prevalence in 
the Venezuelan migrant community and their distribution throughout the 
country, as a lack of good data on the HIV disease burden is one of the 
core challenges in Colombia.
                               __________

    Responses of Carrie Filipetti and Richard H. Glenn to Questions 
                Submitted by Senator Benjamin L. Cardin

                               disclosure
    One method to combat illicit mining is to increase disclosure in 
extractive industries, which may seek to cover the unethical or 
exploitative practices they use for acquiring minerals. To enhance 
transparency and good governance in state-run extractive industries, 
multiple countries, including the United States and European Union 
members, have laws requiring the public disclosure of EI firms' 
payments to governments.

    In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also 
known as the Cardin-Lugar provision. Section 1504 established a global 
standard to require companies to disclose payments made to the U.S. or 
foreign governments related to the development of oil, gas, or 
minerals. Since then, 30 countries have followed the U.S.' lead, 
including Canada, Norway, the U.K., and 27 other members of the 
European Union.

    But in 2017, through the Congressional Review Act procedure, 
Congress voted to revoke the updated rule passed by the SEC that 
required public disclosure. That same year, the U.S. withdrew from the 
Extractive Industries Transparency Initiative (EITI):

    Question. How can the U.S. lead by example when we withdraw from 
initiatives like the EITI and when Congress votes to invalidate rules 
that require transparency in critical sectors of the economy 
responsible for illicit activities?

    Answer. Although the United States announced in 2017 it would no 
longer implement EITI domestically, it continued to support EITI. 
Department of State Bureau of Energy Resources (ENR) represents the 
Supporting Country constituency on the EITI Board of Directors and sits 
on multiple governance committees. USAID provides $3 million per year 
to support the EITI Secretariat and the implementation of EITI in other 
countries.
    ENR also supports transparency in the extractive resources sector 
through the Energy Resources Governance Initiative (ERGI). Through 
ERGI, ENR seeks to bring together countries that believe in the 
principles of sound governance to work together to share leading 
industry practices and encourage a level playing field for investment. 
The initiative will also encourage the creation and promotion of 
resilient, responsible, and integrated supply chains to avoid supply 
disruptions of key energy resource minerals.

    Question. What role does transparency play in ensuring that mining 
is more fair and accountable? What are the U.S. government and U.S. 
companies doing to support transparency in the mining sector, including 
via the EITI?

    Answer. Transparency enables the citizens of a country to 
understand how much money their country's natural resources are worth, 
who is paying for access to those resources, how much they are paying, 
and who is receiving those payments. Systematic disclosure of revenues 
from the extractive sector is at the heart of EITI's work. EITI uses a 
multi-stakeholder group (MSG) model that includes companies, 
governments, and civil society representatives. This diverse MSG works 
together to establish procedures for disclosing extractive resources 
revenue. EITI aims to enable all stakeholders to have equal access to 
the same information, which deters corrupt practices and helps identify 
improper use of revenues.
    The State Department's Bureau of Energy Resources (ENR) represents 
the Supporting Country constituency on the EITI Board of Directors and 
helps govern the organization through its work on the Finance, 
Governance and Oversight, and Outreach and Candidature Committees. 
USAID provides $3 million per year in funding for the implementation of 
EITI in other countries.
    In 2019, the State Department, through ENR, launched the Energy 
Resources Governance Initiative (ERGI) to foster dialogue among 
producers of critical energy minerals on how to promote sound mining 
sector governance, create more resilient supply chains, and provide 
sufficient resources for the rapidly growing critical energy mineral 
market. Through ERGI, we are working together to share leading industry 
practices and encourage a level playing field for investment. The 
initiative will also encourage the creation and promotion of resilient, 
responsible, and integrated supply chains to avoid supply disruptions 
of key energy resource minerals.

    Question. Which efforts are the most effective to reduce corruption 
and other illicit activity in the mining sector?

    Answer. Bringing small-scale gold miners into the formal economy 
and increasing transparency within the illegal gold mining sector and 
in the international and domestic trade of mercury, a key chemical for 
illegal mining, are essential to reducing corrupt practices within the 
mining sector.
    In Latin America, the United States signed Memorandums of 
Understanding (MOUs) with the governments of Peru and Colombia, in 2017 
and 2018 respectively, to expand bilateral cooperation to combat 
illegal mining and minimize its negative criminal, health, and 
environmental impacts. The MOUs allow the U.S. government to advance 
our shared interests through a coordinated interagency approach with an 
eye toward developing greater cross-border collaboration, given the 
regional nature of illegal gold mining and associated crimes.

    Question. Do you agree that initiatives like the EITI are effective 
means of collecting such data? Do you think the U.S. should rejoin the 
EITI? If not, why?

    Answer. EITI is an effective means of collecting extractive sector 
data because it is based on input from all key stakeholders: 
governments, civil society organizations, and the private sector 
entities. Countries implementing the EITI Standard range from 
established democracies with strong governance traditions to those with 
minimal governance capacity. Well-governed countries need years to 
fully implement the EITI Standard. In countries with political 
turbulence, few sources of revenue, and limited histories of 
independent judicial systems, a free press, or open civil society 
space, even an imperfect implementation of EITI's recommendations can 
take many years. In cases where countries perform poorly at providing 
required or requested data, EITI enables citizens to realize what data 
is lacking and serves as a platform for public debate and future 
reforms.
    The United States does not need to re-start implementing the EITI 
Standard. In 2017, the United States changed its status from its dual 
role as a Supporting Country and Implementing Country to Supporting 
Country. The U.S. government has continuously supported EITI with 
financial assistance through USAID and participated in its governance 
through its membership on the EITI Board of Directors since being a 
founding member of the Initiative in 2003. The tax reporting issues 
that led the U.S. government to stop implementing the EITI Standard 
have not changed. To resume implementing the EITI Standard in the 
United States would likely re-create the same debate and do nothing to 
improve extractives sector data reporting. The U.S. government can 
effectively improve extractives sector transparency by supporting EITI 
implementation in developing countries in which basic good governance, 
anti-corruption, and data reporting practices are nascent.
    The United States, with its free press and reporting standards for 
publicly traded companies, and other legislation prohibiting corrupt 
practices at home or abroad, serves as a reliable model for countries 
implementing the EITI Standard.

    Question. Please discuss the role of ``responsible sourcing'' 
(i.e., due diligence-based tracking of mined commodity supply chains) 
to prevent mining revenues from being used to abet illicit armed 
groups, criminal groups, corruption, or problems such as forced labor.

    Answer. Responsible minerals sourcing means that private sector 
companies have in place procedures that respect human rights, avoid 
contributing to conflict through their mineral purchasing decisions and 
practices, and allow them to know each node of their supply chains, 
which reduces the risk of behavior like money laundering. Broad and 
consistent application of due diligence systems, particularly the OECD 
Due Diligence Guidance for Responsible Supply Chains of Minerals from 
Conflict-Affected and High-Risk Areas, increases the supply of 
responsibly sourced minerals over time.

    Question. What lessons learned from this approach in Central Africa 
may be applicable to Latin America, especially with regard to 
countering drug cartels, and other armed or criminal groups' 
involvement in mining?

    Answer. Supply chains for natural resources tend to follow similar 
paths and patterns. Bad actors tend to use similar smuggling paths for 
multiple items or commodities and follow the route of least resistance, 
often through under-governed spaces. The work in Central Africa has 
illuminated the difficulties and opportunities of responsible sourcing 
efforts and illustrated that with consistent effort and public advocacy 
it is possible to attract responsible actors to the supply chains of 
these materials.

    Question. How might the EU's application of responsible sourcing to 
all ``conflict-affected and high-risk areas'' affect Latin America?

    Answer. The EU regulation pertaining to conflict minerals relates 
to ``conflict-affected and high-risk areas (CAHRA)'' around the world, 
in contrast to Dodd-Frank 1502's focus on the Democratic Republic of 
Congo and its neighbors. We believe that the EU is working closely with 
private sector and advocacy groups to be as clear as possible about 
what constitutes a CAHRA and may not ultimately list specific 
countries. EU disclosure requirements for companies will further expand 
the need for private sector companies to implement supply chain due 
diligence. For companies operating in Latin America and the Caribbean, 
the EU regulations may raise private sector and consumer awareness 
about mining in these regions.

    Some indigenous people--such as the Yanomami in Venezuela, among 
other vulnerable populations--have been forced into slavery at some 
illegal mines. Indigenous populations also face threats from illegal 
miners operating near or within their lands. Indigenous groups often 
object to mining because it violates their ancestral land rights, 
pollution and destruction of their land damages their livelihoods, and 
they are often excluded from decision making regarding the disposition 
of mining proceeds.

    Question. What is the U.S. doing to promote the protection of 
rights for indigenous communities exposed to the mining sector?

    Answer. Through bilateral and multilateral diplomacy, programming, 
and reporting, the U.S. government works to promote and protect the 
rights of those who belong to marginalized communities, including 
members of ethnic minority groups and indigenous peoples. This includes 
prohibitions on slavery and forced or compulsory labor.
    We work to promote an open environment for civil society to 
advocate governments to protect human rights and promote transparency, 
accountability, the rule of law, and anti-corruption efforts. This work 
is vital in protecting the human rights of members of vulnerable and 
marginalized populations. We also coordinate closely with the U.S. 
government interagency in support of policies and programs that seek to 
address labor and other human rights issues associated with the mining 
sector.
    Executive Order 13850 authorizes the imposition of sanctions on 
persons determined to operate in the gold sector of the Venezuelan 
economy or in any other sector of the Venezuelan economy as may be 
determined by the Secretary of the Treasury, in consultation with the 
Secretary of State. The Department of Treasury has designated the 
Venezuelan state-run mining and gold processing company Minerven under 
this authority.
    The State Department's annual Country Reports on Human Rights 
Practices include a section on human rights concerns affecting 
indigenous peoples; these reports provide important information and 
draw attention to the impact of mining on indigenous peoples, where 
applicable. Further, the State Department chairs a U.S. government 
interagency working group (IAWG) to monitor violence against 
environmental defenders, many of whom are indigenous people. The IAWG 
seeks to strengthen access to environmental information and 
environmental impact reviews of extractive sector, energy, and 
infrastructure tenders and projects. It also seeks to promote 
transparency and access to justice, particularly in cases of violence.

    Question. What are the primary export destinations for illicit gold 
coming from Africa? From Asia? From Latin America?

    Answer. In Latin America, illicitly mined gold is primarily 
exported to refineries in the United States, China, India, the United 
Arab Emirates (UAE), Switzerland, and Italy. From Africa, a known and 
significant primary export destination and transit point for illicit 
gold is the UAE. China is reportedly a primary destination for 
illegally mined gold from the Philippines.

    Question. What roles do regulatory and tax regimes play in 
incentivizing black market trade in the mining sector?

    Answer. Trade routes quickly adjust when taxes are lowered or 
raised. Given the role low-level corruption can play in burdening 
exports from the source to the point of export, an unregulated business 
environment also can frustrate legitimate business and incentivize 
illegal or illicit trade.

    Question. How do we address demand for illicitly mined products 
like gold and diamonds at the national level?

    Answer. Supply chains for valuable, prolific, and easily smuggled 
commodities like gold and diamonds represent serious challenges for the 
public and private sectors. Governments can continue to encourage 
private sector actors to apply supply chain due diligence efforts to 
add transparency to their sourcing efforts. Consumer awareness of, and 
demand for, responsibly sourced minerals drives a great deal of the 
private sector behavior as modern consumers want to know more about the 
means through which their purchases have been brought to market. 
Companies realize that to stay competitive they need to address these 
concerns. Advocacy groups have helped put pressure on private actors 
and governments to prioritize responsible sourcing as a means of 
minimizing conflict finance, stabilizing supply chains, and ensuring 
the highest sourcing standards. Education, consumer awareness, due 
diligence, transparency, and corporate decision making all will 
continue to play important roles in combatting demand for these 
illicitly mined products.
                               __________

              Responses of Richard H. Glenn to Questions 
                Submitted by Senator Benjamin L. Cardin

    Question. How effective have industry-led due diligence efforts 
been in preventing armed groups from profiting from ASM in eastern DRC?

    Answer. ASM gold mining in eastern DRC is a serious concern for 
private sector supply chain actors and for the governments of the 
United States, the DRC, and international partners. The concept of 
responsible minerals sourcing means that private sector companies have 
in place procedures that respect human rights and avoid contributing to 
conflict through their mineral purchasing decisions and practices. 
Broad and consistent application of supply chain due diligence systems 
by private sector actors, particularly the OECD Due Diligence Guidance 
for Responsible Supply Chains of Minerals from Conflict-Affected and 
High-Risk Areas, increases the supply of responsibly sourced minerals 
over time. Most artisanal gold mines in eastern DRC, unfortunately, 
have not been validated as conflict-free, despite our efforts.
                mining supporting armed groups in africa
    Recent research in the Sahel by the International Crisis Group 
(ICG) indicates that an ASM gold mining boom in Mali, Burkina Faso, and 
Niger--yielding production between 40 and 95 tons per year worth 
between $1.9 and $4.5 billion--has provided ``diverse armed groups... 
in some cases including jihadists, with a new source of funding and 
potentially even recruits:''

    Question. To what extent might gold be funding terrorist groups in 
West Africa's Sahel region? How large is the black market for gold 
across Africa more broadly?

    Answer. Artisanal and small-scale gold mining is a major source of 
livelihood and revenue in West and Central Africa. Based on available 
data, the majority of all gold exports from these regions is illicit. 
The UAE is the primary export destination for illicit African gold, 
through which billions of dollars in gold are smuggled annually. Mining 
operations often lead to illicit behavior, including illegal 
trafficking of gold; human trafficking; labor and human rights abuses 
at mining sites; financial crimes; and supposed support to non-state 
armed and violent extremist groups. Across Africa, the illicit gold 
economy persists as a result of institutional challenges, including 
lack of law enforcement capacity, corruption, and insufficient 
political will. A lack of alternative sources of income for low-level 
actors further exacerbates these issues.
    Researchers and practitioners in the region have identified an 
increasing link between the ``black market gold'' and terrorist/violent 
extremist organizations. The high value and ease with which gold can be 
smuggled and sold into formal supply chains makes it an attractive form 
of income for armed groups, including terrorist organizations. Further 
data would be necessary to understand the extent to which gold mining 
funds terrorist and violent extremist activity in West Africa's Sahel 
region.

    Question. What have been the main approaches, successes, and 
challenges of national-level efforts to counter ASM-related crime and 
tax evasion in Africa?

    Answer. Across Africa, governments have implemented various 
measures to combat Artisanal and Small-Scale Mining (ASM)-related 
crime, including tax evasion, as a part of their commitment to the 
African Mining Vision--adopted in 2009 at the African Union Summit. 
Governments have introduced alternative livelihood programs to move 
miners away from ASM to other sectors, particularly agriculture. 
However, results have been low with many miners viewing agriculture as 
a less attractive alternative. National-level efforts, while helpful, 
could be better supported with local government buy-in, which has been 
absent in some of the efforts. Promising approaches to ASM factors the 
issues noted above and formalization of ASM miners. Formalization and 
regulation are key success indicators. In Ghana, ASM policies provide 
incentives and formalization to support miners in getting a fair price 
for the minerals they sell, purchasing equipment, and technical 
training. The national government works with the local governments to 
regulate ASM policies in an effort to avoid child labor, tax evasion, 
and ban operators that violate ASM policies--those involved in criminal 
activity. In addition to Ghana's policies on ASM, the African Mining 
Vision in 2016 launched the African Minerals Development Centre, which 
will support African government's efforts to formalize and regulate 
their ASM sector.
                               __________

                Responses of Jeffrey Haeni to Questions 
                Submitted by Senator Benjamin L. Cardin

    One method to combat illicit mining is to increase disclosure in 
extractive industries, which may seek to cover the unethical or 
exploitative practices they use for acquiring minerals. To enhance 
transparency and good governance in state-run extractive industries, 
multiple countries, including the United States and European Union 
members, have laws requiring the public disclosure of EI firms' 
payments to governments.

    In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also 
known as the Cardin-Lugar provision. Section 1504 established a global 
standard to require companies to disclose payments made to the U.S. or 
foreign governments related to the development of oil, gas, or 
minerals. Since then, 30 countries have followed the U.S.' lead, 
including Canada, Norway, the U.K., and 27 other members of the 
European Union.

    But in 2017, through the Congressional Review Act procedure, 
Congress voted to revoke the updated rule passed by the SEC that 
required public disclosure. That same year, the U.S. withdrew from the 
Extractive Industries Transparency Initiative (EITI).

    Question. How can the U.S. lead by example when we withdraw from 
initiatives like the EITI and when Congress votes to invalidate rules 
that require transparency in critical sectors of the economy 
responsible for illicit activities?

    Answers. At the outset, it is important to clarify that the United 
States has not withdrawn from EITI, but has reverted from a dual 
Supporting/Implementing Country status within the initiative to our 
long-time prior status as a Supporting Country. In fact, the United 
States maintains--and has since the initiative's launch in 2003--
continual and strong high-level support for EITI. This includes 
providing critical leadership within the multilateral and multi-
stakeholder EITI initiative, as well as robust support for EITI 
implementation around the world.
    The State Department has held the EITI Supporting Country Board 
seat for the United States since 2003, alongside U.S. company board 
EITI members such as ExxonMobil and Freeport McMoran, and provided 
critical American leadership on the governance, financial management, 
and strategic direction of the global initiative. This was particularly 
important during the first years of the initiative, where the United 
States served as both a founding member and a lead Supporting Country 
of EITI, helping to found, form, and stand-up the initiative, 
influencing the adoption of the EITI Standard on transparency and 
disclosure, and supporting new member outreach and engagement. As a 
Supporting Country Board member and Alternate, the United States has 
continued to play a key role in the governance and technical focus of 
EITI, including adoption of rules around beneficial ownership in the 
2016 EITI Standard.
    In addition, since FY 2006, the U.S. Agency for International 
Development (USAID) has robustly supported EITI implementation, peer 
exchange and research around the world, including providing $13.5 
million in support for a World Bank-managed EITI Single Donor Trust 
Fund, and approximately $19 million in bilateral funding for activities 
that promote and support transparency and accountability of extractives 
expenditures and revenues around the world. In Nigeria, Senegal, 
Colombia, Peru, Indonesia, and at least 14 other countries, for 
example, USAID is supporting EITI-related disclosure of government 
revenue, exploration and concession data in the extractives sector, 
strengthening multi-stakeholder governance, and promoting beneficial 
ownership processes to enhance transparency and minimize supply chain 
risks to businesses, including money laundering and terrorist 
financing.
    The United States is committed to this ongoing support because we 
know that engagement in EITI and support for the EITI Standard serves 
key U.S. national and foreign policy objectives, including fighting 
corruption, empowering citizens, leveling the playing field for U.S. 
companies overseas, and promoting good governance in the extractive 
sector worldwide.
    For the first 10 years of the initiative--from 2003 to 2013--the 
United States served exclusively as an EITI Supporting Country. The 
United States began the process of joining EITI in 2012 as a Candidate 
Implementing Country as part of the first U.S. Open Government 
Partnership (OGP) National Action Plan. The EITI Board officially 
accepted the United States as a candidate for Implementing Country 
status in March 2014, and the United States Extractive Industries 
Transparency Initiative (USEITI) was established. The Secretary of the 
Interior led USEITI, with the Department of Interior's (DOI) Office of 
Natural Resources Revenue (ONRR) serving as the institutional home for 
the USEITI Secretariat.
    Over the course of 4 years as a Candidate Implementing Country, 
USEITI made impressive progress in implementation of the EITI Standard 
in the United States. Of note was the DOI-developed state-of-the-art, 
open source interactive data portal, which allows the American public 
to study the use of natural resources on federal lands and contains 
detailed information on taxes collected from the oil, gas, coal, wind 
and geothermal industries and how these revenues are put to use (see 
https://revenuedata.doi.gov/). Yet despite notable progress, and even 
within the U.S.' highly transparent and efficient system that meets or 
exceeds many of the EITI's benchmarks, implementation of some of EITI's 
rules proved overly challenging and were ultimately deemed unfeasible 
for implementation within the United States, primarily due to our 
federal structure and tax disclosure system and framework. While USEITI 
was able to report, for example, on extractive revenues from federal 
lands, it was unable to report (or compel states to report) on revenues 
from state lands (where the majority of extractive activity occurs). 
Privacy and process challenges with both the IRS and the tax legal 
framework also impeded the disclosing of company tax information.
    As a result, the United States decided to discontinue domestic 
implementation of the EITI Standard and its candidacy for Implementing 
Country status. Since then, the United States has continued to 
implement many best practices learned from the EITI process, including 
disclosing industry's financial transactions to the U.S. Government and 
the national and state level distribution of those funds, including the 
revenues generated by royalties, rents, and bonuses. DOI has continued 
to provide enhanced and user-friendly access to reliable information 
that can be used to hold the government and industry to account. DOI 
has also engaged in public awareness and understanding of how 
extractive revenues are collected and disbursed, in order to promote 
accountability and facilitate the full and fair return to the American 
people for these resources.
    The fact that, after a good faith effort, the United States 
acknowledged the infeasibility of implementing the Standard fully has 
not diminished the U.S.' standing or leadership within EITI. Attempting 
to implement the EITI Standard in the United States had always been a 
highly ambitious experiment in mainstreaming EITI principles within an 
existing framework. This effort has not been undertaken by other 
Supporting Countries, all of which also already have legal frameworks 
for transparency and accountability in the sector. It is noteworthy 
that of the current 15 EITI Supporting Countries, 11 others, including 
Australia, Belgium, Canada, Denmark, Finland, France, Italy, Japan, 
Sweden and Switzerland are also not implementing EITI domestically. As 
a result, the United States' ambitious attempt to undertake 
implementation, though ultimately unsuccessful, has not affected our 
standing on the EITI Board or our ability to exercise leadership within 
the initiative.
    The decision to discontinue domestic implementation has also not 
diminished our ability to lead by example, either within EITI or in the 
broader sector of transparency and accountability. Instead, the U.S. 
decision underscores our leadership in this space. Rather than erode 
the EITI Standard by requesting deviations to accommodate the U.S.' 
unique federal and legal structure, the United States elected instead 
to revert to Supporting Country status and to continue to support 
adoption and implementation of EITI. This decision demonstrates and 
sends a clear message about U.S. commitment to the integrity of the 
EITI Standard.
    Lastly, the United States continues to exercise important 
leadership in implementation of robust country-level EITI programming 
through USAID. This country-level support--which exceeds that of any 
other bilateral donor--is making a real-life difference in countries 
around the world in everything from improving revenue recovery, 
ensuring better allocation of resources, enhancing foreign investment, 
improving the business environment, empowering citizens and 
communities, tackling corruption, and supporting self-reliance.

    Question. What role does transparency play in ensuring that mining 
is more fair and accountable? What are the U.S. government and U.S. 
companies doing to support transparency in the mining sector, including 
via the EITI?

    Answer. Transparency is a critical tool in the global fight against 
corruption and mismanagement of natural resources, which impedes 
economic growth and self-reliant country development, reduces 
opportunities for trade and investment, and fosters instability and 
conflict. Transparency empowers citizens, civil society and the private 
sector to hold governments to account for the equitable and responsible 
use of taxpayer and other public resources, as well as the provision of 
citizen-responsive public services. This is particularly important in 
the extractive sector; one which holds so much promise for countries' 
development--especially resource-rich but otherwise poor countries--and 
presents so much risk of misuse and exploitation (the so-called 
``resource curse'').
    Global transparency norms and standards such as EITI were developed 
in recognition of the importance of transparency to ensuring democracy 
and equitable economic growth. At the core of EITI is the principle 
that the extractive resources of a country belong to its people, and 
that the people have the right to information about how these resources 
are governed; how extractive rights, permits and licenses are issued; 
how these resources and revenues (paid and received) are allocated and 
monetized; and how these resources benefit the citizens and the 
economy. Transparency is central to EITI, both for creating new 
institutional norms around openness, accountability and responsiveness, 
and for empowering citizens.
    Measures to increase transparency also strengthen democracy by 
supporting extractive industry reforms that make governments more 
accountable, and addressing some of the pervasive corruption challenges 
within the extractives sector that continue to undermine development, 
feed human rights abuses, support international criminal networks, and 
degrade the environment. By requiring citizens and community 
involvement in understanding and monitoring extractive activity and 
revenues, EITI reforms help prevent corruption, build citizen trust, 
and ensure the benefits of natural resources go towards meeting the 
needs of citizens and communities.
    Transparency also improves the financial and investment environment 
in the countries where we work and levels the playing field for U.S. 
and other businesses. By requiring revenue, concession, procurement and 
extraction data, EITI reforms help governments understand and quantify 
their revenue base from extractives. In Nigeria, for example, the 
government has been able to identify and recover some $2.5 billion in 
back-owed revenue from extractive companies. For investors, EITI 
reforms ensure that concessions and extractive sector management is 
done transparently and effectively, easing the cost of doing business 
and minimizing insider deals and risk.
    Perhaps most importantly, increased transparency contributes to a 
country's long-term development by increasing public-private sector 
cooperation on key development challenges, supporting an active and 
involved civil society, and enhancing the ability of governments to 
effectively utilize and bring to bear their own resources. In many of 
the countries where USAID works, effective and accountable management 
of natural resources has the potential to transform and drive economic 
growth, serving as own-source revenue and a driver of development. On 
the other hand, the failure to address systemic corruption, leakage and 
mismanagement of the extractives sector keeps countries under the 
``resource curse''; wealthy in resources and poor in the ability to 
effectively use them for their own development. In many countries the 
benefits of vast natural and mineral resources are subject to misuse 
and corruption, depriving the poor and marginalized of access to 
critical and life-saving services, while enriching bad actors and 
criminal networks.
    For all of these reasons, the U.S. Government supports both EITI 
and other platforms to improve transparency--and ultimately drive 
accountability--in the mining sector. Since FY 2016, USAID has provided 
approximately $19 million in bilateral support to complement country-
led efforts to increase extractive industry transparency and expand the 
impact and reach of EITI. Activities in countries such as Indonesia, 
Nigeria, Mexico, Ukraine, the Philippines and Colombia have included 
support for multi-stakeholder group development; support to national 
EITI secretariats in conducting public outreach and citizen engagement; 
assistance to civil society organizations and the media in advocating 
for extractive industry transparency; support in passing transparency 
legal and regulatory reform in the extractives area; technical 
assistance in preparing countries to accede to EITI and pass 
validation; and interventions aimed at reducing conflict over 
extractives.

    Question. Which efforts are the most effective to reduce corruption 
and other illicit activity in the mining sector?

    Answer. As an Agency, we understand the difficulty of addressing 
systemic corruption, whether in the mining/extractive sector, or in the 
areas of health, education or infrastructure development. We also 
understand the importance of doing so; there is no doubt that 
corruption weakens democracy, sabotages development gains, hinders 
economic growth, and perpetuates a cycle of dependence. Corruption also 
fundamentally undermines the ability of countries to implement their 
own national development priorities across all sectors, whether health, 
education, governance, or infrastructure.
    USAID knows that the most effective measures to address corruption 
are ones driven by an understanding that corruption is both its own 
system of governance--one with drivers, incentives, value chains, and 
objectives--and a web of public and private behaviors that inform 
expectations about power, responsibility, and democracy. Understanding 
the problem in this way allows for more effective and comprehensive 
approaches to preventing and responding to corruption, including taking 
into account the norms and incentives that drive it.
    USAID's approach to addressing systemic corruption, including in 
the natural resource and mining sector, is to build systemic 
accountability. This means taking a holistic view of the governance 
landscape in-country, and of the implications for building 
accountability and integrity throughout the governance system. It also 
involves recognizing that the system includes all branches and levels 
of government; oversight and audit institutions; law enforcement; 
public sector agencies; the private sector and civil society. All of 
these are critical players in building systemic accountability. This is 
particularly true in the mining sector, where issues of systemic 
corruption and opportunities for systemic accountability can be found 
throughout the governance value chain, from a Ministry of Mines to the 
State Audit office to municipal authorities using royalty funds to 
artisanal/illegal mining companies.
    As with all anti-corruption programming, effective activities in 
the mining sector should aim to promote this systemic accountability by 
building country capacity and commitment to combat corruption. On the 
capacity side, activities should aim to build the systemic ability and 
resilience of public institutions to fight and prevent corruption. 
Using platforms such as EITI or the Open Government Partnership (OGP), 
programs of this kind might help build this systemic accountability by 
creating public disclosure and expenditure tracking systems at the 
national or municipal level; enhancing the governance of royalty or 
other mining revenue funds; building or strengthening the technical 
capacity of audit, enforcement and oversight bodies to ``follow the 
money''; supporting reforms of mining registration and concession 
processes; and supporting the specific technical capacity and 
understanding of the judicial sector, and law enforcement to detect, 
investigate and prosecute corruption in the mining sector.
    On the commitment side, effective activities should aim to support 
implementation of international transparency norms and standards--such 
as EITI and OGP--as tools to encourage countries to deepen reform. At 
their core, these norms are about building citizen-responsive 
governance, and transforming the way the public sector around the world 
serves and is accountable to their citizens. These platforms provide 
opportunities for inclusive design of transparency and accountability 
commitments in the natural resource governance sector, as well as a 
means to holding governments publicly to account. Effective activities 
provide support for new transparency and accountability measures aimed 
at empowering citizens and enhancing their ability to demand greater 
transparency and accountability of their governments, monitor 
compliance with commitments and obligations and actively be part of a 
new accountability culture. Examples include support for citizen 
observatories, participatory budgeting in the use of mining revenues, 
and direct support to civil society reformers and investigative 
journalists to help them drive increased commitment to reform.
    Finally, effective anti-corruption activities in the mining sector 
should include a focus on promoting a culture of good governance and 
accountability, both in and between the public and private sectors and 
civil society. On the government side, examples include integrity and 
ethics training for public officials, transparency assessments and 
scorecards, and support for internal self-assessments and new working 
methods to promote a culture of institutional integrity and facilitate 
behavior change. On the private-sector side, examples include support 
for integrity dialogues and pacts, cooperation and disclosure.

    Question. Do you agree that initiatives like the EITI are effective 
means of collecting such data? Do you think the U.S. should rejoin the 
EITI? If not, why?

    Answer. EITI has been a highly effective platform for deepening 
transparency and combating corruption in the extractive sector around 
the world. Data collection is only one aspect of the initiative; in 
fact, EITI has evolved from its beginnings as a narrow set of rules 
focused on revenue collection into an international standard covering 
the wider governance of extractive resources. It now encompasses 
beneficial ownership disclosure, contract transparency, the integration 
of the EITI into government systems, and transparency in commodity 
trading. Likewise, the focus of EITI Reports has moved from compiling 
data to building systems for open data and making recommendations for 
reforms to improve the extractive sector governance more generally.
    This evolution beyond data collection has amplified the usefulness 
of EITI as a platform for driving change. In addition, connections 
between EITI and OGP--in particular the fact that many countries use 
their OGP National Action Plans to create commitments around mining and 
natural resource management that go beyond EITI--demonstrate the way in 
which good governance can benefit from and build on established 
platforms for dialogue and change. EITI and OGP together not only 
provide reformers with a roadmap for change, and an opportunity for 
multi-stakeholder input from the private sector and civil society, but 
they also increase cooperation and trust. This is particularly 
important in the extractive sector, where government, the private 
sector and civil society have traditionally been at odds with each 
other.
    As noted above, the United States has not withdrawn from EITI, and 
remains an active and engaged member of EITI as both a Supporting 
Country and as a Board (and Alternate) Member. The United States also 
continues to provide robust support for EITI implementation around the 
world through USAID. USAID defers all questions regarding the future of 
domestic implementation of EITI in the United States to the State 
Department.

    Question. U.S. and EU laws require disclosures by firms on their 
sourcing of ``conflict minerals'' (tin, tungsten, tantalum, and gold or 
their ores, known as ``3TGs''). If a firm sources 3TGs from the DRC--
or, in the case of the EU, from any conflict-affected or high risk 
areas globally--the firm must carry out and report on due diligence 
monitoring of its supply chains. The aim is to ensure that firms' 
purchases do not abet illicit armed activity, corruption, or problems 
such as forced labor and child labor.

    Please discuss the role of ``responsible sourcing'' (i.e., due 
diligence-based tracking of mined commodity supply chains) to prevent 
mining revenues from being used to abet illicit armed groups, criminal 
groups, corruption, or problems such as forced labor.

    Answer. Responsible sourcing for minerals means that private sector 
companies have in place procedures that respect human rights and avoid 
contributing to conflict through their mineral purchasing decisions and 
practices. Broad and consistent application of due diligence systems, 
particularly the Organisation for Economic Co-operation and Development 
(OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals 
from Conflict-Affected and High-Risk Areas, has the potential to 
increase the supply of responsibly sourced minerals over time. Consumer 
awareness of and demand for responsibly sourced minerals drives much 
private sector behavior in this regard as modern consumers want to know 
more about the means through which their purchases were brought to 
market. Some companies believe that in order to stay competitive, they 
need to address these concerns. In turn, advocacy groups have helped 
put pressure on private actors and governments to prioritize 
responsible sourcing as a means of minimizing conflict finance, 
stabilize supply chains, and ensure the highest sourcing standards. The 
Public-Private Alliance for Responsible Minerals Trade (PPA) was 
created to bring together each of these groups--private sector, 
governments, and advocacy or civil society groups--to support the 
creation of conflict-free supply chains for so-called conflict minerals 
(tin, tantalum, tungsten, and gold) coming out of the Democratic 
Republic of the Congo and Africa's Great Lakes Region. This public-
private partnership is valuable for its ability to bring together 
interested actors who are focused on achieving solutions to complicated 
supply chain dynamics. USAID works closely with the U.S. interagency on 
these issues, especially the Department of State's Bureau of Economic 
and Business Affairs, which serves as the interagency lead on conflict 
minerals policy.

    Question. What lessons learned from this approach in Central Africa 
may be applicable to Latin America, especially with regard to 
countering drug cartels, and other armed or criminal groups' 
involvement in mining?

    Answer. A critical lesson from Central Africa which is applicable 
to Latin America is that efforts to promote responsible minerals trade 
need to be part of and in support of a partner country government's 
broader economic growth strategy. USAID engagement on mine site 
validation built the capacity of and supported the government-led 
process, resulting in the validation of more than 600 mine sites in 
eastern Democratic Republic of Congo (DRC) as conflict-free. In 2018, 
validated conflict-free mine sites in the DRC legally exported 
approximately 15,800 tons of tin and tantalum worth over $285 million. 
Conflict-free supply chains contribute to security improvements and 
generate an important source of legal revenue.

    Question. How might the EU's application of responsible sourcing to 
all ``conflict-affected and high-risk areas'' affect Latin America?

    Answer. EU disclosure requirements for companies operating in Latin 
America and the Caribbean may raise private sector and consumer 
awareness about artisanal and small-scale gold mining (ASGM) and could 
complement USAID's efforts to create responsible ASGM supply chains in 
the region. The Department of State's Bureau of Economic and Business 
Affairs is the interagency lead on conflict minerals policy.

    Some indigenous people--such as the Yanomami in Venezuela, among 
other vulnerable populations--have been forced into slavery at some 
illegal mines. Indigenous populations also face threats from illegal 
miners operating near or within their lands. Indigenous groups often 
object to mining because it violates their ancestral land rights, 
pollution and destruction of their land damages their livelihoods, and 
they are often excluded from decision making regarding the disposition 
of mining proceeds.

    Question. What is the U.S. doing to promote the protection of 
rights for indigenous communities exposed to the mining sector?

    Answer. USAID works to ensure that the rights of marginalized 
communities, including ethnic minorities and indigenous peoples, are 
protected. This includes their right to be free from slavery and 
trafficking, and to have statutory and customary rights to land and 
resources. USAID has a draft Policy on Promoting the Rights of 
Indigenous Peoples that is currently in the final stages of clearance. 
The Policy proposes adopting a process to assess the impact that an 
activity will have on Indegenouse People, and identifies ways to 
strengthen engagement with Indigenous Peoples in order to support their 
development priorities and safeguard them against unintended harm. 
USAID also coordinates closely with the interagency on programs in the 
artisanal and small-scale mining sector. This includes coordination 
with the U.S. Department of Labor and the Department of State, both of 
which have programs addressing labor and human rights issues associated 
with the mining sector that complement USAID programming.
    In Peru, the U.S. government is supporting the Government of Peru 
in its effort to address the impacts of illegal gold mining in the 
Amazon, such as deforestation, encroachment into protected areas and 
indigenous territories and mercury contamination impacts on the health 
of local populations. USAID provides technical support for 
reforestation and ecosystem remediation and has established the first 
mercury analysis laboratory in Madre de Dios in the Peruvian Amazon to 
collect, analyze and disseminate data on mercury contamination of 
rivers, wildlife and human communities. In addition, it is working in 
collaboration with the Madre de Dios Regional Educational Office to 
promote environmental education in schools to raise awareness of the 
health impacts of mercury in the local population.
    In Colombia, USAID provides support to the Government of Colombia 
to build effective governance of artisanal small-scale gold mines, or 
if legal small-scale mining is not economically or environmentally 
feasible, to provide licit alternative livelihoods. This work includes 
a focus on working with Afro-Colombians, an ethnic minority, especially 
vulnerable to exploitation.
    In September 2019, USAID launched the ``Amazon Indigenous Rights 
and Resources'' a regional activity to improve participation of 
indigenous people in the sustainable economic development of the 
Amazon. The activity is working (1) to incorporate indigenous rights 
and interests into private and public sector development planning, and 
(2) to equitably and sustainably scale up indigenous enterprises to 
regional and global markets. The activity will work with new and non-
traditional partners, including indigenous peoples, their 
organizations, their enterprises, the private sector, civil society, 
government entities, and other key stakeholders of large-scale 
infrastructure and extractives projects in the Amazon region.

    Smuggling of some mined commodities, notably gold, is common across 
sub-Saharan Africa, due to overly burdensome customs and business laws, 
as well as tax evasion. Smuggling from the DRC through neighboring 
countries and on to the Middle East is particularly notable for its 
scale.

    Question. What are the primary export destinations for illicit gold 
coming from Africa? From Asia? From Latin America?

    Answer. According to press reports, customs data indicate that the 
United Arab Emirates, China, and Switzerland are the largest importers 
of African gold. The recorded export data from African states is 
notably lower, which can be an indicator of smuggling. Illicit gold is 
often smuggled into neighboring countries before being exported to 
international destinations.
    USAID does not have dedicated programming to specifically address 
illicit gold supply chains and therefore is not in a position to 
comment on the primary export destinations for gold originating from 
Asia.
    The United States remains an important destination for illicit gold 
coming from Latin America. Last year, more gold arrived in Miami than 
any other U.S. customs district and Miami ranked third in outbound 
shipments of gold. The most common routes take gold from mines in 
Colombia, Mexico, Bolivia, and Peru and the gold trading center of 
Curacao, to Miami and then on to Switzerland, the United Arab Emirates 
and the Dominican Republic.
    While it is difficult to estimate what percentage of that gold is 
illegal, the amounts are significant. For example, the Government of 
Colombia estimated that close to half of the total gold exported by 
Colombia in 2012 and 2013 could have been smuggled into the country 
from neighboring countries and that 15-30 percent of total production 
could be smuggled out of Colombia every year. Moreover, around 80 
percent of domestic gold production is estimated to be illegal, the 
vast majority appears to be exported legally.
    Countries in Latin America, including Colombia, serve as a pass 
through for illicit gold from Venezuela to Miami in order to give the 
appearance that the gold is originating from these countries instead of 
Venezuela. Profits from illicit mining help prop up the Maduro regime 
and criminal and armed groups.

    Question. What roles do regulatory and tax regimes play in 
incentivizing black market trade in the mining sector?

    Answer. Regulatory and tax regimes can impact--both positively and 
negatively--the illicit minerals trade. For example, national mining 
codes may not allow for artisanal or small-scale mining (ASM) 
operations. Or, a country's laws on mining may grant all subsurface 
rights to the state, without addressing how existing rights to land may 
be harmonized with the state's right to allocate mineral concessions. 
These types of regulatory regimes can push the ASM sector further into 
the shadows and encourage illicit supply chains. To help create a 
positive regulatory environment USAID's projects have conducted policy 
analyses and provided ASM-related recommendations for the mining codes 
in the Democratic Republic of the Congo (DRC), Cote d'Ivoire, Central 
African Republic, Afghanistan, and Colombia. In the DRC, for example, 
USAID contributed to the revision of the DRC's Mining Code which led to 
provisions in the Mining Code favorable to artisanal mining and the 
establishment of artisanal mining areas. USAID has also provided 
support to regional mechanisms such as the Regional Certification 
Mechanism of the International Conference of the Great Lakes, and input 
into international due diligence frameworks such as the Kimberley 
Process Certification Scheme (KPCS) for diamonds. Efforts to increase 
transparency in the ASM sector, including voluntary or mandatory 
disclosure requirements, may encourage positive reform.
    High tax rates and disparities in regional tax regimes for minerals 
can encourage smuggling. There is a clear economic incentive to smuggle 
minerals from a producer country into a neighboring country with no 
taxes or lower tax rates for minerals. This is currently happening in 
Afghanistan where the lack of basic regulatory guidelines in the 
extractives sector, overall uncertainty in the implementation of a new 
Minerals Law, high mineral royalty rates and related fees combined with 
endemic corruption do not incentivize illegal mining operations to 
become part of the formal economy that would facilitate government 
revenue generation from legal exports.

    Question. How do we address demand for illicitly mined products 
like gold and diamond at the national level?

    Answer. To reduce demand for illicit minerals at the national 
level, it is important to understand ASM actors in the illicit supply 
chain as economic actors who undertake this activity for profit. Demand 
reduction can be achieved by increasing the risk of enforcement, 
decreasing impunity, and increasing the benefits of entering the licit 
supply chain, such that the cost-benefit analysis of illicit mineral 
production changes in favor of licit, traceable supply chains. In some 
cases, creating legal and responsible supply chains for minerals--
including due diligence and traceability systems--may create a 
desirable alternative source of minerals for the private sector and 
reduce overall demand for illicit minerals. Measures to increase 
transparency and accountability in the minerals sector, including 
voluntary or mandatory disclosure requirements, may encourage positive 
reforms.
    The Washington Declaration Diagnostic Framework, created in 
partnership between USAID, participants in the Kimberley Process, and 
others, specifically outlines policy goals for reducing the trade in 
illicit diamonds. To create a supportive policy environment, the 
Washington Declaration identified the following policy goals: lower 
fees and increase accessibility of mining licenses, enhance data 
collection and analysis, strengthen property rights, improve financial 
transparency and good governance, empower artisanal miners to engage 
with buyers and investors, expand access to mining inputs, support 
complementary livelihoods in diamond mining communities, improve 
working capital and organization in the artisanal diamond mining 
sector, and harmonize legal frameworks covering different land uses and 
natural resources (e.g. mining, forestry, water, land).

    About 40 million people today worldwide are involved in so-called 
artisanal- and small-scale mining. Many of these small-scale miners 
work informally, meaning that their work is not registered or regulated 
by the government, leaving them unbeholden to mandated practices for 
safe labor conditions, employee protections, and environmental 
standards. For example, mining deaths from cave-ins and other hazards 
are common in hand-dug ASM mines across Africa.

    Question. What is meant by ``formalization'' of artisanal and 
small-scale mining (ASM)? What are the main challenges and main 
positive developments of this approach?

    Answer. ASM formalization is the process of collaborative rule-
setting and rule enforcement across supply-chain actors, governments, 
and communities with the aim of enabling ASM to contribute to local and 
national peace and prosperity, both now and for future generations. 
Formalization may include a range of interventions, namely: 
clarification of land and mineral rights, supportive laws and 
regulations, implementation of the legal and regulatory framework, mine 
site validation, traceability, due diligence, certification systems, 
establishment of mining cooperatives, and development of legal and 
responsible supply chains.
    The goal of formalization is to ensure responsible artisanal 
mineral production and trade that contributes to a country's 
development. A formalized and well-regulated ASM sector can be a 
powerful engine for economic growth for men and women and an important 
source of domestic resource mobilization. It can mitigate the 
environmental risks associated with ASM, reduce human rights abuses, 
and cut off an important source of financing for corrupt individuals 
and officials, armed groups, criminal networks, and terrorist 
organizations.
    Formalization is challenging because it is a slow, often years long 
process that necessitates working alongside national and local 
government officials, and directly addressing organized criminal 
operations and corruption. Due-diligence and traceability systems are 
often put in place as part of the formalization process. These systems 
are costly and supply-chain actors, including companies and consumers, 
must be willing to pay for the cost of due-diligence and traceability 
in order for the systems to be economically viable. USAID works closely 
with the private sector when putting in place due diligence and 
traceability systems.

    Question. What role does formalization play--and what can it 
further contribute--in curtailing illicit mining, alleviating poverty, 
and supporting sustainable development of the mining industry?

    Answer. Formalization helps ensure ASM actors are part of the 
formal economy and subject to appropriate laws and regulations, 
including protection and safeguards for ASM actors and local 
communities. It can mitigate environmental and social risks associated 
with the sector, including the risk of conflict with surrounding mining 
operations and other land uses. Formalization helps ensure proper 
regulation and oversight of mining operations to reduce environmental 
damage. It can also help mining communities benefit from mining 
revenue, such that a percentage of the revenue stays within local 
communities. Under a well-regulated formal system, ASM actors are less 
vulnerable to predation by corrupt individuals, government officials, 
or criminal groups. Thus, formalization can result in progress in 
combating criminality and corruption, which in turn reduces smuggling.

    Question. How might formalization methods and outcomes differ 
between Africa and Latin America?

    Answer. Formalization methods and outcomes for artisanal and small-
scale mining are context-specific. Each country requires a unique 
approach that takes into account issues such as the type of mineral 
being smuggled, national and local government regulations and 
capacities, political will, land and mineral rights, level of 
organization and mechanization in the ASM sector, interference in the 
supply chain by corrupt officials or armed groups, smuggling routes, 
and civil society and private sector actors.
    Formalization of the ASM sector is a long-term process. USAID 
prioritizes interventions--and the part of the formalization process 
that we are supporting--based on the primary development challenge to 
be addressed. In some countries, such as the Central African Republic 
or the Democratic Republic of the Congo, priority has been placed on 
breaking the link between ASM and conflict and improving compliance 
with specific conflict-minerals legislation or trade regimes. In 
Colombia, USAID has been working with the Government of Colombia to 
formalize small-scale mining operations, rehabilitate land degraded by 
mining, and--if legal small-scale mining is not economically or 
environmentally feasible--provide licit alternative livelihoods.

    A major issue associated with mining is its negative environmental 
impacts that lead to public health concerns. Large-scale air and water 
mercury emissions directly expose many artisanal and small-scale miners 
and surrounding communities to high concentrations of mercury. This 
exposure is known to cause serious nervous system and internal organ 
disorders and birth defects. Cyanide, used to dissolve gold ores in 
slurries, also poses health and environmental risks, notably when it 
enters water streams.

    Question. How, and to what extent, are mercury and cyanide used in 
illicit mining? What health and environmental risks do their uses pose?

    Answer. Artisanal and small-scale mining (ASM) generates various 
types of pollution that can impact humans and wildlife and stress 
ecosystems. To ensure that USAID programs address and mitigate the 
environmental impacts of ASM in the design and implementation of 
programs in the artisanal mining sector, USAID developed Sector 
Environmental Guidelines on Artisanal and Small-Scale Mining. In 2019, 
in response to increasing concerns over the impact of ASM on 
biodiversity in Latin America, USAID produced a report entitled, Small-
Scale and Artisanal Mining Impacts on Biodiversity in Latin America, to 
elucidate the links between ASM and biodiversity and inform USAID 
programming.
    The most prevalent and widespread pollution includes sedimentation 
from alluvial mining, mercury contamination, and acid mine drainage and 
heavy metal leachates (including cyanide-related leaching). The use of 
mercury is very common in artisanal and small-scale mining of gold 
(ASGM) whereas the use of cyanide is not as wide-spread. The extent of 
mercury and cyanide use varies greatly by country. For example, USAID's 
experience on the ground suggests that mercury use is much more 
prevalent in the illicit gold supply chains in Peru and Colombia than 
in the Democratic Republic of the Congo.
    Use of mercury in ASGM is a common practice globally because it is 
an inexpensive, simple, and rapid process to extract gold from ore. 
ASGM is the largest source of mercury emissions in the world. Recent 
studies estimate that up to 1,400 tons of mercury are released into the 
global environment annually from ASGM, representing approximately 37 
percent of total global emissions. Approximately one-third is released 
into the atmosphere and two-thirds released into waterways and tailings 
piles.
    Mercury is a potent neurotoxin that can cause physiological, 
neurological, behavioral, and reproductive harm to humans and wildlife. 
It is a persistent and powerful neurotoxin that bioaccumulates in the 
food chain. The most problematic form of mercury contamination is from 
organic mercury, which forms methylmercury. Consumption of mercury-
contaminated fish, especially by top predators, is a leading source of 
methylmercury exposure for both humans and wildlife. Miners and 
communities near mine sites, including indigenous communities, are 
especially impacted by mercury contamination.
    Cyanide effectively extracts gold and is used in most industrial 
gold processing world-wide. Cyanide is used to process gold-bearing ore 
and tailings and can be used to extract additional gold from ore that 
has already been treated with mercury. Cyanide itself is toxic, but it 
also releases mercury and other heavy metals from the ore and requires 
significant expertise and technological equipment to do properly. 
Although cyanide is not as commonly used by individual miners as 
mercury, some regional small-scale cyanide processing centers work with 
ASM miners in countries such as Peru and Ecuador. These centers will 
often reprocess ore and tailings that have already been processed with 
mercury once to extract the remaining 70-80 percent of the gold that 
the mercury did not extract.

    Question. Please discuss the role of the Minamata Convention in 
reducing mercury emissions in small-scale mining, and any related 
implementation initiatives in Latin America.

    Answer. The U.S. Department of State leads the U.S. Government's 
efforts pertaining to the Minamata Convention. The Minamata Convention 
is a global treaty to protect human health and the environment from the 
adverse effects of mercury. It concerns artisanal and small-scale gold 
mining (ASGM) as artisanal gold miners are currently the world's 
foremost users of mercury and release significant quantities of it into 
the environment. Developed in 2010 and adopted in 2013, the Convention 
regulates the use of mercury in AGSM, and controls its release in air, 
land, and water. Article 7 of the Convention calls upon countries to 
develop ASGM National Action Plans (NAP) which articulate strategies to 
promote mercury-free gold extraction methods and address related 
environmental and health concerns.
    USAID programs help advance the Minamata Convention by supporting 
the formalization of ASGM supply chains, addressing illegal mining in 
high priority protected areas, establishing and implementing due-
diligence frameworks, and supporting research. For example, USAID 
supports efforts to reduce or eliminate mercury in gold supply chains 
in Colombia and Peru. In Peru, USAID has built up the country's 
scientific and research capacity by establishing the first laboratory 
in Madre de Dios with the capacity to analyze environmental mercury 
contamination and supporting the publication of over 25 papers on 
remediation and management techniques. In Colombia, USAID programs 
promote legal and responsible mineral supply chains in Antioquia and 
Choco. Our programs have helped formalize 42 mining operations and 
eliminated nearly 40 tons of mercury from mining production.

    Question. Apart from mercury and cyanide, what are the main threats 
to water resources and ecosystems arising from illicit mining in Latin 
America? How are governments seeking to prevent such pollution?

    Answer. There are a number of impacts of mining on water and 
ecosystems in Latin America in addition to those from mercury and 
cyanide. The primary impacts of ASM in the ecosystems include 
deforestation and soil displacement, fragmentation of habitats, habitat 
loss, changes in hydrology, and pollution, including from sedimentation 
and mercury. Pollution from ASM can include spills of oil and gas from 
equipment, solid waste, sediment and acid mine drainage released into 
bodies of water, air pollution, and widespread mercury contamination.
    Alluvial mining is widespread in South America and involves 
extracting minerals from alluvial deposits, usually in floodplains, 
terraces, or alluvial fans at the base of mountains ranges or hills. It 
has a wide impact on the landscape and results in most of the topsoil 
and organic matter washed away, causing downstream pollution and 
rendering the mined landscape infertile and devoid of soil or organic 
material which can take decades to revegetate.
    Several countries in Latin America have put measures in place to 
address the environmental and social impacts of ASM including El 
Salvador, Peru, and Colombia. In 2017, El Salvador became the first 
country in the world to ban all metal mining to protect water quality. 
The ban was primarily in response to severe water scarcity generated by 
high rates of deforestation and environmental degradation; the ban 
affected hundreds of families that have practiced ASGM for generations, 
as well as industrial-scale mining.
    USAID has been working in close collaboration with the Governments 
of Colombia and Peru who have been reliable partners committed to 
addressing illegal artisanal gold mining. In February 2017, the U.S. 
Government and the Government of Peru signed a memorandum of 
understanding (MOU) to increase cooperation on small-scale gold mining 
on critical areas such as reducing or eliminating the use of mercury 
and reducing encroachment of illegal mining on natural protected areas, 
indigenous peoples and archaeological zones. A year later, in March 
2018, the U.S. Government also signed a bilateral MOU with the 
Government of Colombia on cooperation related to the prevention and 
control of illegal gold mining, which included efforts for 
regularization and formalization of small-scale mining; detection and 
elimination of mercury use in mining; and recuperation, restoration, 
and/or remediation of areas affected by illegal mining.
    In February 2019, Peru launched Operation Mercury, a massive effort 
to permanently remove illegal gold miners from ``La Pampa,'' Peru's 
epicenter of illegal gold mining in Madre de Dios. The initial 
militarized stages of the operation will be followed by a 2-year 
intensified effort to disable the criminal organizations driving 
illegal mining, transition miners to formal and licit livelihoods, and 
remediate decimated lands and waterways. USAID is providing the 
Government of Peru technical information and technology to facilitate 
the ecosystem recovery in La Pampa after removal of the illegal gold 
mining. For example, USAID provided information to help identify where 
the reforestation process needs to occur, appropriate tree species to 
plant, and methods to revitalize degraded soil using organic materials 
to produce biochar, a sediment that removes heavy metals, such as 
mercury, from the soil and increases water retention capacity and thus 
regeneration.

    Deforestation linked to illicit gold mining is particularly 
extensive in the Amazon region, and has contributed to widespread 
desertification within tropical rainforests. Illegal gold mining in the 
Peruvian Amazon region, for example, from 2011-2016 was responsible for 
the loss of about 60,000 hectares of biodiverse rainforest.

    Question. Is reducing deforestation from mining a priority for the 
Trump administration?

    Answer. Combating deforestation is a high priority for USAID's 
global environment programs, including biodiversity conservation 
programming which takes a threats-based approach. Deforestation caused 
by illegal mining or other threats is addressed, as appropriate, in 
consultation with and in support of host country government efforts. 
Illegal gold mining may also occur in areas that have been illegally 
logged--and both of these illegal activities are included in the 
administration's priority initiative to combat conservation crimes. 
Since 2017, Congress has appropriated $372 million in U.S. foreign 
assistance for sustainable landscapes work to preserve and restore 
forests and other lands. This funding supports enhanced forest 
monitoring, along with capacity building for forest management and 
conservation, which enables our partners to track and combat illegal 
deforestation, including from illicit gold mining.
    In the Amazon Basin, USAID works to reduce deforestation and forest 
degradation; support an environmentally friendly economy; protect key 
landscapes and species; and secure the rights, resources, and health of 
forest dependent communities. Efforts include supporting regional 
deforestation monitoring using remote sensing to enable local 
communities and governments to respond as needed. In recent years, 
USAID has provided research support and technical assistance to the 
Government of Peru's forest management agencies to advance 
understanding of how illegal gold mining contributes to deforestation, 
and to inform emerging national reforestation guidelines. USAID also 
recently launched a new activity that focuses on combating 
environmental crimes in the Peruvian Amazon, including support to the 
Government of Peru to implement its artisanal and small-scale gold 
mining (ASGM) formalization process by incorporating social and 
environmental safeguards that will in turn help to reduce deforestation 
from illegal mining.
    In Africa, USAID's Central Africa Regional Program for the 
Environment (CARPE) implementing partners engage with artisanal miners 
working illegally within protected areas as part of efforts to conserve 
the Congo Basin tropical rainforest and its threatened biodiversity. 
USAID is also supporting a monitoring platform with information on the 
location of illegal mining sites across Ghana and associated land 
degradation. It will provide the necessary spatial data to target areas 
for remediation and landscape restoration activities.

    Question. Because the U.S. has withdrawn from the Paris Climate 
Accords, what leverage do we have when asking other nations to protect 
the environment even when doing so may mean less economic gain?

    Answer. USAID coordinates closely with the interagency on climate 
change; the Department of State leads the United States Government's 
climate change negotiations. The United States has begun the process to 
withdraw from the Paris Agreement. Per the terms of the Agreement, the 
United States submitted formal notification of its withdrawal to the 
United Nations. The withdrawal will take effect on November 4, 2020, 1 
year from delivery of the notification on November 4, 2019. 
Irrespective of our participation in the Paris Agreement, the United 
States continues to be a world leader in reducing emissions. U.S. net 
greenhouse gas emissions dropped 13 percent from 2005 to 2017, even as 
our economy grew more than 19 percent.
    This achievement, which can serve as a model to other countries, 
flows from innovation, technology breakthroughs, and energy efficiency 
gains. The United States will continue to research, innovate, and grow 
our economy while reducing emissions and extending a helping hand to 
our friends and partners around the globe. We will continue to work 
with our global partners to enhance resilience to the impacts of 
climate change and prepare for and respond to natural disasters.
    As stated in USAID's recently launched Environmental and Natural 
Resource Management Framework, sound management of environmental and 
natural resources is integral to a country's development, resilience, 
and self-reliance. USAID is committed to supporting governments, civil 
society, and the private sector in our partner countries on their 
Journey to Self-Reliance, including through strategic investments in 
environmental and natural-resource management and the robust 
integration of environmental protection into our programs. In this 
work, USAID is guided by countries' own development priorities, 
consistent with the growing international consensus around principles 
for effective development assistance.

    An estimated 10 million people in at least 40 of 54 countries in 
sub-Saharan African make a direct living from the mining sector. A 
further 60 million people across the continent make an indirect living 
from the mining sector, which provides an important source of poverty 
alleviation, jobs, livelihoods, and wealth creation. A reliance on 
mining across the sub-Saharan region means that this issue requires 
regional solutions.

    Question. Please discuss the approach and relative success of 
African Union efforts, as envisioned in the ``Africa Mining Vision'' 
and through the activities of the African Minerals Development Centre, 
in helping to foster positive ASM-related development outcomes.

    Answer. The African Minerals Development Center (AMDC), a 
specialized agency of the African Union (AU), aims to help African 
countries properly utilize their mining resources as a catalyst for 
sustainable development. The AMDC helps countries adjust to changing 
technologies and linkages between mining and other sectors of the 
economy, reform their fiscal and tax regimes, and improve governance. 
The center developed a mining guide for countries for domesticating the 
Africa Mining Vision and aligning it with other countries.
    USAID does not currently support the implementation of AU mining 
efforts. USAID is not familiar enough with the AU's efforts to provide 
comments on their relative effectiveness; however, our responsible 
minerals trade work is consistent with ``Africa Mining Vision'' of 
``transparent, equitable and optimal exploitation of mineral resources 
to underpin broad-based sustainable growth and socio-economic 
development'' and the corresponding holistic approach to promoting a 
viable responsible minerals industry.
    USAID has supported regional efforts to address artisanal and small 
scale mining (ASM) in Africa through the International Conference of 
the Great Lakes Region (IGCLR), including efforts to strengthen the 
strategic and financial management capacity of the ICGLR's Regional 
Initiative against the Illegal Exploitation of Natural Resources 
(RINR). Additionally, USAID increased the ICGLR's ability to monitor 
and audit regional supply chains by supporting the establishment of an 
Independent Mineral Chain Auditor within the ICGLR and financing 
several independent third party audits of mineral supply chains in the 
Great Lakes region.
                               __________

           Responses of Patrick J. Lechleitner to Questions 
                 Submtted by Senator Benjamin L. Cardin

                               disclosure
    One method to combat illicit mining is to increase disclosure in 
extractive industries, which may seek to cover the unethical or 
exploitative practices they use for acquiring minerals. To enhance 
transparency and good governance in state-run extractive industries, 
multiple countries, including the United States and European Union 
members, have laws requiring the public disclosure of EI firms' 
payments to governments.

    In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also 
known as the Cardin-Lugar provision. Section 1504 established a global 
standard to require companies to disclose payments made to the U.S. or 
foreign governments related to the development of oil, gas, or 
minerals. Since then, 30 countries have followed the U.S.' lead, 
including Canada, Norway, the U.K., and 27 other members of the 
European Union.

    But in 2017, through the Congressional Review Act procedure, 
Congress voted to revoke the updated rule passed by the SEC that 
required public disclosure. That same year, the U.S. withdrew from the 
Extractive Industries Transparency Initiative (EITI).

    Question. How can the U.S. lead by example when we withdraw from 
initiatives like the EITI and when Congress votes to invalidate rules 
that require transparency in critical sectors of the economy 
responsible for illicit activities?

    Answer. There are several laws enforced by U.S. Immigration and 
Customs Enforcement (ICE) Homeland Security Investigations (HSI) that 
address exploitive practices associated with illicit mining. For 
example, the United States has very clear prohibitions restricting the 
importation of goods produced using forced labor. See 19 U.S.C.  1307. 
Additionally, ICE HSI conducts investigations of violations of the 
Clean Diamond Trade Act, Pub. L. No. 108-19, 117 Stat. 631 (2003), and 
investigates criminal organizations who illegally import illicitly 
mined minerals into the United States, including through commercial 
fraud and third-party and trade-based money laundering. ICE is 
committed to addressing the exploitation of people and natural 
resources by criminal organizations, such as illicit mining, through 
its enforcement of existing laws.

    Question. What role does transparency play in ensuring that mining 
is more fair and accountable? What are the U.S. government and U.S. 
companies doing to support transparency in the mining sector, including 
via the EITI?

    Answer. (LES) Transparency plays an important role in ensuring the 
legal importation of mined minerals. To encourage this transparency and 
information sharing in the importation process with foreign government 
counterparts, ICE HSI established a headquarters-based unit dedicated 
to trade transparency (the Trade Transparency Unit [TTU]) in 2004. 
Since the unit's formation, ICE HSI has established TTUs in partner 
countries to share trade data to detect trade-based money laundering 
and sanctions violations as well as commercial smuggling and other 
crimes that generate illicit proceeds. TTUs detect suspicious 
transactions and financial discrepancies and coordinate investigative 
and enforcement activities with domestic and international ICE HSI 
offices and law enforcement partners. ICE HSI currently has TTU 
agreements with 17 countries, including the Latin American countries of 
Argentina, Brazil, Colombia, Chile, Ecuador, Paraguay, Peru, and 
Uruguay. Formal information sharing agreements are used to exchange 
valuable trade data, providing visibility to both sides of trade 
transactions. TTUs link international customs and law enforcement 
agencies together in combating transnational crime, including the trade 
in illegally mined materials. ICE HSI special agents also engage in 
outreach and training with industries and trade groups to provide 
information on the role of law enforcement in investigating crimes 
connected to illicit mining and the importance of knowing their supply 
chain.

    Question. Which efforts are the most effective to reduce corruption 
and other illicit activity in the mining sector?

    Answer. International cooperation is essential to address 
transnational criminal organizations that engage in illicit mining. ICE 
works closely with our international counterparts to investigate 
corruption, money laundering, and other illicit activity related to the 
mining sector to disrupt and dismantle criminal organizations who 
engage in illicit mining as well as identifying third parties who 
facilitate the laundering of such illicit funds. U.S. Government 
agencies continue to work together to increase enforcement, including 
use of the Tariff Act of 1930 and sanctions authorities based upon 
human rights violations, corruption, and national security.

    Question. Do you agree that initiatives like the EITI are effective 
means of collecting such data? Do you think the U.S. should rejoin the 
EITI? If not, why?

    Answer. Information sharing initiatives like the Extractive 
Industries Transparency Initiative (EITI) create and facilitate 
discussion and cooperation among parties that otherwise may not do so. 
The sharing of this information as well as the collaboration for 
potential solutions can create significant outcomes, result in the 
creation of partnerships, and demonstrate the commitment of the United 
States to issues such as illicit mining.
                             due diligence
    U.S. and EU laws require disclosures by firms on their sourcing of 
``conflict minerals'' (tin, tungsten, tantalum, and gold or their ores, 
known as 3TGs). If a firm sources 3TGs from the DRC--or, in the case of 
the EU, from any conflict-affected or high risk areas globally--the 
firm must carry out and report on due diligence monitoring of its 
supply chains. The aim is to ensure that firms' purchases do not abet 
illicit armed activity, corruption, or problems such as forced labor 
and child labor.

    Question. Please discuss the role of ``responsible sourcing'' 
(i.e., due diligence-based tracking of mined commodity supply chains) 
to prevent mining revenues from being used to abet illicit armed 
groups, criminal groups, corruption, or problems such as forced labor.

    Answer. Responsible sourcing for conflict minerals (tin, tungsten, 
tantalum, and gold or their ores) places a requirement on firms to gain 
greater awareness of their supply chain, while also providing consumers 
with access to information they need to make informed choices for their 
purchases. However, in industries that draw from fungible supplies, 
like gold mining, maintaining a transparent supply chain may be 
difficult. Gold is often smelted each time it changes hands and during 
that process illicit gold may be mixed with licit gold. During the 
mining and transportation process, bad actors have opportunities to 
forge or falsify documents representing illicitly mined gold as 
originating from legitimate mines. While laboratories often can provide 
a chemical breakdown of the gold bars, they cannot identify the 
specific country or region of origin for such gold. While ``responsible 
sourcing'' plays an important role, it must also be combined with a 
strong law enforcement component to address criminal groups, 
corruption, and forced labor issues encountered in the illicit mining 
industry.

    Question. What lessons learned from this approach in Central Africa 
may be applicable to Latin America, especially with regard to 
countering drug cartels, and other armed or criminal groups' 
involvement in mining?

    How might the EU's application of responsible sourcing to all 
``conflict-affected and high-risk areas'' affect Latin America?

    Answer. Illicit minerals are trafficked throughout the world. 
Because of smuggling routes for these illicit minerals, it is not 
always easy for a legitimate business in the United States to know if 
the mineral is derived from a conflict-affected or high-risk area. When 
conflict areas are limited in scope, the culpability of these firms is 
even more difficult to prove. Laws requiring disclosures of minerals 
sourced from all conflict zones allow law enforcement to more 
effectively investigate all crimes associated with this illicit trade. 
ICE HSI coordinates with its partner agencies in the European Union 
(EU), and throughout the world, to pursue investigations involving 
illicit gold sourced from conflict zones.
                           indigenous rights
    Some indigenous people--such as the Yanomami in Venezuela, among 
other vulnerable populations--have been forced into slavery at some 
illegal mines. Indigenous populations also face threats from illegal 
miners operating near or within their lands. Indigenous groups often 
object to mining because it violates their ancestral land rights, 
pollution and destruction of their land damages their livelihoods, and 
they are often excluded from decision making regarding the disposition 
of mining proceeds.

    Question. What is the U.S. doing to promote the protection of 
rights for indigenous communities exposed to the mining sector?

    Answer. ICE's mandate does not specifically reach into the 
protection of rights for foreign indigenous populations; as such, ICE's 
criminal investigations pursue matters impacting such populations when 
there is a U.S. investigatory nexus, such as commercial fraud, or 
forced labor in imported goods investigations.
                            consumer demand
    Smuggling of some mined commodities, notably gold, is common across 
sub-Saharan Africa, due to overly burdensome customs and business laws, 
as well as tax evasion. Smuggling from the DRC through neighboring 
countries and on to the Middle East is particularly notable for its 
scale.

    Question. What are the primary export destinations for illicit gold 
coming from Africa? From Asia? From Latin America?

    Answer. (LES) Uganda is a significant destination for unrefined 
gold from Africa as it is home to gold refineries that are responsible 
for significant portions of the illicit gold trade. Some of these 
refineries operate outside of local law; however, they receive at least 
some degree of protection from law enforcement. These Ugandan gold 
refineries likely source their raw gold from conflict mines in the 
Democratic Republic of the Congo and South Sudan. Ugandan refineries 
are known to have imported at least seven tons of illicit Venezuelan 
gold for processing and refinement.
    (LES) The United Arab Emirates (UAE) is also a primary destination 
for gold from Africa. According to the United Nations Comtrade 
database, the UAE reports a higher intake of gold arriving from Africa 
than African countries report exporting to the UAE. Additionally, the 
UAE reports imports from 46 African countries, while only 21 African 
countries report exporting to the UAE. The UAE trades heavily in gold, 
primarily through Dubai, and exports to numerous countries throughout 
the world, including the United States.
    (LES) Reports by The Global Initiative Against Transnational 
Organized Crime indicate the primary market for illicit gold from Asia 
is from the Philippines to China via large gold markets in Hong Kong 
and Singapore. The same organization reports that the primary market 
for illicit gold from Mongolia is China as well, with smaller amounts 
of illicit Mongolian gold shipped to South Korea.
    (LES) The primary export destinations for illicit gold from Latin 
America are the United States via Miami, Florida; and the Middle East, 
via the UAE.

    Question. What roles do regulatory and tax regimes play in 
incentivizing black market trade in the mining sector?

    Answer. The U.S. Government can help address demand for illegally 
mined products at the national level by raising awareness of the impact 
of illicit mining. As a law enforcement agency, ICE continues to work 
closely with our law enforcement counterparts to investigate 
transnational criminal organizations (TCOs) that import illicit gold 
into the United States and launder the profits. These efforts make it 
more difficult for TCOs to profit from illicit mining.

    Question. How do we address demand for illicitly mined products 
like gold and diamond at the national level?

    Answer. Companies that can claim membership in product 
certification schemes have the ability to share that information with 
consumers as a way to incentivize informed consumer purchases. A public 
relations/advertising campaign to promote the purchase of ethically-
sourced gold and diamonds, accompanied by a government information 
campaign on the potential consequences of purchasing non-ethically-
sourced gold and diamonds (such as human exploitation and forced labor, 
harm to the environment, financing of terrorist organizations, and the 
spread of activities by TCOs in the illicit movement of goods and 
people connected with illegal mining) could increase demand for 
ethically-sourced goods.
                       responsible supply chains
    International mineral supply chains are increasingly complex and 
interconnected, which means companies could be vulnerable to legal, 
financial, and reputational harm if they are unknowingly or indirectly 
contributing to predatory armed groups, organized crime, terrorist 
networks and other corrupt and rights-abusing actors through their 
supply chains.

    Question. How can U.S. companies that rely on certain minerals 
minimize their risk of buying minerals that have benefitted bad actors?

    Answer. U.S. companies may determine that the risk of sourcing from 
a conflict area outweighs the financial benefits of doing so in the 
absence of clear data mapping a supply chain back to the raw materials, 
if they lack information on the identity of all participants in that 
supply chain, or if they are not able to freely access worksites, labor 
forces, or the business data needed to map a supply chain. U.S. 
companies should avail themselves of all sources of information when 
making sourcing decisions, such as U.S. Department of Labor reporting 
on international child labor and forced labor, the U.S. Department of 
Treasury's Office of Foreign Assets Control sanctions list, including 
the list of violations of the Global Magnitsky Human Rights 
Accountability Act, as well as reporting by academics, non-governmental 
organizations, media outlets, or other research to identify locations 
and supply chains of high risk. U.S. companies should also work with 
local authorities and civil society organizations to identify potential 
sources of minerals that operate without ties to problematic groups and 
without the use of prohibited forms of labor.
                          illicit gold mining
    Gold, in particular, has a long history of being used as a vehicle 
for money laundering and is increasingly seen as a lucrative source of 
financing among armed groups and organized criminal networks.

    Just last month, the International Crisis Group published a report 
which warned that ``artisanal gold mining [in the Sahel] provides armed 
groups, in some cases including jihadists, with a new source of funding 
and potentially even new recruits.'' This report finds that ``artisanal 
[gold] production now reportedly amounts to almost half the volume of 
industrially produced gold'' in Niger, Burkina Faso and Mali, 
representing anywhere between $1.9 and $4.5 billion per year.

    Question:. What is the U.S. government doing to mitigate the risk 
of illicit gold mining and the trade in illicit gold?

    Answer. ICE HSI works closely with our U.S. Government and 
international law enforcement partners to investigate the illegal 
importation of gold and associated crimes such as money laundering and 
forced labor. ICE HSI has established Transnational Criminal 
Investigative Units (TCIUs) comprised of foreign law enforcement 
officials who receive Department of Homeland Security training and who 
have sovereign authority to investigate and enforce violations of law 
in their respective countries. Through these TCIUs, ICE HSI has 
increased cooperation and information sharing with foreign law 
enforcement partners. ICE HSI also works to educate the private sector 
on our role in conducting these investigations and how we can work 
together to address this important issue.
                               __________

The Committee Received No Responses From Ms. Regina E. Thompson for the 
      Following Questions Submitted by Senator Benjamin L. Cardin

                               disclosure
    One method to combat illicit mining is to increase disclosure in 
extractive industries, which may seek to cover the unethical or 
exploitative practices they use for acquiring minerals. To enhance 
transparency and good governance in state-run extractive industries, 
multiple countries, including the United States and European Union 
members, have laws requiring the public disclosure of EI firms' 
payments to governments.

    In 2010, Congress passed Section 1504 of the Dodd-Frank Act, also 
known as the Cardin-Lugar provision. Section 1504 established a global 
standard to require companies to disclose payments made to the U.S. or 
foreign governments related to the development of oil, gas, or 
minerals. Since then, 30 countries have followed the U.S.' lead, 
including Canada, Norway, the U.K., and 27 other members of the 
European Union.

    But in 2017, through the Congressional Review Act procedure, 
Congress voted to revoke the updated rule passed by the SEC that 
required public disclosure. That same year, the U.S. withdrew from the 
Extractive Industries Transparency Initiative (EITI).

    Question. How can the U.S. lead by example when we withdraw from 
initiatives like the EITI and when Congress votes to invalidate rules 
that require transparency in critical sectors of the economy 
responsible for illicit activities?

    [No Response Received]

    Question. What role does transparency play in ensuring that mining 
is more fair and accountable? What are the U.S. government and U.S. 
companies doing to support transparency in the mining sector, including 
via the EITI?

    [No Response Received]

    Question. Which efforts are the most effective to reduce corruption 
and other illicit activity in the mining sector?

    [No Response Received]

    Question. Do you agree that initiatives like the EITI are effective 
means of collecting such data? Do you think the U.S. should rejoin the 
EITI? If not, why?

    [No Response Received]
                             due diligence
    U.S. and EU laws require disclosures by firms on their sourcing of 
``conflict minerals'' (tin, tungsten, tantalum, and gold or their ores, 
known as 3TGs). If a firm sources 3TGs from the DRC--or, in the case of 
the EU, from any conflict-affected or high risk areas globally--the 
firm must carry out and report on due diligence monitoring of its 
supply chains. The aim is to ensure that firms' purchases do not abet 
illicit armed activity, corruption, or problems such as forced labor 
and child labor.

    Question. Please discuss the role of ``responsible sourcing'' 
(i.e., due diligence-based tracking of mined commodity supply chains) 
to prevent mining revenues from being used to abet illicit armed 
groups, criminal groups, corruption, or problems such as forced labor.

    [No Response Received]

    Question. What lessons learned from this approach in Central Africa 
may be applicable to Latin America, especially with regard to 
countering drug cartels, and other armed or criminal groups' 
involvement in mining?

    [No Response Received]

    Question. How might the EU's application of responsible sourcing to 
all ``conflict-affected and high-risk areas'' affect Latin America?

    [No Response Received]
                           indigenous rights
    Some indigenous people--such as the Yanomami in Venezuela, among 
other vulnerable populations--have been forced into slavery at some 
illegal mines. Indigenous populations also face threats from illegal 
miners operating near or within their lands. Indigenous groups often 
object to mining on the basis that it violates their ancestral land 
rights, as pollution and destruction of their land damages their 
livelihoods, and as they are often excluded from decision making 
regarding the disposition of mining proceeds.

    Question. What is the U.S. doing to promote the protection of 
rights for indigenous communities exposed to the mining sector?

    [No Response Received]
                            consumer demand
    Smuggling of some mined commodities, notably gold, is common across 
sub-Saharan Africa, due to overly burdensome customs and business laws, 
as well as tax evasion. Smuggling from the DRC through neighboring 
countries and on to the Middle East is particularly notable for its 
scale.

    Question. What are the primary export destinations for illicit gold 
coming from Africa? From Asia? From Latin America?

    [No Response Received]

    Question. What roles do regulatory and tax regimes play in 
incentivizing black market trade in the mining sector?

    [No Response Received]

    Question. How do we address demand for illicitly mined products 
like gold and diamond at the national level?

    [No Response Received]
                               sanctions
    The U.S. Foreign Narcotics Kingpin Designation Act could play a 
role in curtailing links between the illicit gold-related commerce and 
illegal armed groups, organized crime cartels, and other criminal 
networks designated as narcotics traffickers by sanctioning those 
involved.

    Question. What role does--or could--the U.S. Foreign Narcotics 
Kingpin Designation Act play in Latin America in curtailing the 
involvement in illicit mining and gold trading of drug cartels and 
armed groups, including Colombian guerrilla organizations designated 
under the Act?

    [No Response Received]

    Question. What would be the costs, challenges, and prospects for 
establishing a sanctions regime aimed specifically at curbing illegal 
mining?

    [No Response Received]
                               __________

                   Miami Herald Article Submitted by 
                       Senator Benjamin L. Cardin

 how drug lords make billions smuggling gold to miami for your jewelry 
                             and phones\1\
---------------------------------------------------------------------------
    \1\ This article was transcribed by SFRC staff from an article in 
the January 16, 2018 edition of the Miami Herald..
---------------------------------------------------------------------------
            by jay weaver, nicholas nehamas, and kyra gurney

                     Miami Herald, January 16, 2018

    ``I'm like Pablo coming . . . to get the coke,'' he told two co-
workers in a text message in 2014.
    A 36-year-old Florida State University graduate who once sold 
subprime loans, Granda was no cartel kingpin. But his offhand 
comparison was apt: Gold has become the secret ingredient in the 
criminal alchemy of Latin American narco-traffickers who make billions 
turning cocaine into clean cash by exporting the metal to Miami.
    The previous year, Granda's employer, NTR Metals, a South Florida 
precious-metals trading company, had bought nearly $1 billion worth of 
Peruvian gold supplied by narcos--and Granda and NTR needed more.
    The United States depends on Latin American gold to feed ravenous 
demand from its jewelry, bullion, and electronics industries. The 
amount of gold going through Miami every year is equal to roughly 2 
percent of the market value of the vast U.S. stockpile in Fort Knox.
    But much of that gold comes from outlaw mines deep in the jungle 
where dangerous chemicals are poisoning rainforests and laborers who 
toil for scraps of metal, according to human rights watchdogs and 
industry executives. The environmental damage and human misery mirror 
the scale of Africa's ``blood diamonds,'' experts say.
    ``A large part of the gold that's commercialized in the world comes 
stained by blood and human rights abuses,'' said Julian Bernardo 
Gonzalez, vice president of sustainability for Continental Gold, a 
Canadian mining company with operations in Colombia that holds titles 
and pays taxes, unlike many smaller mining operations.
    Pope Francis condemned the horrors of illegal mining during a visit 
to the Peruvian Amazon on Friday. The regions's gold boom, the pope 
said, has become a ``false god that demands human sacrifice.''
    In Latin America, criminals see mining and trading precious metals 
as a lucrative growth business, carefully hidden from U.S. consumers 
who flaunt gold around their necks and fingers but have no idea where 
it comes from--or who gets hurt. The narcos know their market is 
strong; America's addiction to the metal burns as insatiably as its 
craving for cocaine. NTR, for instance, was the subsidiary of a major 
U.S. gold refinery that supplied Apple and 67 other Fortune 500 
companies, as well as Tiffany & Co., according to a Miami Herald 
analysis of corporate disclosures.
    Last March, federal prosecutors in Miami charged Granda, his boss, 
Samer Barrage, and another NTR trader, Renato Rodriguez, with money 
laundering, saying the three men bought $3.6 billion of illegal gold 
from criminal groups in Latin America. The claimed the gold traders, 
who eventually pleaded guilty, fueled ``illegal gold mining, foreign 
bribery [and] narcotics trafficking.''
    Now, those prosecutors are investigation other U.S. precious-metals 
dealers suspected of buying tainted gold from drug traffickers, law 
enforcement sources say. Their goal is not just to take out crooked 
gold firms like NTR--they also want to kneecap the drug cartels.
    Here's why: Over the past two decades, as the U.S. war on drugs 
undercut the cash flow of narco-traffickers, kingpins diversified into 
Latin America's gold industry. By using drug profits to mine and sell 
gold to American and multinational companies, criminal organizations 
can launder ``staggering amounts of money,'' said John Cassara, a 
retired U.S. Treasury special agent. The end result: The gold in 
American jewelry, coins and smartphones is helping finance shipments of 
narcotics to the United States, as well as illegal mining in Latin 
America, current and former law enforcement officials say.
    Mining regions in the rainforest have become epicenters of human 
trafficking, disease and environmental destruction, according to 
government officials and human rights investigators. Miners are forced 
into slavery. Prostitutes set up camps near the miners, fueling the 
spread of sexually transmitted infections. One human rights group found 
that 2,000 sex workers, 60 percent of them children, were employed in a 
single mining area in Peru.
    Meanwhile, strip mining and the indiscriminate use of mercury to 
ferret out gold are turning swaths of the world's most biodiverse 
ecosystems into a nightmarish moonscape. In 2016, Peru declared a 
temporary state of emergency over widespread mercury poisoning in Madre 
de Dios, a jungle province rife with illegal mining. Nearly four in 
five adults in the areas capital city tested positive for dangerous 
levels of mercury, according to the Carnegie Institution for Science in 
Washington, D.C.
    Even criminal outfits from Russia and China are investing in gold 
mining, observers say, abandoning heavy machinery in the jungle once 
they've extracted the metal. Soaring prices over the last two decades 
have driven the modern-day gold rush. In January, gold traded at 
roughly $1,300 per ounce on the open market, compared to less than $300 
in 2001.
    The human rights abuses and deforestation are a ``bleeding sore 
that affects millions of people and their future livelihoods,'' said 
Douglas Farah, a national security consultant and visiting fellow at 
the Pentagon-funded National Defense University in Washington, D.C.
    It's become an enormously damaging industry that very few people 
are looking at seriously,'' Farah said. ``Just as with `blood 
diamonds,' the gold issue . . . brings together money laundering, 
forced prostitution, drug traffickers, human trafficking and child 
slavery.''
    Until now, the international gold market's dark side has drawn 
little public attention in the United States.
    The lack of scrutiny has allowed the trade in dirty gold to grow 
more profitable than cocaine, according to government estimates in 
Latin America.
    ``Criminal groups make so much more money from gold that from coca, 
and it's so much easier,'' said Ivan Diaz Corzo, a former member of 
Colombia's anti-criminal-mining task force.
    And just like cocaine, a market for illicit metal has blossomed in 
South Florida, where nearly a third of the nations's imported gold 
enters.
    Over the past decade, Miami, a longtime point of entry into the 
United States for contraband, imported $35 billion worth of gold via 
air, according to U.S. Customs records analyzed by WorldCity, a Coral 
Gables-based economic data firm. That was more than any other U.S. 
city.
    Some of the metal shipped to Miami is refined locally. Other 
batches are sent across the country to be melted down and manufactured 
into jewelry and bullion. Central banks around the world are major 
buyers of gold. So is the U.S. Mint. And electronics companies use 
small amounts of gold in consumer products because it is an effective 
conductor and doesn't corrode.
    One way or another, almost everyone has Miami gold in their 
pockets, portfolios or jewelry boxes.
    Simple math shows it can't all be clean.
    Take Colombia, a country with a substantial mining industry that 
exported 64 tons of gold in 2016, much of it to the United States, 
according to government statistics. That same year, Colombia's large-
scale, legal mining operations produced only eight tons, according to 
the Colombian Mining
    The big Colombian mines that `` [legally] produce gold can be 
counted on one hand,'' said Jaime Pinilla, an engineer and legal gold 
mine owner in Colombia. ``There's a huge difference in the amount that 
is produced and the amount that is exported.''
    And the discrepancy is not just happening in Colombia: Statistics 
from other Latin American gold producing nations show similar ratios 
between legal and illegal gold mining.
    It's impossible to know where all the illegal gold is coming from--
but it's clear where most of it ends up. Latin America accounts for 
nearly three-quarters of the gold imported into the United States, 
roughly 200 tons in 2015, according to Miami-based trade analytics firm 
Datamyne and the U.S. Geological Survey. That's not far off from the 
total amount of gold mined in the United States annually.
                           a currency of pain
    The parallels between gold and cocaine are striking.
    Both the white powder and yellow metal are sold by Latin American 
cartels at huge costs to workers and the environment. Terrorists, 
including al-Qaida, use gold and cocaine to finance their plots. 
Officials say they are major threats to law and order.
    One big difference between cocaine and gold? Cocaine is obviously 
illegal. With gold, it's hard to tell. Papers can be forged. The metal 
can be melted and remelted until its origin is impossible to pinpoint.
    Another distinction? Profit.
    In 2014, a kilo of gold was worth between $30,000 and $40,000 in 
Colombia, according to Colombian intelligence figures obtained by the 
Miami Herald. By comparison, a kilo of cocaine sold for roughly $2,500. 
While drug trafficking in Colombia generated less than a billion 
dollars in total revenue in 2014, according to those same estimates, 
illegal mining produced roughly $2.4 billion.
    Gold's luster has exerted a powerful hold on humanity since ancient 
times.
    Today, the metal appeals to the darkest corners of the financial 
system. It is a safe investment. It is rare and hard to trace. Best of 
all: Human beings covet it.
    Those factors, coupled with industrial mining and heightened demand 
from investors and tech companies, have turned the precious-metals 
business into ``the Rolls-Royce of money laundering, said Robert Mazur, 
a former federal agent who infiltrated drug cartels in the 1980s.
    Those cartels are always looking for ways to hide how they make 
their money.
    But banks can't accept big deposits of cash, let alone duffel bags 
of coke-dusted bills, without checking how the funds were made. One 
solution for criminals: investing in supposedly legitimate businesses.
    Here's how gold fits in: Drug-cartel associates posing as precious-
metals traders buy and mine gold in Latin America. Cocaine profits are 
their seed money. They sell the metal through front companies--hiding 
its criminal taint--to refineries in the United States and other major 
gold buying nations like Switzerland and the United Arab Emirates.
    Once the deal is made, the cocaine kingpins have successfully 
turned their dirty gold into clean cash. To the outside world, they're 
not drug dealers anymore; they're gold traders. That's money 
laundering.
    The U.S. government--laser-focused on traditional money laundering 
and terror financing through banks--has shied away from untangling the 
twisted tentacles of gold smuggling, which can be hard to follow across 
borders.
    But that's starting to change--and it's happening in America's 
gold-import capital, Miami.
    The criminal case against Granda--the self-styled Escobar--and his 
colleagues at NTR Metals is the largest money-laundering prosecution 
involving precious metals in U.S. history, authorities say.
    ``The scope of the conspiracy is enormous,'' federal prosecutor 
Francisco Maderal told a judge during a hearing in Miami last year.
    So far, the scandal has not only shut down NTR and cost its Dallas-
based parent company, Elemetal, the ability to trade gold on bullion 
and commodity exchanges. It's also put hundreds of employees at 
Elemetal's refinery in rural Ohio out of work. Elemetal and its 
executives have not been charged but remain under federal 
investigation, according to sources with knowledge of the probe. The 
company and its attorney, Trey Gum, did not respond to repeated 
requests for comment, although Elemetal has previously said it is 
cooperating with authorities.
    The downfall of one of North America's biggest gold companies is 
shaking the entire industry, all the way up to the bankers whose lines 
of credit sustain dealers and refineries doing multimillion dollar 
deals.
    ``The case against [the NTR employees] is a big deal,'' said Jason 
Rubin, CEO of Republic Metals, based in Opa-locka, just north of Miami, 
and a major rival of Elemetal. ``Financial institutions . . . have 
rightfully and correctly increased their scrutiny of companies in the 
wake of the allegations.''
    Alejandro Esponda, a South Florida gold trader, said he fears NTR's 
misdeeds will unjustly tarnish the entire industry.
    ``Everybody is guilty by association,'' said Esponda, vice 
president of Universal Precious Metals, based in the Miami suburb 
Doral.
    Although Latin America's gold market is known for corruption and 
danger, precious metal there is plentiful and labor cheap.
    In comparison, the U.S. gold supply, mostly mined in Nevada and 
Alaska, offers stiff competition and regulations. Big companies control 
the big mines. Smaller companies looking to deal in U.S. gold are 
restricted to buying recycled ``scrap'' gold from pawnshops and jewelry 
stores. To gain a competitive edge, many U.S. gold traders look south.
    But because Latin America's gold market is so fragmented--with the 
metal sometimes changing hands among many small companies before it's 
exported--it's hard to guarantee that individual shipments imported to 
the United States are lawful, experts say.
    And since gold's price is set on a worldwide basis and the vast 
majority of trades are financed on credit, the metal must move quickly 
between Latin America and the United States. If one importer can pay a 
supplier faster than a rival can, it wins the deal. Profit margins are 
surprisingly small, making gold a volume business. The need for speed 
and quantity means obeying anti-money laundering laws is a costly 
requirement for the industry.
    The top three traders at NTR seemed to spend their days dreaming up 
ways to avoid those restrictions.
                           heart of darkness
    Juan Granda met Samer Barrage, 40, and Renato Rodriguez, 43, when 
they were hawking subprime loans at HSBC, according to federal court 
documents. Barrage and Granda later moved to work at Kaplan University, 
a for-profit school.
    Barrage, a London-born U.S. citizen who traveled back and forth 
between an NTR office in Colombia and his wife and children in Miami, 
eventually recruited Granda and Rodriguez to work with him buying gold.
    In 2012, the company did relatively little business in Latin 
America.
    But the next year, NTR struck a rich vein, becoming the largest 
U.S. importer of Peruvian gold with $980 million worth of deals, 
according to federal prosecutors.
    How did they do it?
    With help from Peruvian businessman Pedro Perez Miranda, who is 
suspected by authorities in Peru and the United States of laundering 
drug money through the gold trade.
    Shell companies tied to Perez, whose alias is Peter Ferrari, 
quickly became some of NTR's biggest suppliers. None of his firms had 
any track record selling gold. That raised suspicions back at the 
headquarters of NTR's parent company, Elemetal.
    The firm's compliance officer repeatedly warned Barrage and at 
least four Elemetal executives that criminal gold mining and smuggling 
were serious problems in Peru--and that Ferrari seemed to be involved.
    ``We need to be extremely careful going forward,'' the compliance 
office, led by retired U.S. Customs Service agent Steve Crogan, told 
Barrage and his Elemetal bosses in an August 2012 email cited by 
federal prosecutors.
    Ferrari even came to visit Elemetal's giant refinery in rural 
Jackson, Ohio, according to one employee who saw him at the plant.
    ``He was wearing blue jeans and a T-shirt,'' said the worker, who 
asked not to be named. ``It didn't feel right. He wasn't dressed like a 
businessman. His appearance didn't match the amount of money he was 
supposed to represent.''
    The warnings were ignored.
    For the three NTR traders--who declined to comment for this story 
through their lawyers--breaking the law meant big money: Elemetal 
``incentivized Barrage, Rodriguez and Granda to purchase as much gold 
as possible with volume-based commissions,'' court documents show.
    In 2013, NTR went on to buy $400 million in gold from Ferrari--
whose birthday party in Lima early that year was attended by Granda, an 
avid watcher of the Netflix show ``Narcos,'' and his two fellow 
traders. The trio flew in from Miami for the celebration.
    The NTR traders hid the purchases from Elemetal's compliance office 
through front companies and false U.S. Customs declarations, and by 
arranging to bribe Peruvian customs officials, according to court 
documents.
    The scheme didn't last long: NTR's Peruvian operations collapsed at 
the end of 2013 when local authorities raided a storage facility 
outside Lima holding gold that belonged to Ferrari and other traders. 
Agents seized $18.8 million worth of gold bound not only for NTR Metals 
but three other Miami-based gold importers, as well as refineries in 
Switzerland and Italy, according to local media reports.
    The year after the gold raid outside Lima, NTR's exports from Peru 
dropped 92 percent.
    But the party wasn't over--it simply moved to neighboring 
countries.
    In 2014, Granda and his colleagues began smuggling gold across the 
border to Ecuador and Bolivia to hide its origins, according to text 
messages and confidential informants interviewed by U.S. prosecutors. 
Soon, NTR's purchases in Ecuador and Bolivia soared by $485 million. 
Some deals were disguised through the use of companies like furniture 
store in Coral Gables, prosecutors alleged.
    In February 2015, Barrage laid out the plot in a text message 
obtained by the government: ``We need more Peruvian gold from Bolivia 
and Ecuador,'' he told Granda. ``Can u make it happen?''
    Granda couldn't. Local governments in those countries had also 
begun cracking down.
    The party moved again, this time to Colombia. In 2015, NTR's 
imports from Colombia soared to $722 million, more than double the 
previous year's haul. That accounted for more than half of the 
country's gold exports to the United States. Barrage, who owns houses 
in Nicaragua and Spain, ran the show in Colombia, where he made $2 
million overseeing NTR's operations, prosecutors said.
    The company often hid its dirty dealing by exporting gold from 
Colombia's free-trade zones, which are tax- and duty-free economic 
development areas where customs regulations are weaker.
    But the smuggling ring finally came crashing down in 2016 after two 
gold brokers who collaborated with NTR became confidential informants 
for the U.S. government. One worked as a private customs broker in Peru 
and dealt directly with Granda, helping him smuggle gold out of the 
country. The other was a courier based in Chile who carried shipments 
of illicit gold on flights from South America to Miami. As NTR grew 
more and more desperate for gold, the courier told investigators that 
he was sent to Africa, a no-go zone for U.S. gold companies, to secure 
more metal.
    Subpoenas flew, parent company Elemetal began an internal 
investigation, and Granda, Barrage and Rodriguez were arrested last 
spring.
    Then, last week, federal prosecutors investigating NTR indicted 
Ferrari, his twin sons and another Peruvian man on a money-laundering 
charge filed in Miami.
    Ferrari's lawyer in Peru, Benji Espinoza Ramos, said his client, 
who is in custody in his home country on domestic money-laundering 
charges, did not break the law. Espinoza said the gold operations were 
legitimate.
    ``We believe there is no proof of the existence of illegal gold,'' 
he said.
    Granda, Barrage and Rodriguez pleaded guilty to a money-laundering 
conspiracy that carried a maximum of 10 years in prison. They are 
cooperating with federal prosecutors and providing information about 
foreign suppliers with narco ties, and about Elemetal. On Friday, 
Granda and Barrage were sentenced to six and nearly seven years in 
prison, respectively. Rodriguez will be sentenced later this month.
    Will their case scare off other unscrupulous operators in the gold 
industry?
    That's unlikely, experts say, as long as overwhelming demand from 
U.S. consumers and corporations fuels the market for narco gold.
    ``The cartels are so powerful,'' said Mazur, the former federal 
agent. ``They buy banks. They buy refineries. The amount of money they 
have is ridiculous.''
    And the lure of gold's profit is too strong.
                               __________

              Venezuela, The Smugglers' Paradise Article 
                    Submitted by Benjamin L. Cardin

        organized crime controls gold exploitation in venezuela
                 by algimiro montiel and jorge benezra
All ingredients for a conflict mineral can be found in southern 
        Venezuela. A dangerous cocktail of multiple armed groups and 
        corrupt officials control the extraction of the country's gold 
        before taking it to the borders.
    The long road that starts in Ciudad Guayana, Bolivar state, and 
heads southward marks the route of illegal gold mining in Venezuela. 
Hundreds of people travel the route each day in search of El Dorado--
riches that might allow them to flee from an unprecedented economic 
crisis in the South American country.
    Food, medication, fuel, and cash have been scarce for years in the 
rest of the country, but along these roads in southeastern Venezuela 
they're available--as if the riches from gold mining have created a 
parallel world.
    The most important stop is El Callao, a town also in Bolivar state 
clustered between mountains about 530 miles (850 kilometers) from 
Caracas. El Callao is known for its colorful carnival but has been 
rebranded as the region's mining capital.
    The explosion of mining has turned the place into a nightmare. Its 
streets are crowded with cars, motorcycles, and vendors who mostly 
sleep in public plazas as the hotels are fully booked.
    The once serene village had 20,000 inhabitants in 2011. It was a 
place where small businesses sold rudimentary gold jewelry and gold 
pebbles without fear of robberies. Now, some 100,000 people live in the 
area of El Callao and anywhere from 300,000 to 500,000 miners roam the 
numerous mines of southern Venezuela.
    El Callao is part of the Orinoco Mining Arc, a government-sponsored 
mega project that covers 12 percent of Venezuela's surface.
    Launched by President Nicolas Maduro in February 2016, the project 
is an attempt to find resources in the wake of the collapse of the oil 
industry, which sustained the South American nation for a century. As 
part of the plan, the government is trying to validate and certify gold 
reserves amounting to 9,810 tons (8,900 metric tons) by 2025. That 
would give Venezuela the world's second-largest gold deposits.
    But it's not all is abundance and glamour. Gold mining in the area 
used to be run by transnational corporations. Now, criminal groups and 
armed gangs monopolize the business. And the people of El Callao, like 
many villages in the south, have learned to live with the terror spread 
by armed groups.
    Local media has reported on the discovery of mass graves, but 
villagers say that many of the dead, victims of violence and disease, 
are never found and are hidden in the Venezuelan jungles.
    According to the Venezuelan Observatory of Violence, El Callao was 
the most violent locality in Venezuela in 2018, with a homicide rate of 
619.8 per 100,000 inhabitants.
    An employee of the state-run Venezuela General Mining Company 
(Minerven), who wants to remain anonymous in fear of reprisals, 
explains that ``irregular groups'' are getting rich with the gold 
business. They force the miners and their families to live in hell, 
with practices that border on sadism, he describes.
    Some witnesses, including miners who fled to Colombia, confirm 
these accusations and mention other abuses such as forced prostitution, 
torture, massacres and beheadings by armed groups that have control of 
the mines.
    Currently, several criminal elements dominate El Callao and the 
rest of the Orinoco Mining Arc. According to NGO's, opposition 
legislators, and eyewitnesses, dissidents of the Revolutionary Armed 
Forces of Colombia (FARC) and members of Colombia's National Liberation 
Army (ELN) are present in the mines of Bolivar and neighboring Amazonas 
state.
    Until recently, the FARC was the largest guerrilla group in Latin 
America. Based in Colombia and created in 1964 to fight for equal land 
distribution and the rural poor, it remained a guerrilla movement until 
it signed a peace deal in 2016. Now ELN is the biggest guerrilla group 
on the continent.
    The two organizations share the territory with crime syndicates, or 
sindicatos, run by gang leaders known as pranes. There are also 
Committees for the Defense of the Revolution (CDR), which have started 
their own mining groups and are ideologically aligned with the Maduro 
government.
    The gangs, which have been in the mining area since 2010, used to 
be the dominant players but have lost ground to the Colombian 
guerrillas in recent years, said a 25-year-old National Guard soldier.
    He's still amazed when he remembers the first time he saw the ELN 
march through Bolivar state.
    ``We saw patrols of 200 armed men walking by our side identified as 
the ELN,'' he said. ``What are we supposed to do? We just greeted them 
as if they were old friends.''
    Control of the area by armed groups and corrupt military units 
prevents miners from speaking openly.
    ``Here it is better not to comment if you want to be alive. There 
are a lot of mafias,'' said a local entrepreneur who asked to remain 
anonymous. ``The military arrived to do business, not to protect the 
citizens. Every week there is a murder.''
    Miners complained that all the parties are extorting them, charging 
a ``tax'' to work or bring in equipment, but there are few other 
options.
    ``We go to the mine and work in groups to take care of each 
other,'' said an artisanal miner, who wears a shirt of the ``Piar 
Mission,'' a government program designed to fight illegal mining. 
``[The armed groups] take away our cell phones and our belongings 
before entering the mines. We need the work, but if we complain they 
don't allow us to come back.''
             the labyrinth of gold avoids the central bank
    Luis Rosales, a lawyer from the city of Valencia, about 78 miles 
(125 kilometers) from Caracas, arrived in the mining town 2 years ago, 
hoping to work in the goldfields. Now, he sells mining tools on the 
street.
    ``Families are sleeping everywhere, in the bus terminal and the 
square, trying to make a living, not only through gold but by selling 
whatever they can,'' he said. ``You suffer, but manage to put some food 
on the table.''
    In and around El Callao, miners and their families live in shacks 
made of wooden poles and plastic bags for walls. Crime and disease are 
rampant.
    The Venezuelan government has not released figures on malaria 
recently but the World Health Organization registered 411,586 new cases 
in 2017, an increase of 811 percent since 2010. And the mining area 
around Bolivar state has the highest concentration of cases, according 
to experts.
    Without any sort of security measures, men, women and children dig 
with their hands or use rudimentary tools looking for gold. If they can 
find una grama, a gram of gold (.04 ounces), they can make 5 times the 
monthly minimum wage, which is currently about 7 U.S. dollars.
    The promise of gold riches, as other sectors of the Venezuelan 
economy have collapsed, has triggered a mass migration to the south of 
the country.
    Now, dredging machines, suction pumps, pickaxes and shovels, 
cyanide and mercury are increasingly present in southern Venezuela, 
threatening to contaminate the fish stock.
    Miners are also inhaling the mercury vapor that comes from burning 
gold amalgam. The United Nations Environment Program (UNEP) says 
there's no cure for mercury intoxication, which can cause irreparable 
neurological damage.
    To complicate matters, about 45 percent of the miners in the region 
are children or adolescents, according to a report by Cecodap, an NGO 
that looks after the rights of children and adolescents in Venezuela.
    The Organization for Economic Cooperation and Development (OECD) 
and the European Union define ``conflict minerals'' as mining that 
contributes to forced labor, money laundering, child labor and human 
rights abuses. All these ingredients are present in Venezuela's 
conflict-ridden mines.
                             booming demand
    The global demand for gold in 2018 reached 4,888 tons (4,435 metric 
tons), almost half of it coming from the jewelry sector.
    Venezuela is currently the 32nd largest gold producer, according to 
the World Gold Council, with an output of 25.3 tons (23 metric tons) in 
2018. Maduro's Mining Sector Plan sets production goals of 28 tons 
(25.4 metric tons) in 2019 and 87.5 tons (79.4 metric tons) by 2025.
    To hit those targets, the government says it plans to ``coordinate, 
organize and control small scale mining inside the Orinoco Mining 
Arc.''
    There are two large groups currently soaking up the gold produced 
by small, informal miners. One is a group of private investors; the 
other is Minerven.
    The private operators buy gold from illegal miners and sell it to 
wholesalers who then ``in theory'' sell it on to the Central Bank, said 
one of the 570 local gold buyers in El Callao, who handles about 4.4 
pounds (2 kilos) of gold per week.
    ``That hardly ever happens,'' he explained. ``[Wholesalers] make 
more money smuggling the [gold] out of the country and getting paid in 
dollars, and not the bolivares that the state is offering.''
    Minerven is the main supplier of gold to the Central Bank, which in 
turn sells the gold to clients in countries such as Turkey and the 
United Arab Emirates.
    Minerven also gets most of its gold from small miners and 
cooperatives, even though it's aware that it's coming from illegal 
mining, said a company representative who asked for anonymity.
    Founded in 1970, Minerven has been overhauled at least 3 times in 
the last decade amid collapsing production. After hitting a production 
``milestone'' of 13.48 tons (12.23 metric tons) in 2009, mining output 
collapsed from 2010-2015 as international mining companies pulled out 
of the country.
    Even for the company employees, Minerven's operations are shrouded 
in mystery as the government produces no information on gold purchases 
or sales.
    ``How much [gold] is Minerven producing? We don't know that either, 
but they continue to produce,'' one of its employees said. ``We don't 
know how much because it's never made public and that's worrying.''
    When asked for a statement, none of the Venezuelan government 
agencies replied to our requests.
                            smuggling routes
    The government considers El Callao a ``special military zone'' and 
keeps it heavily guarded. On any given day, groups of hooded military 
men with automatic weapons patrol the streets and escort government 
``high officials'' who leave and enter the Minerven plants at all 
times.
    But despite the military presence, the area is the starting point 
for smuggling routes that lead to neighboring Guyana, Brazil and 
Colombia. And criminal organizations use human ``mules,'' boats, 
armored cars and small planes to avoid scrutiny.
    In the neighboring town of Guasipati, gold is flown out on private 
flights to Aruba, Curacao, Dominica and Puerto Rico, an official said. 
But other trafficking routes exist, including from the industrial city 
of Ciudad Guayana to the Dominican Republic and Honduras, with the 
United States as the final destination.
                               gold mules
    To smuggle the illegal gold into neighboring Colombia, criminal 
organizations use a network of young carriers or ``mules'' for the job.
    While drug mules often swallow their product to smuggle it across a 
border, gold mules take the ingots and grams of gold hidden under their 
clothes or inside their body cavities. Gold is considered a strategic 
asset by the Veneuzelan government and smugglers, if they're caught, 
can be severely punished. They're also threatened by the criminal gangs 
and the soldiers who operate the mines and control the borders.
    Ramon, one of the gold mules, was recruited in Caracas early this 
year.
    Telling his story to Climax magazine , Ramon, who used a fictitious 
name for security reasons, said he traveled by bus from Caracas to 
Upata, in Bolivar state. There he was picked up by people driving two 
white Toyota 4Runner.
    They removed the SIM card and battery from his telephone, covered 
his head with a cloth bag and put headphones over his ears.
    Hours later, when they removed the hood, he was in Las Claritas, a 
mining town near the Brazilian border. He spent 4 days incommunicado in 
a makeshift camp guarded by two hooded men with automatic weapons.
    On the fourth day, Ramon left Las Claritas carrying 6.6 pounds 
(three kilos) of gold hidden in the soles of his shoes, in his jacket 
and in the seam of his trousers. Another 4.4 pounds (two kilos) of gold 
were divided between two fellow passengers.
    They traveled by helicopter from Las Claritas to Ciudad Bolivar, 
about 302 miles (486 kilometers) away, where buses belonging to the 
Encava transportation company took them to a coastal town that ``looked 
like Cumana'' in northern Venezuela. There, they were met by a soldier 
in uniform and put on a plane without having to show identification 
papers and flown to a private airport in Tachira state, along the 
border with Colombia.
    A Ford Explorer took them to the border town of San Antonio, where 
they walked across the Simon Bolivar International Bridge that connects 
to Colombia.
    Ramon panicked. He knew that if he was caught with contraband gold, 
he could take about 30 years in prison. But he followed the orders he 
was given and, using certain passwords to identify himself to the 
soldiers, he walked across the bridge unimpeded.
    When he reached Colombia immigration he was received by a corpulent 
woman. After using her first name, as he'd been instructed, she told 
him to ``go on'' without checking his papers or identity documents. 
That's when Ramon realized that the smuggling scheme ``also exists in 
Colombia.''
    In the Colombian border town of Cucuta he waited for his two 
companions, who entered the country on informal trails, or trochas.
    They called the buyer, a man from Ecuador, and agreed to handoff 
the gold at a fast-food chicken restaurant in the city center. When 
they walked into the establishment the doors were locked behind them 
and the employees disappeared.
    The businessman pulled out a bag full of 100 U.S. dollars bills and 
a scale to weigh the gold. He paid and left. For transporting 
Venezuelan gold to Colombia, Ramon was paid 1,500 U.S. dollars.
                             on the border
    In Zulia state, in northwestern Venezuela, a long line of about 40 
cheavy cargo trucks idle in the dark, waiting to cross the Paraguachon 
checkpoint into Colombia.
    At about 11 p.m. the trucks turn on their engines and start honking 
their horns. Venezuela's National Guard wave them through without 
inspecting the cargo, and the trucks roll by Colombian migration 
unimpeded.
    This border has been officially closed since Sept. 7, 2015, when 
Maduro shut it down to prevent the smuggling of food, fuel, and 
medicine. But that hasn't stopped it from becoming a thoroughfare for 
trucks hauling illicit goods, including smuggled gold.
    The Troncal del Caribe, which connects Venezuela and Colombia, has 
at least 14 checkpoints run by the Venezulean National Guard, Army and 
regional police. But no one dares interrupt the flow of cargo trucks or 
inspect them, according to local officials.
    Many of the trucks have special passes, salvoconductos, issued by 
the Zulia Defense Strategic Zone (ZODI), a military division that 
claims the trucks are carrying ``export products,'' said an Army 
corporal with the 13th Infantry Brigade who asked not be identified.
    ``If we check these vehicles, we can get into trouble,'' he said. 
``It appears that the owners of the vehicles are influential people, 
who can put our obs at risk.''
    The official said the trucks are often carrying coltan, silver, 
gold and other items that shouldn't be exported.
    ``We know this because when we have checked some cars, we found 
everything from liquid cocaine to gold and other illegal products,'' 
said the 24-year-old soldier.
    When asked for a statement, the Venezuelan Armed Forces and 
Ministry of Defense didn't reply to our requests.
    In the town of Maicao, Colombia, just 8 miles from the Venezuelan 
border, shops buy the Venezuelan gold.
    At a shop called Amiga, a merchant says he buys up to 5.3 ounces 
(150 grams) of Venezuelan gold, ``which is brought from the south of 
the country; it comes directly from the mines because it is in 
grains.''
    He says the people selling the precious metal are not miners but 
military officials.
    ``Rarely have I dealt with traders who are buying it there cheaply 
and selling it at another cost here,'' he said.
    A Venezuela National Guardsman in Paraguachon, who insisted on 
anonymity, described how he stopped an official government vehicle in 
the town of Dabajuro in December, 2018, at about 2 a.m.
    It was a Toyota Hilux with two women and a male driver. The 
passengers said they worked for the government and were coming from 
Caracas but they seemed nervous so the soldier and his partner 
conducted a search. They discovered the car was actually coming from 
the mining area of Tumeremo, in Bolivar state, and inside they found a 
cardboard box with 8.8 ounces (250 grams) of silver, 10.6 ounces (300 
grams) of gold and 1,000 U.S. dollars in cash.
    The panicked travelers exchanged their valuable cargo for their 
freedom.
    ``The arrest and confiscation were without effect,'' scrubbed from 
the record, the soldier said, ``and we shared the profit.''
                               __________

        Global Witness Statement Submitted by Benjamin L. Cardin

            global witness statement for the hearing record
Hearing titled Illicit Mining: Implications for U.S. National Security 
        and International Human Rights
    Dear Chairman Rubio, Ranking Member Cardin and Members of the 
Subcommittee:
    Global Witness welcomes the opportunity to submit a statement for 
this important hearing.
    We are an international non-governmental organization with offices 
in Washington, London and Brussels. For almost 25 years, Global Witness 
has investigated and uncovered corruption in fragile states, focusing 
on the role of natural resources in driving state corruption and 
conflict. We have exposed how timber, diamonds, minerals, oil and other 
natural resources have incentivized corruption, destabilized 
governments, fueled and financed violent conflict, organized crime and 
terrorist organizations.
    This hearing is a powerful opportunity to examine these systemic 
issues and discuss tools that help broaden our understanding of their 
causes and consequences.
    This statement will provide background and examples of how minerals 
fuel corruption, conflict and human rights abuses and, given the 
context of this hearing, the national security risks this poses for the 
U.S. We will discuss systemic reforms that are needed to address this 
problem, including the need for greater transparency in the mining 
sector and along mineral supply chains. We will examine enforcement of 
sanctions and visa bans for those responsible for human rights 
violations and corruption related to the mining sector and protecting 
human rights defenders who are at risk from exposing these problems.
    how minerals fuel corruption, conflict, human rights abuses and 
                    threaten u.s. national security
    Around the world, the extraction and trade of minerals continues to 
provide lucrative funding to predatory armed groups, organized crime, 
terrorist networks and other corrupt and rights abusing actors. Serious 
human rights abuses have been documented across all types of mining 
operations, from informal small-scale artisanal mining to industrial, 
large-scale, mining projects. Trading routes have been subject to 
extortion and bribery, and minerals illegally smuggled across 
international borders deprive governments and communities of tax 
revenue and benefit sharing.
    The links between mining, corruption and conflict are not limited 
by geography or type of mineral. Our research has shown that this is 
not a problem of a few corrupt politicians or companies acting in bad 
faith. Rather, these are symptoms of a broken system, perpetuated by 
greed and secrecy.
Mining and the Trade in Valuable Minerals Finance Conflict, Instability 
        and Fuel Corruption
    Last year, Global Witness exposed how the Islamic State in 
Afghanistan (ISKP) controls major mining sites in eastern Afghanistan 
and has a strategic interest in the country's rich mineral resources. 
Global Witness research also uncovered evidence that the Taliban are 
making millions a year from talc alone \1\--part of the $200-$300 
million a year they are estimated to make from minerals across 
Afghanistan.\2\ Although Afghanistan's mineral wealth could 
significantly grow its economy, mining has, instead, been a key driver 
of instability, providing significant revenue to key insurgents and 
illegal militias.\3\
    We have seen a similar phenomenon in eastern Democratic Republic of 
Congo, where, for almost two decades, armed groups and members of the 
Congolese national army have used profits from the trade in tin, 
tantalum, tungsten and gold, to perpetuate violent conflict and 
abuses.\4\
    Diamond revenues in Zimbabwe have provided millions in secret off-
budget funding for state security forces, who have been consistently 
implicated in widespread human rights abuses and oppression.\5\ Since 
2010, the country has officially exported over $2.5 billion in 
diamonds, although only a small percentage of this money can clearly be 
identified in the state budget.\6\
    In some cases, corruption can stain a project before mining even 
begins. Between 2010 and 2012, Dan Gertler, a close friend of the then 
Joseph Kabila, the President of Democratic Republic of Congo (DRC), 
secretly purchased major mining concessions at a steep discount, using 
offshore companies to hide his identity. These assets were then sold to 
two major multinational companies. The Congolese state is estimated to 
have lost out on at least $1.36 billion in the process--the equivalent 
of twice the country's health and education spending at the time 
combined.\7\
    In Burma, the jade sector provides another example of how corrupt 
elites siphon off vast profits while the local population sees little 
benefit and suffers human rights abuses. In 2014 alone, we estimated 
the production of jade to be worth up to $31 billion,\8\ or nearly half 
of the country's GDP,\9\ but the precise value is unknown. Industry 
sources estimate that between 50 percent and 80 percent of that 
production was smuggled to China, depriving the government of much 
needed revenues.
    Global Witness investigations have exposed how the jade sector is 
controlled by a group of elites linked to the former military 
government, including the family of former dictator Than Shwe, crony 
businessmen, army companies, Chinese business interests, ethnic armed 
groups and U.S. sanctioned drug lords. Global Witness investigations 
have found that military-owned or affiliated companies profit from the 
most lucrative jade concessions.\10\ Preliminary research also 
indicates that the military and corrupt elite control over jade may 
extend to the valuable ruby sector as well. These stones are being 
smuggled to neighboring countries, including Thailand, where they enter 
the global supply-chain with some likely ending up on the U.S. 
market.\11\
Profits From the Extraction and Trade of Lucrative Minerals Benefit 
        Criminals and Drug Traffickers
    Particularly in impoverished and fragile states, increases in metal 
price or the discovery of a new mine can incite mass migration of 
people seeking better economic opportunities. As the population 
increases, so does demand for goods and services, which often gives 
rise to illicit economies and organized crime.\12\
    Gold mining in southeastern Peru has, for example, been accompanied 
by recent reports of human trafficking and forced labor.\13\ In 
particular, the Madre de Dios region, where illegal mining is rampant, 
has become more dangerous and violent, as its population rises and 
miners fight for access to lucrative mining sites. In 2016, the 
region's homicide rate climbed to almost 4 times the national 
average.\14\
    Gold, in particular, has also become a desirable vehicle for money 
laundering, given its high value relative to small volume, evident from 
recent cases linking the U.S. gold market to senior figures in 
international narcotics cartels, including the brutal Sinaloa cartel, 
and money laundering schemes.\15\ In one case, three employees of the 
Miami-based company NTR Metals, have been sentenced to prison for their 
involvement in a multi-billion dollar gold money laundering scheme 
after an investigation by U.S. authorities into the company's 
suspicious import of over $3 billion worth of gold from Latin America 
into the U.S.\16\
Civil Society Fighting Corruption and Human Abuses in the Mining Sector 
        are Under Threat
    Behind each of these case studies are dozens more that exploit the 
same systematic weaknesses and loopholes, just with different names and 
locations. In many of these examples, civil society leaders play an 
important role in documenting and drawing attention to corruption, 
human rights and environmental concerns associated with extractive 
projects across the globe. However, these defenders of human rights 
often come under attack and face grave risks for their efforts to 
expose these problems and hold governments to account. This is 
particularly the case in countries with autocratic regimes and weak 
rule of law, where civil society faces particular challenges in its 
ability to operate and speak out on these issues.
    Our report, Defenders of the Earth, found that 2016 was the 
deadliest year on record for environmental and land defenders. Nearly 
four people were murdered every week in 2016 protecting their land and 
the natural world from industries like mining, logging and 
agribusiness, with killings across 24 countries.\17\ As part of an 
ongoing trend, the number of defenders murdered rose in 2017; two 
hundred and seven activists were killed, leaving communities without 
their courageous spokespeople and champions.\18\ More than 1,000 
murders have been recorded by Global Witness since 2010.\19\
Corruption and Conflict in the Extractives Sector Threaten U.S. 
        National Security Interests
    As illustrated by the case studies above and in various academic 
studies, there is strong evidence that fragile states that are heavily 
reliant on natural resource revenues are more likely to experience 
conflict than those countries without an abundance of these 
resources.\20\ Secrecy in the extractives sector combined with weak 
rule of law enables corrupt government officials and their cronies to 
divert cash from minerals and other natural resources to terrorist 
organizations, insurgents, and militias. Strengthening transparency and 
accountability in the mining sectors of fragile states is in the 
interest of the United States because it decreases the likelihood and 
severity of conflicts and mitigates the threat of the resource curse.
The Extraction and Trade in Minerals is not Inherently Problematic
    It is the systems that enable ill-gotten minerals to enter 
legitimate supply chains without scrutiny that must be addressed and 
reformed. Problems flow from unmanaged risks that are ignored and swept 
under the carpet by companies with a responsibility to ensure their 
business activities do not finance conflict or abuses. We need to move 
toward normalizing open, transparent, and honest conversation about the 
risks we know are out there, and what has been done--and is yet to be 
done--to manage them.
    Identifying and analyzing these risks requires nuance. In carrying 
out risk assessments, it's easy to focus on binary terms like `legal' 
and `illegal,' `licit' and 'illicit,' and `formal' and `informal.' It's 
easy to assume artisanal mining is bad and industrial mining is good, 
despite the many examples that prove otherwise. Instead of providing 
any real clarity, these terms only serve to muddy the waters to 
distract from efforts to identify and manage the underlying risks and 
harms that should be the focus of attention for all of us, and 
companies in particular.
Going Beyond the ``Governance Problem''
    To date, some efforts to address links between mining and conflict 
have tended to focus on the need for governance reform in producer 
countries. While poor governance is part of the problem, we cannot let 
it detract from the larger systemic issues that also demand our 
attention. Such reforms are critical to securing the conditions under 
which responsible trade can flourish to the benefit of producer 
communities.
    We urge the U.S. government to use its diplomatic and development 
tools to support governance reform at all levels--from the national to 
the local. Smaller producers and the communities where valuable 
resources are found are too often left behind by a scramble for 
investment and industrialization. However, reforms that focus only on 
producers and suppliers in mining areas at the beginning of globalized 
supply chains will inevitably fall short if they are working against 
powerful economic forces. To bring about greater transparency and 
comprehensive reform, policy makers must enlist the demand side in the 
process of identifying and dealing with problems.
    Greater contract transparency and payment disclosures can safeguard 
against corruption risks. Throughout supply chains, the very network of 
traders and suppliers that link U.S. companies and customers to 
conflict and rights abuses can be harnessed and leveraged to facilitate 
much needed reforms and improvements.
systemic problems require systemic reforms: actions the u.s. government 
                              should take
    Despite numerous exposes and widespread reporting on the many links 
between minerals, corruption and conflict, these abuses have long been 
viewed as isolated incidents--the misdeeds of a few bad apples within 
the global extractives industry. But when viewed together, we believe 
there is ample evidence of a broken system in need of reform. Without 
transparency and due diligence requirements in place and effectively 
implemented and enforced throughout the extractives sector, this is 
unlikely to change. Policymakers, companies and their stakeholders need 
more information to better understand why these problems persist and 
how to fully address them.
    Left unchecked, this system continues to contribute to national 
security implications for the United States by exposing U.S. markets 
and companies to the very real risks of funding or fueling corruption, 
conflict and abuses at home and overseas. Our investigation exposed how 
an Islamic affiliate and the Taliban are fighting over talc mines in 
Afghanistan and how consumers and companies in the U.S. could, 
unknowingly, be funding the Afghan insurgency. The talc mined in 
Afghanistan is transported across the border into neighboring Pakistan 
where it is mixed with Pakistani mined talc before exported--some forty 
percent of talc exported from Pakistan goes to the U.S.\21\
    Transparency is a critical first step toward creating extractive 
industries and mineral supply chains in which the people in the country 
benefit from the resources, responsible companies are rewarded, and the 
criminal and corrupt are held to account. To realize this goal, our 
statement provides three recommendations for what the U.S. government 
should do to increase transparency and accountability in the mining 
sector:
    First, companies that trade and use minerals in their products must 
carry out robust due diligence in line with international standards on 
their supply chains, including publishing annual reports disclosing 
efforts to mitigate the risk of contributing or facilitating human 
rights abuses through their trade.
    Companies rely on an array of minerals and metals for the 
production and function of a number of consumer and industrial 
products; they have unique visibility over their supply chains and are 
uniquely placed to leverage their market power to affect change. 
Through engaging with suppliers, carrying out checks on their supply 
chains and publicly sharing information on potential abuses, companies' 
supply chain due diligence can improve mineral sourcing practices, and 
support other policy interventions from sanctions enforcement to 
governance reform.
    Based upon the U.N. Guiding Principles on Business and Human 
Rights, which establish that companies have a responsibility to ensure 
that they do not profit from serious harm to individuals, societies or 
the environment,\22\ the Organization for Economic Cooperation and 
Development (OECD) developed the Due Diligence Guidance for Responsible 
Supply Chains of Minerals from Conflict-Affected and High-Risk Areas in 
2010. The OECD Guidance, which consists of a five step framework meant 
for companies all along the supply chain, is the international standard 
for due diligence on mineral supply chains.\23\ The OECD Guidance makes 
clear that individual companies are responsible for the quality of 
their due diligence--this includes the supply chain checks undertaken 
by companies further up the supply chain.\24\
    The risk of minerals fueling conflict or human rights abuses can 
occur in any type of mining operation and these types of supply chain 
risks are part of the reality of doing business in high-risk areas. The 
OECD Guidance does not encourage companies to stop sourcing minerals 
from conflict-affected and high-risk areas, or to stop sourcing 
specific minerals. Rather, companies that do source from these high-
risk areas must demonstrate how they can do so responsibly. The primary 
question for a company's due diligence practices is how a material has 
been sourced and traded, not where.\25\
The OECD Due Diligence Framework is now a Requirement for Many Major 
        Companies Around the World
    In the U.S., Congress passed the conflict minerals provision in 
2010, in an effort to break the link between minerals and the 
entrenched conflict in eastern Congo.\26\ Section 1502 of the Dodd-
Frank Act, which had its origins with a bill introduced by Senators 
Brownback, Feingold, and Durbin \27\, specifically requires U.S.-listed 
companies that manufacture products containing tin, tantalum, tungsten 
or gold to carry out checks in line with the OECD Guidance on minerals 
that may originate from Congo or its neighboring countries.\28\ In the 
last year, several companies, including Tiffany & Co.,\29\ Apple, 
Richline, and Intel,\30\ have publicly emphasized the importance of 
supply chain due diligence. 129 Investors, representing over $4.8 
trillion in assets, wrote in a letter to the SEC, that the due 
diligence disclosures required by Section 1502 provide valuable 
information about how companies manage supply chain risks.\31\
    Shortly after the law was passed, some companies stopped buying 
minerals from the Great Lakes region. Although the market has now 
readjusted, to some extent, the market response affected thousands of 
artisanal miners' livelihoods. Disengaging from specific regions at the 
first sign of risk, with no regard for the livelihood impact, is also a 
form of irresponsible sourcing.\32\ These consequences speak to an 
urgent need to continue building on what has been achieved to date in 
an effort to develop and implement policies that serve also the most 
vulnerable members of global mineral supply chains. In addition to 
Section 1502, supply chain due diligence is also now law in DRC and 
Rwanda,\33\ and there is voluntary guidance in China.\34\ In 2017, the 
European Union finalized a supply chain due diligence regulation, 
covering minerals linked to human rights abuses around the world, which 
will come into full effect in 2021.\35\ Risk-based due diligence is 
also central to modern slavery laws around the world, including the 
U.K. Modern Slavery Act,\36\ and the French Corporate Duty of Vigilance 
Law.\37\ Recognition of business responsibility for supply chains is 
growing and due diligence has become a global norm.
Public, Annual Reporting on Risk Management is Critical to Demonstrate 
        Responsible Sourcing Efforts
    Annual, public reporting--the fifth step of the OECD Guidance--
serves several purposes: it demonstrates progress in managing risks 
over time, allows information to be scrutinized by the public, and 
provides companies the opportunity to share information about risks so 
that they can address them together, facilitating collaboration and 
collective action. These reports are crucial to turning transparency 
into impact, ensuring the collective resources of the entire supply 
chain are enlisted in the process of finding risks and doing something 
about them.
    In its 2018 report to the SEC, Apple reported on seven distinct 
supply chain risks and the steps it takes to follow up on these 
risks.\38\ In the previous year, Apple's report contained information 
on fifteen specific risks.\39\ We recently did an analysis of 65 
companies exporting tin, tungsten, tantalum and gold from Congo, Rwanda 
and Uganda and found that 45 percent of these companies had due 
diligence reports in 2015, and seven of these reports included detailed 
information about identified risks.\40\ This is a significant increase 
from 2013, when there were no company reports on responsible sourcing, 
and demonstrates that public reporting on risks can be done, and marks 
an important first step towards doing something about the problems that 
have been found.
    Public due diligence reports can also assist governments with 
sanctions enforcement. Over the last four years of conflict minerals 
disclosures to the SEC under section 1502, 43 different companies 
reported that Central Bank of North Korea \41\ was a potential supplier 
of gold, a potential and clear violation of U.S. sanctions.\42\ 
Additionally, it was reported by Reuters in 2016 that the United Wa 
States Army, a group sanctioned for narco-trafficking, is operating in 
a tin mine in Burma, which has allegedly been supplying tin to one of 
the largest tin smelters in the world, Yunnan Tin Company Ltd.\43\ It 
is because of supply chain due diligence regulations that companies 
have been able to better understand their supply chains and identify 
potentially problematic or risky suppliers.
Failing to Conduct Robust Supply Chain Due Diligence can have 
        Significant Consequences
    If a company ignores a risk it leaves itself and its investors 
vulnerable to financial, legal and reputational harm. By doing thorough 
assessments, and engaging with suppliers to better understand the 
circumstances of how minerals are mined and traded, supply chain due 
diligence protects against future liabilities and risks.
    As an example, a 2016 report by the Global Initiative of 
Transnational Organized Crime, alleged that Miami-based NTR Metals, a 
major U.S. refiner and a subsidiary of Elemetal LLC, engaged in 
criminal acts arising from the seizure of gold in Peru between 2013 and 
2014 and laundering the proceeds of illegal mining.\44\ The U.S. 
government investigated the suspicious import of over $3 billion worth 
of illegally acquired and/or smuggled gold from Latin America to Miami 
between 2012 and 2015 by NTR Metals. The U.S. Department of Justice 
indicted three former NTR Metals employees for their alleged 
involvement in a multi-billion dollar gold money laundering scheme.\45\ 
All three former employees have pleaded guilty to a money laundering 
conspiracy, and reportedly all three have been sentenced to between six 
and seven and a half years in prison.\46\
Industry Schemes are not a Replacement for Individual Due Diligence
    In parallel to existing laws and emerging legislation, major 
industry bodies have developed responsible sourcing audit frameworks 
and certification schemes.\47\ These aim to facilitate implementation 
of the OECD Guidance and encourage industry collaboration. While these 
can provide helpful tools for companies to better understand their 
supply chains and identify possible risks of contributing to harms, in 
many cases, these programs are built on weak systems that rely too 
heavily on third-party audits and binary certification schemes.
    As an example, when the Global Initiative's 2016 report was 
published, Elemetal Refining LLC, a gold refiner in Jackson, Ohio was 
certified by the LBMA and the Conflict Free Smelter Initiative 
(CFSI).\48\
    However, it was not until a year later, in March 2017, when 
Bloomberg published investigators' findings in relation to NTR Metals 
that the LBMA de-listed Elemetal Refining LLC.\49\ It is unclear what 
the industry schemes were doing in the interim to assess and manage the 
risks associated with the allegations linked to NTR Metals.
    The OECD recently concluded a study evaluating five major industry 
schemes to see how closely they aligned with the OECD Guidance. The 
report found that even though many of the schemes appeared to align 
with the due diligence guidance on paper, these schemes lack the 
ability to assess whether companies are actually implementing them in 
practice.\50\ Ultimately, the ability of these schemes to affect real 
changes in the way minerals are sourced and traded pales in comparison 
to the collective impact of individual companies working to responsibly 
address risks in mineral supply chains.
    Enforcement by governments is critical to ensure that companies are 
undertaking robust checks on their supply chains; without proper 
enforcement these laws mean little. Though Section 1502 only covers 
minerals from the Great Lakes region of Africa, this important due 
diligence requirement has redefined how companies look at risk in their 
supply chains and must be fully enforced. However, in April 2017, the 
then-acting chair of the SEC announced that the agency no longer 
recommends enforcement of the bulk of the conflict minerals provision, 
including the supply chain due diligence requirement despite the 
statutory mandate.\51\ This decision not only creates uncertainty in 
the minerals market, it sends a dangerous signal that there is wavering 
support for these important supply-chain checks.
    Second, extractive companies must publish what they pay to 
governments for natural resource extraction on a project-by-project 
basis and governments must publish the revenues they receive to 
increase accountability for how natural resource wealth is used.
    Beyond the occurrence of human rights abuses along mineral supply 
chains and the potential for and reality of conflict and terrorist 
financing, the corruption risk in major mining deals is another 
significant problem that cannot be overstated. For too long, many of 
these deals have been negotiated behind closed doors and the terms of 
these deals kept out of public view, keeping poor countries poor, 
propping up dirty and rogue regimes and posing significant risks for 
investors.
    A stark example of this is the involvement of Glencore in secretive 
deals to purchase major mining concessions in the DRC part of a series 
of opaque transactions that led to the Congolese state losing out on an 
estimated $1.36 billion in potential revenues.\52\ On July 3, 2018 
Glencore Ltd, a subsidiary of Glencore Plc, the world's largest 
commodities trader, received a subpoena from the U.S. Department of 
Justice related to U.S. overseas corruption laws focused on operations 
in Democratic Republic of Congo, Nigeria and Venezuela. The company's 
troubles seem to largely stem from its deals in DRC with Dan Gertler, a 
close friend and associate of DRC's former President Joseph Kabila.\53\
    Extractive industry payment transparency is an important tool to 
better understand the deals corrupt and repressive regimes make with 
companies for lucrative mining concessions. In order to hold 
governments and companies accountable, payments for natural resources 
must be made public so that citizens, journalists and civil society 
groups know how much money is being paid to their governments, and can 
hold their governments to account for how it has been spent.
Section 1504 of the Dodd-Frank Act Catalyzed Global Action
    In 2010, Section 1504 of the Dodd-Frank Act, known as the Cardin-
Lugar provision, was passed by Congress, establishing a global standard 
requiring oil, gas and mining companies to disclose project-level 
payments to governments. Thirty other major economies around the world 
followed suit, including Canada, Norway, the U.K. and the other twenty-
seven members of the European Union.\54\
    As these laws have been implemented, citizens and watchdogs in 
resource-rich countries can now see what their governments are being 
paid from individual resource projects and demand that those who pay or 
receive bribes are held to account. As transparency becomes the norm, 
companies will cease being able to operate in secrecy and will be 
deterred from bribery in the future.
    Unfortunately, in early 2017, Congress voted to vacate the SEC rule 
implementing this law. Nevertheless, many American, and even Russian 
and Chinese companies are already complying with similar laws, without 
any business disadvantage, according to a study by the U.K. 
Government.\55\ There is therefore no reason for the U.S. companies to 
be left out of this global transparency standard. The SEC is currently 
working on a new rule to implement Section 1504, which should be 
aligned with similar laws in other countries. We hope that the U.S. 
reclaims its position as a leader on this issue.
The Extractive Industries Transparency Initiative
    In addition to these payment disclosure laws, the Extractive 
Industries Transparency Initiative (EITI) is a voluntary, multi-
stakeholder initiative comprised of governments, companies and civil 
society organizations to promote transparency in oil, gas and mining 
sectors. The EITI publishes country-specific reports including data on 
payments by mining companies to governments and revenues received by 
governments. The EITI Standard also requires countries to publish 
timely and accurate information on key aspects of their natural 
resource management, including how licenses are allocated, how much tax 
and social contributions companies are paying and where this money ends 
up in the government at the national and regional levels.\56\
    EITI's disclosures have made it possible to compare company 
payments with revenues received by governments. This helps to identify 
places where money may have been mismanaged or siphoned off for private 
gain. For example, in the DRC, our analysis of EITI data shows that 
over $750 million of mining sector revenues from copper and cobalt that 
flowed into DRC's national tax agencies and state mining companies 
between 2013 and 2015 did not reach the national treasury. Although 
there is no clarity on where these missing millions ended up, our 
research indicates that at least some of the funds were distributed 
among corrupt networks linked to former President Joseph Kabila's 
regime.\57\
Beneficial Ownership Disclosure Helps Identify the True Owners of 
        Extractive Companies
    In 2013, EITI agreed to make beneficial ownership disclosure a 
criterion for compliance from 2016 onwards.\58\ This new provision 
recommended that countries maintain a publicly available register of 
the beneficial owners of companies that bid for, operate and invest in 
the extractive industries.
    This type of transparency is important in countries like Burma, 
where many of the companies operating in its jade, ruby and gemstone 
sector are secretly controlled by networks of military elites, drug 
lords and crony companies associated with the darkest days of junta 
rule. Through analyzing company licenses and using open data sources, 
we have been able to piece together how the families of notorious 
figures including former dictator Than Shwe and former ruling party 
officials are major players in the jade trade. We have also identified 
how U.S.-sanctioned drug lord Wei Hsueh Kang, a major figure in the Wa 
ethnic armed group, plays a dominant role through a web of front 
companies. In addition, we have uncovered more information on the way 
Burma's army is helping itself to a gigantic slice of the pie via its 
own conglomerates that control some mines and operate others in joint 
ventures with these and other companies whose beneficial ownership 
remains hidden.\59\ The situation in Burma is a problem found in many 
other countries where information about the true owners of companies is 
not publicly available or accessible.
    Third, the U.S. government must hold corrupt officials and human 
rights violators to account and protect human rights defenders who come 
under attack for exposing these problems.
    The U.S. government can exert significant leverage in holding human 
rights violators and the corrupt to account through the use of targeted 
sanctions, including visa bans and asset freezes. The Global Magnitsky 
Act, which was passed in 2016 with bi-partisan support, is chief among 
these tools. This law allows the U.S. government to sanction 
individuals and companies implicated in serious human rights abuses 
and/or guilty of significant corruption so that their visas are denied 
and assets frozen, crippling them of the many privileges of the 
American banking system. The U.S. government should effectively 
implement and promote this provision and also rigorously enforce the 
Foreign Corrupt Practices Act.
    As Global Witness has found through its research, human rights 
defenders face a high level of risk across the globe. The U.S. 
government must promote an enabling for civil society and support and 
protect human rights defenders who come under attack for exposing these 
problems.
                               conclusion
    Transparency won't end conflict or resolve insecurity, but it is an 
important step towards disrupting an economic landscape that too often 
incentivizes continued instability over peace. It is only through 
increased access to information about supply chains that we can discern 
where the loopholes and weaknesses exist that enable conflict financing 
and corruption. Furthermore, increasing transparency and accountability 
over management of natural resources will promote greater stability and 
economic development in Latin America and countries across the globe, 
help protect U.S. national security interests and promote a more stable 
operating environment for American companies.
                            recommendations:
The U.S. government should:
   Recognize good governance of natural resources as a national 
        security priority and promote natural resource governance as a 
        core part of its assistance to resource-rich countries, as well 
        as key trading and processing hubs.
   Promote implementation of the OECD due diligence guidance by U.S. 
        firms sourcing and trading minerals from all conflict-affected 
        and high-risk areas, and ensure that the conflict minerals 
        provision, Section 1502, is fully enforced.

   Support anti-corruption tools like the Cardin-Lugar extractive 
        transparency provision, Section 1504, to improve governance in 
        the mining sector and minimize risk of allowing corrupt deals 
        to go forward; issue a strong 1504 rule requiring U.S.-listed 
        oil, gas and mining companies to publicly report payments to 
        governments on a project-by-project basis, with no exemptions.

   Strongly enforce the Global Magnitsky Act.

   Support and protect human rights defenders at risk by strengthening 
        and implementing the pre-existing State Department guidelines, 
        in close collaboration with local civil society, and ensuring 
        training in their implementation for all embassy staff.
Companies should:
   Carry out comprehensive supply chain checks in line with the OECD 
        Guidance and publish detailed reports listing steps taken to 
        address their specific supply chain risks.

   Publish their natural resource payments to governments in all 
        countries of operations and take additional steps to increase 
        transparency, including through publication of contracts.

   Speak out to condemn threats and attacks against human rights 
        defenders wherever they occur and guarantee that no business 
        project goes ahead without the free, prior and informed consent 
        of affected communities at every stage of the project cycle.
Trade associations should:
   Take steps to ensure members are robustly implementing supply chain 
        due diligence and payment transparency and are taking 
        responsibility for their own individual efforts.

----------------
Notes

    \1\ Global Witness, `At Any Price We Will Take the Mines,' May 
2018, pg. 34.
    \2\ Matt DuPee, `The Taliban Stones Commission and the insurgent 
windfall from illegal mining', Combatting Terrorism Center, March 10, 
2017.
    \3\ Global Witness, `At Any Price We Will Take the Mines,' May 
2018, pg. 4.
    \4\ See Global Witness reports: `Under-Mining Peace,' 2005; Faced 
with a Gun, What Can You Do? War and Militarization of Mining in 
Eastern Congo,' 2009; `The Hill Belongs to Them, The need for 
international action on Congo's conflict minerals trade,' 2010; `River 
of Gold', 2015.
    \5\ Global Witness, `An Inside Job,' September 11, 2017, pgs. 8, 
20.
    \6\ Kimberley Process Certification Scheme, Public Statistics Area; 
see also Global Witness, `An Inside Job,'' September 11, 2017, pg. 6.
    \7\ Global Witness, `Secret Sales,' May 13, 2014.
    \8\ Global Witness, `Jade: Myanmar's ``Big State Secret'',' October 
2015, pg. 26.
    \9\ World Bank, `Myanmar profile.'
    \10\ Global Witness, `Jade: Myanmar's ``Big State Secret'',' pgs. 
10-12, 37.
    \11\ Natural Resource Governance Institute, Multifaceted: 
Governance and Conflict Risks in Myanmar's Ruby Industry,' March 2018, 
pgs. 5, 7.
    \12\ Olaya, Angela, `GameChangers 2016: Illegal Mining and 
Continuing Criminal Diversification,' Insight Crime, January 11, 2017; 
see also Global Initiative against Transnational Organized Crime, 
``Case study: illicit gold mining in Peru,'' November 2017, pg. 2.
    \13\ Weaver, Jay and Nicholas Nehamas, `How drug lords make 
billions smuggling gold to Miami for your jewelry and phone', January 
16, 2018, Miami Herald.
    \14\ Clavel, Tristan, ``Illegal gold Mining Fueling Crime, Violence 
in Peru,'' October 10, 2016, InSight Crime.
    \15\ Weaver, Jay and Nicholas Nehamas, `He sold antiques in 
Florida. Then he helped `El Chapo' launder $100M of dirty gold,' 
January 16, 2018, Miami Herald.; see other articles in theMiami Herald 
`Cash, Dirty Gold' series, January 2018.
    \16\ Weaver, Jay, `Illegal gold dealer weeps as he's sent to prison 
for money laundering', January 31, 2018, Miami Herald.
    \17\ Global Witness, `Defenders of the Earth,' July 2016, pg. 5.
    \18\ Global Witness, `At what cost? Irresponsible business and the 
murder of land and environmental defenders in 2017,' July 2018, pg. 7.
    \19\ Global Witness, `Defenders of the Earth,' July 2016, pg. 8.
    \20\ Natural Resource Governance Institute, The Resource Curse--The 
Political and Economic Challenges of Natural Resource Wealth.
    \21\ Global Witness, `At Any Price We Will Take the Mines'', May 
2018, pgs. 4, 41.
    \22\ U.N. Human Rights Office of the High Commissioner, ``U.N. 
Guiding Principles on Business and Human Rights'', 2011.
    \23\ OECD, ``Due Diligence Guidance for Responsible Supply Chains 
of Minerals from Conflict-Affected and High-Risk Areas'', 2016, see 
annex II for more detail.
    \24\ Ibid., pg. 41.
    \25\ Ibid., see annex I for more detail.
    \26\ United States Congress, 111th Congress, Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Pub. L. No. 111-203, passed July 
2010; see also Securities and Exchange Commission, ``Conflict Minerals; 
Disclosure of Payments by Resource Extraction Issuers; Final Rules,'' 
17 CFR Parts 240 and 249b, September 12, 2012.
    \27\ United States Senate, 111th Congress, bill S. 891: Congo 
Conflict Minerals Act of 2009, introduced, but did not pass.
    \28\ In 2015 Global Witness and Amnesty International analyzed 100 
reports filed by companies with the Securities and Exchange Commission 
(SEC) under Section 1502 of the Dodd-Frank Act. For more information, 
see Global Witness and Amnesty International, `Digging for 
Transparency,' April 2015.
    \29\ Tiffany & Co. statement supporting diligence, transparency in 
addressing conflict minerals, February 2017.
    \30\ ``Why Apple and Intel don't want to see the conflict minerals 
rule rolled back,'' Washington Post, February 23, 2017.
    \31\ Boston Common Asset Management et al, Comments on 
Reconsideration of Conflict Minerals Rule Implementation--Supplemental 
Submission to February 17, 2017, March 7, 2017.
    \32\ Disengagement should only be considered in cases where risk 
mitigation has proven to be infeasible.
    \33\ See `Arrete ministeriel no. 0057 CAB.MIN/MINES/01/2012 du 29 
fevrier 2012' in Congo, and `Ministerial Regulations No. 002//2012/ 
MINIRENA of 28/03/2012 on the Regional Certification Mechanism for 
Minerals' in Rwanda.
    \34\ China Chamber of Commerce of Metals, Minerals and Chemicals 
Importers & Exporters (CCCMC), `Guidelines for Social Responsibility in 
Outbound Mining Investments', 2015.
    \35\ The EU Regulation applies to companies whose imports of ores 
or metals containing tin, tantalum, tungsten or gold into the EU exceed 
certain specified annual thresholds. The law will require companies to 
conduct due diligence on their supply chains broadly in line with the 
OECD Guidance. Unlike the EU's Regulation, the OECD Guidance applies to 
all mineral resources and to the entire supply chain, including 
companies that buy or trade products containing the four minerals. The 
final text of the EU Regulation is available here: http://ec.europa.eu/
trade/policy/in-focus/conflict-minerals-regulation/legal-texts-and-
documents/
    \36\ U.K. Parliament, Modern Slavery Act 2015, March 26, 2015.
    \37\ Assemblee Nationale, Loi n+ 2017-399 du 27 mars 2017 relative 
au devoir de vigilance des societes meres et des entreprises donneuses 
d'ordre.
    \38\ Apple, Conflict Minerals Report, March 7, 2018, pg. 9.
    \39\ Apple, Conflict Minerals Report, May 5, 2017, pg. 4. For more 
information, see Global Witness, `Why it's a good think that Apple 
isn't declaring its products ``conflict-free''', April 2016.
    \40\ Global Witness, `Time to Dig Deeper,' August 30, 2017, pg. 3.
    \41\ Global Witness search, using advanced search function, search 
term ``Central Bank of DPR Korea'' of SD forms between 01/01/2015--07/
24/2018.
    \42\ Schectman, Joel, `North Korea Gold Taints U.S. Firms: Country 
Was Source of Metal Used in Variety of Products,' Wall Street Journal, 
June 4, 2014.
    \43\ Lee, Yimou and Joel Schectman, ``For Apple and others, tin 
supply chain has ties to rebel-held Myanmar mine,'' Reuters, November 
28, 2016.
    \44\ Global Initiative Against Transnational Organized Crime, 
`Organized Crime and Illegally Mined Gold in Latin America', April 
2016, pg. 18. See also Weaver, Jay, `Illegal gold dealer weeps as he's 
sent to prison for money laundering', Miami Herald, January 31, 2018.
    \45\ Department of Justice, Southern District of Florida, `Four 
Peruvian Members of Multi-Billion Dollar, International Gold Money 
Laundering Scheme Indicted', January 9, 2018.
    \46\ Elemetal and its subsidiary NTR reportedly pleaded guilty on 
March 16, 2018, to one count of failure to maintain an adequate anti-
money laundering program. Elemetal agreed to a fine of $15 million as 
part of a plea agreement with federal prosecutors. See Weaver, Jay, 
`Firm behind gold-fueled Miami-based money laundering racket fined $15 
million,' March 16, 2018, Miami Herald.
    \47\ Industry associations that have developed certification 
schemes to facilitate due diligence include the London Bullion Market 
Association (LBMA), Dubai Multi-Commodities Center (DMCC), the 
Responsible Minerals Initiative (RMI-formerly known as the Conflict 
Free Sourcing Initiative or CFSI), Responsible Jewelry Council (RJC) 
among others.
    \48\ See Bloomberg Business Week, `How to become an International 
gold smuggler', 9 March 2017; LBMA, List of LBMA refiners on the former 
Good Delivery list; see also Elemetal Refining LLC's Conflict Free 
Policy stating CFSI certification, dated June 2015.
    \49\ LBMA, List of LBMA refiners on the former Good Delivery list. 
Elemetal Refining, LLC is no longer listed as a conformant gold refiner 
by the Responsible Minerals Initiative (previously CFSI), see also 
Elemetal Refining LLC's Conflict Free Policy stating CFSI 
certification, dated June 2015.
    \50\ OECD, `Alignment assessment of industry programmes with the 
OECD minerals guidance,' April 17, 2018, pg.11.
    \51\ SEC, Division of Corporation Finance, `Updated Statement on 
the Effect of the Court of Appeals Decision on the Conflict. Minerals 
Rule,' April 7, 2017.
    \52\ Global Witness, `Glencore and the Gatekeeper,' May 2014.
    \53\ Global Witness press statement, `A bad year for Glencore,'' 
July 3, 2018.
    \54\ Global Witness, Revenue disclosure laws--Cardin-Lugar and the 
Global Transparency Standard, January 30, 2017.
    \55\ U.K. Government, Department for Business, Energy and 
Industrial Strategy, Post Implementation Review of Reports on Payments 
to Governments Regulations.
    \56\ Extractive Industries Transparency Initiative (EITI).
    \57\ Global Witness, `Regime-Cash Machine,' July 2017.
    \58\ EITI, Beneficial Ownership.
    \59\ Global Witness, `Jade: Myanmar's Big State Secret,' October 
2015.